Buffalo City wants to recover R16m in Covid housing funds

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There is an ongoing court case to recoup the funds from the implicated officials and contractors, although the municipality is still investigating.

A confidential report tabled before the council on Wednesday, 30 April, describes how four senior officials in the municipality’s housing directorate unlawfully authorised R16m in transactions to two contractors for emergency housing during the Covid lockdown.

This is based on the findings of a Special Investigations Unit (SIU) investigation. The SIU delivered its reports to the municipality in August 2022, but the municipality only referred the matter to its attorneys in March 2023. The municipality did not respond to questions about why it took so long.

The funds were initially authorised in 2020 as part of a deviation from normal tendering processes due to the “emergency” caused by Covid. The funds were supposed to be used to build temporary housing structures for more than 300 people who had been evicted from Buffalo Flats in 2019, and others who had lost their homes in fires during the Covid lockdown.

But the SIU’s investigation found that hours before the municipality published a request for quotations, the municipality’s general manager of supply chain management, Andile Xoseka, sent an email to nine companies with the details of the request. This unlawfully favoured these companies, the SIU found.

Three of these companies — SQT Construction and Civils CC, Vitsha PM Consultants CC and Coalition Trading 1203 CC — were eventually awarded the contracts to build the housing. Coalition Trading 1203 CC was not paid for any work delivered, but SQT and Vitsha were paid R6.5m and R9.7m respectively.

The payments to SQT and Vitsha were authorised and completion certificates issued before the housing structures were complete. For this the SIU held head of the housing directorate Luyanda Mbula and inspector for low-cost housing Siphokazi Dlongwana, responsible. One invoice of R1.2m paid to SQT was a duplicate of a previous transaction.

The houses are made of prefab materials, as originally planned for. Many of the people living there were evicted from Buffalo Flats in 2019, so it appears that at least some of the houses were used for what they were originally intended.

But according to the leaked report, the SIU found that not all the houses were delivered as planned and the structures were only finished in 2021 and 2022, after the Covid lockdown had ended.

The SIU found that the budget deviation used to pay the suppliers was invalid because the “emergency” provisions of Covid were no longer relevant and the deviation had expired by the time the payments were made.

All the work done by the companies “did not fall within the scope” of the tenders, the report says, and as a result the companies were “unjustifiably enriched”.

The SIU also found that two officials who assessed companies that had bid for the contract, were not authorised to evaluate bids higher than R200,000.

Next steps

The municipality’s lawyers have advised that the officials are guilty of financial misconduct for violating the Municipal Finance Management Act. Disciplinary matters of this nature need to be referred to to the Disciplinary Board by the city council. This referral was approved by the council last week.

The municipality has also requested the SIU to refer the investigation to the National Prosecuting Authority to consider whether to criminally prosecute the officials.

The municipality has been advised that the funds should be recovered through court action, both from the officials who authorised the expenditure and the contractors who “appropriated the irregular expenditure”.

The municipality issued court summons to the implicated officials and the contractors on Wednesday, 10 January 2024. Xoseka filed his plea, denying that he sent the request for comment to the nine companies before it was published. The other defendants have not yet filed their pleas.

The municipality intends to continue investigating the matter, including conducting a survey of the houses that were built, before taking the legal action further. The SIU has refused to provide the municipality with a quantity surveyor report from the SIU’s investigation.

The SIU has been requested by the municipality to proceed with civil action against the contractors.

Council has also resolved to refer the matter to the Municipal Public Accounts Committee to consider further legal action to recoup the money from the contractors.

SQT’s founder Siviwe Mpengesi was contacted with questions. Asked to respond to the findings, he said “Don’t be fishing. Bring facts to the table. I don’t know what you telling me … I don’t have communication from the SIU or the municipality.”

When we sent him excerpts from the report which mentions the company, Mpengesi said “Sir I will not comment on this top secret municipality report as it is not official. I don’t see mention of my name and my company. I will therefore block you.”

Vitsha did not respond to questions by the time of publication.

The implicated officials did not respond to our questions.

Published originally on GroundUp.

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