Barring any last minute changes, South Africa is set to introduce a new law that will require state agencies and paratastals to sub-contract to Small, Medium, Micro-Enterprises Enterprises (SMMEs) a minimum of 30% of the value of every contract for contracts that are above R30 million ( $2 mn). At the second annual South Africa Investment Conference, Cyril Ramaphosa, South Africa’s President said that this new piece of legislation would be known as the Public Procurement Bill.

“Under the soon-to-be-finalised Public Procurement Bill, every organ of state that receives a tender must sub-contract a minimum of 30% of the value of the contract to SMMEs that are at least 51% black-owned,” Ramaphosa said. 

Ramaphosa said that this public procurement is being used to promote local production, and that SMMEs will benefit from designated products when they participate in public procurement systems. 

A New Tax Regime For SMMEs Too

He added that the tax regime for SMMEs is also being simplified.

“An example of this is the requirement for annual rather than biannual tax returns. Grants received by SMMEs are also tax-exempt,” he said.

“Enhancements have also been made to the venture capital company tax regime to encourage investment in small businesses and junior mining companies.”

Comments

With this proposed legislation, South African startups should be gearing up for some of the biggest deals ever on the continent. In simple terms, for every government contract awarded to any organs of the South African government, startups would get about 30% of the whole contract sum, provided that the total value of the contract is up to $2mn. This would no doubt boost the South African startup ecosystem, and encourage more startups to spring up.

Startups in South Africa are therefore advised to keep track of the proposed legislation and watch when it becomes law. This is also an opportunity for them to position their businesses, get the necessary business documents ahead of the opportunities to be presented by the proposed legislation. 

Apart from South Africa, Nigeria recently issued new regulations — Guidelines for Nigerian Content Development in Information and Communications Technology as amended — that require all indigenous or Nigerian Companies who have secured IT projects or contracts with any Nigerian Federal Public Institution or Government owned companies either fully or partly, of which the gross value of the project is Five Hundred Million Naira (N500,000, 000, 00)or above to engage on the project, a Nigerian startup or incubation team for the purpose of R&D on the project, as well as engage Nigerian graduates with IT background as interns on the project.

The Guidelines apply to all Nigerian Federal Ministries, Departments and Agencies, Federal Government Owned Companies(either fully or partially owned) Federal Institutions and Public Corporation, Private Sector Institutions, Business Enterprises and Individuals carrying out business within the Information and Communications Technology sector in Nigeria.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world