In Afribusiness NPC v Minister of Finance (Case No. 1050/2019) [2020] ZASCA 140 (2 November 2020), the Supreme Court of Appeal considered an appeal pertaining to the validity of the Preferential Procurement Regulations, 2017.

The Minister had previously adopted the Regulations in terms of the Preferential Procurement Policy Framework Act 5 of 2000 (PPPFA). Afribusiness NPC applied to the High Court for an order to review and set aside such decision. The application was dismissed.

On appeal, Afribusiness NPC argued that the Regulations provide for pre-qualification criteria, to be applied before the determination of a bid according to a preference point system. This had the result that qualifying bidders were first determined according to race, gender and disability. Only afterwards were price and other specific goals taken into account. This was not permitted by the PPPFA.

The South African Property Owners’ Association NPC (SAPOA) argued that the pre-qualification criteria were contrary to the objective of competitive bidding. They were inconsistent with the Constitution and open to abuse.

The Minister argued that the application of pre-qualification criteria was indeed permitted under the PPPFA inasmuch as an organ of state enjoyed a discretion to determine what qualified as an acceptable tender.

The SCA held that the pre-qualification criteria amounted to a deviation from the constitutional principles of public procurement. The court observed that the Minister had failed to create a framework to guide an organ of state when applying the pre-qualification criteria. This lent itself to abuse and was contrary to the PPPFA. The existing framework created by the PPPFA did not allow for the preliminary disqualification of bidders, without considering their bids.

Accordingly, the SCA upheld the appeal with costs. It declared the Regulations to be invalid but suspended such declaration for 12 months to enable the Minister to take corrective action.