Afriforum NPC v Minister of Tourism and Others; Solidarity Trade Union v Minister of Small Business Development and Others

During the Covid-19 pandemic, the Minister of Tourism issued a direction on 6 April 2020 establishing a Tourism Relief Fund of R200 million to provide once-off grants (capped at R50,000) to Small, Micro and Medium Enterprises (SMMEs) in the tourism sector affected by the pandemic. The direction was made under regulation 10(8) of the regulations promulgated under the Disaster Management Act 57 of 2002 (DMA) following the declaration of a national state of disaster on 15 March 2020. The direction included eligibility criteria that incorporated B-BBEE status levels from the Tourism Sector Code made under the Broad-Based Black Economic Empowerment Act 53 of 2003 (B-BBEE Act). Points were awarded based on B-BBEE levels, ranging from 20 points for level 1 to 12 points for level 4. The Minister believed she was legally obliged by s 10(1)(e) of the B-BBEE Act to apply the Tourism Sector Code when determining criteria for awarding grants. Afriforum and Solidarity challenged these "race-based criteria" in the Gauteng Division of the High Court, Pretoria. The applications were dismissed by Kollapen J, and leave to appeal was refused. By the time of the appeal, the entire R200 million had been disbursed.

• Whether the Minister's direction constituted administrative action subject to review under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) or executive action reviewable under the principle of legality
• Whether s 10(1)(e) of the B-BBEE Act legally obliged the Minister to apply the Tourism Sector Code when determining eligibility criteria for grants from the Tourism Relief Fund
• Whether grants from the Tourism Relief Fund were 'grants in support of broad-based black economic empowerment' within the meaning of s 10(1)(e) of the B-BBEE Act
• Whether the Minister committed a material error of law in including B-BBEE status levels as eligibility criteria
• Whether the Minister's reliance on one statutory provision precluded her from justifying her action on another basis

1. Leave to appeal is granted. 2. The appeal is upheld with costs, including the costs of two counsel. 3. The order of the court below is set aside and replaced with the following: (a) It is declared that when making the direction dated 6 April 2020, in terms of regulation 10(8) of the regulations under the Disaster Management Act 57 of 2002, the Minister of Tourism was not legally obliged by s 10(1)(e) of the Broad-Based Black Economic Empowerment Act 53 of 2003 to make eligibility for assistance from the Tourism Relief Fund subject to the Tourism Sector Code made in terms of that Act; (b) the direction was consequently unlawful; (c) The order does not authorize or oblige the Minister of Tourism to recover funds already disbursed from the Tourism Relief Fund; (d) The respondents are directed to pay the costs of the applicant, including the costs of two counsel.

The binding legal principles established are: (1) Directions issued by ministers under regulation 10(8) of the DMA regulations constitute administrative action subject to review under PAJA; (2) Section 10(1)(e) of the B-BBEE Act, which requires organs of state to apply relevant codes of good practice when 'determining criteria for the awarding of incentives, grants and investment schemes in support of broad-based black economic empowerment', only applies to grants whose purpose is to support B-BBEE, not to all grants issued by organs of state; (3) Grants intended to mitigate the impact of Covid-19 and ensure business sustainability under the DMA are not grants 'in support of broad-based black economic empowerment' within the meaning of s 10(1)(e) of the B-BBEE Act; (4) When a decision-maker unequivocally commits to a specific statutory basis for exercising power, they cannot subsequently rely on alternative sources of authority to validate their action; (5) An erroneous belief about a legal obligation constitutes a material error of law under s 6(2)(d) of PAJA where it distorts the exercise of discretion by causing the decision-maker to fail to apply their mind properly to relevant considerations; (6) Statutory powers must be exercised for their proper statutory purpose, and pursuing objectives not authorized by the empowering provision constitutes an improper purpose even if those objectives are otherwise laudable.

The court made several observations obiter: (1) The court noted that it would be 'incongruous and illogical' to hold that the Minister of Co-operative Governance and Traditional Affairs acted administratively when making regulations but that other ministers acted executively when exercising powers delegated by those regulations; (2) The court observed that administrative action generally involves 'the conduct of the bureaucracy (whoever the bureaucratic functionary might be) in carrying out the daily functions of the state, which necessarily involves the application of policy, usually after its translation into law, with direct and immediate consequences for individuals or groups of individuals' (citing Grey's Marine); (3) The court expressed the principle that 'the development of a coherent administrative law demands that litigants and courts start with PAJA, and, only when PAJA does not apply, should they look to the principle of legality and any other permissible grounds of review lying outside PAJA'; (4) The court emphasized that 'statutory powers, however permissive, must be used with scrupulous attention to their true purposes and for reasons that are relevant and proper'; (5) The court noted that both parties agreed the appeal should proceed despite the funds being fully disbursed because of the importance of the issues involved, and the court agreed; (6) The court suggested that in the light of full disbursement, declaratory relief was more appropriate than setting aside the direction.

This case is significant for several reasons: (1) It clarifies the scope and application of s 10(1)(e) of the B-BBEE Act, establishing that it only applies to grants specifically intended to support B-BBEE, not to all grants issued by organs of state regardless of purpose; (2) It affirms that administrative actions taken under delegated authority from regulations made under the DMA constitute administrative action subject to PAJA review; (3) It reinforces the principle from Minister of Education v Harris that decision-makers who commit to a specific statutory basis for their authority cannot subsequently rely on alternative sources of power to validate their actions; (4) It demonstrates the application of the material error of law ground of review under s 6(2)(d) of PAJA; (5) It shows judicial restraint in fashioning appropriate remedies where setting aside would be futile and potentially unjust to third parties who received benefits in good faith; (6) The case is important in the context of Covid-19 relief measures and the legal framework governing state responses to disasters. It establishes that disaster relief measures are governed primarily by their disaster management purpose rather than by general transformation imperatives, though it does not preclude voluntary incorporation of such considerations where legally permissible.