New law on state procurement: A recipe for accelerated state decline 

23 July 2024

The Public Procurement Act, signed today, is a recipe for accelerated state failure. Its complicated design and focus on non-value-adding criteria will  drive up procurement costs and degrade state performance.  

This Act seeks to severely restrict state entities' procurement choices, increasing expenses and diminishing service quality whilst potentially facilitating corruption on an unprecedented scale.  

The Act is both unconstitutional and harmful. Sakeliga will now subject this final version to careful scrutiny to determine appropriate steps in countering it and retaining possibilities for normal, value-for-money procurement. 

The Public Procurement Act, assented to today by President Cyril Ramaphosa, is a recipe for accelerated state failure.  

The Act is intended to replace the Preferential Public Procurement Framework Act (PPPFA). If implemented, it would drive up procurement costs and degrade state performance and service delivery, because of its complicated and bad design, as well as its requirements based on race, nationality, and other non-value-adding criteria. Its ambiguous and contradictory clauses will form the perfect cover for self-enrichment and corruption. 

At its core, the Act attempts to deprive state entities of their choice under section 217 of the Constitution between expensive preferential procurement and normal, value-for-money procurement. It seeks to compel all state entities to procure goods and services only from an artificially small pool restricted based on race, nationality, and other criteria which drive up price and degrade service delivery.  

While the Act does not explicitly state political connections as a requirement, it will facilitate this on a scale never experienced before. 

In the way that the Act restricts international business, it likely also falls foul of several of the South African state’s international trade obligations. 

Already, companies that can offer the best value for money increasingly avoid doing business with the state due to the excessive political complications, ethical problems, and legal uncertainty. Under the new Act, this trend is set to accelerate, leaving the public exposed to state procurement from companies who are able to win tenders on every measure except price and quality. 

In part, the Act represents an attempt at countering Sakeliga’s Constitutional Court judgment on procurement two years ago, in which we protected the choice of municipalities and other state entities to determine their own, value-for-money procurement policies. The Act purports to achieve what the Minister was not lawfully able to achieve through regulations, yet also remains unconstitutional for similar reasons: Neither Parliament nor a Minister is empowered to bind an organ of state to specific preferential policies. Section 217 of the Constitution assigns this discretion to organs of state themselves. 

The Public Procurement Act is harmful and unconstitutional, but it is not yet in force. Sakeliga will now subject this final version to careful scrutiny to determine appropriate steps in countering it and retaining possibilities for normal, value-for-money procurement stemming from our 2022 Constitutional Court victory and otherwise.

Issued by Piet Le Roux, CEO, Sakeliga, 24 July 2024