In the case of Zeal Health Innovations (Pty) Ltd vs the Minister of Defence and Military Veterans and Another other (Case No. 967/2023) the Supreme Court of Appeal (SCA) ruled in favor of Zeal Health, holding the government liable for payment although the contract was declared unlawful and invalid.

In 2015, Zeal Health was contracted to provide health and wellness services to 16,000 military veterans. Zeal Health sued the government when it failed to pay for the services. The Gauteng high court ruled that the tender was invalid and unlawful. The Acting Director-General did not have the power to commit the Department to a liability for which money had not been appropriated. That is exactly the conduct that s 38(2) of the PFMA prohibits. The Acting Director-General had the responsibility of ensuring that the Department did not overspend its budget. He acted unlawfully when he breached the provisions of s 38(2). The awarding of the tender to Zeal Health, in circumstances where the provisions of s 38(2) were breached, was clearly unlawful and invalid.

The SCA upheld the high court’s ruling, finding that the government officials breached the Public Finance Management Act. The SCA however found that Zeal Health was entitled to payment for the services it provided.

Therefore, it all boils down to the principle that when you contract with public sector clients, you are fully entitled to request assurance that the financial commitment is in place for the goods or services to be provided. A purchase order should confirm that financial commitment.