Section 217(1) of the Constitution identifies what seems to be a clear duty: Where an organ of state purchases goods and services, this purchase will be made within a system that is characterised by openness, fairness, transparency, competition, and cost-effectiveness. Over the last twenty years the National Treasury (NT) has expanded its use of centralised procurement, especially transversal contracts, to capture economies of scale.
Evaluation and award at the National Treasury
When the NT creates a transversal contract, a bidding committee composed of officials from several departments conducts the evaluation. Evaluators and adjudicators must disclose any personal or business links to bidders, and their statements are cross-checked against national identity and payroll databases. Failure to disclose can be easily flagged and prosecuted.
The process is tightly monitored through mandatory disclosure documents that flag inconsistencies automatically. This macro-level scrutiny is intended to prevent nepotism and to ensure that the award complies with the constitutional mandate for fairness.
From Tender Evaluation to Direct Ordering
Once a transversal contract is in place, state departments and municipalities can place orders directly with panel suppliers. In this case, the entity does not conduct any new process of evaluation and bidding.
Local Officials Exploit Disclosure Gaps
Local procurement officials are not subject to the same proactive disclosure obligations that bind the national adjudication committee. Because the panel carries a stamp of legitimacy, officials can bypass the standard supply-chain-management (SCM) committee oversight and select a supplier with whom they have a personal connection.
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This gap enables officials to steer purchases to relatives or cronies, channeling millions of rands into connected pockets without any localised disclosure. This operational blind spot allows an official to deliberately choose a specific supplier from the panel who happens to be a relative or close crony, siphoning millions of rands into connected pockets without making a single localised disclosure.
Two primary mechanisms exploit this blind spot. First, According to Treasury Regulation 16A6.6, the organ of state may be part of the agreement that is signed by another organ of the state if the agreement itself was made through competitive tendering. In practice, companies that win NT contracts gain access to budgets of other departments without undergoing a new tender, creating a channel for nepotism.
Standard Bidding Document 4 (SBD 4) and committee conflict forms were introduced to mitigate this risk by requiring bidders and adjudication committee members to disclose conflicts of interest. Officials in downstream organs are not required to sign similar forms when procuring under a transversal contract, leaving a significant loophole.
Court Rulings Curtail Piggyback Procurement
In Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency and Others (2014) the Constitutional Court held that compliance with procurement prescripts must be assessed independently of the tender outcome; a material deviation renders the decision unlawful. As such, a manipulation of the transversal sub-allocation that favours a secret relative or friend results in an ultra vires act susceptible to review.
Similarly, the Supreme Court of Appeal in Govan Mbeki Municipality v New Integrated Credit Solutions (Pty) Ltd (2021) warned that municipalities cannot “piggyback” on another organ’s contract to evade competitive bidding. The court warned that such a procurement system should not be used as a free-for-all mechanism to sidestep the basic requirement of competitive bidding.
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While the Public Procurement Act 28 of 2024 now mandates beneficial-ownership disclosure, statutory measures alone cannot eradicate corruption rooted in discretionary local practices. The current framework leaves the selection from transversal panels largely to human judgment, which creates opportunities for bias.
Algorithmic Randomisation Proposed to End Nepotism
Proposals call for algorithmic, randomised selection of suppliers from transversal panels to eliminate human discretion. They also urge the judiciary to levy cost orders de bonis propriis against officers who issue conflicted sub-allocations, enforcing personal financial accountability under s 38 and s 81 of the Public Finance Management Act 1999.
As it stands, the original purpose of transversal contracts—to speed state spending through scale efficiencies—has been undermined by the failure to require conflict disclosures at the local ordering stage, turning the mechanism into a tool for nepotism rather than cost-effectiveness.
The Public Procurement Act 28 of 2024 introduces a new layer of scrutiny by requiring beneficial ownership disclosure for all suppliers operating under transversal contracts. The disclosure extends to trusts, partnerships, and foreign entities where South African residents hold beneficial interests. Failure to comply triggers a presumption of irregularity under Section 76(2) of the PPA, allowing the National Treasury to suspend the supplier from all transversal panels until discrepancies are resolved.
Judicial Oversight and Cost Orders
Algorithmic randomisation would eliminate human discretion in choosing suppliers from pre-approved panels, ensuring selections are based on predefined criteria such as cost, delivery timelines, and past performance. However, implementation faces resistance from procurement officers who view automation as a threat to their influence over supplier choices.
