New tender regulations show impact of Sakeliga win in Constitutional Court

14 March 2022

For the first time since 2017, BEE pre-disqualification criteria are absent from the minister of finance’s proposed regulations for public procurement tenders. The draft regulations published this week follow after the minister's 2017 regulations, which elevated BEE to a basis for pre-disqualification of tenderers at the time, were declared illegal and invalid in February owing to Constitutional Court litigation by Sakeliga.

The proven illegality of the previous regulations forced the Minister to now publish new draft regulations, without any provisions for BEE pre-disqualification. Should the regulations be promulgated, it restores BEE in state tenders at least to the status quo before 2017, when BEE criteria accounted for a maximum of 20% share in the evaluation of tenders.

Although the new regulations are a great improvement, the minister should have taken the step years ago, rather than litigating against Sakeliga. The illegal attempt to make BEE pre-disqualification part of public procurement has caused billions of rands in damage to the public and businesspeople over the past five years. The public had to be served with service delivery that was limited to what emanated from a small, politically connected pool of tenderers, rather than the full spectrum of service providers in the market. Businesspeople suddenly had to dilute their shareholding if they wanted government tenders or could not obtain more government tenders at all.

Although Sakeliga considers the Constitutional Court ruling against the 2017 regulations to be very important, it is not yet the end of BEE. It is to be expected that those who are in favour of or benefit from BEE will look for alternative ways in legislation and regulations to maintain and expand BEE. Sakeliga therefore advises businesspeople to keep their exposure to BEE requirements as low as possible, and to be mindful of the impact of BEE and possible new regulations and other legislation. Sakeliga also welcomes financial or other support for its long-term commitment to restoring a favorable business environment without BEE.

Sakeliga plans to launch a public participation process next week that invites members and businesses in general to comment on the new draft regulations.

Issued by Piet le Roux, CEO, Sakeliga, 14 March 2022