Procurement by all organs of state is at a standstill pending the outcome of an urgent application to the Constitutional Court by finance minister Enoch Godongwana, for clarity regarding the suspension of procurement regulations.
In a notice to all organs of state Treasury, director-general Dondo Mogajane has ordered that no new tenders can be advertised, tenders advertised on or after the February 16 judgment of the Constitutional Court be held in abeyance and tenders issued before this date be finalised in terms of the procurement regulations.
Western Cape MEC for finance and economic opportunities David Maynier said in a statement the prohibition would immediately halt 86 tenders worth R1.85bn planned for March. He has written to Godongwana to request the immediate withdrawal of the notice.
“We cannot allow the entire supply chain system, of all organs of state, across the country to seize up, and so it is now imperative that the note be withdrawn urgently so that certainty be re-established for procurement processes,¨ Maynier said.
Business lobby group Sakeliga, which successfully contested the procurement regulations in court, said the Treasury's instructions were unlawful. It has written to Godongwana, demanding that the Treasury’s instructions be urgently withdrawn. It said that the Preferential Procurement Policy Framework Act provides that organs of state are responsible for their own procurement policies.
It was also incorrect, Sakeliga said, for Mogajani to say that tenders advertised prior to the Constitutional Court judgment could use the BBBEE pre-qualification requirements declared unlawful by the court, as tenders could only be lawfully finalised in terms of the act, which did not allow for this.
“The Treasury is not interpreting the law correctly. It is trite in law that a provision that is ultra vires is void and cannot be sustained in any way,” Sakeliga said in a statement.
Mogajane said clarity is needed from the court as to whether the invalidity of the regulations has been, and continues to be, suspended, which would mean that they continue to be of full force and effect.
The case arises from litigation initiated by Afribusiness NPC (which later changed its name to Sakeliga) which contested the validity of the procurement regulations.
It lost in the high court which found that the minister was authorised to promulgate the regulations and found them to be rational and lawful. Afribusiness took the matter on appeal and the Supreme Court of Appeal found in its favour, ruling that the procurement regulations under the Preferential Procurement Policy Framework Act were unlawful in that the minister had exceeded his powers in terms of the act. The declaration of invalidity was suspended for 12 months.
The minister applied to the Constitutional Court for leave to appeal against this judgment about two weeks ago and a majority in the court dismissed the appeal and ruled against him. However, it did not address the issue of the status of the Supreme Court of Appeal’s order of suspension.
“The legal position — though not what the Constitutional Court seemed to intend — is that the suspensive period of invalidity has been re-engaged and the procurement regulations have been and continue to be of full force and effect,” Mogajane said in his notice.
“The minister will on an urgent basis be seeking confirmation from the Constitutional Court that the invalidity of the procurement regulations has been and continues to be suspended. In other words guidance is required as to whether the procurement regulations remain valid until March 15 2023, unless repealed sooner.”
The procurement regulations among other things introduced pre-qualification criteria to be eligible to tender. These criteria serve to promote BBBEE and the advancement of designated groups. The Supreme Court of Appeal held that the preliminary disqualification by a tenderer was impermissible and that the correct approach to evaluating tenders was to first determine who scored highest and thereafter organs of state may award the tender to a tenderer with a lower score if there were objective criteria to justify the award. It ruled that the minister’s promulgation of the regulations was unlawful.
The Constitutional Court declared that an organ of state must determine its own preferential procurement policy and it was not in the minister’s power to make regulations on this.
Last week, Godongwana told MPs that the Treasury would have to address the Constitutional Court judgment and the issues raised in the Zondo commission of inquiry into state capture on procurement before it publishes the draft Public Procurement Bill.
The draft bill, which aims to codify the entire government procurement process, was initially scheduled to be published with Wednesday’s national budget but was held back by these two developments.
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