DISCUSSION OF THE RECENT RULING OF THE SOUTH AFRICAN SUPREME COURT OF APPEAL IN AFRIBUSINESS NPC V MINISTER OF FINANCE

Abstract

The recent ruling by the South African Supreme Court of Appeal (SCA) in Afribusiness NPC v Minister of Finance raises questions about the lawfulness and fairness of the use of prequalification criteria in public procurement. In this case note we argue that the legality of regulation 4 of the Preferential Procurement Policy Framework Act of 2000 (PPPFA) and the principle of using prequalification criteria in public procurement are discrete issues. The SCA’s finding on the legality issue – that regulation 4 is ultra vires the PPPFA – is unsurprising. Indeed, it is difficult to reconcile the use of prequalification criteria for “designated groups” as set out in reg 4 with the preference-point system prescribed by the PPPFA. However, we question the correctness of the court’s view that prequalification criteria do not satisfy the objectives of section 217(1) of the Constitution, such as fairness, transparency etc. In our view, there is nothing constitutionally suspect about the use of prequalification criteria as a tool to promote socio-economic objectives, provided they are designed and implemented within the discipline required by the Constitution. Properly-designed prequalification criteria serve as important tools for the protection and advancement of persons disadvantaged by unfair discrimination, as envisaged in section 217(2)(b). Furthermore, we recommend that the drafters of the regulations take the opportunity created by the SCA’s ruling to revise the regulations as a whole. In our view, the problems with the regulations are not confined to the impugned regulations 3(b), 4 and 9, but extend to other regulations as well – most notably, regulations 5 and 6 dealing with the preference point system and regulation 8 dealing with local content and production. We argue that these regulations do not award preference points for “specific goals” in the manner contemplated by the PPPFA, and are thus susceptible to challenge. Ultimately, the problems with the regulations are traceable to design defects in the PPPFA itself. The PPPFA cannot be “fixed”. It has run its course and must be replaced with a new legislative framework as a matter of urgency.