SIU flags inflated generator prices in R25m Ditsobotla contract probe

The Special Investigating Unit (SIU) has referred an investigation into a R25 million irregular procurement of generators for the Boikhutsong pump stations in Ditsobotla Local Municipality to the Special Tribunal, after inflated pricing and procurement breaches involving Rensch Trading CC were detected.

In a report tabled before the standing committee on public accounts in parliament last week, the SIU found that the company was appointed without the proper procurement processes being followed. 

The investigation revealed that the service provider was appointed under Regulation 36 of the National Water Act as an emergency measure, despite the process appearing to be aimed at ratifying a prior telephonic appointment.

“No contract or appointment letter exists for a contract valued at R25 million,” the report said. “The delivery and installation of generators took place at inflated prices ranging from R250 000 to R550 000, based on a variation order relating to specifications and pricing, without any supporting evidence to justify the increase.”

The SIU also identified fruitless and wasteful expenditure amounting to R5 704 503.40 for work that was not completed but was paid for. In addition, irregular expenditure of R25m was linked to the procurement of generators.

The matter has been referred to the Special Tribunal, while three cases have been sent to the embattled municipality for disciplinary action.

Advocate Victoria Mdlalose, the acting North West provincial head of the SIU, told parliament that the procurement had been done by Ngaka Molema District Municipality on behalf of Ditsobotla Local Municipality.

Mdlalose said the service provider was paid R5.7m for work not yet done. “Part of this was emanating from payments that were done [by the municipality] to the service provider for days … in actual fact that work was not actually carried out. It is also in relation to an over payment of R2 million that was done to the service provider.”

The SIU said the matter was at the Special Tribunal for civil litigation and while there were three disciplinary referrals, no action was taken against the implicated municipal officials.

“What we did find is that the institution did appoint a firm of attorneys to discipline the SCM [supply chain manager] but nothing actually happened in relation to that. In relation to one of the managers, nothing happened and [the official] is still in the institution and no action was taken against them,” she said. 

For years, the municipality has struggled to deliver basic services, including sanitation, clean water and electricity. 

The SIU has also tabled another report into Maluti-a-Phofung Local Municipality in the Free State.

The investigation focused on the irregular awarding of contracts for events management services and the compilation of an indigent register, as well as instances of fruitless and wasteful expenditure.

The SIU found that procurement processes followed by the municipality for both contracts were not in line with Section 217(1) of the Constitution. Municipal officials who served on bid committees were found to have committed misconduct by failing to comply with relevant legislative requirements.

The report highlighted contraventions of Section 78(1)(c), read with Section 171(3)(c) of the Municipal Finance Management Act, by senior managers and officials who incurred unauthorised, irregular or fruitless and wasteful expenditure.

It also cited fraud by a service provider or its representative through the submission of duplicate invoices.

Further findings included forgery and the use of forged documents, as well as contraventions of the Justice of the Peace and Commissioners of Oaths Act.

A former accounting officer was found to have failed to take reasonable steps to prevent irregular and wasteful expenditure.

Additional allegations include fraud by another service provider involving a fraudulent tax clearance certificate, double billing for VAT and the submission of false claims to the municipality.

The SIU also cited contraventions of the Prevention and Combating of Corrupt Activities Act by a former official and associated individuals and entities. 

The SIU confirmed that 17 criminal cases were referred to the National Prosecuting Authority between 7 November 2022 and 2 May 2023.