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Targeted Procurement in the Republic of South Africa

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Targeted Procurement in the Republic of South Africa ACKNOWLEDGEMENTS The Consultants would like to thank the Steering Committee members for guidance and assistance throughout the assessment, particularly the International Labour Organization, which spent a great deal of time and energy managing the process. The Consultants also would like to acknowledge the openness and frankness of all those individuals from both the public and private sector interviewed in the course of the assessment. Finally, our thanks go to Mr George Mbuthia for collecting data and conducting telephone interviews with emerging contractors. Steering Committee Jan Sako Shadrach Appanna Dajene Sahle Inba Thumbiran Nigel Lowe iii CONTENTS CONTENTS Acknowledgements ..................................................................................................... ii List of tables .............................................................................................................. vi Abbreviations and acronyms .................................................................................... viii Executive summary .................................................................................................... ix 1. Introduction 1.1 Background ....................................................................................................... 1 1.2 Targeted procurement and the RDP ................................................................... 3 1.3 Terms of reference ............................................................................................. 4 1.4 Implementation process and methodology ......................................................... 5 1.5 Report structure ................................................................................................. 8 2. Legislative and political contexts for preferential procurement 2.1 Procurement as an instrument of policy ............................................................ 10 2.1.1 History and diversity ............................................................................. 10 2.1.2 The impact of public sector procurement on the South African economy . 12 2.1.3 Public sector spending on construction-related services ......................... 12 2.1.4 Models for the use of procurement as an instrument for social policy .... 13 2.2 Legislative provisions for preferential procurement policies and their implementation ................................................................................................ 16 2.2.1 Constitutional requirements ................................................................... 16 2.2.2 Development of procurement legislation ............................................... 16 2.2.3 Target groups ........................................................................................ 18 2.2.4 Incorporating preferencing into the tendering process ............................ 19 2.2.5 Monitoring and evaluation of PPP ......................................................... 20 2.2.6 Coherence of PPP procedures ................................................................ 21 3. Development of targeted procurement 3.1 Development of interim procurement policy .................................................... 23 3.2 Development of TP resource specifications ...................................................... 24 3.3 Linking TP with RDP objectives ...................................................................... 25 3.4 Adjudication mechanism .................................................................................. 25 3.5 Monitoring and evaluation ............................................................................... 28 3.6 Targeted procurement experiences roll-out ...................................................... 28 3.7 Rationalizing targeted procurement .................................................................. 30 4. Experiences of organs of state in realizing targeted procurement 4.1 Department of Public Works ............................................................................ 32 4.1.1 Background ........................................................................................... 32 4.1.2 Outcomes of the DPW’s Affirmative Procurement Policy ..................... 33 4.1.3 Use of TP in concession contracts ......................................................... 35 iv CONTENTS 4.1.4 Strategic Project Initiative ..................................................................... 36 4.1.5 Women in construction ......................................................................... 37 4.1.6 Use of TP in community-based projects ................................................ 39 4.1.7 Supply-side interventions ...................................................................... 39 4.2 National level .................................................................................................. 40 4.2.1 Department of Water Affairs and Forestry ............................................. 40 4.2.2 South African National Roads Agency .................................................. 41 4.3 Provincial level ................................................................................................ 42 4.4 Local government level .................................................................................... 43 4.4.1 Midrand Metropolitan Local Council .................................................... 43 4.4.2 Mogale City Local Municipality ............................................................ 44 4.4.3 Development of preferential policies ..................................................... 44 4.5 Private sector and professional entities ............................................................. 45 4.5.1 Professional services providers .............................................................. 45 4.5.2 Construction industry ............................................................................ 46 4.6 International dimension ................................................................................... 49 5. Survey and data collection instruments 5.1 Field case studies ............................................................................................. 52 5.1.1 Data collection and modelling nexus ..................................................... 52 5.1.2 Checklists and validation ....................................................................... 53 5.2 Case study findings .......................................................................................... 54 5.2.1 North West Province ............................................................................. 54 5.2.2 KwaZulu-Natal Province ....................................................................... 55 5.2.3 Western Cape Province ......................................................................... 58 5.2.4 Gauteng Province .................................................................................. 60 5.2.5 Limpopo Province ................................................................................. 63 5.3 Affirmative business enterprise survey ............................................................. 65 5.3.1 Methodology ......................................................................................... 65 5.3.2 Results .................................................................................................. 65 5.3.3 Performance of the targeted procurement process .................................. 66 5.4 Data capture systems ....................................................................................... 68 5.5 Observation from the survey instruments ......................................................... 70 6. Targeted procurement impacts 6.1 Contractual relationships .................................................................................. 73 6.1.1 Subcontracting ...................................................................................... 73 6.1.2 Joint ventures ........................................................................................ 74 6.2 Project delivery ................................................................................................ 76 6.3 Local economy and business ............................................................................ 77 6.3.1 Targeted development ........................................................................... 77 6.3.2 Sustainability ........................................................................................ 79 6.3.3 Imbalances and structural inequities ...................................................... 80 6.4 Employment generation ................................................................................... 81 v CONTENTS 6.5 Training and capacity building ......................................................................... 87 7. Targeted procurement effectiveness 7.1 Small business development ............................................................................ 90 7.2 Engagement of target groups ........................................................................... 91 7.3 Ethical dimension ............................................................................................ 93 7.3.1 Fairness and equality ............................................................................. 93 7.3.2 Transparency and competitiveness ........................................................ 93 7.4 Technical dimension ........................................................................................ 94 7.4.1 Construction
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