Ramaphosa to receive SIU report on Limpopo water projects

The Special Investigating Unit (SIU) has told parliament's standing committee on public accounts (Scopa) that its investigation into the “irregular and unlawful” awarding of contracts to LTE Consulting by Lepelle Northern Water (LNW) in Limpopo has been concluded.

“The presidential report is being finalised and will thereafter be submitted to the president,” said the SIU’s Gina Pretorius.  

Pretorius updated the committee on Tuesday on investigations relating to the department of water and sanitation, specifically the Mopani and Giyani projects.  

The sitting comes after Scopa and the SIU conducted an oversight visit in April to the Nandoni Dam, Xikukwani Canal and Giyani wastewater treatment works in Thomo village. 

Pretorius reminded the committee that in August 2014 there was an imbizo called by the former minister of water and sanitation to address water challenges in Giyani. 

During a SIU hearing Thulani Majola from LTE confirmed he was present at the imbizo. Majola said after the imbizo he met the CEO of Lepelle Northern Water, Phineas Legodi, and proposed ideas to resolve water challenges in Giyani through the company. 

“On the following day, August 15 2014, LTE representatives were present at the task team meeting called by the minister even though the task team was supposed to be attended by officials from Mopani district municipality, the department and LNW.  

“It should be noted LTE was present at the task team meetings before LNW started the supply chain management process to appoint a service provider for the project.”

The state-owned enterprise supplying bulk potable water in Limpopo was initially appointed on an emergency basis in August 2014 for repair and refurbishment of the water and wastewater works to the value of R90m.  

The minister indicated Giyani water treatment works should be completed by no later than September 30 2014 as it was an emergency.

LNW appointed LTE for non-emergency work valued at R2.2bn in September 2014. 

“No procurement processes were followed when the project was extended from R90m to R2.2 bn. It must further be noted the directive issued by the minister in August 2014 was not extended to include non-emergency projects.  

“LNW thus extended the project to include non-emergency works, increasing the amount from R90m to R2.2bn without authorisation from the department as there was no extension to the directive from the minister. 

“The SIU is of the view that if a new directive was issued to include the non–emergency works, LNW would still have been required to go out on a competitive bid,” Pretorius said. 

The SIU was made aware of the maladministration through a whistleblower report which alleged there was a reason to believe the award was made to LTE without competitive bidding or supply chain management process having been followed. 

“It was further alleged LTE is a professional services engineering firm which rendered consultancy services to its clients and did not have the capacity or experience to execute or manage a turnkey project.”

The SIU found there was deviation from the normal processes for the refurbishment and repair of Giyani water and wastewater schemes at an estimated amount of R90m.  

“Our investigation revealed the second appointment was concluded without following any supply chain management processes, the project cost was increased from the approved project budget of R90m to R2.2bn and this was contrary to the directives of the minister.

This was all done without an approved budget plan.  

“The appointment of LTE by LNW at a contract value of R2.2bn was irregular and unlawful as it was concluded without due regard to the constitution, the LNW supply chain management policy and the directives of the minister.” 

The investigation uncovered that LNW paid about R4.1bn to the service provider, which far exceeded the original contract value of R2.2bn. The SIU was also able to establish there was a corrupt relationship between LNW, the service provider and departments officials. 

Pretorius said there was also excessive overpricing and LNW did not receive value for money. 

“The investigation into the supply chain management has been completed. The SIU found the contract was irregularly awarded, and issued summons on November 26 2018 in the high court in Limpopo. 

“The civil litigation action is to have the contract to the value of R2.2bn declared unconstitutional and invalid and set aside. The quantum of the contract has subsequently been increased to R4.1bn and we have increased our litigation to recover that amount.”

The parties include SIU v LNW, LTE Consulting, Khato Civils, South Zambezi Engineering, Mopane district municipality and the department of water and sanitation.

In May senior counsel advised the SIU to file an objection against the proposed amendment filed by the defendant. The notice of objection was served on May 26.  

In October the SIU applied for a trial date and filed a directive compliance affidavit as part of the application.  

“The SIU awaits directives from the acting judge president of the Polokwane high court following the request by the SIU to allocate a preferential hearing date for the case.” 

She said Legodi and the former LNW board subsequently applied for an interdict against the SIU to prevent the unit from conducting further investigations, but the matter was later abandoned by the applicants. 

On October 6 the SIU instituted civil proceedings by way of a damages claim in the Special Tribunal against former LNW employees Carel Schmahl, Legodi and J Killian for the value of R1.9bn. 

She said the matter has been enrolled for hearing in the Special Tribunal next Monday. 

On the SIU’s bid to freeze assets and pensions of those implicated, Pretorius said the SIU successfully submitted court applications to the Special Tribunal to freeze Legodi’s pension of R2.4m and four immovable properties as well as Schmahl’s pension valued at about R10m. 

On consequence management, she said Legodi resigned before the disciplinary hearing was held. 

The unit also recommended the National Prosecution Authority take action against those responsible.  

Pretorius said after the oversight visit it was discovered 37 water reticulation projects in Mopani were allocated to one service provider and about two years later villagers still do not have water.  

“The SIU is drafting a motivation for proclamation as the allegation does not fall within the scope of the current proclamation.”  

Pretorius said the unit is collecting information to support the allegations to see whether it should continue with its motivation. 

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