Minister has no power to make procurement regulations: ConCourt

The Constitutional Court has held that the finance minister acted beyond the scope of the powers conferred on him by the Preferential Procurement Policy Framework Act when he promulgated procurement regulations in 2017.

The regulations, among other things, introduced pre-qualification criteria to be eligible to tender. Under the regulations, if an organ of state elects to apply the pre-qualification criteria, any tender that does not meet the criteria is an “unacceptable tender”.

These qualifying criteria advance certain designated groups and provide that only certain tenderers may respond, including:

• tenderers having a stipulated minimum BBBEE status level;
• exempted micro enterprises (EMEs) or qualifying small enterprises (QSEs); and
• tenderers subcontracting a minimum of 30% to EMEs and QSEs which are at least 51% black owned.

Afribusiness launched an application in the Pretoria high court and sought an order reviewing and setting aside the regulations. The high court dismissed the application with costs in November 2018.

Afribusiness applied for leave to appeal to the Supreme Court of Appeal. That court, in its judgment passed in September 2020, upheld the appeal by Afribusiness and declared that the Preferential Procurement Regulations are inconsistent with the Procurement Act and are invalid.

It held that the preliminary disqualification was impermissible as it was not consonant with the approach envisaged by the constitution.

The minister applied for leave to appeal to the Constitutional Court. The matter was heard in May last year and judgment was passed on Wednesday.

In the majority judgment by justice Mbuyiseli Madlanga, with four other judges concurring, he said section 2(1) of the Procurement Act provided that a preferential procurement policy must be determined by each individual organ of state.

He said the policy must be implemented within the framework set out in that section.

“Logically, that must mean the determination of a preferential procurement by a person or entity other than each organ of state is not necessary for the simple reason that there already is provision in section 2(1) for the determination of such policy by each organ of state,” Madlanga said.

Madlanga said it does not advance the debate to say it is open to organs of state not to apply the prequalification policy contained in the challenged regulations. The question was: does a minister have the power to make regulations of this nature in the first place?

“If she or he does not, the matter ends there. The regulations are invalid for being (beyond the powers of) the enabling section,” Madlanga said.

In the minority judgment where three other judges concurred, justice Nonkosi Mhlantla said the 2017 regulations armed the organs of state with additional means with which to implement their procurement framework, if they so elect.

Mhlantla held that the minister did not act beyond the scope of the powers conferred on him by the Procurement Act when he promulgated the regulations, as the minister has the power to make any regulations regarding any matter that may be “necessary or expedient” to achieve the objects of the act.

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