Finance minister Tito Mboweni has filed court papers challenging a Supreme Court of Appeal ruling which struck down a provision in procurement legislation that prioritised black-owned firms.
The regulations of the Preferential Procurement Framework Act were widely used by state-owned companies Transnet and Eskom during the state capture period to skew the awarding of tenders by imposing prequalification rules, such as the requirement for bidders to be 51% black-owned.
Sakeliga, an independent business lobby group with a history of representing Afrikaner business in particular, approached the courts challenging the regulations arguing that they allowed organs of state to disqualify tenders in advance, simply because a company was not 51% black-owned.
In November 2020 the appellate court rejected the “predisqualification” as invalid and unconstitutional. It gave Mboweni a year to rectify the regulations.
Mboweni, a respondent in the matter, subsequently approached the Constitutional Court to challenge the ruling. The matter is due to be heard next month.
In papers lodged in the Constitutional Court last week Mboweni’s lawyers argue that procurement regulations giving preference to majority black-owned companies are constitutional and designed to address past injustices.
The Preferential Procurement Framework Act is a law that seeks to give black-owned and BEE-compliant companies a leg up in winning government tenders in the interests of economic transformation. The act makes it possible for black-owned companies to score additional points when tenders are evaluated on the points system. However, as the constitution requires public procurement to provide value for money, the act set limitations, allowing no more than a 10% or 20% point advantage, depending on the size of the bid. In 2017 new regulations were promulgated by the then finance minister, Pravin Gordhan, to put the prequalification measures in place.
Mboweni’s lawyers state that the notion that the regulations exclude potential bidders on the basis of race is not correct.
“What is correct is that the 2017 regulations seek to reverse past racial injustice.”
“SA’s past is marked by a repressive and authoritarian state and legislative regime. On the basis solely of their race, black people were divested of their land and forced into territorial segregation, excluded from good jobs, disenfranchised and forcefully excluded from the country’s economy. The long shadow cast by that legacy of economic exclusion remains one of the most pernicious and subversive barriers to the realisation of equality, dignity and freedom at the centre of the constitution’s vision,” says the court papers.
They highlight that Section 217 of the constitution and the Preferential Procurement Framework Act are designed inter alia to reverse exclusion, and it does so by orientating the process of public procurement to transformative ends.
In terms of section 217(2), organs of state are constitutionally mandated to implement procurement policies providing for categories of preference in the allocation of contracts and to protect and advance people historically and systemically subjected to unfair discrimination.
Sakeliga said the minister at the time resorted to legislation, so contradicting the separation of powers underpinned by the constitution.
“The constitution vests the capacity to make new law in parliament, not in the executive,” the group said.
Furthermore, the 2017 regulations provide for a situation where it may be impossible for disadvantaged competitors on lower B-BBEE levels, to compete with entities and suppliers on a higher level of B-BBEE, notwithstanding ability, cost effectiveness and functionality. This is in conflict with the constitution and the Preferential Procurement Framework Act, Sakeliga said.
This week Piet le Roux, the CEO of Sakeliga, said the regulations not only caused potential tenderers to lose points but to be totally excluded from tender processes beforehand.
“The victims of this situation were not only the tenderers, but eventually also the public, because the pool of qualifying tenderers was artificially reduced by excluding, on the ground of race, thousands of companies and business people who could have added value,” Le Roux said. “There can be no possibility of healthy, corruption-free business environments where municipalities and other organs of state in advance exclude large groups of contractors without even looking at the merit of their tenders,” he said.
With Carol Paton
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