South Africa Adopts a Public Procurement Law

Public procurement was previously regulated by a number of different domestic legal acts, which resulted in contradiction of norms and increased corruption risks. In line with the recommendations on how to reform procurement included in the Zondo Commission report, the Public Procurement Act No. 28 was adopted on 23 July 2024 regulating procurement in public bodies, local government bodies and public corporations (hereinafter, customers).

The Act envisages, in particular, the following innovations:

1. Institutional environment

1.1. Public procurement management

Under the Act, a Public Procurement Office, subordinate to the National Treasury, will be established.

The Office will be entrusted with the following functions:

Investigate failures to comply with the provisions of the Act at the request of the respective federal treasury, customer, representative of the public or at its own initiative; the employees of the Office will be entitled to enter the premises of customers and/or contractors and conduct searches;
Provide recommendations on how to eliminate shortcomings and/or forward information on violations to the competent authorities following investigations;
Provide advice or other assistance to customers in procurement;
Develop mandatory guidance on how to comply with the provisions of the Act, methodological guidance on procurement, including on how to enhance transparency, model policies in public procurement and model tender documentation, and publish these materials;
Collect and process the reports of customers on failures of competitive procurement procedures;
Create and maintain a Debarment Register in public procurement (hereinafter, the Register);
Develop and maintain a Single Public Procurement Database, an open database on public procurement and electronic trading platform also for ordering general expendable materials;
Organise training and improve skills of officials involved in public procurement.

1.2. Public Procurement Tribunal

The Act also provides for the establishment of a Public Procurement Tribunal (hereinafter, the Tribunal) that will be responsible for considering the appeals against the decisions taken by customers.

The Tribunal will be headed by a President appointed by the Minister of Finance upon agreement with the Minister of Justice for a five-year term renewable for additional three years.

2. Register of persons debarred from public procurement

Under the Act, the Register to be established by the Office at the request of customers can incorporate the companies-bidders (winners) of public tenders, their directors, members of executive bodies, managers or partners in case of:

Provision of false or misleading information in procurement, subsequent execution of a contract and upon registration in the Single Procurement Database;
Exercise of undue influence on other bidders;
Conviction for corruption, fraud, collusion, pressure or violation of confidentiality requirements in procurement;
Failure to respect contractual obligations;
Failure to comply with other requirements of the Act.

Before being inserted in the Register, the respective person is informed by the customer about their intention to file a request to debar them from procurement. Within ten days, this legal or natural person can appeal against the decision providing the reasons justifying the groundlessness of debarment.

The persons included in the Register will be unable to participate in public procurement for the period not exceeding the one indicated in the request of the customer.

3. Standards of conduct

In line with the Act, all persons engaged in public procurement both from the side of customers and that of contractors shall comply with the following standards:

Exercise their functions in an unbiased and objective manner;
Not to abuse their office or use information obtained in the exercise of their duties to get advantages for themselves and/or third parties or to inflict damage on third parties;
Not to exercise undue influence on any person involved in public procurement.

4. Conflict of interest

The official of the customer involved in public procurement shall disclose information on their conflict of interest and refuse to participate in making decisions on the issue related to the conflict of interest.

The participants of procurement are obliged to file notifications about their personal interest. The lack of such notification serves as the basis for annulling the bid.

The President and all servants of the Tribunal are prohibited from fulfilling their functions if they or their associates are directors, participants or partners or have a controlling stake or an important financial interest in the organisation that refers to the Tribunal or if they have other personal interest preventing just, unbiased and proper exercise of their duties. In such a situation the official shall disclose their conflict of interest and declare their temporary recusal until all members of the Tribunal take the decision about the need (lack of the need) to completely remove the person from the proceedings due to their being in a conflict-of-interest situation.

5. Transparency and accountability

The Act provides for the need to publish information on public procurement, including:

Reasons for the decisions not to conduct open competitive public procurement;
All information related to tender bids;
Identification data of bidders;
Information on the outcomes of tenders;
Public procurement contracts and invoices provided by contractors;
Information on the bids rejected and reasons for their rejection.

6. Measures for combating corruption

Under the Act, customers shall:

Adopt the measures to counter corruption in public procurement also by excluding the possibility for the third parties to interfere with public procurement, make amendments to and/or falsify bids and/or contracts;
Conduct internal investigations into corruption and/or other related offences committed by officials of the customer in public procurement and forward the information obtained to the Office and/or other competent public body;
Verify whether a bidder is included in the Register, is in the category of persons prohibited from participating in public procurement (persons holding public positions, public and municipal servants, organisations the controlling stake of which or other important share of participation is held by such persons, members of the governing bodies of the customers responsible for procurement), their close relatives, and whether a bidder is an associate of the official of the customer involved in public procurement;
Refuse to recognise as the winner/annul the contract with the person caught in misleading the customer and/or providing inaccurate information or convicted of corruption, fraud, collusion or exercise of pressure in public procurement;
Annul the contract if any official of the customer in procurement or other participant is convicted of corruption, fraud, collusion or exercise of pressure in tendering or execution of the contract.

7. Liability measures

The Act also contains the provisions on liability measures for failure to comply with the established requirements, in particular, for:

Deliberate provision of false or misleading information;
Exercise of undue influence on the official of the customer involved in public procurement, member of the Tribunal and/or a person participating in public procurement;
Violation of the tendering procedure related to unveiling information about sealed bids before their formal disclosure;
Collusion to overprice, commit a corruption crime or fraud;
Use of office or information obtained in relation to the official position to gain advantages for oneself and/or third parties and/or inflicting damage on third parties;
Misappropriation of public funds;
Disregard of the order on removal from participation in public procurement.

Commission of relevant offences is punishable by imprisonment for a period of up to ten years and/or a fine, as well as the obligation to repair the damage in specific cases.

Failure of members of the Tribunal to provide information on conflicts of interest is punishable by imprisonment for a period of up to three years and/or a fine.