Report on an investigation into complaints relating to improper awarding of tenders by municipalities in Limpopo and North West

The Public Protector submitted her Report on an investigation into complaints relating to the improper awarding of tenders by municipalities in the Limpopo and North West Provinces to the Speaker of the National Assembly on 13 August 2010.

The investigation was the result of complaints lodged with the Public Protector by Mr E Roets, the National Chairperson of AfriForum Youth and Mr I Kekana, the Head of Communications in the Limpopo Province of the Congress of the People, which were based on a newspaper report published on 21 February 2010. The complainants requested that the awarding of tenders by nine municipalities in the Limpopo Province and one municipality in the North West Province to an entity, referred to as SGL Engineering Projects (SGL), in which Mr J Malema, the President of the ANC Youth League, allegedly had an interest, should be investigated.

The municipalities involved were:

    (a) Bojanala Platinum District Municipality;

    (b) Mopani District Municipality;

    (c) Greater Sekhukhune District Municipality;

    (d) Waterberg District Municipality;

    (e) Vhembe District Municipality;

    (f) Greater Tzaneen Local Municipality;

    (g) Makhado Local Municipality;

    (h) Greater Letaba Local Municipality;

    (i) Lepelle-Nkumpi Local Municipality; and

    (j) Mutale Local Municipality.

The investigation focused on:

(a) Compliance by the municipalities in the awarding of tenders to SGL with the legislation and other prescripts regulating procurement in local government;

(b) Compliance with quality assurance requirements before payment for the procured services and;

(c) The governance and administration of procurement by the municipalities to determine whether it generally complies with the prescribed legal framework relating to supply chain management in local government.

The investigation comprised visits to all the municipalities, interviewing of municipal managers, chief financial officers and other senior officials involved in supply chain management, interviewing of witnesses, studying of the relevant tender documentation, legislation and policy prescripts. Site inspections of several of the projects relating to tenders/contracts awarded to SGL were conducted. The public documentation held by the Companies and Intellectual Property Registration Office (CIPRO) in respect of SGL were perused as were relevant records of the Engineering Council of South Africa.

From the investigation the Public Protector concluded that Mr J Malema was involved with SGL during a period that only three tenders were awarded to SGL by the municipalities referred to above (i.e. on 30 July 2009, 15 October 2009 and 20 November 2009) In one such case, the bid proposal was submitted before he became a director of SGL. In the other two cases, the bid proposals were submitted in the name of SGL Engineering Projects CC, which at the time had already been converted into the private company, SGL Engineering Projects (Pty) Ltd. Mr Malema’s interest in SGL was therefore not disclosed in the bid proposal documents.

It is doubtful whether these tenders would not have been awarded to SGL by the municipalities involved, had the bid proposals been submitted in the name of the private company, as the evaluation was done mainly on functionality and the profile of the bidder entity was of little consequence.

The findings of the Public Protector are that:

    (a) It could not be determined whether:

    (aa) The tender awarded to SGL by the Makhado Local Municipality;

    (bb) Four contracts awarded to SGL by the Greater Sekhukhune District Municipality; and

    (cc) One contract awarded to SGL by the Lepelle-Nkumpi Local Municipality complied with the relevant procurement legislation and other prescripts, due to poor procurement record keeping by the said municipalities;

    (b) Except for the tenders/contracts referred to in paragraph (a) above, in respect of which no finding could be made, the tenders/contracts awarded to SGL by the municipalities were the results of procurement processes that generally complied with the relevant provisions of the Constitution, the Municipal Finance Management Act, 2003 and the Supply Chain Management Regulations.

    (c) The completed projects relating to the tenders/contracts awarded to SGL by the municipalities, referred to in the report, were generally of an acceptable quality and standard;

    (d) No verifiable information or evidence was presented or could be found from the investigation that indicated that contract/tenders were awarded to SGL as a result of improper influence due to friendships, comradeship, favouritism, nepotism, political affiliations, interference or any other impropriety; and

The Public Protector made recommendations relating mainly to improving the Supply Chain Management Regulations, the keeping of procurement records by some municipalities, the reviewing of the Supply Chain Management Policies of some municipalities and the improvement of the documentation relating to two contracts entered into with SGL to reflect the correct status of the company and the updated cover of professional indemnity insurance.


Published Date: 
Monday, August 16, 2010