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After suspending work on a project based on a report citing impropriety, the state-owned entity is now being blamed for allowing the deal to lapse
Transnet may be in hot water over its R4.2 billion Durban Container Terminal tender after the entity that won the work decided to terminate the contract.
The termination could place Transnet in a potentially difficult and costly position.
CMI Emtateni joint venture was awarded the five-year contract on July 3 2018, but the state-owned enterprise decided to stop work on the project in November, after forensic investigator Paul O’Sullivan produced an “unsolicited” report that accused CMI Emtateni partners of improprieties such as fronting, being conduits for payments and tax dodging.
An R87 million payment that was due to be made to the joint venture for work done was also frozen.
Transnet had 13 weeks to act after stopping the work in November last year – as stated in a letter, dated February 20, that CMI deputy project and technical manager Juri Persigilli wrote to Transnet quantity surveyor Shane Perumal.
In the letter he also states that the contract Transnet signed with CMI Emtateni joint venture has lapsed. City Press has seen a copy of the letter.
If it is proven that Transnet was responsible for the lapse, that could open the door for CMI to terminate the contract and claim for loss of profits.
The letter quotes a clause in the contract as follows: “If the project manager has instructed the contractor to stop or not to start any substantial work or all work, and an instruction allowing the work to restart or start has not been given within 13 weeks, the contractor may terminate if the instruction was due to a default on the part of the employer.”
In the letter, Persigilli continues: “So, you instructed us to stop the works from November 20. This suspension has not been lifted to date and has now lasted for 13 weeks.”
Persigilli added that Transnet defaulted by not providing CMI with site access and failed to certify claims for payments for November and December 2018, and January 2019.
“We consider that your above defaults have led to the suspension, which began on November 20, and as such, we are terminating the contract,” Persigilli added.
Transnet would not be drawn into commenting in detail about CMI’s suspension and its move to terminate the contract.
Spokesperson Molatwane Likhethe said: “Transnet is currently engaging with the contractor on the way forward on this contract, and no final decision has been taken.”
CMI Emtateni joint venture was also unwilling to comment further on the matter.
After O’Sullivan’s report, Transnet appointed a law firm, Mkhwanazi Inc, to determine whether the tender was irregularly awarded to CMI Emtateni joint venture.
Mkhwanazi’s preliminary report, which City Press has seen, found nothing wrong with the awarding of the tender to the joint venture.
O’Sullivan’s report had, however, said that CMI Emtateni partners conducted improprieties, such as getting a Construction Industry Development Board grading within an unusually short time.
The report singled out PGM Engineering owner Philani Mavundla, a former mayor of Greytown, KwaZulu-Natal, as a tax dodger.
This, following a 2016 SA Revenue Service judgment of R96 445 and a 2014 civil judgment of R29.2 million.
O’Sullivan alleged that PGM was the “originally intended bidder”.
Mkhwanazi’s report found that PGM Engineering was not part of Emtateni, which partnered with CMI, and also questioned O’Sullivan’s basis for saying PGM was the originally intended bidder.
O’Sullivan has described Mkhwanazi Inc’s report as “the shoddiest draft forensic report I have seen in 45 years”.
He added that he had prepared a docket against CMI Emtateni joint venture.
The R4.2 billion tender was part of the R7 billion planned expansion of the Durban port, which handles 65% of local container cargo, and was aimed at altering berths 203 to 205 to improve safety.
Studies found existing quay walls did not meet the minimum safety standards and that there was a risk of potential quay wall failure. There are a limited number of berths for large container vessels. This has resulted in delays and vessels needing to wait in queues.
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