INVALIDITY OF REGULATIONS UNDER THE PREFERENTIAL PROCUREMENT ACT CAUSES SERVICE DELIVERY CHALLENGES

The Preferential Procurement Policy Framework Act (PPPFA) Regulations has been declared unconstitutional by the Supreme Court of Appeal (SCA) on 16 February 2022.  

These regulations are an integral part of our Supply chain management (SCM) policy and processes as they regulate the number of points to be allocated to tenderers as indicated below;

•    80/20 preference point system for acquisition of goods or services with Rand value equal to or above R30 000 and up to R50 million

•    90/10 preference point system for acquisition of goods or services with Rand value above R50 million

•    80/20 preference points system for tenders to generate income or to dispose of or lease assets with Rand value equal to or above R30 000 and up to Rand value of R50 million

•    90/10 preference point system for tenders to generate income or to dispose of or lease assets with Rand value equal to or above R50 million.

This actually means that if the procurement process for the acquisition of goods and services has not started before this date (16 February 2022), the SCA ruling basically stopped all procurement processes as the point system cannot be used in the appointment of a service provider.  

Any procurement process started before the above date could actually continue as the ruling is not to be applied retrospectively.  However, a total of 47 tenders out of the 179 projects on the approved Demand Management Plan for 2021/2022 are affected by the abovementioned ruling.  

There are also a number of projects from the provincial departments for services to be provided to Overstrand Municipality that are impacted by the same court ruling.  

This will have a significant impact on service delivery in some units within the municipality and it is trusted that the Constitutional Court will provide clarity on the period that the relevant national department must do the necessary amendments to the regulations.   

National Treasury did advise that municipalities can apply for an exemption from the PPPFA Regulations which the municipality did in a bid to ensure that we can actually spend our budget and that there are no breaks in service delivery.  A reply to this application is still awaited at the writing of this press release. 

The current financial year will end on 30 June 2022 and the opinion is held that even if we receive an exemption tomorrow, there would not be enough time to award tenders due to the statutory times for advertisement as well as appeal periods and hence council will have to consider rolling over some of these projects to the new financial year and will be considered with the approval of the budget on 31 May 2022. 

We will keep the public updated on this issue as and when there are any changes.