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  • best practice case studies from south africa

    private and public procurement and the social economy project

  • best practice case studies iN sOutH aFrica

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    Copyright International Labour Organization 2016

    First published 2016

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    ILO

    Best Practice Case Studies

    Private and Public Procurement and the Social Economy Project

    Geneva, International Labour Office

    ISBN: 9789221309864 (print)

    9789221309871 (web pdf)

    The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers.

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    Photographs: Mthente Research and Consulting Services

    Printed in South Africa

    cover photograph | greater uitenhage sewing co-operative

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    foreword

    The social economy has gained visibility at international, national and local levels. In South Africa, social economy enterprises have grown in number, with increased interest in the sector as a way to provide decent employment and social protection. Both the governments New Growth Path and the South African Decent Work Country Programme identify the development of this economy as having the potential to create jobs.

    The National Growth Path, adopted in late 2010, specifically refers to the need to encourage state procurement from, and service delivery through, organisations in the social economy. The South African Decent Work Country Programme was drawn up by organised business and labour, community and government, in consultation with the ILO and is governed by the National Economic Development and Labour Administration Council (Nedlac). It also identifies developing the social economy as a strategic way to create decent jobs in sustainable enterprises.

    Social enterprises can be defined as enterprises that have a social purpose, but are run on business principles, and reinvest any profit or surplus into the social purpose of the entity. In response to promoting the sustainability of this sector, the Government of Flanders funded the Public, Procurement and the Social Economy project in South Africa. This focused on both the demand side (clarifying and influencing the interpretation of procurement regulations, and creating greater procurement opportunities) and the supply side (building the capacity of social economy enterprises to respond to these opportunities) of public procurement from the social economy.

    This is being following by a second phase, the Private and Public Procurement and the Social Economy (PPPSE) Project. The PPPSE Project supports social economy businesses to take advantage of the regulatory space for procurement of their goods and services through both government and private sector businesses. It does this with a mix of advocacy, advisory and training services targeted at procurement officials in government and public and private sector business, and through capacity building support for owner-managers of social enterprises. The project works closely with provincial departments of economic development and a range of local partners to achieve its objectives. The main geographic focus is on social enterprises in the KwaZulu-Natal and Free State Provinces.

    To inform its work in the sector, the ILO has undertaken research on a number of aspects during both phases, including a review of the legal and policy framework, and a scoping study on the access to finance for social entrepreneurs.

    This report showcases six case studies of private and public procurement and the social economy in South Africa. The case studies also look at the impact of procurement strategies on enterprises and their communities. The main objective is to develop knowledge and guidance on best practices of public and private procurement from the social economy.

    Dr Joni Musabayana

    Director (a.i.) | International Labour Organization | Decent Work Team for Eastern and Southern Africa & ILO Country Office for South Africa, Botswana, Lesotho and Swaziland

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    abbreviations

    BBE Black Economic EmpowermentBBBEE Broad-Based Black Economic EmpowermentCBO Community Based OrganisationCIS Co-operative Incentive SchemeCSR Corporate Social ResponsibilityDPW Department of Public WorksDSD Department of Social Developmentdti (the) Department of Trade and IndustryEPWP Expanded Public Works ProgrammeGUSCO Greater Uitenhage Sewing Co-operativeHBRC Hout Bay Recycling CooperativeIDT Independent Development TrustILO International Labour OrganizationMOU Memorandum of UnderstandingNEDLAC National Economic Development and Labour Administration CouncilNGO Non-Governmental OrganisationNGP New Growth PathNPC Non-profit companyNPO Non-Profit OrganisationNYDA National Youth Development AgencyOVC Orphans and Vulnerable ChildrenPO Procurement OfficerPPA Preferential Procurement ActPPPSE Private and Public Procurement and the Social EconomyRDP Reconciliation and Development ProgrammeRFP Request for ProposalRFQ Request for QuotationSARS South African Revenue ServiceSASSA South African Social Security AgencySeda Small Enterprise Development AgencySCM Supply Chain ManagerUDDI Uitenhage Despatch Development Initiative

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    contents

    Executive summary ........................................................................................................6

    Introduction ..................................................................................................................9

    South African case studies

    Greater Uitenhage Sewing Co-operative .................................................................10

    Lesedi Manufacturing Primary Co-operative ..........................................................16

    Itekeng Basadi Setsoto ............................................................................................22

    Masisizane Womens Housing Co-operative ..........................................................30

    Deaf Hands @ Work .................................................................................................34

    Hout Bay Recycling Cooperative ..............................................................................38

    Analysis ..................................................................................................................43

    Conclusions ..................................................................................................................47

    Annexure 1: Case study selection framework ..............................................................49

    References ..................................................................................................................50

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    executive summary

    The six case studies undertaken for this research detail public and private procurement from the social economy in South Africa. Case studies were selected using criteria of success identified via desktop review.

    The five thematic areas in the selection framework included:

    l Fits within the ILO definition of a social enterprise

    l Location of the enterprise within the market

    l Sustainability of the enterprise

    l Contribution to extended value chains

    l Provision of decent work

    Although the enterprises selected were eager to participate, and on paper matched the necessary criteria, it became evident during the fieldwork that not all the participants could provide the technical information required. However, rather than choosing to omit these case studies a decision was made to continue especially if the case study could provide key lessons and highlight the gaps where they exist.

    The case studies selected are best practice case studies that focus on the factors likely to contribute to success or failure; the primary aim being to identify techniques that can be replicated elsewhere.

    Variants of the best practice approach include:

    l Implementation case study Focuses on the change management aspects of putting a practice into effect. The focus is on each major stage of the process, not necessarily the long-term outcome.

    l Success case study Looks at successful practices, in terms of outcomes, and involves isolating success factors and likely causes of failure.

    l Failure case study Looks at unsuccessful practices, with the intention of generating ideas about the practices that could have been implemented to prevent problems from happening or make recommendations for recovery (CAPAM, 2012: 3).

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    The case studies show the important role of the private and public sectors in supporting the growth and sustainability of social economy enterprises, through contractual agreements for goods or services as well as through mentoring and enterprise development initiatives. By procuring goods or services from these social economy enterprises, the private and public sector have enabled them to create jobs and opportunities for income generation within their local communities, thereby increasing the involvement of beneficiaries in their local economy. Furthermore, through the work conducted by these enterprises, beneficiaries become more actively involved in the development of their communities, promoting greater social cohesion and social inclusion.

    opportunities for decent work through pppse

    Decent work is about both social and economic advancement, and therefore involves the promotion of social inclusion and the creation of sustainable livelihoods. With this in mind, and taking into consideration the findings which emerged from the case studies, the social economy has significant potential to provide opportunities for decent work. However, to achieve this requires active participation from both the private and public sectors, in facilitating the involvement of social enterprises in procurement and assisting them throughout the process with support services..

    | hout bay recycling cooperative

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    procurement challenges

    The most common challenges cited were related to compliance and registration issues (i.e. registering as a legal entity; obtaining a South African Revenue Service (SARS) Tax Clearance certificate; registering on supplier databases.) as well as issues related to business administration and financial management (i.e. writing proposals; filling in tender paperwork; managing organisational finances).

    The initial problem for many social enterprises is deciding on which legal form to take. As there is no legal structure for social enterprises at present, enterprises have to decide which form is best suited to their objectives. Enterprises may not always be knowledgeable about the different legal structures available to them, and therefore may not always select the most beneficial form for their objectives and needs. Registration on supplier databases was also cited as a complicated and time-consuming process. As there is no central database on which to register, enterprises are required to register multiple times. Obtaining a Broad-Based Black Economic Empowerment (BBBEE) certification was also highlighted as a difficult challenge.

    Furthermore, the lack of sufficient administration skills makes the procurement process difficult for many enterprises.

    Challenges are also encountered by the procurer. The ability of social economy enterprises to efficiently and effectively manage themselves and their subsequent capacity to deliver on time was raised as a concern. Furthermore, their management structures and processes may not be adequate to ensure the enterprise remains operational. Procurement Officers (POs) and Supply Chain Managers (SCMs) have to ensure that value for money is achieved and that the goods or services paid for are satisfactorily delivered. Accountability is a major consideration, as are issues of legality.

    conclusions

    Key conclusions that emerged from the study include:

    l The social economy has the potential to create jobs, improve service delivery and foster greater social cohesion and social inclusion.

    l Procurement policies and legislation are alienating and difficult.

    l There is not enough conversation encouraging engagement with, and development of, the social economy.

    l Support services, both financial and non-financial, are essential for the establishment and sustainability of social economy enterprises.

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    introduction

    The case studies in this report aim to highlight good practices where the government and private sector are procuring from social enterprises in a sustainable way, and the impact of procurement strategies on enterprises and their communities. The main objective of the study was to develop knowledge and guidance on best practices from public and private procurement from the social economy.

    methodology

    A multi-pronged research methodology was used to conduct the case study research. This included:

    l An inception phase, to develop a shared understanding of the desired outcomes and objectives of the project.

    l Background data collection, including a desktop review, regulatory analysis and stakeholder interviews.

    l The selection of nine potential case study candidates, based on criteria of su...

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