Bureaucracies bending the rules: State capacity in the implementation of preferential procurement in South Africa

Effective policy implementation is foundational to development and depends crucially on a competent and committed bureaucracy. Bureaucratic failures can arise from both imperfect capabilities and incentive misalignment—dimensions of state capacity that often coexist and shape policy outcomes through distinct channels. Using transaction-level administrative procurement data, this paper documents two ways in which local government departments failed to implement an economy-wide policy in South Africa that granted suppliers bid preferences of up to 25 per cent, depending on their contribution to Black economic empowerment. Using bunching methods, we show that departments systematically manipulated tender values to avoid the threshold at which bid preferences became mandatory. Event study analyses reveal no differential change in unit prices or contracts awarded to targeted suppliers above the threshold, indicating that the rule was largely unenforced. While these implementation failures h