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[2021] ZASCA 53
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Minister of Trade and Industry & Another v Murendi Properties and Building Supplies (Pty) Ltd (1293/2019) [2021] ZASCA 53 (28 April 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case no:
1293/2019
In the matter
between:
THE
MINISTER OF TRADE AND INDUSTRY
FIRST APPELLANT
THE
DIRECTOR-GENERAL: DEPARTMENT
OF TRADE
AND INDUSTRY
SECOND APPELLANT
and
MURENDI
PROPERTIES AND BUILDING
SUPPLIES
(PTY) LTD
RESPONDENT
Neutral
citation:
The
Minister of Trade and Industry & Another v Murendi Properties and
Building Supplies (Pty) Ltd (1293/2019)
[2021] ZASCA 53
(28 April
2021)
Coram:
WALLIS, MAKGOKA and MBATHA JJJA and
WEINER and ROGERS AJJA
Heard:
1 March 2021
Delivered:
This judgment was
handed down electronically by circulation to the parties’
representatives by email, publication on the Supreme
Court of Appeal
website and release to SAFLII. The date and time for hand-down is
deemed to be 09:45 on 28 April 2021.
Summary:
Broad-based black
economic empowerment – grant payable in terms of the Black
Industrialist Scheme in support of manufacturing
activities –
whether respondent complied with terms of the scheme.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Mavundla J sitting as court of
first instance):
The
appeal is dismissed with costs, including the costs of two counsel.
JUDGMENT
Mbatha
JA (Wallis and Makgoka JJA and Weiner and Rogers AJJA concurring)
[1]
The primary issue in this appeal is whether the respondent, Murendi
Properties and Building Supplies
(Pty) Ltd (Murendi), had met all the
qualifying requirements for the payment of a grant awarded to it in
terms of the Black Industrialist
Scheme (the BIS) issued under the
Black Industrialists Policy (the policy). The high court found that
the respondent had met all
the requirements, and ordered the
appellants, the Minister of Trade and Industry and the
Director-General: Department of Trade
and Industry, to pay the
respondent the grant in the amount of R14 210 953. The
appeal is with its leave.
[2]
In November 2015, the Department of Trade and Industry (the DTI)
issued an incentive scheme, known as
the Black Industrialist Scheme
(the BIS) for qualifying applicants, issued under the Black
Industrialists Policy (the policy).
The policy was a key part of the
Government’s broad industrialisation initiatives to expand the
industrial base and inject
new entrepreneurial dynamism into the
economy. The policy sought to facilitate the inclusion and
participation of black industrialists
in manufacturing activities,
by, among other things, enabling them to have access to finance. The
policy was therefore aimed at
promoting industrialisation,
sustainable economic growth and transformation through the support of
Black-owned entities in the
manufacturing sector.
[3]
For an applicant to access funding from the DTI it has to comply with
mandatory requirements of the
scheme namely that the applicant must:
’
4.1.1
[B]e a registered legal entity in South Africa in terms of the
Companies Act, 1973 (as amended) or the Companies
Act, 2008 (as
amended), the Close Corporations Act, 1984 (as amended) or the
Co-operatives Act, 2005 (as amended).
4.1.2
Be a taxpayer in good standing and must provide a valid tax clearance
certificate at assessment and before
the grant is disbursed.
4.1.3
Be involved in starting a new operation or expanding an existing
operation or the acquisition of an existing
business/operation.
4.1.4
Be aligned to the productive sectors of the economy within the
identified sectors as outlined in section
3.4 above.
4.1.5
Have more than 50% shareholding and management control.
4.1.6
Have a valid B-BBEE certificate of compliance.
4.1.7
Be directly involved in the day-to-day running of the operation and
must have requisite expertise in the
sector.
4.1.8
Have a projected minimum investment of R30 million; and
4.1.9
Undertake a project that should result in securing or increasing
direct employment.’
[1]
In
addition, an applicant had to score points in the Economic Benefit
Criteria and achieve at least a level four Broad Based Black
Economic
Empowerment (BBBEE) contributor status as per the revised BBBEE Codes
of Good Practice published in October 2013, as amended.
The grant
would not be approved unless these criteria were met. Once the
applicant had been approved to receive a grant under
the scheme, it
became eligible to submit a claim to the DTI for payment of the grant
in accordance with the timelines set out by
the DTI.
[4]
When it applied for a grant Murendi operated nine retail outlets in
the Vhembe District in the Limpopo
Province and employed a staff of
125. Its sole shareholder was Mr Makhesha. It identified itself
as a black industrialist
under the policy, being ‘a juristic
person owned by a Black South African that creates and owns value
adding industrial capacity
and provides long term strategic and
operational leadership to businesses.’ On its business profile
it is described as a
retailer of building supplies, with the majority
of its revenue generated from retail of hardware and building
materials, sourced
from various suppliers and manufacturers. Its
income was supplemented by the manufacture and sale of concrete roof
tiles. It intended
to use the grant to expand its tile manufacturing
plant to enable it to supply other districts in the Limpopo Province,
in the
manufacturing and building supplies sector. To achieve its
expansion goal it required an investment of R40 352 000 for the
acquisition
of a new tile plant and various types of vehicles,
including tippers, forklifts, and tractors. The result would be: a
creation
of an additional 46 jobs, bringing the total employment
opportunities in the company to 138 permanent jobs; the manufacturing
of
South African Bureau of Standards quality branded roof tiles; and
an increase in the company’s market share, by opening seven
more retail outlets in the Limpopo Province.
[5]
The approval of the grant by the DTI was subject to approval for
co-funding from the Development Funding
Institutions (DFIs) to
finance the project of manufacturing roof tiles. The respondent
sought funding from the Industrial Development
Corporation (IDC) in
the form of a loan for R31 810 000. The loan was granted
subject to the respondent obtaining a grant
from the DTI. In line
with the prescripts of the scheme, on 14 August 2016, the respondent
submitted an application for the grant
in terms of the scheme. On 16
March 2017, the Black Industrialist Scheme Funding Adjudication
Committee (the adjudication committee)
conditionally approved the
application. On 19 October 2017, the adjudication committee granted
the final approval of the project
and a matching grant of R14 210
953 was awarded to the respondent.
[6]
The final approval of the grant was granted subject to the following
conditions:
‘
.
. . [A]pproval of the co-funding;
The claims
disbursement[s] will be based on approved cost sharing percentage of
actual cost incurred and performance criteria being
met;
Assets
purchased from a connected party will be excluded from qualifying
costs;
The entity to
maintain the 100% black shareholding and management control for the
full duration of the project; and
The project
must be in line with section 13A of the Broad Based Black Economic
Empowerment Act 53 of 2003
, as amended by Act of 2013 (the BBBEE Act)
which states that:
“
Any
contract or authorisation awarded on account of false information
knowingly furnished by or on behalf of an enterprise in respect
of
its BBBEE status may be cancelled by the organ of state or public
entity without prejudice to any other remedies that the organ
of
state or public entity may have”.’
The
approval letter also provided a schedule, setting out the utilisation
of funds in respect of the capital investment, the cost
sharing
matrix, and the Economic Benefits Point Scoring Criteria.
[7]
An
addendum to the approval letter set out
the commitments made by the applicant against the criteria set out in
the scheme itself.
Two paragraphs were important. They read:
‘10.1 Payments will
be based on actual costs incurred and performance criteria being met
on approved interventions.
10.2 The
final claim for disbursement should be submitted at the completion of
the project as approved by
the dti
.
10.3 If part
of the funding is sourced from the Development Finance institutions
(DFIs),
the
dti
may align its disbursement(s) with that
of the DFIs.’
These
provisions accorded with the Programme Guidelines, save that in the
guidelines the additional words
‘
[c]laims
for disbursements should be submitted as per the approved milestones
and . . .’
appeared
at the commencement of clause 10.1
. On the
final page of the addendum the following appeared:
‘
The
first claim must be submitted within three months after the financial
closure has been secured. The final disbursement will
be made only
when the full investment has been brought into commercial
production/implementation, within a two-year (24 months)
period.
’
[8]
On 9 February 2018, the respondent was notified that it could be in a
claimable position under the approved
grant agreement. It was
requested to submit a claim form for assets which the respondent had
purchased and for costs it had incurred,
as per the approval granted
for the BIS. The documents required for such purposes were dispatched
to the respondent. The letter
also specified that the claim was to be
submitted within five working days of the communication to the
respondent and that the
claims could only be submitted on a bi-annual
basis to the DTI. In response, the respondent submitted the claim
forms and supporting
documents to the DTI on 28 February 2018.
[9]
It was a condition for making a claim that it be accompanied by a
valid BBBEE certificate. Murendi experienced
problems with the first
two certificates it submitted and an attempt to provide the required
information by way of affidavit, but
nothing turns on these attempts.
On 20 April 2018, it provided a new BBBEE certificate from Muthelo
(Pty) Ltd, (Muthelo), a SANAS-accredited
agency, and submitted it to
the DTI.
[10]
On 5 March 2018 the DTI conducted a due diligence investigation in
relation to the claim. Mr Leboho, a deputy director
of legal services
in the employ of the DTI, visited the respondent’s premises for
the investigation. Mr Leboho subsequently
filed a report with the DTI
to the effect that the inspection was positive, and that supporting
documents of costs incurred were
provided and that other relevant
parts of the project, were confirmed during the inspection.
[11]
On 20 November 2018, the respondent received a notice from Muthelo
informing the respondent of its intention to
recall the BBBEE
certificate it had issued in respect of the respondent, referred to
in para 9 above. The notice read as follows:
‘
.
. . [F]ollowing an unscheduled SANAS assessment visit emanating from
a DTI request/complaint, a finding was made that Murendi
Properties &
Building Supplies CC was incorrectly verified under the Amended Codes
of Good Practice instead of Amended Construction
Contractor Sector
Codes. As a result, we have taken a decision to recall the
certificate and re-issue it under the Amended Construction
Sector
Charter’.
The
respondent was advised that this might lead to a change of its BBBEE
status level and it was invited to lodge an appeal within
a period of
48 hours of receipt of the notice. In these circumstances, through
its attorneys, the respondent lodged an appeal against
the decision
to withdraw the certificate.
[12]
The respondent challenged the recall of the certificate on various
grounds, including: (a) the respondent did not
engage in construction
activities, but was in a retail business, which fell under the
Generic Codes; (b) that the Amended Construction
Sector Codes, which
were relied upon by Muthelo to classify the respondent as a
construction business, were non-existent at the
time of the lodging
of the application and were only published in November 2017; and (c)
the Economic Benefit Criteria in the BIS
Programme Guidelines issued
by the DTI required that a black industrialist applicant, such as the
respondent, achieve a level 4
BBBEE contributor status in line with
the revised BBBEE Generic Codes published in October 2013. The
respondent received no further
communication regarding the appeal
either from Muthelo or the DTI. It also received no formal response
to its claim for payment
of the grant.
[13]
The delay prompted the respondent to bring an urgent application to
the high court seeking the following relief:
‘[d]eclaring that
the applicant has met all the qualifying requirements for the payment
of the grant; [and] [d]irecting the
respondent to pay the applicant
the grant in the amount of R14 210 953’. The claim was
expressly based on the contract
to provide a grant and was described
in the founding affidavit as being one:
‘
to
enforce the provisions of an agreement between Murendi and the DTI in
terms of which the DTI agreed to provide a financial grant
to Murendi
for the sum of R14 210 953 ("the grant agreement").
It is effectively an application for specific
performance.’
[14]
Although the DTI accepted in its affidavits and argument in the high
court that the award of the grant gave rise
to a contractual
relationship,
[2]
in its heads of argument it submitted that it
was
provided in terms of a government scheme and not in terms of a
contractual relationship.
[3]
However, in oral argument, counsel for the DTI accepted that this
made no difference to the essential question, which was whether
Murendi satisfied the conditions for making a claim on the grant.
It is therefore unnecessary to explore the
characterisation of the grant any further. The case was brought on
the basis of a contract
and should be decided on that basis.
[15]
As is apparent from the relief sought by the respondent in the high
court the issues were: whether the approval
of the grant constituted
a final conclusion of a contractual relationship between the DTI and
the respondent in terms of the incentive
scheme; whether the
respondent had substantially complied with the requirements of the
DTI after furnishing the third certificate
on 29 April 2018; and if
the objectives of the BBBEE Act 53 of 2003 to level the economic
arena were substantively complied with.
[16]
The high court held,
in reliance on the
decision in
KwaZulu-Natal Joint Liaison
Committee v MEC Department of Education, KwaZulu
Natal
,
[4]
that where a functionary takes a
decision that an applicant, who applies for assistance through a
scheme, qualifies for such a benefit,
the decision creates a binding
undertaking, which cannot be unilaterally withdrawn without
approaching the court. The functionary
was thereby bound to act
within the confines of the scheme. In light thereof, the high court
held that the DTI’s undertaking
to pay the respondent the
amount of R14 210 953 was an enforceable undertaking,
notwithstanding the fact that there was
no chronicled agreement
giving effect to the undertaking. The court based its decision on the
following factors:
(a) ‘the fact that
the applicant substantially complied with the terms set out by the
respondent;
(b) the objective of [the
Broad-Based Black Economic Empowerment] Act 53 of 2003
are to level
the economic arena, by eradicating its skewed turf from which the
majority of this country were excluded. This aspiration,
in my view,
can only be achieved by taking robust means. Towards that end
substantive compliance, rather than formalism which is
not material,
is called for;
(c) the respondent,
although it was initially not happy with the BBEE certificate
submitted by the applicant, it did not immediately
seek to resile
from the undertaking, instead, afforded the applicant an opportunity
to resubmit a compliant certificate, which
request was indeed
complied with; the respondent's inordinate delay in concluding its
investigation, weighs heavily against it,
but in favour of the
applicant, regard being had to equity and fairness.’
Regrettably
this approach overlooked that the claim was based on an admitted
contract, a situation to which the
Joint Liaison Committee
judgment did not apply. In the result, the high court failed to
address the central issue of whether Murendi satisfied its
contractual
obligations when making a claim.
[17]
The issue of enforcement of a
contract raised the question whether the respondent complied with the
mandatory conditions when submitting
the claim for payment to the
DTI. The appellants’ reasons for the DTI’s refusal to pay
were two-fold: first, the respondent’s
failure to submit a
valid BBBEE certificate and, second, that payment was contingent upon
the completion of the due diligence investigation
by the DTI. The DTI
contended that the final BBBEE certificate issued by Muthelo had been
reviewed by SANAS and did not contain
sufficient information. As a
result, Muthelo indicated that it would withdraw the certificate.
Counsel for the appellants submitted
that the SANAS review was fatal
to the respondent’s claim for the payment. Furthermore, it was
submitted that the respondent
failed to meet the approved milestones
for the payment, actual costs had not been incurred, and the
performance criteria had not
been met by the respondent to entitle it
to specific performance. Stress was laid on the fact that the claim
was for payment of
the entire grant at a time when none of the plants
and vehicles had been delivered by the suppliers.
[18]
On the other hand, the respondent contended, first, that the alleged
misclassification under a wrong code did not
make the certificate
invalid. It could only have had an impact on the points allocated to
the respondent. Second, it maintained
that the BBBEE certificate was
correctly measured under the Generic Codes. Third, the assertion that
the respondent had previously
submitted a fraudulent BBBEE
certificate was irrelevant as the review was in respect of an
incorrect classification, which was
disputed by the respondent.
Fourth, the checklist reflecting the issues identified by SANAS was
an internal document which was
never furnished to respondent. The
items identified in the checklist were clearly for Muthelo’s
attention to address and
crucially they did not suggest that the
Muthelo certificate was invalid or incorrect in certifying Murendi’s
status as a
level 4 BEE contributor.
[19]
I highlight a few notes and directions from the SANAS review issued
to Muthelo, for example, ‘(a) no pertinent
notes/workings in
that they failed to support the scores awarded - no action required;
(b) statement of comprehensive income is
missing and therefore cannot
work out the 5 years average – does not affect calculation, no
action required and so forth’.
A cursory glance at the
checklist reveals that the actions required to be carried out by
Muthelo, included: getting confirmation
from the local chief; getting
a letter of confirmation from the beneficiary; getting supporting
documents; establishing correct
amounts and so forth. It is clear
that this is a working document which required Muthelo to verify,
confirm or get supporting documents
and at times not to take any
action. These comments were specifically directed to Muthelo and not
to the respondent.
[20]
The DTI's heads of argument stated that the Muthelo certificate was
invalid as it did not contain sufficient information
as indicated by
SANAS. But the sole purpose of the certificate was to confirm to the
DTI that Murendi had maintained at least a
level four BBBEE status,
which the Muthelo certificate did. The SANAS report did not suggest
that this was incorrect. The issues
raised by SANAS might have been
relevant if the certificate was concerned with the preferential
points to be awarded to a tenderer
on the basis of its BBBEE status,
but that was not the case here. In the absence of any evidence from
the DTI as to the issues
it asked SANAS to review, or from SANAS or
Murendi as to the reasons given for the review, the report had little
force in relation
to the issues in this case. What is more, the
answering affidavit did not go as far as the heads of argument. It
went no further
than to say that there were discrepancies and
inconsistencies in the various certificates and relied solely upon
the SANAS report.
In the result there was a report from a certified
verification agency certifying the very matter that was of concern to
the DTI
and no substantive factual challenge to it. Applying the
established tests for the existence of a
bona
fide
and genuine
dispute of fact,
[5]
no real dispute was raised in regard to the validity of the Muthelo
certificate.
[21]
It was common cause that the respondent was obligated to provide a
valid certificate each time it lodged a claim
for payment with the
DTI, because an entity’s circumstances might change which might
have an impact on the overall BBBEE
status of the entity. This could
be due to a change of ownership or could be a result of an error
uncovered during the verification
process and might result in the
re-issuing of a new certificate. Clause 10.6 of the Verification
Manual,
[6]
provides that an entity has a right to appeal against any decision of
a Verification Agency. In cases where the appeal or complaint
is
upheld, the verification agency is required to conduct a root cause
analysis to ascertain how and why the error occurred. In
this case,
the appellants have failed to show that these processes were followed
after the respondent lodged an appeal. No outcome
of the appeal has
been submitted by the DTI. This Court is not a proper forum for the
determination of the issues raised in the
complaint and the appeal.
Therefore, the appellants’ reliance on the review by Muthelo
was based on unproven allegations.
The BBBEE certificate issued by
Muthelo remained valid until set aside or until it expired on its own
terms. This is reinforced
by the fact that SANAS did not have the
legislative power to dictate to a verification agency to withdraw the
certificate.
[22]
It is not for this Court to determine the category under which the
respondent falls, as this is a technical assessment
that has to be
carried out by a SANAS accredited agency. Be that as it may, on the
evidence before us it can be accepted that the
respondent was
assessed in terms of the Generic Codes as per the DTI directives, as
the amended Construction Codes were non-existent
at the time of
lodging of the application by the respondent.
The
Codes of Good Practice on Broad Based Black Economic Empowerment,
[7]
published on 5 June 2009 (2009 Construction Sector Codes) defined the
application of the Codes. Item 3 of that code provided as
follows:
‘
(a)
Any measured entity which conducts any construction-related
activities, must determine what percentage of its annual turnover
is
derived from construction activities;
(b)
If the majority of the measured entities turnover is derived as a
result of construction related activities, then the Charter
will
apply to such measured entity;
(c)
If the measured entity does not derive the majority of its turnover
from the construction sector, then the Charter will not
apply to such
measured entity and the measured entity will be governed by any other
sector code which may be applicable, failing
which the generic DTI
Codes will apply;
(d)
In the event that a measured entity derives an equal percentage of
its turnover from construction related activities as well
as other
industry-related activities, then such measured entity will have the
chose as to which sector code will apply.’
The
respondent’s assertion was that its involvement in the
construction industry was only 30% of its business. In that regard
Item 3(c) would be applicable to the respondent at the time the grant
was approved.
[23]
At the time the grant to the respondent was finally approved on 19
October 2017, the new Construction Sector Codes
were not yet
promulgated. The applicable 2009 Construction Sector Codes, until
December 2017, were the 2009 Construction Sector
Codes promulgated in
June 2009, and it appears that the retailing of building supplies was
not within the scope of that code. It
may well be that the amended
Construction Sector Codes promulgated in December 2017 did apply to
the retailing of building supplies,
but the DTI did not, in the high
court, positively assert that this was so. The BIS Programme
Guidelines referred only to the BEE
Codes of Good Practice published
in October 2013 ie the Generic Codes, and it was the Generic Codes
which the appellants in the
high court attached to their opposing
papers. It was only the investigation by members of this Court which
brought to light the
terms of the Original and amended Construction
Sector Codes. Their applicability was never debated in the high
court. The DTI’s
point in the high court was that the Muthelo
certificate had been withdrawn so the respondent lacked a BEE
certificate. However,
this ignored the pending and unresolved appeal
which the respondent lodged against the threatened withdrawal of the
certificate.
[24]
The Economic Benefit Criteria requirements, specifically required
that Murendi had to achieve at least a level 4 BBBEE contributor
status as per revised BBBEE Codes of Good Practice published in
October 2013. The DTI did not claim that the respondent failed
to
achieve this. And even if the Amended Construction Sector Codes were
to be applicable, the appellants have never alleged that
the
respondent would have failed to meet the minimum BBBEE contributor
status. More significantly it was grossly unfair on the
respondent to
be told midway the project and after having incurred substantial
costs, that it no longer qualified for funds because
it now had to be
assessed under a different code. In regard to the validity of
assessing the respondent under the generic codes
the DTI did not
positively assert that the generic codes did not apply, that Muthelo
had been required to determine the appropriate
sector when doing the
April 2018 certification and there was no evidence from Muthelo that
it failed to do so.
[25]
It is an important public policy consideration that the BBBEE
contribution of an entity is properly rewarded as
held by
Constitutional Court in
Allpay
2
.
[8]
In
South African
Natural Roads Agency Ltd v Toll Collect Consortium
[2013] ZASCA 102
;
[2013] 4 All SA 393
(SCA);
2013 (6) SA 356
(SCA) at
para 27, this Court held that:
‘
[t]he
invitation to re-score the Consortium’s tender for quality must
be declined. Once again it must be stressed that this
is not the
function of a court . . . Nor will it interfere because it disagrees
with the assessment of the evaluator as to the
relative importance of
different factors and the weight to be attached to them. The court is
only concerned with the legality of
the tender process and not with
its outcome.’
I
find these principles applicable to this case.
[26]
In considering whether the respondent failed to comply with the
qualifying requirements for payment, in
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer of the South African Security Agency and
Others
(
Allpay
1
),
[9]
the Constitutional Court dealt with the failure to comply with a
mandatory condition of a tender. It ruled that the tender could
not
simply be discarded. It held that the materiality of irregularities
should be determined primarily by assessing whether the
purposes of
the tender requirements have been substantially achieved.
[10]
Similarly, in this case I find that the mandatory requirements were
substantially complied with by the respondent.
[27]
In interpreting the provisions of the policy, the scheme and the
letter of grant the principles enunciated in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[11]
find application.
Endumeni
supports the position that a holistic approach should be uniformly
applied to the interpretation of all legal documents. It discourages
superficial interpretation of legal documents. In that regard in the
interpretation of the policy and the scheme we have to take
into
consideration the background, history, purpose and objectives of the
policy. Most importantly, as explained in
Endumeni
a sensible approach which avoids anomalies must be adopted.
[12]
Similarly in
Panamo
Properties (Pty) Ltd & Another v Nel N O & Others
[2015]
ZASCA 76
;
2015 (5) SA 63
(SCA);
[2015] All SA 274
(SCA) this Court
endorsed, at para 27, that this is the proper approach to adopt in
the interpretation of the requirements of the
policy.
[28] The respondent had
substantially satisfied the objects of the policy, which was to
empower and assist financially
Black Industrialists that have a
potential to become major industrialists in line with the prescripts
of the BIS. In
Allpay
1,
the
Constitutional Court held that ‘substantive empowerment, not
mere formal compliance, is what matters’.
[13]
Counsel for the respondent submitted that the most important part of
the mandatory conditions is that the ownership of the business
remained 100% black, which would be in line with the purpose of the
scheme. We agree. The respondent maintained the 100% black
ownership
and management profile. Having found that the criticisms of the
certificate issued by Muthelo lacked any proper factual
basis and
that it remained valid until set aside or until it expired on its own
terms, there was compliance with the terms of the
grant. I am
satisfied that the respondent discharged the onus of proof in regard
to the provision of a valid BBBEE certificate.
[29]
The appellants raised two points in their
opposing papers in support of a contention that the claim was
premature. They were that
first, grant money is paid out ‘per
the approved milestones’, based on actual costs incurred and
performance criteria
being met. When Murendi submitted its claim in
February 2018, the actual costs had not yet been incurred as the
plant and commercial
vehicles had not been delivered. Second, a final
claim for disbursements should be submitted at the completion of the
project as
approved by DTI, whereas Murendi’s February 2018
claim was for the full grant amount. As at February 2018, the
estimated
completion date was August 2018.
[30]
The DTI failed to complete the investigation, which it alleged
payment depended upon. It did not pay regard to
the positive report
completed by Mr Leboho. Under the IDC loan, drawdowns against
the loan could be made against pro forma
invoices. This was important
as the invoices produced and attached to the replying affidavit
showed that all the suppliers required
payment in advance of the
delivery of the goods. The IDC loan was used to pay these suppliers.
The DTI contended
that when the claim was
submitted by Murendi the actual cost had not been incurred because
neither the tile plant nor the commercial
vehicles had been
delivered. However, they had been ordered and the upfront payments
required by the suppliers had been funded
from the IDC loan. The
costs had been incurred and it is impossible to believe that the DTI
was unaware that it would be necessary
to pay – at least in
part – for the plant and vehicles before installation and
commissioning. In fairness, the DTI
did not suggest otherwise.
[31]
In accordance with para 10.1 of the Guidelines, the addendum to the
grant stated that payments of claims would
be ‘based on actual
costs incurred and performance criteria being met’. The grant
did not require that the assets or
services on which costs were
incurred should actually have been delivered or rendered, or even
that Murendi should already have
made payment to the suppliers of the
assets and services. The only requirement was that the cost should
have been incurred, ie
the obligation to make payment. This is
entirely understandable. Counsel were asked whether any performance
criteria had been identified
and accepted that there were none. In
those circumstances, it seems to me that payment of an appropriate
portion of the grant could
be claimed when costs had been incurred.
It may be that the DTI had decided to align its disbursements with
those of the IDC, but
in the absence of any evidence, documentary or
otherwise, to suggest that such a decision was made, I am not
prepared to conclude
that this was the case. But the proposition that
no costs had been incurred when the claim was made is unsupportable.
This ground
of defence must also be rejected.
[32]
The third defence raised by the DTI was that the claim could not be
submitted for payment because the project was
not complete as
required by the provisions set out above in para 7. The respondent
was criticised for submitting a claim for items
where delivery had
not taken place, despite the production of invoices. This failed to
take into account that the purchases were
partly paid for from the
IDC loan, which attracted interest and that some of the ordered items
were specifically being manufactured
for the respondent and not
readily available. Whilst the project was not complete when the claim
was lodged, the suggestion that
this was required was based on a
construction of the provisions of the letter of grant that was not
sensible or practical. The
money from the grant and most of the money
from the IDC loan was intended to be used to acquire the plant and
vehicles for the
extension. When the suppliers required payment in
advance of the fulfilment of the orders, the funds needed to be
available to
enable the project to be undertaken at all. It was not
feasible and could not have been intended that nothing would be
disbursed
until everything had been acquired and the new plant was up
and running. How then was the project to be funded? Given the purpose
of the project and the inevitable requirement for at least the
payment of interim amounts as costs were incurred the correct
interpretation
was that claims could be made once costs were incurred
in accordance with the specified cost sharing proportion of forty per
cent.
The defence that the claim was premature must also fail.
[33]
In the result, all the grounds for refusing to pay the grant raised
by the DTI were unfounded. The DTI did not
suggest that if that was
the case the amount due to Murendi was less than the full amount of
the grant. Its approach was an all
or nothing one. Accordingly, the
appeal is dismissed with costs, including the costs of two counsel.
Y
T MBATHA
JUDGE
OF APPEAL
APPEARANCES:
For
appellants:
M Mphaga
SC (with him H C Janse van Rensburg)
Instructed
by:
State Attorney, Pretoria
State Attorney, Bloemfontein.
For
respondent:
T Ngcukaitobi SC (with him P Bothma)
Instructed
by:
Falcon & Hume
Incorporated, Sandton
Webbers Attorneys, Bloemfontein.
[1]
The Department of Trade and Industry: Black Industrialists Scheme,
2015: Programme Guidelines at 5.
[2]
See
Minister of Home
Affairs v American Ninja IV Partnership
[1992] ZASCA 164
;
1993 (1) SA 257
(A);
[1993] 1 All SA 222
(A).
[3]
Relying on
Dilokong Chrome Mines
Eiendoms Beperk v Direkteur Generaal: Departement van Handel en
Nywerheid
1992 (4) SA 1
(A);
1992 (4) SA 1
;
Die
Suider-Afrikaanse Kooperatiewe Sitrusbeurs Beperk v Direkteur
Generaal: Handel en Nywerheid and another
[1997] 2 All SA 321
(A).
[4]
KwaZulu-Natal Joint Liaison Committee v MEC for Education,
KwaZulu-Natal
[2013] ZACC 10
;
2013 (4) SA 262
(CC);
2013 (6)
BCLR 615
(CC), paras 32 and 48 (
Joint Liaison Committee
).
[5]
Wightman t/a J W Construction v Headfour (Pty)
Ltd and Another
[2008] ZASCA 6
;
2008
(3) SA 371
(SCA) para 13.
[6]
Verification Manual, GG 31255 of 18 July 2008 page 19. Clause 10.6
of the Verification Manual states:
‘10.6.1 The
Verification Agency shall have a documented process for receiving,
evaluating and making decisions on appeals.
10.6.2 A description of
the process for handling appeals shall be made publicly available.
10.6.3 The Verification
Agency shall be responsible for all decisions at all levels of the
appeal-handling process.
10.6.4 Investigation of
and decisions on appeals shall not result in any discriminatory
actions against the appellant.
10.6.5 The
appeals-handling process shall include at least the following
elements and methods:
10.6.5.1 an outline of
the process for receiving, validating and investigating the appeal,
and for deciding what actions are to
be taken in response to it, and
10.6.5.2 a procedure for
tracking and recording appeals, including the actions undertaken to
resolve them.
10.6.6 The Verification
Agency shall acknowledge receipt of the appeal and provide the
appellant with progress reports and outcome.
10.6.7 The decision to be
communicated to the appellant shall be made by, or reviewed by,
individual(s) not involved in the matter
that is the subject of the
appeal.
10.6.8 The Verification
Agency shall give the appellant formal notice of the end of the
appeal-handling process.
10.6.9 All appeals shall
be resolved in a timely manner by the Verification Agency.
10.6.10 As a guide, an
appeal shall be resolved within a maximum of 30 days of the initial
lodging of the appeal.’
[7]
Codes of Good Practice on Broad Based Black
Economic Empowerment GG 32305, GN 862 of 2009.
[8]
Allpay Consolidated Investment Holdings (Pty)
Ltd & Others v CEO, SASSA & 7 Others
(
Allpay
2)
[2014] ZACC 12; 2014 (6) BCLR 641
(CC); 2014 (4) SA 179 (CC).
[9]
Allpay Consolidated Investment Holdings (Pty)
Ltd and Others v Chief Executive Officer of the South African
Security Agency and
Others (Allpay 1)
[2013]
ZACC 42
;
2014 (1) SA 604
(CC);
2014 (1) BCLR 1
(CC).
[10]
Ibid, paras 30 & 58.
[11]
Natal Joint Municipal Pension Fund v Endumeni
Municipality
[2012] ZASCA 13; [2012] 2
All SA 262 (SCA); 2012 (4) SA 593 (SCA).
[12]
Ibid, paras 17-24.
[13]
Allpay Consolidated Investment Holdings (Pty)
Ltd and Others v Chief Executive Officer of the South African
Security Agency and
Other,
fn 10
above, para 55.