Phuhlani Bafazi Construction v PRASA: Cession, Conduct, and the Limits of Public Procurement

Introduction 

The recent decision in Phuhlani Bafazi Construction (Pty) Ltd t/a Chuma Security Services v Passenger Rail Agency of South Africa and Others (2025/155065) [2025] ZAWCHC 422 has added meaningful clarity to how South African courts view contractual transfers within the public procurement sphere. The Western Cape High Court was asked to determine whether a tacit assignment could arise from conduct, even where a contract expressly prohibits cession without consent. The answer, grounded in both contractual and constitutional reasoning, reaffirms that while form matters, substance – and sustained conduct – often matters more. 

The facts 

At the heart of the dispute was a long-running security services contract originally concluded in 2011 between PRASA and High Goals Investments CC. Although the contract had expired, it continued on a month-to-month basis, as often happens in the public sector. When High Goals was liquidated in 2021, its liquidators sold the business, including the ongoing security arrangement, to Phuhlani Bafazi Construction and in turn Phuhlani promptly notified PRASA of the acquisition. 

Phuhlani nevertheless stepped into the shoes of the former contractor, continued rendering services, and was paid by PRASA for almost three years. The relationship appeared settled until PRASA, following a compliance audit, discovered that it had been transacting with a successor company rather than the original service provider. In August 2025, it issued a termination notice, citing misrepresentation, breach of section 217 of the Constitution, and contraventions of its supply-chain policies. Phuhlani turned to the High Court, seeking declaratory relief confirming the continuation of its contract and challenging the termination as defective and unconstitutional.

The judgment

The judgment explores an important intersection between private contractual autonomy and public-law procurement duties. The original agreement contained a pactum de non cedendo (a clause barring cession without consent), a non-variation clause, and a termination clause triggered by liquidation. PRASA’s argument was that the sale of High Goals’ business to Phuhlani violated these terms and was therefore invalid. The Court disagreed, clarifying that a no-cession clause operates only between the original parties; it does not automatically render a cession void. Rather, it gives the debtor  – in this case PRASA– a personal right to object. Importantly, that right can be waived or suspended by conduct, a principle known as pactum de non petendo.

In this instance, PRASA’s own behaviour told the story. For nearly three years, it accepted services, processed payments, and maintained operational instructions as though Phuhlani were the contracted provider – and this was not acquiescence in ignorance: PRASA had been told of the takeover.

Those actions, said the Court, were inconsistent with an intent to enforce the no-cession clause and gave rise to a tacit agreement recognising Phuhlani as the effective contracting party.

PRASA’s reliance on section 217 of the Constitution fared no better. While that provision requires public procurement to be fair, equitable, transparent, competitive, and cost-effective, the Court reiterated that an organ of state cannot merely invoke section 217 in the abstract. It must identify and prove the specific procurement rule or policy said to have been breached. PRASA failed to produce its supply-chain management policy or demonstrate any actual irregularity, and the Court found its constitutional defence unsupported.

On the question of termination, the Court accepted that PRASA’s formal notice of 29 August 2025 was defective but found that its later conduct – particularly statements in its affidavits – amounted to an implied valid notice. The relationship was therefore terminable on reasonable notice, and Phuhlani was entitled to continue providing services until 30 November 2025.

Conclusion

 The outcome was a measured one. Phuhlani succeeded in demonstrating that a tacit agreement existed and that PRASA’s constitutional arguments were unfounded, but the contract itself was not indefinite. The decision balances the need for legal certainty in public contracting with the practical reality of ongoing service delivery.

More broadly, the judgment reinforces several important principles. First, non-cession clauses are not self-executing prohibitions; they create rights of resistance that can be waived through conduct. Second, public entities must substantiate constitutional claims with specificity, not broad reference to section 217. Third, Treasury instructions and procurement directives apply prospectively, preserving stability in existing arrangements.

Ultimately, Phuhlani Bafazi Construction v PRASA stands as a reminder that public entities are bound not only by their contracts but by their conduct.