Buhle Waste (Pty) Ltd v The Municipal Manager and Others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Legodi JP
• Judgment Date: 17 August 2022
• Docket Number: 2460/2019
• Hearing Date: 26 May 2022
• Court: Mpumalanga Division (Main Seat)
• Citation: 2022 JDR 2384 (MN)

Legodi JP:

[1]

At the heart of the dispute amongst the parties in this case, the question is whether the granting on 14 November 2018 of a consent by the City of Mbombela Municipality for a change in control of Silulumanzi and thus effecting the sale and transfer of controlling shares in Silulumanzi to the seventh respondent constituted an administrative action or decision as contemplated in terms of section 33 of the Constitution reviewable under section 7 of PAJA or whether such an approval or granting of consent and sale of shares arose from a pure contractual relationship between equal contracting parties where the principle of administrative review or legality review as envisaged in PAJA, did not apply. The fourth respondent is cited as Semcorp Silulumanzi (RF) (Pty) LTD (hereinafter referred to as Silulumanzi) and the seventh respondent is cited as South African Water Works (Pty) Ltd (hereinafter referred to as SAWW).

[2]

Section 33(1) of the Constitution provides that everyone has the right to administrative action that is lawful, reasonable and procedurally fair. Everyone whose rights have been adversely effected by the administrative action has the right to be given written reasons. [1] National legislation must be enacted to give effect to those rights, and must: (a) provide for the review of administrative action by a court or where appropriate, an independent and impartial tribunal; (b) impose a duty on the state to give effect to the right, in subsections (1) and (2) and (c) promote an efficient administration [2] .

[3]

Promotion of Administrative Justice Act 3 of 2000 (PAJA) is such national legislation as referred to in subsection (3) of section 33 of the Constitution. Of

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relevance, section 1(a) and (b) of PAJA provides that "administrative action" means any decision taken, or any failure to take a decision by a natural or juristic person other than an organ of state, when exercising a public power or performing a public function in terms of empowering provision which adversely affects the rights of any person and which has a direct, external legal effect. On the other hand, in terms of section 1 of PAJA "empowering provision" means a law, a rule of common law, customary law, or an agreement, instrument or other document in terms of which an administrative action was purportedly taken.

Background to the dispute:

[4]

It is necessary to provide some background facts that led to the approval or consent being granted on 14 November 2014 and the dispute referred to in paragraph [1] of this judgment. The background is provided based mainly on the common cause facts summarised as follows: In December 1996, the Municipality undertook a public tender process to find water service providers. On 9 December 1996, it issued a request for proposal. On 21 August 1999 the Municipality pursuant to a bidding process, appointed Silulumanzi (fourth respondent) as a nominated or successful water service provider. Subsequent to the appointment, a water services provision agreement (hereinafter referred to as "the concession agreement") was concluded between Silulumanzi and the Municipality.

[5]

The shares in Silulumanzi were held by two entities, namely, the eighth and ninth respondents. The eighth respondent, that is, Semcorp Utilities (Netherlands)NV held 48% of the shares in Silulumanzi. The ninth respondent, namely Sembcorp Utilities South Africa (Pty) Ltd, held 52% of the shares in Silulumanzi. The ninth respondent on the other hand held 100% of the shares in the eighth respondent. Effectively, the ninth respondent owned or controlled Silulumanzi directly or indirectly. SAWW was geared to acquire all of eighth respondent's shares in Silulumanzi. This was after the eighth respondent in 2017 decided to restructure itself in the provision of water services in South Africa.

[6]

On 21 February 2018 the eighth respondent agreed to sell its 100% of shares in Silulumanzi to the seventh respondent, SAWW. On 22 February 2018, the eighth

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respondent requested the Municipality for a consent to change control of shareholding in Silulumanzi. This request as I see it, was based on two sources. First, the imperative in BBBEE Act. Second, on the specific provisions in the concession agreement. The concession agreement aforesaid was concluded between Silulumanzi and the Municipality in terms of the legislative imperative in the Water Services Act No. 108 of 1997. Section 19(1)(a) thereof provides that a water services authority may perform the functions of water services provider itself. The municipality is such water services authority. In terms of subsection (1)(b)(i) of the section 19, a water services authority may enter into a written contract with water services provider. Clause 7.4.2.1 of the concession agreement provides that no shares in the share capital of the concessionaire (referring to Silulumanzi) may be transferred to any person or entity that will have the effect that the entity or person has control over the concessionaire immediately before such transfer loses such control, save for any such transfer of control is effected with prior approval of the council and the lenders. The request for a change of control of shareholding in Silulumanzi was submitted to the Municipality on 2 March 2018.

[7]

On 28 June 2018 the Municipality sat to consider the request. It agreed to the change of control in Silulumanzi but subject to fulfilment of certain suspensive conditions before a final unconditional approval for change in control of shareholding in Silulumanzi could be granted. At the risk of repetition, some of the salient suspensive conditions were crafted as follows:

"(a)

Council approves and grants conditional consent in accordance with clause 7.4.2 of the Water and Sanitation Concession Agreement dated 21 April 1999, as amended, between the municipality, as Water Services Authority and Sembcorp/Silulumanzi (RF) Pty Ltd, as a Water Services provider; pertaining to the change of control;

(b)

Conditional consent be granted for the transfer of all the shares held by Sembcorp utilities (Netherlands) NV in the Concessionaire (in conjunction with the transfer of its 100% shareholding in Sembcorp Utilities South Africa Pty Ltd) to SA Water Works Pty Ltd (formerly named K2018039949 (South Africa) Pty Ltd), CIPC registration number 2018/039949/07, as set out in the notification and

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application for consent by the Concessionaire dated 2 March 2018 (annexure 127/18);

(c)

Conditional consent be granted with the specific suspensive condition that SAWW and Silulumanzi immediately after this Council resolution, commence with the process of obtaining a 28% Mbombela based BBBEE shareholder in Silulumanzi and conclude the process within the prescribed 90 days from the date of the Council resolution;

(d)

the City of Mbombela, represented by the Executive Mayor and the Acting Municipal Manager, oversee the process administered by SAWW and Silulumanzi regarding the 28% Mbombela based BBBEE shareholder in Silulumanzi;

(e)

SAWW and Silulumanzi to select the final 28% Mbombela based BBBEE shareholder, in consultation with the representatives of the City of Mbombela; BBBEE Mbombela based shareholder;

(f)

the Acting Municipal Manager, as Accounting Officer, be mandated to confirm that the requirements above have been met as per the terms of the conditions of the Conditional Consent granted;

(g)

the Accounting Officer be authorised to sign all documents and do all things necessary in order to implement the above;

(h)

should the suspensive condition stipulated in (c) above not be met within 90 days from the date of the Council resolution and written confirmation not having been issued by the Acting Municipal Manager, confirming that all suspensive conditions for the conditional consent have been met, the Conditional Consent will automatically lapse and be of no further cause or effect and may not be relied upon by any party."

[8]

As it would emerge later in this judgment, these conditions form the subject of contestation between the parties post 14 November 2018. Pursuant to the suspensive conditions so imposed by the Municipality and its obligations in terms thereof, the process of selecting a successful BBBEE purchaser of 28% shares in Silulumanzi unfolded. Invitation to participate in the selection of a 28% BBBEE shareholding in Silulumanzi was issued. The applicant, Buhle Waste (Ply) Ltd (hereinafter referred to as Buhle), Brian Gear Investments (Pty) Ltd, the fifth respondent (hereinafter referred to as Gear Investments) and ZMG Scientific Services (Ply) Ltd were the shortlisted candidates. On 17 September 2018 Silulumanzi informed the Municipality that Gear

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Investments has been selected as a successful 28% BBBEE shareholding bidder in Silulumanzi.

[9]

On 25 September 2018 Buhle attorneys requested the Municipality to provide information on the evaluation of the bids as well as the process followed. Buhle did so seen in the context of the obligations the Municipality imposed on itself as per the resolution of 28 June 2018, in particular its oversight functions and in consultation power in the selection process of 28% BBBEE shareholding in Silulumanzi. The view taken by Buhle in its letter of 25 September 2018 was inter alia; (a) that the bid evaluation was tainted and that Buhle was unfairly not chosen as a preferred bidder; (b) Buhle also requested information on the financial, environmental, social and technical due diligence information considered by SAWW without sellers; (c) the Municipality was also requested to consider and scrutinise the selection process and not merely rubber-stamp the selection of Gear Investments as a successful bidder for the 28% shareholding in Silulumanzi; and (d) that the...