Affirmative procurement is what made BEE a business imperative.

Before the passing of the Broad-based BEE Act, the Employment Equity Act and Skills Development Act were enacted. The effect on companies was major but the buy-in was not as strong as the government would have liked it to be. Some companies even budgeted for the fines of not meeting the requirements of these Acts. For others the skills development levy was and is still seen as the tax that needs to be paid as part of doing business without worrying too much about the underlying training that is required under the Act. These Acts paved the way for the Broad-based BEE Act. Government in its 1997 Green Paper on public sector procurement reform released by Ministers Manuel and Radebe came up with the novel idea that would revolutionise the way business is done in South Africa. This idea revolved around the leverage government has in driving economic development and SMME development. In 2000 Minister Manuel released the Preferential Procurement Policy Framework Act. In the recent past black businesses relied contracts from the public sector for their survival which increased their business reliance on this sector. The market access for black businesses was limited within the private sector. An analysis of the top 100 JSE listed companies in 1992 and 1997 shows that there was a low level of interest in buying from black business as shown from their disclosures in their financial statements. Only 3 percent of the Top 100 mentioned their policy on affirmative procurement in 1992 and 4 percent in 1997. It is only in 2002 that 42% of the Top 100 disclosed publicly their policy on affirmative procurement. However when it comes to actual spend only 1 percent of the companies spent some money on black businesses in 1992 and only 4 percent in 1997 and 2002. These statistics show that there hasnt been an increased focus on acquiring goods and services from black business in the private sector. Then came the Broad Based BEE Strategy in 2003 which firmly underscored the importance of affirmative procurement and allocated a weighting of 20 percent to it. Affirmative procurement is important because it has a trickle down effect. For example, a public sector entity may say that if companies want to conduct business with it they need to show the contribution they have made to Broad-based BEE, which includes how much they have bought from black companies and those companies that contribute meaningfully to Broad-based BEE. These first tier suppliers then need to see how much their suppliers buy from BEE companies in order for them to get affirmative procurement points on their BEE scorecard. The chain goes down to numerous tiers until it affects all companies within the economy. If the suppliers do not contribute to BEE and also buy from BEE companies they present a threat to their clients who may not be able to score any affirmative procurement points. The implications of the trickle-down effect of affirmative procurement is that it increases market access of the black companies and ensures their sustainability by decreasing heavy reliance on one sector of the economy. In reality we have seen the power of the procurement leverage in operation and this ensures that all industries in the South Africa are affected by BEE. This realization has moved companies from the denial stage through the anger stage down to the bargaining stage of the BEE process. Most companies in South Africa are still in the bargaining

stage of BEE where the bottom line for them is, What is the little that I can do, regardless of ultimate effect and quality, that would earn us most points on the BEE scorecard? This feeling is reflected by the levels of fronting that takes place. Fronting gives companies fleeting relief from the heat of the trickle down effect of affirmative procurement. The cost of having this fleeting relief is immense because it just generates more heat that could result in the company being out of business when it gets put on a potential black list of fronting companies. Ultimately companies have to move from the bargaining stage to the acceptance stage because affirmative procurement is essential for our economic growth which is what will accelerate the BEE process. The bridge between the bargaining and acceptance stage is the depression stage which is inevitable. It is important to acknowledge the depression and use it to move to real acceptance for this process to yield the desired results.