South Africa: Supreme Court Dismissal of Procurement Regulations of 2017 a Victory Against BBBEE Corruption

press release

The decision by the Supreme Court of Appeal (SCA) to set aside the Preferential Procurement Regulations of 2017 and declare them invalid is a welcome development. The application of so-called "pre-qualification criteria" was one of the biggest drivers of corruption in public procurement, under the fig leaf of BBBEE and 'empowerment'. The judgment will help to combat corruption and end uncompetitive exclusion of suppliers.

In an appeal case brought by non-profit organisation, Afribusiness, the SCA found that the Minister of Finance (Pravin Gordhan at the time) acted illegal and exceeded his powers when he used section 5 of the Preferential Procurement Policy Framework to introduce the Preferential Procurement Regulations of 2017. The regulations were therefore declared invalid as a result of their inconsistency with the provisions of the procurement policy framework.

The judgment has far-reaching consequences for public procurement in South Africa as it casts doubt on the continued use of BBBEE pre-qualification criteria. Business owners with competitively priced high-quality products have repeatedly been denied the opportunity to do business with government because of the exclusionary requirement to meet a pre-determined threshold of BBBEE scores.

In addition to engendering exclusion, the use of pre-qualifying criteria has in the past resulted in the arbitrary application of BBBEE criteria, inflation of prices from the limited pool of suppliers and corruption. Some suppliers have continued to use BBBEE's exclusion criteria to constantly benefit from government tenders whilst denying access to new entrants.

The Democratic Alliance (DA) will continue to set the example where we govern of public procurement that is transparent, corruption-free, competitive, and respectful of public money.

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