Treasury bringing South Africa to standstill after BEE loss in court

Clinic doctors may soon be without essential equipment and firefighters without protective gear due to an “advisory” issued by National Treasury this week following its Constitutional Court loss over BEE procurement rules.

In mid-February, Sakeliga said it won a significant victory in its campaign against Black Economic Empowerment (BEE) policies.

The Constitutional Court ruled that BEE regulations issued by former finance minister Pravin Gordhan in 2017 were invalid and unconstitutional.

These regulations, issued under the Preferential Procurement Policy Framework Act, allowed organs of state to disqualify bidders from a tender if they were not 100% black-owned.

Previously, all bids submitted according to tender specifications would be considered, and the bidder’s BEE status would make up some fraction of their final score — usually 10% or 20%.

Following the Constitutional Court ruling, National Treasury director-general Dondo Mogajane issued a circular to government departments stating that that:

  • Tenders advertised before 16 February 2022 be finalised in terms of the Procurement Regulations struck down by the ConCourt
  • Tenders advertised on or after 16 February 2022 be held in abeyance
  • No new tenders be advertised

Sakelige CEO Piet le Roux decried the circular as an unlawful instruction.

However, on Thursday, Le Roux revealed that Mogajane had conceded that the circular was not binding in response to their questions.

Piet Le Roux, Sakeliga CEO

Despite Mogajane’s assurance that the circular was merely “advisory”, municipal governments in Cape Town and Johannesburg said it had placed them in a difficult position.

Afrikaans-language newspaper Rapport reported that in Cape Town, tenders to the value of hundreds of millions are standing still.

Quoting Cape Town mayor Geordin Hill-Lewis, the paper wrote that the metropolitan municipality had hoped to conclude a tender for essential medical equipment by 22 March.

It includes new blood pressure monitors, blood glucose sensors, stethoscopes, and other medical devices for the city’s clinics.

Another example of a vital tender stuck in limbo is one for weatherproof jackets and fire-retardant clothing for the city’s firefighters.

Johannesburg spokesperson Nthatisi Modingoane told Rapport that tenders of R1.3 billion are standing still in South Africa’s economic hub.

Modingoane warned that Treasury’s embargo would have a massive impact on service delivery, the city’s procurement plan for the year, and their integrated development plan goals.

Hill-Lewis and Modingoane also warned that various contracts that are renewed monthly would eventually need to be cancelled if Treasury’s moratorium dragged on.

In the Western Cape, provincial finance minister David Maynier said Mogajane’s circular would immediately halt 86 tenders to the value of R1.85 billion planned for March 2022.

Maynier said that he has written to national finance minister Enoch Godongwana to request that Treasury urgently withdraw the note.

Thus far, Mogajane has refused to withdraw the circular and instead wrote to Sakeliga to clarify that the note was purely an “advisory document”.

Sakeliga warned that National Treasury was creating a semblance of lawfulness for the continued application of BEE-based pre-disqualification of tenders.

“This while the Constitutional Court now has finally confirmed the invalidity of the BEE-based pre-disqualification in terms of the 2017 regulations of the Minister of Finance,” Sakeliga’s Le Roux stated.

“Today’s letter by the Director-General to Sakeliga has removed the need for urgent litigation and means that government institutions may now proceed with procurement, regardless of National Treasury’s view of the judgment in favour of Sakeliga handed down by the Constitutional Court on 16 February.”

Sakeliga said it is on standby to resort to litigation again should National Treasury or other government institutions try to sidestep the Constitutional Court’s judgment.

Now read: When BEE backfires – Telkom CEO explains how it hurts local companies

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Treasury bringing South Africa to standstill after BEE loss in court