No More Tenders: Govt Responds To Treasury’s Plea For Clarity

National Treasury’s circular suggesting that the awarding of new tenders from mid-February should be postponed has alarmed government agencies, SOEs and business formations, who fear that service delivery and infrastructure maintenance will be adversely affected.

While some have halted purchase in response to the circular, others, like Eskom, have carried on as usual.

The circular, dated February 25, told state organizations that tenders issued before February 16 should be finished, but those announced after February 16 should be “kept in abeyance” and no fresh tenders should be offered.

The Constitutional Court had not yet clarified its judgment on procurement restrictions.

Mogajane later clarified that the circular was not a directive.

Treasury’s request for clarification came after the Supreme Court dismissed an appeal by the Finance Ministry in 2017 against Afribusiness NPC’s claim that the framework excluded white South Africans and their enterprises.

Mogajane said last week at a Deloitte panel that Treasury needed urgent clarification from the court. Tax authorities and parastatals were consulted, Treasury informed Fin24.

It is unclear whether the Constitutional Court would suspend the 2017 Preferential Procurement Regulations for a year, until February 15, 2023.

Sikonathi Mantshantsha, Eskom’s spokeswoman, said that the state-owned power utility was in communication with National Treasury, adding that Eskom understood National Treasury to be offering advise rather than an instruction.

It was not suspending procurement, it stated.

“Eskom has decided not to extend existing tenders or to issue new ones pending clarification from the Constitutional Court. This would ensure that Eskom can carry out its constitutional and statutory responsibilities “Mantshantsha stated.

Mantshantsha stated that until any new regulations took effect, Eskom would continue to issue tenders and contracts in accordance with the current regulatory procedure. He stated that Eskom would continue to collaborate with National Treasury to adhere to all Supply Chain Management standards.

However, Andiswa Makanda, spokeswoman for the Passenger Rail Agency of South Africa (Prasa), said that the corporation had been impacted, which might have a knock-on effect on rail operations. “Prasa will be impacted by new projects, particularly those involving infrastructure rehabilitation. We are developing a strategy to minimize delays “Makanda explained.

CFO of the Department of Water and Sanitation Frans Moatshe stated that the National Treasury directive had resulted in the suspension of ongoing approval, appointment, and extension processes.

Moatshe stated that if procurement is suspended, certain building work and laboratory testing will be impacted.

“This suspension would have a detrimental effect on the department’s ability to achieve its objectives, including the Resource Quality Information Services laboratory, where it would be unable to complete and construct unit work, laboratory testing such as method accreditation, maintenance and repair of laboratory instruments and monitoring equipment, procurement of laboratory instruments, lease of vehicles for data collection, and implementation of national monitoring programs,” Mo stated.

Moatshe stated that the circular also brought ongoing infrastructure to a halt. He stated that the total value of the affected tenders was estimated to be R724 million for the main account and R1.5 billion for the Trading Account, which includes the Construction Unit.

Thami Mchunu, a spokesperson for the Department of Public Works and Infrastructure, told Fin24 that the department was following to the circular “like other departments are.”

“We are acting in accordance with the circular published by the National Treasury. We have nothing further to contribute. It is best to leave this to the National Treasury “Mchunu explained.

Mchunu declined to disclose the number of tenders, if any, withheld by the department’s circular or their commercial worth. Lumka Oliphant, a spokesperson for the Department of Social Development, also referred Fin24’s inquiries to the National Treasury.

Fin24 also sought several government departments and entities for comment but received no response, including Transnet and the Department of Water and Sanitation.

Business advocacy group Business Leadership South Africa told Fin24 that it was also awaiting a final decision from the National Treasury on the suspension and abatement of current tenders.

“We note that Treasury director-general Dondo Mogajane’s circular to state organs last Friday advising them not to issue any new tenders pending a Constitutional Court clarification of its procurement regulations judgment was not a directive issued in terms of any legislation, but rather advice,” BLSA said.

BLSA warned Fin24 that any disruptions to government procurement processes would be extremely harmful to the broader economy and that these difficulties needed to be resolved immediately.