OUTA exposes dodgy contract and City of Tshwane halts it

24 May 2017

The Organisation Undoing Tax Abuse (OUTA) alerted the City of Tshwane to an irregular tender contract worth nearly R35 million and the metro has now suspended this contract pending further investigation.

OUTA was recently contacted by a whistleblower who passed on a considerable volume of information regarding irregular conduct on a tender awarded by the City of Tshwane to Tahal South Africa (Pty) Ltd. Further investigation revealed damning insights and a subsequent invitation to the City of Tshwane to initiate its own investigation which resulted in the City suspending the contract.

The tender was awarded to Tahal SA on 22 April 2015 for three years at a price of R30 664 348 excluding VAT. The VAT would add another R4 293 008.

The tender is CPD-03-2014-15, officially named “The identification and packaging of catalytic interventions and projects required to fast-track the development of East Capital to realise the required economic growth”.

This is what happened:

- The tender name was essentially nonsense, designed to confuse people and reduce the possibility of other bidders. In simple terms, it’s a feasibility study.

- Planning for this started in April 2013. An initial tender advert request was drafted with a budget estimate of R8m. It’s not clear how the projected cost jumped from R8m to R30m.

- In late 2014 or early 2015 a bid specification committee appointed by the then City of Tshwane city manager, Jason Ngobeni, developed the terms of reference for the tender. Tahal SA apparently worked with this committee on this, which was irregular.

- After the bid documents were ready, there was a request from the team to reduce the standard period for advertising the tender, granted by Ngobeni. According to the whistleblower, this was done to disadvantage other bidders. This was an irregular deviation.

- The tender was advertised in February 2015. Three bids were submitted, from Tahal SA and two other businesses.

- In April 2015, the same person who initiated the tender and who chaired the bid specification committee was appointed to chair the bid evaluation committee. This is regarded as highly irregular conduct.

- Tahal SA was rated at 100% on each of the evaluation criteria by each of the bid evaluation committee members and the other two bidders were disqualified. A senior official in supply chain management raised concerns about the evaluation criteria used that resulted in this.

- The tender terms of reference were for a 10-month contract but the contract awarded was for three years. Once again, this is irregular.

- After winning the contract, Tahal SA appointed Aftec Capital Investments at 20% of the full contract cost as a “consultant” although it is not clear what value Aftec added. Aftec’s sole director is Selwyn Nathan, a former director of Tahal SA.

- Nearly half of the payment to Aftec was paid on to Jet Capital. Jet’s sole director is David Hirschowitz, who is one of the Tahal SA directors.

- Tahal SA also made payments to the Lejwe La Metsi game farm in Bela Bela and to Lejwe Game Breeding. The Lejwe businesses are co-owned by Hirschowitz and the farm was apparently used to entertain politicians and City of Tshwane officials.

- Tahal SA sub-contracted virtually the entire project to another company, which was paid about R1.5 million. Experts have indicated that this is about what the full job was worth. Sub-contracting the bulk of a contract is irregular and it is unclear why Tahal SA was paid R30m if the actual work could be done for just R1.5m.

- This contract was for a preliminary feasibility study, raising the possibility that it was to have been the gateway to a substantially larger contract which would also have gone to Tahal SA.

- Tahal SA’s financial records from November 2015 to April 2016 show that the company had little income other than from the City of Tshwane contract, which raises queries about whether it was a going concern and why it was hired.

“The involvement of Tahal SA in setting the terms of reference is inexcusable. This led to a corrupt relationship which led to the plundering of state funds,” says OUTA’s Chief Operating Officer Ben Theron. “How did the contract price jump from R8 to R30m, for a job that appears not to be valued at more than R1.5 to R2m? Because that is wrong, everything else that they did thereafter is wrong.”

He welcomed the City of Tshwane’s response to OUTA’s alert. “OUTA is pleased that the City of Tshwane has started investigating and has suspended this contract, and we expect to see further action to hold those responsible for the unnecessary costs to the city,” says Theron.

OUTA believes this contract was the tip of the iceberg and that investigations are needed into all other contracts awarded by the City’s procurement team at the time, more so those that involve contracts which Tahal SA and its directors have with any other municipality, government department or entity.

OUTA is a proudly South African non-profit civil action organisation, comprised of and funded by people who are passionate about holding government accountable and improving the prosperity of South Africa.

Issued by Ben Theron, Chief Operating Officer, OUTA, 24 May 2017