What is Preferential Procurement?
The South African Department of Trade and Industry defines preferential procurement as “the procurement of goods and services from Empowering Suppliers as a percentage of total procurement”.
In short, it is the promotion of procurement from businesses with a healthy BBBEE scorecard, small and micro businesses, and to bring previously disadvantaged individuals or businesses into the
What is an “Empowered Supplier”?
It is a B-BBEE compliant entity, which is a good South African corporate citizen and complying with all regulatory requirements of the country (i.e. has a B-BBEE certificate, tax clearance certificate)
A Large Supplier must meet at least 3 out of 4 requirements:
- 25% local procurement – At least 25% of cost of sales (excluding labour costs and depreciation) must be procured from local producers or local suppliers in SA. (For the service industry labour cost are included but capped to 15%)
- Job Creation – 50% of new jobs created must be for Black people provided that the number of Black employees since the immediate prior verified B-BBEE Measurement is maintained.
- Beneficiation – At least 25% transformation of raw material/beneficiation which includes local manufacturing, production and/or assembly, and/or packaging
- Skills Transfer – at least spend 12 days per annum of productivity deployed in assisting Black EMEs and QSEs beneficiaries to increase their operation or financial capacity.
What value can preferential procurement add to my business?
The better your scorecard, the more attractive you are as a potential supplier. Preferential Procurement is the most difficult section of the Enterprise and Supplier Development code, and we therefore need to focus here first.
What can MEDO offer?
- Consulting services
- Supply Chain Analysis
- Supply Chain Transformation Services
- Supplier Database Access and Management
Where do we start?
The first place to start is with your supply chain team to assess what you buy and from whom. Conduct a Pareto Analysis to determine where you spend 80% of your budget to determine your “as is” preferential procurement score.