A damning forensic investigation report into state-owned water management entity Umgeni Water has found that a company belonging to a politically connected businessman was irregularly handed a R300m “social facilitation” contract to smooth relations between communities and contractors in KwaZulu-Natal.
The report by SNG Grant Thornton further found that of this amount, R54m was paid for work the company claimed was done during the hard lockdown between June and August last year, when according to its own fee calculation formula Umgeni should have only paid R3.4m.
The payments are part of a five-year contract awarded to MPS Strategic Solutions, a company owned by Sibonelo Shinga, who was murdered in January. There have as yet been no arrests in connection with his killing.
“MPS does not have their own offices at sites ... as required on the implementation plan. There is no evidence that MPS had the other requirements indicated ... that is vehicles, PPE, office equipment and telecommunications,” the SNG Grant Thornton report states.
In terms of the contract, flagged by the auditor-general during Umgeni Water’s audit this year, Shinga’s company would conduct social facilitation — effectively ironing out relations between Umgeni Water’s service providers and communities — across 15 capital projects valued at R6.96bn.
SNG Grant Thornton was appointed by Umgeni’s interim board, which was removed by new water affairs minister Senzo Mchunu earlier this month. Mchunu reinstated the entity's old board, which was removed by his predecessor, Lindiwe Sisulu, after the Pietermaritzburg high court found it had been unlawfully removed.
The report’s findings implicated a number of senior officials.
The investigators found that Umgeni’s technical evaluation panel and other officials involved in the awarding of the contract were irregularly appointed; that there was no paper trail showing how MPS’s fees were calculated; and that Umgeni did not have a checklist or standard to determine whether the work done during the lockdown was value for money.
“MPS provided various reports for the work done ... however we could not determine if what was submitted by MPS was sufficient to cover the scope of work and the expectations of Umgeni,” the report said.
The investigators also found that MPS was given the contract even though it failed to give 35% of it to a local company, while other bidders had fulfilled this requirement. The company MPS eventually contracted was appointed without due diligence and given 25.2% of the contract.
MPS provided various reports for the work done ... however we could not determine if what was submitted by MPS was sufficient to cover the scope of work and the expectations of Umgeni
— Report
Umgeni also allegedly ignored its own supply chain policy, which stated that the contract had to be awarded to a panel of five companies, not just one.
“When we perused the document of MPS ... it appears to be lamenting the challenges of identifying local partners. Further to this, they highlighted the rise of the ‘construction mafia’ or business forums, most notably the Forum for Radical Economic Transformation (FRET), who apparently extorted inclusion in infrastructure projects or demand being paid off after threatening or actually stopping construction projects,” the report said.
Umgeni did not respond to questions sent to it last week. Spokesperson Shami Harichunder said the new board had not yet concluded its handover period. MPS also did not respond to requests for comment sent to one of its directors, Xolisile Shinga. The other director, Nolwazi Shinga could not be reached.
Instability at Umgeni — which supplies water to 11-million people across six municipalities in KwaZulu-Natal, including eThekwini — is a concern for several institutional investors that hold its bonds.
At a meeting last week, Sanlam Investments, which has a R173m exposure to Umgeni, asked about “the abrupt departure of a number of senior executives”.
“An entity as critical as Umgeni Water should at all times have a board that is properly constituted and suitably qualified. Instability at board level invariably affects the organisation negatively,” Sanlam said.
Prudential said it had as a precaution put a moratorium on buying any further Umgeni debt given governance and related concerns.
Shinga was reportedly killed in Durban while driving to King Shaka International Airport after attending a family funeral. His death prompted former Umgeni CEO Thamsanqa Hlongwa, who resigned abruptly last October, to go into hiding.
The pair were the subject of several whistleblower complaints regarding collusion to former water affairs minister Sisulu.
Shinga’s other company, Raminet, is one of several blacklisted by technology company EOH following its own internal audit of its public sector work. EOH had appointed Raminet as an implementing agent on a multimillion rand contract with Umgeni in 2017. EOH later ceded this contract to Raminet.
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