Manase: Mpisane raked in millions

2013-07-28 14:00

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Report shows contract’s original costs of R78m escalated to R200m

Durban tender queen Shauwn Mpisane’s Zikhulise Cleaning company was given the gift that keeps on giving by the eThekwini Municipality.

The gift took the form of a multimillion-rand Umlazi housing project with no specified budget cap. Tender procedures were ignored when the contract was awarded to Zikhulise Cleaning, Maintenance and Transport, on the instruction of city management.

The Manase Report, released to City Press this week, shows that, in March 2006, former Durban city manager Michael Sutcliffe and his management team recommended to council that the contract for the project, valued at some R78?million, be given to Zikhulise after the initial contractor pulled out.

The city’s head of housing, Cogi Pather, extended the contract with no specified contract sum, a move criticised by Manase as “very loose”.

The failure to cap the contract and the linking of the final bill to the number of subsidies available to build houses in the area resulted in a massive number of variations in the contract, with costs escalating to about R200?million.

The Umlazi project – which Mpisane has repeatedly insisted was legitimate – is not the only dubious deal Manase unearthed.

The revamp of Durban’s council flats in 2007 was manipulated by city officials and consultants to channel multimillion-rand contracts to favoured contractors and supply companies owned by housing department staff.

The eThekwini municipality unlawfully appointed city consultant Vaughan Charles and Associates to design and run its tenders for upgrading housing projects, says the Manase report into corruption in the city. Charles is himself a major player in the Durban property-development market and was a partner of Nandi Mandela, one of former president Nelson Mandela’s granddaughters, in the failed Dolphin Whispers project.

The report states Charles allegedly manipulated the tender process to ensure tenders were awarded to a company called Doctor Khumalo Construction, even when other firms submitted bids that were better for the city.

Manase and Associates was appointed in April 2011 by Cooperative Governance MEC Nomusa Dube to probe the use of section 36 of the Municipal Finance Management Act, designed for emergency projects, by the city, generating some R2.1?billion in unauthorised spending since 2009.

The move was sparked by an earlier probe by Ngubane and Associates into housing and other contracts, with the Manase team incorporating the earlier probe. The report was released to City Press this week following an application in terms of the Promotion of Access to Information Act.

According to Manase, the abuse of council funds and processes did not end with the dodgy tender award. Charles – through the design of the tenders – prescribed that paint for the contracts to renovate council flats at Chatsworth and Marrianridge must be bought from Inyanga Trading 337, a company run by Ronnika Naidoo and Jannika Govender, themselves council employees and the wives of city housing department managers Magan Naidoo and Devan Govender.

The report found that in the Crossmoor, Chatsworth upgrade, a tender for R6.2?million – escalated to R8?million – was awarded to Doctor Khumalo Construction without proper tender procedures being followed.

The amount was later extended by an additional R7?million – because costs were allegedly originally miscalculated by Charles – using section 36 of the Municipal Finance Management Act. This was on the instruction of deputy city manager Derek Naidoo, who insisted that Doctor Khumalo again be given the work.

It found that the city’s bid evaluation committee, which was legally obliged to evaluate the various bids for the contract, did not do its job.

“The evaluation procedures and duties were conducted by Vaughan Charles and Associates?.?.?.?Such conduct is prohibited by Section 4 (3) of Supply Chain Management Policy, which stipulates the council or accounting officer may not delegate, or subdelegate, any supply chain management powers or duties to a person who is not an official of the municipality or to a committee which is not exclusively comprised of the municipality,” said the report.

It found that, in a report by Pather on the contract to the city’s bid adjudication committee, Pather’s deputy Yunus Sacoor misled the committee by claiming proper tender procedures were followed and that the committee, and not Vaughan Charles, had evaluated bids.

It also raised concerns that the cost of the Crossmoor project had doubled by the time it was completed.

The investigating team noted “with some concern the apparent miscalculation of the initial estimate of costs by Vaughan Charles and Associates, a firm of professional quantity surveyors” (who were conflicted as they were also the appointed project managers) to rehabilitate the Crossmoor units by almost 100%, particularly given the absence of any previously undetected geotechnical factors”.

“It is submitted that the value of the requested increase in costs is most peculiar and the team is yet to be provided of any record of any official inquiry?.?.?.?into the reasons for such a gross miscalculation.”

It also found that, in the Crossmoor project, Doctor Khumalo should not have been given the job as it was only certified for projects up to the value of R3?million.

The report found that in the R37?million revamp of flats at Bayview, Chatsworth, the tender was withdrawn after a tender checker discovered Doctor Khumalo’s certification problems and that the company had no tax certificate. The tender was reissued as a series of tenders all valued at under R3?million. The tender was then awarded to Doctor Khumalo, using section 36.

Again, the bid evaluation was carried out by Charles instead of the bid evaluation committee. An affidavit from one of the failed bidders, Triple T Construction, which is attached to the report along with similar statements by two other contractors, states that tender documents were obtained from Charles’ offices, where the tender briefing and opening were also conducted.

According to the terms of the Bayview tender, paints were to be purchased only from Nyanga Trading 337, a stipulation which, Manase said, violated supply chain management policy. Further supply dictates were used to disqualify a better bid from a company called Khayelihle Projects, another supply chain management violation, it said.

“It would appear the entire procurement process was manipulated in favour of Doctor Khumalo Construction. In addition, it has been demonstrated that the housing report contained material misrepresentations relating to the procurement processes followed and appears to have been drafted in order to intentionally conceal the irregular processes adopted by Vaughan Charles and Associates,” it said.

It recommended the city take civil and criminal action against the officials involved in the projects and investigate the deals to recover any money lost to the city by corruption.

It also found Sutcliffe had violated section 34 of the Prevention and Combating of Corrupt Activities Act by not reporting the irregular deals to the police for more than two years.

Sutcliffe’s failure, it said, cost the city about R1.1 million.

Sutcliffe this week dismissed the claim, saying his lawyers at the city advised him there was no loss and thus no need to report anything.

Charles told City Press he had not been interviewed by Manase’s investigators and said his appointment was legitimate. He undertook to respond to questions, but failed to do so. He issued the following statement: “I deny the allegations in their entirety.”

What you need to know about Manase

»?Manase and Associates are chartered accountants whose founder and CEO, Zodwa Manase, is a former board chairperson of arms parastatal Denel

»?The Manase Report deals with allegations of corruption in eThekwini municipality of R2.1?billion worth of unauthorised expenditure over a three-year period

»?The probe was appointed on April 1 2011

»?It wrapped up its work in June 2011

»?The final report, released to City Press this week, is 7?051 pages long, which includes supporting documents

What has happened since Manase?

The eThekwini Municipality has implemented “almost all’’ of the Manase Report’s recommendations, but will blacklist any companies found in follow-up investigations to have been involved in corruption.

Spokesperson Thabo Mofokeng also said councillors found to have done business with the city had appeared before the ethics committee and had been fined. Officials who traded with the city had also been disciplined. Most of the disciplinary hearings have already wound up their work.

The city, Mofokeng said, had worked with the Auditor-General, who had identified R2.1?billion in unauthorised expenditure over three years in his reports, to “regularise’’ the bulk of the spending. He said the city had still received “value for money’’, as projects had been completed.

The city had also, with the Auditor-General, introduced new measures to tighten up financial controls and improve the city’s tender processes.

“City manager S’bu Sithole handed the report to the Special Investigating Unit some time ago for investigation into the allegations of corruption.

They will make their recommendations to the appropriate agencies,’’ he said.

He said companies found to have done shoddy work or to have been involved in illegal activities would be banned from doing business with the city.

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