Sthathu Funding (Pty) Ltd v Amathole District Municipality

The first respondent (Amathole District Municipality) initially advertised a tender for lease of office accommodation closing on 12 June 2024. The applicant bid R54,841,646 and the second respondent bid R96,226,627. Both bids were deemed non-responsive as they exceeded the price stipulated for the preference point system under the Preferential Procurement Policy Framework Act 5 of 2000 (PPPFA). The first respondent then advertised a second tender on 28 October 2024 with substantially similar terms but stipulating that either the 80/20 or 90/10 preference point system would apply depending on the value of the lowest acceptable bid. Points would be awarded for price and specific goals comprising four categories: black youth (4 or 7 points), black women (4 or 7 points), people with disabilities (1 or 3 points), and military veterans (1 or 3 points). The applicant made three enquiries about the status of the first tender and why the second was advertised, with a final ultimatum on 14 November 2024. The first respondent failed to respond. The applicant then launched urgent proceedings to interdict the second tender pending review. The existing lease between applicant and first respondent was due to expire on 28 February 2025.

• Whether the applicant had established a prima facie right warranting interim relief
• Whether the first respondent's selection and inclusion of specific goals in the tender and corresponding points allocation was rational and lawful
• Whether the decision constituted a reviewable irregularity under the Promotion of Administrative Justice Act 3 of 2000 (PAJA)
• Whether the applicant would suffer irreparable harm if the tender process proceeded
• Where the balance of convenience lay
• Whether granting interim relief would infringe the separation of powers doctrine

The application for interim relief brought in terms of Part A of the notice of motion was dismissed. The applicant was ordered to pay the first respondent's costs on scale C.

The binding legal principles established are: (1) An organ of state's decision to include specific preferential procurement goals and allocate points for those goals will be rational and lawful where there is a rational connection between the decision and the socio-economic objectives contemplated in section 217(2) of the Constitution, as given effect through the PPPFA and regulations, and as expressed in the organ of state's supply chain management policy. (2) The inclusion of categories such as black youth, black women, and people with disabilities as specific goals in a tender, with weighted points allocation favoring certain categories, is rationally connected to achieving constitutional and legislative objectives where consistent with the organ of state's stated policy objectives. (3) In applications for interim interdicts pending review of procurement processes, harm that can potentially be remedied through successful review proceedings does not constitute irreparable harm. (4) The balance of convenience in procurement matters must take into account practical considerations such as imminent contract expiry dates, the risk of irregular expenditure, and the practical consequences for service delivery.

The court made several non-binding observations: (1) It noted that it might be debatable whether military veterans constitute a category envisaged under the legislative framework for preferential procurement, though the applicant had not challenged this aspect. (2) The court acknowledged that case law appears to distinguish interim relief in procurement matters from the stricter separation of powers concerns articulated in National Treasury v Urban Tolling Alliance and Economic Freedom Fighters v Gordhan, which require exceptional circumstances before restraining the exercise of public power, but stated "nothing more needs to be said in that regard." (3) The court observed that public procurement is globally recognized as a mechanism by which the state can promote certain socio-economic objectives. (4) The judgment noted that the complexity and value of the matter and its importance to the parties justified costs on scale C.

This case provides guidance on the application of interim relief principles in the context of public procurement challenges. It confirms that procurement policies incorporating specific goals aimed at advancing historically disadvantaged persons (including black youth, black women, and people with disabilities) are constitutionally and legislatively compliant where they align with section 217(2) of the Constitution, the PPPFA, and the organ of state's own supply chain management policy. The judgment emphasizes that rational connection must be shown between the decision to include specific goals and the constitutional/legislative purpose. It also illustrates the application of the balance of convenience test in procurement matters, particularly where there are practical constraints such as lease expiry dates. The case distinguishes procurement-related interim relief from broader separation of powers concerns that apply when restraining the exercise of statutory power.