There is a shocking revelations of how officials in South Africa’s Emfuleni Local Municipal looted close to ZAR1 billion fron the city making the news across the country.
According to News24, the alleged financial crime was carried out through series of fraud, overcharging and duplication of payments bled the municipality of close to R1 billion and points to gross maladministration, dereliction of duty
The medium reported that at least 33 officials at Emfuleni Local Municipality are implicated in a massive looting spree that saw the municipality spend more than R870 million in irregular contracts.
However, six months after a report by forensic company Comperio Consulting was finalised and adopted by the municipality’s council, none of the officials has been disciplined for their alleged role in bankrupting the municipality.
The municipality lost R873 million in irregular expenditure through several violations of the Municipal Finance Management Act.
The report revealed deep rot and linked the municipal manager, and/or chief operating officer, and/or chief financial officer and/or deputy municipal manager to each of the 15 contracts under investigation.
“This is a concern as it is much easier for a top executive or senior manager to override processes and procedures, as has been seen with the cases in hand,” said the report.
It reveals that the municipality lost R873 million in irregular expenditure through several violations of the Municipal Finance Management Act (MFMA), including irregular expenditure, the extension of contracts without following due process, the transfer contracts to separate legal entities, and the manipulation of procurement processes by altering bid evaluation scores.
The forensic investigators also found that more than R100 million was lost owing to duplication, fraud and overcharging by service providers, and they recommended that those identified to have been party to the looting must be held to account.
“The municipality needs to take a stance if it is serious in addressing irregular practices within [its structures]. Officials still in the employ of the municipality must be afforded the opportunity to discuss the findings with the investigating team, as several of the officials were not available during the investigation process to present their side of the events,” says the report.
It also appears that there are officials who are blocking the procurement and appointment of new service providers
It further recommended that Emfuleni lay criminal charges against all implicated officials and ex-officials so that they can present their case in trial.
The report alleges that there was irregularity in the municipality’s contracts with Aurecon SA, Gijima Holdings, Meso Automation, Fleet Horizon Solutions, Dikopane Project Management, Vaal Toyota/Hallmark, Amasondo Fleet Services and Sungu-Sungu Projects.
Most of the contracts, except those with Vaal Toyota, Amasondo, Brilliant Telecommunications and Red Ant Security, have been cancelled.
Investigators revealed in the report that contracts were not concluded in line with the terms and conditions of the contracts concluded by other organs of state, and that the processes were managed and controlled by senior officials and not the user department.
“There has been massive resistance in cancelling some of the contracts because of the crucial services that they offer. It also appears that there are officials who are blocking the procurement and appointment of new service providers,” one insider told City Press.
The report paints a worrisome picture of the affairs of Emfuleni, which was placed under administration in June 2018 and whose financial woes saw its vehicle fleet, including essential services vehicles, being repossessed.
The municipal reportedly defaulted on payments with service providers including Eskom. It entered into a R50 million payment arrangement with the power utility following the intervention of Gauteng Cooperative Governance and Traditional Affairs MEC Lebogang Maile after creditors began attaching its assets.
Investigators revealed in the report that contracts were not concluded in line with the terms and conditions of the contracts concluded by other organs of state, and that the processes were managed and controlled by senior officials and not the user department, as per its needs.
Gijima, now owned by ANC benefactor Robert Gumede, was paid more than R16 million between April 2007 and December 2017, after the contract had expired
The report reveals that tenders were disqualified for not complying with the minimum requirements though found to be compliant and that the scoring of the bid evaluation committee was altered, resulting in tenders not being awarded to companies with the highest scoring points.
R16 MILLION WORTH OF EXPIRED CONTRACTS
Gijima – previously trading as AST Vaal Triangle, a division of AST Holdings – was awarded a three-year contract in March 2003 to provide Emfuleni with 20 cellphones to be used as standby phones for councillors and staff at the office of the mayor. That contract was automatically renewed in successive one-year periods unless terminated. The report found that there was no documentary evidence to substantiate such extensions.
Gijima, now owned by ANC benefactor Robert Gumede, was paid more than R16 million between April 2007 and December 2017, after the contract had expired. Based on the report, these payments can be deemed as irregular in terms of the MFMA.
Gumede’s lawyer, Nicqui Galaktiou, said the businessperson was not part of the company or its executive during the period in question.
“More importantly, Gijima was not a party to the contract concluded between AST-A Holdings and the municipality. Gijima is being compromised by the conduct of City Press and it will, without a doubt, take steps to protect its reputation if it is in any way defamed or portrayed negatively.
READ: AG battles the looting machine, warns officials to change their ways
“Gijima has also not been informed of what allegations have been made against it, but is expected to answer your questions in a vacuum. It is interesting that City Press will rely on a report ostensibly referring to Gijima, notwithstanding that Gijima’s representatives were never engaged by the investigating company, which leads one to question the reliability of such a so-called forensic report and your motivation in relying thereon,” Galaktiou said.
Duplicate payments totalling R205 101.75 must be recovered from the service provider. All services with the Red Ants and Red Ant Security Relocation and Eviction should be terminated.
She said the matter predates to 2003, “long before our client acquired AST and, 17 years later, none of our client’s board of directors or executives was part of AST and therefore have no knowledge of these facts”.
Duplicate payments totalling R205 101.75 must be recovered from the service provider. All services with the Red Ants and Red Ant Security Relocation and Eviction should be terminated
Comperio recommended that the municipality must enter into discussions with Red Ant Security regarding the invalid VAT number reflected on invoices that the company submitted to the municipality.
If the company fails to provide sufficient proof to substantiate the validity of the VAT number, a total of R9.86 million paid to it must be recovered, following which the municipality must report Red Ant Security to the SA Revenue Service.
“Duplicate payments totalling R205 101.75 must be recovered from the service provider. All services with the Red Ants and Red Ant Security Relocation and Eviction should be terminated within the required notice period and a proper procurement process should be followed to procure a new service provider,” the report says.
Attempts to reach Red Ant Security were unsuccessful.
MAFOKO SECURITY SERVICES
The report found that Mafoko was appointed over a festive season at a fixed fee of R4.6 million without the contract going out to tender. The contract was found to have not been properly managed as the service provider claimed in excess of the fixed monthly fee.
“Council resolved that security costs be capped at R4.5 million per year, but management failed to adhere to the resolution … The municipality paid Mafoko an amount of R4 911 300.04 in relation to supplementary security service costs. According to [public safety manager] Nnete Makhubo, the costs related to risk assessment costs authorised by the office of the municipal manager. These authorisations could not be obtained. [Emfuleni municipal manager] Oupa Nkoane did not have any knowledge of costs being authorised from his office,” says the report.
Erasmus Mafoko, the owner of Mafoko Security Services, did not respond to City Press enquiries.
In some matters, disciplinary process had already started, but were brought to an abrupt halt by the Covid-19 coronavirus pandemic and the national lockdown regulations
Emfuleni municipality spokesperson Stanley Gaba said the municipality initiated investigations into a number of contracts in 2017.
“This process revealed that a number of contracts had been irregular. To date, the municipality continues to implement recommendations, including matters or contracts where there are cases of malfeasance [which are] referred to the Directorate for Priority Crime Investigation.
“In some matters, disciplinary process had already started, but were brought to an abrupt halt by the Covid-19 coronavirus pandemic and the national lockdown regulations,” he said.
Gaba said the municipality supported and had adopted the recommendations of forensic investigations, and that a report would be tabled at the next council – which sits on July 24 – to appraise the developments.