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[2020] ZASCA 140
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Afribusiness NPC v Minister of Finance (1050/2019) [2020] ZASCA 140; [2021] 1 All SA 1 (SCA); 2021 (1) SA 325 (SCA) (2 November 2020)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 1050/2019
GP Case no: 34523/2017
In
the matter between:
AFRIBUSINESS
NPC                                                                                            Appellant
and
THE
MINISTER OF
FINANCE                                                                          Respondent
Neutral
citation:
Afribusiness NPC v The
Minister of Finance
(Case no 1050/2019)
[2020] ZASCA 140
(2 November 2020)
Coram:
PONNAN, ZONDI and DAMBUZA JJA and EKSTEEN and
GOOSEN AJJA
Heard
:
8 September 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication
on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 10h00 on 2 November
2020.
Summary:
Exercise of power by Minister under
s 5
of the
Preferential Procurement Policy Framework Act 5 of 2000
to
make Preferential Procurement Regulations 2017 – Minister
exceeding powers - Regulations declared invalid and set aside
–
order of declaration of invalidity suspended for 12 months.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Francis J) sitting as court of first instance:
1 The appeal is upheld with
costs.
2 The order of the court a quo is
set aside and is replaced with the following order:
‘
(a) The
application succeeds with costs.
(b) It is declared that the
Preferential Procurement Regulations, 2017 are inconsistent with the
Preferential Procurement Policy Framework Act 5 of 2000
and are
invalid.
(c) The declaration of invalidity
referred to in para (b) above is suspended for a period of 12 months
from the date of this order.’
JUDGMENT
Zondi JA (Ponnan and Dambuza
JJA and Eksteen and Goosen AJJA concurring)
Introduction
[1]
This matter concerns the validity of the Preferential Procurement
Regulations, 2017 (the 2017 Regulations) promulgated by the

respondent, the Minister of Finance (the Minister) on 20 January
2017 under s 5 of the Preferential Procurement Policy
Framework
Act 5 of 2000 (the Framework
Act).
The appellant, Afribusiness NPC (Afribusiness), who unsuccessfully
challenged the regulations before the Gauteng Division
of the High
Court, Pretoria (high court), appeals with the leave of this court.
Background
[2]
The background facts are briefly the following. On 14 June 2016, the
Minister acting in terms of s 5(2) of the Framework Act
published
Draft Procurement Regulations, 2016 for public comment. The closing
date for submission of comments was 15 July 2016.The
Draft
Regulations were intended, upon their adoption and promulgation, to
replace the Preferential Procurement Policy Regulations
of 2011
(the 2011 Regulations).
[3]
According to the report of the Preferential Procurement Review Task
Team, a body that was convened by the National Treasury,
through the
Office of the Chief Procurement Officer, one of the reasons for
undertaking a review of the public sector Preferential
Procurement
System was that the 2011 Regulations were not in compliance with the
Framework Act to the extent that ‘the Regulations
attempted to
restrict the framework for preferential procurement policies to Black
Economic Empowerment (BEE) credentials to the
exclusion of other
goals contemplated in the Framework Act, causing the 2011
Regulations’ alignment to the Broad-Based Black
Economic
Empowerment Act’s Scorecard to be unlawful’.
[4]
On 23 August 2016, after the time for comment on the Draft
Regulations had elapsed, Afribusiness, a non-profit organisation

representing about 10 500 members in the business community,
addressed a letter to the Minister expressing its concern that the

period of 30 days allowed by the Minister for comments, was
inadequate and requested that the period be extended by a further
period of between 60 and 90 days. On 29 August 2016, the National
Treasury informed Afribusiness that the Minister was considering
an
extension and that Afribusiness would be advised once the Minister
had taken a decision. On 12 September 2016 the National Treasury

advised Afribusiness that the Minister had, by Notice published in
the Government Gazette of 2 September 2016, extended the date
for
comments to 23 September 2016.  It would seem that up until
12 September 2016 Afribusiness was not aware that the
date had
been extended and that it could submit comments. On 15 September 2016
Afribusiness submitted its comments on the Draft Regulations
to
the Minister. In its submissions, it reiterated that an extension of
60 to 90 days would have sufficed to ensure meaningful

public participation considering that some of its members, who
would have wished to comment, did not have sufficient time
to do so.
[5] On 20 January 2017 the
Minister, in terms of s 5 of the Framework Act adopted the 2017
Regulations and caused them to be published
in the Government
Gazette. Aggrieved by the Minister’s decision, Afribusiness, on
19 May 2017 brought an application in the
high court in which it
sought, inter alia, the following relief:
‘
1.
That the promulgation and adoption of the Preferential Procurement
Regulations, 2017 by the Respondent is reviewed and set aside;
2.
That the adoption of the Preferential Procurement Regulations, 2017
be declared invalid;
3.
The Respondent be ordered to pay the costs of the application.’
[6] It was stated in the founding
affidavit in support of the application that:
‘
4.2
The application is instituted on the basis that Respondent acted
ultra
vires
of
the powers conferred upon him by the
Preferential Procurement Policy
Framework Act, No 5 of 2000
, read with Section 217 of the
Constitution. Furthermore it is submitted that Respondent failed to
provide sufficient opportunity
for reasonable and meaningful public
participation, with reference to the notice and comment procedure
implemented by the Respondent,
regarding the finalisation of the
Regulations, with the consequence that the Regulations are not
rationally connected to relevant
information which was not taken into
account by the Respondent. Furthermore it is contended that the
Regulations adopted are so
unreasonable that no reasonable person
could have so exercised the power to promulgate same, and the
Regulations were adopted arbitrarily
and capriciously.
4.3
It is consequently contended that the promulgation and adoption of
the Regulations by Respondent should be reviewed and set
aside upon
the grounds mentioned in Section 6(2)(a)(i), Section 6(2)(b), Section
6(2)(c), Section 6(2)(d), Section 6(2)(e)(i),
Section 6(2)(e)(vi),
Section 6(2)(f)(i) and(ii) and Section 6(2)(h) of the Promotion of
Administrative Justice Act, No 3 of 2000
(“
PAJA”
).’
[7]
The Minister opposed the application, principally on the following
grounds: he denied that his decision to promulgate the 2017

Regulations is an administrative action that is reviewable under the
Promotion of Administrative Justice Act 3 of 2000 (PAJA).
He
contended therefore that the application had to be dismissed. As
regards the merits, the Minister contended, first, that the

application of pre-qualification criteria in terms of the 2017
Regulations, is discretionary and will not apply in every case.
The
discretion created, he maintained, falls to be exercised by the
relevant organ of state in the light of all relevant circumstances,

which was congruent with, and intra vires, the provisions of the
Framework Act; second, that the procedure he followed in promulgating

the 2017 Regulations not only met, but in fact exceeded the
requirements of PAJA; third, that the Socio-Economic Impact
Assessment
System (SEIAS) guidelines are just that, and compliance
with them, is not a legal prerequisite to the validity of the 2017
Regulations;
and fourth, that the categories of preference under the
2017 Regulations are based on sound constitutional principles, are
not
irrational, unreasonable, or unfair.
[8] The Minister’s
contentions were upheld by Francis J and on 28 November 2018 he
dismissed the application with costs, including
the costs of two
counsel. The application for leave that was subsequently brought by
Afribusiness was similarly dismissed.
Application by the Amicus to
be admitted and to lead further evidence
[9]
Subsequent to the proceedings in the high court, the South African
Property Owners’ Association NPC (SAPOA), a non-profit
company
whose mission is to represent, protect and advance its members’
commercial property interests within the property
industry, applied
to this Court to be admitted as amicus curiae. SAPOA alleged that its
interest in this appeal is ensuring a competitive
bidding process in
the property sector and, in particular, properties supplied to organs
of state. SAPOA adopted the position that
the appeal ought to
succeed.
[10]
Whilst Afribusiness consented to SAPOA’s admission, the
Minister did not. It was thus necessary for SAPOA to seek admission

by way of an application in terms of rule 16(4). SAPOA also sought
leave to make oral submissions and to adduce further evidence
on
appeal. For these reasons the presiding judge in consultation with
the remaining members of the Court permitted SAPOA to deliver
written
argument and to make oral submissions at the hearing of the appeal
encompassing both whether it should be admitted as an
amicus curiae
and the merits.
[11]
The contentions advanced on behalf of SAPOA were clearly new and of
assistance to the Court in dealing with the merits of the
appeal. As
the submissions from the amicus undoubtedly assisted the court in its
deliberations, the application for admission had
to succeed. The same
cannot be said about SAPOA’s application for leave to lead
further evidence. The evidence consisted
of what it termed ‘practical
examples’. In terms of s 19
(b)
of
the Superior Court Act 10 of 2013, this Court is empowered to receive
further evidence on appeal. The general principle is that
an
appellate Court does not decide an appeal according to new
circumstances that came into existence after the judgment appealed

against.
[1]
But there may be exceptional circumstances where it might be able to
take cognisance of subsequent events. The power to admit evidence
on
appeal should be exercised sparingly.
[12] In terms of rule 16(8) an
amicus curiae is ordinarily ‘limited to the record on appeal
and may not add thereto. . .’.
In
Minister of Justice and
Constitutional Development and Others v Southern Africa Litigation
Centre and Others
[2016] ZASCA 17
;
2016 (3) SA 317
(SCA) this
Court held at para 29:
‘
An
amicus is not entitled to submit further evidence to the Court but is
confined to the record. That is expressly provided in rule
16(8). It
is unnecessary to consider whether there are exceptional
circumstances in which the Court hearing the appeal may
relax that
rule.
In
making submissions the amicus is not permitted to traverse ground
already covered by other parties, but is confined to making

submissions on the new contentions that it wishes to place before the
Court. In that regard it is apposite to point out that adding

additional references, whether to case law or to academic writings,
on the matters canvassed in the heads of argument of the litigants,

does not amount to advancing new contentions. That obviously does not
exclude placing material before the Court to demonstrate
that a point
of controversy between the parties has been settled by way of an
authoritative judgment. It would only be if there
had, for example,
been an authoritative decision placing a legal issue thought to be
controversial beyond dispute that an amicus
may include that in its
argument. Otherwise it is confined to its new and different
contentions and these must be clearly stated.’
(Footnotes
omitted.)
[13] It would be prejudicial to
the Minister for evidence relating to ‘practical examples’
to be admitted without the
Minister having had the opportunity to
respond to such evidence. The new factual material is not common
cause or otherwise incontrovertible.
It follows therefore that
the application to lead further evidence must fail.
Preliminary Issues
[14]
Although some argument was initially advanced as to whether this is a
PAJA or legality review, it ultimately came to be accepted
that
nothing turns on the point. The argument proceeded on the basis that
whether or not the Minister exceeded his powers in promulgating
the
regulations was indeed subject to review. As this court observed in
Minister of Home
Affairs and Another v Public Protector of the Republic of South
Africa
: ‘
No
procedural differences arise and the grounds of review that
apply in respect of both pathways to review derive ultimately
from
the same source – the common law – although, in the PAJA,
those grounds have been codified.’
[2]
[15] Before analysing the
provisions of the impugned regulations it is necessary to address
first Afribusiness’ contention
that the regulations are invalid
on the ground that they were enacted in a procedurally unfair manner,
or that the Minister, before
adopting them, had failed to comply with
the Socio-Economic Impact Assessment System Guidelines (SEIAS
Guidelines). Neither point
need detain us. Although by no means
persuaded, I shall assume (without deciding) in the Minister’s
favour that sufficient
time had been provided for comments on the
Draft Regulations.  I am also willing to assume in the
Minister’s favour
that his failure to comply with SEIAS
Guidelines did not render the 2017 Regulations unlawful.
Legal Framework
[16] Section 5 of the Framework
Act empowers the Minister to make regulations. It provides as
follows:
‘
(1)
The Minister may make regulations regarding any matter that may be
necessary or expedient to prescribe in order to achieve the
objects
of this Act.
(2)
Draft regulation must be published for public comment in the
Government Gazette and every Provincial Gazette before promulgation.’
According
to its Preamble, the Framework Act was enacted to give effect to
s 217(3) of the Constitution by providing a framework
for the
implementation of the procurement policy contemplated in s 217(2) of
the Constitution; and to provide for matters connected
therewith.
And, ‘preferential procurement policy’ is defined in the
Framework Act to mean ‘a procurement policy
contemplated in s
217(2) of the Constitution’.
[17] Section 217 of the
Constitution reads:
‘
(1)
When an organ of state in the national, provincial or local sphere of
government, or any other institution identified in national

legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,

competitive and cost-effective.
(2)
Subsection (1) does not prevent the organs of state or institutions
referred to in that subsection from implementing a procurement
policy
providing for─
(a)
categories
of preference in the allocation of contracts; and
(b)
the
protection or advancement of persons, or categories of persons,
disadvantaged by unfair discrimination.
(3)
National legislation must prescribe a framework within which the
policy referred to in subsection (2) must be implemented.’
[18]
The national legislation contemplated in s 217(3) is the Framework
Act. Section 1 of the Framework Act defines ‘acceptable
tender’
to mean ‘any tender which, in all respects, complies with the
specifications and conditions of tender as set
out in the tender
documents’.
[3]
In terms of s 2:
‘
(1)
An organ of state must determine its preferential procurement policy
and implement it within the following framework:
(a)
A
preference point system must be followed;
(b)
(i)
for contracts with a Rand value a prescribed amount a maximum of 10
points may be allocated for specific goals as contemplated
in
paragraph (d) provided that the lowest acceptable tender scores 90
points for price;
(ii)
for contracts with a Rand value equal to or below a prescribed amount
a maximum of 20 points may be allocated for specific
goals as
contemplated in paragraph (d) provided that the lowest acceptable
tender scores 80 points for price;
(c)
any
other acceptable tenders which are higher in price must score fewer
points, on a
pro
rata
basis,
calculated on their tender prices in relation to the lowest
acceptable tender, in accordance with a prescribed formula;
(d)
the
specific goals may include─
(i)
contracting with persons, or categories of persons, historically
disadvantaged by unfair discrimination on the basis of race,
gender
or disability;
(ii)
implementing the programmes of the Reconstruction and Development
Programme as published in
Government Gazette
No. 16085 dated
23 November 1994;
(e)
any
specific goal for which a point may be awarded, must be clearly
specified in the invitation to submit a tender;
(f)
the
contract must be awarded to the tenderer who scores the highest
points, unless objective criteria in addition to those contemplated

in paragraphs (d) and (e) justify the award to another tenderer; and
(g)
any
contract awarded on account of false information furnished by the
tenderer in order to secure preference in terms of this Act,
may be
cancelled at the sole discretion of the organ of state without
prejudice to any other remedies the organ of state may have.
(2)
Any goals contemplated in subsection (1) (e) must be measurable,
quantifiable and monitored for compliance.’
[19] The attack is directed at
regulations 3(b), 4, 9 and 10 of the 2017 Regulations. Regulation
3(b) reads:
‘
An
organ of state must-
.
. .
determine
whether pre-qualification criteria are applicable to the tender as
envisaged in regulation 4;
’
Regulation 4(1), which deals with
pre-qualification criteria for preferential procurement, provides:
‘
(1)
If an organ of state decides to apply pre-qualifying criteria to
advance certain designated groups, that organ of state must
advertise
the tender with a specific tendering condition that only one or more
of the following tenderers may respond-
(a)
a tenderer having a stipulated minimum B-BBEE status level of
contributor;
(b)
an EME or QSE;
(c)
a tenderer subcontracting a minimum of 30% to-
(i)
an EME or QSE which is at least 51% owned by black people;
(ii)
an EME or QSE which is at least 51% owned by black people who are
youth;
(iii)
an EME or QSE which is at least 51% owned by black people who are
women;
(iv)
an EME or QSE which is at least 51% owned by black people with
disabilities;
(v)
an EME or QSE which is 51% owned by black people living in rural or
underdeveloped areas or townships;
(vi)
a cooperative which is at least 51% owned by black people;
(vii)
an EME or QSE which is at least 51% owned by black people who are
military veterans;
(viii)
and EME or QSE.’
In
terms of Regulation 4(2), ‘[a] tender that fails to meet any
pre-qualifying criteria stipulated in the tender documents
is an
unacceptable tender.’
[20] Regulation 9 deals with
Subcontracting. It provides:
‘
(1)
If feasible to subcontract for a contract above R30 million, an organ
of state must apply subcontracting to advance designated
groups.
(2)
If an organ of state applies subcontracting as contemplated in
subregulation (1), the organ of state must advertise the tender
with
a specific tendering condition that the successful tenderer must
subcontract a minimum of 30% of the value of the contract
to-
(a)
an EME or QSE;
(b)
an EME or QSE which is at least 51% owned by black people;
(c)
an EME or QSE which is at least 51% owned by black people who are
youth;
(d)
an EME or QSE which is at least 51% owned by black people who are
women;
(e)
an EME or QSE which is at least 51% owned by black people with
disabilities;
(f)
an EME or QSE which is at least 51% owned by black people living in
rural or underdeveloped areas or townships;
(g)
a cooperative which is at least 51% owned by black people;
(h)
an EME or QSE which is at least 51% owned by black people who are
military veterans; or
(i)
more than one of the categories referred to in paragraphs (a) to (h).
(3)
The organ of state must make available the list of all suppliers
registered on a database approved by the National Treasury
to provide
the required goods or services in respect of the applicable
designated groups mentioned in subregulation (2) from which
the
tenderer must select a supplier.’
[21] Regulation 10, which deals
with criteria for breaking a deadlock in scoring, provides:
‘
(1)
If two or more tenderers score an equal total number of points, the
contract must be awarded to the tenderer that scored the
highest
points for B-BBEE.
(2)
If functionality is part of the evaluation process and two or more
tenderers score equal total points and equal preference points
for
B-BBEE, the contract must be awarded to the tenderer that scored the
highest points for functionality.
(3)
If two or more tenderers score equal total points in all respects,
the award must be decided by the drawing of lots.’
[22] ‘Designated Group’
is defined in Regulation 1 as:
‘
(a)
black designated groups;
(b)
black people;
(c)
woman;
(d)
people with disabilities; or
(e)
small enterprises as defined in Section 1 of the National Small
Enterprise, 1996 (Act No 102 of 1996)’
Approach
by the High Court
[23] The high court held that the
2017 Regulations are lawful and rational on the basis that ‘they
follow a preference point
system, as required by s 2(1)
(a)
of
the PPPFA. They permit the application of the 80/20 and 90/10 split
for contract value that is contemplated in s 2(1)
(b)
of the
PPPFA. They do not interfere with the requirement that tenders with a
higher price must be given pro rata lower scores in
terms of s
2(1)
(c)
of the PPPFA. They permit tenders to be awarded
tenderers who do not score the highest points in the circumstances
permitted under
s 2(1)
(f)
of the PPPFA. They do not interfere
with the application of s 2(1)
(g)
of the PPPFA . . . [They] do
not elevate race to a pre-qualification . . . ’
Submissions on behalf of
Afribusiness
[24]
Afribusiness argued that the 2017 Regulations, in particular
Regulations 4 and 9 provide respectively, for pre-qualification

criteria, which must be applied before determining the award of a
tender on the preference point system. It contended that the
purpose
of pre-qualifying and sub-contracting criteria is to prefer
‘designated groups’ above other tenderers. According
to
Afribusiness, the 2017 Regulations put the cart before the horse by
providing that the tenderers who qualify to tender, may
first be
determined according to, inter alia, race, gender and disability, and
only thereafter in terms of the preference points
system. It argued
that s 2 of the Framework Act does not allow for qualifying criteria,
which may disqualify a potential tenderer
from tendering for State
contracts.
[25]
Counsel for Afribusiness submitted that, upon a proper interpretation
of s 2(1), the high court’s criticism that Afribusiness
places
undue emphasis on s 2(1)
(b)
of
the Framework Act, is unwarranted. He argued that as envisaged in s
217(2) of the Constitution, provision is made for the protection
and
advancement of persons, or categories of persons, disadvantaged by
unfair discrimination, by allowing for specific goals to
be taken
into account as part of the preference point system, the points to be
allocated for such specific goals to be limited
to 10 points for
higher value contracts, and 20 points for lower value contracts. In
terms of s 2(1)
(d)
of the Framework Act the specific goals may include contracting with
persons or categories of persons, historically disadvantaged
by
unfair discrimination on the basis of race, gender or disability.
Persons disadvantaged on the basis of race, gender and disability
can
therefore, in terms of the Framework Act be preferred, by scoring
respectively 10 or 20 additional points before price is taken
into
account.
[26]
Counsel maintained that it was clear from s 2(1)
(f)
of the Framework Act that contracts
must be awarded to tenderers who score the highest points unless
objective criteria in addition
to those contemplated in paras (d) and
(e) justify the award to another tenderer. Section 2(1)
(f),
he submitted, is cast in peremptory
terms which therefore means that the first step in determining to
whom the contract must be
awarded is to determine which tenderer has
scored the highest points on the basis of points for price and for
special goals, including
historic unfair discrimination on the basis
of race, gender and disability. The next step is to determine whether
there are objective
criteria, in addition to those contemplated in
paragraphs
(d)
and
(e)
,
necessarily implying objective criteria over and above historic
discrimination on grounds of race, gender or disability.
[27]
In support of this proposition counsel referred to
Mosene
Road Construction v King Civil Engineering Contractors
,
[4]
in which Harms DP concluded:
‘
The
award of Government tenders is governed by Section 217(1) of the
Constitution . . . National legislation must prescribe the
framework
for the implementation of any preferential policy (s 217(3)). This is
done by the
Preferential Procurement Policy Framework Act 5 of 2000
.
It provides that Organs of State must determine their preferential
procurement policy based on a points system. The importance
of a
points system is that contracts must be awarded to the tenderer who
scores the highest points unless objective criteria justify
the award
to another tenderer
(s 2(1)
(f)
).’
[28]
In
Grinaker
LTA Ltd v Tender Board (Mpumalanga)
[5]
De
Villiers J remarked:
‘
Paragraph
(f)
,
in my view, contemplates objective criteria over and above those
contemplated in paragraphs
(d)
and
(e)
. . . To put it differently, the legislature did not intend that
criteria contemplated in paragraphs
(d)
and
(e)
,
should be taken into account twice, firstly in determining what score
was achieved out of 10 in respect of the criteria contemplated
in
these paragraphs, and, secondly, in taking into account those
self-same criteria to determine whether objective criteria justified

the award of the contract to another tenderer than the one who had
scored the highest points.
.
. .
In
any event, as indicated, the HDI factors referred to are not
objective criteria, as contemplated in Section 2(1)
(f)
of
the Procurement Act.’
[29]
Afribusiness thus argued that it is clear from jurisprudence on the
Framework Act that s 2 posits a two-stage enquiry:
The first
step is to determine which tenderer scored the highest points in
terms of the 90/10 or 80/20 points system; the next
stage is to
determine whether objective criteria exist, in addition to those
referred in ss 2 (1)
(d)
and
(e)
,
which justify the award of a tender to a lower scoring tenderer.
[6]
It was accordingly submitted that the legislature, through the
Framework Act, seems to have afforded a very limited discretion

to organs of state with regard to the award of a contract to a bidder
who does not score the highest points.
Submissions on behalf of the
Amicus
[30]
SAPOA submitted that the pre-qualification criteria provided for in
regulation 4 of the 2017 Regulations are contrary
to the
objective of competitive bidding and inconsistent with s 217 of the
Constitution. It argued that the blanket ‘permission’
to
apply pre-qualification criteria, in terms of regulation 4, without
creating a framework for that criteria, lends itself to
abuse and the
manipulation of tenders to the detriment of potential bidders.
[31]
SAPOA further submitted that the 2017 Regulations are not rationally
connected to, first, the purpose for which they are promulgated;

second, the purpose of the empowering legislation, the Framework Act
as read with s 217 of the Constitution, and the B-BBEE
Act,
which has one of its objectives as ‘increasing the extent to
which black women own and manage existing and new enterprises,
and
increasing their access to economic activities infrastructure and
skills training’; third, the information before the

administrator or, fourth, the reasons given for it by the
administrator.
[32] It was further submitted by
SAPOA that regulation 4 is not only contrary to the framework of s 2
of the Framework Act as Afribusiness
contends, but even insofar as
the Minister may be empowered to create an additional framework
outside s 2 of the Framework Act,
the Minister has failed to do so in
a manner that is rational, lawful and fair. In addition, SAPOA
contended that the 2017 Regulations,
specifically regulation 4 does
not, as required by s 217(3) of the Constitution, prescribe a
framework for the proper and legal
implementation of s 217(2) of the
Constitution in compliance with s 217(1) of the Constitution.
Submissions on behalf of the
Minister
[33]
It was submitted on behalf of the Minister that Afribusiness places
undue emphasis on s 2(1)
(b)
of
the Framework Act and that it unduly ignores two other important
features of the framework for the procurement process. It was
pointed
out that the first feature envisaged by the Framework Act is the
pre-qualification stage. The argument in this regard was
that before
the Framework Act permits an organ of state to evaluate any
tender, such tender must first ‘qualify’
by meeting the
requirements for an ‘acceptable tender’, where the
requirements for an ‘acceptable tender’
in the
circumstances of a given tender process are left to the discretion of
the organ of state and not prescribed in any way.
[34]
The second feature is one that may arise after the point-scoring
exercise is complete and this allows organs of state to award
a
tender to a bidder who does not score the highest points, but rather
to another bidder who satisfies certain other ‘objective

criteria’.
[35] It was submitted on behalf
of the Minister that s 2 of the Framework Act does not constrain the
Minister. It constrains the
organs of state. This was so, it was
argued, because when the Minister makes Regulations, he does not act
as an organ of state
and is not exercising powers under s 217(1) of
the Constitution. The source of power is s 5 of the Framework Act, it
was argued.
Section 5 of the Framework Act, the argument proceeded,
confers wide powers on the Minister to legislate what is considered
to
be ‘necessary or expedient’. For this proposition
counsel placed reliance on
Omar and Others v Minister of Law and
Order and Another
;
Fani and Others v Minister of Law and Order
and Others
;
State President and Others v Bill 1987(3) SA 859
(A)
in which the phrase ‘necessary or expedient’ was
interpreted as conferring on the Minister wide discretionary powers.
Analysis
[36]
It may be convenient to first dispose of the last submission advanced
on behalf of the Minister. In my view, the
Omar
case does not assist the Minister. In
that matter (at 892A) the Court explained that the Legislature was
justified in giving the
Minister such wide powers, because of the
need to ensure the safety of the public during a state of emergency,
when extraordinary
measures were required to be put in place. The
meaning which the court ascribed to the words ‘necessary or
expedient’
was thus based on a consideration of the context in
which and the purpose for which the relevant legislation was enacted.
[37]
As s 5 of the Framework Act itself makes plain, the Minister’s
powers are not unconstrained. He may only make regulations
‘regarding
any matter that may be necessary or expedient to prescribe in order
to achieve the objects of the Act’.
Section 2 of the Framework
Act is headed ‘Framework for the implementation of preferential
procurement policy’. On
a proper reading of the regulations the
Minister has failed to create a framework as contemplated in s 2.
It is correct that
the application of the pre-qualification
requirements is largely discretionary. But the regulations do not
provide organs of state
with a framework which will guide them in the
exercise of their discretion should they decide to apply the
pre-qualification requirements.
[38]
The discretionary pre-qualification criteria in regulation 4 of the
2017 Regulations constitutes a deviation from the provision
of s
217(1) of the Constitution which enjoins organs of state when
contracting for goods or services, to do so in in accordance
with a
system which is fair, equitable, transparent, competitive and
cost-effective. Any pre-qualification requirement which is
sought to
be imposed must have as its objective the advancement of the
requirements of s 217(1) of the Constitution. The pre-qualification

criteria stipulated in regulation 4 and other related regulations do
not meet this requirement. Points are to be allocated to bidders

based on the goals set out in s 2 of the Framework Act. The
discretion which is conferred on organs of state under regulation
4
to apply pre-qualification criteria in certain tenders, without
creating a framework for the application of the criteria, may
lend
itself to abuse and is contrary to s 2 of the Framework Act.
[39]
The procurement process must comply with five key principles. It must
be equitable, transparent, fair, competitive and cost-effective.
As
Ponnan JA explained in
Airports
Company South Africa SOC Ltd v Imperial Group Ltd and Others
:
[7]
‘
The
general rule under s 217 of the Constitution is that all public
procurement must be effected in accordance with a system that
is
fair, equitable, transparent, competitive and cost-effective. The
only exception to that general rule is that envisaged by ss
217(2)
and (3). Section 217(2) allows organs of state to implement
preferential procurement policies, that is, policies that provide
for
categories of preference in the allocation of contracts and the
protection and advancement of people disadvantaged by unfair

discrimination. Express provision to permit this needed to be
included in the Constitution in order for public procurement to be
an
instrument of transformation and to prevent that from being
stultified by appeals to the guarantee of equality and
non-discrimination
in s 9 of the Constitution. The freedom conferred
on organs of state to implement preferential procurement policies is
however
circumscribed by s 217(3), which states that national
legislation must prescribe a framework within which those
preferential procurement
policies must be implemented. The clear
implication therefore is that preferential procurement policies may
only be implemented
within a framework prescribed by national
legislation. It follows that the only escape for ACSA from the reach
of s 217(1) is if
it is able to bring itself within ss (2) and (3).’
I
entirely agree with this analysis of s 217 of the Constitution.
[40]
It follows therefore that the Minister’s promulgation of
regulations 3
(b)
,
4 and 9 was unlawful. He acted outside his powers under s 5 of the
Framework Act. In exercising the powers to make the 2017 Regulations,

the Minister had to comply with the Constitution and the Framework
Act, which is the national legislation that was enacted to give

effect to s 217 of the Constitution. The framework providing for
the evaluation of tenders provides firstly for the determination
of
the highest points scorer and thereafter for consideration of
objective criteria which may justify the award of a tender to
a lower
scorer. The framework does not allow for the preliminary
disqualification of tenderers, without any consideration of a
tender
as such. The Minister cannot through the medium of the impugned
regulations create a framework which contradicts the mandated

framework of the Framework Act.
[41] The Minister’s
decision is ultra vires the powers conferred upon him in terms of s 5
of the Framework Act. The Constitutional
Court held in
Minister of
Constitutional Development and Another v South African Restructuring
and Insolvency Practitioners Association and Others
[2018] ZACC
20
;
2018 (5) SA 349
(CC) para 27 that the rule ultra vires ‘forms
part of the principle of legality which is an integral component of
the rule
of law’. This principle was affirmed by the
Constitutional Court in
Affordable Medicines Trust and Others v
Minister of Health and Others
[2005] ZACC 3
; 2006 (3) 247 (CC):
‘
[49]
The exercise of public power must therefore comply with the
Constitution, which is the supreme law, and the doctrine of legality,

which is part of that law. The doctrine of legality, which is an
incident of the rule of law, is one of the constitutional controls

through which the exercise of public power is regulated by the
Constitution. It entails that both the Legislature and the Executive

“are constrained by the principle that they may exercise no
power and perform no function beyond that conferred upon them
by
law”. In this sense the Constitution entrenches the principle
of legality and provides the foundation for the control
of public
power.’ (Footnotes omitted.)
[42] The Constitutional Court
went on to hold at para 50:
‘
[50]
In exercising the power to make regulations, the Minister had to
comply with the Constitution, which is the supreme law, and
the
empowering provisions of the Medicines Act. If, in making
regulations, the Minister exceeds the powers conferred by the
empowering
provisions of the Medicines Act, the Minister acts
ultra
vires
(beyond
the powers) and in breach of the doctrine of legality. The finding
that the Minister acted
ultra
vires
is
in effect a finding that the Minister acted in a manner that is
inconsistent with the Constitution and his or her conduct is
invalid.
What would have been
ultra
vires
under
common law by reason of a functionary exceeding his or her powers is
now invalid under the Constitution as an infringement
of the
principle of legality. The question, therefore, is whether the
Minister acted
ultra
vires
in
making regulations that link a licence to compound and dispense
medicines to specific premises. The answer to this question must
be
sought in the empowering provisions.’ (Footnotes omitted.)
[43]
It is correct that the discretionary pre-qualification criteria
stipulated in regulation 4 may constitute an antecedent step.
But the
antecedent step that is introduced in regulation 4 creates an
additional layer which, neither s 217 of the Constitution,
nor s 2 of
the Framework Act, authorises. The Minister may not in terms of
s 5 of the Framework Act make regulations
which permit organs of
state to incorporate in their tender documents conditions which are
inconsistent with s 217 of the Constitution
and the Framework Act. In
its application, the antecedent step may well disqualify certain
tenderers who do not otherwise fall
to be disqualified by the
Framework Act. In that the Minister has exercised a power that is
reserved for the legislature.
[44] That leaves regulation 10:
Afribusiness’ argument is that regulation 10 is unlawful in
that it puts B-BBEE above other
considerations and it is only if
functionality is part of the evaluation process that the contract
must go to the tenderer that
scores the highest points for
functionality. In my view there is nothing objectionable about
regulation 10. It seeks to address
a much later stage of the
evaluation process. If by then tenderers are equally ranked there can
be no objection to B-BBEE, in the
first instance, being used to break
the deadlock. At that stage all tenderers would already have met the
functionality requirement.
Remedy
[45] In terms of s 172(1) of the
Constitution:
‘
(1)
When deciding a constitutional matter within its power, a court─
(a)
must
declare that any law or conduct that is inconsistent with the
Constitution is invalid to the extent of its inconsistency; and
(b)
may
make any order that is just and equitable, including─
(i)
an order limiting the retrospective effect of the declaration of
invalidity; and
(ii)
an order suspending the declaration of invalidity for any period and
on any conditions, to allow the competent authority to
correct the
defect.’
This
may include suspending the order of invalidity to enable the Minister
to take corrective action or set aside only those regulations,
whose
provisions are inconsistent with the Framework Act and s 217 of the
Constitution.
[46]
Counsel for the Minister submitted that in the event that the Court
finds against the Minister on the merits, it should consider
setting
aside regulation 4 only and not the regulation in its entirety.
However, that option, due to the interconnectedness of
the
regulations, may not be an appropriate one. It was further submitted
that any order of invalidity should be suspended for a
period of 12
months to allow the Minister to remedy the defects.
[8]
The appropriate remedy in the circumstances will be to declare the
2017 Regulations to be inconsistent with s 217 of the Constitution

and s 2 of the Framework Act and suspend the order of invalidity for
a period of 12 months from the date of this order.
[47] In the result I make the
following order:
1 The appeal is upheld with
costs.
2 The order of the court a quo is
set aside and is replaced with the following order:
‘
(a) The
application succeeds with costs.
(b) It is declared that the
Preferential Procurement Regulations, 2017 are inconsistent with the
Preferential Procurement Policy Framework Act 5 of 2000
and are
invalid.
(c) The declaration of invalidity
referred to in para (b) above is suspended for a period of 12 months
from the date of this order.’
_________________
Zondi JA
Judge
of Appeal
Appearances:
For
appellant: J G Bergenthuin SC
Instructed
by: Hurter Spies Inc, Centurion
McIntyre
Van der Post, Bloemfontein
For
respondent: N Maenetje SC (with him M Stubbs)
Instructed
by: The State Attorney,
Pretoria
The
State Attorney, Bloemfontein
[1]
Weber-Stephen
Products Co v Alrite Engineering (Pty) Ltd and Others
[1992] ZASCA 2
;
1992
(2) SA 489
(A) at 507D-E.
[2]
Minister
of Home Affairs and Another v Public Protector of the Republic of
South Africa
[2018] ZASCA 15
;
[2018] 2 All SA 311
(SCA);
2018 (3) SA 380
(SCA) para 38.
[3]
In
Chairperson:
Standing Tender Committee and Others v JFE Sapela Electronics (Pty)
Ltd and Others
[2005] 4 All SA 487
(SCA) Scott JA said (para 14):
‘
The
definition of “acceptable tender” in the Preferential
Act must be construed against the background of the system
envisaged
by section 217(1) of the Constitution, namely one which is “fair,
equitable, transparent, competitive and cost-effective”.
In
other words, whether “the tender in all respects complies with
the specifications and conditions set out in the contract
documents”
must be judged against these values.’
[4]
Mosene
Road Construction v King Civil Engineering Contractors
[2010] ZASCA 13
;
2010 (4) SA 359
SCA para 2.
[5]
Grinaker
LTA Ltd v Tender Board (Mpumalanga)
[2002] 3 All SA 336
T para 60 and 62.
[6]
Rainbow
Civils CC v Minister of Transport and Public Works, Western Cape
[2013]
ZAWCH 3 para 111.
[7]
Airports
Company South Africa SOC Ltd v Imperial Group Ltd and Others
[2020]
ZASCA 2
;
2020
(4) SA 17
(SCA) para 64.
[8]
Estate
Agency Affairs Board v Auction Alliance (Pty) Ltd and Others
[2014] ZACC 3
;
2014 (3) SA 106
(CC) para 55.