Dodgy R646 million water contract in South Africa

The Special Investigating Unit (SIU) has welcomed a judgment by the Special Tribunal that declared a R646 million water contract constitutionally invalid and set it aside.

This was awarded to AECOM SA (Pty) Ltd for the emergency upgrading of the Thukela–Goedertrouw Transfer Scheme in KwaZulu-Natal.

The Department of Water and Sanitation initiated the project to prevent the Richards Bay area from running out of water.

However, the Tribunal found that the contract value was unlawfully inflated from an initial budget of R407 million to R646.5 million, resulting in irregular expenditure and significant losses to the State.

In its ruling, the Tribunal found that the procurement process violated Section 217 of the Constitution, which requires public procurement to be conducted in a manner that is fair, equitable, transparent, competitive, and cost-effective.

The Tribunal further found that AECOM was not formally invited to participate in the closed tender process, yet was irregularly included and ultimately appointed.

SIU spokesperson Kaizer Kganyago said that although the Bid Adjudication Committee did not support the recommendation to appoint AECOM, the Acting Director-General proceeded with the award regardless.

This led to irregular expenditure exceeding R357 million and losses totalling R429 million.

Wrongdoing by officials and orders

The SIU investigation, together with findings by the Department’s Risk Management Committee, identified serious failures by senior officials to discharge their legislative responsibilities.

The Acting Director-General, Sfiso Mkhize, approved the appointment of AECOM despite clear procedural irregularities and without proper adjudication.

Zandile Makhathini, then Chief Director: Supply Chain Management, bypassed the competitive bidding process and submitted the request for approval directly to the Acting Director-General.

Mpho Mofokeng, the Chief Financial Officer, signed off on submissions despite being aware of irregularities in the procurement process.

The Chief Director: Strategic Asset Management and the Chief Financial Officer also failed to implement controls to prevent irregular expenditure, in contravention of Section 45 of the Public Finance Management Act.

The SIU said that these failures directly contributed to unlawful procurement, irregular expenditure, and the undermining of constitutional procurement principles.

The Tribunal ordered AECOM to provide the SIU, within 30 days, with audited financial statements, invoices, and supporting documentation relating to the R646 million contract.

The SIU must, within 60 days, determine the profits earned by AECOM and notify the company of the amount to be repaid.

AECOM must repay the determined profits to the SIU. Should it fail to do so, the matter may be re-enrolled before the Tribunal for determination.

They also ordered AECOM to pay the SIU’s legal costs, including the costs of two counsel, and reserved jurisdiction to issue further orders necessary to ensure recovery and compliance.

“The SIU remains committed to protecting public resources, advancing clean governance, and reinforcing constitutional values in the management of state contracts,” said Kganyago.

“The Tribunal’s ruling strengthens the principle of legality in public procurement and ensures that wrongdoing by officials and service providers does not go unchecked,” he added.

The spokesperson added that the SIU is empowered to institute civil proceedings in the High Court or Special Tribunal to correct wrongdoing uncovered during investigations into corruption, fraud, or maladministration.

Where evidence of criminal conduct is identified, the SIU will refer the matter to the National Prosecuting Authority (NPA) for further action.