Troubled waters

2016-10-30 06:56
The incomplete Rand Water pumping station site in Alberton. (Photo: Tebogo Letsie)

The incomplete Rand Water pumping station site in Alberton. (Photo: Tebogo Letsie)

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South Africa’s biggest water utility has handed over R1.1 billion in tenders to a company that is battling to complete critical work, which has led to its paying millions more for work that is still not finished.

Rand Water, which supplies the whole of Gauteng and parts of Mpumalanga, Free State and North West with water, also paid the company, Fast Move Electrical, R56 million in advance for work it has not completed.

A City Press investigation has found that between March 2011 and June last year, Rand Water dished out at least four mega water projects to the little-known company, a close corporation owned by Zimbabwe-born businessman Osfael Vusumuzi Mazibuko.

These include:

R371 million for a 11km pipeline in the Vaal that was supposed be completed by 2014, but is still not finished and, experts say, will cost at least another R100 million to complete;

- A R490 million project to design and build an engine room and reservoir at the Zuikerbosch Pumping Station in Vereeniging. Its completion date is in 2018, but workers have not yet started working on site;

A R151 million contract to install four electrical motors at a pumping station in Meyersdal, Midvaal, which was supposed to have been completed 21 months ago. It remains incomplete, but the company has already been paid R143 million; and

- A R31 million water pipeline in Brakpan, Ekurhuleni, which was supposed to be completed in 2012, but was finished in October 2014 – R10 million over budget.

A water expert who spoke on condition of anonymity told City Press that the impact of these specific project delays mean “significant” escalation in costs “and water users will eventually pick up the tab”.

“Also, don’t forget that the current infrastructure is too old, so, in the meantime, more water is being lost through leaky pipes and other crumbling infrastructure,” he said.

“Unaccounted-for water that is lost through leaky pipes costs Rand Water hundreds of millions every year.

"However, I must stress that it is a good thing that Rand Water is replacing old infrastructure that reached its life span many moons ago.”

This is the latest in a string of irregular water projects City Press has uncovered.

In July, City Press exposed attempts by Water and Sanitation Minister Nomvula Mokonyane and her Lesotho counterpart to capture the R26 billion Lesotho Highlands Water Project and give contracts to politically connected companies.

Last month, City Press reported that the department of water and sanitation was at loggerheads with Treasury over the impending merger of KwaZulu-Natal’s Umgeni and Mhlathuze water boards.

In April, President Jacob Zuma proclaimed a Special Investigating Unit investigation into how LTE – a little-known firm of consulting engineers – bagged more than R2 billion in contracts throughout the country.

Three weeks ago, Mokonyane announced an investigation into her department’s procurement processes, as well as a review of all deals signed since she was appointed minister in 2014. Tenders awarded before her appointment, which were still running, would also be looked into, she said.

The document trail

Documents City Press has obtained show that in August 2014, Rand Water made three upfront payments to Fast Move Electrical totalling R56 million for work it had not yet completed on two separate contracts. Advance payments to companies are expressly forbidden by the Public Finance Management Act.

One of those documents is a payment certificate issued by Rand Water that confirms an upfront fee of R25 million paid for the still incomplete Vaal water pipeline.

Mazibuko declined to comment this week, and referred all queries to Rand Water.

The utility’s spokesperson, Justice Mohale, confirmed the delays and cost overruns of projects in Fast Move’s hands, but said there were good explanations for them.

Mohale remained insistent that Fast Move was never paid upfront on any of its contracts, saying: “There were no advanced payments made as alleged.”

Meyersdal Pumping Station

City Press has also established that R31 million was paid in two advance payments for four electrical motors for the Meyersdal Pumping Station project, which is still incomplete.

At the Meyersdal site, City Press found Fast Move’s employees and equipment hard at work. The site – said an insider close to the water utility with intimate knowledge of the projects, who spoke on condition of anonymity – should have been handed over to Rand Water in February 2015.

“The duration of the contract was 18 months,” the insider said.

Mohale confirmed that the original completion date was February last year, but an extension was granted to July that same year.

“Rand Water granted the contractor the extension of time at the contractor’s costs. The estimated completion is February next year,” he said.

“The issue of applicable penalties [for late completion] is currently under review by the two parties as per contractual mechanisms.”

About R160 million would have been paid to the contractor by the time it handed over the site, he said.

Problematic pipeline

Regarding the Vaal pipeline project, the payment certificate shows that Fast Move was paid R405 million – R34 million more than the initial contract value of R371 million.

The insider close to Rand Water said that about 3km of pipeline, valued at more than R100 million, was still to be laid and that this cost would be passed on to Rand Water and, by extension, its users.

However, Mohale said provisions had been made for R29 million in escalations and a further R32.6 million in contingencies.

Minutes of meetings, obtained by City Press, show that Fast Move should have finished the Vaal pipeline 18 months after it was awarded the contract.

The company started work on the contract in July 2013.

When City Press visited the construction site near Meyerton this week, workers, pay loaders and front loaders were busy on site.

Mohale blamed the delays on “abnormal underground water” conditions, continuous flooding of work areas, collapsing soil and the diversion of the Klip River in order to lay the pipes.

Excessively hard rock, which required specialised blasting, also contributed to the delays, he said.

“The question relating to 3km of the outstanding work is currently for internal discussions. This information has been prematurely leaked to the media,” he said, adding that all work is due to be completed by May next year.

“The contractual matters relating to penalties cannot be disclosed since they are under review.”

Brakpan pipeline

The insider said it was curious that – after Fast Move took three years to complete the comparatively small, 12-month Brakpan pipeline project, completing it in 2014 – it subsequently received “projects worth billion of rands”.

However, Mohale defended the company, saying the delays were not Fast Move’s fault, and it was held up by several factors such as a delay in the issuing of a water-use licence, problems with interconnections to existing infrastructure and changes to the scope of work.

The firm was therefore not penalised for the delays, he said. Normally, construction companies incur heavy penalties if they are not able to meet deadlines.

As a result of the delays, escalations and other contingencies, Rand Water ended up with a R41.6 million bill for the R31 million project, Mohale said.

Pumping station still not started

City Press was unable to access the site of the Zuikerbosch Pumping Station, but the insider said Fast Move, which received the contract in June last year, had still not started work and was unlikely to make the deadline.

“They are still establishing the site,” he said.

However, Mohale insisted the company would meet the December 2018 completion deadline.

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Read more on:    rand water  |  nomvula mokonyane  |  sanitation

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