By Joubert Galpin Searle Director and Head of the Commercial Division - Warren Parker
On 16 February 2022 the Constitutional Court handed down judgment in the ongoing battle between the Minister of Finance (the “Minister”) and Afribusiness NPC regarding the validity of the Preferential Procurement Regulations, 2017 (the “Procurement Regulations”).
The Minister had sought leave to appeal against the order of the Supreme Court of Appeal declaring invalid the Procurement Regulations. This declaration of invalidity was suspended for 12 months, from 2 November 2020 to 1 November 2021.
The Constitutional Court by a narrow majority of 5 to 4 dismissed the appeal of the Minister, finding that the Minister had acted beyond his powers by making the Procurement Regulations (and more specifically the pre-qualifying criteria relating to, amongst others, a stipulated minimum B-BBEE status level and sub-contracting a minimum value of 30% of the works to various small business enterprises).
The dismissal of the appeal now revives the earlier order of the Supreme Court of Appeal.
The immediate conundrum is that the suspension of the declaration of invalidity (until 1 November 2021) has now lapsed, with the following consequences:
1. Potentially, all tenders issued by Organs of State after 1 November 2021 and which have applied, amongst others, the pre-qualification criteria of the Procurement Regulations, are liable to be set aside as being contrary to the Preferential Procurement Policy Framework Act (the “PPPFA”);
2. All new tenders to be issued by Organs of State will, subject to what is set out below, have to comply with the Preferential Procurement Regulations, 2011, which have now been revived.
The situation is clearly untenable, and it is highly likely that the Minister will approach either the Constitutional Court or the Supreme Court of Appeal to seek a further suspension of the declaration of invalidity to enable the Minister to make fresh regulations which comply with the PPPFA.
Organs of State are in the interim warned to act with extreme caution until greater clarity is obtained.