Toilet saga: Red flags over grant money shift

Dispatch has retracted certain statements contained in this article. The full apology to Izwelethu Cemforce can be found here

Chris Hani district municipality mayor Wongama Gela maintains all is above board with a multimillion-rand VIP toilet contract, yet questions have been raised over funds being shifted around and whether Gela had the authority to do so.

While Gela says the deal has been “misinterpreted” by the media, the Dispatch has established that money used to pay for the project was taken from Chris Hani’s municipal infrastructure grant (MiG) and that Gela had authorised this move.  

A Dispatch investigation in December showed that Kimberley-based company Izwelethu Cemforce was paid  a sum of R45m upfront to build 4,600 VIP (ventilated individual pit-latrines) toilets in the Intsika Yethu municipality, yet no toilets have been built.

Three sanitation projects were awarded to the company to build the ablutions in Intsika Yethu wards 1, 2, 5, 6 and 7.

MP Mandla Mandela has called for a thorough investigation into how this money was paid without any work being done.

In a statement issued by Gela to "all media", Gela expressed his dismay at how the toilet project was “interpreted”.

“To set the record straight”, he refuted claims that the alleged payment to the service provider was related to the construction of VIP toilets.

“This particular tender clearly sought for the supply and delivery of material for the construction of VIP toilets, not construction as it has been reported,” he said.

He said the payment made by the municipality to Izwelethu Cemforce was for the “material only at this stage, not the work done”.

“It is rather unfortunate that the payment to the service provider is viewed as an upfront payment for the construction of VIP toilets as it relates to the procurement of material, not the actual construction of the VIP toilets as yet,” he said.

In an invoice seen by the Dispatch, Izwelethu Cemforce billed the municipality for R710 397,94 for  reflection vests, protective overalls, protective footwear, earplugs, dust masks, gloves and provision of part- time health and safety officer and first-aid boxes, among other items.

What has raised red flags for municipal sources who spoke to the Dispatch on condition of anonymity, is that the company previously carried out construction. 

This same tender was issued in 2016/2017 for supply and construction of VIP toilets in ward 1, 2 and 5.

“What has changed now? Why are they are they paid for supply, not construction? There’s more to this tender than what we are told to believe,” a source said.

The Dispatch was also leaked another document which was sent to the municipality’s finance department.

It is signed by the technical services director, Luzuko Govu, and requests Gela to “authorise the expenditure of R64m meant for VIP toilets”.

Govu said  the mayor should authorise the expenditure while the municipality was awaiting the council budget adjustment in February 2020.

“Funding is available in Municipal Infrastructure Grant under capital expenditure,” Govu said in the document.

Govu said the money should be  released under “unforeseen and unavoidable expenditure”. 

“The mayor is duly requested to authorise the expenditure to be incurred under operational grant to ensure expenditure of the MiG grant,” wrote Govu wrote.

The mayor authorised the expenditure, which sources familiar with Chris Hani’s finances said was not allowed.

“The Treasury would not allow this MiG money to be used for something else under any circumstances. The mayor has no powers to touch a grant fund.

“The only time he or she may do that it is when it is internal municipality money,” said a source.

The R45m paid to Izwelethu Cemforce is more than 60% the total amount of the value of the project. The total value is R77m.

Another source said upfront payments were not allowed by government.

“There is no way that the municipality can use government money to make upfront payments and this money is way more than 50% [of the total amount].

“The money that is normally paid is for site establishment and is between 5% and 10% of the total value of the contract. The companies who were bidding for this same tender should question us [the municipality] about this.”

On Friday Gela said Izwelethu Cemforce  had done work for the municipality since 2011  to alleviate a huge sanitation backlog that stood at about 110,000 households across the district. 

"The current contract involves supply and delivery of all material relating to the contract and we are still hopeful that the delivery of all the said materials will start from the 13th of January as the site-hand over has been done already.  The project is estimated to be completed within seven months," he said in a statement in response to the Dispatch's queries.

He confirmed that the Cemforce will appoint sub-contractors from Intsika Yethu  who will undertake the construction of the structures, using local labour. 

On questions of how he authorised the money to be shifted around, he referenced sections of the Municipal Financial Management Act (MFMA).   

He said section 29, which states  the mayor may in emergency or exceptional circumstances authorise  unforeseen and unavoidable expenditure for which no provision was made in an approved budget, should be read in conjunction with Sections 53 and 54 of the same legislation. 

"Section 53 clearly confirms the responsibilities of the executive mayor that he is the custodian of the budget as delegated by council.  Section 54 provides that the mayor 'must identify the financial problems facing the municipality and must promptly respond and initiate remedial or corrective steps and report to council'." 

He said he did not need to get authority from Treasury as he was acting within his responsibility as stipulated in the relevant sections of the act.

“By nature the sanitation project is a capital item. However, because we are not creating an asset for the municipality but an asset for members of the community, it is thus classified as operational .  Hence the project is registered with MIG. It is  misleading to make assumptions that funds were moved from Capital projects to operational projects."