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Black business fights Supreme Court B-BBEE ruling


Durban - THE Black Business Council has called on the National Treasury to appeal a Supreme Court of Appeal (SCA) ruling that businesses will no longer have to be 51% black owned before submitting a tender for consideration for government contracts.

The SCA ruling handed down this week declared that the Preferential Procurement Regulations, 2017, issued in terms of section 5 of the Preferential Procurement Policy Framework Act (PPPFA), 2000, were invalid and set them aside.

The regulations stipulate a set of pre-qualification criteria before tenders can be assessed on price, functionality and other factors, including a tenderer being a stipulated minimum broad-based black economic empowerment (B-BBEE) status level of contributor and being a qualifying small enterprise which is at least 51% owned by black people.

The court ruled that the minister had acted ultra vires (outside his powers) in issuing the regulations in 2017.

AfriBusiness took the matter to the SCA on appeal, with the SA Property Owners Association (Sapoa) as amicus curiae (friends of the court), after the Pretoria High Court dismissed its application to have the regulations issued by then Minister of Finance Pravin Gordhan reviewed and set aside.

In its ruling, the SCA said AfriBusiness had argued that the regulations provided 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 those who qualify to tender may first be determined according to race, gender and disability, and only thereafter in terms of the preference poin ts system,” the SCA said.

AfriBusiness contended that section 2 of the Framework Act did not allow for qualifying criteria which might disqualify a potential tenderer from bidding for State contracts.

Sapoa had submitted that the pre-qualification criteria were contrary to the objective of competitive bidding and inconsistent with section 217 of the Constitution.

The minister had argued that before the Framework Act allowed the state to evaluate a tender, the tender must first “qualify” by meeting the requirements of an “acceptable tender” – the requirements of which, in the circumstances of a given tender process, are left to the discretion of the organ of state and not prescribed in any way.

He further argued that after the point-scoring exercise had been completed, the act allowed the state to award a tender to a bidder who does not score the highest points, but rather to another bidder who satisfies other “objective criteria”.

However, in upholding the appeal, the SCA ruled that the regulations were “inconsistent with the Preferential Procurement Policy Framework Act 5 of 2000 and are invalid”. The declaration of invalidity was suspended for 12 months.

“The minister may not, in terms of section 5 of the Framework Act, make regulations which permit organs of state to incorporate conditions in their tender documents which are inconsistent with section 217 of the Constitution and the Framework Act,” the SCA ruled.

Black Business Council (BBC) chief executive Kganki Matabane urged National Treasury to appeal the matter in the Constitutional Court.

“The regulations were trying to put a bandage on an act that is not enabling socio-economic empowerment through state procurement.

“The challenge lies in the primary act (PPPFA). The BBC has been calling for the repeal of the act for more than 10 years. Now that the Public Procurement Bill to repeal the PPPFA is being processed, we are calling on National Treasury to expedite the bill into an act and ensure that the problems that were being addressed by the regulations are attended to in the Public Procurement Act,” he said.

“We will work hard to ensure that the Public Procurement Bill becomes law in the next 12 months, before the suspension of the regulations takes effect. We call upon all organs of state to implement the regulations as they are until the suspension period lapses.

“We also encourage National Treasury to appeal the judgment in the Constitutional Court and we will join them as the friends of the court,” he said.

Asked whether National Treasury intended to appeal the ruling, a spokesperson said they were currently studying the judgment.

The KwaZulu-Natal executive council in a statement released last night said while it was still analysing the implications of the judgment on the country’s economic transformation, the ruling raised grave concerns.

“The Provincial Executive Council considers this decision as being tantamount to the reversal of the transformation process. We will engage the national government on this decision. We will also encourage the national government to appeal against this judgment,” the statement said.

The provincial government added that in the wake of the judgment, it was calling for the review of the entire legislative procurement regime.

DA spokesperson on Finance, Geordin Hill-Lewis, welcomed the ruling.

“The application of so- called ‘pre-qualification criteria’ was one of the biggest drivers of corruption in public procurement, under the fig leaf of B-BBEE and ‘empowerment’. The judgment will help to combat corruption and end uncompetitive exclusion of suppliers,” Hill-Lewis said.

“The judgment has far-reaching consequences for public procurement in South Africa, as it casts doubt on the continued use of B-BBEE pre-qualification criteria,” he said.

B-BBEE commission spokesperson Sidwell Medupe said the ruling was “not a blow to the B-BBEE requirements for tenders as reported”.

“The invalidity of the PPPFA Regulations of 2017 does not invalidate the B-BBEE Act, and the PPPFA Regulations were not issued under the B-BBEE Act. The framework for the B-BBEE Act, and how it is applied, is clear and thus not affected by the ruling of the Supreme Court of Appeal,” he said.



Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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