MEC: Department of Police, Roads and Transport, Free State Provincial Government v Terra Graphics (Pty) Ltd t/a Terra Works and SSI/Tshepega Joint Venture

The Free State Provincial Government, through its Department of Police, Roads and Transport, embarked on a road rehabilitation programme and concluded a written contract with SSI/Tshepega Joint Venture as principal contractor to provide engineering and project management services. With the Province’s approval, SSI concluded a subcontract with Terra Graphics (Pty) Ltd t/a Terra Works to provide environmental consultancy services. Both SSI and Terra Works performed their contractual obligations, and partial payments were made. The Province thereafter refused to pay the outstanding balance, contending that the programme had not been properly budgeted for and that payment would contravene the Public Finance Management Act 1 of 1999 (PFMA). Terra Works applied to the High Court for payment, alternatively seeking an order compelling payment to SSI with a directive that SSI pay Terra Works.

The appeal was dismissed with costs, save that the amount awarded by the High Court was reduced from R1 540 123.54 to R1 436 880.21. The order directing payment (directly or via the main contractor) and interest was otherwise confirmed.

The case affirms that organs of state cannot evade contractual obligations by invoking alleged non-compliance with budgetary or financial management statutes after having authorised and benefited from the work. It underscores constitutional principles of accountability, transparency, and legality in public contracting, and clarifies the interaction between contractual liability and the PFMA.