CASE STUDY

[100 Marks]

The BEE loophole that keeps gifting Covid-19 tenders

The BEE Commission, which monitors compliance with empowerment legislation by companies, has joined the fray by

placing the responsibility squarely on state organs to ensure that contracts/tenders are awarded lawfully and not based on

patronage networks.

Although Black Economic Empowerment (BEE) is well-intentioned for creating an inclusive economy and reversing the

stubborn legacy of apartheid that still determines access to opportunity for black citizens, the policy has become a major

pitfall during the Covid-19 storm.

The pitfall of BEE has been underscored by the states current and enormous procurement processes of personal protective

equipment (PPE) and other Covid-19-related goods.

Before SAs first case of Covid-19 was officially confirmed on 5 March, the BEE policy had long been built into the states

procurement ecosystem valued at almost R1-trillion annually and is crucial for how tender bids by companies are

evaluated.

In other words, a companys empowerment/transformation profile (black ownership and management) is one of the main

criteria used by the state to determine if it is worth being awarded a tender to supply PPE and Covid-19 related goods such

as face masks/shields, hazmat suits, gloves, hand sanitisers and ventilators.

But BEE has not (in some cases) been empowering for the nation during the devastating pandemic, the policy was used as

a vehicle for corruption and to blatantly flout procurement laws. These laws include the Public Finance Management Act

and the Municipal Finance Management Act, which call for state procurement to be done in a fair, equitable, transparent,

competitive, and cost-effective manner.

It didnt help that the National Treasury relaxed procurement rules in April, allowing national departments, provinces, and

municipalities to procure goods on an expedited basis at a time when countries around the world were hoarding crucial

health products.

In recent weeks, the nation has been angered by the scandal around the procurement of PPE and other Covid-19 related

goods in Gauteng and around SA, as companies with favourable BEE profiles (on paper) were established overnight and

emerged as successful tender bidders. Adding insult to injury was that some businessmen/women behind newly

established companies had no track record in procuring medical supplies but did so at inflated prices to the state, and

enjoyed the proximity to key figures in the state, which probably gave them an advantage in the tender bidding process.

At the same time, Trade union Solidarity has written to the World Health Organisation raising concerns around the South

African governments plans to promote black empowerment through the rollout of vaccines. This comes after Afrikaans

newspaper Rapport reported that President Cyril Ramaphosa recently told an ANC top six meeting that the rollout of

vaccines would provide an opportunity for black economic empowerment.

Trade union Solidarity fulfils the role of a traditional trade union, but at the same time offers a broader Network of Work

which any working or prospective working person can join. Due to the constant changes in the workplace, the trade union

established Occupational Guilds with the aim of organising people based on their occupation rather than their place of work,

and in this way bringing them into contact with other people working in the same occupational field.

Trade union Solidarity said that the pandemic is threatening peoples lives and that regulations must make it as easy as

possible to combat the pandemic. Barriers of race should not be part of this process, it said.

The Solidarity Movement, consisting of several institutions and independent partners, has approximately 500 000 families

as members and is the largest mainstream Afrikaner organisation and one of the largest organisations in our country.

The main goal of the Movement is to help its people lead a normal life in a normal country. Each of the institutions and

individual partners that are part of the Movement, plays a unique role in achieving this goal. Currently, the Movement

consists of 21 institutions and 3 independent partners.

We would therefore express our firm belief that during a time of such a devastating disaster there should be no

differentiation and or discrimination either directly and or indirectly on the basis of race, gender and or other listed grounds

as set out in section 9(3) of the Constitution, Solidarity said in its letter.

In the grips of a pandemic, risking both the livelihoods as well as the lives of citizens no one should seek to profit.

Ramaphosa was resolute in his rebuke of PPE and food tender scandals which exposed individuals who sought toopportunistically benefit from the pandemic. Yet, it appears as though he has abandoned this stance.

To stop the feasting on Covid-19 tenders, the National Treasury has tightened procurement rules and stopped the

emergency procurement of PPE and other Covid-19 related goods. In other words, the Treasury is returning to onerous

tender rules but the BEE requirement from companies will still be in place.

The BEE Commission, which monitors compliance with empowerment legislation by companies, has joined the fray by

placing the responsibility squarely on state organs to ensure that contracts/tenders are awarded lawfully and not based on

patronage networks.

Even in the bidding process, there is an obligation on those people [at state organs] assessing tender bids to ensure that

the companies have the track record and experience. And where they dont have the experience, they need to demonstrate

where the experience will be coming from to complement their own, said BEE Commissioner Zodwa Ntuli in a Business

Maverick interview.

Ntuli doesnt believe that incidents of unlawfully awarded tenders are a reflection of the BEE policy, especially its

shortcomings.

There is nothing about B-BBEE [broad-based black economic empowerment] that requires anybody to drop the standards.

B-BBEE is about giving people an opportunity to be able to participate in the economy. There is nothing that says where

there is a black entity, the standards must be dropped B-BBEE has nothing to do with corruption. Corruption is a crime

and must be dealt with.

Ntuli hastens to add that not only state organs are complicit in incidents of corruption or BEE gone wrong, as the private

sector can equally be blamed for unlawful conduct.

Supporting her view is that it was often privately-owned companies that won tenders by taking advantage of the states

failure to audit successful bidders or effectively manage its enormous procurement system. After all, it takes two to tango.

Question 1

(25 Marks)

Elaborate on the four types of organisational conflict and discuss the conflict between Trade Union Solidarity and the BEE

Commission.

Question 2

(25 Marks)

Discuss the impact of the unethical behaviours mentioned in the case study and elaborate on strategies and tactics that the

mentioned state organs can utilise to improve their ethical climate.

Question 3

(25 Marks)

In relation to the case study, discuss the tripartite relationship and evaluate Trade Union Solidaritys positioning.

Question 4

(25 Marks)

Explain the concept of BEE as well as the categories of black ownership and discuss how BEE was abused in the

procurement of personal protective equipment (PPE) and other Covid-19-related goods. In your opinion, was BEE to be

blamed for this scandal?