MICHAEL MORRIS: IRR proposes shift from race to value in procurement - Business Day

It follows that since 1994 something has happened to produce a “better” outcome. Hasn’t it?

In the past week alone, three triggers have prompted me to think less about enduring poverty than the scale of wealth.

First was the launch of draft legislation by the Institute of Race Relations (IRR) – the Value For Money Bill – that demonstrates the feasibility of the state’s ditching race-based choices in spending its R1-trillion-a-year procurement budget to one based strictly on value for money.

Then came Business Day’s reporting on BEE commissioner Tshediso Matona mounting “a vigorous defence of broad-based BEE … arguing that economic redress is not only vital for growth but essential to restoring the dignity of black people”. (“Commissioner Matona defends BEE as moral and an economic imperative amid backlash”, October 29).

Finally, there was Daily Friend columnist Ivo Vegter’s remarks in a piece on the wealthy in which he wrote: “Whether your income depends directly on how inclined the rich are to spend their money, or indirectly on their investment holdings or consumption patterns, most of us have a direct interest in how well-off the wealthiest parts of society are”.

But let’s return to the IRR’s draft bill and the argument for scrapping a system that has, doubtless, produced vast wealth for some – and possibly a dream for many – but is central to the crippling of the SA economy, limiting growth, optimism and investment in an increasingly competitive and dynamic global setting.

The Value for Money Bill replaces the complex points-based preference system with a single, transparent standard: the tender that offers the best value over its full life cycle wins. It retains limited and transparent tie-break preferences such as proven delivery, employment intensity, financial soundness and a three-year transitional race-based tie-break, for cases where bids are equal on value.

In a chat last week the bill’s author, IRR fellow Gabriel Crouse, said the idea behind a transitional tie-breaker mechanism – as used in the US too – was to “smooth the transition from hard preference to no preference, reducing disruption”.

Given that since 2017 63% of procurement spend to the private sector has gone to majority black-owned businesses, the “idea of cutting BEE premiums is not to cut out those businesses, but to phase them into more competitive pricing”.

Ultimately, the argument is, only a dynamic, competitive and thus growing economy is capable of benefiting all economic participants. Without the dynamism open, credible competition brings wealth, remains limited and, for most, merely tantalising.

Noted liberal commentator Adrian Wooldridge wrote two years ago that a “never-ending battle rages within the soul of capitalism – between the liberal values that ensure its success in the long run (competition, meritocracy, individualism) and the pursuit of short-term advantage (controlling markets, seducing governments, debasing culture)”.

If liberalism was impossible without capitalism, he wrote, “you can certainly have capitalism without liberalism”.

For South Africans the power of other people’s riches must never be underestimated as the lodestar of the have-nots, but their economic redemption lies not in wealth’s symbols but in how it is created.

Morris is head of media at the SA Institute of Race Relations.