The contradiction at the heart of Public Procurement

21 December 2023

On May 22, 2023, the Public Procurement Bill (B 18-2023) was introduced into Parliament, representing a significant attempt to create a unified legal framework regulating public procurement in South Africa. The Bill aims to streamline and simplify a complex regulatory landscape that has long hindered the efficiency and transparency of public procurement processes. As a response to the multifaceted challenges identified in numerous research reports, academic articles, and findings from the Zondo Commission, the introduction of this legislation is pivotal for the reform of South Africa's public procurement system.

However, a critical evaluation of the Bill reveals substantial concerns that must be addressed to ensure its constitutionality and effectiveness. One of the primary issues lies in the lack of clarity regarding essential definitions, a point emphasised by stakeholders such as the Procurement Reform Working Group (PRWG).

The Bill's definition of preferential procurement, for instance, fails to align with the global understanding of "preference" in procurement, introducing potential challenges of interpretation later on. This lack of precision is contrary to the standards set in Section 217 of the Constitution, which demands fairness, equitability, transparency, competitiveness, and cost-effectiveness in public procurement.

Furthermore, the broad and vague definitions in the Bill, such as that of "public procurement," raise concerns about its enforceability on a nationwide scale. The Bill must provide unambiguous definitions to avoid potential inconsistencies and misinterpretations, aligning with the constitutional requirement for laws to be clear and accessible.

A central constitutional concern highlighted by various stakeholders, including the Democratic Alliance (DA), revolves around the excessive law-making power granted to the National Treasury, the Public Procurement Office, and organs of state. The DA argues that the Bill grants these entities too much authority to create subordinate legislation, such as regulations, instruction notes, and circulars, without providing clarity on when these will be made available for public input. This lack of transparency and certainty further contradicts the principles of fairness and openness required by the Constitution.

Public participation, a cornerstone of democratic governance, is another area where the Bill falls short. Civil society groups, including the PRWG and the Ahmed Kathrada Foundation, have raised serious concerns about the rushed and unclear process leading to the current draft. Despite the Constitutional Court ruling that proper public participation is essential in the lawmaking process, the PRWG notes that the parliamentary participation process was problematic, with only 36% of submissions receiving attention from the Treasury.

The rushed nature of the legislative process has also led to what the PRWG calls "unclear, unstudied, and un-consulted eleventh-hour changes," indicating a potential disregard for the participatory spirit of the Constitution. This rushed approach not only undermines the principles of openness and fairness but also poses a risk of implementing legislation that may have far-reaching and unintended consequences.

The concerns expressed by NGOs, such as Corruption Watch and amaBhungane, regarding corruption safeguards in the Bill are particularly alarming. Corruption Watch has emphasised the importance of the Bill having economic transformation as its driving purpose and achieving open and transparent procurement. However, the current state of the Bill does not align with these objectives, raising doubts about its effectiveness in preventing corruption in procurement processes.

In examining the Bill, it is essential to scrutinise its race-based elements, which have also been a point of contention. The Bill introduces preferential procurement measures, including setting aside contracts for specific demographic groups and incorporating criteria such as BEE ratings/ownership. While the intention behind such measures may be rooted in addressing historical imbalances, concerns have been raised about the potential pitfalls of implementing race-based preferences.

This raises constitutional considerations, particularly with respect to Section 9 of the Constitution, which enshrines the right to equality. Navigating the constitutional landscape becomes crucial to aligning race-based preferences with the overarching constitutional imperative of equality, ensuring that redress measures are both legally defensible and conducive to economic efficiency.

The crux of the problem lies in the potential contradiction between sections 217(1) and 217(2) of the Constitution. Section 217(1) requires public procurement that is “fair, equitable, transparent, competitive and cost-effective.”  Section 217(2) makes provision for “(a) categories of preference in the allocation of contracts, and (b) the protection or advancement of persons or categories of persons, disadvantaged by unfair discrimination.”

The challenge for the public procurement legislation is to find an equitable balance between these provisions to ensure on the one hand that genuinely disadvantaged people can participate in the economic opportunities available in state contracts – and the crucial requirement that the state procurement process should be “fair, equitable, transparent, competitive and cost-effective.” 

Bitter experience with Eskom, Transnet, Prasa and all the other SOEs and general government procurement has shown that South Africa has woefully failed to achieve anything like the correct balance between these provisions. This failure lies at the heart of many of our present crises.

Sadly, there is no indication that the Public Procurement Bill in its present form will achieve this balance or succeed with its goal of reforming South Africa's public procurement system.  The lack of clarity in definitions, excessive law-making powers, inadequate public participation, and concerns about corruption safeguards are significant drawbacks that need urgent attention.

Stakeholders, including civil society groups and opposition parties, have rightfully voiced their concerns, urging Parliament to reconsider and refine the Bill before its passage. To uphold the constitutional principles of transparency, fairness, and public participation, comprehensive revisions are imperative to ensure that the Bill effectively serves its intended purpose without compromising the democratic values enshrined in the Constitution.

Issued by FW de Klerk Foundation, 21 December 2023