How KZN municipality bled millions in funds in dodgy tender processes

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26-10-2022
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News 24
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A forensic investigation into tenders at the Umuziwabantu municipality revealed millions in irregular funds.

The main offence against the municipal manager stems from a contract for the Harding municipal office.

Nkosazana Dlamini-Zuma requested Sihle Zikalala to monitor the implementation of recommendations.

A forensic investigation into tenders at the Umuziwabantu municipality, in northern KwaZulu-Natal, has revealed millions in wasted funds and serious abuses of power from officials, including the municipal manager, West Gumede.

The report, commissioned earlier this year by attorneys Shepstone and Wylie, investigated allegations of supply chain irregularities and irregular payments by the municipality.

Forensic firm, the Makali Group, investigated contracts for possible irregularities.

The tenders included new municipal offices in Harding, the construction of the Endlovini Sports Field, the construction of Mdulashe Access Road and the construction of Nogumbe Access Road.

The case against Gumede

Gumede was singled out for serious financial misconduct relating to the Harding municipal office contract, which was awarded to Rembu Construction, valued at R48 279 680.

He unilaterally approved more money, including almost R1.5 million relating to purchases of furniture, without the signing off from the municipal council.

In many cases, costs were inflated and, in some cases, additional expenses, such as for concrete for ramps which Gumede approved, were already catered for in the initial tender scope.

The report found many of his approvals of additional funds for municipal offices were not required.

Gumede has vehemently denied any wrongdoing.

He told News24 there was a political conspiracy to oust him from his position. Gumede claimed a conspiracy to oust him from his position "because of their ulterior motives".

"I obviously support any effort to combat corruption. I have cooperated with investigation of the administration that I'm leading as I support the principles of good governance."

Without going into detail, he asserted that there were serious flaws in the methodology, content and findings of the report "in many respects".

"It is flawed and devoid of any truth, but I'm waiting to first respond to my employer before I can issue any statement."

He denied having a personal relationship with Rembu Construction "or any of its directors and I  have not received any kickbacks from them".

"Allegations levelled against me are categorically false. This is just a smear campaign concocted by those who want me out of my position in pursuit of their nefarious motives."

In a letter on 21 September to Umuziwabantu Municipality mayor Siboniso Zungu, Cooperative Governance and Traditional Affairs Minister Nkosazana Dlamini-Zuma, indicated that she directed MEC Sihle Zikalala to monitor the implementation of the report's recommendations.

Zikalala department, however, did not respond to News24's request for comment on the matter. Dlamini-Zuma's spokesperson also did not respond to a request for comment.

Harding building contract

Investigations found that, after the tender for the Harding building was awarded, several "variations" or additional costs, outside of the original tender that were not required and already built into the contract, were approved.

In one instance, on 7 July 2020, Rembu Construction's technical director submitted a memo for subsoil drainage on Turner Street as well as the purchase of storage water tanks. This was approved by Gumede on 21 July 2020 for R6 970 094.

The supply chain section of the municipality was not involved in this process, the report said, adding that storage water tanks could have been "procured separately instead of being added into construction costs via variation order".

The investigation also found that the project engineer, not the contractor, motivated for any changes in design.

"It is our understanding that the underground water would have been discovered during the clearing of the site and would, therefore, have been catered for at the beginning of the project in July 2018."

No proof exists that the items submitted and approved under the variation order were needed, said the report.

"There is no motivation from the project engineer... showing the need for additional items. The municipal manager has failed to effectively use the structures of the municipality to assist in the monitoring of the project and in affecting changes to original specification.

"The variation amount of R6 970 094,67 is regarded as material and may influence the decisions or actions of the council or mayor; therefore, should have been disclosed to the council."

Yet, Gumede had deep knowledge of the tender, according to the report.

Gumede had both "insight and knowledge of the processes followed in the initiation and implementation of the process to build the new municipality offices, including the original specification that the BAC adjudicated on", the report cited.

He was also found to have unilaterally approved an additional R3 805 686 on 18 January 2021 for concrete required for ramps in the Harding building, These, however, were catered for in the original tender document with no revised designs to accommodate proposed alterations.

"The variation order appears to be covered under items that are already part of the original specification. It is not clear which part of the concrete would have not been foreseen in the original specification.

"The motivation submitted makes reference to the contractor and earlier earthworks; this should be motivated by the project engineer with alterations and different options presented to the municipality."

Office furniture inflated by nearly R1.5 million

Gumede's actions in procuring furniture, also as a "variation order" for the municipality, was described as financial misconduct after a comparison quote from Waltons furniture revealed the Umuziwabantu municipality overpaid by R1 424 364.

The investigation further labelled the procurement as an "irregular arrangement", which again overlooked supply chain processes.

Another dodgy furniture payment was made to Hedcor (Pty) Ltd for seating in council chambers.

The investigation showed a variation purchase was not needed because it "would have been foreseen during the specification, and with the involvement of the supply chain unit could have been procured separately".

Municipal documents revealed that, on 18 January 2021, Hedcor (Pty) Ltd entered into an agreement for a direct payment with Rembu Construction and the municipality, for the procurement of the chamber seating.

This was described as Rembu "playing the role of the supply chain unit in this transaction".

There was also no proof of any monitoring of the mark-up by the service provider, which the investigation said "exposes the municipality to inflated prices".