SA procurement rule change will be a boost for startups

Startups that do work for the government are in for a major boon with a new procurement rules coming into effect this week that will see 30% of state procurement directed to small enterprises, says Silicon Cape director Alexandra Fraser.

Fraser says the revised Preferential Procurement Regulations, which were gazetted in January and came into effect on 1 April, would provide a “stepping stone” for small firms and startups that wish to do work for government.

They make provision for government departments, municipalities and state agencies to ensure that those bidding for contracts of R30-million or more subcontract at least 30% of the value of the contract to small businesses.

Under the new regulations the threshold at which 20 preference points are applied to contracts has been increased from contracts valued at R1-million to those valued at up to R50-million.

Fraser says the subcontracting clause in the new rules would allow startups to build strategic partnerships with large firms and to develop tech solutions for the government.

The revised Preferential Procurement Regulations would provide a ‘stepping stone’ for small firms and startups that wish to do work for government

The state currently spends about R500-billion on goods and services meaning the new rules could direct R150-billion in procurement spend to small enterprises.

New procurement rules would provide a “stepping stone” for startups

Nelson Veerasamy, the centre manager for the Softstart Business and Technology Incubator, believes there will be a number of opportunities available for tech startups, particularly with the growing move towards digitalisation in cities. The incubator, based in Midrand, currently has 42 startups and companies based at the incubator.

Veerasamy urged startups to meet the necessary compliance requirements, including being tax and BEE compliant and registered with the National Treasury’s Central Supplier Database.

In February the Minister of Small Business Development Lindiwe Zulu said much work still remained to ensure that implementation happens within the timelines set by the National Treasury and called upon departments and agencies to work with National Treasury and other stakeholders to ensure that this dispensation is implemented “effectively and timeously”.