On Thursday the Democratic Alliance (DA) in Tshwane made public correspondence between the City of Tshwane and National Treasury, including a letter from then minister of finance Pravin Gordhan to Mayor Kgosientso Ramokgopa warning against the disastrous PEU metering contract as early as 2013.
Tshwane would not comment at the time, but said it will address the DA’s statements later in detail.
Some of the warnings came even before the contract was signed, but all of it was however ignored, the DA said.
DA shadow member of the mayoral committee (MMC) for finance, Lex Middelburg, said copies of the letters were leaked to the DA by a whistle-blower with direct access to it, whom he would not name.
The existence of this correspondence was never disclosed to council or to the High Court in the pending review of the procurement process. Middelberg said if the council members, including those from the ANC, knew the content of the letters and Treasury’s concern about the contract, they would not have approved the contract.
He calculates the cost to the City to be R1.4 billion to date. This includes R400 million the City spent on a previous pre-paid roll-out in 2012/13 that was abandoned in the face of the agreement with PEU Capital Partners. Those meters were “ripped out” as the PEU meters were installed, according to Middelberg.
The DA is now also questioning Gordhan’s competence, since his failure to act with regard to the PEU contract allegedly contributed to the damage the City suffered.
According to the documents the DA disclosed, National Treasury wrote to municipal manager Jason Ngobeni on May 17, 2013, complaining about a lack of response from the City in providing Treasury with information to review the contract in terms of Section 33 of the Municipal Finance Management Act (MFMA).
That was two weeks before council approved the contract on May 30, 2013.
A week later on June 7, 2013, National Treasury Chief Procurement Officer Kenneth Brown wrote to Ngobeni voicing its concern that there was a conflict of interest with regard to PEU, since it provided consulting services and was then contracted to implement the solution it advised on.
Brown then said: “To this end, the City of Tshwane is advised to put this project on hold and seek the necessary guidance on how to proceed with this project from the National Treasury.”
According to the DA, further information furnished by the City at a subsequent meeting with Treasury still did not satisfy Treasury.
On August 29, 2013, Treasury again wrote to Ngobeni, stating supply chain management procedures were not complied with, the procurement model was not the most cost effective, the costs over the lifetime of the project were exorbitant and that the risks were biased against the City.
Treasury again advised Ngobeni: “In light of the above, it is recommended that the CoT (Tshwane) undertake a proper feasibility study and follow a procurement process that is in line with the legislation and prescripts.”
According to the DA, a meeting between Gordhan and Ramokgopa heeded no results and on September 13 2013 Gordhan wrote to Ramokgopa, highlighting five points of non-compliance with applicable legislation during the procurement of the PEU contract.
Gordhan further pointed out that the offer didn’t offer value for money since:
- The City would be required to buy back the infrastructure at the end of the contract;
- The 19.5% service levy to PEU was exorbitant and should be between 5% and 7%;
- The increase in revenue collected would be absorbed by the increasing fees payable to PEU.
As late as May 15, 2015, three days after Ramokgopa publicly announced the cancellation of the contract, Treasury again wrote to Ngobeni, advising him to “halt the payment of any settlement amount agreed with the service provider pending the National Treasury’s detailed review of the entire procurement process, implementation and the ultimate cancellation of the project.”
As with all the other advice from Treasury and Gordhan this was again ignored and Tshwane proceeded to conclude a termination agreement placing serious financial obligation on itself and facilitating further payments to PEU for a “transitional period” of six months.
The DA is calling upon Ramokgopa and Ngobeni to resign for their part in what it calls “the greatest financial disaster in the history of any city of the country”.
The DA however doesn’t stop there. MP Gordon MacKay (Deputy Shadow Minister for Energy), who represented the DA’s parliamentary caucus at the briefing, said the party will call Gordhan to account in Parliament for his failure to act for two and a half years to stop the devastating contract.
Middelburg said the DA will set the process in motion for disciplinary steps against Ngobeni. A motion of no confidence will be instituted against Ramokgopa and the party is taking legal advice on any criminal consequences of the PEU-debacle.
Moneyweb approached National Treasury and Gordhan for comment and will add such when received.
Read the full DA press release and documents released here.