Maano Water v Eskom (383/24) [2025] ZASCA 87: SCA affirms [Eskom’s] right to cancel unworkable tenders

On 12 June 2025, the Supreme Court of Appeal dismissed Maano Water’s appeal and upheld Eskom’s decision to cancel Tender CORP 5542, which had sought suppliers for sulphuric acid over five years.

By confirming that Eskom’s cancellation was an unreviewable executive act, rationally taken in response to global price shocks, the SCA has drawn clear boundaries around the rights of reserve bidders and the limits of “agreement to negotiate” clauses.

Factual and procedural background

In August 2021, Eskom issued a tender for a five-year sulphuric-acid supply contract. After the highest-ranked bidder’s proposal became unaffordable following a 250 percent spike in global sulphur prices, Eskom turned to Maano Water as the first reserve. Maano proposed a dollar-based cost-adjustment model on 21 April 2022, but Eskom rejected it on 4 May, citing unmanageable exchange-rate and commodity-price risks.

Despite further meetings, Eskom and Maano remained at loggerheads. On 4 August 2022, Eskom formally cancelled the tender, explaining that the original contract was no longer “fit for purpose” given market volatility and that continuing with any reserve bidder would likely yield the same result. Maano launched an urgent application seeking a mandamus to resume negotiations, or alternatively to review and set aside the cancellation. The High Court refused relief, and Maano appealed.

Core legal issues and findings

 Reviewability: Executive vs administrative action
The SCA held that Eskom’s tender-cancellation decision was an executive act, not administrative action under PAJA. Drawing on Tshwane City v Nambiti Technologies, the court reasoned that cancelling a tender before any binding contract exists affects only expectations, not legal rights. As a result, PAJA’s “just and equitable” review did not apply; instead, any challenge fell to the common-law principle of legality (rationality review).

Rationality of the cancellation
Under the principle of legality, Eskom’s decision was upheld as rationally connected to its purpose. The SCA emphasised that Eskom had repeatedly communicated its objections to dollar-indexation, documented the unsustainable cost projections (from about ZAR289 million to ZAR529 million), and lawfully exercised its explicit power (clause 1.6.1 of its Standard Conditions of Tender) to cancel the process. In the face of unforeseeable, dramatic cost shifts, it would have been irrational to bind public funds under the original terms.

“Agreement to Negotiate” clauses and pacta de contrahendo
Maano argued that clause 1.1 (requiring fair, transparent and cost-effective conduct) created a binding “right to negotiate to deadlock,” preventing Eskom from cancelling until negotiations reached an impasse. The SCA unanimously rejected this, applying the Letaba Sawmills and Makate v Vodacom principles: an “agreement to agree” is enforceable only if essential terms are agreed, and a clear deadlock-breaking mechanism exists. Here, clause 1.1 was a general conduct pledge, lacking any mechanism to resolve negotiation deadlock. Moreover, it sat alongside an express cancellation right so it imposed no substantive limitation on Eskom.

Practical Implications

For litigators

• Frame challenges correctly: When a client seeks to set aside a tender cancellation, assess whether the act is administrative (PAJA) or executive (legality). Tailor grounds accordingly. PAJA seemingly won’t cover pre-contract cancellations.
• Build the rationality record: Secure and present contemporaneous documents (i.e. tender-committee minutes, feedback reports and correspondence) to establish the contracting authority’s rationale and demonstrate reasonableness.
• Clarify deadlock mechanisms: If negotiating rights are crucial, advise drafting tender provisions that specify a deadlock-resolution mechanism (e.g., arbitration or expert determination), rather than relying on broad “fair conduct” commitments.

For clients and bidders

• Manage expectations: Reserve bidders have no entitlement to continued negotiation absent a binding contract or expressly enforceable terms.
• Negotiate smartly: Propose cost-adjustment models with built-in parametric or hedging protections to address the buyer’s risk concerns, rather than shifting outright commodity and forex exposure.

For procurement authorities

• Document decision-making: Record every negotiation phase, cost analysis and risk assessment to buttress rationality and guard against review.
• Draft clear termination clauses: Include explicit cancellation powers in tender documents (as Eskom did) to ensure unworkable processes can be ended without legal uncertainty.

Conclusion

Maano Water v Eskom confirms that state-owned entities enjoy broad executive discretion to cancel tenders in the face of fundamental market changes, so long as decisions are rational and within the tender’s express terms. For practitioners, the judgment underscores the need to distinguish between administrative and executive acts, to document rational decision-making thoroughly, and to negotiate enforceable deadlock-resolution clauses rather than vague “agreement to negotiate” promises.

For advice on review challenges and procurement law, contact Dee-dee Mathelela, Head of our Dispute Resolution Practice.