WRITTEN BY: OMEGA NGEM
Public entities can no longer demand that companies be 51% black-owned to get tenders. This after the Supreme Court of Appeal overturned the ruling on this pre-existing preferential procurement regulations that allowed organs of state to disqualify tenders in advance, simply because a company was not 51% black-owned, for example on Monday.
Earlier this year the preferential procurement regulations, promulgated by the minister of finance in 2017 was charged into the forefront of national discourse when several people and groups, including AfriForum, launched a campaign against the ‘racist policy’, which allegedly informed the selection criteria for companies receiving UIF TERS funding.
At the time government dismissed this as fake news and Minister of small business and development Khumbubdzo Ntshabeni confirmed that the document which was circulated stating that this clause was an unofficial draft.
Political group Afriforum has been on the forefront of the amendment of this document calling it a “racist policy’ saying they were ready to go to court with their protest.
According to Business day, 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 to put the prequalification measures in place.
The new prequalification regulations including the fact that companies needed to be 51% black owned to get tenders from state owned companies was taken to the Supreme Court of Appeal by business group Afribusiness, now known as Sekaliga.
On Monday the The Supreme Court of Appeal ruled in favour of business group Sakeliga. The court found that the Preferential Procurement Regulations of 2017 conflicted with the Preferential Procurement Policy Framework Act, 5 of 2000 and the Constitution and consequently declared it invalid. The court also found that the Minister of Finance who promulgated it at the time, Pravin Gordhan, acted ultra vires, by regulating as if he had legislative powers.
“Any pre-qualification criteria which is sought to be imposed must have as its objective the advancement of the requirements of section 217(1) of the constitution. The prequalification criteria stipulated in regulation 4 and other regulations do not meet this requirement,” the Supreme Court of Appeal reportedly said in its judgment penned by justice Dumisani Zondi.
In a statement released after the ruling, Piet le Roux, CEO of Sakeliga, Pat le Roux said the ruling was an important turning point for the country. “It is an important step in the right direction, namely, to judge tenders based on business measures and value for the public, instead of race and other political considerations,” said Le Roux.
“Ironically, Minister Gordhan, who implemented the PPPFA regulations in 2017, is now as Minister of Public Enterprises reaping its fruits. Under his regulations organs of state have in recent years frequently pre-emptively disqualified prospective contractors when they were not 51% black owned. That is, disqualified them from the get-go based on race without even considering their price and value proposition,” he said.
Justice Dumisani Zondi delivered the instrumental ruling on the tender game on Monday.