SIU to again try recoup R92m after court finds Amahlati tender unlawful

The Special Investigating Unit has been given a second stab at recouping about R92.4m paid by the Amahlati local municipality to entrepreneur Mcebisi Mlonzi and his company, Kwane Capital, relating to an “unlawful” hire-purchase agreement.

A full bench of the Makhanda high court has declared as unlawful and void the 2014 multimillion rand hire-purchase (HP) agreement between Kwane Capital and Amahlati, which saw the company lease heavy plant and equipment to the municipality for three years.

The agreement was signed without going through any competitive bidding process. 

It was initially claimed that the agreement had “piggybacked” on a similar contract between Port St Johns municipality and Kwane. 

However, Amahlati later said the deviation was on the basis that Kwane was the only possible supplier that would enter into such an HP agreement.

But judge Jannie Eksteen, with judges Philip Zilwa and Denzil Potgieter agreeing, found that a decision to deviate and to dispense with procurement procedures could not be justified on the basis of inconvenience.

“It should be used only as a measure of last resort where no alternative is available.  

“Even where a thorough market analysis leads to the conclusion that there is only one supplier, the SCM policy still requires advance public notice to ensure transparency and fairness.”

This had not happened in this case.

The three judges upheld the SIU’s appeal against a 2022 high court ruling, in terms of which its application to declare the HP agreement unlawful was dismissed.

The SIU has asked the trial court to order Mlonzi to repay the more than R92.4m.

The three judges disagreed with acting judge Samson Dunywa’s finding that the deviation had been rational, and his dismissing of the application.

“There is nothing peculiar about an HP facility [instalment agreement] over a period of 36 months,” Eksteen said.

He said the municipality had failed to meet its own SCM policy requiring minutes to be kept of the negotiations leading to the agreement.

“The trial court had no regard to these provisions of the SCM policy and, in my view, it erred in concluding that rational and verifiable reasons had been advanced to justify a conclusion that Kwane was the sole provider able to provide the finance.”

The HP agreement was unlawful and invalid and had to be set aside.

The SIU had argued that Kwane and Mlonzi were complicit in maladministration and impropriety, at least to the extent that they should have been aware that the contract concluded with the municipality was patently unlawful. 

It argued that Kwane had derived exorbitant profits from the HP agreement and that the company and Mlonzi should be ordered to cough up the R92.4m.

But Eksteen said there was a dearth of evidence on both the profits Kwane had enjoyed in respect of the financial benefit the municipality derived from the contract during the time it had the use of the fleet plant and equipment.

It was therefore more appropriate that now the contract was invalidated, the matter be referred back to the trial court to hear further evidence.

Mlonzi was ordered to pay the legal costs of the application.

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