PREFERENTIAL PROCUREMENT POLICY

JULY 2005

Introduction 

With the emphasis being placed on the empowerment of historically disadvantaged individuals in the economy, Applied Pneumatics S.A. (Pty) Ltd., including Everlee Engineering has developed this policy to streamline company expenditure and clearly outline processes and restrictions on procurement with regards Black Economic Empowerment and Preferential Procurement. This document specifically distinguishes between Black Economic Empowerment (BEE) and Preferential Procurement, as in addition to BEE requirements; preference will also be given to enterprises owned by women, youth and persons with disabilities.

 Definitions

 This document provides a framework and guideline for the procuring of services within the company. It should be used within the context of the broader BEE strategy developed for the company. The following definitions will assist with the common understanding of concepts and terminology. 

1. Black

Black is defined within the Broad Based Black Economic Empowerment Act 2004 (BBBEE) as encompassing Asians, Coloureds and Indigenous Africans in South Africa. 

2. Black Entities

·        A “black enterprise” is one that is 50.1% owned by black persons and where there is substantial management control. Ownership refers to economic interest while management refers to the membership of any board or similar governing body of the enterprise.

·        A “black empowered enterprise” is one that is at least 25.1% owned by black persons and where there is substantial management control. Ownership refers to economic interests. Management refers to executive directors. This is whether the black enterprise has control or not.

·        A “black woman-owned enterprise” is one with at least 25.1% representation of black women within the black equity and management portion.

·        A “community or broad-based enterprise” has an empowerment shareholder who represents a broad base of members such as a local community or where the benefits support a target group, for example black women, people living with disabilities, the youth and workers. Shares are held via direct equity, non-profit organizations and trusts.

·        A “co-operative or collective enterprise” is an autonomous association of persons who voluntarily join together to meet their economic, social and cultural needs and aspirations through the formation of a jointly-owned enterprise and democratically controlled enterprise.  

3. Preferred Supplier

In addition to existing technical compliance and preference requirements, the company will also be evaluating suppliers based on their BEE status. The following categories of suppliers will exist: 

Category A: Excellent Contributor                               -            > 80%

Category B: Good Contributor                               -            > 65% but < 79%

Category C: Satisfactory Contributor                   -            > 45% but < 64%

Category D: Non contributor                                -            < 45%

Applied Pneumatics (Pty) Ltd., including Everlee Engineering will utilize the above to categorize the suppliers. Preference will be given according to the status herein as well.  

It must be noted that the evaluation of tenders and submissions will not only include BEE but all existing criteria as well. Thus, each evaluation process will have a schedule of weighting which will be used to evaluate suppliers.  

Policy Framework 

1. Applied Pneumatics (Pty) Ltd., including Everlee Engineering will give highest preference to a Category A supplier, who also meets the technical requirements and other existing requirements of the company.
2. No price compromises will be accommodated in the preferential procurement process. All quotations will be evaluated with cost reduction and business efficiency in mind.
3. All quotations will also be evaluated noting the Enterprise Development Programme as a mechanism to get black suppliers ready to supply the company. Where such a possibility exists, black suppliers will be identified to enter the Enterprise Development Programme and will be reconsidered once the complete intervention has been assessed. A formal assessment will take place by the manager responsible.
4. No purchasing opportunity, whether BEE or not, will be considered without the perusal and comment of the Managing Director. All possible ideas, opportunities and proposals must be submitted to the Manager Director for perusal, comment and approval.
5. Disciplinary action can and will be taken against any personnel approaching outside stakeholders formally on behalf of the company without prior approval or verification by the Managing Director.

In addition to the above, a minimum target for preferential procurement will be identified during budgeting and evaluation of Management. This policy will be driven by the Managing Director and will be evaluated by a team established by the Management Committee.