# summary

- Link: https://dearsouthafrica.co.za/pref-pro/summary/
- Published: 2022-03-14T16:27:59+02:00
- Author: dearSA

[ Have your say on the REVISED draft regulations](https://dearsouthafrica.co.za/pref-pro/)

### DOWNLOAD DOCUMENTS

Notice from Treasury

 ⌊Loader⌉ Loading...

 ⌊EAD Logo⌉ Taking too long?

 ⌊Reload⌉ Reload document

 | [ ⌊Open⌉ Open in new tab ](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2022/03/14161737/2022031101-Preferential-Procurement-Regulations-2017-Concourt-judgment-Steps-taken-by-NT-11-3-2022-R.pdf)

[Download [284.55 KB] ](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2022/03/14161737/2022031101-Preferential-Procurement-Regulations-2017-Concourt-judgment-Steps-taken-by-NT-11-3-2022-R.pdf)

Draft Regulations

 ⌊Loader⌉ Loading...

 ⌊EAD Logo⌉ Taking too long?

 ⌊Reload⌉ Reload document

 | [ ⌊Open⌉ Open in new tab ](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2022/03/14161825/220310National_Gazette_Draft_Prefential_Procurement_Regulations_Comment.pdf)

[Download [130.93 KB] ](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2022/03/14161825/220310National_Gazette_Draft_Prefential_Procurement_Regulations_Comment.pdf)

Preferential Procurement Act

 ⌊Loader⌉ Loading...

 ⌊EAD Logo⌉ Taking too long?

 ⌊Reload⌉ Reload document

 | [ ⌊Open⌉ Open in new tab ](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2022/03/14161912/a5-000.pdf)

[Download [67.57 KB] ](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2022/03/14161912/a5-000.pdf)

SUMMARY

[Post Judgment Media Summary](https://www.concourt.org.za/index.php/judgement/455-minister-of-finance-v-afribusiness-ncp-cct279-20)

On Wednesday, 16 February 2022 at 10h00, the Constitutional Court handed down judgment
in the application for leave to appeal against a judgment and order of the Supreme
Court of Appeal. This application was brought by the Minister of Finance (Minister)
against Afribusiness NPC, and concerns the validity of the Preferential Procurement
Regulations, 2017 (Procurement Regulations) promulgated by the Minister on 20 January
2017 in terms of section 5 of the Preferential Procurement Policy Framework Act (
Procurement Act).

The Procurement Regulations, amongst 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 Broad-Based Black Economic Empowerment (B-BBEE) 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. If feasible to subcontract for a contract above R30 million, then
the organ of state must apply subcontracting to advance the designated groups.

Afribusiness launched an application in the High Court and sought an order reviewing
and setting aside the Procurement Regulations in terms of the Promotion of Administrative
Justice Act 3 of 2000 (PAJA) on the basis that the Minister had acted beyond the
scope of his powers and that the regulations were invalid.

The High Court held that the 2011 Regulations, the precursor to the Procurement 
Regulations, also contained pre-qualifying criteria relating to functionality which
were never challenged. Therefore, Afribusiness’ complaint could not be said to be
against the concept of pre-qualifying criteria, but rather that they did not fall
within the designated groups to be advanced. That Court held that the Minister was
authorised to promulgate the regulations. It thus rejected the argument that the
Minister had acted beyond the scope of his powers. In the result, the High Court
held that the Procurement Regulations were rational and lawful, and dismissed the
application with costs.

Afribusiness appealed to the Supreme Court of Appeal. After considering the Procurement
Act and section 217 of the Constitution, the Supreme Court of Appeal held that the
Minister had failed to act within the scope of his powers under the Act. That Court
held that in light of section 2 of the Procurement Act, the correct approach to 
evaluating tenders is to first ascertain the highest points scorer and thereafter,
if there are objective criteria that justify the award of the tender to a tenderer
with a lower score, organs of state may do so. The Supreme Court of Appeal held 
that the preliminary disqualification was impermissible as it was not consonant 
with the approach envisaged by section 217(1) of the Constitution. Consequently,
it held that the Minister’s promulgation of regulations 3(b), 4 and 9 was unlawful.
The Procurement Regulations were declared invalid as they were for inconsistent 
with the Procurement Act and section 217 of the Constitution. The declaration of
invalidity was suspended for 12 months.

Before the Constitutional Court, the Minister applied for leave to appeal against
the order of the Supreme Court of Appeal. Shortly before the hearing of the application,
Fidelity Services Group (Pty) Limited and the South African National Security Employers
Association (SANSEA) applied for leave to intervene in the application. They also
applied for direct access, on an urgent basis, in respect of separate interdictory
relief to prevent the further implementation of the Procurement Regulations pending
the outcome of this matter. The applications were opposed by the Minister.

The two applications were heard together with the main application. In support of
their application to intervene, the Fidelity Group and SANSEA argued that the application
of the Procurement Regulations had caused them significant financial loss, and this
has led to numerous job losses. With regard to their application for direct access,
the Fidelity Services Group and the SANSEA argued that it was in the interests of
justice to grant them direct access, as they could not approach any other court 
for the relief they sought.

With regards to the main application, the Minister argued that a proper reading 
of section 217 of the Constitution requires a consideration of South Africa’s segregated
past. The Minister submitted that section 5 of the Procurement Act confers wide 
regulatory powers to the Minister and that the Supreme Court of Appeal failed to
appreciate this, as the regulatory scheme is flexible and enables the Minister to
make any regulations that advance the objects of the Procurement Act. He contended
that the Supreme Court of Appeal erred in that it measured the legality of the 2017
Regulations solely against the requirements of section 217(1) of the Constitution
and did not attempt to read sections 2 and 5 of the Procurement Act harmoniously
considering section 217(2) and (3) of the Constitution. Moreover, the Minster argued
that, in any event, the 2017 Regulations were not intended to replace the scoring
system under the Procurement Act but are contemplated in terms of the Act’s definition
of an “acceptable tender” to which the preference point system may be applied.

Afribusiness argued that the Procurement Act does not empower the Minister to create
pre-qualification criteria that disqualifies tenderers without recourse to their
preference point score in section 2 of the Act, therefore the Procurement Regulations
are inconsistent with the Act. It contended that any regulations made must be congruent
with the provisions of section 217(1) of the Constitution, which require that state
procurement must, amongst other things, be competitive and cost-effective. Further,
the correct approach is to consider the highest points scorer and then consider 
whether the tender can be awarded to a lower scorer, in terms of section 2(1)(f)
of the Act. Afribusiness advanced that the pre-qualification criteria overly narrow
the selection pool and, therefore, do not enable the state to find the most capable
and cost-effective tenderer. Thus, the promulgation of the Procurement Regulations,
besides being outside the scope of the Minister’s powers, was a breach of the separation
of powers as the Minister stepped into law-making terrain.

The first judgment (minority judgment) was penned by Mhlantla J (Khampepe ADCJ, 
Jafta J and Tshiqi J concurring). The Court was unanimous on three issues. First,
on granting leave to appeal, as the application was a judicial review of an exercise
of public power, which is a constitutional matter. Second, the application for intervention
by the Fidelity Services Group (Pty) Limited and the South African National Security
Employers Association was dismissed on the grounds that they failed to demonstrate
a direct and substantial interest in the matter, and it was not in the interests
of justice to grant the application. Finally, the application for direct access 
suffered a similar fate on basis that the Fidelity Services Group (Pty) Limited 
and the South African National Security Employers Association failed to exhaust 
all other available remedies.

The minority judgment and the majority judgment diverge on the reasoning and outcome
of the main application. Mhlantla J held that the Minster 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 Procurement
Act. The minority held that the Regulations were aimed at achieving the purpose 
of the Procurement Act and section 217 of the Constitution, and that a proper reading
of the Procurement Regulations would demonstrate that an organ of state has a discretion
to implement the pre-qualification criteria. Thus, the minority would have upheld
the appeal.

The second judgment (majority judgment) penned by Madlanga J (Majiedt J, Pillay 
AJ, Tlaletsi AJ and Theron J concurring) disagrees with the minority judgment on
whether the Minister had the power to make the impugned regulations. This divergence
arose from the reading of the words “necessary or expedient” as contained in section
5 of the Procurement Act. The majority judgment interprets the words “necessary 
or expedient” to be the limiting factor to the power of the Minister to make regulations,
rather than the factor that allows the Minister to make regulations to achieve the
objects of the Procurement Act.

The majority judgment comes to this conclusion by reading the words “necessary or
expedient” with section 2(1) of the Procurement Act, which provides that an organ
of state must determine its preferential procurement policy. Since each organ of
state is empowered to determine its own preferential procurement policy, it cannot
also lie with the Minister to make regulations that cover the same field. Ultimately,
the majority judgment holds that it can neither be necessary nor expedient for the
Minister to make regulations that seek to achieve that which can already be achieved
in terms of section 2(1).

In the result, the applications to intervene and for direct access were dismissed.
Leave to appeal was granted, however, the appeal was dismissed with costs..

### IN THE MEDIA

 * Concourt.org – [MINISTER OF FINANCE V AFRIBUSINESS NCP CCT279/20](https://www.concourt.org.za/index.php/judgement/455-minister-of-finance-v-afribusiness-ncp-cct279-20)

### STATEMENTS FROM OTHER ORGANISATIONS

Click on a logo to view.
 Want to display your organisation’s statement? [Click here. ](https://dearsouthafrica.co.za/pref-pro/summary/ referendum@dearsouthafrica.co.za?subject=org info for referendum info page)

Close

### Cape Independence Advocacy Group

### Dear Speaker,

I am writing to you on behalf of the Cape Independence Advocacy Group (CIAG) and
the seventy thousand South Africans who actively follow our work.

We wish to comment on the ‘Electoral Commissions Amendment Act, 2021’, which is 
proposed by the Democratic Alliance (DA) and was published in the Government Gazette
on 21 June 2021.

Given our mandate, our comments are made in the context of the Western Cape, although
we appreciate and respect that the constitutional rights enacted through this bill
will rightfully apply to all provinces.

This bill is essential to restoring some degree of functional democracy to the voters
of the Western Cape and we therefore unreservedly and wholeheartedly endorse it.

Through their voting behaviour, Western Cape voters have made it abundantly clear
that they do not endorse many of the policy and ideological positions of the South
African national government, but are left utterly powerless to resist them because
the voters in other South African provinces, who greatly outnumber them, hold starkly
different ideological and political opinions.

In terms of seeing their democratic will enacted, for the majority of Western Cape
voters, the democratic era has not offered much of an improvement over the apartheid
era. It is a statistical fact that, since 1994, the majority of Western Cape voters
have never been governed by the political party they voted for, and they have no
foreseeable prospect of ever being governed by the party they vote for. As such,
they cannot be said to have functional democracy.

One of the few glimmers of democratic hope Western Cape voters do have, is the provision
of Clause 127(2)(f) of the national constitution, and 37(2)(f) of the Western Cape
constitution, which allows them, at the discretion of the premier who they elected,
to have their voices heard on matters which are important to them, without being
drowned out by a national majority who fundamentally hold different views.

To deny Western Cape voters this constitutional right would be a very serious infringement
of their political rights and freedoms, and would be a clear indication that parliament
and the national government are not interested in the constitutional rights and 
democratic wishes of Western Cape voters.

We therefore call upon parliament to pass this bill at the earliest opportunity,
and without objection.

Yours Faithfully

**Phil Craig
 
(On behalf of the Cape Independence Advocacy Group)