24 Jul What if the South African government earmarked 50% of its procurement budget for goods and services strictly from Black business?

This post is a follow-up to the signing into law of the Public Procurement Act on 23 July 2024, which you can read more about here.

Picture this.

Close to R3 of every R7 of the South African economy is spent by the government, which includes national and provincial departments, municipalities and SOE’s.

With the South African economy estimated at R7 trillion in GDP terms, total government spend alone is R3 trillion!

Let’s do the math.

Allocate 60% (or R1.8 trillion) of the annual total government spend to salaries, and the balance of R1.2 trillion goes to procurement of goods and services – from stationery to infrastructure. The bulk of government’s procurement of goods and services is outsourced.

The question is: which businesses have benefited from supplying government in the last 30 years of democracy?

Economic transformation in focus.

As a reminder, the founding of BANA in 2022 was inspired by the finding that Black-owned agencies accounted for a measly 2% of the R58 billion media spend in 2021.

The shocking state of affairs experienced in the Marketing, Advertising and Communications (MAC) sector is not vastly different across many other sectors of the South African economy.

The government’s procurement policies have not done any better. Otherwise the Public Procurement Act of 2024 would not be necessary.

Perspective

Despite the short-sightedness on the part of the gatekeepers of the current lopsided South African economy, there is no debate that transformation – an environment where money is in the hands of many citizens and not concentrated in the hands of the few who do not have the capacity to spend it all on themselves – is good for all who live in this country as this will lead to more spending capacity.

This scenario is good also for the previously advantaged!

Back to government spend.

What if the South African government earmarks 50% of its spend on goods and services, or R600 billion, for procurement strictly from businesses that are owned and managed by Black businesses only, and put a robust monitoring system in place to ensure this happens?

What difference will this make towards the transformation of this economy that is still not showing signs of discernable change 30 years since the dawn of democracy?

As the math goes, a minimum of 10% of the economy will be firmly in the hands of the previously disadvantaged, who happen to like spending money on nice things. In turn, the currently grinding wheels of the economy of this country will start to turn faster, taking us to the glory days of President Mbeki’s era.

Will the Public Procurement Act of 2024 achieve the same result as per the above scenario? Time will tell.