On Monday the 2nd of November 2020 the Supreme Court of Appeal ruled that the provision regulations of the Preferential Procurement legislation was invalid and unconstitutional with its criteria allowing Government entities to set prequalifying conditions based on Broad – Based Black Economic Empowerment, on entities to be considered for tenders in public procurement.
The Preferential Procurement Framework Act has been widely used by many state-owned entities to contort the award of tenders by enforcing these pre-qualification rules, thus allowing the disqualifying of tenders in advance as the entity was not for example 51% Black Owned.
"The Supreme Court of Appeals further found that due to the contradictions between the 2017 Preferential Procurement Regulations and the Preferential Procurement Policy Framework Act, 5 of 2000 as well as the Constitution that the qualifying criteria were invalid.
The problem with the impugned regulations was that it constituted a seemingly small but extraordinarily damaging extension of BEE legislation. Since 2017, it has given state organs a new power, namely to set their own discretionary and arbitrary minimum requirements - in particular BEE requirements - that a contractor must meet if he is to be considered at all only for matters with a state entity. Prior to these regulations, organs of state could take BEE into account, but they may only apply it for a part (approximately between 10% and 20%) of the total marks, based on which tenders were awarded."
"The finding that the regulations are illegal has been suspended for 12 months, to give current finance minister Tito Mboweni time to rectify them."
Please revert to the attached document as the response from the B-BBEE Commission with regards to the Supreme Court of Appeals findings.
(Sources: Sakaliga.co.za, www.businesslive.co.za, BEE Commission Media Release, 04 Nov 2020)