THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 1050/2019
GP Case no: 34523/2017
In the matter between:

AFRIBUSINESS NPC
Appellant

and

THE MINISTER OF FINANCE
Respondent

Neutral citation:
Afribusiness NPC v The Minister of Finance (Case no
1050/2019) [2020] ZASCA 140 (2 November 2020)

Coram:
PONNAN, ZONDI and DAMBUZA JJA and EKSTEEN and GOOSEN
AJJA

Heard:
8 September 2020

Delivered:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication on the Supreme
Court of Appeal website and release to SAFLII. The date and time
for hand-down is deemed to be 10h00 on 2 November 2020.

Summary: Exercise of power by Minister under s 5 of the Preferential
Procurement Policy Framework Act 5 of 2000 to make Preferential Procurement
Regulations 2017 – Minister exceeding powers - Regulations declared invalid and
set aside – order of declaration of invalidity suspended for 12 months.

ORDER

On appeal from: Gauteng Division of the High Court, Pretoria (Francis J) sitting
as court of first instance:
The appeal is upheld with costs.
The order of the court a quo is set aside and is replaced with the following
order:
‘(a)
The application succeeds with costs.
(b)
It is declared that the Preferential Procurement Regulations, 2017 are
inconsistent with the Preferential Procurement Policy Framework Act 5 of
2000 and are invalid.
(c)
The declaration of invalidity referred to in para (b) above is suspended for
a period of 12 months from the date of this order.’
________________________________________________________________
JUDGMENT
________________________________________________________________
Zondi JA (Ponnan and Dambuza JJA and Eksteen and Goosen AJJA
concurring)
Introduction
[1] This matter concerns the validity of the Preferential Procurement
Regulations, 2017 (the 2017 Regulations) promulgated by the respondent, the
Minister of Finance (the Minister) on 20 January 2017 under s 5 of the
Preferential Procurement Policy Framework Act 5 of 2000 (the Framework Act).
The appellant, Afribusiness NPC (Afribusiness), who unsuccessfully challenged
the regulations before the Gauteng Division of the High Court, Pretoria (high court),
appeals with the leave of this court.

Background
[2] The background facts are briefly the following. On 14 June 2016, the
Minister acting in terms of s 5(2) of the Framework Act published Draft

Procurement Regulations, 2016 for public comment. The closing date for
submission of comments was 15 July 2016.The Draft Regulations were intended,
upon their adoption and promulgation, to replace the Preferential Procurement
Policy Regulations of 2011 (the 2011 Regulations).

[3] According to the report of the Preferential Procurement Review Task Team,
a body that was convened by the National Treasury, through the Office of the Chief
Procurement Officer, one of the reasons for undertaking a review of the public
sector Preferential Procurement System was that the 2011 Regulations were not
in compliance with the Framework Act to the extent that ‘the Regulations attempted
to restrict the framework for preferential procurement policies to Black Economic
Empowerment (BEE) credentials to the exclusion of other goals contemplated in
the Framework Act, causing the 2011 Regulations’ alignment to the Broad-Based
Black Economic Empowerment Act’s Scorecard to be unlawful’.

[4] On 23 August 2016, after the time for comment on the Draft Regulations
had elapsed, Afribusiness, a non-profit organisation representing about 10 500
members in the business community, addressed a letter to the Minister expressing
its concern that the period of 30 days allowed by the Minister for comments, was
inadequate and requested that the period be extended by a further period of
between 60 and 90 days. On 29 August 2016, the National Treasury informed
Afribusiness that the Minister was considering an extension and that Afribusiness
would be advised once the Minister had taken a decision. On 12 September 2016
the National Treasury advised Afribusiness that the Minister had, by Notice
published in the Government Gazette of 2 September 2016, extended the date for
comments to 23 September 2016.  It would seem that up until 12 September 2016
Afribusiness was not aware that the date had been extended and that it could
submit comments. On 15 September 2016 Afribusiness submitted its comments
on the Draft Regulations to the Minister. In its submissions, it reiterated that an
extension of 60 to 90 days would have sufficed to ensure meaningful

public participation considering that some of its members, who would have wished
to comment, did not have sufficient time to do so.

[5] On 20 January 2017 the Minister, in terms of s 5 of the Framework Act
adopted the 2017 Regulations and caused them to be published in the
Government Gazette. Aggrieved by the Minister’s decision, Afribusiness, on 19
May 2017 brought an application in the high court in which it sought, inter alia, the
following relief:
‘1.
That the promulgation and adoption of the Preferential Procurement Regulations,
2017 by the Respondent is reviewed and set aside;
2.
That the adoption of the Preferential Procurement Regulations, 2017 be declared
invalid;
3.
The Respondent be ordered to pay the costs of the application.’

[6] It was stated in the founding affidavit in support of the application that:
‘4.2
The application is instituted on the basis that Respondent acted ultra vires of the
powers conferred upon him by the Preferential Procurement Policy Framework Act, No 5
of 2000, read with Section 217 of the Constitution. Furthermore it is submitted that
Respondent failed to provide sufficient opportunity for reasonable and meaningful public
participation, with reference to the notice and comment procedure implemented by the
Respondent, regarding the finalisation of the Regulations, with the consequence that the
Regulations are not rationally connected to relevant information which was not taken into
account by the Respondent. Furthermore it is contended that the Regulations adopted are
so unreasonable that no reasonable person could have so exercised the power to
promulgate same, and the Regulations were adopted arbitrarily and capriciously.

4.3
It is consequently contended that the promulgation and adoption of the Regulations
by Respondent should be reviewed and set aside upon the grounds mentioned in Section
6(2)(a)(i), Section 6(2)(b), Section 6(2)(c), Section 6(2)(d), Section 6(2)(e)(i), Section
6(2)(e)(vi), Section 6(2)(f)(i) and(ii) and Section 6(2)(h) of the Promotion of Administrative
Justice Act, No 3 of 2000 (“PAJA”).’

[7] The Minister opposed the application, principally on the following grounds:
he denied that his decision to promulgate the 2017 Regulations is an administrative
action that is reviewable under the Promotion of Administrative Justice Act 3 of
2000 (PAJA). He contended therefore that the application had to be dismissed. As
regards the merits, the Minister contended, first, that the application of pre-
qualification criteria in terms of the 2017 Regulations, is discretionary and will not
apply in every case. The discretion created, he maintained, falls to be exercised
by the relevant organ of state in the light of all relevant circumstances, which was
congruent with, and intra vires, the provisions of the Framework Act; second, that
the procedure he followed in promulgating the 2017 Regulations not only met, but
in fact exceeded the requirements of PAJA; third, that the Socio-Economic Impact
Assessment System (SEIAS) guidelines are just that, and compliance with them,
is not a legal prerequisite to the validity of the 2017 Regulations; and fourth, that
the categories of preference under the 2017 Regulations are based on sound
constitutional principles, are not irrational, unreasonable, or unfair.

[8] The Minister’s contentions were upheld by Francis J and on 28 November
2018 he dismissed the application with costs, including the costs of two counsel.
The application for leave that was subsequently brought by Afribusiness was
similarly dismissed.

Application by the Amicus to be admitted and to lead further evidence
[9] Subsequent to the proceedings in the high court, the South African Property
Owners’ Association NPC (SAPOA), a non-profit company whose mission is to
represent, protect and advance its members’ commercial property interests within
the property industry, applied to this Court to be admitted as amicus curiae.
SAPOA alleged that its interest in this appeal is ensuring a competitive bidding
process in the property sector and, in particular, properties supplied to organs of
state. SAPOA adopted the position that the appeal ought to succeed.

[10] Whilst Afribusiness consented to SAPOA’s admission, the Minister did not.
It was thus necessary for SAPOA to seek admission by way of an application in
terms of rule 16(4). SAPOA also sought leave to make oral submissions and to
adduce further evidence on appeal. For these reasons the presiding judge in
consultation with the remaining members of the Court permitted SAPOA to deliver
written argument and to make oral submissions at the hearing of the appeal
encompassing both whether it should be admitted as an amicus curiae and the
merits.

[11] The contentions advanced on behalf of SAPOA were clearly new and of
assistance to the Court in dealing with the merits of the appeal. As the submissions
from the amicus undoubtedly assisted the court in its deliberations, the application
for admission had to succeed. The same cannot be said about SAPOA’s
application for leave to lead further evidence. The evidence consisted of what it
termed ‘practical examples’. In terms of s 19(b) of the Superior Court Act 10 of
2013, this Court is empowered to receive further evidence on appeal. The general
principle is that an appellate Court does not decide an appeal according to new
circumstances that came into existence after the judgment appealed against.1 But
there may be exceptional circumstances where it might be able to take cognisance
of subsequent events. The power to admit evidence on appeal should be exercised
sparingly.

[12] In terms of rule 16(8) an amicus curiae is ordinarily ‘limited to the record on
appeal and may not add thereto. . .’. In Minister of Justice and Constitutional
Development and Others v Southern Africa Litigation Centre and Others [2016]
ZASCA 17; 2016 (3) SA 317 (SCA) this Court held at para 29:
‘An amicus is not entitled to submit further evidence to the Court but is confined to the
record. That is expressly provided in rule 16(8). It is unnecessary to consider whether
there are exceptional circumstances in which the Court hearing the appeal may relax that

1 Weber-Stephen Products Co v Alrite Engineering (Pty) Ltd and Others 1992 (2) SA 489 (A) at
507D-E.

rule. In making submissions the amicus is not permitted to traverse ground already
covered by other parties, but is confined to making submissions on the new contentions
that it wishes to place before the Court. In that regard it is apposite to point out that adding
additional references, whether to case law or to academic writings, on the matters
canvassed in the heads of argument of the litigants, does not amount to advancing new
contentions. That obviously does not exclude placing material before the Court to
demonstrate that a point of controversy between the parties has been settled by way of
an authoritative judgment. It would only be if there had, for example, been an authoritative
decision placing a legal issue thought to be controversial beyond dispute that an amicus
may include that in its argument. Otherwise it is confined to its new and different
contentions and these must be clearly stated.’ (Footnotes omitted.)

[13] It would be prejudicial to the Minister for evidence relating to ‘practical
examples’ to be admitted without the Minister having had the opportunity to
respond to such evidence. The new factual material is not common cause or
otherwise incontrovertible.  It follows therefore that the application to lead further
evidence must fail.

Preliminary Issues
[14] Although some argument was initially advanced as to whether this is a
PAJA or legality review, it ultimately came to be accepted that nothing turns on the
point. The argument proceeded on the basis that whether or not the Minister
exceeded his powers in promulgating the regulations was indeed subject to review.
As this court observed in Minister of Home Affairs and Another v Public Protector
of the Republic of South Africa: ‘No procedural differences arise and the grounds
of review that apply in respect of both pathways to review derive ultimately from
the same source – the common law – although, in the PAJA, those grounds have
been codified.’2

2 Minister of Home Affairs and Another v Public Protector of the Republic of South Africa [2018]
ZASCA 15; [2018] 2 All SA 311 (SCA); 2018 (3) SA 380 (SCA) para 38.

[15] Before analysing the provisions of the impugned regulations it is necessary
to address first Afribusiness’ contention that the regulations are invalid on the
ground that they were enacted in a procedurally unfair manner, or that the Minister,
before adopting them, had failed to comply with the Socio-Economic Impact
Assessment System Guidelines (SEIAS Guidelines). Neither point need detain us.
Although by no means persuaded, I shall assume (without deciding) in the
Minister’s favour that sufficient time had been provided for comments on the Draft
Regulations.  I am also willing to assume in the Minister’s favour that his failure to
comply with SEIAS Guidelines did not render the 2017 Regulations unlawful.

Legal Framework
[16] Section 5 of the Framework Act empowers the Minister to make regulations.
It provides as follows:
‘(1)
The Minister may make regulations regarding any matter that may be necessary
or expedient to prescribe in order to achieve the objects of this Act.
(2)
Draft regulation must be published for public comment in the Government Gazette
and every Provincial Gazette before promulgation.’
According to its Preamble, the Framework Act was enacted to give effect to
s 217(3) of the Constitution by providing a framework for the implementation of the
procurement policy contemplated in s 217(2) of the Constitution; and to provide for
matters connected therewith. And, ‘preferential procurement policy’ is defined in
the Framework Act to mean ‘a procurement policy contemplated in s 217(2) of the
Constitution’.

[17] Section 217 of the Constitution reads:
‘(1)
When an organ of state in the national, provincial or local sphere of government,
or any other institution identified in national legislation, contracts for goods or services, it
must do so in accordance with a system which is fair, equitable, transparent, competitive
and cost-effective.
(2)
Subsection (1) does not prevent the organs of state or institutions referred to in
that subsection from implementing a procurement policy providing for─
(a)
categories of preference in the allocation of contracts; and

(b)
the protection or advancement of persons, or categories of persons,
disadvantaged by unfair discrimination.
(3)
National legislation must prescribe a framework within which the policy referred to
in subsection (2) must be implemented.’

[18] The national legislation contemplated in s 217(3) is the Framework Act.
Section 1 of the Framework Act defines ‘acceptable tender’ to mean ‘any tender
which, in all respects, complies with the specifications and conditions of tender as
set out in the tender documents’.3 In terms of s 2:
‘(1) An organ of state must determine its preferential procurement policy and implement it
within the following framework:
(a)
A preference point system must be followed;
(b)
(i)
for contracts with a Rand value a prescribed amount a maximum of 10
points may be allocated for specific goals as contemplated in paragraph (d) provided that
the lowest acceptable tender scores 90 points for price;
(ii)
for contracts with a Rand value equal to or below a prescribed amount a maximum
of 20 points may be allocated for specific goals as contemplated in paragraph (d) provided
that the lowest acceptable tender scores 80 points for price;
(c)
any other acceptable tenders which are higher in price must score fewer points,
on a pro rata basis, calculated on their tender prices in relation to the lowest acceptable
tender, in accordance with a prescribed formula;
(d)
the specific goals may include─
(i)
contracting with persons, or categories of persons, historically disadvantaged by
unfair discrimination on the basis of race, gender or disability;
(ii)
implementing the programmes of the Reconstruction and Development
Programme as published in Government Gazette No. 16085 dated 23 November 1994;
(e)
any specific goal for which a point may be awarded, must be clearly specified in
the invitation to submit a tender;

3 In Chairperson: Standing Tender Committee and Others v JFE Sapela Electronics (Pty) Ltd and
Others [2005] 4 All SA 487 (SCA) Scott JA said (para 14):
‘The definition of “acceptable tender” in the Preferential Act must be construed against the
background of the system envisaged by section 217(1) of the Constitution, namely one which is
“fair, equitable, transparent, competitive and cost-effective”. In other words, whether “the tender in
all respects complies with the specifications and conditions set out in the contract documents” must
be judged against these values.’

(f)
the contract must be awarded to the tenderer who scores the highest points, unless
objective criteria in addition to those contemplated in paragraphs (d) and (e) justify the
award to another tenderer; and
(g)
any contract awarded on account of false information furnished by the tenderer in
order to secure preference in terms of this Act, may be cancelled at the sole discretion of
the organ of state without prejudice to any other remedies the organ of state may have.
(2)
Any goals contemplated in subsection (1) (e) must be measurable, quantifiable
and monitored for compliance.’

[19]  The attack is directed at regulations 3(b), 4, 9 and 10 of the 2017
Regulations. Regulation 3(b) reads:
‘An organ of state must-
. . .
determine whether pre-qualification criteria are applicable to the tender as envisaged in
regulation 4;’
Regulation 4(1), which deals with pre-qualification criteria for preferential
procurement, provides:
‘(1)
If an organ of state decides to apply pre-qualifying criteria to advance certain
designated groups, that organ of state must advertise the tender with a specific tendering
condition that only one or more of the following tenderers may respond-
(a)
a tenderer having a stipulated minimum B-BBEE status level of contributor;
(b)
an EME or QSE;
(c)
a tenderer subcontracting a minimum of 30% to-
(i)
an EME or QSE which is at least 51% owned by black people;
(ii)
an EME or QSE which is at least 51% owned by black people who are youth;
(iii)
an EME or QSE which is at least 51% owned by black people who are women;
(iv)
an EME or QSE which is at least 51% owned by black people with disabilities;
(v)
an EME or QSE which is 51% owned by black people living in rural or
underdeveloped areas or townships;
(vi)
a cooperative which is at least 51% owned by black people;
(vii)
an EME or QSE which is at least 51% owned by black people who are military
veterans;
(viii)
and EME or QSE.’

In terms of Regulation 4(2), ‘[a] tender that fails to meet any pre-qualifying criteria
stipulated in the tender documents is an unacceptable tender.’

[20] Regulation 9 deals with Subcontracting. It provides:
‘(1)
If feasible to subcontract for a contract above R30 million, an organ of state must
apply subcontracting to advance designated groups.
(2)
If an organ of state applies subcontracting as contemplated in subregulation (1),
the organ of state must advertise the tender with a specific tendering condition that the
successful tenderer must subcontract a minimum of 30% of the value of the contract to-
(a)
an EME or QSE;
(b)
an EME or QSE which is at least 51% owned by black people;
(c)
an EME or QSE which is at least 51% owned by black people who are youth;
(d)
an EME or QSE which is at least 51% owned by black people who are women;
(e)
an EME or QSE which is at least 51% owned by black people with disabilities;
(f)
an EME or QSE which is at least 51% owned by black people living in rural or
underdeveloped areas or townships;
(g)
a cooperative which is at least 51% owned by black people;
(h)
an EME or QSE which is at least 51% owned by black people who are military
veterans; or
(i)
more than one of the categories referred to in paragraphs (a) to (h).
(3)
The organ of state must make available the list of all suppliers registered on a
database approved by the National Treasury to provide the required goods or services in
respect of the applicable designated groups mentioned in subregulation (2) from which
the tenderer must select a supplier.’

[21] Regulation 10, which deals with criteria for breaking a deadlock in scoring,
provides:
‘(1)
If two or more tenderers score an equal total number of points, the contract must
be awarded to the tenderer that scored the highest points for B-BBEE.
(2)
If functionality is part of the evaluation process and two or more tenderers score
equal total points and equal preference points for B-BBEE, the contract must be awarded
to the tenderer that scored the highest points for functionality.

(3)
If two or more tenderers score equal total points in all respects, the award must be
decided by the drawing of lots.’

[22] ‘Designated Group’ is defined in Regulation 1 as:
‘(a)
black designated groups;
(b)
black people;
(c)
woman;
(d)
people with disabilities; or
(e)
small enterprises as defined in Section 1 of the National Small Enterprise, 1996
(Act No 102 of 1996)’

Approach by the High Court
[23] The high court held that the 2017 Regulations are lawful and rational on
the basis that ‘they follow a preference point system, as required by s 2(1)(a) of
the PPPFA. They permit the application of the 80/20 and 90/10 split for contract
value that is contemplated in s 2(1)(b) of the PPPFA. They do not interfere with the
requirement that tenders with a higher price must be given pro rata lower scores
in terms of s 2(1)(c) of the PPPFA. They permit tenders to be awarded tenderers
who do not score the highest points in the circumstances permitted under s 2(1)(f)
of the PPPFA. They do not interfere with the application of s 2(1)(g) of the PPPFA
. . . [They] do not elevate race to a pre-qualification . . . ’

Submissions on behalf of Afribusiness
[24] Afribusiness argued that the 2017 Regulations, in particular Regulations 4
and 9 provide respectively, 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 the tenderers who
qualify to tender, may first be determined according to, inter alia, race, gender and
disability, and only thereafter in terms of the preference points system. It argued

that s 2 of the Framework Act does not allow for qualifying criteria, which may
disqualify a potential tenderer from tendering for State contracts.

[25] Counsel for Afribusiness submitted that, upon a proper interpretation of s
2(1), the high court’s criticism that Afribusiness places undue emphasis on s
2(1)(b) of the Framework Act, is unwarranted. He argued that as envisaged in s
217(2) of the Constitution, provision is made for the protection and advancement
of persons, or categories of persons, disadvantaged by unfair discrimination, by
allowing for specific goals to be taken into account as part of the preference point
system, the points to be allocated for such specific goals to be limited to 10 points
for higher value contracts, and 20 points for lower value contracts. In terms of s
2(1)(d) of the Framework Act the specific goals may include contracting with
persons or categories of persons, historically disadvantaged by unfair
discrimination on the basis of race, gender or disability. Persons disadvantaged on
the basis of race, gender and disability can therefore, in terms of the Framework
Act be preferred, by scoring respectively 10 or 20 additional points before price is
taken into account.

[26] Counsel maintained that it was clear from s 2(1)(f) of the Framework Act
that contracts must be awarded to tenderers who score the highest points unless
objective criteria in addition to those contemplated in paras (d) and (e) justify the
award to another tenderer. Section 2(1)(f), he submitted, is cast in peremptory
terms which therefore means that the first step in determining to whom the contract
must be awarded is to determine which tenderer has scored the highest points on
the basis of points for price and for special goals, including historic unfair
discrimination on the basis of race, gender and disability. The next step is to
determine whether there are objective criteria, in addition to those contemplated in
paragraphs (d) and (e), necessarily implying objective criteria over and above
historic discrimination on grounds of race, gender or disability.

[27] In support of this proposition counsel referred to Mosene Road Construction
v King Civil Engineering Contractors,4 in which Harms DP concluded:
‘The award of Government tenders is governed by Section 217(1) of the Constitution . . .
National legislation must prescribe the framework for the implementation of any
preferential policy (s 217(3)). This is done by the Preferential Procurement Policy
Framework Act 5 of 2000. It provides that Organs of State must determine their preferential
procurement policy based on a points system. The importance of a points system is that
contracts must be awarded to the tenderer who scores the highest points unless objective
criteria justify the award to another tenderer (s 2(1)(f)).’

[28] In Grinaker LTA Ltd v Tender Board (Mpumalanga)5 De Villiers J remarked:
‘Paragraph (f), in my view, contemplates objective criteria over and above those
contemplated in paragraphs (d) and (e) . . . To put it differently, the legislature did not
intend that criteria contemplated in paragraphs (d) and (e), should be taken into account
twice, firstly in determining what score was achieved out of 10 in respect of the criteria
contemplated in these paragraphs, and, secondly, in taking into account those self-same
criteria to determine whether objective criteria justified the award of the contract to another
tenderer than the one who had scored the highest points.
. . .
In any event, as indicated, the HDI factors referred to are not objective criteria, as
contemplated in Section 2(1)(f) of the Procurement Act.’

[29] Afribusiness thus argued that it is clear from jurisprudence on the
Framework Act that s 2 posits a two-stage enquiry: The first step is to determine
which tenderer scored the highest points in terms of the 90/10 or 80/20 points
system; the next stage is to determine whether objective criteria exist, in addition
to those referred in ss 2 (1)(d) and (e), which justify the award of a tender to a
lower scoring tenderer.6 It was accordingly submitted that the legislature, through
the Framework Act, seems to have afforded a very limited discretion to organs of

4 Mosene Road Construction v King Civil Engineering Contractors [2010] ZASCA 13; 2010 (4) SA
359 SCA para 2.
5 Grinaker LTA Ltd v Tender Board (Mpumalanga) [2002] 3 All SA 336 T para 60 and 62.
6 Rainbow Civils CC v Minister of Transport and Public Works, Western Cape [2013] ZAWCH 3
para 111.

state with regard to the award of a contract to a bidder who does not score the
highest points.

Submissions on behalf of the Amicus
[30] SAPOA submitted that the pre-qualification criteria provided for in
regulation 4 of the 2017 Regulations are contrary to the objective of competitive
bidding and inconsistent with s 217 of the Constitution. It argued that the blanket
‘permission’ to apply pre-qualification criteria, in terms of regulation 4, without
creating a framework for that criteria, lends itself to abuse and the manipulation of
tenders to the detriment of potential bidders.

[31] SAPOA further submitted that the 2017 Regulations are not rationally
connected to, first, the purpose for which they are promulgated; second, the
purpose of the empowering legislation, the Framework Act as read with s 217 of
the Constitution, and the B-BBEE Act, which has one of its objectives as
‘increasing the extent to which black women own and manage existing and new
enterprises, and increasing their access to economic activities infrastructure and
skills training’; third, the information before the administrator or, fourth, the reasons
given for it by the administrator.

[32] It was further submitted by SAPOA that regulation 4 is not only contrary to
the framework of s 2 of the Framework Act as Afribusiness contends, but even
insofar as the Minister may be empowered to create an additional framework
outside s 2 of the Framework Act, the Minister has failed to do so in a manner that
is rational, lawful and fair. In addition, SAPOA contended that the 2017
Regulations, specifically regulation 4 does not, as required by s 217(3) of the
Constitution, prescribe a framework for the proper and legal implementation of s
217(2) of the Constitution in compliance with s 217(1) of the Constitution.

Submissions on behalf of the Minister

[33] It was submitted on behalf of the Minister that Afribusiness places undue
emphasis on s 2(1)(b) of the Framework Act and that it unduly ignores two other
important features of the framework for the procurement process. It was pointed
out that the first feature envisaged by the Framework Act is the pre-qualification
stage. The argument in this regard was that before the Framework Act permits an
organ of state to evaluate any tender, such tender must first ‘qualify’ by meeting
the requirements for an ‘acceptable tender’, where the requirements for an
‘acceptable tender’ in the circumstances of a given tender process are left to the
discretion of the organ of state and not prescribed in any way.

[34] The second feature is one that may arise after the point-scoring exercise is
complete and this allows organs of state to award a tender to a bidder who does
not score the highest points, but rather to another bidder who satisfies certain other
‘objective criteria’.

[35] It was submitted on behalf of the Minister that s 2 of the Framework Act
does not constrain the Minister. It constrains the organs of state. This was so, it
was argued, because when the Minister makes Regulations, he does not act as
an organ of state and is not exercising powers under s 217(1) of the Constitution.
The source of power is s 5 of the Framework Act, it was argued. Section 5 of the
Framework Act, the argument proceeded, confers wide powers on the Minister to
legislate what is considered to be ‘necessary or expedient’. For this proposition
counsel placed reliance on Omar and Others v Minister of Law and Order and
Another; Fani and Others v Minister of Law and Order and Others; State President
and Others v Bill 1987(3) SA 859 (A) in which the phrase ‘necessary or expedient’
was interpreted as conferring on the Minister wide discretionary powers.

Analysis
[36] It may be convenient to first dispose of the last submission advanced on
behalf of the Minister. In my view, the Omar case does not assist the Minister. In
that matter (at 892A) the Court explained that the Legislature was justified in giving

the Minister such wide powers, because of the need to ensure the safety of the
public during a state of emergency, when extraordinary measures were required
to be put in place. The meaning which the court ascribed to the words ‘necessary
or expedient’ was thus based on a consideration of the context in which and the
purpose for which the relevant legislation was enacted.

[37] As s 5 of the Framework Act itself makes plain, the Minister’s powers are
not unconstrained. He may only make regulations ‘regarding any matter that may
be necessary or expedient to prescribe in order to achieve the objects of the Act’.
Section 2 of the Framework Act is headed ‘Framework for the implementation of
preferential procurement policy’. On a proper reading of the regulations the
Minister has failed to create a framework as contemplated in s 2.  It is correct that
the application of the pre-qualification requirements is largely discretionary. But the
regulations do not provide organs of state with a framework which will guide them
in the exercise of their discretion should they decide to apply the pre-qualification
requirements.

[38] The discretionary pre-qualification criteria in regulation 4 of the 2017
Regulations constitutes a deviation from the provision of s 217(1) of the
Constitution which enjoins organs of state when contracting for goods or services,
to do so in in accordance with a system which is fair, equitable, transparent,
competitive and cost-effective. Any pre-qualification requirement which is sought
to be imposed must have as its objective the advancement of the requirements of
s 217(1) of the Constitution. The pre-qualification criteria stipulated in regulation 4
and other related regulations do not meet this requirement. Points are to be
allocated to bidders based on the goals set out in s 2 of the Framework Act. The
discretion which is conferred on organs of state under regulation 4 to apply pre-
qualification criteria in certain tenders, without creating a framework for the
application of the criteria, may lend itself to abuse and is contrary to s 2 of the
Framework Act.

[39] The procurement process must comply with five key principles. It must be
equitable, transparent, fair, competitive and cost-effective. As Ponnan JA
explained in Airports Company South Africa SOC Ltd v Imperial Group Ltd and
Others:7
‘The general rule under s 217 of the Constitution is that all public procurement must be
effected in accordance with a system that is fair, equitable, transparent, competitive and
cost-effective. The only exception to that general rule is that envisaged by ss 217(2) and
(3). Section 217(2) allows organs of state to implement preferential procurement policies,
that is, policies that provide for categories of preference in the allocation of contracts and
the protection and advancement of people disadvantaged by unfair discrimination.
Express provision to permit this needed to be included in the Constitution in order for
public procurement to be an instrument of transformation and to prevent that from being
stultified by appeals to the guarantee of equality and non-discrimination in s 9 of the
Constitution. The freedom conferred on organs of state to implement preferential
procurement policies is however circumscribed by s 217(3), which states that national
legislation must prescribe a framework within which those preferential procurement
policies must be implemented. The clear implication therefore is that preferential
procurement policies may only be implemented within a framework prescribed by national
legislation. It follows that the only escape for ACSA from the reach of s 217(1) is if it is
able to bring itself within ss (2) and (3).’
I entirely agree with this analysis of s 217 of the Constitution.

[40] It follows therefore that the Minister’s promulgation of regulations 3(b), 4
and 9 was unlawful. He acted outside his powers under s 5 of the Framework Act.
In exercising the powers to make the 2017 Regulations, the Minister had to comply
with the Constitution and the Framework Act, which is the national legislation that
was enacted to give effect to s 217 of the Constitution. The framework providing
for the evaluation of tenders provides firstly for the determination of the highest
points scorer and thereafter for consideration of objective criteria which may justify
the award of a tender to a lower scorer. The framework does not allow for the

7 Airports Company South Africa SOC Ltd v Imperial Group Ltd and Others [2020] ZASCA 2; 2020
(4) SA 17 (SCA) para 64.

preliminary disqualification of tenderers, without any consideration of a tender as
such. The Minister cannot through the medium of the impugned regulations create
a framework which contradicts the mandated framework of the Framework Act.

[41] The Minister’s decision is ultra vires the powers conferred upon him in terms
of s 5 of the Framework Act. The Constitutional Court held in Minister of
Constitutional Development and Another v South African Restructuring and
Insolvency Practitioners Association and Others [2018] ZACC 20; 2018 (5) SA 349
(CC) para 27 that the rule ultra vires ‘forms part of the principle of legality which is
an integral component of the rule of law’. This principle was affirmed by the
Constitutional Court in Affordable Medicines Trust and Others v Minister of Health
and Others [2005] ZACC 3; 2006 (3) 247 (CC):
‘[49]
The exercise of public power must therefore comply with the Constitution, which is
the supreme law, and the doctrine of legality, which is part of that law. The doctrine of
legality, which is an incident of the rule of law, is one of the constitutional controls through
which the exercise of public power is regulated by the Constitution. It entails that both the
Legislature and the Executive “are constrained by the principle that they may exercise no
power and perform no function beyond that conferred upon them by law”. In this sense
the Constitution entrenches the principle of legality and provides the foundation for the
control of public power.’ (Footnotes omitted.)

[42] The Constitutional Court went on to hold at para 50:
‘[50]
In exercising the power to make regulations, the Minister had to comply with the
Constitution, which is the supreme law, and the empowering provisions of the Medicines
Act. If, in making regulations, the Minister exceeds the powers conferred by the
empowering provisions of the Medicines Act, the Minister acts ultra vires (beyond the
powers) and in breach of the doctrine of legality. The finding that the Minister acted ultra
vires is in effect a finding that the Minister acted in a manner that is inconsistent with the
Constitution and his or her conduct is invalid. What would have been ultra vires under
common law by reason of a functionary exceeding his or her powers is now invalid under
the Constitution as an infringement of the principle of legality. The question, therefore, is
whether the Minister acted ultra vires in making regulations that link a licence to compound

and dispense medicines to specific premises. The answer to this question must be sought
in the empowering provisions.’ (Footnotes omitted.)

[43] It is correct that the discretionary pre-qualification criteria stipulated in
regulation 4 may constitute an antecedent step. But the antecedent step that is
introduced in regulation 4 creates an additional layer which, neither s 217 of the
Constitution, nor s 2 of the Framework Act, authorises. The Minister may not in
terms of s 5 of the Framework Act make regulations which permit organs of state
to incorporate in their tender documents conditions which are inconsistent with s
217 of the Constitution and the Framework Act. In its application, the antecedent
step may well disqualify certain tenderers who do not otherwise fall to be
disqualified by the Framework Act. In that the Minister has exercised a power that
is reserved for the legislature.

[44] That leaves regulation 10: Afribusiness’ argument is that regulation 10 is
unlawful in that it puts B-BBEE above other considerations and it is only if
functionality is part of the evaluation process that the contract must go to the
tenderer that scores the highest points for functionality. In my view there is nothing
objectionable about regulation 10. It seeks to address a much later stage of the
evaluation process. If by then tenderers are equally ranked there can be no
objection to B-BBEE, in the first instance, being used to break the deadlock. At
that stage all tenderers would already have met the functionality requirement.

Remedy
[45] In terms of s 172(1) of the Constitution:
‘(1)
When deciding a constitutional matter within its power, a court─
(a)
must declare that any law or conduct that is inconsistent with the Constitution is
invalid to the extent of its inconsistency; and
(b)
may make any order that is just and equitable, including─
(i)
an order limiting the retrospective effect of the declaration of invalidity; and
(ii)
an order suspending the declaration of invalidity for any period and on any
conditions, to allow the competent authority to correct the defect.’

This may include suspending the order of invalidity to enable the Minister to take
corrective action or set aside only those regulations, whose provisions are
inconsistent with the Framework Act and s 217 of the Constitution.

[46] Counsel for the Minister submitted that in the event that the Court finds
against the Minister on the merits, it should consider setting aside regulation 4 only
and not the regulation in its entirety. However, that option, due to the
interconnectedness of the regulations, may not be an appropriate one. It was
further submitted that any order of invalidity should be suspended for a period of
12 months to allow the Minister to remedy the defects.8 The appropriate remedy in
the circumstances will be to declare the 2017 Regulations to be inconsistent with
s 217 of the Constitution and s 2 of the Framework Act and suspend the order of
invalidity for a period of 12 months from the date of this order.

[47] In the result I make the following order:
The appeal is upheld with costs.
The order of the court a quo is set aside and is replaced with the following
order:
‘(a)
The application succeeds with costs.
(b)
It is declared that the Preferential Procurement Regulations, 2017 are
inconsistent with the Preferential Procurement Policy Framework Act 5 of
2000 and are invalid.
(c)
The declaration of invalidity referred to in para (b) above is suspended for
a period of 12 months from the date of this order.’

_________________
Zondi JA
Judge of Appeal

8 Estate Agency Affairs Board v Auction Alliance (Pty) Ltd and Others [2014] ZACC 3; 2014 (3) SA
106 (CC) para 55.

Appearances:

For appellant:
J G Bergenthuin SC
Instructed by:
Hurter Spies Inc, Centurion
McIntyre Van der Post, Bloemfontein

For respondent:
N Maenetje SC (with him M Stubbs)
Instructed by:
The State Attorney, Pretoria

The State Attorney, Bloemfontein

SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL
AL
FROM:

The Registrar, Supreme Court of Appeal
DATE:

2 November 2020
STATUS:

Immediate

Afribusiness NPC v The Minister of Finance (Case no 1050/2019) [2020] ZASCA
140 (2 November 2020)
Please note that the media summary is for the benefit of the media and does not form part of the
judgment of the Supreme Court of Appeal.
Today the Supreme Court of Appeal (SCA) upheld the appeal by the appellant with costs.
This matter concerned the validity of the Preferential Procurement Regulations, 2017 (the 2017
Regulations) promulgated by the Minister of Finance (the Minister) on 20 January 2017 under s 5 of
the Preferential Procurement Policy Framework Act 5 of 2000 (the Framework Act). The appellant,
Afribusiness NPC (Afribusiness), unsuccessfully challenged the regulations before the Gauteng
Division of the High Court, Pretoria (high court) and appealed with the leave of this court. The
background facts are that the Minister acting in terms of s 5(2) of the Framework Act published Draft
Procurement Regulations for public comment. After the time for comment had elapsed, Afribusiness
requested that the period be extended as the initial period was insufficient. The Minister extended the
date and Afribusiness submitted its comments.
The Minister, in terms of s 5 of the Framework Act, later adopted the 2017 Regulations. Aggrieved by
the Minister’s decision, Afribusiness, brought an application in the high court in which it sought for the
regulations to be set aside and be declared invalid. The Minister opposed the application and
contended that his decision to promulgate the 2017 Regulations was an administrative action that was
reviewable. On merits, the Minister contended that the application of pre-qualification criteria in terms
of the 2017 Regulations was discretionary and would not apply in every case; that the procedure he
followed in promulgating the 2017 Regulations met the requirements of PAJA; that the categories of
preference under the 2017 Regulations were based on sound constitutional principles, were not
irrational, unreasonable, or unfair. These contentions were upheld by the high court and it dismissed
Afribusiness’ challenge.

The argument in this Court was whether or not the Minister exceeded his powers in promulgating the
regulations and whether the Minister’s decision to promulgate the regulation was subject to review
under PAJA. Afribusiness argued that the Minister exceeded his powers under s of the Framework
Act by promulgating Regulations which provide for pre-qualification criteria which it contended were
inconsistent with s 217 of the Constitution and s 2 of the Framework Act. It argued that s 2 of the
Framework Act did not allow for qualifying criteria, which could disqualify a potential tenderer from
tendering for State contracts. It maintained further that it was clear from s 2(1)(f) of the Framework Act
that contracts must be awarded to tenderers who scored the highest points unless objective criteria
justified the award to another tenderer. SAPOA as the amicus argued that the blanket ‘permission’ to
apply pre-qualification criteria, without creating a framework for that criteria, caused abuse and the
manipulation of tenders to the detriment of potential bidders. Further, this was considered to not only
being contrary to the framework of s 2 of the Framework Act as Afribusiness contended, but even
insofar as the Minister could be empowered to create an additional framework outside s 2 of the
Framework Act, the Minister had failed to do so in a manner that was rational, lawful and fair.
It was submitted on behalf of the Minister that before the Framework Act permits an organ of state to
evaluate any tender, such tender must first ‘qualify’ by meeting the requirements for an ‘acceptable
tender’, where the requirements for an ‘acceptable tender’ in the circumstances of a given tender
process are left to the discretion of the organ of state and not prescribed in any way. The Minister
submitted that s 2 of the Framework Act constrains only the organs of state. This was so, proceeded
the argument, because when the Minister makes Regulations, he does not act as an organ of state
and is not exercising powers under s 217(1) of the Constitution. The SCA rejected that argument
holding that s 5 of the Framework Act makes it plain that the Minister’s powers are not unconstrained.
He may only make regulations ‘regarding any matter that may be necessary or expedient to prescribe
in order to achieve the objects of the Act’. While the SCA accepted that it was correct that the
application of the pre-qualification requirements was largely discretionary it noted, however, that any
pre-qualification requirement which was sought to be imposed must have as its objective the
advancement of the requirements of s 217(1) of the Constitution. The pre-qualification criteria
stipulated in regulation 4 and other related regulations were said to have not met this requirement.
The SCA held that the Minister’s decision was ultra vires the powers conferred upon him in terms of s
5 of the Framework Act.
The SCA concluded that the appropriate remedy in the circumstances was to declare the 2017
Regulations to be inconsistent with s 217 of the Constitution and s 2 of the Framework Act and
suspend the declaration of invalidity for a period of 12 months from the date of the order to enable the
Minister to take remedial action.