This article claims that the Procurement Bill 2023 is constitutionally flawed because it empowers the Procurement Regulator to issue binding directives and instructions. This amounts to unconstitutional interference with municipal procurement powers. It violates a well-established constitutional principle, namely, that national and provincial governments may not usurp the constitutional authority of municipalities.

Institutional procurement reforms in South Africa

The Public Procurement Bill aims to introduce a single regulatory framework for all public procurement across national, provincial and local government. It aims to codify South Africa’s multi-layered procurement system which has been fragmented since its inception two decades ago. The Bill does this by repealing several laws, including Chapter 11 of the Municipal Finance Management Act (MFMA) that deals with municipal supply chain management (s 60 Procurement Bill 2023).

The Bill, comprising seven chapters, also aims to create an oversight mechanism with the establishment of centralised institutions such as the Public Procurement Office based in the National Treasury. Various other institutional reforms are also proposed such as the establishment of a Public Procurement Tribunal. It has been argued by Mitchell  Brooks, in an article published in the African Procurement Law Journal (AFPPLJ), that the establishment and powers of the Public Procurement Office (PPO) are unconstitutional. The scope of this article is thus limited to the PPO's responsibilities. Also, the abovementioned article focused mostly on the 2020 Bill. The question is whether the 2023 version of the Bill addresses this issue.

The revised 2023 Bill is different from its predecessor. The 2020 Bill comprised ten chapters and 124 provisions, whereas the 2023 Bill comprises seven chapters and 61 provisions. In both Bills, section 4 provides for the establishment of a central public procurement entity charged with overseeing compliance with procurement legislation across all spheres of government. In both versions of the Bill, this central procurement entity is based in the National Treasury (s 4). As the procurement regulator is situated within the National Treasury, the argument is that it will not act independently from national government - a concern which was previously raised.

Institutionally, the 2023 Bill changed the title of the central procurement entity from ‘regulator’ to ‘office’, ostensibly to downplay the interventionist nature of the central procurement entity. Indeed, the Procurement Regulator under the 2020 Bill had broad powers, including the power to reconsider decisions of institutions, issue reviews and amend standard bid documents for use by institutions (section 5(1)(f) and 5(2)(a).  In addition, the central procurement regulator has the authority to give both binding and non-binding directives to procuring institutions, including municipalities (s 5(1)(f)(g) 2020). This power to issue binding instructions was retained in the 2023 version of the Bill (s 5(2)(a)-(b)).

The issue of binding instructions raises two concerns. First, is there constitutional scope for the issuing of these instructions? Second, will these binding instructions result in the continued proliferation of laws, thereby defeating the primary objective of the Bill, which is to harmonise and simplify the procurement regulatory framework?

Constitutional scope for binding instructions

The Constitution protects the status and powers of local government. It grants municipalities the executive authority to administer the functions (water and sanitation, etc.)  listed in Part B of schedules 4 and 5 of the Constitution. Municipalities must perform the listed functions in accordance with a regulatory framework established in national and provincial legislation. In regulating these functions, national and provincial governments may not exercise direct control.  As noted by the Constitutional Court on several occasions, including a recent decision discussed elsewhere in the Bulletin, they must restrict themselves to setting norms and standards. In essence, the power to regulate local government does not entitle provincial and national governments to usurp the function by exercising a power on behalf of municipalities.

It is argued that the same applies to municipal procurement decisions. While procurement is not a function listed in Part B of schedules 4 or 5, it is “reasonably necessary for, or incidental, to the effective performance of the functions listed in Schedule 4B and 5B” (s 156(5), Constitution).  This is because municipalities depend on the procurement of goods and services to render services. Section 217 of the Constitution recognises the need for municipalities to acquire goods and services. It is thus a so-called ‘incidental power’ and is protected by the Constitution. This does not mean that municipalities are without bounds when they procure. The municipal power to procure goods and services may be subject to regulation that establishes norms and standards. However, these regulations, or in this case binding instructions issued by the PPO, may not be used to usurp or take over the procurement decision-making powers of municipalities. 

Procurement Bill: Recipe for over-regulation?

As stated previously, one of the primary objectives of the Procurement Bill is to reduce the fragmentation of procurement law in South Africa. Will the Bill achieve this? The Bill intends to repeal several general procurement laws such as provisions in the MFMA. However, it opens the way for additional forms of regulation emanating from different sources, including the Bill itself. For example, the Bill does not only empower the PPO to issue binding instructions and reporting requirements, but it also further empowers the Minister of Finance to issue additional regulations (s 58). The Bill furthermore empowers provincial treasuries to issue binding instructions (s 6(1)(a)). Thus, while the Bill aims to consolidate procurement laws, the number of provisions that set the scene for more subordinate regulation means that procurement law is likely to remain complex and fragmented, and perhaps become even more so. This concern was also noted by the South African Local Government Association and Pippa Reyburn, in an article published in the AFPPLJ journal, albeit with respect to the 2020 version of the Bill. Subordinate legislation is relatively easy to change and, if the experience with procurement regulation and circulars is anything to go by, there is a risk that this will happen often. This may then lead to overlapping, duplicative, and even conflicting norms given that there is no prescribed format in place to manage the issuing of binding instructions. For example, the Bill, in s 58(2), provides stringent procedures regarding the Minister's authority to issue regulations, mandating that all draft regulations must undergo parliamentary scrutiny. No such rule applies to the issuance of binding instructions. The objective of the Bill, namely to streamline and simplify procurement law, may therefore be undermined. 

This piece is the first in a series examining the Public Procurement Bill.

By Curtly Stevens, Doctoral Researcher