Warped tender delays building of Kimberley psychiatric hospital for years
A much-needed psychiatric hospital in Kimberley is reportedly R1.5-billion over budget and seven years behind schedule while a network of Northern Cape business people connected to powerful ANC politicians has cashed in on the construction contracts.
Last month, the standing committee on public accounts (Scopa), Parliament's public spending watchdog, noted the need for a full investigation of the project and suggested that the Special Investigating Unit (SIU) should be asked to probe what went wrong.
The Northern Cape has no specialised psychiatric hospital. Kimberley's West End Hospital has a mere 12-bed psychiatric wing, which means patients have to queue, sometimes literally for years, to be admitted. They are often kept in police holding cells before being admitted.
The psychiatric hospital is on the outskirts of Kimberley on the road to Barkly West. It stands out in the open veld because it does not strike one as a typical government building – there are no signs indicating its purpose and it seems forever under sporadic construction.
A former consultant claimed there were structural flaws in the construction of the hospital and that the design of the building was overly ambitious.
But as a Mail & Guardian investigation has revealed, the project appears to have been a source of lavish, ever-expanding tenders for a clique of connected business people and their politician friends. It also lends support to claims that this small and well-connected clique in the Northern Cape benefits from other lucrative tenders and contracts in the province.
Two senior government officials, Tshego Motaung and Deon Madyo, were allegedly intimately involved in the conception of the project, then resigned and joined the ranks of the development's project managers, engineers and architects, according to a recent audit report. With the former officials now benefiting from the massive project as well as their close business links to the Northern Cape's ruling elite, it has raised questions about a conflict of interest.
The ANC's provincial chairperson, John Block, was the MEC for public works when the project was launched in 2003. At the time, Motaung had business ties with Block and his wife, Noluthando.
One of Block's other political allies and business associates, Motsamai Rantho, won the security tender on the hospital site.
The audit report by external forensic auditors Gobodo Incorporated, handed to the Northern Cape government in January this year and leaked to the M&G, refers to reports of political interference.
The project is more than R1-billion over budget. (Gallo)
The report also says that such claims are strengthened by the fact that the main building contractor, Andrew Scholtz, was shielded from penalties for delayed work by a former official on the grounds of being "historically disadvantaged".
Sources told the M&G that Scholtz was "uniquely" well connected with senior Northern Cape politicians, including being in business with a partner of the then ANC provincial secretary, Neville Mompati. Scholtz denied that these connections won him the contract.
Gobodo says it could find no evidence of corruption in the tender process. But it also says Scholtz's company, Vista Park Developers, should not have been appointed because he did not submit the required documentation.
The tender board's decision to appoint him remains a mystery, because some key documents were missing.
The Northern Cape government began awarding tenders for the hospital in 2003. The project was scheduled for completion in 2007 at a cost of about R250-million.
A new opening date has now been provisionally set for 2014 – 11 years after the hospital was conceptualised – and its estimated cost now stands at R1.8-billion. The Gobodo report says it is between 60% and 70% complete. The department of public works claims the hospital has cost only R408-million to date, but officials who recently accounted to Parliament confirm that the figure is closer to R1.8-billion.
A subcontractor, who worked on the site and asked not to be named, said the job would not be finished before 2017 and estimated that repairing "shoddy" work could push the total cost over the R2-billion mark.
One of the former government officials who appears to have benefited from the initial contract was Motaung, a director who allegedly oversaw the hospital project in the provincial public works department, then headed by Block.
In August 2003, Motaung left the department to become director of Babereki Consulting Engineers.
The Gobodo report states that, on October 8 2003, Block signed off on the appointment of Babereki as project manager and civil and structural engineer on the hospital. This was a little more than a month after Motaung had left his senior position in the department.
Block, through his lawyers, denied this, saying the appointment was made through the provincial tender board. He said he was not MEC at the time and could not have signed off on Babereki's appointment.
However, media statements at the time show that Block was still a provincial MEC on October 28 2003. His signature appears on the appointment letter, according to the Gobodo report.
There is evidence that Babereki was appointed and earned a consulting fee from Block's department for almost a year before being registered. Motaung denies this, but the Companies and Intellectual Property Commission register shows that the company was registered only in 2004.
In addition, the M&G has established that, at the time the contract was awarded, Motaung had business ties with Block and his wife.
He and Block were directors of Isothermic Investments, and he and Noluthando were directors of alluvial mining company Internship Investments.
Block and Motaung – and Rantho, who later won a subcontract to secure the hospital – were also directors in Talal Investments until June 2005.
Public works is suing the original contractors, who an audit revealed did not comply with tender procedur. (Gallo)
Motaung said he had nothing to do with the provincial tender board's appointment of the main contractor (Scholtz) and was not involved in planning the hospital while still employed by the department.
He also said he was "never involved in any company with Mr Block while he was MEC of the department concerned".
However, he recalled that after Block's resignation as MEC, "I became a director of companies that the former was involved in. These companies, however, never conducted any business."
Motaung denied any knowledge of structural flaws in the construction of the hospital and said he could not comment on allegations that the design of the building was too ambitious.
He also would not comment on the Gobodo report's allegations, saying that he was not "officially" in possession of it and reserved his right to comment on issues that were the "subject of an investigation by Scopa".
The Blocks' lawyer, Dali Mjila, said his clients "were not in the habit of responding to media inquiries". However, they would make an exception in this case to see whether the M&G would print their side of the story.
"[As] Mr and Mrs Block never did business with the mentioned individuals [Motaung and Rantho], there could not ... have even [been a] perceived conflict," Mjila said on his clients' behalf.
The one exception was a mining concern, Internships Investments, in which Motaung and Noluthando Block were co-directors.
Connecting the Blocks with other business dealings would be "stretching it, thoroughly unethical and intended to boost the sales of your paper and ... defame our clients", Mjila said.
Mompati confirmed his business dealings with Rantho and Motaung, but said they had no bearing on either of their companies being awarded government contracts.
The M&G has also established that the head of the Northern Cape health department, Madyo, also walked out of his job and, in this case, straight into a position linked to the firm of architects who designed the hospital.
The Gobodo report shows that Madyo was employed by the Sakhiwo Health Solutions Group in 2006 when he resigned as head of the department. The next year he became Sakhiwo's chief executive.
According to Gobodo, the architects on the hospital project, the Hospital Design Group, are part of Sakhiwo.
Sakhiwo, however, disputes this. A spokesperson, Johann Loubser, said the Gobodo report was "devoid of all truth".
He said Sakhiwo had no involvement in the Kimberley psychiatric hospital and that the group was formed after the hospital project started. Sakhiwo occasionally outsourced its architectural requirements to the Hospital Design Group, but the latter had "no interest in Sakhiwo whatsoever".
Nine years after its launch, the much needed psychiatric hospital outside Kimberley remains unfinished. (Gallo)
Along with Uruguayan businessman Gaston Savoi, Madyo is Block's co-accused in the ongoing fraud and corruption case relating to the sale of water and oxygen purifiers to health facilities in the Northern Cape.
Madyo could not be reached for comment and the Hospital Design Group did not respond to questions.
'The wrong appointment'
By 2005, the consulting, engineering and architectural firms had been appointed. It was then that Motaung's Babereki consulting firm short-listed Scholtz's company, Vista Park Developers, in a joint venture with a company called Joh Arch Investments for the main hospital contract, according to the Gobodo report.
Joh Arch was owned by Bongani Sibisi, who is Rantho's business partner in another venture.
Motaung denied being involved in the short-listing.
The Gobodo report states that Joh Arch and Vista Park should have been disqualified in the pre-tendering round because they had not provided the required documentation.
In the next step, the adjudication committee appears to have recommended a joint venture comprising Grinaker LTA and HSH Construction for the job.
Yet Scholtz's company, Vista Park Developers, got the lucrative job.
Gobodo says it could not get to the bottom of the tender board's decision because it could find no documentation for the crucial final stage of the award.
A source, who worked on the project but asked not to be named, said that, at the time the tender was awarded, Scholtz was well connected to senior politicians and had several provincial ministers "on speed dial".
Scholtz and his joint venture partner, Sibisi, denied this, saying that the provincial tender board was responsible for the appointment process and that it was awarded "fairly".
Both blamed the systematic delays and price inflation on the provincial government and the team of engineers and architects. Sibisi said Babereki had the "last word" and had approved the work done by the joint venture. Vista Park and Joh Arch could therefore not be held responsible for allegedly inferior construction work.
The Gobodo report also notes that it could not test the basis of provincial roads director Boitshwarelo Modise's instruction that Vista Park should escape penalties of R20 000 a day because of its disadvantaged status.
"Although the accuracy of this statement could not be verified due to the unavailability of minutes for the provincial tender board, it does strengthen the view that there was at least some political influence affecting the appointment," the report states.
Modise was killed in a car accident in 2011.
To date, Vista Park has paid no penalties.
Commenting, Scholtz said there was "absolutely no interference" and that Gobodo had not interviewed him during its investigation. "There was no agreement that Vista Park should be liable for penalties, because it had been granted an extension of time on the project."
Scholtz said the extension of the contract and delays were "inevitable" owing to changes in the scope and specifications of the contract made by the departments of public works and health.
He admitted to being "well connected", but not politically so; his connections were the result of his long business experience.
Lack of capital
The Gobodo report also asserts that the winning bidder lacked the capital to finance the project. Vista Park did not submit a bank-guaranteed cheque as required, which should have resulted in its disqualification, it states.
Again, Scholtz denied this, saying that a cheque was submitted.
Yet the contract ran into trouble from the outset: just two months after Vista Park was awarded the tender, meetings were held to discuss the lack of progress.
By 2006, consultants were complaining that there was insufficient labour on site for the job to be completed in time.
Scholtz said this was because he was competing with the construction of a new prison and that, owing to the Northern Cape's small pool of skilled workers, labour had to be sourced from outside the province.
At the time, officials suggested that the work should be stopped until this was addressed, but roads director Modise appears to have strongly opposed the idea and it continued.
A senior national health official, who recently inspected the hospital, said it was clear that attempts had been made to cut costs during construction.
"Some of the walls will have to be broken down and rebuilt in line with our policy requirements," the official said. "The construction work is shoddy. There is evidence that inferior cement was used to cut corners."
Blunders and incapacity
Departmental blunders and incapacity also appear to have undermined progress. In September 2006, construction almost ground to a halt when Vista Park claimed that it was owed money.
Gobodo says it could not prove this, citing a government source who claimed that the health department had not made a single late payment.
Scholtz and a consultant, Corrie Pietersen, disputed this, saying that they intended to sue the province for money allegedly owed to them.
Scholtz wrote to the department in 2009 to complain that he had no control over the appointment of subcontractors and that the price of subcontracts had ballooned exponentially.
He says in his letter: "The variance between the tender and the current price is so large that the reasons should be investigated by the department. The electrical contract increased by 210% and ... is expected to increase even further; the security contract by 246% and the air-conditioning contract by 270%."
Scholtz complains further that the architect's drawings had been issued in the wrong sequence, "resulting in much extra cost". Because of the incorrect sequencing of services, it had been necessary to tunnel beneath the foundations to install them.
"VPD [Vista Park Developers] has continuously been subject to department [public works], client [health department] and the professional teams' indecisions and late information, which have impacted widely on site progress."
These and other planning issues were within the ambit of the "professional team", led initially by Motaung.
By 2007, when the hospital should have been completed, it was 565 days behind schedule and Vista Park was allegedly in breach of contract. The company was again in breach when it stopped construction in 2009, saying that it had not been paid. The department then cancelled the contract and Scholtz took it to court, claiming the department owed him millions.
For a year, while the parties battled it out in court, construction was stalled and completed work deteriorated because of bad weather, theft and vandalism.
This was despite the presence of Rantho's Karibuni Security on site.
Rantho was recently charged, with public works officials, for fraud and corruption relating to unrelated public works security contracts. He has pleaded not guilty.
Rantho denied winning the hospital security contract because of his political connections. He had a long-standing contract with the public works department and this "automatically" meant that he had landed the security deal, he said.
In 2010 the department brought an application to have Vista Park liquidated even before the dispute over the contract was solved.
The Gobodo report again cites allegations of political interference leading to the delay in the cancellation of Vista Park's contract, but says this "could not be corroborated".
The report accuses department officials of failing to act when Vista Park allegedly breached the terms of the contract.
It blames the former head of public works, Elias Selemela, and Modise for this failure. Selemela told the M&G that he did not work in the department after 2006 and could not be held responsible.
With Vista Park finally off the scene, Inyatsi Construction was awarded a new R400-million contract in 2011 to complete the hospital.
It is understood that the national health department has now involved itself in the project, scaling down some of the "unnecessary" trimmings.
However, no one has been held accountable for the abject failure of the initial contract.
A spokesperson for the provincial public works department, Crystal Robertson, said the provincial tender board had approved the appointment of Joh Arch Investments and Vista Park Developers as the main contractor.
Robertson blamed the massive escalation of the project cost on the price increases of building materials and claimed that only R408-million had been spent on the hospital to date.
She also explained that the original tender had not included an additional housing complex, a reservoir, a mini-power substation and a sewerage pump station, which now formed part of the construction.
* Got a tip-off for us about this story? Email [email protected]
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.