Sakeliga requests suspension of race-requirements for tenders at Eskom pending outcome of court case

2 April 2019

Business organisation Sakeliga today announces legal action to challenge race-based pre-qualification for contractors at state-owned enterprises (SOEs). The organisation will also request Eskom, the Minister of Finance and the Minister of Public Enterprises to suspend race-based pre-qualification requirements at Eskom, pending the outcome of Sakeliga’s court case.

Sakeliga’s decision to pursue the court case, challenging the legality of SOEs’ pre-emptive disqualification of contractors based on race, comes especially in light of the electricity crisis in South Africa. Sakeliga calls on communities in general, but business communities in particular to sign Sakeliga’s memorandum at www.pickmypower.co.za.

Sakeliga CEO Piet le Roux says Eskom’s race-based disqualification of contractors is unreasonably limiting the pool from which it could draw expertise: “It has come to our attention that Eskom has increasingly been setting race-based pre-qualification criteria in its tender documents. Today, businesses who are not 51% black-owned are frequently pre-emptively disqualified from even being considered for award of a tender. By disqualifying contractors based on race, Eskom now precludes – at a critical time for the economy and society – electricity consumers in South Africa from the full range of cost-effective expertise available on the market. I shall therefore be writing to Phakamani Hadebe, CEO of Eskom, Tito Mboweni, Minister of Finance and Pravin Gordhan, Minister of Public Enterprises to request suspension of race-based pre-qualification requirements at Eskom pending the outcome of Sakeliga’s court case.”

Le Roux comments on Sakeliga’s legal action: “SOEs set these pre-qualification criteria for contractors under regulations in terms of the Preferential Procurement Policy Framework Act (PPPFA, Act 5 of 2000). The regulations were promulgated in 2017 by then Minister of Finance Pravin Gordhan. We objected to these regulations at the time and subsequent to promulgation challenged it in court. While initial judgement in the case was unfavourable to Sakeliga, with the Gauteng High Court dismissing the application in November 2018, Sakeliga has decided to appeal the case on advice of several counsel, including two senior counsel.”

Sakeliga argues, inter alia, that the PPPFA regulations of 2017 are ultra viresand unconstitutional, because it allows SOEs to set pre-qualification criteria beyond the criteria for tender validity determined by the PPPFA. The PPPFA in article 2(1)(d) read with article 2(1)(b) does not allow for the BBBEE status of a tender to become a pre-qualification criterion, such as that a contractor or sub-contractor should be 51% black-owned. In promulgating the regulations, Pravin Gordhan as Minister of Finance at the time acted beyond what he was allowed under the PPPFA, thereby resorting to law-making and contradicting the separation of powers prescribed by the Constitution.

Le Roux says Sakeliga’s court case has implications for all SOEs and SOE contractors: “Eskom is not the only SOE in crisis. Electricity provision is not the only service that the public doesn’t have cost-effective access to because some race groups are pre-emptively disqualified from contributing. Our court case attempts to allow all players at the table, instead of having some precluded from contributing because of their race.”

History of the case

- 2016: Sakeliga submits comment on the proposed regulations in terms of the PPPFA

- May 2017: Sakeliga initiates court procedures against the Minister of Finance, requesting that the regulations be declared ultra vires

- June 2018: Case heard before the Gauteng High Court

- 28 November 2018: Judgement delivered against Sakeliga

- December 2018: Sakeliga gives notice of application for leave to appeal

- December to March 2019: Sakeliga obtains further counsel; receives complaints from several members about being pre-emptively disqualified from tendering at Eskom because of pre-qualification race-requirements

- April 2019: Sakeliga to request Eskom to suspend pre-qualification race-requirements imposed on contractors pending the outcome of Sakeliga’s court case. Sakeliga request public participation atwww.pickmypower.co.za

- May – June 2019 (expected): Sakeliga’s application for leave to appeal to be heard

Issued by Moira-Marie Kloppers, Head: Media and Marketing, Sakeliga, 2 April 2019