Sanral applies for exemption from preferential procurement regulations

The South African National Roads Agency (Sanral), which has experienced delays in the adjudication and award of 258 projects valued at R31.7 billion, has applied to National Treasury for an exemption from the provisions of the Preferential Procurement Policy Framework Act (PPPFA).

It is the second organ of state that is known to have applied for such an exemption.

Transnet last month confirmed it requested and was granted an exemption from the application of the provisions of the PPPFA effective from March 11.

Sanral told Moneyweb it applied to National Treasury for exemption on March 29, but Sanral GM for communications and marketing Vusi Mona said last week that the roads agency is awaiting feedback on its application.

Moneyweb emailed questions to National Treasury on March 23 but has not yet received a response. This article will be updated once a response is received.

Regulations ‘unlawful’

These exemption applications follow the Constitutional Court on February 16, in the case of The Minister of Finance v Afribusiness NPC, confirming the ruling of the Supreme Court of Appeal (SCA) that the 2017 Preferential Procurement Regulations (PPR) issued by the Minister of Finance in terms of the PPPFA were unlawful.

The declaration of invalidity was suspended for 12 months but the majority judgment was silent about the date on which the suspension expires.

To address this uncertainty, the finance minister has lodged an urgent Constitutional Court application to seek confirmation and establish whether the 2017 Regulations remain valid until February 15 2023, unless repealed sooner, or are no longer valid from February 16 2022, the date of the Constitutional Court judgment.

Read: SA’s procurement regulatory regime finds itself in muddy waters

National Treasury last month advised organs of state that while awaiting clarity from the Constitutional Court:

• Tenders advertised before February 16 2022 be finalised in terms of the 2017 regulations;

• Tenders advertised on or after February 16 2022 be held in abeyance; and

• That no new tenders be advertised and made available on National Treasury’s website.

National Treasury stressed it was only advising organs of state – and not instructing or directing them – and its advice was to curtail the risk of awarding tenders based on regulations that may no longer be valid.

It published draft PPR for public comment with a closing date of April 11.

But it advised that until the new regulations take effect or the Constitutional Court provides clarity on the suspension of the invalidity of the 2017 regulations, an organ of state may request an exemption from the provisions of the PPPFA for a specific procurement or category of procurement requirements.

Mona said the benefit to Sanral of an exemption from the provisions of the PPR is that it would allow Sanral to proceed with procurement without prequalification requirements relating to the Constitutional Court ruling.

“We have continued with the evaluation and adjudication of tenders advertised prior to the ConCourt ruling published on February 16 2022,” he said.

“The advisory note from National Treasury only had an impact on new tenders advertised after February 16 2022.”

Sanral earlier confirmed that the 258 projects collectively valued at R31.7 billion were planned to be awarded in Sanral’s 2020/21 financial year but were rolled over to the current 2021/22 Annual Procurement Plan.

The 2021/22 plan also includes the commencement of the procurement process for a further 312 projects collectively valued at R30 billion.

The significant backlog at Sanral was, among other things, attributed to clarification with National Treasury of the 30% subcontracting requirement in the PPPFA.

To wait would have ‘huge ramifications’

Transnet spokesperson Ayanda Shezi said waiting for the new PPR regulations to take effect, or for confirmation by the Constitutional Court of the effective date of the judgment before proceeding with procurement events at Transnet, “would have huge ramifications for the business, and its ability to service its customers”.

Shezi said Transnet is not able to use preference during this exemption period, including the 80/20 and 90/10 preference points system, or to issue tenders with preferential procurement prequalification criteria, which would not be in compliance with the Constitution.

“This situation is anticipated to be short term pending either the new regulations or clarification of the Constitutional Court judgment,” she said.

“Transnet would ideally have preferred to apply preference during this period, however it is left with no other options in order to meet immediate operational requirements and economic objectives.”

Shezi said Transnet remains fully committed to transformation and the full participation of historically disadvantaged individuals in the economy and described this ruling and the absence of a new and better mechanism for ensuring the participation of black or transformed businesses as “regrettable”.

“Transnet and the South African economy cannot afford to stop all procurement whilst waiting for the new regulations or an alternative ruling by the Constitutional Court in order to avoid our procurement being interdicted,” she said.

Read: New dark cloud over infrastructure investment programme

Economist Dr Roelof Botha warned last month that National Treasury’s advisory notice to organs of state poses “a huge risk” to construction activity.

“If people wait before they spend and government waits before putting out a tender or spending money, they are postponing economic activity and ultimately that is going to impact GDP growth in 2022,” he said.