Leaked AG report reveals Tshwane’s R12bn GladAfrica contract was irregular

It has now been confirmed that the Auditor-General has found that the city’s controversial contract with consultancy company GladAfrica was irregular.

The City of Tshwane has now confirmed the Auditor-General’s adverse finding in a leaked report, including the fact that hundreds of millions have already been paid to the firm in a buildings project overseen by city manager Moeketsi Mosola.

In a report on News24, the municipal manager, Moeketsi Mosola, also finally admitted that the tender was irregular.

About R317 million spent of the R12 billion tender so far was found to be irregular.

In November, Mosola was given five days to provide documentary evidence against the damning preliminary findings by Auditor-General Kimi Makwetu about the city’s controversial project management contract.

Moneyweb learnt at the time that the AG’s office served its 13-page detailed audit findings about the contract on the city and invited Mosola to respond, after which the AG was to finalise the findings.

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He also wanted Mosola to provide him with a copy of the preliminary report of law firm Bowmans, which was investigating the matter on the instruction of mayor Solly Msimanga, who announced his resignation earlier this month. He will depart at the end of February, to focus, he said, on his candidacy for the Gauteng premiership.

A defiant Mosola last year obtained an interim order in the Labour Court to stop Msimanga and city speaker Katlego Mathebe from tabling the preliminary Bowmans report in council.

The GladAfrica matter led to tension between Mosola and Msimanga and there seemed to be little trust left between the DA-led political leadership and the city administration.

Mosola was, however, unable to provide the AG with compelling evidence to change his findings, and has now conceded the matter.

Moneyweb reported in November that GladAfrica had already received payments totalling more than R455 million from the city.

Mosola took ‘total control’

According to the AG’s findings, Mosola took total control of the procurement process that led to the appointment of GladAfrica. He initiated the process, determined the demands of the project management unit and approved the process to be followed. This should have been done by the supply chain management department.

The AG found that some payments were made to a GladAfrica entity, GladAfrica Consulting Engineers, without a valid contract and before GladAfrica Project Management had been appointed. At the time there was no valid contract between the City and GladAfrica Consulting Engineers.

‘Piggy back’ procurement 

The contract the city entered into on November 3 2017 was procured on the basis of paragraph 32 of the Municipal Supply Chain Management Regulations, which provides for an organ of state to ‘piggy back’ on the procurement process of another organ of state when it procures the same goods or services.

In this case, the city obtained permission from the Development Bank of Southern Africa (DBSA) to ‘piggy back’ on its procurement process for the appointment of a panel of companies to assist with the roll-out of infrastructure projects.

The companies on the panel were then supposed to submit quotations to the city for the project management work.

This process bypasses the city and prevents it from following its own competitive procurement process. Such a move is only permissible if there are demonstrable discounts or benefits to the city.

According to the AG the City, however, failed to show such benefits and in fact did no proper financial analysis to determine the cost savings.

The AG found that the city’s executive adjudication committee resolved that all 29 service providers on the panel should be invited to submit quotations, but the city randomly selected only six of them, including Ariya Project Management, the predecessor of GladAfrica.

This rendered the process unfair and inequitable, the AG found.

Once the consultancy agreement with GladAfrica was concluded, the material terms and conditions differed to such an extent from the DBSA agreement that it fell outside the scope of paragraph 32, the AG found. This included differences in duration, contract value and rates, scope of work and the fact that the city contracted with a different legal entity than the DBSA.

The consultancy agreement the city signed was with GladAfrica Project Managers, but it reflected the company registration number of GladAfrica Consulting Engineers. As a result, the city failed to check the status of the correct entity with the South African Revenue Service as required.

The AG also found that the city contravened the Public Audit Act by failing to provide it with certain documentation, including the preliminary Bowmans report.

The city will now have to decide on what action to take on the illegal contract and Mosola’s future.

– Background reporting, Antoinette Slabbert, Moneyweb. Compiled by Charles Cilliers