Procurement is the strategic, end-to-end process an organisation uses to find, negotiate with and buy from external suppliers — whether it needs goods, services or works.
Done well, procurement saves money, reduces risk and makes sure the business gets the quality it needs, on time. In South Africa it also plays a central role in compliance and transformation, through the PFMA for public entities and preferential procurement under B-BBEE.
Types of procurement
Direct procurement
Buying the raw materials, components and stock that go directly into the products or services a business sells.
Example: A manufacturer buying steel, packaging or electronic components.
Indirect procurement
Buying the goods and services a business needs to run day to day, which do not form part of the final product.
Example: Office supplies, software subscriptions, cleaning, security or facility maintenance.
Goods vs services procurement
Goods procurement covers physical items that can be inspected and stored. Services procurement covers external labour and expertise, where quality is measured through performance and service levels.
Example: Buying forklifts (goods) versus contracting a forklift maintenance provider (services).
Public procurement
How government departments, municipalities and state-owned entities buy goods, services and works from the private sector using public funds — under strict legal rules.
Example: A public entity running a tender for IT support, governed by the PFMA.
Procurement vs purchasing
Procurement
The full strategic lifecycle: identifying needs, market research, supplier sourcing and vetting, negotiation, contracting, quality control and long-term supplier relationship management.
Purchasing
A transactional part of procurement: placing orders, receiving deliveries and processing payments. Purchasing answers “how do we buy it?” — procurement also asks “should we, from whom, and on what terms?”
The procurement process, step by step
- 1
Identify the need
Define exactly what is required — specifications, quality standards, quantities, budget and delivery dates.
- 2
Source and vet suppliers
Research the market, issue requests for quotation (RFQs) or proposals (RFPs), and check that suppliers are compliant, capable and correctly classified for B-BBEE.
How ProcureWise helps: Supplier vetting - 3
Negotiate and contract
Agree price, delivery schedules, legal terms and service level agreements (SLAs) that protect value for the whole life of the contract.
How ProcureWise helps: Negotiation & contracts - 4
Purchase and receive
Issue a purchase order, inspect what is delivered, and run a three-way match between the purchase order, delivery note and invoice.
How ProcureWise helps: Procure-to-pay mapping - 5
Pay and review
Pay the supplier on agreed terms, then review their performance so the next buying decision is better informed.
What does a procurement department do?
A procurement department owns how the organisation buys. It writes and enforces the procurement policy, sources and vets suppliers, runs quotation and tender processes, negotiates and manages contracts, tracks supplier performance and spend, and makes sure every purchase complies with legislation and internal controls. Smaller businesses often don’t have a dedicated department — which is where an external procurement consultant can fill the gap.
Procurement in South Africa
Section 217 of the Constitution requires organs of state to contract for goods and services in a way that is:
- Fair
- Equitable
- Transparent
- Competitive
- Cost-effective
Public entities must also follow the Public Finance Management Act (PFMA), which is why they need PFMA-aligned procurement policies. In the private sector, preferential procurement and enterprise and supplier development (ESD) are key elements of the B-BBEE scorecard — so who you buy from directly affects your B-BBEE level.
Need help with procurement?
ProcureWise Consulting has over 20 years of procurement experience helping organisations in Alberton, Johannesburg, Pretoria and across Gauteng build procurement that is compliant, cost-effective and transformation-focused.
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