Biggest court case on BEE and procurement gets even bigger

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EFF, Free Market Foundation, and Fidelity now part of Sakeliga’s BEE case in Constitutional Court

The biggest BEE and procurement case to date has just grown even bigger with three well-known organisations moving to participate in Sakeliga’s constitutional litigation.

The EFF, the Free-Market Foundation’s Rule of Law project, and the security company Fidelity are all three currently in the process of being admitted as respondents and/or friends of the court (amici curiae), for the trial scheduled for 25 May 2021 in the Constitutional Court.

The case stems from an appeal by the Minister of Finance against the Supreme Court of Appeal’s finding last year, with costs, in Sakeliga’s favour. In that case, the court agreed with Sakeliga that the 2017 procurement regulations, issued by Minister Pravin Gordhan, are illegal and unconstitutional. The regulations ushered in a new era in BEE-related state procurement: for the first time, state entities could refuse to accept tenders if they did not meet arbitrary BEE requirements, whereas previously, they could only subtract between 10% and 20% of tender points. However, instead of accepting the Supreme Court of Appeal’s ruling, the Minister of Finance soon appealed – inter alia at the public insistence of ANC Secretary-General Ace Magashule –  to the Constitutional Court.

The EFF’s application to be admitted as amicus curiae was ignored by the Minister of Finance and opposed by Sakeliga, as it offers the court no new insights and merely repeats the Minister’s arguments with political partisanship. The Constitutional Court rejected the EFF’s first application last week and requested them to submit a proper application.

Sakeliga meanwhile welcomes the admittance of the Rule of Law project as amicus curiae to the case. According to a statement from the Rule of Law project, it seeks to assist the court by drawing attention to the Constitution’s commitment in section 1(b) to non-racialism. Furthermore, the Rule of Law project is concerned that the Minister’s regulations jeopardise the rule of law, as the Minister is not empowered to make regulations on procurement for the whole of government, but only for his own portfolio of national government finances.

The security group, Fidelity, applied to be admitted as a respondent in the case. The group focusses on the harm that Minister Gordhan’s procurement regulations have caused and continue to cause.

Sakeliga’s counsel will deliver oral arguments in the Constitutional Court on May 25, in this noteworthy and precedent-setting case on black economic empowerment in state procurement. Sakeliga wants to see the Constitutional Court confirm that former Minister of Finance Pravin Gordhan acted illegally when he issued the relevant regulations in 2017 and that ministers do not have such powers.

“The 2017 PPFA-regulations, issued without Parliament’s permission, ushered in a new era of race-based procurement, which in no way serves the public interest,” Le Roux explains. “BEE is a failed and harmful policy, especially in state procurement. There, it formed a toxic breeding ground for corruption, because service delivery and products were not measured by their use to the public, but by their use to politicians.”

The case has far-reaching consequences for the future of race-based legislation and its impact on the business environment and economy in South Africa.

“The constitutional order, which is a prerequisite for a favourable business environment, is jeopardised when members of the executive, without the authority of the legislature and contrary to the principles of constitutionalism, issue ideological regulations at their own discretion,” warns Le Roux.

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