National

Everything but on point

Lionel Faull

It is certainly not its experience in engineering that won Limpopo's On-Point Engineering a R52-million tender, writes Lionel Faull.

Julius Malema and Lesiba Gwangwa, with friend Lawrence Mapoloe. (Siphiwe Mhlambi)

The public protector has recommended that the state attorney recovers  any "improper financial benefit" that Julius Malema and others received from a roads management tender in Limpopo, handing the former ANC Youth League leader a R2million headache and his associates a R50million migraine.

In a report released on Wednesday, Thuli Madonsela found that Malema "benefited improperly" from the tender, but stopped short of blaming him for the "unlawful, fraudulent and corrupt" tender award or for the way On-Point Engineering's directors subsequently did business.

The protector's investigation into the awarding of a R52million management contract to On-Point Engineering by the Limpopo roads and transport department mirrors the criminal charges Malema and his associates face.

Madonsela confirms in the report that her investigators shared "information and resources" with the Hawks to avoid duplicating efforts.

The protector traced R2.1million in dividends and loans that flowed to Malema from On-Point. In three cases, On-Point made payments to properties known to be owned by Malema – a Polokwane farm and a Sandton mansion.

Malema, who has held a 50% shareholding in On-Point since August 2010, has been charged with 16 counts of money laundering. The prosecution believes he "ought ­reasonably to have known" he was benefiting from the "proceeds of unlawful activities".

Fraud and corruption
The Hawks claim to have traced an additional series of direct and indirect payments to Malema from companies doing business with the department under On-Point's supervision. These amount to R3million plus a contribution to a Mercedes-Benz Vito. The Hawks have also charged Lesiba Gwangwa, who holds the other 50% share in On-Point, and Kagisho Dichabe, a founder director and former shareholder, with nine counts of fraud and corruption.

Madonsela directed the department to cancel the contract, which has only another week to run. She has also asked the state attorney to "recover any amount to which the [roads] department is entitled, due to On-Point's fraudulent misrepresentation in respect of its bid and the improper financial benefit that it and its shareholders gained".

Malema would have to repay R2.1million and possibly part of one or both the properties that received funds from On-Point. The South African Revenue Service slapped a R16.2million tax judgment on him last month.

Dichabe and Gwangwa would have to repay close to R50-million that On-Point received from the department, including a series of "double and other undue payments" that it regards as "corrupt practices".

Madonsela found that "On-Point should never have been awarded the tender … as it did not qualify by a long stretch."

On-Point submitted its tender bid to the department in September 2009, claiming to have nine years' experience, a full complement of staff and an annual turnover of R2million. In fact, it had been in existence for a month, having changed its name from that of a shelf company that had been registered for only five months.

Intentions
Most staff members told the protector they didn't know how their CVs came to be submitted with On-Point's application; others could not be traced.

Whereas tax-compliant bidders – including a consortium led by engineering firm Aurecon – were rejected at the first hurdle for not submitting a covering letter, On-Point was allowed to submit a tax clearance certificate after bids were evaluated.

Madonsela found that Aurecon's letter was, in fact, included in its bid documents and that it should have been considered by the bid adjudication committee. Aurecon was not immediately available for comment.

Gwangwa told the protector that On-Point's claims were a reflection of the company's "intentions". "I thought nine years was the correct period to indicate to the bid committee … the relevant combined experience of the partners … that became On-Point," he is quoted as saying.

Mind-boggling
Madonsela said that "without doubt" On-Point "was given preferential treatment". However, she held back on pronouncing the tender corruptly awarded, pending the conclusion of the Hawks's investigation.

Nevertheless, she blasted the Limpopo roads department's decision-makers, especially its head, Ntau Letebele: "It is mind-boggling why the stark discrepancies between the bid document and the tax clearance certificate did not disqualify On-Point or present red flags regarding the possibility of tender fraud to those who dealt with the bid, particularly the head of department."

Letebele said he had "merely signed" the letter written by the bid adjudication committee head, ordering On-Point to submit a tax clearance certificate. Madonsela recommended that the department should investigate Letebele.

Unlike Gwangwa and Letebele, Malema was not interviewed during the protector's investigation. Malema initially objected to not having been interviewed, but later declined an invitation to do so and provided no further response to the provisional report. The M&G asked Malema for his reaction by SMS. He had not responded by the time of printing.

Download the full protector's report.  

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.


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