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A R73m water war

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SERVICE DELIVERY Water pipes, resembling these laid down by construction workers in Nyavani in Limpopo for a water reticulation project, are at the centre of a legal storm in KwaZulu-Natal  PHOTO: silas nduvheni
SERVICE DELIVERY Water pipes, resembling these laid down by construction workers in Nyavani in Limpopo for a water reticulation project, are at the centre of a legal storm in KwaZulu-Natal PHOTO: silas nduvheni

Auditing firm PwC has been roped in to verify who owes who, and how much, after the husband of the MEC of cooperative governance in KwaZulu-Natal laid charges against the Umkhanyakude District Municipality over a R73 million tender to supply steel pipes for a water project.

Sibusiso Ncube – the husband of MEC Nomusa Dube-Ncube and a director of Sinosa Construction – filed papers at the Durban High Court, claiming an outstanding amount of R10 million from the Umkhanyakude municipality.

In turn, the municipality sought legal advice about the case and was told it had overpaid Sinosa. As a result, the municipality hit back with a counterclaim of R15 million from Ncube.

City Press has seen a copy of the municipality’s legal opinion, which revealed that, in 2012, without an open public tender, the municipality had awarded Sinosa a R73 million tender to buy steel water pipes.

The dossier reads: “The total amount of payments already effected by the [municipality] to the applicant [Sinosa] is R73 million. The total value of the steel pipes delivered to the municipality, calculated in accordance with the appointment letter, is R57.3 million.

“It follows that the applicant has been overpaid by an amount of R15.7 million. In my considered view, the municipality has reasonable prospects of pursuing a counter-application against the applicant for the recovery of the latter amount, together with interests thereon.”

The municipality’s legal adviser concluded: “I do not consider that the municipality has any viable alternative available to it other than to resist the application and pursue the counter-application. I consider that the municipality’s prospects of success in this regard are reasonable.”

In the lawyer’s document, it was also noted that Sinosa’s claim would not be enforceable because there was never a contract between it and the municipality.

Moreover, Sinosa was paid an upfront fee of R40 million, contrary to Municipal Finance Management Act directives.

Umkhanyakude has remained under administration despite the August 3 local government elections, which ushered in a new council.

Lennox Mabaso, spokesperson for Dube-Ncube, said the administrator would stay in place until the new council “proved” it could run the municipality properly.

Its administrator, Martin Sithole, told City Press there was no evidence that a service level agreement had been signed between Sinosa and the municipality.

Sinosa, he explained, “was engaged through an appointment letter”. This means the company was hired merely by means of a letter of appointment, but not with an official contract.

Regarding the upfront payment to Sinosa, he said: “Of course, advance payments are prohibited by the Municipal Finance Management Act. The only reason cited by management at the time [to justify doing so] in its report – presented to council in October 2014 – was that it was trying to avoid a price escalation.”

Sithole added that there was no documentation to prove whether Dube-Ncube and her husband had declared their relationship with each other.

However, Mabaso said that, at the time of the procurement deal, the MEC and her husband were not even in a relationship, let alone married.

As a result, there was nothing to declare on her part.

Mabaso added that Ncube had been a businessman for more than 20 years, and had a long-established and good reputation in business circles.

The R73 million required to buy the pipes had come from Treasury.

About four months before the tender was awarded to Sinosa, Dube-Ncube had seconded a three-member team of experts to help run the troubled municipality she had placed under administration.

In turn, the municipality appointed the same team to oversee the procurement of the pipes, the legal opinion revealed.

Mabaso argued that when the district municipality terminated the contracts of its previous municipal manager and chief financial officer in 2011, it struggled to recruit personnel with the required capacity to fill the vacant positions.

It then approached the MEC’s office – as other municipalities had done before, such as Msunduzi and Ethekwini – requesting recommendations for appropriately skilled individuals.

He said the department recommended candidates to the municipality, which, “at the sole discretion of its municipal council”, accepted these personnel.

The three candidates – PS Gwacela, Z Masuku and M Msiwa – were hired in the respective positions of municipal manager, chief financial officer and technical expert.

“From that point on, these individuals became employees of the municipality, accountable to its municipal council rather than the department of cooperative governance and traditional affairs,” he said.

Meanwhile, administrator Sithole said that while the municipality was defending Sinosa’s lawsuit, the council and Sinosa had agreed to postpone the court battle while PwC verified who owed who, and how much.

Ncube referred all queries to Sinosa CEO Pravin Naidoo, who declined to comment.

The matter is also being investigated by the Public Protector and the provincial Treasury in KwaZulu-Natal.

Mabaso added that, on receiving the allegations of corruption relating to a number of procurement activities in Umkhanyakude, the department instituted an investigation, led by Integrated Forensic Solutions.

But because the provincial Treasury had also undertaken an investigation, both departments’ agencies collaborated on their finding to ensure everything was beyond reproach and there were no gaps.

“Once the investigations are concluded, a report will be tabled to the municipal council and relevant stakeholders – including the media – will be informed, in the spirit of transparency,” said Mabaso.

He said that, prior to 2009, Umkhanyakude saw virtually no delivery of water infrastructure, and this was always deemed newsworthy.

“Only since service delivery started from 2009 in this distant and historically neglected region have issues such as those raised in your media enquiry come to the fore and dominated – to the point of obscuring the rationale of water provision to a previously disadvantaged community.”

Mayor Jeff Vilane confirmed having received legal advice on the matter and acted on it.

“An ideal situation would be to have the parties talk, because going to court will cost this poor municipality a lot of money. But once the audit firm completes its work and determines the costs, we will negotiate with the party and come to an amicable agreement,” he said.

Asked how far along the water project was, Vilane said the pipes were being used. Some areas in the district had received water, while others would soon have water too.

“The project has different phases and is progressively being delivered. We are satisfied with the developments.”

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