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A decision by Transnet to suspend work on a R4.2 billion project at Durban Container Terminal is set to cost the state-owned logistics company R150 million.
This comes as the company that was doing the work at the terminal, CMI Emtateni Joint Venture (JV), decided to terminate the contract after four months of inactivity.
Transnet awarded the five-year, R4.2 billion contract to CMI Emtateni JV – whose partners include Italian construction company CMC di Ravenna and some local firms – on July 3 2018.
However, four months into the project, Transnet suspended the joint venture from continuing work on the project after an “unsolicited” forensic report accused CMI Emtateni partners of improprieties such as fronting, being conduits for payments and tax dodging.
The report was compiled by forensic investigator Paul O’Sullivan.
O’Sullivan’s report was, however, disputed by another law firm, Mkhwanazi Inc, which was appointed by Transnet to ascertain the veracity of the claims contained in O’Sullivan’s report.
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The law firm found nothing amiss with the awarding of the tender to the joint venture, but Transnet has indicated that it is conducting further investigations, including probing matters not covered by Mkhwanazi.
But earlier last week, CMI Emtateni JV decided to terminate the contract, citing a clause in the contract which says it can terminate the deal if 13 weeks lapse without an instruction to resume work after the project manager has stopped it.
Because Transnet is in breach of the contract, it is liable to pay the joint venture for loss of profits, which is estimated at R150 million. This expenditure could be classified as irregular since it constitutes payment for work that was not done.
Transnet spokesperson Molatwane Likhethe said last week that the state-owned entity accepted CMI Emtateni JV’s notice of termination and had issued the contractor with a termination certificate on April 16.
“Transnet’s internal forensic investigations are still ongoing and have not been concluded,” said Likhethe.
“Transnet is currently reassessing a way forward on the main marine contract scope of works in order to minimise any further delays in realising the benefits of the project.”
Likhethe said that no payments had been made to CMI Emtateni JV after the contract was terminated because the final account was still being assessed.
He said the joint venture had a right to terminate in terms of the conditions stipulated in the contract.
“Transnet engaged with CMI Emtateni to delay their decision to terminate the contract until all investigations were concluded. It was always Transnet’s intention to continue with the contract if there were no findings from the investigations,” Likhethe added.
He said Transnet was conducting “investigations” with a number of authorities and that these would include a review of the findings made by Mkhwanazi.
Likhethe declined to identify the authorities who were probing the matter.
The project at the Durban port, which handles about 65% of South Africa’s container cargo, was meant to include the reconstruction, deepening and lengthening of berths 203 to 205 to accommodate larger vessels.
O’Sullivan’s report, done under the auspices of nonprofit organisation Forensics for Justice, accuses CMI Emtateni and its partners of improprieties such as getting a Construction Industry Development Board grading within an unusually short period of time.
The report also singled out PGM Engineering owner and former Greytown mayor Philani Mavundla as a tax dodger following a 2016 SA Revenue Service judgment amounting to R96 445 and PGM Engineering’s 2014 civil judgment amounting to R29.2 million. O’Sullivan also said that PGM was the “original intended bidder”.
Mkhwanazi’s report, however, found that PGM Engineering was not part of Emtateni, which partnered with CMI, and questioned O’Sullivan’s basis for saying PGM was the originally intended bidder.
Transnet suspended CMI Emtateni JV’s contract based on O’Sullivan’s recommendations.
But the Mkhwanazi probe commissioned by Transnet found that O’Sullivan’s report:
- Made material and substantive errors in coming to certain factual findings;
- Used these erroneous findings to make conclusions, impute intent and brand persons; and
- Disregarded easily obtainable evidence that might contradict their narrative.
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