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The Constitutional Court has struck down the government’s most prescriptive attempt yet to impose more racial procurement rules across the state, four years after an earlier Sakeliga case curtailed National Treasury’s power to impose a single procurement preference system on organs of state.

The Public Procurement Act of 2024 was intended to replace South Africa’s fragmented procurement laws with a single national system requiring hundreds of government departments, municipalities, state entities, and other public institutions to apply strict racial criteria to the goods and services they buy.

At the centre of the Act was its new Chapter 4 governing preferential procurement.

The Constitutional Court described the system as significantly more prescriptive than the framework that preceded it. Instead of merely allowing individual organs of state to develop preferential procurement policies within a national framework, the legislation specified mechanisms that would have to form part of those policies.

Those mechanisms included mandatory racial set-asides, prequalification requirements, subcontracting obligations, and local content requirements.

The importance of prequalification is that it operates before price and other characteristics of a tender are compared and firms could have been disqualified from tendering just because their racial make-up was not black enough.

Under a conventional preference points system, businesses can submit bids and then receive different numbers of preference points according to specified government objectives. Under racial prequalification, a business that does not satisfy a required racial characteristic is prevented from competing for the contract in the first place.

The Constitutional Court said the legislation would have created mandatory prequalification criteria and thereby institutionalised a system under which categories of bidders could routinely be excluded from participation as a matter of law.

The Sakeliga case

The origins of the dispute stretch back to Preferential Procurement Regulations introduced by then finance minister Pravin Gordhan in 2017.

Those regulations allowed organs of state to establish prequalification requirements for tenders. In practice, that meant a tender could require a bidder to satisfy specified racial ownership or other transformation criteria before its price or ability to perform the contract was considered.

AfriBusiness, which subsequently became Sakeliga, challenged the regulations.

That case ultimately reached the Constitutional Court as Minister of Finance v AfriBusiness NPC. On 16 February 2022, the Constitutional Court dismissed the finance minister’s appeal and allowed an earlier Supreme Court of Appeal ruling invalidating the regulations to stand.

The legal principle established by the majority was particularly important.

The court did not find that preferential procurement itself was unconstitutional. Nor did it rule that government could never use race, gender, or other characteristics to determine procurement policy.

Instead, it found that the finance minister had exceeded the powers Parliament had given him.

Under the Preferential Procurement Policy Framework Act, the power to determine a preferential procurement policy belonged to each individual organ of state. The minister could prescribe a framework, but could not use regulations to create a single preference policy for the entire public procurement system.

That distinction fundamentally changed the architecture of preferential procurement.

Following the judgement, National Treasury introduced the Preferential Procurement Regulations of 2022. These returned substantial discretion to individual organs of state. They retained preference points and allowed public bodies to identify specific procurement goals.

The 2022 case therefore did not abolish preferential procurement. Its importance was that it limited National Treasury’s ability to dictate a single exclusionary preference mechanism to every organ of state through ministerial regulation.

There was, however, another route open to government.

The Constitutional Court itself observed in the 2022 case that if the minister wanted a different national procurement system, legislation could be taken to Parliament.

That is effectively what happened.

Parliament tries again

The Public Procurement Act placed the new preferential procurement architecture in legislation itself rather than attempting to impose it through ministerial regulations.

This was a much more powerful legal mechanism.

The 2017 system had depended on regulations made under an existing Act. The new system embedded mandatory procurement mechanisms directly in primary legislation.

The Constitutional Court noted precisely this distinction in its latest judgement.

Who challenged it

Two cases were brought before the Constitutional Court to challenge the 2022 Act, and heard together.

The first was brought by the Premier of the Western Cape, with the amaBhungane Centre for Investigative Journalism as the second applicant.

The second was brought by the City of Cape Town. AmaBhungane again joined as an applicant, alongside Solidarity.

The challenges focused primarily on the way Parliament had passed the legislation rather than asking the Court to decide whether race-based preferential procurement was itself constitutionally permissible.

The applicants argued that major changes had been made to Chapter 4 of the Act after the initial public consultation process without giving the public a proper opportunity to respond.

The court agreed.

The initial version of Chapter 4 had largely operated as an enabling framework. During the parliamentary process, it was transformed into the substantially more prescriptive system containing mandatory racial prequalification and other requirements.

The court found those changes were material enough that Parliament should have reopened the public participation process.

The shortcomings were substantial.

National Treasury received around 112 stakeholder submissions containing more than 2 200 lines of commentary, but told Parliament that time constraints prevented it from responding to all of them. At one stage responses had been prepared to only 25 submissions. Stakeholders were also given only around four hours to study substantial new provisions governing preferential procurement before a meeting and around two minutes each to make presentations.

The Constitutional Court unanimously found that Parliament had failed to fulfil its constitutional obligation to facilitate reasonable public participation.

On 17 September 2026 it declared the Public Procurement Act unconstitutional and invalid in its entirety.

Why the 2022 victory still matters

The result means South Africa falls back, for now, on the procurement architecture that emerged following the 2022 Sakeliga litigation.

The Preferential Procurement Policy Framework Act and the 2022 regulations remain the operative framework.