Supreme Court sets aside High Court judgment on Tshwane’s broadband tender

The Supreme Court of Appeal (SCA) has overturned a ruling by the Gauteng High Court in Pretoria, which set aside the awarding of Tshwane’s ominous broadband tender.

The contract – which was meant to install, operate and later transfer a fibre network to the Tshwane municipality – was awarded while the ANC was still in control of the capital city before the 2016 local government elections.

The awarding of the tender and subsequent rollout – set to run for 18 years at a cost of more than R2.7 billion – caused petulance among residents and political parties for years.

When the DA took control of the metro through a coalition government, they set their sights on a number of contracts awarded by the ANC administration, with the view to reviewing and possibly cancelling them.

The DA administration later reviewed the BOT (Build, Operate and Transfer) agreement, which was awarded to Altech Radio Holdings, which holds a controlling interest in Thobela Telecoms.

At that point, the City contended that it was a dodgy deal and was not within the prescripts of the law.

The City also said the Auditor-General (AG) was extremely critical of the broadband project, to the point that a report stated the expenditure constituted irregular expenditure.

The Gauteng High Court in Pretoria ultimately agreed with the City’s position that the contract was full of irregularities and set it aside, declaring the awarding of the tender invalid.

Altech, Thobela and one of its lenders, Absa, took the matter on appeal, with their main argument being the legality of the delay by the City in bringing the review application.

The SCA held a different view to that of the lower court and made several findings against the City, one of which agreed with the sentiment that the delay in bringing the initial application was erroneous.

On behalf of the full bench, appellate Judge Visvanathan Ponnan said: “When all is said and done, there is no escape from the facts.

“Even though armed with the evidence upon which it now relies, the City, both under its previous administration and also the present administration, sat back over a protracted period, but wants this indifference to be disregarded entirely.”

“The City had several opportunities to have alerted the appellants to its misgivings or brought review proceedings. It did neither. This inaction has left the appellants financially exposed.”

The SCA also found that the City blew hot and cold with the project.

This was evidenced in the judgment, which noted that the City had asked the contractors to continue working at one point before the entire project was put on ice.

“The appellants were not privy to the various reports or the internal workings of the City and had arranged their affairs on the strength of the fact that the tender had been lawfully awarded and the BOT agreement validly concluded.

“As at 15 January 2018, Altech and Thobela had incurred costs and liabilities to the tune of approximately R610 million. And, by the time that the review application was launched, the build phase of the project was 34% complete.”

The SCA said the High Court had failed to sufficiently acknowledge the position of the contractors and their lenders, who only got involved after the awarding of the tender.

The judgment further read: “The appellants, who were entirely removed from the tender, could not second-guess the regularity of the procurement process of an organ of state.

“The funders and the other appellants were entitled to assume that the City would have acted in a manner that is fair in all the circumstances.

“They were also entitled to assume that the City would have complied with its own internal arrangements and formalities.”

The full bench, which did not intimately deal with the aspects relating to the procurement contract, noted that it would seldom be a public procurement process entirely without flaws.

“But, perfection is not demanded and not every flaw is fatal. Nor does every flaw in a tender process amount to an irregularity, much less a material irregularity,” Ponnan said.

“Public contracts do not fall to be invalidated for immaterial or inconsequential irregularities. Indeed, as it has been put, ‘[n]ot every slip in the administration of tenders is necessarily to be visited by judicial sanction’.”

The full bench ordered that the appeal be upheld with costs and set aside the High Court judgment.

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