Reddy's City Power deal 'irregular'

2017-07-16 06:05
Herman Mashaba

Herman Mashaba

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A forensic investigation into Johannesburg’s power utility has revealed that the R1.2bn contract awarded to ANC benefactor and President Jacob Zuma’s friend Vivian Reddy was irregular.

It has emerged that Johannesburg City Power has paid Edison Power Group, owned by KwaZulu-Natal business mogul Reddy, an estimated R2.8bn since the company was awarded a contract to install and commission smart meters in August 2012.

According to the SizweNtsalubaGobodo forensic investigation report (commissioned by the city) into the string of allegations of fraud and corruption at City Power, which City Press has obtained, Edison Power Group’s contract did not comply with “legislative and administrative” regulations.

Among the reasons cited for the contract’s noncompliance are the letter of acceptance and the original contract signed by Edison Power Group, which indicate that the company had already been awarded the smart metering tender even before the final adjudication report was signed off on September 10 2012.

The investigation also found evidence of four purchase orders that were created before the actual contract was signed, which was irregular.

“We noted the delivery of 5 000 meters dated December 14 2012 wherein the delivery was made to City Power premises before the contract was concluded on December 18 2012.”

But Reddy rubbished the document, calling it a “fake report”, while former City Power managing director Sicelo Xulu questioned the methodology of the investigation as he was not given the opportunity to respond or clarify critical aspects of the probe.

Both have threatened to fight the matter in court.

The report noted irregularities during the adjudication and awarding of the tender, including that the evaluation criteria and score sheets were altered during the evaluation process without the requisite supporting documentation.

Even Edison Power Group’s broad-based BEE scores have come into question after it emerged that it had submitted an invalid certificate.

The report found that Edison Power Group installed smart meters that were “not functioning or operating as proposed and specified in their bid and service level agreement concluded between them and City Power”.


It also found that Xulu had failed to notify both national and provincial treasury, City of Johannesburg and the Auditor-General about the appointment of a contractor without following the recommendations of the bid adjudication committee.

The report called for him to be reprimanded for having also incorrectly approved discretionary allowances to other employees without budget provisions.

SizweNtsalubaGobodo recommended that City Power take corrective action against its chief financial officer for confirming the budget availability of R600m when only R262m was available in the 2012 financial year.

The report, however, has cleared Xulu on other allegations, including that he had forced a human resources director to pay R7m to Deloitte for services rendered in the department, which the director had refused to pay, stating that she had not contracted the firm.

However, sources within City Power described the forensic investigation as a witch-hunt and questioned why the investigations excluded two other senior officials, Mdu Nzimande and Quentin Green, who were allegedly implicated.

They also questioned how the board made the decision to expel Xulu when it had not received or seen the report.

Reddy argued that former City Power chairperson Reverend Frank Chikane had appointed senior counsel from a major law firm and an international auditing company to conduct an independent investigation.

After seven months of investigation, they found no irregularity in the awarding of the smart meter contract to Edison Power Group and no irregularity perpetrated by any City Power official.

Even the Auditor-General’s office had investigated the matter and found no irregularities, Reddy emphasised.

He added that allegations that the project had doubled in value could not be true as only 80% of the original awarded contract had been completed.

“Former mayor Parks Tau has publicly acknowledged that the smart meters installed by Edison have resulted in revenue from billing increasing by R950m to the City of Johannesburg.

"Just last week, mayor Herman Mashaba stated that the revenue from billing on electricity was at 94%, the highest in the history of the City of Johannesburg,” he quipped, adding that, when they began the project, electricity billing revenue was only at 58%.

“The statement that the meters are dysfunctional is a total misrepresentation and mischievous. It is apparent that the Gobodo statement on the smart meters is a gross fabrication and lacks credibility.

"We will take the appropriate legal action against the authors and also complain to the SA Institute of Chartered Accountants,” he said.

Mashaba said those implicated by the report would be dealt with and that the city’s forensic investigation department was in the process of laying criminal charges with the police.

Read more on:    anc  |  vivian reddy  |  jacob zuma

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