How R502m grew to R2.7bn in a year

City Press, April 24 2016
City Press, April 24 2016

President Jacob Zuma has ordered the Special Investigating Unit to probe how a little-known firm of consulting engineers received water and sanitation contracts worth hundreds of millions of rands without tendering for the jobs.

In terms of the proclamation gazetted last week, the unit will investigate the appointment of LTE Consulting by Lepelle Northern Water.

Documents that City Press has obtained show how the value of the contracts dished out to LTE and its related companies has increased from R502 million to R2.7 billion in less than a year.

In September 2014, Lepelle Northern appointed LTE Consulting to deliver a R502 million “turnkey” emergency water and sanitation project in the water-scarce Mopani District Municipality in Limpopo, where the national Freedom Day celebrations will be held on Wednesday.

Just six months earlier, in Sweetwaters, south of Johannesburg, the company scored a R200 million water and sewer reticulation contract it had not tendered for.

The proclamation reveals that the investigating unit will probe the Gauteng and Limpopo contracts, including allegations of “serious maladministration”, theft and wastage of public money, and flouting tender procedures.

LTE was appointed on a “turnkey” basis for the Limpopo and Gauteng projects. In turnkey projects, a single company is appointed and becomes responsible for the entire project, including the appointment of all subcontractors.

The Limpopo gig

Last month, City Press reported that shortly after her appointment as water and sanitation minister, Nomvula Mokonyane authorised Polokwane-based water utility Lepelle Northern to implement a R502 million water and sewage provision project in Giyani.

Lepelle directly appointed LTE Consulting on an emergency basis, and the company in turn appointed Khato Civils and South Zambezi to do the construction.

The project was completed in October 2014. But last year, Lepelle Northern Water dished out nine more mega water projects, totalling R2.2 billion, to the three companies without following any tender procedures.

The documents also reveal that:

  • Between April and September last year, Khato Civils was paid R850 million, of which R735 million was for the nine new projects;
  • Of that sum, R217 million was for “rejuvenating” 154 boreholes. A document from the department of water and sanitation shows that the contract price for this job was set at R198 million, but it was increased to R217 million. This week, two companies quoted City Press less than R100 000 for a single borehole. Mopani’s boreholes cost R1.4 million each to “rejuvenate”;
  • LTE’s Nedbank statements reveal that between June 2014 and February this year, Lepelle made five payments to the company, totalling R134 million; and
  • The companies bagged two more contracts, without tenders, including the design and construction of the Nwamitwa Dam outside Tzaneen and the Nandoni-Mhinga water supply tender. These fall outside of the R2.7 billion in contracts the companies have already received.

The Gauteng project

In March 2014, while Mokonyane was the premier of Gauteng, the directors of LTE discovered that the company was handed a R200 million “turnkey” water and sewer reticulation project for which it had not tendered.

A scandal erupted after the company’s management wrote to the provincial department of human settlements, which gave it the tender, asking it to take it back because it was irregularly awarded and there was no proper tender process.

In this project, LTE appointed Khato Civils, without a public tender, to do the construction work.

What Lepelle says

Lepelle Northern Water acting CEO Phineas Legodi said the nine new projects worth R2.2 billion were always part of the original tender.

“From the beginning, it was clear that for the intervention to be effective, it required that the project be divided into short- and long-term milestones.”

These nine contracts, he said, were part of the long-term projects.

But in an interview with City Press last week, he said the entire project was worth R502 million.

Legodi defended handing over all the mega water projects to LTE, Khato Civils and Zambezi South, saying he was procuring for an emergency project and procurement policies allowed him to do that.

Regarding the R217 million spent on 154 boreholes, Legodi said the scope of work included “sighting, drilling, yield testing, installation of boreholes and pump stations, construction of pump houses, refurbishment of existing boreholes, testing of water quality, design, installation, electrification and power supply”, which contributed to the cost.

LTE responds

Asked how his company received the other nine mega water projects, LTE’s chief executive, Thulani Majola, said: “A tender was advertised for consultants to be on the panel of the department of water and sanitation. LTE responded to the tender and was subsequently appointed.”

Once on the panel, Majola said consultants received work based on their capacity and experience.

“Due to the complexity of this project, and LTE being a Level 6 consultant, we accepted the appointment as per the procurement procedure.”

Majola confirmed that his company was also awarded the contract to design Nwamitwa Dam, but he declined to reveal how much it was worth.

Responding to a question about swift payments made to his company, Majola said: “Invoices are progressively drawn and submitted to the client. The project comprises various work packages, all at varying stages of implementation.

“For invoicing purposes, a single consolidated invoice is drawn per month.”

Khato Civils boss Simbi Phiri declined to comment.

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