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The Public Procurement Act (PPA) is finally here, after President Cyril Ramaphosa signed it into law on 23 July 2024. However, the act is not yet in force, as the president has not determined the date on which it will take effect. This will be gazetted in due course.
Broadly, the act aims to regulate public procurement by prescribing a framework which must be implemented by all organs of state, including instances of preferential procurement, with integrity, efficiency, and cost-effectiveness. This accords with Section 217 of the Constitution which stipulates that: “When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive, and cost-effective.”
Furthermore, the Constitution does not prohibit organs of state from implementing a procurement policy providing for categories of preference in the allocation of contracts, or the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination. The Constitution adds that national legislation must prescribe a framework within which such a policy must be implemented, and the PPA provides for this.
The PPA will be administered by the minister of finance. It applies to departments, constitutional institutions, municipalities, municipal entities, and public entities, and in a more limited way to Parliament and provincial legislatures.
Responding to Zondo recommendations
The new legislation bolsters the October 2022 government response to the Zondo commission’s extensive recommendations. The commission, chaired by Chief Justice Raymond Zondo from 2018 to 2022, found that interference from members of the Executive in government’s procurement function was one of the ways that allowed state capture to thrive.
One of the recommendations was for the public procurement sector to be professionalised, and for legislation to be developed that establishes a body for all public officials in supply chain management. This, said Zondo, would help authorities distinguish between procurement decisions made in good faith and those made irregularly, and would ensure consequence management for the latter.
“Apart from the abuse of procurement for the purposes of state capture, the country’s procurement system currently faces challenges of professional capacity, fragmentation, and operational flexibility,” the response document noted. “The introduction of preferential procurement goals, which is an economic and social imperative, adds a layer of complexity that some have used to manipulate procurement outcomes.”
The Public Procurement Bill was already in draft form when the Zondo response was published, and it has taken almost two years since then for it to reach the president’s office.
In the 29 July edition of his weekly blog, Ramaphosa stated that the PPA “eliminates the problem identified by outgoing Chief Justice Zondo of fragmentation in procurement laws by creating a cohesive regulatory framework”.
It also provides for the establishment of a public procurement tribunal and a centralised public procurement office, located in the treasury.
Momentous occasion
We reached out to procurement law expert Prof Geo Quinot, a frequent collaborator, for his thoughts on this development. He was cautiously optimistic.
“I think the promulgation of the Public Procurement Act is itself a momentous occasion in South African procurement law,” he said, “despite the fact that there are still a number of outstanding questions that must be resolved, and a lot of work still to be done before the act can be fully implemented, not the least of which is the creation of extensive regulations to give content to the system.”
The big thing, he added, was that the PPA creates, for the first time, a proper focus point for public procurement law in South Africa, which will facilitate optimal outcomes in procurement.
Quinot concurred with the problem of fragmentation, saying: “I think that [the PPA] has at least the potential to address the significant fragmentation that has characterised our public procurement law. We know that fragmentation has been a major factor in the many failures of our public procurement system over the years both in terms of the abuse of the system and also the failure of the system.”
The next priority must be the drafting of regulations, said Quinot, which will help to arrive at more specific operational details such as permissible procurement methods or thresholds. “Those are important practical aspects that I hope we will get some sight of very soon, because for many procuring institutions, the changes that those detailed operational rules will bring about are going to be very important in terms of their own planning, operational systems, and standard operating procedures.”
There are other issues that must be clarified with urgency, he said, such as the constitutionality of the PPA, which is also the subject of a Western Cape challenge. “The last thing I would want to see is that we spend a lot of time crafting detailed rules and regulations to enable procurement operations, only to find that there are parts of the act that that cannot be implemented or that that are unconstitutional, and we then have to go back to the drawing board.”
Whether this clarity will be achieved through court or parliamentary or other types of processes remains to be seen.
The PPA is not likely to be enforced all at once, Quinot said. “We know that there are parts of the act that will be more difficult to bring into operation. I mainly think about the new dispute resolution mechanisms in chapter six, the new tribunal, those things will have to be set up first because they do not exist at the moment.”
The most urgent part is probably the chapter for preferential procurement regulations, he said, because the existing regime under the Preferential Procurement Policy Framework Act is taking extreme strain. There is currently great uncertainty about what the 2022 preferential procurement regulations actually entail and what is lawful and what is unlawful under those regulations, Quinot added. “Given that we are going to replace the entire preferential procurement policy framework act with this new procurement act, it is really in our interest to expedite the implementation of that part of the new act so that we don’t have to waste a lot of time trying to fix the current system which we know will be replaced.”
