/How Emfuleni wasted millions: Officials, tenderpreneurs and private sector companies fingered for fraud

How Emfuleni wasted millions: Officials, tenderpreneurs and private sector companies fingered for fraud

Municipality to charge officials of pouring money down drain, bringing service delivery to a halt

The embattled Emfuleni Local Municipality paid the company of billionaire businessperson and ANC benefactor Robert Gumede R16.2 million for an expired cellphone services contract and settled a R1.2 million security bill at the guesthouse of former mayor Simon Mofokeng.

These details are contained in five forensic reports which finger officials, politicians, tenderpreneurs and private sector companies of fraud and corruption by awarding and mismanaging five tenders totalling more than R300 million.

The reports show how officials allegedly irregularly awarded and fraudulently extended security, fleet lease, cellphone and landfill sites management tenders in contravention of the Municipal Finance Management Act.

The reports, which City Press has obtained, were finalised in May, June and last month.

The municipality, which serves residents and towns in the Vaal in Gauteng, was placed under administration in June last year.

The forensic reports, which were compiled by Comperio Consulting, found that:

. Mafoko Security which was appointed to deliver security services for three years for R165 million, was paid more than R57 million more;

. Wesizwe Risk Solutions was paid R17.6 million after a security tender between the council and BBP Security Services was fraudulently transferred to the company;

. The Hallmark Motor Group was paid R27 million for two fleet leases and maintenance contracts which had expired and had been irregularly extended;

. Sungu Sungu Projects, appointed to manage a landfill site for R14 million for three years, eventually got paid about R24 million more after other projects were piled on the company without going out to tender;

. Between 2007 and 2017 Gijima AST was paid R16.2 million for a tender to provide a bouquet of cellphone services contract which expired in 2007; and

. The council incurred irregular expenditure totalling more than R1.2 million after paying for the security at the guesthouse of its former mayor Simon Mofokeng.

MAFOKO MAKES HAY WHILE THE SUN SHINES

Comperio’s report on Mafoko shows that in February 2015 Emfuleni signed a service level agreement with the firm for the provision of security for three years.

Emfuleni awarded Mafoko the R165 million contract through piggybacking on another contract which the security firm had with the Sedibeng District Municipality.

To save costs and time, and in emergencies, Treasury allows “piggybacking”.

This permits government entities to appoint a company already contracted by another department to deliver the same services, with the same terms and conditions, without going out to tender.

The report shows that at the end of January last year, when the contract expired, the municipality had paid Mafoko R57 million more than had been agreed.

Officials, the report shows, irregularly extended Mafoko’s contract twice between February and July last year, costing the council another R37.8 million.

“The expenditure incurred in terms of the contract was irregular. The municipality’s contract with Mafoko was further extended until the end of July last year without following due process. As per invoice analysis, it appears as if Mafoko inflated invoices, said the report.

EVERYTHING KEEPS GOING WRONG

In June 2006 and September 2007, Emfuleni and Vaal Toyota signed two five-year agreements for the latter to lease and maintain vehicles to the council.

The 2006 contract was for the supply and maintenance of 70 cars but Comperio’s investigators could not verify the delivery of 19 of the cars.

The report said Vaal Toyota delivered only 18 cars of the 2007 contract.

According to the dossier, Emfuleni did not return the cars when both contracts expired in 2011 and 2012.

Between July 2011 and May 2017 the municipality paid Vaal Toyota a further R27.1 million for both contracts, which had not been formally extended.

The report shows that for the 2006 contract Vaal Toyota had submitted an expired tax clearance certificate belonging to the Hallmark group.

It shows that although the 2007 contract was signed with Vaal Toyota, it was New Vaal Motors which had submitted the bid.

Both New Vaal Motors and Vaal Toyota are subsidiaries of the Hallmark Motor Group.

New Vaal Motors, the report said, had submitted an expired tax clearance certificate belonging to the Hallmark group.

THROUGH THE BACKDOOR

Comperio’s investigators have recommended that the council makes an effort to recover R27 million from BBP Security Services and Wesizwe Risk Solutions.

In November 2013 Emfuleni awarded BBP a security tender through piggybacking on a three-year contract the company already had with the Midvaal Local Municipality.

In July Emfuleni’s officials informed the council’s supply chain office that BBP had changed it’s name to Wesizwe Risk Solutions. The officials said the company had also changed its banking details.

But the council’s legal office warned that the changing BBP’s name and banking details was a ruse to transfer the tender to Wesizwe Risk Solutions, a company which had been registered in 2008.

The change of BBP’s name and banking details into Wesizwe were effected despite the warning from lawyers.

When the contract expired in March 2015, officials allegedly irregularly extended it without following processes.

The municipality paid BBP Security Services R9.3 million when the contract expired at the end of March.

Between April 2015 and May last year Wesizwe Risk Solutions was paid R17.6 million.

Investigators concluded that both companies committed fraud and that Emfuleni should recover all monies paid to them.

THE EVERGREEN CONTRACT

One of Comperio’s reports shows that in February 2003 Emfuleni signed a three-year contract with Gijima AST, then known as AST Vaal Triangle, for the provision of 20 cellphone contracts.

“The contract was valid for three years whereafter it automatically renewed for a successive one year unless terminated.

“The contract expired on March 24 2006 and there is no documentary evidence to substantiate the approval pertaining to the extension,” said the report, adding that by the end of March 2007 Gijima had been paid R3 million.

After the expiry of the automatic renewal of one year, the contract was not cancelled and was left to run indefinitely. By March 2017 Emfuleni had paid Gijima R16.2 million.

“The contract pertaining to the outsourcing of the cellphones concluded between the municipality and Gijima expired on March 24 2006 although the contract made provision for the renewal of the contract for a period of a year ending on March 24 2007.

“The expenditure, to the amount of R16.2 million, incurred after March 24 2007, can thus be deemed irregular as there is no documentary evidence to substantiate the extension of the contract. The contract can be regarded as an evergreen contract, as there is no predetermined termination date.”

SUNGU SUNGU’S BONANZA

Another report into the appointment of service providers to manage landfill sites shows that in July 2014 members of the bid adjudication committee doctored scores to engineer the appointment of Sungu Sungu Projects to manage the Boitsepi landfill site.

The report shows that officials manipulated scores to prevent Mashinini Enterprises Trust from being appointed.

Sungu Sungu was handed a R14.1 million, three-year contract to manage the Boitsepi landfill site.

The company’s appointment letter included the management of the Palm Springs and Vaaloewer landfill sites, which were not part of the three-year contract.

Sungu Sungu was paid R27 million and R11.2 million respectively for the Boitsepi landfill site and the alleged irregular extensions at Palm Springs and Vaaloewer sites.

WHAT THEY SAID

The Hallmark Motor Group declined to comment, saying the matter was sub judice as it was involved in litigation with the municipality.

Lebo Nare, a director a Mafoko Security declined to comment, saying he had not seen the findings against his company.

Johannes Penning, a director at both BBP Security and Wesizwe Risk Solutions, said there was nothing wrong with how BBP’s contract was taken over by Wesizwe.

Although aware of the ongoing investigations at Emfuleni, he declined to comment further. He said he had not seen the report.

Thabang Kgomo, Sungu Sungu Projects’ director, said there was nothing wrong with how his company was appointed.

“I did absolutely nothing wrong. In fact, we ended up cancelling the contract because they kept extending it and we know that the law does not allow many extensions of contracts. As it is, they still owe us R8 million.”

Emfuleni’s mayor Reverend Gift Moerane said the council received Comperio’s reports last week.

“The municipal public accounts committee will make recommendations on how we move forward. But we are already in the process of laying criminal charges against some of the implicated officials. Mofokeng said a decision had been taken to secure all his properties following an attempt on his life.

“The decision was taken to guard me and all my properties. The attempts were linked to my position hence the security risk analysis and the decisions.”

Gumede’s lawyer Nicqui Galaktiou said the contract, which was supposed to run for three years, continued beyond 2006 because the municipality did not inform Gijima of the council’s intention to terminate the contract.

“The contract states that it will continue indefinitely until either party provides three months’ written notice. Such communication was not received by Gijima.” The company stopped rendering services in September last year, she said, adding that at different stages of the contract Gijima, and it’s forerunner AST, provided the council with data, voice, cellular and audiovisual equipment. All the services by Gijima were based on the 2003 contract, said Galaktiou.

Gijima, she said, did not know about the investigation and was not approached to state the company’s side of the story.

Galaktiou also pointed out that Gijima was not party to the original contract signed in 2003. Gijima merged with AST in April 2005, she said.


 

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