The preferential procurement regulations stipulate that where feasible‚ organs of state must apply subcontracting conditions to contracts valued at more than R30-million. These conditions are that 30 percent of the value of the contract be subcontracted to designated groups‚ which include majority black-owned small and emerging enterprises‚ which can be run by women‚ youth‚ the disabled‚ rural enterprises‚ military veterans or cooperatives.
Public tenders have to specify whether they include prequalifying criteria‚ which are intended to advance designated groups. Those awarded a contract may only enter into a subcontracting arrangement with the approval of the organ of state.
Treasury noted in its statement that the demands for cash payments ran counter to Section 217 of the Constitution‚ which demands that when an organ of state in the national‚ provincial or local sphere of government procures goods and services‚ it must do so in accordance with a system that is fair‚ equitable‚ transparent‚ competitive and cost-effective.