NICE ONE, CHINA!
Water minister wants to open R20bn tap for Beijing
Water and Sanitation Minister Nomvula Mokonyane wants the freedom to bypass tender regulations in order to award a R20-billion Eastern Cape water project to a hand-picked Chinese company.
Parliament and National Treasury have both previously warned her department to follow proper procurement processes as any deviation would be deemed irregular.
Mokonyane wrote to Finance Minister Malusi Gigaba on August 25 — a few months after being turned down by Pravin Gordhan — requesting that her department be exempted from the Preferential Procurement Policy Framework Act and Preferential Procurement Regulations, for a Chinese company to be appointed to build the multibillion Umzimvubu water project.
She also wants a government guarantee for her department to get a R20-billion loan from China’s Exim Bank through the Forum on China-Africa Co-operation.
Mokonyane and Gordhan had been at loggerheads over the project, as he had advised that the contract be put out for a competitive bidding process. Gordhan had said the loan was outside the fiscal framework, which could have serious implications for South Africa’s sovereign credit rating.
Mokonyane said in her letter to Gigaba that it was in the public interest for the Treasury to grant a deviation so that her department could meet the Chinese’s requirements for funding.
“One of the key requirements in terms of the . . . funding is that the conclusion of the concessional loan agreement should be preceded by a commercial agreement between DWS [the Department of Water and Sanitation] and a Chinese construction entity. Accordingly, it will be impractical for DWS to procure the services of the Chinese construction entity in accordance with the process set out in the aforesaid PPPFA and the Regulations,” said Mokonyane.
Treasury spokesman Mayihlome Tshwete would only say some concerns had been raised internally about the deviation request. “These will be communicated to water and sanitation.”
The parliamentary portfolio committee that exercises oversight on Mokonyane and her department wants answers from her office over the project and the loan.
Committee chairman Mlungisi “Lulu” Johnson said it would be irregular for the department to be granted a deviation instead of going through normal tender processes.
“It can only be that you have the department going through [Public Finance Management Act]-guided processes for procuring the services of a contractor . . . Anything outside that smells of a rat. National Treasury has PFMA regulations and they are very specific and they guide government as a whole, so water and sanitation is no exception. If National Treasury is going to deviate from their own regulations, then there is a problem,” said Johnson.
The committee was awaiting answers from the department about agreements it has already signed with China.
As part of preparatory work for the loan, the department signed a non-binding letter of intent on July 29 last year with Exim Bank in Beijing for co-operation on the Umzimvubu water project.
This followed a co-operation agreement signed in December 2015 by the TransCaledon Tunnel Authority, an agency of the department, with the China Communications Construction Company. This is the same company Exim Bank wants to appoint to build the Umzimvubu project.
Mokonyane revealed in her letter to Gigaba that 35% of materials for phase 1 would be “sourced from China”.
Her spokesman, Mlimandlela Ndamase, said on Friday that the water project was to be financed from a $60-billion investment committed to by the Chinese in December 2015. He said the tender for the actual construction was still the subject of negotiations.