National Treasury’s Draft Regulations Put Race, Ownership and Procurement Under Fresh Public Scrutiny

South Africa’s proposed public procurement regulations have placed race, ownership and preferential procurement firmly back in the spotlight, with critics questioning whether the government’s latest approach could exclude some businesses from competing for state contracts.

The controversy follows the publication by National Treasury of the Draft General Public Procurement Regulations, 2026, on April 16. The regulations are intended to give effect to the Public Procurement Act, 2024, and establish mechanisms, thresholds and conditions for preferential procurement. They include provisions dealing with set-asides, pre-qualification and mandatory subcontracting.

The draft has now attracted criticism from business organisations and commentators who argue that some of its requirements go beyond preferential treatment and could amount to direct exclusion based on ownership and race.

Among those raising the issue is National Employers’ Association of South Africa CEO Gerhard Papenfus, whose concerns were reported by Newsday. YouTube commentator Renaldo has subsequently highlighted the issue, asking whether the proposed regulations amount to discrimination against white-owned businesses.

The question is not simply whether South Africa should pursue economic redress. It is whether the method being proposed creates a new form of exclusion — and whether that exclusion can be justified within South Africa’s constitutional procurement framework.

What Do The Draft Regulations Propose?

The proposed regulations introduce different procurement requirements depending on the value and nature of a government contract.

For contracts below R20 million, the regulations provide for set-asides involving specified categories of suppliers. These include black people, black women, women, people with disabilities, military veterans and certain qualifying enterprises and geographic categories.

Under the proposed framework, businesses seeking to qualify for particular set-asides may have to meet a 100% ownership requirement relating to the category concerned.

This is the provision that has generated much of the controversy.

Papenfus argues that the requirement would effectively exclude businesses with any white male ownership from certain procurement opportunities. He has pointed to the example of a company that is 90% black-owned but would nevertheless fail to qualify for a category requiring 100% ownership. He has also questioned what happens to companies that have complied with BEE requirements for many years but do not meet the new ownership threshold.

The draft regulations do not, however, mean that every government contract below R20 million is automatically unavailable to every business that does not meet a particular racial ownership category. The set-aside provisions contain conditions concerning the availability of qualifying suppliers and the applicable procurement category.

That distinction is important, but it does not remove the central question surrounding the ownership requirement.

Why Is The 100% Ownership Requirement Significant?

South Africa has used preferential procurement and BEE policies for years as mechanisms intended to address the economic consequences of apartheid and historical exclusion.

The proposed regulations take that principle into a more specific procurement environment.

For certain set-aside categories, ownership is not simply a factor that can improve a company’s position against competing bidders. It can become a condition for eligibility.

That creates a fundamental question for business owners:

If two companies are capable of supplying the same product or service, can one be prevented from competing for a particular state contract because of the racial composition of its ownership?

Renaldo’s argument is that this is precisely what the regulations risk doing.

In his YouTube commentary on the Newsday report, he questioned how such a policy could be regarded differently from other forms of race-based discrimination simply because it is being introduced as part of a redress or transformation programme.

He also raised the position of younger business owners who were born after apartheid and had no involvement in the policies of the past.

The argument is straightforward: if an individual starts a business decades after apartheid and is subsequently excluded from a government procurement opportunity because he or she does not belong to the prescribed racial ownership category, what principle determines whether that is legitimate redress or discrimination?

The Government’s Transformation Objective

The government’s position needs to be considered alongside those concerns.

Preferential procurement is not a new concept in South Africa. The country’s constitutional framework specifically provides for procurement policies that may advance people disadvantaged by unfair discrimination.

The Public Procurement Act, signed into law in July 2024, provides the legislative framework for the new procurement system. The draft regulations are intended to bring that framework into operation.

National Treasury has said the regulations are designed to establish the mechanisms and thresholds necessary for preferential procurement while also supporting categories of suppliers that have historically been disadvantaged.

The policy objective is therefore not hidden.

The question is whether the specific mechanism chosen to achieve that objective is proportionate, effective and capable of meeting the constitutional requirements governing public procurement.

When Does Preference Become Exclusion?

This may be the central issue emerging from the debate.

There is a significant difference between giving a qualifying business an advantage during a procurement process and preventing another business from entering that particular procurement process altogether.

South Africa’s procurement system is required to operate according to principles including fairness, transparency, competitiveness and cost-effectiveness, while the Constitution also permits measures designed to advance people disadvantaged by unfair discrimination.

That creates a balancing exercise.

How far can government go in using race and ownership as procurement criteria before preferential procurement becomes exclusionary?

And how should that balance be applied where the excluded business may have a lower price, greater technical expertise or a stronger record of delivering the required service?

Those questions are likely to become increasingly important as the new procurement framework progresses.

The Economic Question

There is also an economic dimension that extends beyond the race debate.

Papenfus has warned that restricting the supplier pool could increase costs and ultimately affect taxpayers and service delivery. He argues that fewer eligible suppliers could mean less competition, potentially resulting in higher prices.

That concern is not limited to Papenfus.

Business Leadership South Africa CEO Busi Mavuso has separately questioned the economic impact of the proposed regulations, arguing that National Treasury has not produced an economic impact assessment demonstrating what the new system will cost or how effective it will be.

Mavuso has raised particular concerns about specialised sectors, where the pool of companies capable of delivering technically complex projects may already be limited.

Her argument is that transformation remains an important objective, but that procurement policy must also consider whether sufficient qualifying suppliers exist to maintain competition and deliver projects efficiently.

That introduces another question:

What happens when the policy objective and the practical realities of a particular market collide?

Is This About Race Or Redress?

This is where the political debate becomes particularly difficult.

Critics describe the proposed provisions as racial discrimination because eligibility can depend on the racial composition of a company’s ownership.

Supporters of preferential procurement are likely to argue that the provisions form part of a broader programme of economic redress intended to address structural inequalities that remain decades after apartheid.

Both positions can be stated without ignoring the underlying evidence.

South Africa’s history is relevant to the policy.

But so is the present-day position of business owners who had no involvement in apartheid and are nevertheless required to operate within a procurement system that continues to use racial classifications.

The difficult question is whether historical disadvantage can justify contemporary exclusion indefinitely, and if so, what criteria should determine when such measures are no longer necessary.

What Happens To Businesses That Do Not Qualify?

For a small business owner, the debate is not theoretical.

A company may have invested years in building its capabilities, employing staff, paying taxes and supplying private-sector clients. It may have previously participated in government procurement under the existing BEE framework.

Under the proposed system, however, some procurement opportunities could depend on whether the business satisfies a particular ownership category.

That raises questions about the long-term consequences for companies that fall outside those categories.

Could they simply redirect their businesses toward private-sector markets?

Would they be encouraged to restructure ownership?

Could the system encourage genuine partnerships between established businesses and qualifying enterprises?

Or could it create incentives for ownership arrangements designed primarily to satisfy procurement requirements?

The answers will matter not only to companies affected by the rules but also to the state institutions responsible for implementing them.

A Wider Debate About South Africa’s Procurement Future

The draft regulations form part of a much broader transformation of South Africa’s public procurement system.

They are not yet simply another set of rules already operating across government. They were published for public comment as part of the process of bringing the Public Procurement Act into effect.

That consultation process provides an opportunity for government, business organisations and members of the public to challenge, support or propose changes to the regulations.

The controversy surrounding the 100% ownership requirements may therefore be only the beginning of a much larger debate.

There are legitimate questions about historical economic exclusion.

There are also legitimate questions about whether modern procurement rules should exclude individuals from opportunities because of their racial classification or ownership structure.

There are questions about competition.

There are questions about cost.

There are questions about transformation.

And there are questions about whether the state can achieve all of these objectives simultaneously without compromising one in pursuit of another.

The Questions South Africa Now Has To Answer

The debate sparked by the draft regulations ultimately goes beyond whether someone agrees with Renaldo, Papenfus, National Treasury or the broader transformation agenda.

The evidence shows that the proposed framework contains ownership requirements linked to specific preferential procurement categories.

The argument over what those provisions mean is now moving into the public domain.

The important questions are therefore perhaps more complicated than simply asking whether the regulations are “racist” or “transformative.”

Does a 100% ownership requirement constitute legitimate economic redress, or does it cross the line into exclusion based on race?

Should a business that is 90% black-owned really be excluded from a category requiring 100% ownership?

Should a business with decades of BEE compliance nevertheless be excluded from a particular tender because its ownership does not meet the prescribed category?

How should government balance transformation against competition, price, and service delivery?

And perhaps most importantly, how long can race-based economic measures remain necessary before South Africa begins asking whether they are creating new forms of exclusion rather than dismantling old ones?

Those are questions that National Treasury, political parties, business organisations and the public will ultimately have to confront as South Africa’s new procurement framework takes shape.