Public Procurement Bill & National Small Enterprise A/B: briefings

Meeting report

The Chairperson apologised for the delayed start of the meeting, explaining that Committee Members were engaged in another commitment that ran longer than expected, thus impacting the meeting's schedule. She requested both Members and officials to introduce themselves, welcoming everyone. With no apologies received for the day, she announced that the Committee could proceed directly to the agenda. She then delegated the briefing on the National Small Enterprise Amendment Bill to Mr J Londt (DA, Western Cape), an NCOP Member, followed by the Department for its presentation.

National Small Enterprise Amendment Bill [B 16 – 2023]

Introduction by Western Cape NCOP Delegate

Mr J Londt (DA, Western Cape), a NCOP Member, explained that his role would primarily involve listening to and taking the Committee's negotiating mandate to the Select Committee, advocating for the Western Cape's position and persuading colleagues from other provinces. He acknowledged that while there might be some minor points of contention, he believed there was potential for a bipartisan agreement on this piece of legislation. Given the time constraints and pressure facing Committee Members, Mr Londt emphasised the importance of reaching consensus. He expressed hope for cooperation both within the Committee and in the Select Committee, aiming to contribute positively to the legacy of the sixth term of Parliament. Concluding his remarks, Mr Londt indicated his readiness to remain present before handing back control of the meeting to the Chairperson, thanking him for the opportunity.

Department briefing

Mr Bathandwa Mlambo, Parliamentary Officer, Department of Small Business Development, began by clarifying his role as not being a Member but representing the Department. He proceeded to summarise the background of the Bill, explaining the Department's process of public consultations, presentation to Cabinet, submission to Parliament, and subsequent hearings. Mr Mlambo clarified that the Department was presenting the Bill to allow public engagement, with the possibility of the Department providing clarification once all provinces had made their inputs.

He delved into the objectives of the Bill.

(See presentation attached)

Discussion

Mr A Van der Westhuizen (DA) thanked the Department for its presentation. He acknowledged the challenges faced by small enterprises but also expressed simultaneous concerns regarding the proliferation of Ombuds and Boards, which he believed could burden taxpayers. He inquired about the potential additional costs resulting from the amendment and legislation. Additionally, he queried whether consideration had been given to expanding the mandate of existing offices, such as consumer tribunals, to include providing support or acting in the best interests of small enterprises. He suggested that this expansion could allow small enterprises to lodge cases of unfair treatment with such offices.

Ms N Nkondlo (ANC) expressed her appreciation for the presentation. She sought clarification on several points. Firstly, she inquired about the effectiveness of the Ombuds office, emphasising the need for background research to understand its potential challenges and effectiveness, particularly in comparison to similar offices in other countries. She questioned how the Ombuds office would address grievances of Small and Medium Enterprises (SMEs) and how it would be linked to processes such as the competition regulatory framework and other government departments, especially concerning issues like payment disputes across different spheres of government.

Secondly, she sought information on the Department's assessment of the efficiencies and weaknesses of consolidating the three entities into the Small Enterprise Development Finance Agency (SEDFA). She expressed personal support for the consolidation but wanted to understand how the new entity would address the previous inefficiencies and avoid resource wastage. She requested insight into the proposed model for SEDFA and any available information from the Department to elucidate its functioning.

The Chairperson said she felt her questions had been mostly addressed and mentioned her curiosity about the specific powers of the Ombuds office compared to those of the National Council tribunal. She also inquired about the alignment between the Bill's proposals and any functions that could be delegated to provincial or local levels. She concluded by indicating that she would defer these questions back to the Department.

Responses

Mr Mlambo expressed his gratitude and addressed the questions raised by Members. He acknowledged the concern regarding the potential burden on taxpayers due to the proliferation of offices but clarified that specific figures regarding establishing the Ombuds office were not yet available. He explained that discussions with National Treasury were ongoing, and once the Act was passed, further engagements and presentations would be conducted to provide detailed information.

Regarding the question about confining the Ombuds office to consumer tribunals, Mr Mlambo stated that the aim was to address the lack of effective representation and support for small businesses. He highlighted the feedback received indicating that current structures were inadequate in providing recourse to justice for small businesses. The proposed legislation aimed to establish a statutory Ombuds office with adequate powers to address these concerns.

Regarding alignment with the competition regulatory framework, Mr Mlambo explained that while the Competition Commission covered broader competition issues, individual cases involving small enterprises were often left unattended. He emphasised that the Ombuds Office would complement the Competition Commission by addressing these individual cases.

Mr Mlambo also discussed the consolidation of entities into SEDFA, stating that it would streamline processes and eliminate inefficiencies. He outlined the current challenges faced by small businesses when navigating different entities for support and funding, emphasising the need for a more integrated approach. He mentioned the development of a business case for SEDFA and indicated that further presentations could be made to provide detailed information to Members.

Mr Mlambo invited Members to indicate any areas where clarification was needed or if any points had been overlooked.

Further discussion

Mr Van der Westhuizen thanked the Chairperson and expressed concern regarding the classification of Small, Medium, and Micro-Enterprises (SMMEs). He noted that currently, these classifications are determined by law and scheduled to the law. He acknowledged the need for a mechanism to account for inflation but raised concerns about the potential implications of the Amendment Bill. Mr Van der Westhuizen worried that the Bill might grant the Minister unchecked authority to determine the limits of what constitutes SMMEs. He expressed apprehension that this could lead to an expansion of the Minister's jurisdiction and an increase in budget allocation to entities reporting to the Minister.

He sought clarification on whether the Amendment Bill would indeed grant the Minister a free hand in determining these criteria or if there would be any oversight body or board to which the Minister would be accountable. He highlighted the importance of having objective criteria for classifying enterprises as small and expressed the need for transparency and accountability in the process.

Ms Nkondlo highlighted the importance of public engagement in shaping policy decisions and regulating the role of the state. Ms Nkondlo emphasised the need to assess whether regulations ultimately alleviate or exacerbate burdens, referencing concerns about red tape.

Drawing from her experience, she underscored the challenge of securing relevant expertise for regulatory bodies such as the Competition Commission and the difficulty of assembling knowledgeable personnel for the Ombuds offices. Ms Nkondlo stressed the significance of ensuring the capabilities and legal training of individuals appointed to these roles to enhance the effectiveness of their functions.

Further, she raised concerns about efficiency and coordination within governmental offices, citing examples where disjointed processes led to inefficiencies and frustrations for small businesses seeking support. Ms Nkondlo cautioned against decisions that may perpetuate siloed operations within government entities and advocated for a holistic approach to governance.

She concluded by expressing her appreciation for her colleague's responses while urging careful consideration of the broader implications of consolidating functions within government entities.

Mr Mlambo began by addressing a specific section, presumably Section 22, which pertains to the Minister's authority to regulate the classification of SMMEs. He highlighted the requirement for consultation with relevant ministries, particularly the Department of Trade and Industry (DTI), before regulations are gazetted. This process involves soliciting input from the public and receiving approval from Cabinet.

Mr Mlambo acknowledged the need for checks and balances and assured that additional measures could be considered if Members felt necessary. He emphasised the importance of transparency and accountability, noting that the Minister could be called upon to explain decisions to parliamentary committees.

Regarding concerns about overlapping functions with existing entities like the Competition Commission, Mr Mlambo assured the Committee that the proposed legislation aimed to fill gaps in coverage rather than duplicate efforts. He mentioned consultations with relevant Departments and stakeholders to ensure alignment with existing mandates.

In response to Ms Nkondlo's mention of a business case for establishing an Ombuds office, Mr Mlambo expressed willingness to address comments and engage further with Committee Members on the matter.

National Small Enterprise Amendment Bill [B 16B – 2023]: Clauses  

Adv Romeo Maasdorp, Western Cape Committees of Parliament (WCCP) Legal Adviser, began by stating the necessity of focusing on the actual Bill rather than PowerPoint presentations. He stated, "We are tasked with passing Bills, not presentations," highlighting the importance of legislation over visual aids. Adv Maasdorp stressed the need for high-quality laws to ensure a proper interpretation by courts in the future.

He directed attention to specific sections of the Bill, particularly Clause 17L and Clause 17Y, expressing concerns about the broad discretion granted to the Ombud and the lack of clarity in defining terms like "significant number" and "unreasonably prejudicing." Adv Maasdorp argued that such vague language could lead to challenges in interpretation and application in legal proceedings. He recommended either deleting certain provisions or providing clearer qualifications to guide the ministerial Ombud in determining unfair trading practices. He emphasised the importance of drafting laws with precision to avoid ambiguity and ensure effective implementation in practice.

See Bill attached

Discussion

The Chairperson thanked Adv Maasdorp for his insights and then asked if the Department had any comments before moving on.

Mr Mlambo responded by expressing uncertainty about whether the Department needed to intervene. He apologised to Adv Maasdorp, acknowledging that the Department could have gone through the Bill clause by clause if that had been the expectation. He clarified that the Department typically summarised the Bill at a high level, but the Department was open to adjusting its approach based on the Committee's preferences.

Mr Mlambo explained that while the Department had engaged with the Office of the Chief State Law Advisor to ensure the Bill's soundness before presenting it to Parliament, it was ultimately up to the Committee to determine if it was satisfied with the clauses as they were or if the Committee wanted to make amendments or deletions. He deferred to the Committee's prerogative in deciding how to proceed with the clauses.

Mr Londt acknowledged the possibility of being ruled out of order as a Member of the Select Committee and representing the province. He noted that this was not the first time such arguments had been presented to the Department. He further mentioned that similar concerns had been raised in the National Assembly and that he himself had raised them twice in the Select Committee. He highlighted that clauses open for interpretation and granting broad powers to individuals had been recurring issues, which the Department was well aware of. He concluded by flagging this information for awareness without further elaboration.

The Chairperson indicated a transition to the next Bill, requested the screen be taken down or unshared, and then passed the floor to Mr Londt and subsequently to the Department to guide the Committee through the next Bill.

Mr Londt acknowledged his commitment to representing the negotiating mandate of the Committee in the Select Committee based on its work and consideration. He deferred to the Department for its briefing to the Committee.

National Treasury on the Public Procurement Bill [B 18B – 2023]

Mr Willie Mathebula, Chief Procurement Officer, National Treasury (NT), confirming his allotted time of 40 minutes, expressed gratitude and proceeded to share his screen for the presentation.

He introduced the Public Procurement Bill, highlighting its introduction in the National Assembly by the Minister on 30 June 2023, and its subsequent passage in December 2023. The presentation aimed to discuss key principles and ministerial regulations within the Bill, stressing its role in supporting government objectives.

Mr Mathebula outlined the Bill's foundation in the Constitution, particularly sections 195, 216, and 217, focusing on transparency, expenditure control, and preferential procurement. He stressed the need to consolidate fragmented procurement laws into a single regulatory framework.

The Bill's seven chapters were briefly described, covering definitions, objectives, application to various government entities, and establishing a Public Procurement Office. Mr Mathebula detailed Chapter Four, which addresses the Preferential Procurement Framework mandated by section 217(3) of the Constitution. He explained the need for clarity in response to stakeholder concerns raised during public hearings and submissions.

Chapter Five focused on procurement methods, strategic approaches, and the use of technology to modernise procurement processes. Mr Mathebula highlighted the introduction of subcontracting and measures to promote local production and content.

Chapter Six introduced an alternative dispute resolution mechanism through a tribunal, aiming to expedite resolution and reduce costs associated with litigation.

Chapter Seven covered general provisions, including the Public Procurement Office's investigative role and measures to prevent abuse and ensure compliance.

Mr Mathebula concluded by acknowledging the need for amendments to existing legislation, repeal of certain laws, and differentiation in implementation based on sector-specific regulations.

He thanked the Committee and returned control to the Chairperson.

(See presentation attached)

Discussion

The Chairperson thanked Mr Mathebula for the presentation and invited Committee Members to raise any questions or points for discussion. She requested Members to raise their hands, indicating a desire to speak, and assured them they would be recognised accordingly.

Mr Van der Westhuizen acknowledged the contentious history of public procurement in South Africa, suggesting that the aims outlined in the Constitution may have been narrowly interpreted, leading to neglect of the wider socio-economic impact. He noted instances where public procurement processes resulted in substandard goods and services being procured. Mr Van der Westhuizen emphasised the importance of seeking public input during the comment period and advocated for approaching it with an open mind.

Regarding the timing of the Bill's introduction, Mr Van der Westhuizen raised concerns about the extended duration it took for the Bill to reach Parliament, despite having been working on since at least 2020. He highlighted the late referral to the National Council of Provinces (NCOP) and expressed apprehension about the limited time available for thorough consideration before the next constituency period and election. He objected to the pressure placed on the Committee by the late introduction of important legislation and noted similar delays with other Bills.

Mr Van der Westhuizen concluded by thanking the Chairperson and stated his intention not to delve into the details of the legislation during the current discussion due to time constraints, while indicating several significant aspects of the Bill warrant careful consideration.

The Chairperson raised several questions regarding the need for uniform norms and standards in public procurement, the potential impact on provinces with good procurement practices, the possibility of increased procurement backlogs due to centralisation, and concerns about the implications of centralising IT procurement.

The Chairperson questioned the necessity of uniform norms and standards across all provinces, particularly in regions like the Western Cape with a track record of clean audits. She inquired about the potential impact on existing good procurement practices and whether uniform standards might undermine efficient systems already in place.

Next, the Chairperson expressed concern about the potential for increased procurement backlogs if processes are centralised at a national level. She cited examples such as the procurement of schoolbooks or pens, questioning whether centralisation might lead to delays or inefficiencies in the procurement process.

The Chairperson also raised specific queries about clauses 30 and 31 concerning Information Technology (IT) procurement. She questioned whether the centralisation of IT procurement might result in sunk costs for provinces that have already invested in expensive financial programs. Additionally, he said that the Committee sought clarification on how centralised IT procurement would interact with existing IT systems at the provincial level.

The Chairperson indicated she would hold back a few additional questions for later and handed over the Committee's queries to the Department, seeking responses to address these concerns.

Responses

Mr Mlambo addressed the questions raised by the Chairperson regarding centralised IT systems and the procurement of stationery like pens and pencils.

Regarding centralised IT systems, Mr Mlambo clarified that the Bill does not mandate the centralisation of IT procurement or the implementation of an integrated system. Instead, it allows accounting officers and authorities the discretion to choose their own systems. However, the Bill emphasises the use of technology in procurement processes, ensuring that all entities use ICT. This approach aims to modernise procurement processes while allowing flexibility for different entities to choose their own systems.

Regarding the procurement of stationery, Mr Mlambo stated that the responsibility for procurement, including stationery like pens and pencils, lies with accounting officers and authorities. He explained that the Bill does not propose centralising the procurement of stationery. Instead, it advocates for a strategic procurement approach, putting emphasis on proper planning, demand aggregation, and strategic processes for procurement, regardless of the commodity being procured.

Mr Mlambo mentioned that Adv Van Schoor could provide further clarification on the issue of uniform norms and standards.

AdvEmpie van Schoor, Chief Director: Legislation, National Treasury, provided further clarification on the need for uniform norms and standards in public procurement. She explained that currently, different rules apply to different provinces and public entities, creating inconsistency in procurement practices. Additionally, entities like local government and public enterprises operate under separate regulations. The aim of the proposed legislation is to establish uniform standards applicable to all procurement entities, ensuring consistency and transparency.

Adv van Schoor emphasised that while the legislation aims for uniformity, provisions allow for differentiation based on the type of institution or procurement involved. This means specific rules can be tailored to suit different contexts or needs, such as infrastructure projects.

She also highlighted that procurement decisions are made by accounting officers and authorities, as outlined in Clause Seven of the Bill. The role of National Treasury or the Public Office is to establish systems that facilitate access to procurement information across government, rather than to dictate specific procurement processes through centralised IT systems.

Further Discussion

Mr Van der Westhuizen raised a pertinent point regarding the procurement of IT equipment through the State Information Technology Agency (SITA). He highlighted the existing requirement for all organs of state to procure IT goods and services through SITA as a default option, necessitating permission for exemptions.

He suggested that it would be beneficial if the proposed procurement legislation could address this aspect, potentially revising or updating the current regime regarding IT procurement through SITA. This would streamline the procurement process and provide clarity on exemptions or alternative procurement methods for IT-related purchases.

Mr Mlambo provided reassurance that the SITA Act would indeed be subject to the proposed procurement legislation, indicating that it would be amended accordingly. He acknowledged the importance of addressing the current requirement for institutions to procure through SITA and confirmed that this aspect would be covered in the legislative amendments.

The Chairperson requested a list of legislation that would be amended.

In response to the Chairperson's request for a list of legislation needing amendment and any accompanying Socio-Economic Impact Assessment Study (SIEAS) reports, Mr Mlambo assured the Committee that the necessary information would be provided. He mentioned that the list of legislation earmarked for amendment is included in the schedule of the Bill itself, and the Department would coordinate with the relevant advisors to ensure the Committee receives the required documents.

Adv Mpho Khoele raised several concerns regarding the criminalisation aspect of the Bill. She expressed reservations about certain provisions related to the power to enter and search premises, the issuing of warrants, and the authority of individuals conducting investigations. Specifically, she questioned the legal authority of those authorised to conduct investigations and seize items, as well as their power to enter premises, as such powers typically require being vested with the authority of a peace officer. Adv Khoele sought clarification on the process of referring identified criminality to the authorities outlined in Clause 27(c) of the Act, inquiring whether the investigation must occur first before referral or if it is a concurrent process. She highlighted the need for clarity in the Act regarding these important procedural and legal matters.
Adv van Schoor clarified that Clause 27 of the Bill, as passed by the National Assembly, clearly indicates that the purpose of investigations conducted under the Bill is not for the detection of crime. She explained that the provision excludes any alleged commission of an offence committed under the Act. This approach is similar to provisions found in other legislation such as the Financial Intelligence Centre Act and the Financial Sector Regulation Act.

Adv van Schoor expressed confidence that the Bill is in compliance with the Constitution, citing previous concerns that were rectified during the legislative process.

Regarding the point of referral to law enforcement agencies, she explained that if any allegations or possibilities of criminality are identified during an investigation, they should be referred to the appropriate authorities. However, she noted that they would review the provisions again to ensure clarity on whether the referral should be immediate or if there is flexibility in the timing.

The Chairperson thanked the Members for their participation and asked if there were any final questions. Upon receiving none, she expressed gratitude to the officials from National Treasury for their presentation and excused them from the meeting. She indicated that the Committee would now proceed to discuss the next steps regarding the Bills that were briefed during the session.

Ad hoc matters (Public Hearing Plans)

Mr Van der Westhuizen suggested exploring the possibility of combining some of the public participation processes and running them concurrently. Additionally, he proposed implementing a hybrid model for public hearings to alleviate concerns about timing and the workload of Members. He pointed out the potential benefits of saving on travelling time and increasing the efficiency of the public participation model.

The Chairperson directed the Committee Secretariat to respond to the suggestions made because, after the Secretariat's response, she planned to proceed with discussing the Bills and then move on to addressing public booking arrangements.

The Committee Secretariat acknowledged the question regarding the hybrid option, stating that it had been discussed and agreed upon in the group chat. She confirmed that the hearings would indeed be hybrid, and now it was up to the Committee to agree on the specifics of the hearings before proceeding further.

The Chairperson indicated she would outline a way forward regarding the Small Enterprises Bill and invited feedback or alternative ideas.

It was mentioned that the NCOP had provided legislators with the programme, and the negotiating mandate was due on 19 March 2024, with an extension the Committee managed to secure. It was noted that the Committee had agreed to hold a public hearing in Cape Town, designed to accommodate both in-person and virtual oral submissions. The option of advertising in mainstream community newspapers as well as on social media was discussed, although it was mentioned that the Western Cape Provincial Parliament had depleted its social media budget. Therefore, if paid social media were to be used, funding considerations by the Committee would need to be made. The decision on which newspapers to advertise in was also open for discussion. Examples of newspapers to be used were provided, with the potential addition of the George Herald to ensure coverage of all district municipalities in print media. Stakeholders were encouraged to submit comments via email or WhatsApp, with the option of voice notes or messages. Those wishing to make oral submissions were instructed to indicate their interest, with an invitation to speak at the public hearing. The Procedural Officer would then be responsible for securing radio slots for broadcasting a call for comments at the Western Cape Provincial Parliament's communications sector. The Chairperson mentioned that she could provide voice notes to be played on the radio once advertising was finalised. A media plan would be developed by the Committees team, incorporating posting on the Western Cape Provincial Parliament's social media pages and any paid social media. Assistance would be requested from the Public Education and Outreach (PEO) to ensure attendance at the hearing through their network, and the Department of Economic Development and Tourism would be asked to send the advert and build to interested stakeholders. The Chairperson sought feedback on this proposed way forward and welcomed any additional thoughts on how to proceed.

Mr Van der Westhuizen expressed gratitude for the proposed plan and suggested supporting it. He proposed granting the Chairperson and the Procedural Officer the flexibility to collaborate with other procedural officers. He highlighted the challenge of serving on multiple Committees, many of which require organising public participation sessions simultaneously. He suggested possibly holding sessions in the same venue on the same evening and combining advertisements to reduce costs. Mr Van der Westhuizen emphasised the importance of maximising efficiency given the limited time available and urged the Committee to grant the Chairperson and procedural officer the freedom to liaise with other Chairpersons and procedural officers to achieve this goal.

The Chairperson acknowledged the need for increased public participation regarding the procurement Bill. Instead of the initially proposed single hybrid public hearing, it was suggested that three public hearings be held in Cape Town, Saldanha Bay, and George.

The Committee had requested dates from the relevant authorities for these hearings. The plan included advertising in both mainstream and community newspapers and on social media. Considering that the Western Cape Provincial Parliament's budget for social media is limited, the Committee may need to use its own funds to supplement social media advertising.

The proposal is to use a similar mix of newspapers to the one used for the Upstream Bill to ensure representation across district municipalities. Interested stakeholders would be invited to submit their comments via email or WhatsApp, including voice notes or messages. Those wishing to make oral submissions would be given the opportunity to do so at a public hearing. The procedural officer would arrange for radio slots to broadcast calls for comments, and a media plan would be provided once advertising details are finalised. The Committee would seek assistance from the Western Cape Provincial Parliament's Public Outreach unit to ensure attendance at the hearings, and the Department of Economic Development and Tourism would be requested to distribute the advert and Bill to interested stakeholders.

The Chairperson invited Members to share any thoughts or concerns about this proposed approach. Members unanimously agreed.

Resolutions

The Chairperson noted a resolution regarding the need to obtain the SIEAS report for both Bills and requested the business plan for the Ombudsman, which had been previously presented. Instead of another presentation, the Chairperson suggested obtaining a copy of the presentation for review and further questions. The resolution received unanimous support.

With no further resolutions, the Chairperson thanked everyone for their time and participation, expressing gratitude to all staff and officials who contributed to the meeting. Despite challenging circumstances, their hard work was greatly appreciated.

The meeting was then adjourned.