How to burn R358.7m

2018-07-22 00:00

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There are many ways to loot a municipality, and a recent forensic report details how R358.7m from public coffers was plundered.

The highly anticipated report on Mpumalanga’s Thaba Chweu Local Municipality, which City Press has obtained, shows how brazen officials incurred wasteful and irregular expenses.

It reveals that officials allocated donated houses to themselves and their relatives, made irregular payments to law firms, paid companies for work not done, flouted tender processes to appoint certain companies, and flogged off municipal land cheaply to private companies and a conveyancer.

The Thaba Chweu council refused to release the report after its finalisation two months ago, and it took protest marches by residents and legal threats from opposition parties for it to change its mind.

The municipality has been teetering on the brink of collapse for eight years, receiving 10 consecutive disclaimers from the Auditor-General, whose reports indicate it haemorrhaged R358.7m from 2011 until now.

Thaba Chweu, which owes Eskom more than R400m, has had 16 acting municipal managers since 2010. The findings, the report states, are just the tip of the iceberg.

Auditors from Audit and Risk Management Solutions say they could not find any documents to scrutinise for transactions that took place between 2011 and 2014. Their findings are based on transactions that took place in the 2015/16 financial year until now.

A total of R201.2m of the lost money cannot be recovered. The municipality’s only hope is to recover R84.4m.

These are some of the questionable transactions in which unscrupulous officials participated:

Irregular payments to law firms

The municipality appointed Macbeth Ngcongwane Attorneys on a R120 000 monthly retainer from February to August 2015 to handle all legal matters. But officials diverted work to other law firms during those six months, costing the municipality R3.5m instead of the R720 000 retainer. The report recommends that R3.7m in “wasteful” expenditure be reclaimed from the officials responsible.

James Montakisi, former acting director: corporate services, allegedly paid Macbeth Ngcongwane Attorneys R166 141 over and above the retainer amount.

Ngcongwane said that he was hired on a retainer to deal with cases within Thaba Chweu municipal area and anything outside the area had to be paid over and above the retainer.

“I was paid extra for work outside the area. We did well because the municipality had no legal unit and had valuable properties attached. The objective was achieved,” Ngcongwane said.

Irregular appointment of former police commissioner’s company

When he was acting municipal manager, now suspended chief financial officer allegedly paid George Fivaz Forensic and Risk R840 000 to investigate cable theft in August 2016 without following tender processes. The company is owned by former national police commissioner George Fivaz. The six-month contract was irregular, the report found, and payments were not linked to any outcome.

“[He] said he deviated [from supply chain processes] because he wanted the investigation to be confidential. Payments were not linked to any outcome and were fruitless as they did not require any tangible outcome,” the report found.

R14m land scandal

Private companies disposed of stands worth R14.9m, but the money for the land did not find its way to the municipality’s coffers.

The report recommends the municipality institute a civil claim against a law firm to recover R8.9m plus interest after money for 400 stands sold by a company called Vipcon was allegedly not paid to the council. Another company, Townlands Commercial and Industrial, must return R6m owed to the municipality for land sales, the report recommends.

Paying for breaking the rules

Three municipal infrastructure grant road construction projects worth R7.7m were extended without a letter authorising this.

The report found that the municipality’s now suspended project management unit manager did this with the aim of “bypassing supply chain management processes”.

“[He] awarded projects to existing contractors as variations, thereby incurring irregular expenditure,” the report found. The variation of projects was also more than 20% of the value of the contract, which is in contravention of Treasury instructions.

Officials also resorted to turnkey projects, in which private companies spend their money and recoup it once the project is completed. Auditors said the municipality implemented 21 turnkey projects from 2015 to last year, but they “did not find any technical reason for using the turnkey method of contracting”.

As a result, two roads worth R14.2m were so badly built that the money must be recovered.

Not good enough

Thaba Chweu is considered a cash cow for senior ANC leaders because it remains untouched while other poorly performing municipalities have been placed under administration by the provincial government.

Acting municipal manager Sinky Matsi said three officials implicated in the report have been suspended. They are chief financial officer, project management unit manager and former acting director of corporate services.

“One has been charged for financial mismanagement, while the two other officials are still to be charged,” Matsi said.

Economic Freedom Fighters councillor Exodus Maloka has called for more officials to be suspended

DA legislature member Jane Sithole called on Premier Refilwe Mtsweni to place Thaba Chweu under administration.

“The municipality is approaching its 10th consecutive disclaimer of opinion. The Auditor-General consistently has damning findings against the municipality, but the situation remains the same. This is partly due to the fact that systems in the municipality either don’t exist, or have been corrupted to the extent that they have collapsed,” Sithole said.

Read more on:    municipalities

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