Automated Summary
Key Facts
Afribusiness NPC challenged the Preferential Procurement Regulations, 2017 (2017 Regulations) promulgated by the Minister of Finance, arguing the Minister exceeded his powers under section 5 of the Preferential Procurement Policy Framework Act (Framework Act) and that the regulations violated constitutional principles of fair and equitable public procurement. The Supreme Court of Appeal upheld the appeal, declaring the 2017 Regulations inconsistent with the Framework Act and invalid. The court found the regulations improperly introduced pre-qualification criteria that disallowed tenderers from competing based on race, gender, and disability without a guiding framework, contravening the constitutional requirement for procurement to be fair, equitable, transparent, competitive, and cost-effective. The declaration of invalidity was suspended for 12 months to allow the Minister to rectify the defects.
Issues
- The court considered the appropriate remedy after declaring the 2017 Regulations inconsistent with the Framework Act and Constitution, ultimately suspending the invalidity declaration for 12 months to allow the Minister to correct the regulations.
- The court assessed the legality of pre-qualification criteria in the 2017 Regulations (e.g., requiring tenderers to meet specific B-BBEE status or ownership thresholds before evaluation) under the Framework Act and Constitution, determining they conflicted with the Act's points-based system and constitutional procurement principles.
- The court evaluated whether the Minister of Finance exceeded his powers under s 5 of the Preferential Procurement Policy Framework Act (Framework Act) by promulgating the 2017 Regulations, which introduced pre-qualification criteria inconsistent with the Act's mandate for a preference point system and constitutional principles of fair, equitable, transparent, competitive, and cost-effective procurement.
Holdings
- The declaration of invalidity is suspended for 12 months from 2 November 2020 to allow the Minister of Finance to remedy the defects and align the regulations with the legal framework.
- The 2017 Preferential Procurement Regulations are declared invalid and inconsistent with the Preferential Procurement Policy Framework Act and the Constitution, as they permit pre-qualification criteria that conflict with the mandated framework for fair and equitable public procurement.
- Regulation 10 of the 2017 Regulations, which addresses deadlock in scoring by prioritizing B-BBEE, is upheld as lawful and not inconsistent with the legal framework.
- The appeal is upheld with costs, overturning the High Court's dismissal of the application challenging the 2017 Preferential Procurement Regulations.
Remedies
- The declaration of invalidity is suspended for 12 months from the date of the judgment (2 November 2020) to allow the Minister to remedy the defects in the regulations.
- The appeal is upheld with costs, and the court a quo's order is set aside and replaced with the following remedies: declaration of invalidity of the 2017 Regulations and a 12-month suspension of that declaration.
- The Preferential Procurement Regulations, 2017 are declared inconsistent with the Preferential Procurement Policy Framework Act 5 of 2000 and invalid, replacing the court a quo's order.
Legal Principles
The court declared the Preferential Procurement Regulations 2017 invalid, holding that the Minister of Finance exceeded his powers under s 5 of the Framework Act by creating pre-qualification criteria inconsistent with the statutory framework. This concluded the Minister acted ultra vires, violating the doctrine of legality and the constitutional requirement that public procurement systems must be fair, equitable, transparent, competitive, and cost-effective. The judgment emphasized that the Framework Act's mandate under s 217(3) of the Constitution requires regulations to align with the prescribed preference point system, and the Minister cannot override this through discretionary provisions.
Precedent Name
- Rainbow Civils CC v Minister of Transport and Public Works, Western Cape
- Mosene Road Construction v King Civil Engineering Contractors
- Weber-Stephen Products Co v Alrite Engineering (Pty) Ltd and Others
- Minister of Home Affairs and Another v Public Protector of the Republic of South Africa
- Chairperson: Standing Tender Committee and Others v JFE Sapela Electronics (Pty) Ltd and Others
- Affordable Medicines Trust and Others v Minister of Health and Others
- Grinaker LTA Ltd v Tender Board (Mpumalanga)
- Omar and Others v Minister of Law and Order and Another, Fani and Others v Minister of Law and Order and Others; State President and Others v Bill
Cited Statute
- Preferential Procurement Policy Framework Act 5 of 2000
- Constitution of the Republic of South Africa
- Broad-Based Black Economic Empowerment Act
- Promotion of Administrative Justice Act 3 of 2000
- National Small Enterprise Act 102 of 1996
Judge Name
- Eksteen
- Zondi
- Goosen
- Dambuza
- Ponnan
Passage Text
- The Minister's promulgation of regulations 3(b), 4 and 9 was unlawful. He acted outside his powers under s 5 of the Framework Act.
- The declaration of invalidity referred to in para (b) above is suspended for a period of 12 months from the date of this order.
- It is declared that the Preferential Procurement Regulations, 2017 are inconsistent with the Preferential Procurement Policy Framework Act 5 of 2000 and are invalid.