STATEMENT BY COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS MEC, HON. NOMUSA DUBE ON PROGRESS IN RESPECT OF THE IMPLEMENTATION PROCESS OF THE RECOMMENDATIONS OF THE MANASE REPORT AND ANNOUNCEMENT OF THE RELEASE OF THE FULL REPORT

04 JUNE 2012

(EMBARGO: 12 NOON, 4TH JUNE 2013)

___________________________________________________________________

Programme Director;

Honourable Mayor;

Head of Department of Cogta;

Municipal Manager;

Members of the Media;

We are pleased to welcome you ladies and gentlemen to this media briefing on progress report regarding the Manase Investigation into the affairs of the eThekwini Municipality.

Earlier today, I received the progress report from the Municipality on the implementation process of the recommendations following our tabling of the Report to the Municipality in February last year (2012).

As we may all recall, the investigation was instituted by the Department of Co-operative Governance and Traditional Affairs in terms of Section 106 of the Municipal Systems Act No 32 of 2000, following a call from the ruling African National Congress for the investigation into allegations of fraud, corruption and maladministration.

At the outset, we want to state it categorically that it was the ANC that called for this investigation to happen, owing to its long standing commitment to good and clean governance.



SCOPE OF THE INVESTIGATION

In order to help refresh memories, the investigation covered:

• Alleged irregular expenditure resulting from inadequate budgetary controls and controls over payment processes and weak checks and balances;

• Alleged abuse of the use of Urgent and Emergency Procurement Policy when appointing service providers;

• Alleged non-compliance with SCM policies and regulations in respect of the various infrastructure and housing related projects;

• Alleged unwarranted variation orders being approved by the management without following proper procedure

• Alleged non-disclosure of interests by Councillors and Officials of the municipality;

• Alleged irregularities in the supply chain management process in the award of contracts, payments and performance management in respect of telecommunications;

• Alleged illegal rental and sale of RDP houses;

• Alleged irregularities in human resources pertaining to recruitment, selection and appointment of staff within the municipality;

• Alleged irregularities pertaining to the abuse of overtime, locomotion allowance, subsistence and travel claims;

• Alleged fraudulent practices within the Durban Metro Police and Traffic Police;

• Alleged irregularities in the Development and Planning Offices and alleged non-compliance with Street Traders Bylaws; and

• Any other consequential matter/s that may arise during the investigation.



MEDIA ROLE ON THE MATTER

Before proceeding to the recommendations, we wish to place it on record that the hallucinations that have been bandied about in the public space about the report being covered up or watered down are indeed devoid of truth or fact.

We understand them when they are emanating from opposition parties, however, it deeply concerns us when the media, who are supposed to be public watchdogs, choose to distort information and indirectly promote a propaganda narrative without any shred of evidence or any effort to establish the facts.

As such, the media has been found in a very compromising position on this matter in that they have sought to present the stories around this report only on the side of the opposition political parties, ignoring all the processes that have unfolded.

A scramble has ensued in the media fraternity, like sheep blithely ambling into a slaughter house. Journalists have been falling over each other in an effort to parrot the propaganda narrative. Actually this exposes the reality that most of our media are psyched towards the opposition corner. The media need to check if they have not unwittingly become instruments of the opposition.

We are cautioning against this trend because we believe that media have a duty to uphold democratic standards, which include, among others, fair and objective reporting.

We also want to state it upfront that this investigation was never a witch-hunt against certain individuals, because for us government, the institutions are much more important than individuals.

As we stated before, our aim with this investigation was to identify weaknesses in the systems and controls within the eThekwini Municipality in order to eliminate any risks that were threatening this municipality.

This was the genesis of this investigation. Once again, we applaud the ANC in leading the call for this investigation. The ANC has been consistent in its calls for good governance.

Also of importance to note is the fact that the report has at no stage been kept as a secret document. The full report was tabled in February 2012 before the full council of eThekwini, during an in-committee session of the sitting of the council.

Therefore, the accusations ventilated in the public discourse to claim that councillors had no access to the report actually represent only a figment of an imagination since we have councillors who have spent many hours on end, reading the details on the report. If the report had contained anything of material significance that should have been disclosed, and wasn’t, the councillors could have disclosed this a long time ago. Sadly, these facts have deliberately been ignored by the media.

REPORT NOW PUBLIC

Today, we officially announce that the report on the recommendations of the Manase Investigation is officially available to members of the public since we have allowed the Municipality time to implement corrective action in respect of the Manase Report.

The Report now in the public domain has not been doctored or watered-down or sanitized in any way.

We need to indicate that the findings remain the subject of further investigations and actions by interested law enforcement institutions.

Accordingly, the following applies:



PROCEDURE FOR ACCESSING THE REPORT

Any person who wishes to access the complete Manase Report may apply for access thereto in terms of the provisions of the Promotion of Access to Information Act. Such an application entails the completion of the necessary form for submission to the Information Officer, of CoGTA, Mrs. D N Qhobosheane.



PROGRESS WITH RESPECT TO THE RECOMMENDATIONS OF THE REPORT

Let us now move to the progress in respect of the investigation.



COUNCILLORS DOING BUSINESS WITH THE MUNICIPALITY

The following councillors contravened paragraph 6 of Schedule 1, Code of Conduct for Councillors of the Municipal Systems Act, No. 32 of 2000 read with section 54 of same Act:

Councillor J N Cele

Councillor G M Cele

Councillor S Shange

Councillors S Z Xulu

Councillor P P Hlengwa

Councillor B A Chili

Councillor S Gumede

Councillor M P Gumede

Councillor T S Mtshali

Councillor M Shezi



RECOMMENDATIONS

Appropriate action should be instituted by Council in terms of paragraphs 13 and 14 respectively of Schedule 1, Code of Conduct for Councilors of the Municipal Systems Act, No.32 of 2000 against these Councilors.



ACTION TAKEN:

Ò The Ethics Committee was established by Council to process these matters. The Ethics committee is dealing with these matters in terms of the Financial years. For the 2009/2010 Financial Year:

Ò Closed cases:

Ò Cllr G.M. Cele - No longer a Councillor;

Ò Cllr Sthe. Gumede - Deceased

Ò Cllr M. Shezi - Deceased

Ò Three Councillors were fined according to the quantum of transgression as follows:

Ò Cllr J.N. Cele - fined two weeks salary [R8 248-19]

Ò Cllr S. Shange - fined four weeks salary [ R18 187-95]

Ò Cllr S. Xulu - fined one year’s salary [ R195 002-22]

Ò Two cases of Cllr Cele and Shange have been settled on Sept 2012 and Nov 2012 respectively. Cllr Xulu has an outstanding balance of R105 000,02 at end of May 2013

Ò Accordingly, matter is closed for 2009/2010



PROGRESS:

Ò The Manase report considered the reports of the A-G for the financial years 2009/10 and 2010/11. The Ethics committee has dealt with the 2009/10 report separately though transgressions overlap two financial years.

Ò The committee is now dealing with the 2010/11 report which involves the following Councillors:

É Cllrs S. Xulu, BA Chili, JN Cele, S Shange, AB Mvubu, CB Dlamini, MP Mkhize, VS Ngcobo, MP Gumede, MP Shelembe, BA Mkhize, PP Hlengwa, BA Hlongwa.



ALLEGATION THAT THE SUPPLY CHAIN MANAGEMENT PROCESS IN RESPECT OF THE SUPPLY OF A WASTE VOLUME REDUCTION PLANT AT THE BISASAR ROAD LANDFILL SITE WAS IRREGULARLY AND UNLAWFULLY INFLUENCED BY THE FORMER MAYOR



FINDINGS



Ò The allegation that the former Mayor acted in a manner contrary to the Code of Conduct for Councillors appears to have substance.

Ò There is sufficient documentary evidence that confirms the former Mayor’s involvement in the Waste Volume Reduction Plant at the Bisasar Road Landfill Site tender.

Ò Certain employees of the EMM may have colluded with the former Mayor and /or EWS.





RECOMMENDATIONS

Ò It is recommended that the tender be cancelled as the integrity of the tender process has been grossly and irreversibly compromised.

Ò Certain employees of the EMM should be further investigated by the Municipality for negligence and/or collusion with the supplier, EWS, during this tender process.



ACTION TAKEN

Ò With regard to the contract, investigations revealed that the award had indeed been made to EWS. This was followed by an appeal by other unsuccessful parties, which appeal was dismissed. That notwithstanding, the tender was not implemented.

Ò Matter of the former Mayor was referred to Senior Counsel. Senior Counsel advised that as the former Mayor was no longer a Councillor, Council had no jurisdiction to discipline him in terms of the Code of Conduct for Councillors.

Ò From the documents reviewed, it is not clear how Manase found that certain unnamed employees of the eThekwini Municipality (EMM) had colluded with the company

Ò An investigation of the documents reveals that communication between officials and the company was official. There is also an e-mail where officials were informed that the company was in the process of changing its name, (P234 of the report). The matter was not taken any further because the former Mayor, Accounting Officer and the relevant DCM had already left the municipality (or exited the system). Further investigation was also unwarranted because Council did not incur any losses.

Ò However, the Anti-Corruption Task Team has been investigating this issue to ascertain whether any criminal actions took place in this matter.

Ò This matter is therefore closed.

REPORT ON (RETROSPECTIVE) REGULARISATION OF IRREGULAR EXPENDITURE RAISED BY AUDITOR GENERAL IN HIS AUDIT REPORT ON THE 2009/2010 FINANCIAL STATEMENTS



FINDINGS

Ò AG reported material non-compliance with the SCM policy section 36 (2) of the MFMA in that the deviations from the procurement procedure were not reported to the council.

Ò There was non-compliance with:

Ò The MFMA

Ò Officials must ensure financial resources are utilised effectively, efficiently, economically & transparently and the prevention of irregular expenditure.

Ò Section 116 (3) of the MFMA

Ò Variation orders to be tabled in the Council and the local community be given reasonable notice and be invited to submit representations to the Municipality.

Ò Of the R 532,576 million irregular expenditure referred to by the AG for the financial year ending 30 June 2010, R 428 million Payment Vouchers not signed as “authorized” for payment;

Ò dates “Authorized / Certified” for payment are post facto to the date of “Approved” for payment; and no reflection of the date of “Works Actually Completed”, or “Checked For Payment”.

Ò Variation Orders

Ò Not signed by Head: Housing; orders addressed directly to a sub-contractor and not the appointed contractor; post facto dates of approval to dates of origin, i.e. V/O signed approved 3 days prior to the date of origin; authorizing signatures not dated when signed, and orders issued without a reference number related to EMM’s Housing Unit.

Ò Letters of Appointments / Letters of Award / Letters of Acceptance of Quotation

Ò Contractor’s letter of appointment not dated when awarded to the contractor;

Ò difference in values reflected in the letter of appointment and the contract;

Ò letters of appointment awarded to contractor prior to completion of the Quotation Evaluation Report;

Ò letters of appointment awarded to contractor prior to receipt of contractor’s quotation;

Ò letters of award not signed as accepted by the contractor;

Ò Letters of appointment awarded to contractor prior to the contractor’s tender document being completed;

Ò values reflected in the letter of appointment exceeding the value of the contractor’s quotation / tender value; and

Ò letters of Acceptance of Quotation by the Municipality dated prior to the tender request date.

Ò Tender Documents

Ò Copies of submitted tender documents not being completed fully;

Ò tender documents bearing evidence of unsigned alterations and the use of correcting fluid;

Ò tender documents being dated and completed post facto to the contractor’s “Letter of Appointment”;

Ò handwritten unsigned alterations and changes to tender closing dates;

Ò tender documents being completed after the advertised tender closing date; and

Ò acceptance of undated tender application documents.

Ò Memorandums of Agreement(M.O.A.)

Ò Documents not dated when signed by the Head: Housing;

Ò Documents not dated when signed by the consultant; and

Ò M.O.A. between the client and the contractor not signed by the contractor yet bearing signatures of the same witnesses in the spaces provided for both the client and the contractor.

Ò Quotation Evaluation Reports (Q.E.R)

Ò Documents not dated when authored; Q.E.R compiled but not identifying the author; and

Ò documents dated post facto to the signing of the Memorandum of Agreement.

Ò Reports by Head : Housing and Bid Adjudication Committee

Ò Reports written, dated post facto to a request for tender.

Ò Letters of Amendment

Ò Documents signed by the client, Head: Housing and bearing witness signatures to the proof of the client’s signature and same 2 witness signatures appear on behalf of the contractor yet the contractor has not signed the document.

Ò BAC failed to apply its minds and did not exercise due care and diligence in recommending condonation of the irregular expenditure.

Ò The former MM contravened section 32 of MFMA by not promptly reporting irregular expenditure in writing to the Mayor, the MEC and the AG.

Ò The Deputy City Manager: Treasury, misled the Municipal Public Accounts Committee and the Executive Council, and also the general public to believe that the irregular expenditure had been appropriately and justifiably addressed.

Ò The MM contravened Section 32 (4) of the MFMA by not promptly reporting irregular expenditure in writing to the Mayor, the MEC and the AG.

Ò He also contravened Section 62(1) (d) and 95 (d) of the MFMA both of which require the Municipal Manager to take all reasonable steps to prevent irregular expenditure.

Ò It would appear that the Deputy City Manager: Treasury, contravened the MFMA which requires Municipality officials responsible for financial management to take all reasonable steps to prevent irregular expenditure.



RECOMMENDATIONS

Ò Comprehensive forensic investigations into each of the contracts identified as irregular to identify and discipline the officials found to be implicated in contravening the SCM policy and MFMA in incurring the irregular expenditure.

Ò The Municipality must implement effective controls to prevent unauthorised, irregular and wasteful expenditure.

Ò Disciplinary action be taken against the Deputy City Manager: Treasury, former Deputy City Manager: Infrastructure; and former Head: Housing.

Ò The Municipality must recover the irregular expenditure in terms of Section 32 (2) of MFMA.



ACTION TAKEN

Ò In terms of controls to prevent unauthorized, irregular and wasteful expenditure, the following have been put in place to address the anomaly that existed at the municipality:

Ò SCM now falls under the DCM: Treasury;

Ò Membership of the bid committees has been revised;

Ò Delegations have been revised and put in place;

Ò Reg 36 reports are tabled before EXCO before they are considered by the BAC

Ò Units are required to confirm authorized signatories regularly;

Ò Regular reports are submitted to Finance & Procurement Committee for oversight purposes

Ò Line managers certify on a monthly basis if there has been any irregular expenditure and the reasons therefor;

Ò In addition, the line managers appear before MPAC to account for the irregular expenditure;

Ò The SCM Policy is being revised to effect improvements, including unlocking some of the bottlenecks in the procurement processes.

Ò These matters have been reported in terms of section 32(4) and S34(6) of the MFMA.

Ò Disciplinary actions:

Ò No disciplinary charges were brought against the former Head of Housing and former Deputy City Manager for Procurement and Infrastructure who primarily had a case to answer for these transgressions resigned but their involvement is criminally investigated by ACTT. Also, issues of recovery will be pursued upon completion of criminal investigations

Ò It is clear from the evidence that the former DCM, and the former Head of Housing had a case to answer as they signed most of the documents relating to irregular expenditure.

Ò Disciplinary charges were brought against the City Treasurer.

Ò During the proceedings, points in limine were raised on behalf of the City Treasurer.

Ò The first point was about the suitability of the chairperson to hear the matter. The investigator (Manase) was then called to give evidence.

Ò There was an argument about the admissibility of the documents the witness was referring to, in order to support his evidence, as he was not the author. Presiding officer decided to deal with the matter formally.

Ò Presiding officer called for written heads of argument on all these issues. It became clear that there were difficulties with the Municipality’s case. Some of the difficulties are:

Ò At the time when irregular expenditure occurred, City Treasurer was not in charge of SCM, which was an anomaly as SCM function was under DCM: Infrastructure contrary to MFMA;

Ò Most of the irregular expenditure arose from awards of more than R10m which had been approved and signed by the former CM;

Ò Manase, in making the recommendation to charge City Treasurer, had cited a wrong section of the legislation: S105(1)(c). This section refers to entities. The decision of Council was therefore based on the wrong section. To correct this would have required an amendment of the report as well as the council resolution.

Ò The HOD Provincial Treasury was approached to assist with expert witnesses to testify on the seriousness of irregular expenditure.

Ò In consultations, the expert witness for SCM did not appear convinced about the seriousness and indicated that this was more to do with adherence with accounting procedures than fraud or corruption;

Ò The Provincial Accountant General was not very helpful - his office did not deal with municipalities; and

Ò More critically for our case, the council had already condoned the irregular expenditure in terms of section 32 of the MFMA, the process of which City Treasurer championed with support from National Treasury, to ensure that this did not have a bearing on audit outcomes of the municipality.

Ò We then had to weigh the cost implications of continuing with the enquiry, which would have lasted for a good few weeks, for a sanction that would be less than a dismissal

Ò It became clear that it would not be cost effective for the Municipality to proceed with the disciplinary case especially with senior counsel and an external attorney involved.

Ò Based on the afore-mentioned factors it was agreed to recommend that disciplinary proceedings against City Treasurer be withdrawn in the best interest of all parties involved.

Ò Council is to consider withdrawing the disciplinary action against the City Treasurer.

Ò Investigation of contracts to determine involvement of other officials:

Ò In the light of the regularisation of irregular expenditure and the view taken by both the Treasury and A-G officials, it was felt that it would not be cost effective to institute an investigation, of another investigation. This would have been the third forensic investigation.

Ò It should be noted that all irregular expenditure is independently investigated by the ACTT



MARIANRIDGE & CHATSWORTH HOUSING REHABILITATION AND REDECORATION PROJECTS



FINDINGS

Ò The award to Dr Khumalo Construction of R 6.3m in respect of the Marianridge project was irregular as the BSC and the BEC did not meet to approve the bid specifications and to evaluate this tender, respectively;

Ò The SCM Policy requiring these committees to meet was therefore contravened;

Ò The award to Dr Khumalo Construction was beyond their R 3m CIDB grading;

Ò Housing Management misrepresented the facts to the BAC by stating that proper SCM Policy and procedures were followed;

Ò As a result of the above, the former Municipal Manager’s management response to the Ngubane& Co report was incorrect.

Ò A further award made to Dr Khumalo Construction in respect of the Chatsworth Housing project of R 16.9m was irregular as the award appears to have been split to suit the CIDB grading of the construction company subsequent to the Tender Verifier pointing to the disqualification of Dr Khumalo Construction doing work which was more than R3m.


RECOMMENDATIONS

Ò That former Head of Housing and the Deputy Head of Social Housing be provided with a copy of this section and instructed to respond, as to why disciplinary and criminal proceedings should not be instituted against them.

Ò Depending on their responses, such steps be considered against them.

Ò Further investigation be performed with powers to subpoena third party individuals and documentation.(p301-302)

Ò Disciplinary and where applicable, criminal action be taken against the following:

Ò Members of the BAC meeting held on 8 February 2008:

Ò the Deputy City Manager: Procurement & Infrastructure;

Ò Head Supply Chain Management, and

Ò Project Executive: Treasury.

Ò EMM must recover the irregular expenditure in terms of Section 32 (2) of the MFMA.


ACTION TAKEN

Ò The former Head of Housing who primarily had a case to answer for these transgressions resigned.

Ò After further investigations against Deputy Head of Social Housing and Deputy Head of Policy and Support Services (SCM), it became clear that their specific roles in aiding wrongdoing was limited to signing reports for the BAC which had been evaluated by external consultants instead of the BEC. Secondly the reports had been generated by the two officials in the Housing Unit.

Ò Deputy Head of Social Housing told the investigators that former DCM: Procurement and Infrastructure Cluster had instructed the housing unit to utilise regulation 36 to expedite the Chatsworth rehabilitation programmes. According to the report, this was also confirmed by the two housing officials who were disciplined and dismissed. (P298) The issue of further investigation was not pursued further as it is unlikely that a third investigator could have arrived at a different conclusion. However, it should be recorded that these matters are subject of investigation by the Anti-Corruption Task Team.


CONTRAVENTION OF SECTION 34 OF THE PREVENTION AND COMBATING OF CORRUPT ACTIVITIES ACT, ACT 12 OF 2004

FINDINGS

Ò The former Municipal Manager contravened Section 34 of the Prevention and Combating of Corrupt Activities Act by not reporting the above-mentioned fraudulent and corrupt activities in the Municipality to SAPS.

Ò The former Municipal Manager contravened Section 32 (4) of the MFMA by not promptly reporting this irregular expenditure in writing to the former Mayor, the MEC and the AG.

Ò Further, the former Municipal Manager’s failure to report fraudulent and corrupt activities in the Municipality to SAPS was also contravention of section 32 (6) of the MFMA.

Ò The former Municipal Manager only reported this matter two years later, after the interviews with the investigating team.

Ò The corrupt and fraudulent activities resulted in the Municipality being financially prejudiced by R 1.1m.

Ò The former Municipal Manager failed to take appropriate steps to recover the R 1.1m from the relevant companies and individuals, some of whom are still in the employ of the Municipality to date.



RECOMMENDATIONS

Ò The Municipality must take urgent steps to recover the R 1.1m before this matter prescribes.

Ò Action must be taken against the companies and individuals involved in this fraud.

Ò The Municipality must recover the irregular expenditure in terms of Section 32 (2) of MFMA.



ACTION TAKEN

Ò The new CM has duly reported the matter to the SAPS.

Ò Disciplinary steps have been taken against the two officials from housing who were involved in fraud. They set up a company with their partners (wife and girlfriend) as sole members and channelled work to the company.

Ò Both have been dismissed and have now appealed. (This process was started by the former CM).

Ò What is recoverable is the amount by which they inflated their prices, which is lesser than R1,1 m. This will be recovered from their pension



OFFICIALS CONDUCTING BUSINESS WITH THE MUNICIPALITY



FINDINGS

Ò Further to the 38 municipal officials identified by the AG as having business interests in companies which are conducting business with the Municipality and who had failed to disclose their interest in such entities, an additional 123 municipal officials were later identified by the investigating team.

Ò Consequent thereto, such employees contravened Section 4(3) read in junction with Section 4(2)(a)(i) and (ii) and Section 5(1) of Schedule 2 of The Municipal Systems Act, Act 32 of 2000. This Act requires that Municipality staff members should obtain consent of the Council prior to being party to a contract for the provision of goods and/ or services to the Municipality



RECOMMENDATIONS

Ò Council has swiftly and adequately dealt with disciplining all of the initially identified 38 officials.

Ò Similar action should be taken against the additional 123 identified employees.

Ò EMM must implement systems to ensure prevention of officials conducting business with the Municipality and ensure compliance with the Municipal Systems Act.

Ò The Municipality must recover the irregular expenditure in terms of Section 32 (2) of MFMA.



ACTION TAKEN

Ò Internal control processes have been put in place to prevent the repeat of this form of misdemeanour.

Ò All officials are now required to fill declarations of interest and the JD Edward System can now detect staff involvement in companies bidding for Council work.

Ò All cases involving 123 officials have been concluded. All affected officials were given Final Written Warnings. Details of the cases are available for inspection. It must be noted that each case has been investigated and treated on its own merits



EXCEPTION REPORTS ON PAYMENTS FROM JUNE 2008 TO OCTOBER 2011



FINDINGS AND RECOMMENDATIONS

Ò A number of exceptions were identified relating to irregular transactions by councillors, employees of EMM and certain suppliers.

Ò The above should be investigated urgently as there could still be a chance of recovering some monies for the EMM.

Ò We have identified some material transactions that need to be prioritised.



ACTION TAKEN

Ò INVESTIGATION OF CONTRACTS AWARDED TO H2O NETWORKS SOUTH AFRICA (PTY) LIMITED



FINDINGS

Ò Three contracts were awarded to H2O Networks (South Africa) (Pty) Limited through Section 36 awards were irregular.

Ò The first award amounting to R 293 575.00, which was a pilot project for the laying of 1,25 km of fibre, was irregular as it contravened the following:

Ò Paragraph 13 (a) of the SCM policy as the company did not have a valid tax clearance certificate;

Ò Paragraph 13 (b) of the SCM Policy in that a former employee of GIPO, who previously reported directly to the Head of GIPO, was involved in the management of H2O. H2O was awarded the pilot project within eight months of former employee resigning from the Municipality, in contravention of the paragraph 13 (b) of the SCM which requires that a bid from a company, where a former employee is involved, may not be considered for a period of 12 months subsequent to such resignation.

Ò Paragraph 14 (4) of the SCM policy as H2O had not been registered on the supplier’s database.

Ò The second award amounting to R 27, 4 million and styled as “Extended Pilot” by GIPO was irregular as:

Ò The vendor enjoyed undue preference in that the contract was drafted by H2O Networks, was not independently reviewed and did not protect the interests of the Municipality.

Ò H2O did not provide the required surety bond of R 2 737 793,00 in respect of the second award and no one from SCM or GIPO followed up to ensure that the bond was provided as required by the letter of award.

Ò On 22 January 2010 an amount of R 15 977 929, 92 was paid in advance to H2O for the extended pilot project. This payment was made before the fibre could be laid; this payment was made on the very same date that the Head of GIPO signed the contract; it would thus appear that she effectively funded the cash flow requirements of H2O.

Ò The third award to H2O in the amount of R 53 000 000.00 was irregular as:

Ò In terms of a “joint venture relationship”, H2O takes joint ownership of the fibre in that H2O takes ownership of 62 of the cores for its own use whilst the Municipality only owns 10 cores of the 72 cores laid.

Ò This relationship with H2O is in the nature of a Public-Private Partnership which is governed by Section 120 of the MFMA and a different set of rules and regulations apply which have not been complied with. Given that PPP’s are managed under a completely separate set of rules, this issue may make this entire tender and award process null and void.

Ò The third award to H2O exceeded R 50 million. It is submitted that BAC failed to apply its mind in interpreting Section 31 of the EMM’s SCM Policy as Section 31 (3) provides that the Accounting Officer must notify SITA together with a motivation of the IT needs if the transaction value of IT related goods or services required in any financial year will exceed R 50 million (VAT included); or the transaction value of a contract to be procured whether for one or more years exceeds R 50 million (VAT included).

Ò The technical team’s conclusion was that:

Ò The contracts in respect of the third award are inadequate to protect the Municipality, and need considerable rework and strong input from the legal department or industry experts.

Ò It remains a concern that, after 7 or 8 draft versions of these agreements, there remained so many important unresolved issues; the investigating team notes that the final signed contract is materially similar to the drafts inspected by the technical team.

Ò The numerous transgressions of SCM Policy procedures detailed above, and the fact that a former employee is a beneficiary of material amounts of the Municipal funds as a result of these transgressions, is of serious concern.



RECOMMENDATIONS

Ò Disciplinary proceedings should be instituted against the, the Head: GIPO and Senior Manager: Networks and Telecommunication Information Services.

Ò The Municipality must perform an independent legal review of all three awards to limit the risk of exposure.

Ò Further, the awards to H2O should be investigated by the Municipality, with powers to subpoena witnesses and third party records, to identify instances of corruption and fraud (if any) in this transaction and possibly recover monies for the Municipality.

Ò The Municipality must recover the irregular expenditure in terms of Section 32 (2) of MFMA.



ACTION TAKEN

Ò Disciplinary proceedings against the Head of GIPO are in progress.

Ò No action has been taken against the afore-mentioned Senior Manager. Manase has made no finding against him; in fact he is only mentioned in the recommendation. It is not clear what his role was in this whole matter.

Ò Legal opinion was sought on the continued relationship with H2O, which recommended that this contract be cancelled after it also became clear that fibre optic cables were put in other places other than through the sewer system thus causing damage to municipal infrastructure. Extent of damage is still being assessed with a view to suing for damages.

Ò The process to terminate the contract of H2O has commenced.

Ò Matter has been referred to the Anti-Corruption Task Team.

Ò On the former officials who have not observed the cooling-off period, the municipality has no jurisdiction over them, but the ACTT is looking into the matter.

Ò Controls have been put in place to limit this risk.



ALLEGATION OF A DUPLICATE PAYMENT AND AN IRREGULAR UPFRONT PAYMENT BEING MADE TO DIMENSION DATA



FINDINGS AND RECOMMENDATION

Ò A duplicate payment of R2 629 750.86 was made to Dimension Data.

Ò The allegation that there was an irregular upfront payment to Dimension Data appears to have no merit.

Ò Disciplinary proceedings should be instituted against the Head: GIPO.

Ò Council resolved to accept this recommendation.



ACTION TAKEN

Ò This matter is dealt with simultaneously with those relevant to those matters alluded to above.



ALLEGATIONS AGAINST METROCONNECT



FINDINGS AND RECOMMENDATIONS

Ò No evidence in support of the allegations of irregularities against MetroConnect could be found.

Ò Allegations against MetroConnect appear not to have any merit.

Ò Unless evidence supporting the allegations against MetroConnect is produced, no further action is warranted.



ALLEGATIONS AGAINST SMARTEXCHANGE

FINDINGS AND RECOMMENDATIONS

Ò No evidence in support of the allegations of irregularities against SmartXchange could be found.

Ò Allegations against SmartXchange appear not to have any merit.

Ò Unless evidence supporting the allegations against SmartXchange is produced, no further action is warranted



ALLEGATIONS AGAINST REVENUE MANAGEMENT SYSTEM



FINDINGS

Ò The initial cost of this project was estimated at between

R 90 million to R 150 million over a period of four years, from the commencement date 29 March 2003;

Ò The project was only completed in 2011, at which stage the project costs totalled R 474,7 million;

Ò The above-mentioned variation did not comply with section 116 (3) of the MFMA in that the local community was not given reasonable notice and invited to submit representations to the Municipality;

Ò A new contract of R 44.8m for standard support and maintenance payable quarterly in advance for the periods 01 July 2011 to 30 June 2012 was signed on 01 July 2011;

Ò It is noted that Section 5 (2) (a) of EMM’s SCM Policies states that: “The power to make a final award above R10 million (VAT included) may not be sub-delegated by an accounting officer.” As the accounting officer has not approved the awards in excess of R 10 million, this award is irregular.



RECOMMENDATIONS

Ò It is recommended that further investigation, with powers to subpoena third party individuals and documentation, must be performed on the Revenue Management System as:

Ò The variation from the initial estimate of R 150m to R 474m without compliance to MFMA is irregular and material;

Ò A new contract of R 44.8m for standard support and maintenance payable quarterly in advance for the periods 01 July 2011 to 30 June 2012 was signed on 01 July 2011 in contravention of the SCM policy;

Ò Further significant costs are likely to be incurred by the Municipality on this project.



ACTION TAKEN

Ò An independent auditor was appointed to review the work done to date and advise on the best way forward. The recommendation of the auditor was that we continue with the project, and invest an additional R150 million to ensure that the system can go-live and ensure that all change management processes, data migration and User Testing principles are put in place.

Ò This further investment is necessary to avoid a wasteful expenditure of over R500 million that Council has already incurred.

Ò New contracts for project management, data migration and independent user testing are being drawn up to ensure that stringent controls and tight deadline are being met and monitored.

Ò It must be noted that the ACTT is investigating whether any corruption occurred.



ALLEGED RENTAL AND SALE OF RDP HOUSING

The State President has appointed the Special Investigations Unit, by proclamation in the government Gazette to investigate all allegations of fraud and corruption surrounding RDP housing matters.



ALLEGED ABUSE OF OVERTIME IN THE ELECTRICITY UNIT



FINDINGS

Ò The following irregularities were identified:-

Ò Advance / Retrospective overtime approval forms had not been duly pre-authorised and dated by the Section Head and Division Head.

Ò Advance / Retrospective overtime approval forms had been pre and post-authorised by an junior employee and not the Section Head.

Ò The EMM has contravened Section 10(1) (b) of the Basic Conditions of Employment Act, 1997 (Act No 75 of 1997).

Ò No meaningful investigation has been launched into overtime at the electricity department as, only 1 employee was investigated amongst 632 operational employees who qualify for overtime at the Department, hardly constitutes an investigation.

Ò Management has, however, commenced addressing the issue of vacancies. The investigating team has verified that twenty six (26) electricians have been appointed to the municipality’s electricity unit as at June 2011.





RECOMMENDATIONS

Ò Further investigation be conducted by the Municipality on the abuse of overtime.

Ò The EMM must recover all overtime that was paid to its employees irregularly.

Ò Action be taken against the Section Head and Division Head at the Phoenix Electricity Depot;

Ò Section Head and Division Head at the Western Electricity Depot; and

Ò Employee



ACTION TAKEN

Ò This matter has been investigated. It has been found that the overtime has been worked. In Metro police there is still high overtime worked. The reason is the current shift system which was an outcome of negotiations. This is being re-negotiated.

Ò A longitudinal analysis of the trends over a defined period of time is also in place to monitor and verify cases of abuse and ultimately claim a recovery from those cited in the investigations.

Ò To date reports have been produced focusing on Top 150 cases and the individuals who are involved. Line managers are dealing with these matters.

Ò In the electricity unit, critical vacancies are being filled.

Ò For the reasons stated above, no disciplinary steps were taken against these officials.



ALLEGED RECRUITMENT IRREGULATIES



FINDINGS

Ò The appointments and promotion of certain employees immediately after completion of their traineeship from a TK10 grade to a TK14 grade appears to be irregular in that other employees were prejudiced as they had more experience and qualifications than those appointed.

Ò It appears that the post of Senior Manager: Applications and Projects was earmarked for a specific employee, making such appointment irregular and thereby prejudicing all other applicants and prospective applicants.



RECOMMENDATIONS

Ò Action must be taken against those responsible for the irregular appointments and promotions.

Ò Action must be taken against the Deputy Head: Applications and Projects.



ACTION TAKEN

Ò The HR retention practice that was utilised within IT was to train incumbents at Grade 10 and promotion to higher grade automatic based on training completed.

Ò HR grievance procedures are being followed.

Ò Owing to the investigations of the ACTT into activities of GIPO (IT division), including recruitment and the relations with several companies that have been employed by that unit, disciplinary actions are still pending



PAYMENT OF MARKET ALLOWANCES TO POSTS DESIGNATED AS SCARCE SKILLS AND CONTRAVENTION OF SECTION 57



FINDINGS

Ò In the absence of any approved policy or any act regulating the scarce skills or market allowance, there is no evidence indicating that the former MM acted irregularly and/or beyond the mandate afforded to him by Council.

Ò The former MM was duly authorized to address and implement a senior management retention scheme by increasing their remuneration in accordance with the research conducted by him and presented to Council during 2008.

Ò Council has subsequently identified shortcomings in the process used during the initial awards during 2008 by developing a policy to formalise the awarding of such allowances by establishing various committees to address same.

Ò Of the eleven (11) contracts, drafted in terms of Section 57 of Act 32 of 2000, none was fully completed in all aspects, therefore certain requirements of section 57 on the contracts are not met.

Ò Seven (7) contracts of senior managers reporting to the Municipal Manager were not renewed and therefore contravene section 57.

Ò It would appear that any senior manager reporting to the Municipal l Manager whose contract has not been renewed is employed by the Municipality in contravention of section 57 and any remuneration paid thereto may be irregular.

Ò In addition, section 57 states that the employment of managers reporting to the Municipal Manager is subject to a separate performance agreement.

Ò It then appears that without a performance agreement, any employment of a manager reporting to the Municipal Manager is also in contravention of section 57 and any remuneration paid thereto may be irregular.



RECOMMENDATIONS

Ò EMM must take appropriate steps to ensure that section 57 is adhered to.

Ò A coherent policy be developed to deal with all aspects related to Section 57 contracts.

Ò The tax implications of the market/scarce skills allowance payments should be further investigated to ensure that the Municipality complied with the appropriate tax regulations.

Ò No further market/scarce skills allowances should be paid until Council approves the appropriate policies



ACTION TAKEN

Ò Council exercised its right not to renew those contracts in respect of former DCM for P&I and DCM for Safety and Security. The latter challenged this decision at the bargaining council and was awarded three months’ salary. He lodged an application for the review in the Labour Appeal Court against the decision of the bargaining council, and the matter is still pending.

Ò The matter involving the Head: Legal was seen as falling within those cases that were supposed to be converted to full-time employees instead of section 56. So it was an error to categorise her as a section 56 employee when all other employees like her were already converted. This has already been finalised.

Ò The scarce skills issue is under discussion at the Governance and HR Committee which will make recommendations to EXCO and Council

Ò It is recommended that progress be noted and Council be informed about developments regarding the review application lodged in the Labour Court.





IRREGULARITIES WITHIN DURBAN METRO POLICE



TRAFFIC FINES CORRUPTION AND IRREGULARITIES



FINDINGS

Ò Despite credible evidence supporting numerous allegations of corruption and/or fraud totalling more than R 300,000.00 against Metro Police Official, the Senior Manager: Municipal Court and several other junior staff. The police official was only charged with one count of corruption;

Ò No action whatsoever was taken against the Senior manager and/or any other employee in this regard.



RECOMMENDATIONS

Ò That the metro police official be charged, without delay, for the remaining allegations of misconduct relating to corruption, impersonating a police officer, fraud and dishonesty for which he was not asked to plead.

Ò That a full investigation be conducted into the conduct of all the other persons involved in said matter.

Ò Person/s be appointed to hold a watching brief over the criminal and corruption prosecution of the aforesaid official, in order to ensure the conclusion of the said process.



OVERTIME FRAUD



FINDINGS

Ò The allegations of irregular overtime claims submitted against inter alia a Metro Police Director and a Superintendent, appear to have substance in that procedures contained in the Conditions of Service dated 21 June 2007 were not adhered to;



RECOMMENDATION

Ò A full investigation be conducted into overtime claims paid to the aforementioned officials with a view to recover the monies paid and to take action against those found to be guilty of misconduct and contravening the applicable policies and MFMA



DRIVER’S LICENSE FRAUD



FINDINGS

Ò It appears that there is substance in the allegations that 30 Trainee Constables recently employed by the Metro Police purchased their driver’s licenses in order to satisfy recruitment criteria, and that these recruits were referred to illegal driving schools by Metro Police College instructors;

Ò The Hawks are apparently conducting an investigation into the matter.

Ò Recommendations

Ò The Municipality should follow up the investigation by the Hawks to ensure that appropriate action is taken against those who are found guilty of the driver’s licence fraud.

Ò An independent review of the said Trainee Constables in order to test their driving abilities.



NEPOTISM



FINDINGS

Ò Whilst an investigation into allegations of nepotism within the Metro Police has confirmed that several high ranking officials have direct family members employed within the Metro Police, there is no evidence that directly implicates these members in influencing these appointments.



ABNORMAL LOAD ESCORTING



FINDINGS

Ò There is substance in the allegation that Metro Police revenue is being negatively affected by the fact that a former Metro Police Constable was operating an unauthorized abnormal loads escort business, and thereby taking normal business away from the Abnormal Loads Section of the Metro Police.

Ò Recommendation

Ò Disciplinary action be taken against the former constable in respect of the transgressions relating to his misconduct regarding his abnormal load escort business and the disregard he has for regulations and processes.







METRO POLICE “TAXI OPERATORS”



FINDINGS

Ò At least 14 Metro Police officers are implicated in the operation of taxis, this in contravention of Durban Metro policy and section 38 of the National Land Transport Transition Act, disqualifying them of holding a taxi license.

Ò These police officers were identified because they had outstanding fines ranging from R 5 100.00 to R 117 250.00.

Ò Allegations have been made that numerous other Metro Police are ‘Taxi operators’.



RECOMMENDATIONS

Ò Action be taken against the Metro Police officials identified as conducting taxi businesses.

Ò A full investigation into Metro Police officials conducting Taxi business be conducted.



OTHER ALLEGATIONS AGAINST METRO POLICE

Ò Numerous other allegations were levelled which the investigation team, due to time constraints, have not investigated.



GENERAL RECOMMENDATIONS

Ò Further investigation, with powers to subpoena third party individuals and documentation, should be conducted on the Metro Police Unit.

ACTION TAKEN

Ò The CM has moved Metro Police to the Cluster reporting directly to him;

Ò The matter of Metro Police involved in illegal driving licences scam is not yet finalised. This is due to the fact that both the Provincial Traffic Department and Hawks are still investigating the matter as it is alleged that a syndicate has been operating. The city has been requested to co-operate with the Hawks who are leading the investigations which are wider than just Ethekwini Metro with a view of utilsing these officials as section 205 witnesses.

Ò In respect of Metro Police doing business with the municipality or involved in the taxi industry, application for condonation was granted by the South African Local Government Bargaining Council on 15 March 2013 after 23 Officers opposed disciplinary actions owing to delays in the investigation of their cases by the Ombudsperson’s Office. These cases will now proceed as planned.



ACTION TAKEN

Ò The former constable has resigned.

Ò The metro official was dismissed and was re-instated on review by the arbitrator in the bargaining council and criminal charges brought by ICD were withdrawn. The municipal court official case was not pursued based on weaknesses of the former official’s case and the fact she had delegated powers from DPP. The matters were out of the control of the municipality and subject to the arbitrator and DPP on the basis of witnesses refusing to testify.

Ò In addition, discussions have been taking place about leadership changes within the Metro Police. What remains is that a few loose ends need to be tightened up to ensure that a sustainable and legally sound solution is found.

Ò It is recommended that a further progress report be submitted on this matter especially with regard to stabilisation of Metro Police environment to make it conducive for police to do their work and to restore morale and discipline of members.

Ò It be noted that the ACTT is criminally investigating all allegations against Metro Police.

Ò It is further recommended that steps be taken by the City Manager to investigate all recent allegations regarding Metro Police through an independent process.



WARWICK EARLY MORNING MARKET



FINDINGS

Ò It is submitted that, based upon the reports of the existing Market Management and a review of the documentation, that any attempt at this juncture to arbitrarily enforce the Municipal Bylaws will be met with legal action and potential public violence.

Ò It would appear that the existing dismal physical condition of the market is directly related to regular incidents of violent crime and is further a perilous health and safety hazard and places EMM at risk.

Ò The Warwick Early Morning Market, is therefore unregulated.



RECOMMENDATIONS

Ò It is proposed that the EMM Council be urgently explore alternative measures to this most deplorable and potentially disastrous state of affairs.

Ò Urgent measures to mitigate the health and safety conditions must be implemented by the Municipality.



ACTION TAKEN

Ò Business Support Unit has been instructed to implement all hygiene measures and to look at processes of healing old wounds with all stakeholders. These measures are in progress.

Ò Further, the future of Morning Market and its redevelopment needs to be considered as part of the renewal of Warwick Junction.

Ò It is recommended that progress in this matter be noted.







ALLEGATIONS AGAINST ISIDINGO SECURITY



FINDINGS AND RECOMMENDATION

Ò No evidence to support the allegation.

Ò No further action is warranted until evidence becomes available to substantiate this allegation.



IRREGULAR EXPENDITURE - THE WESTRICH HOUSING PROJECT



FINDINGS

Ò Not been provided with the reason for the use of section 36 of the SCM policy in awarding this contract.

Ò The three contractors were given appointment letters before submitting tender document forms and other appropriate documents.

Ò Two of the contractors did not issue proper tax invoices, as required by the VAT Act.

Ò The Municipality had an obligation to ensure that the full requirements of a tax invoice should have been complied with.

Ò Cession agreements were entered into by all three contractors with the same hardware supplier so that R 3.5m due for the supply of materials could be paid directly to the supplier and deducted from monies owing to the contractor.

Ò No involvement of the legal department in the cessions, resulted in the interest of the Municipality not being protected.

Ò A variation order was issued to each of the contractors; in two cases to increase the number of units and the value by R 2.7m and in the third to reduce the number of units and decrease the value by R 2m.

Ò All these variation orders did not comply with section 116 (3) of the MFMA as they were not tabled in council and the local community was not given reasonable notice and invited to submit representations to the Municipality.

Ò CIDB grading for these contractors were not been provided.



RECOMMENDATIONS

Ò Disciplinary action should be taken against the former Head: Housing for not following the SCM policy in appointing the contractors.

Ò Disciplinary action should be taken against the acting Deputy Head: Housing Engineering for authorising invoices for payment where these did not comply with the requirements of a tax invoice, as required by the VAT Act.

Ò Controls should be instituted to ensure that where a contractor does not supply a valid tax invoice, when required to do so, payment is withheld pending the receipt of a valid tax invoice.

Ò The Legal department should be involved in all agreements signed on behalf of the Municipality to ensure that the interests of the Municipality are appropriately protected.

Ò The Municipality must recover the irregular expenditure in terms of Section 32 (2) of MFMA.



ACTION TAKEN

Ò Former Head of Housing, who primarily had a case to answer for these transgressions, resigned.

Ò The acting Deputy Head’s case is pending. Investigation of this matter revealed possible additional transgressions in other housing projects. This investigation will be concluded by end of June 2013 and will lead to a disciplinary charge sheet being drawn.

Ò After further investigations against a Corporate Executive in Treasury and Head of SCM unit, it became clear that their specific roles were to consider the reports as members of the BAC. Secondly the reports had been generated by the two officials. However, it should be recorded that these matters are the subject of investigation by the Anti-Corruption Task Team.



IRREGULAR EXPENDITURE - BURBREEZE HOUSING PROJECT



FINDINGS

Ò There was an inadequate feasibility study prior the commencement of the project. A proper feasibility study would have identified problems upfront and would have provided a useful platform to decide on whether it was economically viable to commit to this project or not.

Ò Cost and time overruns (from R18m to R57m) experienced on this project, as well as the issue of poor workmanship, may be attributed to the poor controls exercised by the various stakeholders.

Ò Variation orders mentioned above were irregular in that they did not comply with section 116 (3) of the MFMA in that they were not tabled in the council and the local community was not given reasonable notice and invited to submit representations to the Municipality.

Ò A contractor which was not registered with the NHBRC was appointed.

Ò There was lack of supervision and management of the project.

Ò Poor workmanship was identified by NHBRC on the work done by the contractor. Included in this CIDB report are phrases like “shocking and unacceptable, dangerous, substandard, etc.”



RECOMMENDATIONS

Ò The Municipality should take action against all those found to have been negligent. These would include the former Head: Housing, the Project Manager , the Consulting Engineers and the Consulting Resident Engineer.

Ò Contracts should be revised to hold the contractor responsible for damages, where the contractor (for whatever reason) opts out of the contract. In all instances of default, the 10% surety bond in favour of the Municipality should be forfeited as a penalty.

Ò Contracts should be revised to include penalty clauses in respect of time over-runs. These penalties act as an incentive for the contractor to complete the project on time.

Ò Defaulting contractors should not be permitted to have any involvement in the decision as to who should replace them.

Ò The EMM should only award contracts for top-structures to contractors who are registered with the NHBRC

Ò These appointed contractors should, in addition, also have the appropriate CIDB grading.

Ò Where a development is taken on from an existing developer, a thorough and proper feasibility study should be performed prior to the EMM committing itself.

Ò Where a project is taken over from an existing developer, the EMM should reserve the right to appoint the contractors of its choice.



RECOMMENDATIONS

Ò Future variation orders should be referred to the Bid Adjudication Committee for consideration and/or approval, prior to the additional costs being incurred. In order to avoid a conflict of interest, officials from the Housing division should not be permitted to authorise variation orders.

Ò Variation orders should comply with section 116 (3) of the MFMA in that they should be tabled in the council and the local community must be given reasonable notice and invited to submit representations to the Municipality.

Ò As the amount spent by Housing per annum is significant, the EMM should consider employing additional internal resources such as Accountants, Civil Engineers and supporting staff.

Ò The professional consultants involved in his project should be reported to their regulating bodies.

Ò The ultimate responsibility for the poor performance of Gralio Precast, Blue Magolia, Nelson Allopi and Associates and Vernon Smith, as identified in the report from the NHBRC, and the poor control over the project and the subsequent over expenditure should be placed with former Head of Housing in terms of the MFMA, including:

Ò Lack of monitoring of the project;

Ò Payment without proof of quality workmanship; and

Ò Vernon Smith signing off on his own work.

Ò The Municipality must recover the irregular expenditure in terms of Section 32 (2) of MFMA.



ACTION TAKEN

Ò The former Head of Housing, who primarily had a case to answer for these transgressions, resigned.

Ò The Acting Deputy Head of Housing’s case is pending. Investigation of this matter revealed possible additional transgressions in other housing projects. This investigation is still ongoing.



IRREGULAR EXPENDITURE - HAMMOND’S FARM HOUSING PROJECT



FINDINGS

Ò Inadequate feasibility study prior the commencement of the project. A thorough and proper feasibility study would have identified problems upfront and would have provided a useful platform to decide on whether it was economically viable to commit to this project or not;

Ò Cost and time overruns (from R68m to R351m) experienced on this project, as well as the issue of poor workmanship, may be attributed to the poor controls exercised by the various stakeholders.

Ò Variation orders did not comply with section 116 (3) of the MFMA in that they were not tabled in the council and the local community was not given reasonable notice and invited to submit representations to the Municipality.

Ò A contractor which was not registered with the NHBRC was appointed;

Ò There was lack of supervision and management of the project;

Ò Poor workmanship identified by NHBRC on the work done by the contractor resulted in 22 units that had to be destroyed due to stability problems



RECOMMENDATIONS

Ò The Municipality should take action against all those found to have been negligent. These would include the former Head: Housing, the Project Manager (Blue Magnolia), the Consulting Engineers (Nelson Allopi& Associates) and the Consulting Resident Engineer (Vernon Smith).

Ò The Municipality should re-evaluate and reconsider the awards made to Gralio Precast for the Cornubia Housing Development Project, in view of the NHBRC reports on the poor quality of its workmanship on the Burbreeze and Hammonds Farm Housing Development Projects.

Ò The ultimate responsibility for the poor performance of Gralio Precast, Blue Magolia, Nelson Allopi and Associates and Vernon Smith, as identified in the report from the NHBRC, and the poor control over the project and the subsequent over expenditure should be placed with the former Head: Housing in terms of the MFMA, including:

Ò Lack of monitoring of the project;

Ò Payment without proof of quality workmanship; and

Ò Vernon Smith signing off on his own work.

Ò The Municipality must recover the irregular expenditure in terms of Section 32 (2) of MFMA



ACTION TAKEN

Ò The former Head of Housing, who primarily had a case to answer for these transgressions, resigned.

Ò The Acting Deputy Head of Housing’s case is pending. Investigation of this matter revealed possible additional transgressions in other housing projects. This investigation is still ongoing.

CONCLUSION

Ò From our investigation above, it appears that the allegations made hereunder, have substance and is corroborated by supporting evidence collated and examined during the investigation. Consequently, the MEC for Local Government was justified in instituting an investigation into maladministration, potential fraud, corruption or other serious malpractices which have occurred in the EMM.

Ò Non-compliance with and disregard for SCM policies, MFMA and the Municipal Systems Act;

Ò Excessive and inappropriate use of Section 36 of the SCM Policy;

Ò Lack of budgetary controls on expenditure;

Ò Abuse of overtime;

Ò Irregular recruitment practices;

Ò Evidence of corrupt and fraudulent practices by certain employees in collusion with suppliers;

Ò Councillors trading with the Municipality, in contravention of Section 32 of the MSA;

Ò Employees trading with the Municipality, in contravention of Section 32 of the MSA;

Ò Corruption and fraudulent practices in the Metro Police department.

Ò The Municipality must take appropriate steps to root out corruption and fraud and must prevent irregular and wasteful expenditure.

Ò Disciplinary and civil recovery processes must be instituted against certain individuals identified in the report.

Ò The internal control unit of the municipality should be appropriately resourced and mandated to ensure compliance.

Ò Section 32 (2) of the MFMA requires that the Municipality must recover unauthorised, irregular or fruitless and wasteful expenditure from the person liable for that expenditure.

Ò The municipality must undertake certain further investigations to establish potential fraud and corruption toward criminal prosecution.

Ò Release of the executive summary

Ò COGTA have reviewed the Executive Summary (With the Annexure of Acronyms) and are of the view that it can be released on the following basis;

Ò Whistleblowers have not been named;

Ò Councillors and officials named have been given the opportunity to respond through due process even if some processes are ongoing. Further reports should be released upon conclusion of matters.

Ò Companies named are recorded on the basis of factual and documented evidence. No assertions or accusations are made.

Ò It is recommended that consideration be given to the Executive Summary being released.

Ò Risks

Ò All matters must have been responded to or there will be criticism.

The municipality should table the report in council before the release of any statement or the executive summary.

Ò Dissatisfaction at the fact that the entire report was not released. However, due to the criminal investigations that are ongoing, this is justified.

Ò The timing of the release of the report is critical and all outstanding matters should be responded to before this is done.



Ladies and Gentlemen,

As can be seen from this presentation, indeed a lot of work has been undertaken to improve the systems and right all the wrongs that compromised governance in this municipality. We are reasonably satisfied with the progress that has been made by Ethekwini Municipality. This report has ushered in a new era of renewal for this municipality and altered for the better, the way business is conducted in Ethekwini Municipality. Of course, more work still has to be done as a number of matters are still under criminal investigation and the municipality is cooperating well with various law enforcement agencies that have vested interest in some of the matters.



The Report henceforth is a public document; therefore any arguments about the public status of the Report have been laid to rest. We trust that the media will report factually and objectively so that all stakeholders, including the media, will now be better informed. Ethekwini Municipality remains a world-class city; which is an envy of many around the world and one of the most successful stories of the post 1994 South Africa. Its contribution to the KwaZulu-Natal GDP is phenomenal at a whopping 53%. Its contribution to development and change to people’s lives is unparalleled when compared to any of the Cities in Africa.



THANK YOU

Issued by the Communications Unit, Ministry for Co-operative Governance and Traditional Affairs, KwaZulu-Natal. Contact Vernon Mchunu on 082 474 1882 or Lennox Mabaso on 082 884 2403.