Buhle Waste (Pty) Ltd v Municipal Manager City of Mbombela Municipality and Others (2640/2019) [2022] ZAMPMBHC 70 (17 August 2022)

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[2022] ZAMPMBHC 70
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Buhle Waste (Pty) Ltd v Municipal Manager City of Mbombela Municipality and Others (2640/2019) [2022] ZAMPMBHC 70 (17 August 2022)

IN
THE HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION (MAIN SEAT)
CASE
NUMBER  2640/2019
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES: YES
BUHLE
WASTE (PTY) LTD

APPLICANT
And
THE
MUNICIPAL MANAGER
CITY
OF MBOMBELA MUNICIPALITY                                    1
ST
RESPONDENT
THE
CHAIRPERSON, COUNCIL OF THE
CITY
OF MBOMBELA MUNICIPALITY                                    2
ND
RESPONDENT
THE
CITY OF MBOMBELA MUNICIPALITY                            3
RD
RESPONDENT
SEMBCORP
SILULUMANZI (RF)(PTY) LTD                           4
TH
RESPONDENT
BRAIN
GEAR INVESTMENTS (PTY) LTD                               5
TH
RESPONDENT
ZMG
SCIENTIFIC SERVICES (PTY) LTD                                6
TH
RESPONDENT
SOUTH
AFRICAN WATER WORKS (PTY) LTD

7
TH
RESPONDENT
SEMBCORP
UTILITIES (NETHERLANDS) NV                       8
TH
RESPONDENT
SEMBCORP
UTILITIES SOUTH AFRICA (PTY) LTD
9
TH
RESPONDENT
JUDGMENT
LEGODI
JP
[1]
At the heart of the dispute amongst the parties in this case, the
question is whether
the granting on 14 November 2018 of a consent by
the City of Mbombela Municipality for a change in control of
Silulumanzi and thus
effecting the sale and transfer of controlling
shares in Silulumanzi to the seventh respondent constituted an
administrative action
or decision as contemplated in terms of section
33 of the Constitution reviewable under section 7 of PAJA or whether
such an approval
or granting of consent and sale of shares arose from
a pure contractual relationship between equal contracting parties
where the
principle of administrative review or legality review as
envisaged in PAJA, did not apply. The fourth respondent is cited as
Semcorp
Silulumanzi (RF) (Pty) LTD (hereinafter referred to as
Silulumanzi) and the seventh respondent is cited as South African
Water
Works (Pty) Ltd (hereinafter referred to as SAWW).
[2]
Section 33(1) of the Constitution provides that everyone has the
right to administrative
action that is lawful, reasonable and
procedurally fair.  Everyone whose rights have been adversely
effected by the administrative
action has the right to be given
written reasons.
[1]
National legislation must be enacted to give effect to those rights,
and must: (a) provide for the review of administrative
action by a
court or where appropriate, an independent and impartial tribunal;
(b) impose a duty on the state to give effect to
the right, in
subsections (1) and (2) and (c) promote an efficient
administration
[2]
.
[3]
Promotion of Administrative Justice Act 3 of 2000 (PAJA) is such
national legislation
as referred to in subsection (3) of section 33
of the Constitution.  Of relevance, section 1(a) and (b) of PAJA
provides that
“administrative action” means any decision
taken, or any failure to take a decision by a natural or juristic
person
other than an organ of state, when exercising a public power
or performing a public function in terms of empowering provision
which
adversely affects the rights of any person and which has a
direct, external legal effect.  On the other hand, in terms of
section 1 of PAJA “empowering provision” means a law, a
rule of common law, customary law, or an agreement, instrument
or
other document in terms of which an administrative action was
purportedly taken.
Background
to the dispute
[4]
It is necessary to provide some background facts that led to the
approval or consent
being granted on 14 November 2014 and the dispute
referred to in paragraph [1] of this judgment.  The background
is provided
based mainly on the common cause facts summarised as
follows:  In December 1996, the Municipality undertook a public
tender
process to find water service providers.  On 9 December
1996, it issued a request for proposal.  On 21 August 1999 the

Municipality pursuant to a bidding process, appointed Silulumanzi
(fourth respondent) as a nominated or successful water service

provider.  Subsequent to the appointment, a water services
provision agreement (hereinafter referred to as “the concession

agreement”) was concluded between Silulumanzi and the
Municipality.
[5]
The shares in Silulumanzi were held by two entities, namely, the
eighth and ninth
respondents.  The eighth respondent, that is,
Semcorp Utilities (Netherlands)NV held 48% of the shares in
Silulumanzi.
The ninth respondent, namely Sembcorp Utilities
South Africa (Pty) Ltd, held 52% of the shares in Silulumanzi.
The ninth
respondent on the other hand held 100% of the shares in the
eighth respondent.  Effectively, the ninth respondent owned or

controlled Silulumanzi directly or indirectly. SAWW was geared to
acquire all of eighth respondent’s shares in Silulumanzi.

This was after the eighth respondent in 2017 decided to restructure
itself in the provision of water services in South Africa.
[6]
On 21 February 2018 the eighth respondent agreed to sell its 100% of
shares in Silulumanzi
to the seventh respondent, SAWW.  On 22
February 2018, the eighth respondent requested the Municipality for a
consent to change
control of shareholding in Silulumanzi.  This
request as I see it, was based on two sources. First, the imperative
in BBBEE
Act. Second, on the specific provisions in the concession
agreement. The concession agreement aforesaid was concluded between
Silulumanzi
and the Municipality in terms of the legislative
imperative in the
Water Services Act No. 108 of 1997
.
Section
19(1)(a)
thereof provides that a water
services authority
may
perform the functions of water services provider itself. The
municipality is such water services authority. In terms of subsection

(1)(b)(i) of the
section 19
, a water services authority may enter
into a written contract with water services provider.  Clause
7.4.2.1 of the concession
agreement provides that no shares in the
share capital of the concessionaire (referring to Silulumanzi) may be
transferred to any
person or entity that will have the effect that
the entity or person has control over the concessionaire immediately
before such
transfer loses such control,
save for any such
transfer of control is effected with prior approval of the council
and the lenders
.  The request for a change of control of
shareholding in Silulumanzi was submitted to the Municipality on 2
March 2018.
[7]
On 28 June 2018 the Municipality sat to consider the request.
It agreed to the
change of control in Silulumanzi but subject to
fulfilment of certain suspensive conditions before a final
unconditional
approval for change in
control of shareholding in Silulumanzi could be granted.  At the
risk of repetition, some of the salient
suspensive conditions were
crafted as follows:
“
(a)
Council approves and grants conditional consent in accordance with
clause 7.4.2 of the Water and Sanitation
Concession Agreement dated
21 April 1999, as amended, between the municipality, as Water
Services Authority and Sembcorp/Silulumanzi
(RF) Pty Ltd, as a Water
Services provider; pertaining to the change of control;
(b)
Conditional consent
be granted for the transfer of all the
shares held by Sembcorp utilities (Netherlands) NV in the
Concessionaire (in conjunction
with the transfer of its 100%
shareholding in Sembcorp Utilities South Africa Pty Ltd) to SA Water
Works Pty Ltd (formerly named
K2018039949 (South Africa) Pty Ltd),
CIPC registration number 2018/039949/07, as set out in the
notification and application for
consent by the Concessionaire dated
2 March 2018 (annexure 127/18);
(c)
Conditional consent be granted with the specific suspensive condition
that
SAWW and Silulumanzi immediately after this Council
resolution, commence with the process of obtaining a 28% Mbombela
based BBBEE
shareholder in Silulumanzi and conclude the process
within the prescribed 90 days from the date of the Council
resolution
;
(d)
the City of Mbombela, represented by the Executive Mayor and the
Acting Municipal Manager,
oversee the process administered by SAWW
and Silulumanzi regarding the 28% Mbombela based BBBEE shareholder in
Silulumanzi;
(e)
SAWW and Silulumanzi to select the final 28% Mbombela based BBBEE
shareholder,
in consultation
with the representatives of the
City of Mbombela; BBBEE Mbombela based shareholder;
(f)
the Acting Municipal Manager, as Accounting Officer, be mandated to
confirm that the requirements
above have been met as per the terms of
the conditions of the Conditional Consent granted;
(g)
the Accounting Officer be authorised to sign all documents and do all
things necessary in order to implement
the above;
h)
should the suspensive condition stipulated in (c) above not be met
within 90 days from the date
of the Council resolution and written
confirmation not having been issued by the Acting Municipal Manager,
confirming that all
suspensive conditions for the conditional consent
have been met, the Conditional Consent will automatically lapse and
be of no
further cause or effect and may not be relied upon by any
party.”
[8]
As it would emerge later in this judgment, these conditions form the
subject of contestation
between the parties post 14 November 2018.
Pursuant to the suspensive conditions so imposed by the Municipality
and its obligations
in terms thereof, the process of selecting a
successful BBBEE purchaser of 28% shares in Silulumanzi unfolded.
Invitation
to participate in the selection of a 28% BBBEE
shareholding in Silulumanzi was issued.  The applicant, Buhle
Waste (Pty) Ltd
(hereinafter referred to as Buhle), Brian Gear
Investments (Pty) Ltd, the fifth respondent (hereinafter referred to
as Gear Investments)
and ZMG Scientific Services (Pty) Ltd were the
shortlisted candidates.  On 17 September 2018 Silulumanzi
informed the Municipality
that Gear Investments has been selected as
a successful 28% BBBEE shareholding bidder in Silulumanzi.
[9]
On 25 September 2018 Buhle attorneys requested the Municipality to
provide information
on the evaluation of the bids as well as the
process followed.  Buhle did so seen in the context of the
obligations the Municipality
imposed on itself as per the resolution
of 28 June 2018, in particular its oversight functions and in
consultation power in the
selection process of 28% BBBEE shareholding
in Silulumanzi.  The view taken by Buhle in its letter of 25
September 2018 was
inter alia
; (a) that the bid evaluation was
tainted and that Buhle was unfairly not chosen as a preferred bidder;
(b) Buhle also requested
information on the financial, environmental,
social and technical due diligence information considered by SAWW
without sellers;
(c) the Municipality was also requested to consider
and scrutinise the selection process and not merely rubber-stamp the
selection
of Gear Investments as a successful bidder for the 28%
shareholding in Silulumanzi; and (d) that the Municipality should
consider
tax compliance, conflict of interest, nepotism etc, that
might have overshadowed the selection process.  The request for
the
information and enquiry as above, was according to Buhle prompted
by the suspicion it had regarding the integrity of the selection

process.
[10]
On 28 October 2018 the Municipality responded to the letter of 28
September as follows:
“
4.
City of Mbombela’s role in the process
was merely to
oversee the selection process and ensure that the requirements
spelled out in the council resolution are met.
The selection process
having been concluded, City of Mbombela played no role in the
matter…”
[11]
The statement by the Municipality was preceded by the following
events:  On 6 July 2018
Gear Investments and SAWW wrote to the
Municipality in response to the resolution of 28 June 2018.  The
letter was jointly
authored by Messrs Van Aardt and Van Wyk of
Silulumanzi and SAWW respectively.  In the letter it was stated
as follows:
“
1.
We refer to your letter dated 2 July 2018 requesting the process and
timelines for the selection of a
28% local Mbombela Based Broad Black
Economic Empowerment (“BBBEE”) shareholders (“Local
Consortium”) for
Sembcorp Silulumanzi (RF) (Pty) Limited,
(Registration Number 1998/016432/07) (“Silulumanzi”)
2.
We understand from your letter dated 28 June 2018, that the Executive
Mayor and Municipal
Manager has the following role in relation to the
securing of local BEE:
2.1
Oversee the process; and
2.2
Selection to be made will be
in consultation with
the
representatives of the City of Mbombela being the Executive Mayor and
the Municipal Manager.
3.
We understand oversee to mean supervision of the process.
4.
We understand consultation to mean the process of formally consulting
or discussion.
5.
We reiterate that the final decision on the BBBEE shareholding
selection resides with SA Water Works.
6
…
7.
Request for Proposals
7.1
For purpose of good corporate governance and applying best practise
in this regard, Silulumanzi will
engage the services of
PWC as
independent advisor to manage the selection process, to report to the
steering committee
and to provide corporate advisory services
relating to the introduction of suitable local City of Mbombela
(“COM”)
BBBEE partners of 28% shareholding (Attached in
Annexure A: PWC Engagement Letter).
7.2
SAWW will select
the Local Consortium through a comprehensive
RFP process that will be managed by PWC.  The following
Selection Criteria will
be described in detail in the RFP and
supporting documents will have to be provided to demonstrate that the
participant(s) has
the ability to fulfil the criteria.
Weighagte for each criterion for the purpose of evaluating the
participant(s) will be
proposed by PWC
TO BE AGREED BY THE
Steering Committee
for evaluation.
8.
Selection Criteria
1.
Local City of Mbombela based BBBEE partner with the bulk of
its operations within the Mbombela municipal area;
2.
Sound water industry or related knowledge;
3.
A culture of integrity (integrity due diligence will be
performed), ethics and governance that is beyond reproach;
4.
Business acumen and
track record
;
5.
Access to equity and/or debt Funding;
6.
No politically exposed persons, government officials and
their family members
”
9.
…
10.1  SAWW,
Silulumanzi
and a representative of the City of Mbombela will form
a Steering Committee
(See attached Steering Committee Terms of
Reference Annexure B) who will have regular update meetings to
discuss the process and
the progress relative to the indicative
timetables.
10.2  Subject to
compliance with all and any applicable South African law, SAWW shall
manage and execute the RFP process, and
have
full authority for
the planning and execution thereof, the selection and eventual
negotiation with preferred entity/ies, as long
as these meet the
Selection Criteria
.
10.3  SAWW will
use reasonable commercial endeavours to complete the procurement of a
BBBEE shareholders within 90-days of
the Council Resolution on this
matter.
10.4
SAWW
will implement the RFP process with the selection and implementation
of Local Consortium and negotiate and settle the terms
of the Share
Purchase Agreements with it, in its sole and absolute discretion
deemed acceptable
.
10.5  SAWW will
immediately
notify Council once the RFP process has been
completed
.
10.6  SAWW
understands that the selection of the Local Consortium and the
signing of the Share Purchase Agreement on the same
commercial terms
as SAWW’s acquisition cost between SAWW and Local Consortium
will be sufficient and consent will become
unconditional.
10.7  If we
follow this process as outlined we understand that we would comply
with the council conditions and no further approval
is required from
the Council.  As the Municipal Manager and/or his delegates has
the delegated authority this will be sufficient
to confirm that all
requirements have been met.
10.8  In the
event, that despite our best endeavours, the Local Consortium
procurement process is not concluded within 90 days
of the Council
Resolution, consent will become unconditional and SAWW will provide
an undertaking (on terms and conditions acceptable
to both parties)
in which SAWW undertakes to complete the process”.
[12]
As it would appear from paragraph 7.2 of the letter of 6 July 2018,
PWC was to manage the selection
process of a 28% BBBEE shareholding
in Silulumanzi.  PWC was also to report to a steering committee
and to provide corporate
advisory services relating to introduction
of suitable local City of Mbombela.  The Steering Committee
included Mr Neil Diamond,
representing Municipality in his capacity
as acting Municipal Manager.  The first meeting of the steering
committee took place
on 17 July 2018 and amongst others it was
recorded or resolved during the meeting as follows:
“
The meeting
agreed that as per the SAWW proposal, the COM (referring to the
Municipality) will be consulting and will oversee the
process while
SAWW has full authority to exercise the RFP powers, including the
selection and negotiation with the preferred entity/ies
as
long as it meets the agreed evaluation and selection criteria
”
[13]
Then in paragraph 1 of the steering committee minutes it was
recorded:
“
The proposed
selection criteria was discussed and the meeting resolved that PWC
will, as per the SAWW meeting proposal and the PWC
TOR (terms of
reference) advise the steering committee with regards to the weighty
and application of selection criteria.
In particular the
criteria of Water Industry Knowledge, and Track Record was discussed
as potentially limiting, and this has to
be considered in relative
weighting”.
[14]
On 3 August 2018  an invitation was issued.  The rules of
the invitation included the
following:
“
Improper
assistance, fraud and corruption
·
Respondents may not seek or obtain the assistance of employees,
contractors or advisors of SAWW and/or SILU in the preparation of

their Submission
.
·
SAWW and/or SILU may in its absolute discretion, immediately
disqualify a Respondent that it believes has sought or obtained such

improper assistance.
·
Respondents are to be familiar with the implications of
contravening the
Prevention and Combating of Corrupt Activities Act,
No. 12 of 2004
and any other relevant legislation.
Conflict of
interest
·
A Respondent must not, and must ensure that its officers,
employees, agents and advisors do not, place themselves in a position
that may give rise to actual, potential or perceived conflict of
interest between the interests of SAWW and/or SILU and the
Respondents
interests during the process.
·
The Respondents Submission in this RFI requires the Respondent
to provide details of any interests, relationships or clients which

may or do give rise to a conflict of interest in relation to the
supply of the services under any contract that may result from
this
RFI.
·
If
the Respondent submits its information Pack and a subsequent conflict
of interest arises, or is likely to arise, which was not
disclosed in
the submission, the Respondent must notify PWC immediately in writing
of that conflict to
RFPSubmission@za.pwc.com
;
·
SAWW and/or SILU may immediately disqualify a Respondent from
the process if the Respondent fails to notify SAWW and or SILU of the

conflict as required.
”
[15]
The rules of invitation further required those who would want to
participate in the bid to provide
details of any interest, complete a
form designed for the purpose and to make a declaration of
relationships or clients which may
give rise to a conflict of
interest and the area of expertise in which that conflict of interest
may arise.  Paragraph 7 of
the invitation document provides as
follows:
“
1.1
Any legal person, including persons employed by the Key Stakeholders,
or persons having a kinship with persons employed
by the Key
Stakeholders, including a blood relationship, may make an offer or
offers in terms of this invitation (includes an advertised

competitive bid, a limited bid, a proposal or written price
quotation).
In view of possible allegations of
favouritism, should the resulting bid, or part thereof, be awarded to
persons employed by the
Key Stakeholders, or to persons connected
with or related to them, it is required that the Respondent or
his/her authorised representative
declare his/her position in
relation to the evaluating/adjudicating authority where:
(a)
the Respondent is employed by the Key Stakeholders; and/or
(b)
the legal person on whose behalf the bidding document is
signed, has a relationship with persons/a person who are/is involved
in
the evaluation and or adjudication of the bid(s), or where it is
known that such a relationship exists between the person or persons

for or on whose behalf, the declarant acts and persons who are
involved with the evaluation and or adjudication of the bid
.
[16]
On 6 September 2018 PWC submitted a draft report to the Steering
Committee and
inter alia
, stated that the draft report was
“…
for exclusive use of Sembcorp and Silulumanzi /
South African Water Works…  No other party whether
referred to therein
or not, is entitled to rely on the contents of
the report”.
The report was however disclosed to
Buhle by the Municipality.  Amongst others, the following were
recorded in the report
by PWC: Eleven participants were invited for
possible selection, Gear Investment
misrepresented their
contributor level status as a level 1 in the Terms of Offer
and
certificate obtained from a rating agency, however, specified a level
2 rating. PWC indicated that it was not able to confirm
all the work
experience of key executives of Gear Investments. Despite all of
these, Gear Investments is indicated as having outscored
Buhle by
score of 3.49 to 3.43.
PWC also in their report referring to
a level 2 rating recorded:
“
In light of
this misrepresentation the decision to proceed remains that of SAWW
and SILU”.
[17]
Apparently worried by what was happening between Silulumanzi and
SAWW, on 12 September 2018 the
Municipality wrote to Silulumanzi and
expressed itself as follows:
“
1.
The 6
th
meeting of the steering committee
(Steerco) to procure a BEE shareholder has reference as do our letter
dated 10 September 2018.
2.
The City of Mbombela at a special council meeting on 27 June 2018
resolved under item A (10)
that the Municipality should exercise
oversight over the process of procuring a BEE Partner in Silulumanzi
as a precondition for
consent to change the shareholding in
Silulumanzi.
3.
The municipality wish to place on record that the transparent
sharing of information is a prerequisite for accountability and
oversight
in this process
.
4.
The Steerco at its various meetings stressed the importance of a
process that would be guided
by principles of inclusivity and
empowerment
without fear or favour and that the integrity and
neutrality of the
Steerco members and
stakeholders should be
above reproach
.
5.
In this regard,
City of Mbombela requires that SEMCORB and
MERGENCE confirm in writing that either party separately or jointly
were not involved
with any RFI
on 24 August 2018.
6.
SEMCORB and MERGENCE to
confirm in writing that either party
separately or jointly gave no special support, favours or made
funding arrangements or funding
introductions for individual RFI
participants prior to the closure of the RFI on 24 August 2018 that
could be interpreted as prejudicial to any other participant or
seen as an unfair advantage to any other participant and challenge

the integrity and neutrality of this process
.
7.
The municipality under item A(10) on 27 June 2018 in specific
Resolution A(10)(e) resolved
that the City of Mbombela must be fully
satisfied that this process was above reproach to procure a BEE
shareholder to comply with
the suspensive condition for consent.
8.
In this regard we refer to the above mentioned as well as the terms
and conditions imposed
by Council resolution, A(10) dated 27 June
2018, the contents of which you are aware off.
9.
Kindly
disclose any possible unfair advantage, undue benefit or
existing conflict of interest, or any possible conflict of interest
that may arise on conclusion of this process, concerning the RFI
participants and bidding parties.
10.
Please regard the terms “unfair advantage”, “undue
benefit” and “conflict of interest” must be
seen in
the widest sense conceivable, including any set of circumstances that
create a risk that judgment or actions regarding
a primary interest
will be unduly influenced by a secondary interest, any situation in
which an individual or corporation is in
a position to exploit a
professional or official capacity in some way for their personal or
corporate benefit, moreover including
but not limited to tangible and
non-tangible, “Competition of interest”, including
connotation of natural competition
between valid interests
.
11.
Please take note that the above
should not be construed as an
exhaustive list of all examples
, and we advise that you seek
legal counsel should there be any uncertainty in this regard.
We trust that you find
the above in order and look forward to receiving your written reply
by close of business on 14 September
2018.”
[18]
This was almost like telling Silulumanzi as to who was in authority
or superior.  Almost
like saying there will be no change of
shareholding in Sululumanzi unless certain things are clarified and
properly processed.
I allude to more facts regarding this aspect
later in this judgment when I deal with the critical issue raised in
paragraph [1]
of this judgment.  When the municipality was
apparently not satisfied with a response to the letter of 12
September 2018,
on 16 September 2018 it despatched a follow-up letter
and stated almost like repeating itself as follows:
“
1.
Your letter from SA Water Works “SAWW” dated 14 September
2018 and sent via email on 16 September
2018 has reference.
2.
The City of Mbombela at a special council meeting on 27 June 2018
resolved under item A(10)
that the Municipality should exercise
oversight over the process of procuring a BEE partner in Silulumanzi
as a precondition for
consent to change the shareholding in
Silulumanzi.
We hold the view that our oversight role is
being undermined alternatively not taken seriously.
3.
Your letter dated 14 September 2018 from SAWW is in response to our
letter directed to SEMCORB
and MERGENCE.  We place on record
that our letter of 12 September 2018 remains unanswered by both
SEMCORB and MERGENCE.
4.
Your SAWW letter makes various assumptions as deduced by you
based on your interpretation of our letter to SEMCOR and MERENCE and
subsequent discussions with your Mr. Mark van Wyk representing
both
SAWW and MERGENCE.
Kindly take note that we do not intend
responding to each and every assumption or deduction contained in
your letter but reserved
the right to do so in future, if necessary
.
5.
The City of Mbombela note with appreciation that SAWW provided
written confirmation that
no special support, favors or funding
arrangements have been made for, or funding introductions made to,
individual RFI participants
prior to the closure of the RFI on 24
August 2018.
6.
Notwithstanding this confirmation by SAWW the reasonable request
to MERGENCE and/or SEMCORB to confirm same in writing remain
unanswered
.  We trust this will be remedied urgently and we
have directed separate communication to both parties in this matter
today.
7.
We have a responsibility to the residents and citizens of the City of
Mbombela to ensure
a free and fair process is followed as resolved by
the Municipal Council.  In this regard, we wish to remind you of
the conditions
imposed by the municipal Council in its resolution on
28 June 2018, as well as the timeframes set by the Steering
Committee, and
urge you to give consideration thereto.  You are
currently in default of the agreed time frames and your current
default could
prejudice all parties concerned.
8.
Please adhere to the agreed time frames as per the steering committee
and remedy any breech
immediately without further delay.”
[19]
On 11 October 2018 the Municipality apparently sought legal advice
from its internal legal services
which request
inter alia
was
drafted as follows:  “
The technical confirmed that the
process for selection of preferred Mbombela BBBEE shareholder has
been finalised.
We believe that they have not fully
complied with the conditions set out in the council resolution, in
particular the element of
consultation.
Kindly
confirm whether the process complied fully with the council
resolution, … SAWW and Silulumanzi will select the final
28%
Mbombela based BBBEE shareholder in consultation with the
representatives of the City of Mbombela”
.
[20]
On 17 October 2018 the Municipality Senior Manager Legal Services
responded to the request by
the Municipality as per the latter’s
letter of 11 October 2018.  The response was couched as follows:
“
We have
evaluated the process followed in selecting and appointing a BBBEE
shareholder against the requirements specified in the
council A(10)
of 28 June 2018.  We are satisfied that the process has complied
with the council’s resolution”.
[21]
On 28 October 2018 the Municipality then wrote to the Buhle as
follows:
“
4.
City of Mbombela’s role in the process was merely to oversee
the selection process and ensure that
the requirements out in the
council resolution are met.
5.
The selection process having been concluded City of Mbombela played
no role in the matter”.
[22]
On 14 November 2018 the Municipality came to the conclusion that all
suspensive conditions it
imposed as per its resolution of the 28 June
2018 and quoted in paragraph (7) of this judgment have been
fulfilled.  The effect
of this decision is that the agreement of
sale of shares concluded between Silulumanzi and SAWW was complete
and of effect.
It is this decision which offended Buhle and in
its amended notice of motion it asked for a relief as follows:
“
1.
The decision taken by the first, second or third respondents (“the
city”) on or about 14
November 2018 to consent to a Change in
Control Request presented to the City by the fourth and/or seventy
and/or eighth and/or
ninth respondents on or about 21 February 2018,
in terms of which the fourth respondent sought the City’s
written approval
of a transfer of certain shares in the fourth
respondent to the seventh respondent (“
the consent
decision”
), is declared unlawful, unconstitutional
and is hereby reviewed and set aside.
2.
The agreement concluded by the City and the fourth respondent on or
about 14 November 2018,
in terms of which the consent decision was
given effect to and/or formally recorded (“the
agreement”
),
is declared unlawful, unconstitutional and is hereby reviewed and set
aside;
3.
Any share purchase agreement concluded between the seventh and the
fifth respondents, pursuant
to the consent decision and/or the
agreement, is hereby reviewed and set aside.
4.
The consent decision is hereby substituted by an order authorising
the transfer of shares
(in the fourth respondent) from the eighth and
the ninth respondents to the seventh respondent, subject to the
following conditions
being fulfilled within three months of this
order or such extension being granted (on good cause shown) by this
Court upon application
by any party in these proceeding:
4.1
The seventh respondent shall conclude a share purchase agreement with
the applicant on the same terms
and conditions as those concluded
(alternative intended to be concluded) with the fifth respondent and
give effect to the Council
Resolution of 28 June 2018 within three
months of this order;
4.2
The fourth and seventh respondents are hereby ordered to do
everything necessary to effect the transfer
of 28% of the shares in
the fourth respondent to the applicant as envisaged in the Council
Resolution of 28 June 2018 within three
months of this order;
4.3
The applicant shall pay the sum of R221 000 000 as follows:
4.3.1  By the
delivery of such guarantee(s) by a bank or financial institution
securing the payment of an amount equal to at
least 90% of the sum of
R221 000 000 to the seventh respondent; and
4.3.2  Payment of
an amount equal to at least 10% of the sum of R221 000 000 to the
seventh respondent;
5.
The costs of this application shall be paid by any respondent that
opposes this application,
save that if more than one respondent
opposes this application, they shall pay the costs thereof jointly
and severally;
6.
The applicant is granted further and/or alternative relief.
The
attack by the respondents against the relief sought
[23]
The Municipality stated its salvo by making a statement as follows in
its written heads of argument:
“
The applicant’s
case is stillborn and ought to collapse at its preliminary stages.
It is evident from the applicant’s
notice of motion, including
its amended notice of motion that it seeks to review a decision which
according to it, was taken on
14 November 2018”.
[24]
Seeking to amplify the statement above, the Municipality in
paragraphs 89 and 90 of its written
heads, proceeded as follows:
“
89.
However, once a tender is awarded, the agreement or contract
concluded between an organ of state
and private entity
is purely a contractual matter governed by the principles of law of
contract.  In this regard, the parties conclude a contract
on
equal contractual footing.  At this stage, no public authority
or power is exercised by either or all the parties in such

contractual agreement. Therefore, the concession agreement concluded
by the Municipality and Silulumanzi is a purely contractual

arrangement and should be viewed through the prism of the law of
contract and not administrative.
90.
Equally, the share purchase agreement concluded between Silulumanzi
and SAWW, being private juristic entities
concluding their own
private commercial affairs, is a purely contractual matter regulated
by the law of contract.  No public
function, exercise of public
authority or power features in this regard.  Accordingly, this
aspect is beyond the reach of
the court’s power of judicial
review unless there are public policy considerations involved, which
we submit is not the case
in the present case”.
[25]
The statements quoted above became the theme
adopted
by all the respondents who participated in these proceedings.
They all
inter
alia,
sought to rely on the principle enunciated in the case of
Cape
Metropolitan Council v Metro Inspection Services Western Cape CC
[3]
.
It follows that whether or not conduct is administrative action would
depend on the nature of the power being exercised.
Other
considerations which may be relevant are the source of the power, the
subject matter, whether it involves the exercise of
a public duty
and
how closely related it is to the implementation of legislation
[4]
.
(My emphasis)
[26]
The Cape Provincial Division in
Cape-Metropolitan
Council
set aside a decision by the Council to terminate a contract with
Metropolitan
Inspection Services (Western Cape) CC
and reinstated the contract.  The Council was also ordered to
afford Metropolitan Inspection Services or its nominated
representative
access to the written information contained in certain
documents, to furnish reasons for its decision and to pay the costs
of the
application.  The main issue that was before the appeal
court in
Cape-Metropolitan
Council case
was whether such cancellation constituted administrative action
within the meaning of that phrase in the Constitution. Cape
Metropolitan
Council denied that its cancellation of the contract
constituted administrative action entitling Metropolitan Inspections
Services
to procedural fairness and reasons in terms of section 33 of
the Constitution.  It contended that it was entitled to
summarily
cancel the contract in that Inspections Services submitted
claims for commissions to which it was not entitled to.  The
court
a
quo
had
found that when the Council made the decision to terminate its
contract with Inspections Services  the principle of
administrative
law applied to the decision.  It stated that the
Council was a public authority which derived its authority to appoint
the
Inspections Services from a public power and applying the
principle expounded in
Administration,
Transvaal and others v Zenzile and Others
1991 (1) SA 21
A,
came to the conclusion that its authority to terminate the agreement
with the Inspections Services similarly derived from a public
power.
It
follows that whether or not conduct is administrative action would
depend on the nature of the power being exercised
[5]
.
Other consideration why may be relevant are the source of the power,
the subject matter, whether it involves the exercise
of a public duty
and how closely related it is to the implementation of
legislation
[6]
.
I
deal with this principle later in paragraph [36] of this judgment.
[27]
Turning to the
Cape Metropolitan case
, the SCA in paragraph 18
of its judgment held as follows:
“
[18]
The
appellant is a public authority and, although it derived its power to
enter into the contract with the first respondent from
statute,
it
derived its power to cancel the contract from the terms of the
contract and the common law.
Those terms were not prescribed by statute and could not be dictated
by the appellant by virtue of its position as a public authority.

They were agreed to by the first respondent, a very substantial
commercial undertaking. The appellant, when it concluded the
contract,
was, therefore, not acting from
a
position of superiority or authority by virtue of its being a public
authority
and, in respect of the cancellation, did not by virtue of its being a
public authority, find itself in a stronger position, than
the
position it would have been in, had it been a private institution.
When it purported to cancel the contract, it was not performing
a
public duty or implementing legislation; it was purporting to
exercise a contractual right founded on the consensus of the parties,

in respect of a commercial contract. In all these circumstances it
cannot be said that the appellant was exercising a public power.
S 33
of the Constitution is concerned with the public administration
acting as an administrative authority exercising public powers
not
with the public administration acting as a contracting party from a
position no different from what it would have been in,
had it been a
private individual or institution”.
[28]
Pausing for a moment and for the purpose of the issues raised in
these proceedings and regard
being had to the principles as
enunciated in
Sarfu and Cape Metropolitan cases
, what is to be
considered in the present case is clear:  First, it is the
nature of the power being exercised. Second, the
source of the power,
the subject matter in question and whether such subject matter
involves the exercise of a public duty and
how closely it is to the
implementation of applicable legislation.  Third, aspect to
consider is whether the terms of the
agreement between Silulumanzi
and SAWW were dictated by the Municipality by virtue of its position
as a public authority.
Lastly, the other issue to be considered
is whether the municipality when it so imposed suspensive conditions
as per the resolution
of 28 June 2018 it did so from a position of
superiority or authority by virtue of it being a public entity
exercising public authority
to reach the ultimate decision it took on
14 November 2018.  Put differently, whether the imposition of
suspensive conditions
and the ultimate decision of 14 November 2018
was taken by the exercise public authority, finding itself in a
stronger position
than the position it would have been in, had it not
have been a public institution or had it have been a private entity.
Source
documents
[29]
As indicated in paragraph [3] of this judgment “
empowering
provision”
in terms of section 1 of PAJA means “a
law, a rule of common law or customary law or an agreement ,
instrument, or other
documents in terms of which an administrative
action was purportedly taken”. The words empowering provision
should therefore
be seen in the context of definition of the word
“
decision”
under PAJA. The following documents are
source documents some of which and other communications amongst the
parties will be dealt
with in this judgment to give context to the
decision taken by the Municipality on 14 November 2018.  The
source documents
are: Water Service Act, the concession agreement,
Broad-Based Black Economic Empowerment Act, PAJA Act, the
Constitution, the municipal
resolution of 28 June 2018 and
Employment
Equity Act No. 55 of 1998
.  In this judgment one will
consider each of the legislative imperatives, source documents and
the facts in relation thereto
insofar as they may be relevant.
Water
Services Act No. 108 0f
1997
[30]
The Act as a source document to the authority and power that was
exercised on 14 November 2018
has to be seen in context.  The
Act was enacted to provide for the rights of access to basic water
supply and basic sanitation
services; to provide for setting of
national standards and norms and standards for tariffs; to provide
for water services development
plans; to provide a regulatory
framework for water services institutions and water services
intermediaries; to provide for the
establishment of water boards and
water services committees and their power and to provide for
monitoring of water services; etc.
[31]
In the Preamble to the Act is amongst others, stated that there is a
duty on all spheres of government
to ensure that water supply
services and sanitation services are efficient, equitable and
sustainable and all spheres of government
must strive to provide
water supply services and sanitation services sufficiently for
subsistence of economic activity.  Furthermore,
in terms of the
Preamble, water supply services and sanitation services are often
provided in a monopolistic or non-monopolistic
circumstances and that
the interests of consumers and broader goals of public policy must be
promoted and the national government’s
role as custodian of the
nation’s water resources must be adhered to.
[32]
The Municipality in terms of section 1 (LXX) of the Act is defined as
water services authority.
What is stated in the preamble is
also largely repeated in section 2 of the Act.  Section 2 deals
with the main objects of
the Act.  Section 3 on the other hand
deals with ‘right of access to basic water supply and basic
sanitation’.
Inter alia,
subsection (3) thereof
provides that every water services authority must in its water
services development plan provide measures
to realise these rights.
Section 19 of the Act deals with “contracts and joint ventures
with water services providers”.
Subsection (1) of section
19 provides as follows:
“
A
water services authority-
(a)
May perform the functions of a water services
provider itself
;
(b)
May-
(i)
Enter into a written contract with a water services
provider
; or
(ii)
Form a joint venture with another water services institutions
to promote water services”.
[33]
The concession agreement referred to in this judgment is the brain
child of section 19(1)(b)(i)
of the Act. That is, “
written
contract with a water services provider”.
The
question is how is the Act of relevance to the decision of 14
November 2018 and related bidding process for the appointment
of 28%
shareholder in Silulumanzi.  This requires a zoomed needle eye
taking into account the fact that the concession agreement
and
annexures thereto consists of many pages. But before one ventures
into this exercise, it is important that I turn first to
deal with
how the Municipality sees itself in relation to the concession
agreement.  In paragraph 12.4 of the municipality’s

answering affidavit the “concession agreement” is
described as “water and sanitation agreement”.
In
the same paragraph, the Municipality alludes to the fact that
“following the bidding process, the Municipality identified

Silulumanzi as the successful bidder and in April 1999 the
Municipality and Silulumanzi entered into the concession agreement”.
[34]
Then in paragraph 13 of the affidavit a statement is made as follows:
“
When the
municipality
evaluated the bidding process
,
which ultimately led to the appointment of Silulumanzi as successful
bidder,
it was discharging its administrative duties
in
terms of the WSA…”
[35]
The bidding process in the selection of Silulumanzi as a water
service provider and a nominee
of the municipality was a discharge of
municipality’s administrative duties. So too should be the
selection of 28% shareholder
in Silulumanzi in particular the
granting of consent to the change of control in Silulumanzi. This
should be seen as municipality
discharging its administrative duties.
The Municipality  however in its attempt to distance itself from
the essence as quoted
in paragraph [34] above, proceeded as follows:
“
However,
immediately after the tender was awarded, the relationship between
the Municipality and Silulumanzi became one of ordinary
contracting
parties doing so on equal footing.  Putting the same position
differently, when the Municipality concluded the
concession agreement
as the Municipality was not concluded the concession agreement
with Silulumanzi, this was purely a contractual matter, as the
Municipality
was not exercising public power or performing a public
function when doing so
”.
[36]
The municipality cannot have it both. I cannot agree with the
contention as quoted in paragraph
[35] above. For this purpose, the
agreement and its terms have to be examined including the case law
and municipality’s own
utterances.  Later in this judgment
I deal with the suggestion that post the conclusion of the concession
agreement, the parties
dealt with each on an equal footing. It
suffices for now to state that I do not agree with suggestion. In
paragraph [26]
of this judgment I
referred to
Sarfu case
and of relevance the principle laid
down therein. That is, ‘...
it follows, whether or not
conduct is administrative action would depend on the nature of the
power being exercised
…’ and ‘
other
considerations which may be relevant are the source of the power, the
subject matter, whether it involves the exercise of
public duty and
how closely related it is to the implementation of legislation’.
In my view, implementation of such legislation will include
relevant provisions in the
Water Services Act, BBBEE
Act read with
the concession agreement and communications amongst the parties and
including other relevant legislative and constitutional
imperatives.
[37]
The conclusion of concession agreement between Silulumanzi and the
Municipality in April 1999
arose from a legislative imperative in
section 19 of the Act and quoted in paragraph [32] of this judgment.
That is conceded
as indicated in paragraph [34] above.  A close
look at the terms of the concession agreement in my view, speaks to
the objects
in the Act referred to in paragraphs [30] to [34] of this
judgment.  For example, in terms of Annexure “B8” to

the concession agreement in particular clause 3.1 thereof,
Silulumanzi or its predecessor assumed the responsibility in terms
and pursuant to the contract, the supply of water services in the
concession areas.  This is a term in a contract that speaks
to
the core function of the Municipality in terms of the Act which
responsibility has been delegated to Silulumanzi or its predecessor

in terms of section 19 of the Water Act referred to earlier in this
judgment.  So, any suggestion that this legislative imperative

was lost by virtue of the concession agreement cannot be correct.
The bucks stop with the Municipality in terms of the Act
throughout.
I later in this judgment deal with the issue of empowerment. This
will be with reference to BBBEE and some relevant
terms of the
agreement in some of the annexures to the concession agreement.
[38]
Clause 31 of the concession agreement deals with “Service
requirements”.  In
clause 31.1 it is recorded that supply
of water service
is a public service
and shall be developed by
the concessionaire (referring to Silulumanzi).  This is a term
in the agreement that is founded
on the legislative imperative.
It is a must provision binding the municipality and Silulumanzi the
latter being a nominee
of the municipality almost like the
Municipality being at a higher level and not on an equal footing with
Silulumanzi. Legislatively,
the buck stops with the Municipality.
Just to emphasise this point: Clause 40 deals with the tariffs
policy.  In clause
40.1 thereof it is recorded that in terms of
the regulatory provisions,
the council being a democratically
elected legislative body, has statutory power and authority
and
social duty to set and levy tariffs on consumers for the supply of
water services in the concession area in accordance with
the
regulatory provisions.  This should dispose of any suggestion
that post the selection process of Silulumanzi, the concession

agreement was an agreement based on an equal footing between
Silulumanzi and the Municipality.  The nature of the agreement

and its source is that the primary services to be rendered are
heavily regulated so much that it became imperative in the concession

agreement to set out the terms or conditions that would be in line
with the legislative or regulatory imperative.
[39]
Section 6 of the Act deals with access to water services through
nominated water services providers.
Silulumanzi is such water
services provider nominated by the council. Without the approval of
the Municipality to supply water
and sanitation services, Silulumanzi
would offend the provisions of section 6(1).  This too shows the
extent
of the Municipality’s
authority for which the concession agreement was all about. That is
rendering water and sanitation services
by Municipality through its
nominee, namely Silulumanzi. Therefore, it cannot be correct to
suggest that concession agreement and
its terms are not closely
related or connected to the legislative framework from which the
municipality derives its public authority.
This then brings me
to another important term of the concession agreement which is linked
to a constitutional legislative framework.
Constitutional
imperative leading to the concession agreement
[40]
Section 27(1)(b) of the Constitution guarantees everyone of a right
to have access to sufficient
food
and water
.  On the
other hand, section 7(2) of the Constitution provides that the state
must respect, protect, promote and fulfil the
rights in the Bill of
Rights. One of such rights is access to clean water services. Section
9(2) of the Constitution provides that
“
equality includes
the full and equal enjoyment of
all rights
and
freedoms.
To promote the achievement of equality,
legislative and measures designed to protect or advance persons or
categories of persons,
disadvantaged by unfair, discrimination may be
taken into consideration
”. (My emphasis).
[41]
The Municipality in paragraph 13 of its answering affidavit deposed
to on 17 October 2019 articulated itself as follows:
“
On 20 May 2018,
the municipality
and indeed influenced
by the
provisions of the Broad Based Black Economic Empowerment Act, 53 of
2003 (“the BBBEE Act”), proposed that the
local Broad
Based Black Economic Empowerment (“BBBEE”) partners
should also be considered in the SPA.  In this
regard, SAWW
proposed to offer a maximum equity participation of 28% in
Silulumanzi to local BBBEE partners, then yet to be identified”.
[42]
In my view, the statement above, should also dispose of any
suggestion that administrative review
or public law review does not
apply because of the contended pure contractual relationship between
the Municipality and Silulumanzi.
Look at the legislative
framework in the BBBEE Act this way:  First, because of our
past, it was necessary to have a legislation
and other measures
designed to protect or advance persons, categories of persons,
disadvantaged by unfair discrimination.
This is not just a pure
contractual obligation.  It is a constitutional provision in
section 9(2) of the Constitution.
Second, BBBEE Act is the Act
that was enacted to deal with this very fundamental constitutional
imperative also read with the provisions
of section 7(2) and 27(1) of
the Constitution referred to earlier in this judgment. The
municipality recognised and acknowledged
the imperative in BBBEE Act
No 53 of 2003 read with the constitutional imperative.
[43]
The Preamble to BBBEE Act says it all.  That is, under apartheid
race was used to control
access to South African’s productive
resources and access to skills and that South Africa’s economy
still excluding
the vast majority of its people from ownership of
productive assets and the possession of advanced skills and that
unless further
steps are taken to increase the effective
participation of the majority of South Africans in the economy,
stability and prosperity
of the economy in the future may be
undermined to the detriment of all South Africans, irrespective of
race.  This is a fundamental
prelude to the objects of the Act
aimed at promoting the achievement of the constitutional right of
equality, increase broad-based
and effective participation of black
people in the economy and promote a higher growth rate, increased
employment and more equitable
income distribution and establish a
national policy on broad-based black economic empowerment,
inter
alia
, so as to promote equal opportunity and equal access to
government services.
[44]
Section 2 of the BBBEE Act deals with the objects of the Act. That
is, to facilitate broad-based
economic empowerment (a) by promoting
economic transformation in order to enable meaningful participation
of black people in the
economy; and (b) by achieving a substantial
change in the racial composition of ownership and management
structures and in the
skilled occupations of existing and new
interpose act.  In interpreting the Act, one must interpret its
provisions so as to
give effect to its objectives and to comply with
the Constitution.  These provisions are founded on section 3 of
the BBBEE
Act.  Section 10 of the BBBEE Act provides
inter
alia
that every organ of state and public entity
must
take
into account and as far as is reasonably possible, apply any relevant
code of good practice issued in terms of the Act (referring
to the
BBBEE Act). “
Every organ of state and public entity
”
has to be the emphasis, in my view, for the purpose of the issues at
hand.
[45]
As on 16 August 1999 when the concession agreement was concluded, the
imperative in the Constitution
under section 9 was there to be
complied with particularly read in the context of sections 7 and 27
of the Constitution.
One must therefore have a look at some of
the terms and conditions in the concession agreement.  This is
important to determine
whether such terms and conditions are closely
linked or connected to the constitutional imperative in section 9(2)
of the Constitution
and other relevant provisions in the Constitution
including other national legislations relevant hereto.
[46]
In
Sarfu case
referred to the paragraph [26] of this judgment,
one other consideration is whether the decision or action complained
of involves
the exercise of public duty and how closely related it is
to the implementation of a legislative imperative.  This
principle
was also reaffirmed in paragraph [17] in the case of
Cape
Metropolitan Council v Metro Inspection Services Western Cape CC and
Others (10/99) [221] ZASCA 56 (30 March 2001)
. It is therefore
necessary to examine whether consenting to the appointment of Gear
Investments as 28% BBBEE shareholder in Silulumanzi
is closely
related to the imperative in section 9(2) of the Constitution.
Put differently whether the inclusion of clause
7.4.2.1 in the
concession agreement is closely related to the imperative in the
BBBEE Act and the Constitution in particular section
9(2) thereof.
[47]
In terms of clause 7.4.2 of the concession agreement “no share
in the share capital of
the Silulumanzi or concessionaire  may
be transferred to any person or entity that will have the effect that
the entity or
person controlling Silulumanzi immediately before such
transfer loses such control,
save for any such transfer or change
in control-
“
7.4.2.1
that is effected with the prior written approval of the Council
Municipality and lenders”.
[48]
This term of an agreement cannot be divorced from the constitutional
imperative in section 9(2)
of the Constitution.  It appears even
more clearly in paragraphs 1 and 2 of the annexure D3 to the
concession agreement. I
deal later with this when one deal with the
relevant provisions in BBBEE Act which came into effect after the
conclusion of the
concession agreement in April 1999.  But,
embodied in the concession agreement there are specific terms which
speak directly
to the imperative in section 9(2) of the Constitution
read with the enabling provisions of national legislations envisaged
in the
Constitution.  In clause 26 of the concession agreement
is recorded: “
The concessionaire
shall
comply with the regulatory provisions
in respect of
employment equity and implement the affirmative action and equal
opportunity employment plan in the affirmative
schedule
annexed hereto marked annexure D3 as from the effective date
”.
I mention this term of the concession agreement to show that it was
not just a pure contractual relationship based
on an equal footing
with no regulatory or statutory terms and conditions attached to it.
This also shows the extent to which
Silulumanzi was to continue to
supply water services in terms of the
Water  Services Act at
the
will of the Municipality bearing in mind that the latter is a public
entity and the buck stops with it.
[49]
What appears in schedule D3 referred to above is even more
interesting and pointed.  This
will appear even more relevant
when dealing with the challenged decision of 14 November 2018 in
relation to BBBEE Act.  Annexure
D3 to the concession agreement
deals with “Affirmative Action Schedule”.  Paragraph
1 thereof deals with the “Policy”
and of relevance is
recorded as follows:
“
1.1
The Concessionaire shall comply with all regulatory provisions in
respect of employment equity and implement
and adhere to the
following principles in respect of its employment practices, namely-
1.1.1
Preference
will be given to the employment of
suitable qualified and experienced
previously disadvantaged
individuals from communities within the concession area
,
based on the operational needs of the Concessionaire as well as its
training and development requirements,
1.1.2
The
Concessionaire shall, as far as possible, maintain and employ a staff
complement that is representable in terms of the demographic

composition of the community within the concession”.
[50]
What is stipulated in annexure D3 quoted above as terms and
obligations contained in the concession
agreement can only have been
prompted by the Constitutional imperative in section 9(2). This in my
view, disposes of any suggestion
that the concession agreement was
just a contract with mere contractual obligations that are not based
on any legislative imperative.
Clause 2 in Annexure D3 deals
with targets.
Inter alia
, it is recorded that target
compliance will be in conformity with the
Employment Equity Act No.
55 of 1998
.
[51]
Similarly, the purpose of Equity Act in section 2 is to advance
equity by, (a) promoting equal
opportunity and fair treatment in
employment through the elimination of unfair discrimination and (b)
by implementing affirmative
action measures to redress the
disadvantages in employment experienced designated groups, in order
to ensure their equitable representations
in all occupational
categories and levels in the workplace.
Section 3
of the
Employment Equity Act requires
any interpretation of the Act to
comply with the Constitution so as to give effect to the purpose the
Act by taking into account
any relevant code of practice issued in
terms of the Act or any other employment law.  The
Employment
Equity Act in
my view, is meant to promote and encourage entities or
institutions to comply with the constitutional provisions
inter
alia
, in section 9(2) of the Constitution.  This should be
read with the imperative in the BBBEE Act which is mainly designed to

deal with organs of state.  Therefore, even from the point of
view of
Employment Equity Act, one
cannot say the Municipality and
Silulumanzi on the facts of the present case, contracted purely on an
equal footing and that same
is implicit in the concession agreement.
The Municipality in my view, never saw itself as an equal partner in
terms of its
interaction with Silulumanzi preceding the taking of a
decision on 14 November 2018.
Municipality
resolution of 28 June 2018
[52]
The resolution of 28 June 2018 was brought about by the terms of the
concession agreement in
particular clause 7.4.2 thereof and quoted
earlier in this judgment.  What is stipulated in clause 7.4.2
are specific obligations
placed on Silulumanzi in terms of the
resolution, which obligations cannot be divorced from the provisions
of the
Water Services Act, section
9(2) of the Constitution and
Employment Equity Act.  The
BBBEE Act also came into the picture
after the conclusion of the concession agreement and its imperative
thereof as so conceded
by the Municipality seen in the contents of
its averments quoted in paragraph [41] of this judgment.
[53]
At the risk of repetition, the resolution of 28 June 2018 of
relevance was crafted as follows:
“
(a)
Council approve and grant conditional consent, in accordance with
clause 7.4.2 of the Water and Sanitation
Concession Agreement dated
21 April 1999, as amended, between the municipality, as Water
Services Authority and Sembcorp/Silulumanzi
(RF) Pty Ltd, as a Water
Services provider; pertaining to the change of control;
(b)
Conditional consent be granted for the transfer of all the shares
held by Sembcorp utilities (Netherlands)
NV in the Concessionaire (in
conjunction with the transfer of its 100% shareholding in Sembcorp
Utilities South Africa Pty Ltd)
to SA Water Works Pty Ltd (formerly
named K2018039949 (South Africa) Pty Ltd), CIPC registration number
2018/039949/07, as set
out in the notification and application for
consent by the Concessionaire dated 2 March 2018 (annexure 127/18);
(c)
Conditional consent be granted with the specific suspensive condition
that SAWW and Silulumanzi immediately
after this Council resolution,
commence with the process of obtaining a 28% Mbombela based BBBEE
shareholder in Silulumanzi and
conclude the process within the
prescribed 90 days from the date of the Council resolution;
(d)
the City of Mbombela, represented by the Executive Mayor and the
Acting Municipal Manager,
oversee the process administered by SAWW
and Silulumanzi regarding the 28% BBBEE Mbombela based shareholder
;
(e)
SAWW and Silulumanzi to select the final 28% Mbombela based BBBEE
shareholder,
in consultation with the representatives of the City
of Mbombela;
(f)
the Acting Municipal Manager, as Accounting Officer, be mandated to
confirm that the requirements
above have been met as per the terms of
the conditions of the Conditional Consent granted;
(g)
the Accounting Officer be authorised to sign all documents and do all
things necessary in order to implement
the above;
(h)
should the suspensive condition stipulated in (c) above not be met
within 90 days from the date of the
Council resolution and written
confirmation not having been issued by the Acting Municipal Manager,
confirming that all suspensive
conditions for the conditional consent
have been met, the Conditional Consent will automatically lapse and
be of no further cause
or effect and may not be relied upon by any
party.”
[54]
The conditional consent set out in (c) and (e) is somewhat in line
with the quotation referred
to paragraph [47] of this judgment and
that it was “
indeed influenced by the provisions of the
Broad Based Economic
Empowerment Act”
as
quoted in
paragraph [41] above.  I deal later with this under the heading
“
Superiority or authority”.
This conditional
consent derived from BBBEE Act is with reference to the sale of
shares between Silulumanzi and the seventh respondent.
It suffices to
mention that certain terms or conditions in the resolution of 28 June
2018 may not have been specifically mentioned
in any of the
legislative or constitutional imperative, but there can be so implied
or inferred. These are the terms or conditions
dictated by the
Municipality and so set by it on the basis of its public authority.
For example, based on its public authority,
it so imposed a condition
for 28% BBBEE shareholding in Silulumanzi almost like as  a
non-negotiable condition before a consent
as envisaged in clause
7.4.2.1 could be granted. The respondents knew of this authority and
acted on the basis that the authority
was not negotiable save of
course for the percentage of BBBEE shareholding in Silulumanzi
Superiority
or authority of the Municipality
[55]
The real question is whether the Municipality throughout acted from a
position of superiority
or authority.  Based on the facts of the
case, the answer should be in the affirmative.  For example, the
Municipality
prompted by its legislative authority and on its
own, started to advance affirmative action. When it concluded the
concession agreement
in 1999, it ensured that should an opportunity
arise, it will activate clause 7.4.2.1 thereof.  In my view, it
had an upper
hand here driven by the imperative in the Constitution
in particular section 9(2) thereof. In an equal footing contractual
relationship,
Silulumanzi or its shareholders would have been free to
sell any of its shares to change the controlling power in it without
anyone’s
consent. However in the present case this was not the
situation. The concession agreement concluded in 1999 was never on
“an
equal footing contractual relationship”.
Silulumanzi had no power or freedom to freely dispose of its shares
having
the effect of change its control through sale of its shares.
When clause 7.4.2.1 was activated, the Municipality seized the
opportunity
by not only invoking the imperative in section 9(2) of
the Constitution but by also invoking the provisions of the BBBEE
Act. The
BBBEE Act was the Municipality’s ace card to twist
Silulumanzi’s hand. For this, on 28 June 2018 the Municipality
imposed
a 28% BBBEE shareholding on the Silulumanzi.  It did not
only do that, but it also ensured that it did not become a by-stander

in the selection of the 28% BBBEE shareholder in Silulumanzi. This
was almost like “take or leave it” attitude towards
the
Silulumanzi. The municipality did so in the exercise of its public
authority.  Probably, Silulumanzi must have pleaded
with the
seventh respondent to agree to a stipulation in the Municipality’s
resolution of 28 June 2018 regarding 28% BBBEE
shareholding in
Silulumanzi.  The seventh respondent was clearly desirous of
obtaining a control over Silulumanzi. For this,
it had to agree and
comply with the suspensive conditions imposed by the Municipality on
28 June 2018.
[56]
In paragraphs [17] to [19] of this judgment I set out in some details
some of the articulations
by the Municipality expressing displeasure
in the way the selection process of 28% shareholding in Silulumanzi
was being conducted.
But before I deal with those
assertions, it is necessary to deal first with what was required. It
suffices for now
to mention that the Municipality expressed itself as
it did in paragraphs [17] to [19] of this judgment because it
appreciated
or understood the superiority or authority it had on the
appointment of 28% BBBEE shareholder in Silulumanzi.
[57]
What was said in the other case law herein, is relevant to the issue
at hand.  That is,
whether the Municipality and Silulumanzi were
exercising mere contractual obligations or whether they were
performing public functions
in the selection of a 28% BBBEE
shareholder in Silulumanzi.  The late Sigogo AJ had an occasion
to deal with an application
in terms of rule 35(12).  Buhle was
forced to approach the court for disclosure of the share purchase
agreement. In finding
that the documents required by Buhle should be
provided, Sigogo AJ inter alia, held:
“
There is no
doubt that when the first respondent (referring to Silulumanzi)
availed itself to provide public service, it waived
its private
entity and clothed itself with the public entity in respect of the
scope of public service it sought to deliver.
Importantly, it
is through this SPA (referring to share purchase agreement) that the
second respondent (referring to the seventh
respondent) took control
of the first respondent…”
[58]
I cannot fault this finding by the late Sigogo AJ.  That should
also be seen the context
of what was articulated in the case of
AllPay Consolidated Investment Holdings (Pty) Ltd and Others v
Chief Executive Officer, South African Security Agency and Others

2014(4) SA 179 (CC).
In paragraph [49] of its judgment, the
Constitutional Court held:
“
Organs
of state have obligations that extend beyond the merely contractual
.
In
terms of section 8 of the Constitution, the Bill of Rights binds all
organs of state.  Organs of state, even if not state
departments
or part of the administration of the national, provincial or local
spheres of government, must thus “respect,
protect, promote and
fulfil the rights in the Bill of Rights”.
[59]
The municipality is such an organ of the state in these proceedings
although it delegated its
core function to Silulumanzi  to make
water services accessible as so entrenched in the Constitution and
the
Water Services Act.  Silulumanzi
in these proceedings
performs public duty by virtue of the concession agreement and its
terms and obligations in the agreement.
It therefore, as Sigogo AJ
concluded, “clothed itself with public entity in respect of
public service it sought to deliver”.
[60]
The Constitutional Court in
AllPay
put it this way in
paragraph [52] of its judgment:
“
That
SASSA is an organ of state is clear.  But, for the purposes of
the impugned contract, so too is Cash Paymaster.
In determining
whether an entity is an organ of state, the presence or absence of
governmental control over that entity is a factor,
but in our
constitutional era, is not determinative.
In
Cash
Paymaster’s case
the “control test” is not helpful; although it may be
independent from SASSA’s control, the function that it
performs
– the country-wide administration of the payment of social
grants – is fundamentally public in nature”.
[61]
Just to pause for a moment and comment on the absence or presence of
government’s control.
That is, municipality’s
control over the selection process of BBBEE shareholding in
Silulumanzi.  First, is the municipality’s
articulation as
quoted in paragraph [41] of this judgment.  Second, it is its
assertions in its letter of 12 September wherein
inter alia,
it
stated:
“
2.
The City of Mbombela at a special council meeting on 27 June 2018
(referring to 28 June 2018) resolved
under item A(10) that the
Municipality should
exercise oversight over the process of
procuring a BBBEE Partner in Silulumanzi as a pre-conditionn for
consent to change shareholding
in Silulumanzi”.
(My
emphasis)
[62]
This is a statement of authority and superiority found in paragraph
(e) of the resolution of
28 June 2018 in terms of which “SAWW
and Silulumanzi was to select the final 28% Mbombela based BBBEE
shareholder
in consultation with
the representative of the
City of Mbombela”.  Also, almost like another “take
or leave it” attitude towards
both SAWW and Silulumanzi.
The authority is founded on the BBBEE Act, the Constitution and
reinforced in the resolution of
28 June 2018.  It was not just a
simple contractual pre-condition term. It was based on the public and
constitutional  authority
bestowed on the municipality in terms
of the law.
[63]
This statement quoted in paragraph [61] above was preceded by a
statement made in a letter dated
6 July 2018 from SAWW.  This
letter by SAWW as I see it, was intended to thwart the authority
which the municipality set for
itself in the resolution of 28 June
2018 in particular with reference to the “in consultation”
process.  The statement
was made by SAWW as follows:
“
2.
We understand that from your letter dated 28 June 2018, that the
Executive Mayor and
Municipal Mayor has the following role in
relation to securing of local BBBEE:
2.1
Oversee the process; and
2.2
Selection to be made will be in consultation with the representatives
of the City of Mbombela being the Executive
Mayor and Municipal
Manager”.
[64]
The Municipality as indicated in the quotation under paragraph [18]
of this judgment regarded
these assertions as assumptions by SAWW to
which it did not necessarily agree. Having restated the
in
consultation
process contained in the resolution of 28 June 2018
and apparently worried by the power which the Municipality bestowed
on itself
as it was so entitled to do, SAWW tried to deflate the “in
consultation” imperative.  SAWW in its letter of 6 July

2016 argues as follows:
“
4.
We understand “consultation” to mean the process of
formally consulting or discussing.
5.
We reiterate that the final decision on the BBBEE shareholding
selection resides with SA
Water Works”.
[65]
In my view, SAWW was all wrong for the following reasons:  (a)
“consultation”
as so stated in paragraph 4 of the letter
is one thing, and “in consultation” as stated in
paragraph 2.2 of SAWW’s
letter is another.  “In
consultation” means that the person required to consult before
arriving at a decision
arrives at the decision after securing the
agreement or consent of the person so consulted.  Therefore,
SAWW was wrong in
law in thinking that “the final decision on
the BBBEE shareholding selection” resided with it.
Without the consent
or agreement of the Municipality, the purchase of
shares by SAWW in Silulumanzi would never have taken place as so
stipulated in
clause 7.4.2.1 of the concession agreement.
[66]
On the other hand, and according to
Meriam Webster Dictionary
“
oversee”
means “
to watch over and
direct-in order to ensure a satisfactory outcome of performance”.
Therefore, the statement by SAWW in its letter of 6 July 2018 was
wrong when it stated: “
3. We understand oversee to mean
supervision of the process”
.  The statement is wrong
because it is not only a question of supervision, but is also the
power to direct the process and
to ensure that a satisfactory outcome
of performance is realised.  The municipality never formally
withdrew the authority
that it gave to itself in the resolution of 28
June 2018. An attempt by the municipality at the end tail of the
process to act
contrary to its public authority and obligation so
reinforced in its resolution of 28 June 2018, is unhelpful to its
asserted defence
in these proceedings.
[67]
Until the decision of 14 November 2018 was made, the Municipality
never withdrew its superiority
or authority in terms of the
resolution of 28 June 2018. I say so because despite SAWW’s
letter of 6 July 2018, the Municipality
on 12 September 2018
expressed itself as indicated in paragraph [61] of this judgment.
In the same letter of 12 September
2018 the Municipality further made
a statement to this effect:
“
1.
The 6
th
meeting of the steering committee
(Steerco) to procure a BEE shareholder has reference as do our letter
dated 10 September 2018.
2...
3.
The municipality wish to place on record that the transparent
sharing of information is a prerequisite for accountability and
oversight
in this process.
4.
The Steerco at its various meeting stressed the importance of a
process that would be guided
by principles of inclusivity
and
empowerment without fear or favour and that the integrity and
neutrality of the
Steerco members and
stakeholders should be
above reproach
.
5.
In this regard,
the City of Mbombela requires that SEMCORB and
MERGENCE confirm in writing that either party separately or jointly
were not involved
with any RFI participants prior to the conclusion
of the closure of the RFI on 24 August 2018.
6.
SEMCORB and MERGENCE to
confirm in writing that either party
separately or jointly gave no special support, favours or made
funding arrangements or funding
introductions for individual RFI
participants prior to the closure of the RFI on 24 August 2018 that
could be interpreted as prejudicial to any other participant or
seen as an unfair advantage to any other participant and challenge

the integrity and neutrality of this process
.
7.
The municipality under item A(10) on 27 June 2018 in specific
Resolution A(10)(e) resolved
that the City of Mbombela must be fully
satisfied that this process was above reproach to procure a BEE
shareholder to comply with
the suspensive condition for consent.
8.
In this regard we refer to the above mentioned as well as the terms
and conditions imposed
by Council resolution, A(10) dated 27 June
2018, the contents of which you are aware off.
9.
Kindly
disclose any possible unfair advantage, undue benefit or
existing conflict of interest, or any possible conflict of interest
that may arise on conclusion of this process, concerning the RFI
participants and bidding parties.
10.
Please regard the terms “unfair advantage”, “undue
benefit” and “conflict of interest” must be
seen in
the widest sense conceivable, including any set of circumstances that
create a risk that judgment or actions regarding
a primary interest
will be unduly influenced by a secondary interest, any situation in
which an individual or corporation is in
a position to exploit a
professional or official capacity in some way for their personal or
corporate benefit, moreover including
but not limited to tangible and
non-tangible, “Competition of interest”, including
connotation of natural competition
between valid interests
.
11.
Please take note that the above
should not be construed as an
exhaustive list of all examples
, and we advise that you seek
legal counsel should there be any uncertainty in this regard.
12.
We trust that you find the above in order and look forward to
receiving your written reply by close of business
on 14 September
2018”.
[68]
It is clear that the municipality considered itself as dictating the
terms in the appointment
of BBBEE partner or shareholder in
Silulumanzi.  Furthermore, two letters were written to SAWW on
16 September 2018 and in
a somewhat authoritative and repetitive way
in the first letter of 16 September 2018 the Municipality recorded:
“
1.
The 6
th
meeting of the steering committee
(Steerco) to procure a BEE shareholder has reference as do our letter
dated 10 September 2018
and 12 September 2018 that remain unanswered.
2.
The City of Mbombela at a special council meeting on 27 June 2018
resolved under item A(10)
that the Municipality should exercise
oversight over the process of procuring a BEE partner in Silulumanzi
as a precondition for
consent to change the shareholding in
Silulumanzi.
3.
The municipality wish to place on record that it made a reasonable
request for SEMCORB and
MERGENCE to provide written confirmation that
no special support, favors or funding arrangements have been made
for, or funding
introductions made to, individual RFI participants
prior to the closure of the RFI on 24 August 2018.
4.
Notwithstanding this reasonable request no reply from MERGENCE
and/or SEMCORB were received by close of business on Friday 14
September
2018.  The inference drawn from this is that there may
very well may be a challenge to the integrity and neutrality of this

process which will be most disappointing and unfortunate
.
5.
We have a responsibility to the residents and citizens of the City
of Mbombela to ensure a free and fair process is followed as resolved

by the Municipal Council
and herewith call upon MERGENCE and
SEMCORB to immediately and without any further delay respond to our
reasonable request as outlined
in our letter of 12 September 2018”.
[69]
A response by SAWW caused the municipality to hit back as follows and
again in a repetitive way:
“
1.
Your letter from SA Water Works “SAWW” dated 14 September
2018 and sent via email on 16 September
2018 has reference
2.
The City of Mbombela at a special council meeting on 27 June 2018
resolved under item A(10)
that the Municipality should exercise
oversight over the process of procuring a BEE Partner in Silulumanzi
as a precondition for
consent to change the shareholding in
Silulumanzi.  We hold the view that our oversight role is being
undermined alternatively
not taken seriously.
3.
Your letter dated 14 September 2018 from SAWW is in response to our
letter directed to SEMCORB
and MERGENCE.  We place on record
that out letter of 12 September 2018 remains unanswered by both
SEMCORB and MERGENCE.
4.
Your SAWW letter makes various assumptions as deduced by you based on
your interpretation
of our letter to SEMCORB and MERGENCE and
subsequent discussions with your Mr. Mark van Wyk representing both
SAWW and MERGENCE.
Kindly take note that we not intend
responding to each and every assumption or deduction contained in
your letter but reserved
the right to do so in future, if necessary.
5.
The City of Mbombela note with appreciation that SAWW provided
written confirmation that
no special support, favors or funding
arrangements have been made for, or funding introductions made to,
individual RFI participants
prior to the closure of RFI on 24 August
2018.
6.
Notwithstanding this confirmation by SAWW the reasonable request to
MERGENCE and/or SEMCORB
to confirm same in writing remain
unanswered.  We trust this will be remedied urgently and we have
directed separate communication
to both parties in this matter today.
7.
We have a responsibility to the residents and citizens of the City of
Mbombela to ensure
a free and fair process is followed as resolved by
the Municipal Council.  In this regard, we wish to remind you of
the conditions
imposed by the municipal council in its resolution on
28 June 2018, as well as the timeframes set by the Steering
Committee, and
urge you to give consideration thereto.  You are
currently in default of the agreed time frames and your current
default could
prejudice all parties concerned.
8.
Please adhere to the agreed time frames as per the steering
committee and remedy any breach immediately without further delay.”
[70]
You only speak like this when you believe in your authority and
superiority. The extensive quotation
is necessary as all the
respondents sought to deflate the authority, power or superiority of
the municipality based on contractual,
legislative and constitutional
imperative the municipality had in the selection of BBBEE shareholder
in Silulumanzi. This serves
to show that the ultimate consent given
by the Municipality was not just a mere contractual terms and
obligations based on an equal
footing by the contracting parties.
Therefore, the main argument urging the court to find that no basis
has been laid for
administrative or legality review of the decision
of 14 November 2018, has to be rejected. There was just no private
affair about
the process of selecting the BBBEE partner. The
municipality could not have stood on the road side particularly seen
in the context
of what has already been alluded to in this judgment
and also as hereunder. The municipality had a public obligation and
authority
to dictate its involvement or participation in the form of
in consultation process to identify a 28% BBEE partner in Silulumanzi

and the ultimate appointment thereof followed by its decision on 14
November2018 which is in the main the subject of the review

proceedings herein. Accordingly, the decision by the Municipality on
14 November 2018 falls to be reviewed under PAJA.
The
criteria for the selection of BBBEE shareholder and the role of the
steering committee
[71]
The criteria that were set for the selection of 28%
BBBEE-Shareholding in Silulumanzi cannot
be divorced from the
legislative imperative in the
Water Services Act. The
main objective
of the Act being to make water and sanitation services accessible to
every person as so envisaged in section 27(b)
of the Constitution
which provides that everyone has the right to have access to
sufficient food and water.  One of the critical
criteria set for
the selection of a 28% BBBEE-Shareholder in Silulumanzi was stated as
“sound water industry or related knowledge”.
This
was not an isolated requirement in the bidding process.  “Sound
water industry or related knowledge” is a
broad
requirement based on the
Water Services Act, the
Constitution, BBBEE
Act, concession agreement and the 28 June 2018 municipality’s
resolution.  This too speaks to the
fact that the municipality
and Silulumanzi did not want to lose their legislative authority and
obligation, the two being responsible
to perform public functions by
providing or making water access in the areas identified in the
concession agreement. In addition,
the requirement was to ensure that
the 28% BBBEE shareholder in Silulumanzi will significantly
contribute to the provision of water
services and at the same time
serve as advancing broad based economic empowerment envisaged in the
BBBEE Act.
[72]
There was another requirement that was meant to be observed and
drafted as  the rules to
be utilised and followed by the Project
Steering Committee. Its role inter alia, was indicated as being to
ensure that the project
is aligned with municipality’s
condition precedent.  For this purpose, one must be mindful of
the fact that the Steering
Committee consisted of a representative
from the municipality and Messrs Marius van Aardt and Mark van Wyk
from Silulumanzi and
SAWW respectively.  In terms of paragraph 1
of the Terms of Reference it was recorded: “
The purpose of
the Steering Committee is to fulfil the requirements of the
condition”.
This must have been with reference to 28%
BBBEE shareholding condition imposed on Silulumanzi as per the
municipal’s
resolution of 28 June 2018. In paragraph 5 of the
Terms of Reference, the responsibilities of the members of the
Steering Committee
included and regarding the individual steering
committee members an understanding of the goals, objectives and
desired outcomes
of the project and an understanding in  representing
the interest of the project stake-holders and taking genuine
interests
in the project’s outcomes and overall success, and
act on opportunities to communicate through attendance, discussion
and
review of the minutes, papers and other steering committee
documents and to support open discussion and debate, and encourage
fellow
steering committee members to voice their insights.
These responsibilities will become more relevant when dealing with
the
municipality’s attempts to suggest its passive role in the
selection of 28% BBBEE shareholder in Silulumanzi.  It suffices

for now to mention that the municipality represented by Mr Neil
Diamond was part of the steering committee.  He was not just

only an invitee or nominee in the steering committee.  He was
there because of the legislative and constitutional imperative

including the terms of the concession agreement and the resolution of
28 June 2018 discussed earlier in this judgment. The municipality

however failed to properly exercise its oversight role and
in
consultation
authority in the selection of a 28% shareholding in
Silulumanzi as provided for in the resolution of 28 June 2018.  I
now
turn to deal with other facts which led to the ultimate decision
which is now the subject of review.
Letter
from municipality’s legal division and subsequent decision of
14 November 2018
[73]
On 11 October 2018, the Acting Municipal Manager wrote to the
municipality’s internal legal
team.  In his letter he
stated
inter alia, the followings
:
“
The Technical
Committee confirmed that the process of the selection and appointment
of preferred Mbombela based BBBEE shareholder
has been finalised.
We believe that they have not fully complied with
the
conditions set out in the Council Resolution, the element of
consultation.
Kindly confirm whether
the process complied fully with the Council Resolution, A(10)(e),
SAWW and Silulumanzi will select the final
28% Mbombela based BBBEE
shareholder
in consultation
with the representatives of the
City of Mbombela.
You are kindly
requested
to provide legal opinion as to whether the perceived
non-compliance is material to the extent that the
council may withhold the granting of the consent”.
[74]
Starting with the latter statement, the municipality clearly as on 11
October 2018 believed and
correctly so in my view, that it was still
calling the shot, so much that it understood that in terms of its
authority, it could
still “
withhold the granting of
consent
”. If the municipality ultimately withheld its
consent, it would effectively have aborted any attempt to sell the
shares in
Silulumanzi to SAWW. It is something that the municipality
was entitled to do provided the facts were on its side. This
authority
goes against the suggestion that the municipality had no
role to play in the selection of 28% BBBEE shareholder. The
statement,
‘
we believe that they have not fully complied
with the conditions set out in Council Resolution in particular the
element of consultation…’
read with
in
consultation
process as expressed by the municipality, speaks to
its authority and superiority. The municipality through its municipal
manager
clearly seems to have understood the meaning of “in
consultation” and thus entitling it to withhold the consent as
envisaged in clause 7.4.2.1 of the concession agreement read with the
resolution of 28 June 2018.
[75]
On 17 October 2018 the Legal Services of the municipality in a
somewhat unexplained and unmotivated
fashion replied to the letter of
11 October 2018 as follows:
“
1.
Purpose
The purpose of this
memorandum is to provide the Acting Municipal Manager with Legal
Advice pertaining to the process culminating
in the appointment of a
BBBEE Shareholder for Sembcorp Silulumanzi.
2.
Discussion
We have evaluated the
process followed in selecting and appointing a BBBEE shareholder
against requirements specified in the Council
Resolution A(10) of 28
June 2018.  We are satisfied that the process has been complied
with the council resolution.
3.
RECOMMENDATION
It is hereby
recommended that-
In terms of clause (g)
of the resolution mandating the Acting Municipal Manager (Accounting
Officer), he
is authorised to sign all documents and do all things
necessary to implement the Council Resolution”
[76]
Starting with the latter statement, it is important to recall that
and as quoted paragraph [7]
of this judgment, the signing of all
documents and do all things to implement the Council Resolution must
be preceded by in consultation
process in its fullest and overseeing
the process as so contemplated in paragraphs  (c),(d) and (e) of
the municipal resolution
of 28 June 2018. The statement: “
We
have evaluated the process followed in selecting and appointing a
BBBEE shareholder against requirements specified in the Council

Resolution A(10) of 28 June 2018. We are satisfied that the process
has been complied with the council resolution
”, is with
respect unhelpful and lacking in both facts and substance. To have
relied on it, in my view, amounted to a dereliction
of duty by the
municipality. Look at it this way: Nothing is said about the in
consultation process followed and fulfilled. For
example, who was
consulted as part of
in consultation process
and what was the
view or decision taken by the person so approached as part of in
consultation process. Did the legal team take
into account all the
concerns previously raised by the acting municipal who so forcefully
expressed his frustrations in the manner
in which the selection
process of 28% BBBEE was unfolding? What about the concerns raised in
the PWC’s report also alluded
to earlier in this judgment?
Those concerns have been quoted elsewhere in this judgment.
[77]
The legal advice by the municipality’s Legal Services is not
explained. In particular,
how it came to the conclusion that they
were ‘
satisfied that the process has complied with the
Council Resolution’
.  No indication that the Legal
Services clearly understood the process that was to be followed, what
role was to be played
by the municipality and what is meant by “in
consultation”, bearing in mind the enquiry by the acting
municipal manager
was for the Legal Services to legally advise
whether in selecting Gear Investments as a 28% BBBEE-shareholder all
the criteria
and selection requirements have been complied with
including due diligence, checks and balances requirements.
[78]
Things started to hot up and unfolded very dramatically and
interestingly or shockingly just
less than a month before the
impugned decision of 14 November 2018.  The letter by the Legal
Services dated 17 October 2018
seems to have been brought to the
attention of the Buhle’s attorney on the same day.  I say
so because on 17 October
2018 Buhle through its attorneys wrote a
letter to the municipality requesting for access to the record and
also enquiring what
fees were payable for access to the record. On 25
October 2018 the Legal Services of the municipality and on behalf of
the municipality
inter alia,
and of relevance informed the
Buhle’s attorneys as follows:
“
1
…
2
…
3
We further like to reiterate that the City of Mbombela
did
not play active role in the decision that led to the section of a
BBBEE partner in Sembcorp Silulumanzi (Pty) Ltd.
4
City of Mbombela role in the process was merely to oversee the
selection process and ensure that the requirements spelled out in
the
council resolution are met.
5
The selection process having been concluded, City of Mbombela
play (sic) no further role in this matter and you are free to liaise

with Sembcorp Silulumanzi (Pty) Ltd on any additional request for
information.
6
…
7
…”
[79]
The response by the Legal Services of the Municipality in my view is
revealing, almost like washing
off hands. It is revealing and in my
view, deflating the legal advice it provided to the Municipality as
quoted in paragraph [75]
of this judgment. It exposes the municipal’s
or its Legal Services’ lack of the understating of “
overseeing
and in consultation
” stipulated in the municipal resolution
of 28 June 2018. The quotation in paragraph [78] above looks
uninformed or ignoring
the history or context that preceded the 25th
October 2018 letter penned by the “
Acting GM: Legal
Services
” on behalf of the municipality.  I do not
find it necessary to repeat myself.  The September letters
written by
the Acting Municipal Manager and quoted in paragraphs [17]
to [19] and other letters quoted in paragraphs [67] to [69] of this
judgment are at odds with the statement now made by the Legal
Services. No facts and legal basis were provided by the Legal
Services
in their advice and municipality’s passive role as
quoted in paragraphs [74] and [77] above. In paragraphs [64] and [65]
of this judgment I dealt with the meaning of “to oversee”
and “in consultation”.  If the Legal Services
of the
municipality was privy to all the background and context provided in
this judgment, then its response as per the letter
of 25 October 2018
boggles one’s mind.  But it looks like the municipality
just capitulated.  On 14 November 2018
it sought to have
concluded an agreement with Silulumanzi in terms of which a consent
as contemplated in clause 7.4.2.1 of the
concession agreement was
granted and thus giving effect to the transfer of shares in
Silulumanzi to SAWW.
[80]
Why the municipality concluded an agreement with Silulumanzi instead
of taking a resolution on
its own as it did on 28 June 2018 is
astonishing and raises some eyebrows.  Perhaps it was meant to
facilitate an argument
that the decision taken on14 November 2018 was
an issue between two contracting parties dealing with each other on
an equal footing.
I have already dealt with this aspect at
length in this judgment.  The suggestion that the municipality
and Silulumanzi had
been operating on an equal footing as contracting
parties had already been rejected and same should apply here if that
was meant
to be the argument when a written agreement was concluded
post the impugned decision of 14 November2018.
[81]
There are also interesting features regarding what had happened on 14
November 2018.  In
paragraph 4 of the 14th November 2018
document, it is recorded that a resolution was taken on 28 June 2018
after having considered
a request for “change in control
request”.  Then in a somewhat contradictory version the
municipality in paragraph
5 of the 14
th
November 2018
document made a statement as follows:
“
The
concessionaire has, to the satisfaction of COM (referring to the
municipality), selected a local BBBEE shareholder as contemplated
in
Annexure A (referring to the resolution of 28 June 2018).  Com
confirms the fulfilment of the conditions referred to in
Annexure A
and the parties now wish to formally record the consent granted by
Com to the concessionaire”.
[82]
This is what prompted the present litigation.  At the risk of
repeating myself “
to oversee
” means “
to
watch over and direct in order to ensure a satisfactory outcome or
performance”.
So, characterisation of “
overseeing”
as  meaning the municipality ‘
not playing active role
in the decision that led to the selection of BBBEE partner in
Sembcorp Silulumanzi
…’, is a mischaracterisation of
the role which the municipality was to play as set out in this
judgment. The municipality
was not only required “to watch
over”, but it was also required “to direct” the
process in the selection
of 28% BBBEE shareholder in Silulumanzi. The
acting manager never took a stance on behalf of the municipality as
is now articulated
by its Legal Services Unit after the acting
municipal manager has asked for legal advice.  Unfortunately for
the municipality,
the acting manager relented and  so the
municipality did on the advice of its Legal Service without more, and
that is where
their actions became fatal to their case.
[83]
The decision to consent to a change of control in Silulumanzi was not
the decision of Silulumanzi,
neither was a pre-requisite for the
municipality to enter into an agreement with Silulumanzi as it did
after having taken a decision
on 14 November 2018 which decision is
now the subject of a challenge.  It was also not necessary to
record in the agreement
between the municipality and Silulumanzi that
‘…
the parties now wish to formally record the consent
granted by Com to the Concessionaire’
. Such formalisation
as I see it,  was conflating as an attempt to make an argument
that the decision falls under law of contract
and thus not reviewable
under administrative law or public law review.  I am satisfied
that the decision taken on 14 November
2018 for reasons explained in
this judgment falls to be reviewed under administrative law and thus
PAJA finds application.
I deal later with the issue of delay in
relation hereto, but before I do so, I find it necessary to deal with
the essence of the
attack against the decision and the remedy
suggested.
The
attack against the decision of 14 November 2018
[84]
Under this heading,  I deal first with the criteria for the
selection of 28% BBBEE shareholder
in Silulumanzi , one of which I
have already dealt with as “sound water industry or related
knowledge”.  The criteria
were recorded by Silulumanzi and
SAWW in a letter of 6 July 2018 referred to in paragraph [11] of this
judgment.  The followings
were some of the selection criteria:
(a) a culture of integrity (integrity due diligence will be
performed), (b) business acumen
and track record, (c) access to
equity and/or debt funding and, (e) no politically exposed persons,
government officials and their
family members. With regard to the
request for proposals it was stated that “for the purpose of
good corporate governance
and applying best practices in this regard,
Silulumanzi will engage the services of PWC (an auditing firm) as
independent advisor
to manage the selection process, to report to the
steering committee and to provide corporate advisory service relating
to the
introduction of suitable local City of Mbombela (“COM”)
BBBEE partners of 28% shareholding. The request for proposal
was to
be managed by PWC.   The participants, that is,
bidders
were to provide documents to demonstrate that they have the ability
to fulfil the criteria”
. (My emphasis.)
[85]
The first meeting of the steering committee was held on 17 July 2018.
In paragraph 1 of the minutes
of the meeting in question and having
agreed that PWC will advise the steering committee with regard to the
weighting and application
of the selection criteria, it was recorded:
‘
In particular the criteria of water industry knowledge and
Track Record was discussed as potentially limiting and that this has
to be considered in the relative weighting’
.
[86]
The meeting of 17 July 2018 was attended by the deputy municipal
manger on behalf of the municipality
and Mr Mojake Mosala from the
Legal Services of the municipality.  Mr Mosala was the man who
provided legal advice to the
acting municipal manager, Mr Diamond on
25 October 2018.  On 3 August 2018 the invitation to participate
in an investment
opportunity in Silulumanzi for the 28% BBBEE
shareholding was issued.  The rules of invitation were
included.  Of relevance,
the following headings were pointers:
“
Improper assistance, fraud and corruption
”, and
“
conflict of interest
”.
[87]
Under “improper assistance, fraud and corruption”, the
following were recorded as
the rules of the game in the selection of
the 28% BBBEE shareholding: (a) respondents may not seek or obtain
the assistance of
employers of contracting or advisors of SAWW and or
SILU in the preparation of their submission, (b) SAWW and or SILU may
in its
absolute discretion, immediately disqualify a respondent that
it believes has sought or obtained such improper assistance, and (c)

respondents are to be familiar with the implications of contravening
the
Prevention and Combating of Corrupt Activities Act, No.12 of 2004
and any other relevant legislation.
[88]
As regards the rule dealing with “
conflict of interest”,
the following were recorded: (a) a respondent must not and must
ensure that its officers, employees, agents and advisors do not
place
themselves in a position that may give rise to actual, potential or
perceived conflict of interest between the interest of
SAWW and or
SILU and the respondents interest during the process; (b) if the
respondent submits the information pack and a subsequent
conflict of
interest arises, or is likely to arise, which was not disclosed in
the submission, the respondent must notify PWC immediately
in writing
of that conflict to REP…,(c) the respondents submission in the
RFI (requests for information) requires the respondent
to provide
details of any interests, relationships or clients which may or do
give rise to a conflict of interest in relation to
the supply of the
services under any contract that may result from this RFI, and (d)
SAWW and or SILU may immediately disqualify
a respondent from the
process if the respondent fail to notify SAWW and or SILU of the
conflict as required.
[89]
In the invitation, the participants or respondents were further
notified or required  in
the bid- process ‘to provide
details of any interests, complete as attached Form in
ANX006-Declaration relationships or clients
which may give of
interest rise to a conflict of interest and the area of expertise in
which that conflict of interest may arise’.
Lastly, in
the invitation notice and clearly without the participation of the
municipality it was recorded that “…
the draft and
findings are for the exclusive use of Semcorp Silulumanzi and South
African Water Works…no other party referred
to therein or not
is entitled to rely on the contents of the report
”.
[90]
It looks like somewhere along the selection process, the municipality
abandoned its oversight
role in the selection of a 28% BBBEE partner
including its “in consultation” authority.  That
appears clearly
from the letters written by the acting municipal
manager quoted in this judgment.  Failure to play its role as
per its own
resolution of 28 June 2018, is fatal to its decision of
14 November 2018.
Due
diligence report by PWC
[91]
The report was handed over to Buhle by the Municipality on 1 November
2018.  Submission
of this report to Buhle was preceded by a
request to the municipality for the record of the decision in the
selection of Gear Investments
as a preferred 28% BBBEE shareholder in
Silulumanzi.  Failure to submit the report at the time when the
record for the decision
was first requested is seen by Buhle as
having been a deliberate move by the municipality not to disclose the
report. The strange
thing however is that in the municipality’s
letter of September 2019, it was indicated to Buhle that the
municipality never
had in its possession the report by PWC whereas it
was the municipality that provided such a report on 1 November 2018.
That
is, before it made its impugned decision on 14 November 2018.
According to Buhle the report by PWC contained damning information

and findings against Gear Investments.  For this, it is
contended that the disclosure of the report makes it patently clear

that the municipality’s decision of 14 November 2018 cannot
withstand legal scrutiny. I tend to agree as it would appear
later
herein.
Conflict
of interest
[92]
Mr Van Aardt who was at the time managing director of Silulumanzi was
part of the steering committee
referred to earlier in this judgment
and he was therefore exposed to all the information in connection
with the biding of 28% BBBEE
shareholding in Silulumanzi. He had
direct interest in his representative capacity in the bidding process
and selection of a successful
BBBEE shareholder, so was the
contention by Buhle.  On the other hand, one Mr John Pempela
Shongwe was a director of the Gear
Investments, an entity that was
ultimately selected as a successful 28% shareholder in Silulumanzi.
But Mr Shongwe
was not only director in
Gear Investments, he was also a chairman and director of Silulumanzi
of which Mr Van Aardt was a managing
director.  On the other
hand, one Mr Eddy Mabuza who was the head of economic regulations in
Silulumanzi was also a director
in Gear Investments.  In other
words, three prominent people in Silulumanzi had an interest or a
role to play in Gear Investments.
Mr Van Aardt sat as a member of the
steering committee which ultimately supported or played a role in the
appointment of Gear Investments
as a successful 28% BBBEE shareholder
in Silulumanzi.  This information was only disclosed in the
PWC’s report.
Mr Mabuza also submitted a report by Brian
Investments apparently as its director.
[93]
Buhle sees this relationship explained above as too close to the
successful bidder, namely Gear
Investments. The close relationship
between Gear Investments and Silulumanzi is seen as a clear conflict
of interests and contrary
to the Rules of the bid as set out in the
invitation of 3 August 2018 referred to in paragraph [86] of this
judgment and that it
offended against the rule relating to “improper
assistance” referred to in paragraph [87] above .  But
what boggles
one’s mind is the municipality’s attitude
that it had no role to play or that it played no role in the
selection of
28% BBBEE shareholder in Suilulumanzi, something which
was contrary to its own resolution of 28 June 2018. This attitude was
adopted
very close to the decision of 14 November 2018.  I say
so because as explained in this judgment, all along the municipality

through its acting municipal manager adopted the stance that the
municipality had a role to play.  It only relented and had
a
second thought when its Legal Services through Mr Mosala suggested
that there was nothing unto what regarding the selection process.

The municipality therefore relied on a legal advice which in my view,
was flawed both on the facts and the law.
[94]
The municipality as explained previously in this judgment, had a duty
to ensure that the process
was flawless and that it was executed with
integrity.  For obvious reasons, it should have avoided any
negativity surrounding
Silulumanzi which was responsible for the
supply of water and sanitation services on behalf of the
municipality.  The information
as stated above tainted the
integrity of the process. On careful consideration, the consent to
the change of shareholding in Silulumanzi
should never have been
granted without due regard to all relevant facts and the law
applicable alluded to in this judgment.
I now turn to another
worrying factor.
Lack
of track record and experience on the part of Gear Investments
[95]
To the exclusion of the municipality, evaluation of the bids took
place on 11 and 12 September
2018 when Gear Investments was chosen as
a successful bidder for the 28% BBBEE shareholder in Silulumanzi.
Either this
was deliberately done for the municipality
just to remove itself from the process of evaluation or was
deliberately excluded by
other role players in the bidding and
evaluation processes. This was done  despite the municipality’s
membership in
the steering committee and its obligations as it
imposed on itself in the resolution of 28 June 2018.  The
ultimate successful
candidate was recommended and reported as having
“
strong technical knowledge and experience in the water
sector”.
As a start, knowledge and experience in the
water sector was all what the municipality needed to do through
Silulumanzi to
ensure that its constitutional and legislative
obligation to provide clean water and sanitation services were met or
complied with.
[96]
There is a serious problem with the statement that “
Gear
Investments had a strong technical knowledge and experience in the
water sector
” and that Gear Investments was also recognised
as “
existing operator in the water sector
”. Buhle
in paragraph 59 of its supplementary founding affidavit deposed to on
26 September 2019 responded to these questionable
statements praising
Gear Investments. Buhle hit back as follows: “
None of these
statements are correct.  In fact, they are designed to mislead
and expose the flaws in the matter in which the
selection process
were undertaken”.
I tend to agree.  Look at it
this way.  Gear Investment’s CIPC records, show that Gear
Investments was only
incorporated on 16 April 2018.  In the
CIPC’s records a statement is made as follows: “
Brian
Gear Investments (Pty) Ltd has been recently registered solely for
the purpose of bidding for this transaction
”.
[97]
It was on this basis that Buhle in its supplementary affidavit stated
that ‘
it is patently clear from submission that Brian Gear
could never have had the experience referred to in the report by
SAWW’s
report’
.  According to Buhle, Silulumanzi
and SAWW must have known that the statements quoted in paragraphs
[95] and [96] above, were
incorrect. The municipality seems to have
ignored this information and the evidence as so articulated by Buhle
in these proceedings.
In fact, the municipality seems to have
no defence to these averments and contentions made by Buhle.
Therefore its decision of
14 November 2018 cannot stand. Reliance on
some experience on the part of some individuals in Gear Investments
is not enough as
Gear Investments exists in law separate from its
employees and or directors.
Lack
of integrity on the part of Gear Investments
[98]
In paragraph 62 of the supplementary founding affidavit Buhle states
that it is also not stated
how a company (referring to Gear
Investments) that had barely been in existence for a few weeks or
months could be of a good integrity
and record and chosen as a
preferred 28% BBBEE shareholder in Silulumanzi. PWC in its due
diligence report alluded to and expressed
its concerns about the
apparent lack of good record and integrity on the part of Gear
Investments. Eleven participants were invited
for possible selection.
According to PWC Gear Investments misrepresented their contributor
level which was stated as a level 1
in the Term offer. The
certificate obtained from a rating agency specified a level 2 rating
and not level 1.  To this effect
, PWC
in its report made
a statement as follows
:
“
In light of
this misrepresentation the decision to proceed remains that of SAWW
and SILU”.
[99]
In its report, PWC was not able to confirm all the work experience of
the key executives, but
despite all of the above, Gear Investments
was scored 3.49 as against 3.43 for Buhle.  To all of these, the
attitude by the
municipality is that it played no role in the
selection process and in the same breath it came to the conclusion
that all suspensive
conditions have been met and that it was
satisfied that everything was above board.  There was a good
reason why PWC was to
report to the steering committee of which
municipality was a member represented by the acting municipal
manager, Mr Diamond.
The appointment of PWC was meant to ensure
that unbiased and independent entity or body was to do due diligence
to avoid suspicion
of cover-up and hidden agendas in the selection
process.  All things happening in the course of the selection
process were
meant to be reported not only to SIlulumanzi and SAWW,
but also to the municipality in the fulfilment of its oversight role
and
in consultation as contemplated in its resolution of 28 June
2018.  This was meant to ensure that the municipality fulfils

its public duty both in terms of the Water Services Act, the
concession agreement, BBBEE Act,
Employment Equity Act, the
Constitution and the resolution of 28 June 2018.  The
Municipality however failed to do so as indicated earlier in this
judgment
and as it would also appear further hereunder. Such failure
is one of the grounds for review in these proceedings.
Simulation
of share purchase agreement.
[100]
The allegations of simulation of the share purchase agreement between
Silulumanzi and SAWW came up strongly in
Buhle’s second
supplementary affidavit deposed to on 28 January 2021.  Starting
at the top before the tail end of the
allegations, on 30 December
2020 Buhle was provided with share register of Silulumanzi.  It
shows that a total of 31 000 ordinary
shares in Silulumanzi have
purportedly been issued.  According to Buhle, this accords with
clause 2 of the share purchase
agreement to which I refer later in
some detail under this heading.  The share register was provided
to the Buhle by the municipality.
It is not clear whether at
the time the municipality took the decision on 14 November 2018, it
had in its possession the share
register in question.  If it
did, it must be found to have ignored critical information that could
have had a bearing on its
decision.  If it did not, then it
should be found to be guilty of dereliction of duty as it would have
failed to ensure that
everything was above board before it took its
decision on 14 November 2018.
[101]
The share register further reveals that on 20 November 2018 a total
of 10612 ordinary  shares of Gear Investments
in Silulumanzi
were purportedly issued to an entity named
Brian Gear Investments
South Africa (Pty) Ltd
(hereinafter referred to as “
Gear
Investments SA”
). This is not
Brain Gear Investments
(Pty) Ltd
. That is, it is not Gear Investments, the fifth
respondent in these proceedings and a preferred 28% BBBEE shareholder
in Silulumanzi.
You need a needle eye to pick up the difference
between
Brian Gear Investments South Africa (Pty) Ltd
and
Brian Gear Investments (Pty) Ltd.
Gear Investments SA
was established or incorporated on 16 November 2018. That is, two
days after the municipality had granted
the consent on 14 November
2018.  One should not lose sight of the fact that Gear
Investments ( the fifth respondent) which
was a participant as a
bidder in the selection process of 28% BBBEE shareholding in
Silulumanzi, was only incorporated on 16 April
2018.
[102]
Gear Investments (fifth respondent) in its answering affidavit
deposed to in November 2019 acknowledged that it
did not have money
to pay for the shares. Perhaps this did not come as a surprise taking
into the infant nature of Gear Investments
already alluded to in this
judgment. Gear Investments, that is, the fifth respondent then
alleged in its affidavit that it would
complete the share purchase
transaction within few days from deposition of its affidavit in
November 2019.  According to Buhle,
this latter assertion or
statement by Gear Investments is not only untrue, but it also shows
that the parties involved in the transactions,
that is, Silulumanzi
and SAWW never had any intention of transferring the 28% shareholding
in Silulumanzi to Gear Investments.
Instead the 28% BBBEE shares in
SIlulumanzi were meant to be transferred straight to another entity,
purportedly the newly established
Gear Investment SA, so was the
contention by Buhle.  I tend to share this view. This then
brings me to the events that preceded
the incorporation of Gear
Investments SA and the shares in Silulumanzi that were ultimately
transferred to it.  The shares
purchase agreement that was
allegedly concluded on 22 February 2018 between Silulumanzi and SAWW,
was according to Buhle, ultimately
shown to have actually been
concluded on 1 December 2017.  That is, about two months before
the municipality was approached
for a consent as contemplated in
clause 7.4.2.1 of the concession agreement. What preceded 22 February
2018 is painstakingly explained
in Buhle’s second supplementary
affidavit deposed to on 28 January 2021.
[103]
According Buhle, the change in the control of Silulumanzi had in fact
fallen in the hands of SAWW from 1 December
2017. For this, Buhle
takes the view that SAWW, Silulumanzi and others simply engineered an
arrangement scheme in terms of which
certain role-players in
Silulumanzi and SAWW were conflicted. They were conflicted as they
were participants both as referees and
beneficiaries in the selection
process of a 28% BBBEE shareholder, so was the argument by
Silulumanzi and I tend to agree seen
in the context of what is
alluded to in paragraphs [92] to [94] of this judgment.  Copy of
the redacted version of the Shares
Purchase agreement is said to have
been provided to Buhle on the date of the hearing of the rule 30A
application before Sigogo
AJ. In clause 1.1.26 of the shares purchase
agreement, the effective date of the share purchase agreement or
takeover of Silulumanzi
was indicated as 1 December 2017.
[104]
Further clauses of the share purchase agreement which the parties
never wanted to disclose either to the municipality
or Buhle is very
telling as to what had gone behind the scenes preceding 22 February
2018.  In clause 4.1 for example, the
rights and obligations of
the parties were to be subject to the fulfilment of suspensive
conditions from the signature date or
such other date as is specified
in relation to any specific suspensive condition.  It looks like
despite the effective date
in terms of the share purchase agreement
determined as 1 December 2017 in terms of clause 1.1.26, the parties,
that is, Silulumanzi
and SAWW accepted that the municipality and
correctly so in my view, was having an upper hand derived from the
concession agreement
read with the provisions of the Water Services
Act, BBBEE Act and the Constitution.  As everything is so very
much linked
to the public authority, the parties to the share
purchase agreement correctly anticipated that the suspensive
conditions would
be imposed for the change of control in Silulumanzi
in terms of the 1999 concession agreement. The municipality had that
authority
to impose suspensive conditions seen in the context of
clause 7.4.2. of the concession agreement.
[105]
In clause 4.1.3 of the share purchase agreement, Silulumanzi and SAWW
mooted a possibility of unconditional approval
by the municipality
regarding a change of control in Silulumanzi. In the same clause, a
possibility of conditional approval and
their right to reject any
such conditional approval was also mooted.  But, they were
mistaken as they were in a weak position.
Any such rejection of
conditional approval for a change of control in Silulumanzi  would
have meant that there will be no
change in the control of
Silulumanzi.  Clause 5.2 of the share purchase agreement is very
important and in my view, speaks
to part of the issues under
discussion.  It provides that, “
Notwithstanding the
closing, date, the risk in and the benefit of the sale of shares,
shall pass to the purchaser on and with effect from the
Effective Date
.  Ownership of the sale shares, shall
pass to the Purchaser on the Closing Date against payment of the
adjusted Acquisition
Price and delivery in accordance with clause
7.5…”
[106]
The provision of clause 5.2 is said not to have been disclosed to the
municipality.  Therefore, as on 28
June 2018 when it imposed
suspensive conditions, the municipality did not know that the
risk
in
the share purchase agreement that might have a bearing on a
possible 28% BBBEE shareholding, was effective from 1 December 2017.

According Buhle, the effective control of Silulumanzi by SAWW
effectively took place from 1 December 2017. This is an issue, not

disclosed to the municipality so was Buhle’s contention. The
municipality did not interrogate this, and by so doing failed
to
exercise an oversight role and due diligence in real time before it
decided to grant a consent on 14 November 2018 to a change
of control
in Silulumanzi. The municipality failed in its duty and therefore its
decision is found to be reviewable under PAJA
for reasons already
mentioned in this judgment. A case for reviewing and setting the
decision aside,  is made.  This
then brings me to another
issue.
The
delay in the institution of the review proceedings and condonation
for the late filing second supplementary affidavit
[107]
On 28 November 2018 Buhle became aware of the impugned municipality’s
decision of 14 November 2018.
The background preceding the
decision of 14 November 2018 has already been sketched out in this
judgment and I do not find it necessary
to repeat same.  It
suffices to mention that the scanty information provided by the
municipality and other parties to Buhle
before the alleged undue
delay, did not assist much, neither was there any willingness to play
open cards with Buhle regarding
the requested information.  This
actually contributed to the delay. According Buhle, during December
2018 to May 2019 it tried
to obtain necessary information after it
became aware of the impugned decision.  Information was needed
to place Buhle in
a position to decide whether or not to challenge
the decision and if so the nature of the facts in relation thereto to
justify
a
prima facie
case for review.  The
municipality’s stance post the advice by its Legal Services to
date hereof has been that the issue
at hand had nothing to do with
its public authority as an organ of state and that the complaint or
issues raised by Buhle were
based on the law of contract between or
amongst equal negotiating parties
[108]
According to Buhle it was during June-July 2019 that it obtained some
information and carried out some research
on Gear Investments. It was
only then that it was able to provide counsel with some information
and documentation. Subsequent thereto,
the present proceedings were
instituted. Silulumanzi and SAWW is said to have done everything in
their power to conceal the share
purchase agreement until the dispute
was laid before Sigogo AJ when he inter alia, found as quoted in
paragraph [57] of this judgment.
[109]
Look at it this way: The present proceedings were instituted on 9
July 2019. This was  slightly less than
two months after the
expiry of the 180 days calculated from 28 November 2018.
Presence of prejudice or absence thereof to
the respondents based on
an element of
undue
delay in instituting the present
proceedings, is important.  The municipality was fully aware as
early as September 2018 that
there was threat of litigation.
When information was required, it did not seek to help Buhle.
Instead, the municipality became
somewhat destructive or dilatory.
Most importantly, none of the respondents has claimed prejudice
occasioned by the less than two
months’ delay. Lastly, the
delay in question cannot be said to be undue in the circumstances of
the case. I therefore find
that a case for condonation has been made.
[110]
As regards condonation for the late filing of second founding
affidavit, Buhle states that it had to fight booth
tooth and nail to
have access to share purchase agreement which ultimately it was
obtained through an order of court when an application
was laid
before the late Sigogo AJ.  It is further Buhle’s view
that had the municipality done what it was required
to do during the
decision making process, it would have sought a copy of the share
purchase agreement.  I tend to agree. I
am satisfied that a case
for allowing the second supplementary affidavit has been made.
I now turn to deal with the last
issue.
Just
and equitable
[111]
At the end of the hearing on 26 May 2022, I directed the parties to
file supplementary  written heads of
argument to deal with
appropriate remedy in the event I was to find in favour of Buhle, the
applicant.  I am greatly indebted
to the legal representatives
of the parties who have provided detailed heads of argument.
[112]
Once a ground of review under PAJA has been established, there is no
room for shying away from dealing with just
and equitable remedy
requirement. First, section 172(1)(a) of the Constitution requires
the decision to be declared unlawful.
The consequences of the
declaration of unlawfulness must then be dealt with in a just and
equitable order under section 172(1)(g).
Section 8 of PAJA
gives detailed content of “just and equitable” remedy in
line with the Constitution.  In this
case, I have already found
that the decision to grant a consent to a change in the control of
Silulumanzi was an administrative
decision reviewable under PAJA or
under public law.  Secondly, the grounds of review articulated
in this judgement have been
established. In  particular,
regarding the municipality’s attempts to distance itself from
the selection and adjudication
process that resulted in the
appointment of Gear Investments as a preferred or successful 28%
BBBEE shareholder in Silulumanzi.
[113]
Section 217 of the Constitution deals with procurement and subsection
(2) thereof provides that subsection (1)
does not prevent an organ of
state or institution referred to in that subsection from implementing
a procurement policy providing
for, (a) categories of preferences in
the allocation of contracts; and (b) the protection or advancement of
persons or categories
of persons disadvantaged by unfair
discrimination.  It was the municipality’s intention in
its resolution of 28 June
2018 to comply with this constitutional
imperative. It did so by  imposing suspensive conditions on a
change in the control
of Silulumanzi. When it did so, it also invoked
the imperative in the national legislation namely, BBBEE Act. The
municipality’s
conduct in distancing itself from the selection
and lack of due diligence on its part before it granted the consent
to a change
in the control of Silulumanzi rendered the decision of 14
November 2018 unlawful and susceptible to be reviewed and set aside.
This finding brings one to consider a “just and equitable
remedy” in the context of the facts of the present case
and the
law applicable thereto.
[114]
Section 8 of PAJA deals with remedy in proceedings for judicial
review. It entitles the court to grant any order
that is just and
equitable including amongst others, setting aside an administrative
action and remit the matter for reconsideration
by the administrator
or decision maker as contemplated in section 8(1)(c)(i) with or
without directions.
[115]
I must immediately indicate that I am inclined to invoke the
provisions of paragraph (c) (i) of section 8(1) of
PAJA.  Look
at it this way:  Three bidders for the 28% BBBEE shareholding in
Silulumanzi were shortlisted. These were,
Buhle, Gear Investments and
ZMG Scientific Services (Pty) Ltd the latter cited as the sixth
respondent in these proceedings. The
sixth respondent did not
participate in these proceedings. The grounds of review set out in
this judgment have been established.
The effect of this is that the
change of control in Silulumanzi based on the municipality’s
decision of 14 November 2018
has to be reversed pending
reconsideration by the municipality. Therefore the appropriate remedy
in these circumstances would be
to refer the matter to the
municipality for reconsideration of its decision of 14 November 2018.
[116]
Section 8(1)(d) provides that the court may in proceedings for review
in terms of section 6(1) grant an order
that is just and equitable,
including the orders declaring the rights of the parties in respect
of
any matter to which the administrative action relates.
In my view, the question whether the suspensive conditions have been
fulfilled is such “
any matter to which the administrative
action relates
”.  Put it differently, what is the
effect of reviewing and setting the municipality’s decision
which effected
the change of control in Silulumanzi? This question,
in my view,  also speaks to the requirement of “just and
equitable”
remedy.
[117]
In several case law the principle has been established that a court’s
remedial discretion under section
8 of PAJA is to moderate or
minimise injustice. In the exercise of the discretionary power, an
element of prejudice that might
affect other people or the public
will be one of the considerations to take into account. In this case,
continuous and uninterrupted
supply of water and sanitation services
should weigh heavily in favour of continuity thereof. There will
however no need for this
court to exercise its  court’s
discretionary power in this regard as the nature of the order I
intend to make hereunder
does not impeded on that obligation to
supply and sanitation services. I say this in the context of the fact
that there can be
no properly appointed 28% BBBEE shareholder in
Silulumanzi in the absence of a legal decision granting consent to
change shareholding
control in Silulumanzi.  That is, once the
decision of 14 November 2018 is reviewed and set aside as I hereunder
intend to
do, there can be no valid change of control in Silulumanzi,
neither can there be a valid appointment of Gear Investments as a 28%

BBBEE shareholder in Silulumanzi. Change of control and appointment
of 28% BBBEE shareholder in Silulumanzi, were set as suspensive

conditions in the municipal resolutions of 28 June 2018.  In
other words, the rights which Gear Investments (the fifth respondent)

acquired in Silulumanzi or the rights which were so acquired by John
Gear Investments South Africa (Pty) Ltd after the granting
of consent
to a change in the control of Silulumanzi, should be found to be of
no effect pending the reconsideration by the municipality
as
hereunder ordered. In the light of the order I make herein, I do not
find it necessary to deal with other reliefs sought. Perhaps
that
could be an issue for another day, should a need arise.
[118]
Consequently, an order is hereby made as follows:
118.1
The decision taken by the municipality on 14 November 2018
in terms
of which it consented to a change in control of Silulumazi is
declared unlawful and is hereby reviewed and set aside.
118.2
The request for the consent regarding change in control of

Silulumanzi is hereby remitted to the municipality for
reconsideration of its decision of 14 November 2018.
118.3
In reconsidering its consent to a change in the control of

Silulumanzi, the municipality shall take into account all what has
been alluded to in this judgment regarding the process that
led to
the appointment of 28% BBBEE shareholder, its failure to exercise
oversight role as per its resolution of 28 June 2018 regarding
the
adjudication process, issues of concerned raised in this judgment
leading to the appointment of Gear Investment as a successful
28%
BBBEE shareholder in Silulumanzi including the transfer of shares to
another entity after the consent was granted on 14 November
2018 and
any other relevant factor and alluded in this judgment.
118.4
A decision with regard to the reconsideration of its consent
to a
change in the control of Silulumanzi should be concluded and
delivered by not later than
17 October 2022
118.5
Such a decision and the reasons thereof should be filed with
the
court registrar of this court and by email at
PMaitsapo@judiciary.org.za
and
LRameregi@judiciary.org.za
.
118.6
The appointment of John Gear Investments Pty Ltd as a successful
28%
BBBEE shareholder in Silulmanzi and the effective date of the
transfer of 28% BBBEE shareholding in Silulumanzi to either
John
Gear Investments (Pty) Ltd
or to
John Gear Investment South
Africa (Pty) Ltd
based on the decision of 14 November 2018 is
hereby suspended pending the reconsideration of the decision to grant
consent for
a change in the control of Silulumanzi.
118.7
It is hereby declared that pending the reconsideration of
the
municipal decision of 14 November 2014, the suspensive conditions in
the resolution of 28 June 2018, have not been fulfilled.
118.8 The first, second,
third, fourth, fifth, seventh and ninth respondents are hereby
ordered to pay the costs of the application
including reserved costs
and costs of employment of two counsel for the applicant, such costs
to be paid jointly and severally
the one paying the other to be
absolved.
LEGODI
JP
DATE
OF HEARING:
26

May 2022
DATE
OF JUDGMENT
17

August 2022
FOR
THE APPLICANT

ADV JG Wasserman SC / ADV S Tshikila
INSTRUCTED
BY
FAIRBRIDGES

WERTHEIM BECKER
C/O C W A PISTORIUS INC
105 BELMONT VILLAS
15 PAUL KRUGER STREET
MBOMBELA
TEL:  013 752 8337
REF:  Mr Amish
Kika/jn/BUH1/0035
Email:
akika@fwbattorneys.co.za
Cwapmelissa@mweb.co.za
FOR
1
st
, 2
nd
and 3
rd
RESPONDENT:      ADV P L MOKOENA SC
/ADV TK
MANYAGE
INSTRUCTED
BY
WDT

ATTORNEYS INC
RUSSELSTREET CHAMBERS
26 RUSSELSTREET
MBOMBELA
TEL:  013 752 2119
Email:
msizi@wdtatt.co.za
Ref: Mr Dlamini
[MB04/0001][M6/19]
FOR
THE 4
th
, 5
th
, 7
th
and 9
th
RESPONDENT      :
INSTRUCTED
BY                                    VAN

DER SCHYFF & ASSOCIATES INC
F06 ROSTRA, THE FORUM
3 NORTH BANK LANE,
CENTURY CITY
C/O CHIGO ATTORNEYS
OFFICE NO 2, 23 VAN
RENSBURG STREE
MBOMBELA
TEL:  013 752 2119
Email:
leko@chigoattorneys.co.za
nailah@vdsinc.co..za
FOR
THE 8
th
RESPONDENT    :             ADV
KATE HOFMEYER SC / ADV
M
SALUKAZANA
INSTRUCTED
BY
NORTON

ROSE FULBRIGHT
C/O SWANEPOEL AND
PARTNERS
SUTE 601, THE PINNACLE
BUILDING
1 PARKIN STREET
MBOMBELA
TEL:  011 685 8978
Email:
Candice.Grieve@nortonrosefulbright.com
Jeffrey.kron@nortonrosefulbright.com
Ref: Mr
Siebrits/Bernice/MTA32152
[1]
Subsection
(2) of section 33 of the Constitution
[2]
Subsection
(3) of section 33
supra
[3]
(10/99)
[2001] ZASCA 56
(30 march 2001)
[4]
Para
4 in Cape Metropolitan Council
[5]
President
of the Republic of South Africa and Others v South African Rugby
Football Union and Others
2000 (1) SA 1
CC (Sarfu) at para 141
[6]
See
para 143 of Sarfu