Appeal court rules BEE criteria for tourism relief fund are unlawful

• Minister’s error caused her to fail to apply her mind properly, judge says

The application of BEE criteria in the disbursement of money from the Tourism Relief Fund was unlawful, according to the Supreme Court of Appeal.

Appeal court judge Clive Plasket on Wednesday ruled against two judgments of the high court in Pretoria in matters brought separately by Solidarity and AfriForum to review and set aside what they described as “race-based criteria” to be eligible for assistance from the fund.

The fund, which was set up in 2020 to help mitigate the effects of the Covid-19 lockdown on the tourism sector, has already disbursed R200m to small and medium enterprises, but the court order does not require that the money be recovered.

The judge decided that even though the Tourism Relief Fund had been depleted it was in the public interest that judgment be passed on the appeals. The respondents were ordered to pay costs, including counsel.

Plasket held that the Tourism Relief Fund was established under the Disaster Management Act and that former minister of tourism Mmamoloko Kubayi was not legally obliged by the Broad-Based Black Economic Empowerment Act (BBBEE Act), as she had argued, to make eligibility criteria for financial assistance subject to the Tourism Sector Code.

Kubayi has since been appointed human settlements minister after President Cyril Ramaphosa’s recent cabinet reshuffle.

DIFFERENT GOALS

“It is apparent that the purposes of the Disaster Management Act on the one hand, and the BBBEE Act, on the other, are very different and that each statute is directed at achieving different goals: the Disaster Management Act is aimed at preventing or limiting disasters, mitigating their impact and enabling postdisaster recovery, while the BBBEE Act is aimed at promoting BEE to enable black people to participate meaningfully in the economy,” Plasket said.

“As the Disaster Management Act’s empowering provisions for the making of regulations and directions make no mention of BBBEE objectives, the only way in which they could be imported into the minister’s empowerment would be if she was correct that section 10(1)(e) of the BBBEE Act required her to include them in her direction.

In the absence of that, their inclusion would appear to amount to the pursuit of an improper purpose — one not authorised by the empowering provision — no matter how laudable her intentions.”

The judge noted that it was a well-established principle that a power given for a specific purpose may not be misused to secure an ulterior purpose.

In his view, the Tourism Relief Fund grants were not grants in support of B-BBEE but grants to further the purposes of the Disaster Management Act.

“The minister believed erroneously that she was bound by the BBBEE Act to apply the Tourism Sector Code in her direction. Her error was material because it distorted her discretion in the sense that it caused her to fail to apply her mind properly to the criteria that should have been used for eligibility. Her inclusion of the BBBEE status level of applicants for assistance as a criterion for eligibility for grants from the fund was therefore invalid.”

Solidarity head of legal matters Anton van der Bijl welcomed the decision.

“It is a victory for everyone in the tourism sector who has lost their revenue and businesses as a result of the government’s implementations of the Disaster Management Act, but also whom the government has rejected based on the colour of their skin,” he said.

“Solidarity and AfriForum were persistent, saying that the virus does not choose its victims based on the colour of their skin and that the government has no right to choose whom they will help based on this criteria. We simply could not allow this gross exploitation of people in need by the government.”

AfriForum campaign manager Jacques Broodryk said the court’s ruling made it clear that the minister made a mistake in her interpretation of the act.

‘MINISTER BELIEVED ERRONEOUSLY THAT SHE WAS BOUND BY THE BBBEE ACT TO APPLY THE TOURISM SECTOR CODE IN HER DIRECTION’