The High Court has handed down judgement in proceedings involving Primedia (Pty) Ltd, the Passenger Rail Agency of South Africa and others in March 2021. The court has held that a tender had to be set aside because:

  1. Prasa, as a public body which knew that the tenderer did not exist when the tender closed, awarded the contract for an ulterior purpose.
  2. The award of the contract to the tenderer was not sound as the tenderer was a non-existent entity which could not perform the contractual obligations.
  3. The fact that a cession of the tenderer’s rights to another entity was made prior to the award of the tender indicated that the tenderer had advance knowledge that it would be awarded the tender.
  4. The cessionary was not, as it alleged, an innocent party because it entered into the cession with the tenderer despite the fact that the tenderer was not eligible to be awarded the tender and it did so before the tender was even awarded.

Prasa had issued a tender inviting parties to submit bids for the provision of media advertising and broadcasting services on various sites which was ultimately awarded to the “Umjanji Media Consortium”.  At the time that the tender had closed, and to the knowledge of Prasa, Umjanji was not in existence. Members of the consortium which ultimately formed Umjanji had attended the tender briefings but Umjanji was only incorporated more than a month after the closing of the tender.

Umjani then entered into two agreements with Strawberry Worx Pop (Pty) Ltd and Siyathembana Trading 281 (Pty) Ltd. in terms of which Umjanji ceded and assigned rights from its Prasa contract. As a result, both Siyathembana and Strawberry Worx Pop had occupation and usage of Prasa sites and sold advertising space. Prasa consented to the Siyathembana cession expressly, and tacitly to Strawberry Worx Pop cession.

Primedia (an unsuccessful tenderer) applied to review and set aside Prasa’s award of the tender to Umjanji.

Prasa initially opposed the review application but later withdrew its opposition, essentially conceding that Primedia’s allegations were correct.

Prasa’s decision to award the tender to Umjanji was set aside based on contraventions of the constitutional and legislative principles concerning public procurement.  The court also noted that Prasa had failed to comply with section 217 of the Constitution and section 2 of the Public Finance Management Act, 1999 which requires Prasa to manage its ‘revenue, expenditure, assets and liabilities soundly’.

Prasa submitted that the contract had a limited period of operation contained to 5 years which expired in May 2016 and therefore the relief sought was moot. The court disagreed saying that the effluxion of time did not detract from the unlawfulness of the decision and the benefits enjoyed by Strawberry Worx Pop and Siyathembana.  The court remarked that if it allowed parties to benefit from an unlawful decision, it would effectively be endorsing the unlawful decision.  It was necessary to clarify the legal position and put an end to any ancillary benefits the parties enjoyed.

The case is Primedia And Others v Prasa And Others (Case No: 2011/28108).

This article was co-authored by Alaika Alli