THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case no. 827/2020
Reportable
In the matter between:
EASTERN CAPE RURAL DEVELOPMENT AGENCY               FIRST APPELLANT

MEMBER OF THE EXECUTIVE COUNCIL FOR
RURAL DEVELOPMENT AND AGRARIAN
REFORM, PROVINCE OF THE EASTERN CAPE

SECOND APPELLANT
and
AGRIBEE BEEF FUND (PTY) LTD

FIRST RESPONDENT
BERLIN BEEF (PTY) LTD

SECOND RESPONDENT
THE RESPONDENTS LISTED ON
SCHEDULE 1 HERETO                    THIRD TO TWENTY EIGHTH RESPONDENTS
Neutral citation:
Eastern Cape Rural Development Agency and Another v Agribee
Beef Fund (Pty) Ltd and Others (Case no. 827/2020) [2022] ZASCA 2 (6 January
2022)

Coram:
Saldulker ADP, Dambuza, Mathopo, Mocumie and Plasket JJA

Heard:
22 November 2021

Delivered:
This judgment was handed down electronically by circulation to the
parties’ representative via email, publication on the Supreme Court of Appeal website
and release to SAFLII. The date and time of hand-down is deemed to be 10:00 am on
6 January 2022.
Summary:
Procurement – Section 217(1) of the Constitution – whether a tripartite
agreement between two organs of state and a private entity was one that
contemplated contracting for goods or services – the agreement, in furtherance of the
objects of the organs of state, required the private entity to provide smallholder farmers
with cattle, paid for with public funds, veterinary kits and feed supplements, and to
provide training and mentorship – the agreement was for the provision of goods and
services as contemplated by s 217(1) – no procurement process complying with s
217(1) preceded the agreement – the agreement was declared to be invalid.

ORDER

On appeal from: Eastern Cape Division of the High Court, Grahamstown (Brooks J
sitting as court of first instance):
The appeal is upheld with costs.
The order of the court below is set aside and replaced with the following order.
‘1
It is declared that the agreement concluded on 16 July 2018 between the
Department of Rural Development and Agrarian Reform in the Eastern Cape provincial
government, the Eastern Cape Rural Development Agency and the Eastern Cape
Beef Fund is invalid.
The first respondent is directed to pay the applicants’ costs.’

JUDGMENT

Plasket JA (Saldulker ADP, Dambuza, Mathopo and Mocumie JJA concurring)

[1] On 16 July 2018, a tripartite agreement was concluded by the Department of
Rural Development and Agrarian Reform of the Eastern Cape provincial government

(the Department), the Eastern Cape Rural Development Agency (the Agency) and a
private entity referred to as the Eastern Cape Beef Fund (the ECBF). This is the trading
name of Agribee Beef Fund (Pty) Ltd (Agribee), the first respondent. The agreement
was to endure for a period of a few months short of three years, terminating on 31
March 2021. By notice of motion dated 19 March 2019, the Agency and the MEC of
the Department applied, in the Eastern Cape Division of the High Court, Grahamstown
for an order setting aside the agreement. Brooks J dismissed the application with costs
but later granted the Agency and the Department leave to appeal to this court.

[2] One issue arises for determination. It is whether the agreement was one that
contemplated the provision of goods or services. As the Department and the Agency
are both organs of state as defined in s 239 of the Constitution, if the agreement is of
this character, it may be set aside if its conclusion was not preceded by a procurement
process that met the requirements of s 217(1) of the Constitution. This section
provides:
‘When an organ of state in the national, provincial or local spheres of government, or any other
institution identified in national legislation, contracts for goods or services, it must do so in
accordance with a system that is fair, equitable, transparent, competitive and cost-effective.’
That system is provided for by primary legislation such as the Preferential
Procurement Policy Framework Act 5 of 2000 and the Public Finance Management
Act 1 of 1999, subordinate legislation such as Treasury Regulations, and other
instruments such as Supply Chain Management Policies.1

Background
[3] Baxter, writing in 1984 of a different constitutional arrangement to the present,
said that the public service constituted ‘the largest grouping of central government
institutions’ consisting at the time, inter alia, of ‘departments of State as well as four
provincial administrations’.2 The departments of state were confined to the central
government and it is probably true to say that they were the principal vehicles for state
administration in the centralized system then in existence. Now, departments of state

1 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African
Social Security Agency and Others [2013] ZACC 42; 2014 (1) SA 604 (CC); 2014 (1) BCLR 1 (CC)
paras 31-40; Joubert Galpin Searle Inc and Others v Road Accident Fund and Others 2014 (4) SA 148
(ECP) para 57.
2 Lawrence Baxter Administrative Law (1984) at 112.

have a wider meaning because of the federal character of our present constitutional
arrangement, with significant, original and autonomous governmental power in the
hands of the nine provincial governments.

[4] The Department of Rural Development and Agrarian Reform in the Eastern
Cape provincial government is a ‘department’ as defined in s 1 of the Public Service
Act, 1994.3 Section 7(2) provides that, for purposes of the administration of the public
service, there are national departments and national components, as well as provincial
departments and provincial components. All are set out by name in schedules to the
Act. The Department is listed in column 1 of Schedule 2 as one of the departments of
the Eastern Cape provincial government.

[5] The Department’s principal mandate, according to the deponent to the founding
affidavit, Mr Nhlanganiso Dladla, the chief executive officer of the Agency, is to
‘support and grow the Eastern Cape agricultural sector’. It is also the department in
the provincial government that is responsible for the administration of the Eastern
Cape Rural Development Agency Act 9 of 1999 (EC) (the ECRDA Act). More will be
said of this, and particularly of the ECRDA Act below.

[6] As part of fulfilling its mandate, the department had, in 2016, adopted a strategy
which it called the Eastern Cape Agricultural Economic Transformation Strategy. Its
focus was, to quote Dladla, on the support of ‘smallholders, subsistence/communal
and commercial farmers and/or investors from all sectors in their partnerships and
which sought through investment to turn smallholders into [agri]-entrepreneurs and
subsistence and communal farms into profitable businesses’. Part of the strategy dealt
with beef production in the province and, in particular, mentioned a project initiated by
‘Berlin Beef’, apparently a reference to Agribee.

[7] Provision was made in the Department’s budget for 2018/2019 for funding for
what was termed ‘beef commercialisation’. An amount of R15 million was earmarked
for red meat development in respect of smallholder farmers for that year. (A total
amount of R67 535 000 was budgeted for a three-year period.) The idea, Dladla said,

3 Proclamation 103 of 1994, Government Gazette 15791 of 3 June 1994.

was for this amount to be transferred to the Agency for it to use appropriately in terms
of a service level agreement between the Department and the Agency. That
agreement was in fact concluded.

[8] The Agency was, in its original form, known as the Eastern Cape Rural Finance
Corporation. That entity was created by the Eastern Cape Rural Finance Corporation
Act 9 of 1999 (EC). In terms of the Eastern Cape Rural Development Agency
Amendment Act 1 of 2012 (EC), the short title of the 1999 Act was changed to the
Eastern Cape Rural Development Agency Act 9 of 1999, and the name of the body
created and empowered by the Act was changed to the Eastern Cape Rural
Development Agency.

[9] Section 2 of the ECRDA Act established the Agency as a statutory body with
juristic personality. It has limited liability and perpetual succession. It is capable of
suing and being sued in its own name. The Eastern Cape provincial government is the
Agency’s sole shareholder, although it may transfer shares to other entities, but may
not transfer them to natural persons.4

[10] Section 3 sets out the objects of the Agency. This section states:
‘The objects of the corporation are to promote, support and facilitate rural development in the
Province by-
(1) mobilising financial resources and providing financial and supportive services to persons
domiciled, ordinarily resident or carrying on business within the Province;
(2) promoting and encouraging private sector investment in the Province and the participation
of the private sector in contributing to economic growth;
(3) promoting, assisting and encouraging the development of the Province's human resources
and financial infrastructure, in association with other institutions having similar or related
objects;
(4) acting as the governments agent for performing any development-related tasks and
responsibilities that the government considers may be more efficiently or effectively performed
by a corporate entity;
(5) driving and coordinating integrated programmes of rural development, land reform and
agrarian transformation in the Province;

4 Section 7.

(6) project managing rural development interventions in the Province;
(7) promoting applied research and innovative technologies for rural development in the
Province;
(8) planning, monitoring, implementing and evaluating rural development in the Province;
(9) facilitating the participation of the private sector and community organizations in rural
development programmes.’

[11] Section 4 arms the Agency with the powers necessary to achieve its objects. It
may, for instance, in order to attain its objects: raise funds from both the public and
private sectors through loans, grants and donations; lend or advance money and
recover debt owed to it; acquire, hold and deal with ‘movable or immovable property,
whether corporeal or incorporeal’; charge for services that it renders, including to the
government; establish a fund to support rural development programs; and ‘generally,
do all things necessary for the attainment of its objects, the exercise of its powers, or
the management and administration of its affairs, whether or not expressly provided
for in this section’.

[12] Section 5 is concerned with the Agency’s method of operation and area of
operation. It may operate anywhere in the Eastern Cape province5 but, if it considers
it necessary in order to attain its objects, it may ‘become involved in projects and
programmes and enter into transactions with persons outside the Province’.6 In terms
of s 5(1), the Agency must, as far as possible and consistently with good business
practice, conduct its activities in order to:
‘(a) raise and apply its funds and other resources in a responsible manner and in such a way
that the corporation's activities are sustainable;
(b) support the government's agricultural, land reform and rural development strategies;
(c) maximise and spread the development impact of such activities;
(d) develop synergistic relationships with other agencies for the delivery of development in the
Province and avoid duplicating functions and resources;
(e) promote and encourage private sector participation in economic growth and employment
creation;
(f) reinforce and promote values consistent with the Constitution.’

5 Section 5(2).
6 Section 5(3).

The agreement
[13] There are a number of factual disputes concerning how the agreement came
about and how it was signed, purportedly on behalf of the Department and the Agency,
by senior officials. It is not necessary to traverse the evidence in this regard or to make
findings concerning these issues. They are irrelevant to the job at hand, which entails
an interpretive exercise aimed at determining whether the agreement was one for the
provision of goods or services.

[14] The agreement appears to have had its genesis in an unsolicited approach
made by Agribee to the Department in which it proposed a project aimed at developing
black smallholder beef farmers into commercial farmers. It is not in dispute that no
procurement process that complied with the requirements of s 217(1) of the
Constitution occurred before the agreement was concluded.

[15] The agreement’s preamble noted that the Department, the Agency and the
ECBF wished to implement a project to support beef production and contribute to rural
development; that the Department had a budget for three years of R67 535 0007 which
it would transfer to the Agency ‘for the project by ECBF in support of 200 black farmers
in beef value chain production’; that the Agency was authorised to receive the funds
for the project, to administer them and to transfer them to the ECBF; and that the ECBF
would function as ‘the operating company to implement and manage the project’.

[16] Clause 1 contains definitions. It defines the ‘Implementing agent’ as the ECBF
and ‘The Project’ as ‘the Eastern Cape Beef Value Chain Development Program’. The
term ‘The Fund’ is defined to mean ‘any transfer of funding from [the Department] to
[the Agency] for onward transfer to ECBF, the purpose of which is to implement,
administer and or support the Project’.

[17] Clause 2 summarises the object of the agreement and defines the roles of the
parties. It notes that the ECBF ‘has been identified as the suitable partner for
commercialization of 200 black smallholder beef cattle farmers in the Eastern Cape’.

7 This total amount was made up of R15 million in the first year, R21 308 000 in the second year and
R31 227 000 in the third year.

It notes too that in terms of the Department’s Agriculture Transformation Strategy, it
‘strives to expand beef production in the Eastern Cape by tapping into the underutilized
40% cattle population that are in the hands of smallholder farmers’. The Agency,
clause 2 asserts, was established, as an ‘entity’ of the Department, to ‘champion rural
development’ in the Eastern Cape and is able to receive and administer the project’s
funds.

[18] Clause 3 defines the purpose of the agreement as follows:
‘Develop, promote commercial cattle production and marketing of appropriate products to
promote rural economic development through establishment of economically sustainable
cattle production in the Eastern Cape that create jobs, empowerment, promote value addition
and increase agricultural contribution to provincial [GDP].’

[19] The objectives of the agreement are listed in clause 4. First, the project aimed
to transform the beef production value chain by ‘introducing 200 smallholder black
farmers into local and international markets’. Secondly, the project aimed to
background and finish 18 000 steers over a three year period. Thirdly, the project was
intended to introduce ‘superior genetic material’ to 25 of the identified farms. Fourthly,
it sought to facilitate ‘market access for the finished steers in the local and international
markets’. Finally, it was aimed at facilitating ‘[agri]-processing and value-adding of the
finished steers to create broad-based BEE participating in the beef value chain’ and
to create ‘new sustainable jobs in the beef value chain’.

[20] In order to achieve these objects, in terms of clause 5, the Department
appointed the Agency to receive and administer the project’s funds on behalf of the
Department. The ECBF was appointed ‘to be the agricultural and business developer
for the Project accountable to [the Agency]’. In terms of clause 6, the agreement was
to endure from the date of the last signature, which was 16 July 2018, until 31 March
2021. Its budget, according to clause 7.1, was R67 535 000, which would be utilized
in accordance with a business plan and administered by the Agency.

[21] Clause 8 lists the duties of the ECBF. They include using the funds ‘for the
purposes set out in the business plan, implementation plan and budget of the project,
which have been approved by the Department’; putting in place ‘appropriate internal

procurement and financial controls to ensure effective, efficient and transparent
financial management’ and the keeping of ‘proper books of account’; drafting annual
implementation plans and submitting them timeously to the Department; and
submitting reports to the Department.

[22] In terms of clause 9, the duties of the Department include the transfer of the
project’s funds to the Agency; the evaluation of business plans; the monitoring and
evaluation of the project; the verification of reports and invoices; and the maintenance
of records relating to the project.

[23] The duties of the Agency are listed in clause 10. They include the
implementation of the project; receiving and administering the project’s funds;
maintaining accurate records of all project transactions; the monitoring and evaluation
of the implementation of the project; and reporting to the Department on a quarterly
and annual basis.

[24] It will be noted that the agreement is rather sparse on the detail of how the
project will in fact operate. That is to be found in the business plan. Essentially, the
Department’s funds were to be utilized by the ECBF, after having been channeled
through the Agency, to purchase beef weaners8 and to supply them, at cost, to the
farmers identified as beneficiaries of the project. The farmers were then required to
background9 these cattle. When they were ready to be placed in feedlots,10 the farmers
would then sell them, hopefully at a profit. The ECBF was required to provide the
feedlots, abattoirs and access to markets. In addition, the ECBF was to supply the
farmers with veterinary packs, supplementary feed, accredited training, mentorship
and support.

The nature of the agreement
[25] In order to answer the question that this appeal raises – whether the agreement
was one that required, for its validity, the completion of a public procurement process

8 A weaner is a calf that has been weaned during the current year.
9 The term ‘backgrounding’ refers to the optimal use of pasture and forages for the weaners until they
are ready to be placed in a feedlot.
10 A feedlot is a feeding facility for the ‘finishing’ of beef cattle prior to slaughter.

that met the requirements of s 217(1) of the Constitution – it is necessary to consider
the obligations that are imposed by it on the parties within the broader context of its
purpose. This, it seems to me, is far more likely of producing a correct result than an
attempt to pigeon-hole the agreement, as the court below did. In other words, it does
not matter what descriptor is given to the agreement. What is important is whether it
is an agreement relating to the procurement of goods or services. This approach is in
harmony with the approach taken by this court in Airports Company South Africa SOC
Ltd v Imperial Group Ltd and Others,11 in which the reach of s 217(1) of the
Constitution, and the meaning of the terms in dispute before us, were dealt with.

[26] The Airports Company SOC Ltd (ACSA) is a state-owned company – and an
organ of state – that manages airports. It issued a request for bids (RFB) in respect of
the granting of concessions for car-rental facilities at the airports it managed. It
intended to make available to the successful bidders the use of car-rental kiosks and
parking bays, in return for payment. The RFB was challenged by the Imperial Group
Ltd on the ground, inter alia, that it was in conflict with s 217(1) of the Constitution.

[27] As in this case, the central issue was whether the RFB related to the
procurement of goods or services as envisaged by s 217(1). It was argued on behalf
of ACSA that it would simply be granting concessions to successful bidders at a price
and so goods or services were not procured by it.

[28] Two judgments were delivered that differed in emphasis, perhaps, but not in
the result. Both held that the terms of s 217(1) were clear and unambiguous. Molemela
JA, with whom Tshiqi JA concurred, held that s 217(1) does not limit the meaning of
procuring goods or services to state expenditure and it ‘does not restrict the means by
which goods and services are acquired’.12 She held that the RFB envisaged the
successful bidders ‘performing a service on behalf of ACSA’ by promoting the interests
and needs of airport-users in accordance with ACSA’s objects.13 Section 217(1) was,
accordingly, applicable.

11 Airports Company South Africa SOC Ltd v Imperial Group Ltd and Others [2020] ZASCA 2; 2020 (4)
SA 17 (SCA).
12 Para 22.
13 Para 26.

[29] In this process, Molemela JA held, the objects of the legislation that created
ACSA were ‘helpful in ascertaining whether the RFB amounted to contracting for
goods or services’. Among ACSA's objects was 'the acquisition, establishment,
development, provision, maintenance, management, control or operation of any
airport, any part of any airport or any facility or service at any airport normally related
to the functioning of an airport'. It was evident, she held, that ‘the concessions
envisaged in the RFB are aligned to ACSA's objects and key to ACSA's operations’,
and that by inviting bids, ACSA ‘considered itself to be contracting for services’.14 She
concluded, on this issue, as follows:15
‘ACSA's contention that it was effectively leasing its property to successful bidders so that
those bidders could engage in a direct relationship with members of the public fails to take
into account the assertions set out in the extracts above. Bearing those assertions and ACSA's
strategy in mind, as well as the presentation ACSA made to prospective bidders as part of the
pre-tender roadshow, it cannot be gainsaid that the essence of the transaction is that ACSA
contracts with car-rental companies to complete and enhance the services available to its
customers at its airports in accordance with its own mandate as contemplated in the ACSA
Act. In this case the focus falls on what constitutes services in s 217 of the Constitution. The
successful operation of a modern airport is heavily dependent upon passengers on arrival
being able to secure transport to their ultimate destination, and the ability to hire a car for
onward travel is essential. In order to ensure the availability of that service for its passengers,
ACSA had to contract with car-hire firms to provide it. The RFB proposes to do that by leasing
facilities at airports to car-rental firms. ACSA's suggestion that the granting of concessions to
car-rental firms as envisaged in the RFB did not equate to it contracting for services with those
bidders within the meaning of s 217 of the Constitution thus amounts to the elevation of form
over substance.’

[30] In similar vein, Ponnan JA, with whom Cachalia and Wallis JJA concurred, said
the following of s 217(1) and its scope:16
‘The language of s 217(1) is clear. It applies whenever an organ of state “contracts for goods
or services”. These words are plain and unqualified. They make it clear that the section applies
whenever an organ of state contracts for goods or services, whether for itself or for somebody
else. ACSA's restrictive reading thus finds no support in the plain language of the section.

14 Para 24.
15 Para 25.
16 Para 63.

ACSA suggests that the ambit of the section is limited by the reference to the word
“procurement” in the heading and in s 217(2). The ordinary meaning of “procure” is “obtain”.
In any event, s 217(1) spells out what the section means when it speaks of “procurement”,
which is “to contract for goods or services”. It thus places the meaning of the word beyond
doubt. ACSA suggests that the RFB is not directed at procurement but only at contracts for
the lease of premises to car-rental companies, who provide their services directly to the public.
But, that is to elevate form above substance. The substance of the transaction is that ACSA
contracts with car-rental companies to provide a public service at its airports. That is how
ACSA itself described the transaction in the RFB.’

[31] Before I turn to an application of the principles set out in Airports Company
South Africa to the facts of this case, it is necessary to say something of another
argument made on behalf of Agribee. It was that this court, in Auditor-General of SA v
MEC for Economic Opportunities, Western Cape and Another,17 held, in
circumstances similar to those in this case, that payments made in respect of an entity
that performed a similar role to the ECBF were classified as transfers, and not
payments for goods and services, because that body was the agent of the provincial
government. From this, it followed, according to the argument, that the procurement
of goods and services did not arise in this case, with the result that s 217(1) was not
implicated.

[32] Agribee reads too much into Auditor-General of SA. It concerned the
interpretation of an accounting standard issued by the National Treasury that had its
origin in s 216(1) of the Constitution. It had nothing to do with procurement and the
applicability of s 217(1). Indeed, the court made the point specifically that procurement
issues were not even alluded to in the papers and may have been of interest to the
Auditor-General ‘down the line, as it were’.18 The case is thus distinguishable from the
present matter and no authority for the proposition that s 217(1) is of no application to
the agreement with which we are concerned.

[33] It is clear from the terms of the agreement that the project pursued by the
Department, the Agency and the ECBF fell within the core functions of both the

17 Auditor-General of SA v MEC for Economic Opportunities, Western Cape and Another [2021] ZASCA
133.
18 Para 34.

Department and the Agency. In respect of the objects of the Department, it was aimed
at support for, and the growth of, a part of the agricultural sector in the Eastern Cape,
in line with its strategy to focus, inter alia, on the commercialization of smallholder beef
production. From the Agency’s point of view, the agreement was aimed at promoting,
supporting and facilitating rural development, in relation to beef production in
particular, in the province.

[34] In order to achieve these objects, public money – more than R67. 5 million over
three years – was budgeted. The funds were to be used to pay for the ECBF’s
acquisition of beef weaners, which it was required to deliver, at cost, to the project’s
beneficiaries. It was also required to provide veterinary kits, supplementary feed and
so on. After the cattle had been backgrounded by the beneficiaries, the ECBF was
required to step in again to deliver them to feedlots, to arrange for their slaughter and
to market the product.

[35] The agreement, therefore, contemplated that goods, in the form of beef
weaners, would be delivered to beneficiaries by the ECBF, together with veterinary
kits and feed supplements. In addition certain services, such as training and
mentorship, would be provided to beneficiaries by the ECBF.

[36] While the direct beneficiaries of the goods and services were the smallholder
farmers who had been identified as participants in the project, the Department and the
Agency also benefited from the services provided by the ECBF. They contracted with
the ECBF to provide the goods and services that, otherwise, they would have had to
provide in order to fulfil their mandates. If the ECBF had not undertaken the task, the
Department and the Agency would have had to acquire the beef weaners, care for
them prior to delivery, arrange for their delivery to feedlots when they were ready,
arrange for their slaughter and arrange for the marketing of the product. These were
services the ECBF provided to the Department and the Agency in terms of the
agreement.

[37] The conclusion is, in my view, inescapable that s 217(1) applied to the
agreement. The absence of any procurement process, let alone one that met the
requirements of the section, prior to the conclusion of the agreement renders it

invalid.19 It follows that the court below erred in its characterization of the agreement
as one that did not require compliance with s 217(1). In the result, the appeal must
succeed.

The order
[38] Mr Rorke, who appeared for the appellants no longer sought the review and
setting aside of the agreement but, rather, a declaratory order to the effect that it was
invalid. He submitted that this was the appropriate remedy in the light of the
Constitutional Court’s finding as to the effect of such an order in Buffalo City
Metropolitan Municipality v Asla Construction (Pty) Ltd.20 In that case, Theron J held
that the effect of a declarator, rather than an order setting aside the agreement, was
to preserve the accrued rights of the parties but not ‘further rights under the invalid
agreement’.21 I propose to make an order in those terms.

[39] I make the following order.
The appeal is upheld with costs.
The order of the court below is set aside and replaced with the following order.
‘1
It is declared that the agreement concluded on 16 July 2018 between the
Department of Rural Development and Agrarian Reform in the Eastern Cape provincial
government, the Eastern Cape Rural Development Agency and the Eastern Cape
Beef Fund is invalid.
The first respondent is directed to pay the applicants’ costs.’

____________________
C Plasket

Judge of Appeal

19 Premier, Free State and Others v Firechem Free State (Pty) Ltd [2000] ZASCA 28; 2000 (4) SA 413
(SCA) para 30; Metro Projects CC and Another v Klerksdorp Municipality [2003] ZASCA 91; 2004 (1)
SA 16 (SCA) para 14.
20 Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd [2019] ZACC 15; 2019 (4) SA 331
(CC); 2019 (6) BCLR 661 (CC).
21 Para 105.

APPEARANCES
For the appellants:

S Rorke SC
Instructed by:
Wesley Pretorius and Associates Inc,
East London

Honey Attorneys, Bloemfontein

For the first respondent:
C J Pammenter SC and J Y Thobela-
Mkhulisi
Instructed by:

Garlicke & Bousfield Inc, Durban

Webbers Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

6 January 2022

STATUS

Immediate

Please note that the media summary is for the benefit of the media and does not form part of
the judgment.

Eastern Cape Rural Development Agency and Another v Agribee Beef Fund (Pty)
Ltd (827/2020) [2022] ZASCA 2 (6 January 2022)

MEDIA STATEMENT

The Supreme Court of Appeal (SCA) today upheld the appeal of the Eastern Cape
Rural Development Agency (the ECRDA) and the MEC for Rural Development and
Agrarian Reform in the Eastern Cape provincial government against Agribee Beef
Fund (Pty) Ltd (Agribee).

On 16 July 2018, a tripartite agreement was concluded by the ECRDA, the
Department of Rural Development and Agrarian Reform in the Eastern Cape provincial
government (the Department) and the Eastern Cape Beef Fund (the ECBF), the
trading name of Agribee. The purpose of the agreement was to support and develop
smallholder beef farmers in the Eastern Cape.

For this purpose, the Department had a three-year budget of R67 535 000.
These funds would be transferred to the Agency which, in turn, would disburse funds
to the ECBF when required. The ECBF’s role was to acquire a large number of recently
weaned beef cattle and to deliver them to the smallholder farmers who had been
identified as beneficiaries of the project. The ECBF was also to provide veterinary

packs, feed supplements, training and mentorship to the beneficiaries. They, in turn,
would rear the cattle to the point when they were ready to be moved to feedlots. The
ECBF would deliver the cattle to feedlots, arrange for their slaughter and the marketing
of the meat.
Before the agreement had run its three-year course, the Agency and the MEC
of the Department applied to the Eastern Cape High Court, Grahamstown for an order
setting the agreement aside. The basis for the application was that the agreement was
invalid because its conclusion had not been preceded by a procurement process that
met the requirements of s 217(1) of the Constitution. This section requires that, when
organs of state contract for goods or services, they must do so in accordance with a
system that is ‘fair, equitable, transparent, competitive and cost-effective’. While it was
common cause that no such process was followed, Agribee argued that s 217(1) was
of no application because the agreement was not one for goods or services. The high
court upheld Agribee’s argument and dismissed the application to set aside the
agreement.

On appeal, the SCA arrived at a different conclusion. It found that the
agreement, when considered within the wider context of its purpose and the mandates
of the Agency and the Department, was indeed one for the provision of goods or
services. The ECBF provided goods to the beneficiaries in the form of the cattle, the
veterinary packs and the feed supplements. It provided services to the beneficiaries in
the form of training, mentorship, delivering the cattle to feedlots, arranging for their
slaughter and attending to the marketing of the meat. It provided services to the
Agency and the Department by providing goods and services to the beneficiaries
which the Agency and the Department would otherwise have had to provide
themselves.

As a result, the appeal was upheld. The high court’s order was set aside and
replaced with an order declaring the agreement to be invalid.