As con­trac­tors de­mand bil­lions in un­paid in­voices, calls mount to place the depart­ment un­der ad­min­is­tra­tion. But of­fi­cials in­sist noth­ing is wrong

CityPress - - Front Page - SIPHO MASONDO sipho.masondo@city­

The depart­ment of wa­ter and san­i­ta­tion is broke. The crit­i­cal depart­ment is now R4.3 bil­lion in the red, leav­ing hun­dreds of con­trac­tors un­paid for at least seven months. Se­nior ex­ec­u­tives from Na­tional Trea­sury, the depart­ment and a key wa­ter board told City Press this week that Cabi­net should place it un­der ad­min­is­tra­tion be­cause “in­ter­nal con­trols, project man­age­ment and con­tract man­age­ment have col­lapsed”.

The sit­u­a­tion has be­come so dire that in late Novem­ber last year, Fi­nance Min­is­ter Pravin Gord­han called a cri­sis meet­ing with Wa­ter and San­i­ta­tion Min­is­ter Nomvula Mokonyane to dis­cuss the depart­ment’s de­te­ri­o­rat­ing fi­nances.

The cash woes come at a time when Mokonyane’s depart­ment is fac­ing in­ves­ti­ga­tions by both Pub­lic Pro­tec­tor Bu­sisiwe Mkhwe­bane and the Spe­cial In­ves­ti­gat­ing Unit (SIU), sparked by City Press in­ves­ti­ga­tions.

Mkhwe­bane, who con­firmed her probe this week, will in­ves­ti­gate the R26 bil­lion Le­sotho High­lands Wa­ter Project. Mkhwe­bane and the SIU are in­ves­ti­gat­ing ten­der and other ir­reg­u­lar­i­ties in the con­tro­ver­sial Giyani Emer­gency Project, the cost of which has al­ready bal­looned from R500 mil­lion to over R5 bil­lion.


Con­fi­den­tial emails, con­tracts and let­ters City Press ob­tained fur­ther re­veal that:

The depart­ment has un­paid in­voices amount­ing to R1.7 bil­lion for the cur­rent fi­nan­cial year. Ac­cord­ing to the Au­di­tor-Gen­eral, the depart­ment ended the pre­vi­ous fi­nan­cial year with un­paid in­voices worth R1.1 bil­lion.

The same email trail re­veals that the Wa­ter Trad­ing En­tity, a depart­ment unit that deals with wa­ter sales and rights, has racked up an over­draft of more than R2.6 bil­lion.

At least one of the con­trac­tors is su­ing the depart­ment for more than R400 mil­lion for un­paid in­voices, which it can­not pay. More law­suits are ex­pected.

The depart­ment’s cash crunch has led to the stalling of crit­i­cal ser­vice de­liv­ery projects such as the Giyani Emer­gency Project.

Con­fi­den­tial depart­ment doc­u­ments dated Au­gust 2014 re­veal that the Giyani project be­gan with a R500 mil­lion bud­get, but con­tracts worth R2.2 bil­lion were soon added to LTE Con­sult­ing’s orig­i­nal emer­gency ten­der with­out ten­der pro­cesses be­ing fol­lowed. Emails, doc­u­ments and let­ters writ­ten over the past seven months sent be­tween LTE, wa­ter au­thor­ity Le­pelle North­ern Wa­ter and Simbi Phiri, the boss of Giyani project con­trac­tor Khato Civils, re­veal that even more con­tracts have since been added with­out ten­ders, bring­ing the to­tal cost of the project to more than R5 bil­lion.

Se­nior of­fi­cials fear the depart­ment will pay “sig­nif­i­cantly more” for all projects, as stop­pages and go-slows led to mas­sive cost es­ca­la­tions.


A se­nior Na­tional Trea­sury of­fi­cial said “the depart­ment is bankrupt and we started rais­ing th­ese is­sues with them about seven months ago”.

“In­ter­nal con­trols, project man­age­ment and con­tract man­age­ment have col­lapsed com­pletely. The depart­ment should be placed un­der ad­min­is­tra­tion,” the source said.

The highly placed of­fi­cial, who was part of the team Trea­sury sent to Lim­popo when it was placed un­der ad­min­is­tra­tion in 2012, said: “Lim­popo was placed un­der ad­min­is­tra­tion for R2 bil­lion. This is far worse.”

A se­nior ex­ec­u­tive in the depart­ment, who has seen fi­nan­cial doc­u­ments pre­sented to both the risk and fi­nance com­mit­tees, said: “Un­paid in­voices amount to R1.7 bil­lion. The Wa­ter Trad­ing En­tity has ac­cu­mu­lated an over­draft of over R2.6 bil­lion. The sit­u­a­tion is ugly. The depart­ment should be placed un­der ad­min­is­tra­tion, but be­cause of pol­i­tics, I know it won’t.”

THE STALLED PROJECTS The Giyani Project, in­tended to pro­vide a con­stant wa­ter sup­ply to Lim­popo’s Mopani dis­trict, has drawn fierce po­lit­i­cal heat. City Press has learnt that, in an ef­fort to get rid of Khato Civils, wa­ter of­fi­cials told Phiri that Trea­sury wanted the con­tract ter­mi­nated. This prompted Eco­nomic Free­dom Fighters deputy pres­i­dent Floyd Shivambu to write to Gord­han to en­quire why. But in his re­sponse dated Jan­uary 11 2017, Gord­han said this claim was not true and that the project was in­stead “pro­gress­ing ac­cord­ing to plan” and funds had been set aside to “take it to com­ple­tion”. How­ever, this week, Phiri vowed to leave the site if he was not paid the R250 mil­lion he is owed by the end of Fe­bru­ary. Last year, City Press ex­posed how, in 2014, Le­pelle ap­pointed LTE to de­liver a “turnkey emer­gency wa­ter” project in Giyani. LTE, a com­pany with close ties with Mokonyane, was ap­pointed with­out a ten­der process and of­fi­cials jus­ti­fied the move say­ing the project was com­mis­sioned on an emer­gency ba­sis, which Trea­sury al­lows. LTE ap­pointed Khato Civils to do the con­struc­tion. An­other doc­u­ment re­veals that the depart­ment owes Vha­ranani Prop­er­ties more than R400 mil­lion. The com­pany, owned by prop­erty ty­coon David Ma­bilu, has worked on two projects for the depart­ment: one a san­i­ta­tion project in­tended to erad­i­cate bucket toi­lets across the Free State, and the other a wa­ter pipe­line in Tho­hoyan­dou, Lim­popo. Ma­bilu de­clined to com­ment; how­ever, a source close to him said he was su­ing the depart­ment. “He has filed pa­pers and the mat­ter will be heard in the Pre­to­ria High Court next week Fri­day.”


The depart­ment’s deputy di­rec­tor-gen­eral of com­mu­ni­ca­tions, Mat­lakala Mot­loung, con­firmed the meet­ing be­tween Gord­han and Mokonyane, but said: “I don’t want to call it a cri­sis meet­ing. It was just a meet­ing be­tween two col­leagues.”

With re­gard to Shivambu’s let­ter to Gord­han, Mot­loung said sug­ges­tions that the depart­ment wanted to get rid of Phiri were “lies”.

“We couldn’t do that be­cause he has a le­git­i­mate con­tract and we are happy with his work,” she said.

Mokonyane’s spokesper­son, Sput­nik Ratau, said: “The depart­ment is not broke, as al­leged. Out of the R15.5 bil­lion bud­get al­lo­ca­tion for the depart­ment, the depart­ment has spent R12.6 bil­lion and still has R2.9 bil­lion avail­able.” He de­nied that the depart­ment had an over­draft.

Ratau said the con­trac­tors will be paid “with­out any de­lay”. “Other than Vha­ranani, the depart­ment has no pend­ing court cases against it brought by con­trac­tors due to de­lay in pay­ments. The depart­ment is in the process of set­tling the dis­pute be­tween it and Vha­ranani,” he said.

The Giyani wa­ter project is di­vided into three stages: crit­i­cal emer­gency, emer­gency and long term.

The crit­i­cal emer­gency stage in­volved fix­ing 154 bore­holes and build­ing wa­ter and waste­water treat­ment plants.

The sub­se­quent emer­gency stage in­volved build­ing pipe­lines, nine reser­voirs, a wa­ter treat­ment plant in Tho­hoyan­dou and a waste­water treat­ment plant in Giyani.

The long-term projects, for which the depart­ment is yet to al­lo­cate funds, in­clude wa­ter sup­ply to vil­lage homes. But the project ap­pears to have gone awry. In July last year, Le­pelle North­ern Wa­ter chief ex­ec­u­tive of­fi­cer Phineas Le­godi wrote to LTE or­der­ing it not to start con­struct­ing the emer­gency stage reser­voirs and treat­ment plants. He did not say why.

Phiri said the di­rec­tive was un­fair be­cause his com­pany had al­ready “done the de­signs, cost­ing, em­ployed peo­ple, set up equip­ment and es­tab­lished sites and they tell us to stop be­cause they have to go out on ten­der”.

“We will go to court if there is no am­i­ca­ble set­tle­ment. In any case, if th­ese projects don’t move par­al­lel with the pipe­lines we are fin­ish­ing, what is the point? The pipes will be­come white ele­phants with­out the reser­voirs and treat­ment plants, and com­mu­ni­ties will still be with­out wa­ter.”

LTE boss Thu­lani Ma­jola said the con­struc­tion of the reser­voirs and the treat­ment plants was never part of the agree­ment with Phiri. “They must pro­duce the con­tract and ap­point­ment let­ters as proof.”

But an email sent in Au­gust last year, from LTE’s chief en­gi­neer, sug­gests other­wise. En­gi­neer Ken­neth Chitenhe told Khato Civils its quo­ta­tion for one of the reser­voirs was over­priced and had to be re­vised.

A let­ter from Phiri to Le­godi sent last month, and ces­sion let­ters, re­veal that LTE didn’t have pro­fes­sional staff on site, failed to at­tend crit­i­cal meet­ings and ceded most of the work to South Zam­bezi, a con­sult­ing firm Phiri also owns.

A se­nior of­fi­cial in the depart­ment who mon­i­tors con­struc­tion projects said: “It was a big anom­aly for LTE to cede work to South Zam­bezi. It means that, on the same project, Phiri was con­sult­ing via South Zam­bezi and con­struct­ing through Khato Civils. He is both player and ref­eree. That is not al­lowed in con­struc­tion. I don’t know how the depart­ment al­lowed it.”

The of­fi­cial, how­ever, said the depart­ment was happy with Phiri’s work, say­ing “few black con­struc­tion com­pa­nies can com­plete over 380km of pip­ing in two years, much less in rocky and rugged ter­rain such as in Giyani”.

“Phiri has im­ported four hard-ter­rain trenchers, worth over R100 mil­lion, from Spain and Italy. Of course, the depart­ment has se­ri­ous ques­tions to an­swer about th­ese con­tracts, but his work ethic is im­pres­sive,” he said.

Le­godi, whose wa­ter au­thor­ity is re­spon­si­ble for the Giyani project, said it has “con­tin­ued pay­ing ser­vice providers for the work done and Khato Civils has also been paid”.

“Ac­cord­ing to our records, in­voices re­ceived from Khato Civils were and are paid as per the funds’ avail­abil­ity.”

A se­nior Le­pelle of­fi­cial said: “I feel for Le­godi. His hands are tied. He gets most of his fund­ing from the depart­ment.

“As such, if the depart­ment is broke, you can ex­pect him to be equally broke.

“I know that he also has many con­trac­tors queu­ing at his door for pay­ment.”

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