Primary briefing · Judgment
high impact High Court (Gauteng Division, Johannesburg) · 10 March 2026
Sekela Xabiso CA Incorporated v Transnet SOC Limited and Others
Transnet contracted Sekela Xabiso, an auditing firm, for auditing services. The contract included a restrictive covenant (clause 6) prohibiting Transnet from procuring similar auditing services from any other provider for 60 months — a period extending well beyond the contract term. When Transnet sought to procure on the open market, Sekela Xabiso sought to enforce the restriction. Transnet then launched a self-review application to have the clause declared unconstitutional.
The court held: The court declared the restrictive covenant unconstitutional and set it aside. It held that s 217(1) requires procurement to be competitive and transparent, and that an organ of state may not contractually bind itself to procure exclusively from one provider beyond the contract term. Such an arrangement grants an unconstitutional monopoly on state resources and enables a contractor to dictate pricing. The court confirmed that arbitrators lack competence to determine the constitutional validity of public procurement acts. Transnet's delay was condoned given the overwhelming prospects of success, but no costs order was made because Transnet should have identified the invalidity from the outset rather than waiting for enforcement proceedings.
Legal impact: This judgment develops s 217 procurement law by establishing that post-contract exclusivity clauses binding organs of state are unconstitutional per se, even where time-limited. It applies to all organs of state and SOEs, not only Transnet. Any existing restrictive covenant that prevents an organ of state from procuring on the open market after a contract ends is now clearly unenforceable. The ruling also confirms the jurisdictional bar on arbitrators adjudicating constitutional procurement challenges, which affects dispute resolution planning. The court's willingness to condone significant delay where unconstitutionality is clear may lower the procedural barrier for future self-review applications.
Who is affected
Professional services firms (auditing, legal, consulting) contracting with government or SOEsOrgans of state and state-owned companies structuring procurement contractsIn-house counsel advising on public procurementPublic procurement practitionersDispute resolution practitioners advising on arbitration clauses in state contracts What this means for practitioners
Review all existing contracts with organs of state or SOEs for post-contract restrictive covenants or exclusivity clauses — these are now clearly unenforceable and should be restructured or removed.
Do not include post-contract exclusivity provisions in new government or SOE engagements; structure client retention through service quality and competitive re-tendering instead.
Where disputes over such clauses are pending in arbitration, consider whether the arbitrator has jurisdiction in light of the confirmed bar on arbitrators determining constitutional procurement validity.
Organs of state should proactively self-review procurement contracts containing such clauses rather than waiting for enforcement — the court signalled that delay in doing so may attract adverse cost consequences.