Nomvula defies Treasury

2016-09-11 06:03
Nomvula Mokonyane (Picture: Beeld)

Nomvula Mokonyane (Picture: Beeld)

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Water Affairs and Sanitation Minister Nomvula Mokonyane is embroiled in fresh controversy as her department proceeds to merge two of the country’s most powerful water boards, despite misgivings by Treasury.

Treasury has raised concerns over the impending merger of Umgeni and Mhlathuze water boards in KwaZulu-Natal. Should this go ahead, controversial businesswoman Dudu Myeni stands to benefit as she has been appointed by Mokonyane as the board chairperson overseeing the amalgamation.

Government reappointed Myeni, an ally of President Jacob Zuma, to chair the lossmaking SAA last week, with 11 new board members.

In a strongly worded letter in September last year, Treasury director-general Lungisa Fuzile warned her former water and sanitation counterpart Margaret-Ann Diedricks that merging the water utilities could expose Umgeni “to serious risk, including a credit downgrade”.

Umgeni has a R600 million loan from the European Investment Bank and has issued bonds in excess of R600 million.

“The domestic medium-term programme also contains a cross-default clause, so should the European bank declare an event of default, the bondholders may also declare such an event,” said Fuzile.

“This could mean that the combined bond and loan tally of R1.25 billion would have to be repaid immediately. As liability [for the plan to disestablish the two water boards and merge them into a single entity] vests with the water and sanitation minister, if Umgeni Water were unable to repay these loans, her department would have to secure R1.25 billion from its budget through reprioritisation to settle Umgeni’s liabilities.”

While Treasury was not necessarily against the merger, Fuzile warned that “a key concern is that the proposed disestablishment of Umgeni and Mhlathuze differs vastly from the recommendations of the Institutional Realignment and Reform process [undertaken by the water and sanitation department] and the report subsequently approved by Cabinet”.

Fuzile also warned Diedricks that, according to the Public Finance Management Act, she should seek his permission to establish the new entity and submit a business plan for his approval.

Umgeni is one of the biggest water boards in the country, serving more than 6 million people in the eThekwini metro, five district municipalities and one local council. Mhlathuze is smaller and serves the Umkhanyakude municipality in northern KwaZulu-Natal, among others.

A senior official in Mokonyane’s office, who spoke on condition of anonymity, said while there was a Cabinet directive to realign water boards to create efficiencies, the speed with which Mokonyane was moving to merge the two water boards seemed to suggest that she was trying to sneak Myeni into the new entity.

“The reality is Myeni’s term has expired. She should not be there. It is also legally wrong to appoint her as chair of a board that does not exist yet,” said the official.

Dudu Myeni

Myeni and Mokonyane’s department are also fending off court action seeking to remove Myeni from Mhlathuze and the new proposed water board.

In November last year, Myeni suspended Mhlathuze chief executive Sibusiso Makhanya, citing allegations of tender irregularities.

In turn, in July this year, Makhanya rushed to the Pietermaritzburg High Court, asking judges to overturn the suspension. In court papers, Makhanya said Myeni and her board had no right to suspend him and that their term of office expired in February last year and was illegally extended by Mokonyane.

“The minister has no statutory power to extend the board’s term of office. It has lapsed, having done so on February 28 2015, and the minister has no power to extend it,” read the papers. Mokonyane is one of the respondents in the case.

“The term of office of the chairperson of the board has expired, and the minister can neither extend it nor reappoint her [Myeni]. She has served the maximum period of three terms. The minister’s purported extension of the board’s and the chairperson’s term of office is unconstitutional. It amounts to an unlawful usurpation of legislative powers.”

According to the papers, Myeni was first appointed to the board in 2002. In 2006, she was reappointed for a second term. In 2010, the water authority appointed a new board.

“A selection panel had found that the second respondent [Myeni] was not suitable to be reappointed as she would bring instability back in the board. The second respondent was also excluded on the basis that she had failed a probity test due to a substantial court order against her name,” said Makhanya.

“Eleven days after [Myeni’s] nonappointment, the then water affairs minister Buyelwa Sonjica intervened and reinstated [her] and other members to the board, insisting that the appointment of the new board was flawed.”

When the process to appoint a new board was restarted, probity tests were not done, he claimed in the papers, stating that was how Myeni sneaked in for the third term.

“The Water Act does not allow anyone to serve more than three terms,” argued Makhanya.

Malicious intent

Mokonyane had extended the board’s term to June last year. She then extended it for the second time – indefinitely. This extension coincided with Mokonyane’s announcement to merge the Mhlathuze and Umgeni water boards.

Makhanya contends that Mokonyane extended the term of the board for the second time to benefit Myeni and ensure she became part of the board that would result from the merger of Umgeni and Mhlathuze.

“I will seek to demonstrate that Myeni has tyrannical control over the functions of Mhlathuze Water. [She] has overseen and directly sought to enforce the irregular award of tenders and appointment of personnel who, I believe, were favoured by her.”

Makhanya goes on to argue that:

  • In March 2015, Myeni instructed him to invoice the KwaZulu-Natal cooperative governance department to the tune of R1.4 million for work the water authority had not done. Myeni had also told Makhanya that she would give him account details of where to deposit the money.
  • Since 2014 Myeni had been demanding information about all tenders to be advertised.
  • Myeni had not declared her interests in a firm that had been awarded a tender by the water board.
  • Myeni demanded the cancellation of a R50 million tender after realising that the company she was eyeing was not appointed.

He adds that when Myeni told him he was being investigated, she said: “Ukuthi wena Makhanya awungidlisi, kanti abanye oCEO bayabadlisa o chairperson babo” [It is because you, Makhanya, are not feeding me, when other chief executives are feeding their chairpersons].

Myeni hits back

In her responding affidavit, Myeni accuses Makhanya of tender irregularities. “The investigation also revealed that procurement processes were not followed in relation to a number of projects ... The applicant appeared to not have the relevant delegation of authority to sign certain contracts.”

A number of tender awards, Myeni claims in court papers, appeared to have been concluded irregularly while under the supervision of the client.

She also claims she was surprised by Makhanya’s argument that the board had no authority to suspend him, since he had written a letter stating he believed “the extension of the board’s term of office has been the right decision by the minister, which has kept the organisation stable, and that he was instrumental in ensuring that the board’s term of office is extended on both occasions”.

Makhanya, argued Myeni, had also said he had “a very positive relationship” with her. At the time of going to print, Myeni had not responded to questions sent on Thursday by City Press.

The department responds

Mlimandlela Ndamase, Mokonyane’s spokesperson, said: “It was deemed prudent to extend the current board’s term of office until a new board is in place to ensure that Mhlathuze is not without a board in place. The process of establishing the single KwaZulu-Natal Water Board would take about three years.

“The minister is empowered by law to extend the life of a board, and to establish and disestablish water boards,” he added, saying Myeni’s retention on the board was done “in the interest of continuity, stability and the need to ensure good governance”.

Read more on:    treasury  |  dudu myeni  |  nomvula mokonyane  |  water scandal

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