The ruling is likely to have significant implications for subsidised public transport contracts in KZN and potentially elsewhere in South Africa, particularly where interim or negotiated agreements have been repeatedly extended without competitive tender processes.
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The KwaZulu-Natal High Court has dismissed an application by a group of subsidised bus operators seeking to keep long-running transport contracts in place, ruling that repeated extensions of the agreements were unconstitutional and failed to comply with public procurement laws.
In a judgment handed down on Tuesday, the Pietermaritzburg High Court found that the KZN Department of Transport’s continued extensions of interim and negotiated bus service contracts were inconsistent with Section 217 of the Constitution, which requires public procurement to be fair, equitable, transparent, competitive and cost-effective.
The ruling is likely to have significant implications for subsidised public transport contracts in KZN and potentially elsewhere in South Africa, particularly where interim or negotiated agreements have been repeatedly extended without competitive tender processes.
The case involved 15 bus operators, including Sizanani Mazulu Transport, Duzi Bus Services, Mtunzini Bus Services, Tansnat Coach Lines, and South Coast Bus Service, which had approached the court seeking declarations that the extensions of their contracts were lawful under the National Land Transport Act (NLTA).
The operators argued that Sections 41 and 46 of the NLTA permitted provincial transport authorities to conclude negotiated contracts without going through an open tender process. They also sought orders compelling the provincial transport department to continue extending the contracts until new negotiated agreements or integrated public transport networks were finalised.
The dispute has its roots in transport contracts awarded between 1997 and 2001.
According to the judgment, the original agreements expired between 2005 and 2007 but were repeatedly extended on a month-to-month basis. Further interim addendums were concluded in 2017, extending contracts for another year while negotiations over future arrangements continued.
However, the Auditor-General later found the contract extensions to be irregular and contrary to the Public Finance Management Act (PFMA) and National Treasury regulations.
Judge Pieter Bezuidenhout ruled that although the NLTA does allow negotiated contracts in limited circumstances, those provisions could not justify indefinite extensions of expired agreements.
“A reading of sections 41 and 46 of the NLTA indicates that indeed this can be done but in certain limited circumstances,” the judge said.
The court found that the addendums signed after the expiry of the original contracts were not new negotiated contracts, but merely temporary extensions designed to maintain services.
Bezuidenhout said the continued yearly extensions could not be regarded as competitive or fair because no other operators were given an opportunity to bid for the services.
“The extension of the contracts for a year at a time for the same service provider cannot be competitive or fair as there is no input from anyone else besides Applicants and First Respondent and Treasury,” the judgment stated.
The court further held that indefinite extensions prejudiced other potential operators who may have been capable of providing the services.
“If the contracts are merely extended it cannot be competitive nor fair. It excludes operators who are unknown at this stage who may qualify and want to take part in any tender and are in a position to do so,” the judge ruled.
The KZN Department of Transport had filed a counter-application asking the court to declare the addendums invalid, suspend the declaration for one year and compel the department to initiate a new tender process within 30 days.
The court ultimately granted the counter-application, allowing the current operators to continue running services temporarily while a fresh procurement process is undertaken.
Bezuidenhout said the arrangement would ensure uninterrupted public transport services while opening the market to competitive bidding.
“It allows for a competitive bidding process. This is open to any operator who is in a position to qualify for the tender and in a position to provide the necessary services,” the judge said.
The court discharged the long-standing rule nisi that had kept the contracts alive since 2020 and dismissed the operators’ application with costs, including the costs of three counsel for the provincial transport department and costs awarded to the KwaZulu-Natal Treasury.
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