SANRAL BOARD WITHDRAWS THE PREFERENTIAL PROCUREMENT POLICY TO AVOID A LENGTHY LEGAL BATTLE AND ALLOW CONSTRUCTION OF CRITICAL INFRASTRUCTURE WHILE CONSULTING STAKEHOLDERS ON TRANSFORMATION OF THE INDUSTRY

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SANRAL BOARD WITHDRAWS THE PREFERENTIAL PROCUREMENT POLICY TO AVOID A LENGTHY LEGAL BATTLE AND ALLOW CONSTRUCTION OF CRITICAL INFRASTRUCTURE WHILE CONSULTING STAKEHOLDERS ON TRANSFORMATION OF THE INDUSTRY

Pretoria, 24 October 2023 – The Board of the South African National Roads Agency SOC Limited (SANRAL) announces the withdrawal of its new Preferential Procurement Policy (PPP) adopted by the Board on 23 May 2023 so as to avert lengthy court battles associated thereto. SANRAL intends to commence a process on a date soon to be announced where it seeks to engage the construction industry and all relevant stakeholders to address meaningful transformation imperatives of the sector.

The Chairperson of the SANRAL Board, Mr Themba Mhambi says the decision to withdraw the new Preferential Procurement Policy was taken by the Board after careful consideration of developments since it was adopted. “Following our adoption in May 2023 of a new Preferential Procurement Policy for SANRAL, there have been a number of legal challenges to the policy which were launched by construction companies in various courts across the country,” said Mr Mhambi. “The legal challenges to the new Preferential Procurement Policy have regrettably resulted in SANRAL being prevented from proceeding with the processing of close to 80 tenders worth billions of rands, with significant negative consequences for the fulfilment of the constitutional and statutory mandate of SANRAL.
“The Board of SANRAL has adopted the decision to withdraw the new Preferential Procurement Policy because of the negative impact these court challenges have, including the fact that we anticipate that the lengthy court processes will cause significant delays to the work of SANRAL .”

The Board proposes, as an interim measure, pending the adoption of a finalised policy, to adjudicate all tenders in accordance with the Scorecard, attached hereto as an annexure that contains Table 1 described as Allocation of Specific Goals. Insofar as subcontracting is concerned, SANRAL shall require, as a condition of contract, that successful bidders be required to ensure compliance with contract participation goals for targeted enterprises in targeted areas and labour as per the formula applied by the CIDB in terms of Government Gazette No. 4127 published in November 2017, as was applied before the introduction of the policy which is being withdrawn. In this regard, SANRAL shall be inviting representations from stakeholders to make submissions on the content of the draft interim policy. The date and time when such representations should be made shall be announced shortly.

SANRAL is advised by Senior Counsel that in light of the change in the scoring formula, it is necessary to commence the tender process afresh, a decision which has been reached with much angst in light of the urgent need for the services to be rendered. SANRAL will therefore be cancelling all existing advertised tenders that have not yet closed, issue new tender adverts, and subsequently adjudicate all tenders within the confines of the interim policy. SANRAL intends to expedite the re-advertisement of tenders and processing thereof within this current financial year.

SANRAL’s Chief Executive Officer, Mr Reginald Demana, said that infrastructure development is critical to South Africa’s economic growth and, in the wake of the COVID-19 pandemic, the country could not afford further disruptions towards the expansion and maintenance of the national road network and
key arteries across the country’s provinces. “Road and rail infrastructure are the lifeblood of our economy and as such, any disruption to its maintenance, as well as any disruption to our extensive programme of new infrastructure projects, is a threat to our country’s economic growth,” said Mr Demana.

“A protracted legal battle between SANRAL and the construction industry would have dire consequences not only for SANRAL’s projects, which run into billions of rands, but would also be detrimental to the entire economy. Clearly, it is not in the interest of SANRAL, nor is it in the national interest, to delay our infrastructure build programme.

“To this end, we at SANRAL are conscious of the role that the national road network – currently at 23,559km but set to expand to 35,000 km through transfers of roads from provinces to SANRAL – plays in the economy and everything related, including job creation and poverty alleviation. By the end of this financial year (2023/24), SANRAL’s network is likely to be 25,000 km already. For context, South Africa’s road network is the 11th longest in the world and the 19th longest paved road network globally. Of this, SANRAL currently manages only four percent (4%), which will then become 4.7% at 35,000km. However, this relatively small network makes up the most important economic arteries of South Africa, carrying some 40% of annual vehicle kilometres, some 60% of all freight and approximately 70% of all road freight. It is clear then that roads altogether account for a very high level of all freight in South Africa”.

Mr Demana said SANRAL’s operating model was based on ensuring that the road network is maintained, improved, strengthened, expanded and rehabilitated at all times, using private sector contractors and engineers to provide the services for road design and construction. SANRAL’s Procurement Policy is based on an open tender system which is provided for in Section 217 of the Constitution which requires public procurement to be fair, equitable, transparent, competitive and cost-effective. The Constitution, the Public Finance Management Act (PFMA) and Preferential Procurement Policy Framework Act (PPPFA), the Broad-Based Black Economic Empowerment (B-BBEE) Act, and SANRAL’s procurement framework, policies and procedures, combined with directives from National Treasury, form the basis of SANRAL’s procurement system. All relevant policies, legislation, regulations and directives shall be used to continue to champion the transformation of the construction industry in consultation with its stakeholders.

“The SANRAL Board adopted in May 2023 the new Preferential Procurement Policy to advance transformation of one of the most important industries in South Africa, the construction industry. In taking the decision to adjudicate tenders in accordance with interim measures highlighted above, SANRAL hopes and trusts that all construction companies, and indeed all our stakeholders, shall work together with us to ensure that we are able to continue with the procurement of services and to meaningfully transform the construction industry”.

SANRAL shall continue to consult all its stakeholders to consider and work on a new procurement policy, in order to build and transform the economy of the country. This process will be undertaken as soon as possible and within a reasonable time and will undergo a public consultation process.

We have consulted with those who had indicated commitment to join the court matter in defence of SANRAL and they understand that we have taken this stance to avoid prolonged non-award of tenders and in the interests of the government’s economic recovery plan. We thank, as well, the myriad entities and individuals who expressed their support for us and wish to reassure them that we remain firmly committed to meaningful transformation of the industry, including increasing black ownership and benefit beyond current levels.