Driving licence card contract battle heads to highest court

The Constitutional Court has been asked to make a benchmark decision which will have significant implications for powers that government’s directors-general have to take decision impacting the state's pocket.

Prodiba, a company that supplies driving licence cards to the Department of Transport, said in its application to the Constitutional Court that the Supreme Court of Appeal (SCA) had erred in holding that a director-general’s authority to award the multi-million contract was subject to an additional legal requirement of cabinet authorisation or ministerial approval.

Prodiba is asking leave to appeal against an SCA judgment, passed in March, which declared that an extension of the driving licence card contract signed by the then director-general George Mahlalela in February 2013 for another five years was invalid from the outset.

The contract was worth an estimated R1.1-billion.

Mahlalela signed the agreement in the final month of his contract with the department.

In the application filed last month, Prodiba said the SCA’s decision was at odds with the Public Finance Management Act (PFMA), which issued general authority to contract to an accounting officer. It said the PFMA made no provision limiting this authority at all.

In 1997, the department awarded a tender to Prodiba to produce licences for a period of five years. The contract period was repeatedly extended and the last extension was from March 1 2012 until February 29 2014.

The agreement Mahlalela signed meant the migration from the initial card system to a smart card microchip-based driving licence system would be performed by Prodiba.

This was in contrast to the stance taken by the department in October 2012 that it would undertake the entire production process in-house.

In April 2013, the department cancelled the agreement, which was opposed by Prodiba. The department alleged that Mahlalela was “on a frolic of his own” when he signed the contract.

In September 2013, the high court in Pretoria set aside the department’s decision. It held that there was no provision in the PFMA requiring Mahlalela to obtain the minister’s approval before binding the department by concluding the agreement.

However, the SCA held in March that policy decisions such as those to migrate to a new driving licence system, which had significant fiscal implications, fell within the authority of the legislature or the executive.

Prodiba’s director André Appelgryn said it was not in dispute that Mahlalela was the director-general at all relevant times until the expiry of his contract on February 28 2013 and had the requisite statutory authority to conclude the agreement on behalf of the department.

“Nothing in the Constitution, the PFMA or the Treasury Regulations prescribes that further approval by cabinet or by the minister is required for an accounting officer to conclude a contract on behalf of a department,” Appelgryn said.

The department said it would comment next week.