Government departments, State-owned entities (SOEs) and business formations have expressed concern over National Treasury's circular advising that the issuing of new tenders from mid-February should be stalled, saying service delivery and infrastructure maintenance could be badly impacted if they toe the line.

While some have stalled procurement in line with the circular, others – including State-owned power utility Eskom – have continued with business as usual.

The circular, which was signed by director-general Dondo Mogajane, was dated 25 February and advised organs of State that tenders issued before 16 February should be finalised, while tenders advertised on or after 16 February should be "held in abeyance" and no new tenders should be advertised.

This was pending clarification from the Constitutional Court regarding its judgment on procurement regulations.

Mogajane subsequently said the circular was advice rather than a directive.

Treasury's bid to seek clarity followed a ruling by the apex court dismissing an appeal by the office of the finance minister in 2017 against a case by Afribusiness NPC, which sought to challenge the framework, saying it excluded white South Africans and their businesses.

Last week Mogajane told a Deloitte panel discussion that Treasury was seeking urgent clarity from the court on the matter. Treasury told Fin24 that it was in talks with government departments and parastatals on the circular.

"National Treasury is communicating directly with organs of state on the continuation of procurement until clarity from the Constitutional Court on whether or not the order on the invalidity of the 2017 Preferential Procurement Regulations is suspended for 12 months, until 15 February 2023," Treasury said.

Eskom spokesperson Sikonathi Mantshantsha said the State-owned power company was in contact with National Treasury, adding that Eskom's understanding was that National Treasury was issuing advice, rather than an instruction.

It was not placing procurement on hold, it said.

"Eskom has resolved not to stay current tenders, or to cease issuing new tenders pending clarification by the Constitutional Court. This will ensure Eskom is able to fulfil its Constitutional and statutory mandates," said Mantshantsha.

Mantshantsha said Eskom would continue issuing tenders and contracts in terms of the current regulatory procedure until any new regulations take effect. He said Eskom would continue to work with National Treasury to comply with all Supply Chain Management guidelines.

But Passenger Rail Agency of South Africa (Prasa) spokesperson Andiswa Makanda said the company had been affected, which could have a knock-on effect on rail service. "In as far as new projects are concerned, Prasa will be impacted, in particular, the rehabilitating of infrastructure. We are working on a plan to mitigate delays," Makanda said.

Department of Water and Sanitation CFO Frans Moatshe said the National Treasury circular had resulted in the processes of approval, appointments and extensions that were in process being held in abeyance. 

In particular, Moatshe said, some construction work and laboratory testing would be affected if procurement were suspended.

"This suspension impact would be dire on the department to achieve its results, such as the Resource Quality Information Services laboratory, where it would not be able to finalise and construction unit work, laboratory testing such as methods accreditation, maintenance and repairs of laboratory instruments and monitoring equipment, procurement of laboratory instruments, lease of vehicles for data collection, and implementation of national monitoring programmes," said Moatshe.

Moatshe said the circular also caused infrastructure that was in progress to come to a standstill. He said the value of the tenders affected came to estimated at R724-million for the main account and R1.5-billion for the Trading Account including Construction Unit.

Department of Public Works and Infrastructure spokesperson Thami Mchunu told Fin24 that the department was adhering to the circular "as other departments are".

"We are working in line with the circular that was issued by National Treasury. There is nothing more that we would like to add. It is a matter best left to the National Treasury," Mchunu said.

Mchunu would not disclose the number of tenders, if any, held back by the circular in the department, or their commercial value. Department of Social Development spokesperson Lumka Oliphant also referred Fin24's queries to the National Treasury.

Other government departments and entities such as the Transnet and the Department of Water and Sanitation were also approached by Fin24 for comment but did not respond.

Business lobby Business Leadership South Africa told Fin24 it was also awaiting the National Treasury's final decision on the suspension and abeyance of current tenders.

"We note Treasury director-general Dondo Mogajane says in his circular issued last Friday to organs of state not to issue any new tenders pending a Constitutional Court clarification on its judgment on procurement regulations, was not an instruction issued in terms of any legislation, but advice," BLSA said.

BLSA told Fin24 that any disruptions to government procurement processes would be extremely detrimental to the wider economy and a swift resolution to these issues was urgently needed.

Netwerk24 reported over the weekend that Cape Town mayor Geordin Hill-Lewis had claimed tenders worth hundreds of millions of rands were on hold due to Treasury's circular.