Understanding the powers conferred upon an organ of state in blacklisting persons or companies as suppliers or service providers

Section 28 of the Prevention and Combating of Corrupt Activities Act, No 12 of 2004 (Act) empowers a court to direct that a convicted person’s particulars, conviction and sentence be endorsed on the Register. If a company is convicted of corruption, the court may order that the company, any partner, manager, director or any other person exercising control over the company, who knew or should have known of the corruption, be endorsed on the Register. Section 28 of the Act does not make provision for blacklisting without judicial oversight.

Regulation 13 of the Preferential Procurement Policy Regulations, 2011 (Regulations) makes provision for the blacklisting of persons but only in the procurement environment. Regulation 13(1) provides that an organ of state can only act against the tenderer or person awarded the contract upon detecting that:

• the B-BBEE status level of contribution has been claimed or obtained on a fraudulent basis; or
• any of the conditions of the contract have not been fulfilled.

Regulation 13(2) further provides that an organ of state may, in addition to the aforesaid remedies:

• disqualify the person from the tender process;
• recover all costs, losses or damages it has incurred or suffered as a result of that person's conduct;
• cancel the contract and claim any damages which it has suffered as a result of having to make less favourable arrangements due to such cancellation;
• restrict the tenderer or contractor, its shareholders and directors, or only the shareholders and directors who acted fraudulently from obtaining business from any organ of state for a period not exceeding 10 years, after the audi alteram partem (hear the other side) rules have been applied; and
• refer the matter for criminal prosecution.

Having established that statute makes provision for the blacklisting of persons, it is worth mentioning that such powers are with limitation and to be exercised with caution. Persons can be blacklisted by organs of state if a court so directs or if persons have breached the provisions of Regulation 13(1).

It would appear that Regulation 13 would only be applicable pursuant to the award of a previous tender in which the successful tenderer committed an act of fraud. However the provisions of s217 of the Constitution dealing with procurement by organs of state must be borne in mind before a person may be blacklisted. Essentially an organ of state is required to act in a system that is inter alia fair, equitable, reasonable and transparent.