Minister of Finance v Afribusiness NPC

Afribusiness NPC challenged regulations promulgated by the Minister of Finance (the 2017 Preferential Procurement Regulations) as inconsistent with the Preferential Procurement Policy Framework Act 5 of 2000 (Procurement Act) and section 217 of the Constitution. The regulations introduced pre-qualification criteria allowing organs of state to exclude tenderers who did not meet specified requirements aimed at advancing previously disadvantaged persons. The criteria included minimum B-BBEE status levels, EME or QSE status, or subcontracting to majority black-owned enterprises. The High Court dismissed the application, finding the Minister acted within his powers and that the regulations were constitutional. The Supreme Court of Appeal reversed this, finding the Minister acted ultra vires the Procurement Act by creating regulations that contradicted the framework established in section 2 of the Act, which required a points-based system for evaluating tenders. The Minister sought leave to appeal to the Constitutional Court.

• Whether the Minister of Finance acted ultra vires (beyond his powers) in promulgating the 2017 Preferential Procurement Regulations
• Whether the 2017 Preferential Procurement Regulations are inconsistent with the Preferential Procurement Policy Framework Act 5 of 2000
• Whether the 2017 Preferential Procurement Regulations are inconsistent with section 217 of the Constitution
• The proper interpretation of section 5 of the Procurement Act (the Minister's regulation-making powers)
• The scope and meaning of 'necessary or expedient' in section 5(1) of the Procurement Act
• The relationship between section 2 and section 5 of the Procurement Act
• Whether pre-qualification criteria are permitted under section 217 of the Constitution and the Procurement Act

Leave to appeal granted. Appeal dismissed with costs, including costs of two counsel. Applications by Fidelity Services Group (Pty) Ltd and the South African National Security Employers Association for intervention and direct access dismissed.

A Minister's power to make regulations that are 'necessary or expedient' to achieve the objects of an Act, while wide, is not unlimited and must be interpreted in the context of the entire statutory framework. Where an Act expressly vests a power in organs of state (here, the power to determine preferential procurement policies in section 2(1) of the Procurement Act), the Minister cannot make regulations that duplicate or usurp that power, as such regulations would be neither necessary nor expedient. The words 'necessary or expedient' in section 5(1) of the Procurement Act are limiting factors that constrain the Minister's regulation-making power. It is ultra vires for a Minister to make regulations providing for matters that the empowering legislation has already explicitly allocated to other entities. The principle of legality requires that public power be exercised within the bounds set by the applicable law and Constitution.

The majority noted that if the Minister believes organs of state are failing to fulfill their section 2(1) obligations, the appropriate remedies are political engagement or introducing a Bill to amend the Procurement Act, not making ultra vires regulations. The minority observed that the 2017 Procurement Regulations were flexible and discretionary, allowing organs of state to determine whether to apply pre-qualification criteria. The minority also commented that the designated groups under the regulations did not exclude bidders based on race alone, as they included categories such as EMEs and QSEs where Black people need not hold any shareholding. The majority raised the question of what would happen if a preferential procurement system created by the Minister conflicted with one created by an organ of state under section 2(1), suggesting this conundrum illustrated that the Minister has no business creating such systems. The minority judgment emphasized the transformative imperative of section 217(2) and section 9(2) of the Constitution and criticized the Supreme Court of Appeal for failing to engage adequately with these provisions. Both judgments agreed on the dismissal of the intervention and direct access applications by Fidelity and SANSEA.

This case clarifies the limits of ministerial regulation-making powers under the Preferential Procurement Policy Framework Act and the proper allocation of powers between the Minister and organs of state in determining preferential procurement policies. It establishes important principles about ultra vires conduct and the interpretation of enabling legislation, particularly the meaning of 'necessary or expedient' in delegated legislation powers. The judgment reinforces that even broad regulation-making powers are subject to the framework established by Parliament and that a Minister cannot arrogate powers that the enabling legislation vests in other entities. The case also addresses the relationship between section 217(1) and (2) of the Constitution in the context of transformative procurement policies. The split decision reflects different approaches to interpreting broad regulatory powers in the context of achieving constitutional transformation objectives.