Companies convicted of economic crimes and their participation in government tender processes in South Africa: A comment on Namasthethu Electrical (PTY) LTD v City of Cape Town and another (201/19) [2020] ZASCA 74 (29 JUNE 2020)

• Date: 30 June 2021
• DOI: https://doi.org/10.47348/JCLA/v8/i1a4
• Author: Mujuzi, D.J.
• Pages: 102-122
• Published date: 30 June 2021

https://doi.org/10.47348/JCLA/v8/i1a4

102

COMPANIES CONVICTED OF ECONOMIC

CRIMES AND THEIR PARTICIPATION IN

GOVERNMENT TENDER PROCESSES

IN SOUTH AFRICA: A COMMENT ON

NAMASTHETHU ELECTRICAL (PTY) LTD V

CITY OF CAPE TOWN AND ANOTHER (201/19)

[2020] ZASCA 74 (29 JUNE 2020)

Jamil Ddamulira Mujuzi*

Abstract

In South Africa, persons or companies convicted of fraud or corruption or companies

whose directors have been convicted are debarred from participating in bidding for

government tenders. Although it is easy to establish whether or not a natural person

has been convicted of an offence, because a certificate can be obtained from the South

African Police Service to that effect, it is the opposite with juristic persons. This

issue came up in the case of Namasthethu Electrical (Pty) Ltd v City of Cape

Town and Another in which the appellant company was awarded a government

tender although the company and its former director had been convicted of fraud

and corruption. The purpose of this article is to analyse this judgment and show

the challenges that the government is faced with when dealing with companies that

have been convicted of offences bid for government tenders. Because South Africa

is in the process of enacting public procurement legislation, the Public Procurement

Bill was published for comment in early 2020. One of the issues addressed in the

Bill relates to debarring bidders who have been convicted of some offences from

bidding for government tenders. Based on the facts of this case and legislation from

other African countries, the author suggests ways in which the provisions of the Bill

could be strengthened to address this issue.

Keywords: cr iminal record; companies; public procurement; bidder;

Namasthethu; government tender; South Afr ica; debar

Résumé

En Afrique du Sud, les personnes ou les entrepr ises reconnues coupables de fraude

ou de corruption ou les sociétés dont les administrateurs ont été condamnés, sont

interdites de participer à des appels d’offres du gouvernement. Bien qu’il soit facile

d’établir si une personne physique a été reconnue coupable d’une infraction, étant

donné qu’un extrait de casier judiciaire émis par la police sud-africaine peut être

obtenu à cet effet, c’est plutôt l’inverse pour les personnes morales. Cette question

s’est posée dans l’affaire de Namasthethu Electrical (Pty) Ltd v City of Cape

Tow et une autre dans laquelle la société partie appelante avait été bénéficiaire

* Professor of Law, Faculty of Law, University of the Western Cape. Email: djmujuzi@gmail.

com

(2021) 8(1) Journal of Comparative Law in Africa 102

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COMPANIES CONVICTED OF ECONOMIC CRIMES AND THEIR

PARTICIPATION IN GOVERNMENT TENDER PROCESSES IN SOUTH AFRICA 103

https://doi.org/10.47348/JCLA/v8/i1a4

d’une offre publique, bien que cette même société et son ancien gérant avaient

été reconnus coupables de fraude et de corruption. L’objectif de cet article est

d’analyser ce jugement et de souligner les défis auxquels le gouvernement est

confronté lorsqu’il traite avec des sociétés reconnues coupables d’infractions qui

postulent pour des offres gouvernementales. Parce que l’Afrique du Sud est dans

le processus de promulgation d’une loi sur les marchés publics, le projet de loi

sur les marchés publics avait été publié pour commentaires au début de l’année

2020. L’une des questions abordée dans ce projet de loi concernela disqualification

des personnes qui ont été condamnées pour certaines infractions du processus de

soumission pour les offres du gouvernement. Sur la base des faits de cette affaire

et de la législation d’autres pays africains, l’auteur suggère différents moyens de

renforcer les dispositions de ce projet de loi pour résoudre ce problème.

Mots-clés : casier judiciaire ; entreprises ; marchés publics ;

soumissionnaire ; Namasthethu ; appel d’offre public ; Afrique du Sud ;

disqualification.

Introduction

In South Africa, persons or companies convicted of fraud or corruption

or companies whose directors have been convicted are debarred from

participating in bidding for government tenders.1 Case law from South

Africa shows that some companies2 or the directors or employees of these

companies3 or both the companies and the directors,4 have been convicted

1 Condition 23.7 of the National Treasury, General Conditions of Contract (revised July 2010).

2 In S v Quantum Property Group Ltd (SH7/67/2016) [2016] ZACOMMC 1 (21 July 2016)

the company, on the basis of a plea and sentence agreement, was convicted of failure to convene an

annual general meeting and to prepare and provide shareholders with audited financial statements

contrary to the Companies Act and the court made it very clear that the director was not convicted.

In Kukama v Lobelo 2012 JDR 0663 (GSJ) the court found that the fraudulent conduct of one of the

directors of the company exposed the company to the risk of prosecution.

3 See for example, S v Delange 2005 JDR 0041 (SCA) (the appellant, a sole member of a close

corporation, was prosecuted and convicted of fraud in his personal capacity and the court dismissed

the argument that the offence had been committed by the close corporation); S v African Bank of

South Africa Ltd and Others 1990 (2) SACR 585 (W) (the servants of the bank were convicted of

fraud and contravening foreign exchange regulations but the bank was acquitted); S v Suid-Afrikaanse

Uitsaaikorporasie 1991 (2) SA 698 (W) (an employee of the respondent company was convicted for

an offence in terms of the Prisons Act and the company was not convicted. This is so because the

employee had acted contrary to the instructions of the company). Where the director of a company

is charged in his representative capacity, the charge sheet should clearly indicate that fact, The Director

of Public Prosecutions v Schreiber 2010 JDR 0370 (GNP).

4 For example, in S v African Game Services 2006 JDR 1031 (T) (the appellant company and

its directors were convicted of the relevant provisions of the Animal Protection Act 71 of 1962

and the Performing Animals Protection Act 24 of 1935); S v Maddock Incorporated and Another

(0) [2008] ZACOMMC 1 (1 February 2008) (the accused company, on the basis of a plea and

sentence agreement, were convicted of money-launder ing in contravention of s 4 of the Prevention

of Organised Crime Act 121 of 1998 and the accused company itself was convicted of several

offences under the Financial Intelligence Centre Act 38 of 2001); Du Plessis v S (A232/2017) [2018]

ZAGPJHC 607 (29 October 2018) (the appellant, the financial director of the company, and the

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