ConCourt victory blocks state procurement capture

Sakeliga welcomes today’s Constitutional Court victory over the Public Procurement Act by the Premier of the Western Cape, the City of Cape Town, Amabhungane, and Solidarity.

While the judgment was made on public participation grounds, its effect is highly consequential: It thwarts Parliament and the national government’s attempts to capture control of all state entities’ procurement policies and subject them to racial and other value-destructive conditions.

The Act proposes to compel more than 700 state entities to apply mandatory set-asides, prequalification criteria and subcontracting quotas based on race, gender, and other non-competitive criteria. According to the court, the Act sought to “institutionalise a system in which categories of bidders would be routinely excluded from participation as a matter of law.”

Domestic and international accountability implications

Today’s judgment means that the position established by Sakeliga’s constitutional court victory in 2022 – under which responsibility for procurement policy lies with individual state entities and not the national government – remains preserved.

This applies to local governments, provincial governments, national government departments, state-owned enterprises, regulators, and all other state entities. Wherever race restrictions and other value-destructive criteria appear in a state entity’s procurement policy, it is because that entity chose to implement or maintain them, and relevant officials or elected representatives can be held directly accountable.

The fact that accountability for procurement lies with individual state entities, their officials, and the elected representatives who set policy has extensive domestic and international implications. In both cases, this enables the public, businesses, and foreign entities to direct their engagements and responses directly at local government and other individual state entities in South Africa, since section 217 of its Constitution locates decision-making power at that level, not in the hands of the national government.

Parliament’s attempt to circumvent Sakeliga’s earlier ConCourt victory

Notably, the court found that Parliament’s attempt to codify many of the race-restrictive prescriptions in the Public Procurement Bill came as a reaction to Sakeliga’s Constitutional Court victory in 2022. In that case, together with the Free Market Foundation as amicus curiae, Sakeliga restored procurement discretion for all state entities, which the national government had threatened to usurp under the Constitution. Today’s judgment noted:

“Finally, the fact that the 2017 PPPFA Regulations were ultimately declared unlawful [in the case won by Sakeliga] reinforces rather than weakens the need for renewed public participation on the [“extensive, prescriptive statutory regime centred on mandatory set-asides, prequalification criteria, subcontracting obligations and local content requirements”]. Although the respondents are correct that the Regulations were set aside on legality grounds, the initial litigation raised controversy over the compatibility of prequalification mechanisms with the Constitution. The subsequent decision by Parliament to codify and expand this mechanism in primary legislation therefore heightens, rather than diminishes, the need for meaningful public participation.”

Sakeliga has previously published a comprehensive guide to how any entity of state could lawfully remove all race-restrictions from its procurement policy – and why it may be constitutionally obligated to do so. The report is available here.

Next Steps

Parliament may reintroduce the Bill only after a constitutionally compliant public participation process. Should such a Bill materialise, Sakeliga will continue to oppose any compulsion of race-restrictive and value-destructive procurement on organs of state, and will support a framework that recognises the importance of independent procurement policies and the constitutional directive of value-for-money procurement that prioritises the public, not a narrow group of politically favoured tenderpreneurs and middlemen.

Resources

• Judgment and order
• Sakeliga's report on how any state entity may lawfully avoid race-restrictive and other non-value-for-money procurement policies