Automated Summary
Key Facts
The Constitutional Court of South Africa addressed the validity of the 2017 Preferential Procurement Regulations (regulations 3(b), 4, and 9) under the Preferential Procurement Policy Framework Act (Procurement Act). The case, initiated by Afribusiness NPC, challenged the Minister of Finance's authority to promulgate regulations that introduced pre-qualification criteria for tender participation, which allowed organs of state to exclude tenderers based on B-BBEE status, ownership demographics, or subcontracting requirements. The Supreme Court of Appeal had previously declared these regulations invalid, ruling they contradicted the Procurement Act's framework by permitting pre-qualification criteria to override the points-based tender evaluation system. The Constitutional Court delivered a split decision: Mhlantla J (minority) concluded the Minister acted within her powers to advance constitutional objectives of transformation, while Madlanga J (majority) held the regulations were ultra vires as they usurped the power of individual organs of state to determine their own preferential procurement policies. The appeal was ultimately dismissed with costs.
Issues
- The court examined whether it had jurisdiction to entertain the appeal from the Supreme Court of Appeal's decision on the 2017 Procurement Regulations.
- The court analyzed whether the Minister of Finance exceeded his powers by promulgating the 2017 Procurement Regulations, including their inconsistency with the Procurement Act and section 217(1) of the Constitution, and the scope of his regulatory authority under section 5 of the Procurement Act.
- The court evaluated applications for intervention and direct access by Fidelity Services Group and the South African National Security Employers Association.
- The court assessed whether it was in the interests of justice to grant leave to appeal the Supreme Court of Appeal's judgment.
Holdings
- Mhlantla J (minority) held that the Minister had the power to promulgate the 2017 Procurement Regulations, finding that the regulations were valid and consistent with the Procurement Act and the Constitution. The judgment emphasized the broad regulatory powers granted under section 5 of the Act and concluded that the regulations were expedient for achieving the Act's objects of economic redress and transformation.
- Madlanga J (majority) held that the 2017 Procurement Regulations were invalid because the Minister acted ultra vires by creating a preferential procurement policy. The judgment argued that the power to determine preferential procurement policies lies with the organs of state under section 2(1) of the Procurement Act, and the Minister's regulations conflicted with this framework.
Remedies
- The application for direct access by Fidelity Services Group (Pty) Limited and the South African National Security Employers Association is dismissed.
- The application by Fidelity Services Group (Pty) Limited and the South African National Security Employers Association for leave to intervene in the proceedings is dismissed.
- Leave to appeal is granted.
- The appeal is dismissed with costs, including the costs of two counsel.
Legal Principles
- The principle of legality, a subset of the rule of law, was central to the court's analysis. The court emphasized that the Minister's powers are bounded by the empowering legislation (Procurement Act) and the Constitution, which cannot be exceeded even when pursuing transformative objectives.
- The court used a purposive interpretation of statutory language, particularly the terms 'necessary or expedient' in section 5(1) of the Procurement Act. It assessed whether the regulations furthered the Act's objects of achieving economic redress while balancing with constitutional requirements.
- The court applied the ultra vires doctrine to determine whether the Minister of Finance exceeded his regulatory powers under the Preferential Procurement Policy Framework Act. It concluded that the 2017 Procurement Regulations were inconsistent with the Act and section 217(1) of the Constitution, rendering them invalid.
Precedent Name
- Morudi v NC Housing Services and Development Co Limited
- National Director of Public Prosecutions v Mohamed N.O.
- Ferreira v Levin N.O.; Vryenhoek v Powell N.O.
- Airports Company South Africa SOC Ltd v Imperial Group Ltd and Others
- South African Police Service v Solidarity obo Barnard
- Biowatch Trust v Registrar, Genetic Resources
- Besserglik v Minister of Trade, Industry and Tourism
- Allpay Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer of the South African Social Security Agency
- Snyders v De Jager (Joinder)
- Pharmaceutical Manufacturers Association of South Africa: In re Ex parte President of the Republic of South Africa
- Mazibuko N.O. v Sisulu
- Gory v Kolver N.O. (Starke Intervening)
Cited Statute
- Promotion of Administrative Justice Act 3 of 2000
- Constitution of the Republic of South Africa
- Preferential Procurement Policy Framework Act 5 of 2000
- Broad-Based Black Economic Empowerment Act 53 of 2003
Judge Name
- Majiedt
- Khampepe
- Pillay
- Theron
- Mhlantla
- Tlaletsi
- Jafta
- Tshiqi
- Madlanga
Passage Text
- The Minister's promulgation of regulations 3(b), 4 and 9 was unlawful, because he acted outside his powers, under section 5 of the Procurement Act, by promulgating regulations which contradicted the requirements of the Procurement Act.
- the Supreme Court of Appeal held that the 2017 Procurement Regulations were inconsistent with the Procurement Act and section 217(1) of the Constitution.
- 4. The appeal is dismissed with costs, including the costs of two counsel.