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Public protector to probe R1.25bn Reddy tender

Staff Reporter

The DA has received confirmation from the public protector that it will investigate the smart meters contract awarded to Vivian Reddy.

Vivian Reddy has been implicated in tender fraud and is facing an investigation by the public protector. (Gallo)

This follows the Democratic Aliance (DA)'s request for an investigation submitted on January 18 2013. The public protector indicated that the investigation will be conducted by its good governance unit.

A R1.25-billion contract to supply "smart" electricity meters to the City of Johannesburg was manipulated to favour Vivian Reddy, one of President Jacob Zuma's key benefactors, information obtained by the Mail & Guardian suggested.

DA questions
"There are a number of troubling questions with this tender that the public protector must resolve," the DA said. Questions include why the tender was inflated from R800-million to R1.25-billion after it was awarded to Edison, Vivian Reddy's corporation.

Questions were also raised as to why the original bid scores were changed to Edison's advantage and why the tender was awarded solely to Edison after the bid committee recommended it be awarded to multiple bidders.

The DA further questioned what role City Power's managing director Sicelo Xulu played in changing the bid scores.

"We believe that the process followed in awarding this tender was fundamentally flawed to advantage Mr Reddy's company. The public protector must now get to work to get to the bottom of this as soon as possible", said the DA.

M&G investigation
The City and its power utility, which procured the meters, have denied any irregularities in awarding the tender.

But key discrepancies uncovered by the M&G suggested otherwise.

These included:

  • Detailed allegations that an initial technical evaluation scoresheet was amended to improve the result for Reddy's company, Edison Power; 
  • The revised scoring pushed another bidder, Hefcom, below the cut-off 70% technical score. When price was factored in, Hefcom – whose bid was half the cost of Edison's – would have scored better than Edison; 
  • A letter informing Edison it had won the bid is dated before City Power supply chain management even received the bid recommendation or the chair of the adjudication committee had signed off on the decision; 
  • Edison's share of the contract was pushed up from an initial recommendation of a R600-million share of an R800-million contract to an exclusive contract for R1.25-billion; and 
  • A man central to the award, City Power chief executive Sicelo Xulu, is alleged to be "friends with Zuma" though he denies this.

Reddy's funding to Nkandla
?
The three-year contract to deliver hundreds of thousands of so-called smart meters was awarded in August 2012. 

The meters will allow the municipality to track and control electricity usage remotely at each metering point in real time. The project is also intended to cut down on fraud and tampering.

There are about 1.5-million metering points in the greater Johannesburg area, the majority of which have to be read manually.

Edison has no prior experience in smart metering, several industry sources said, but the company teamed up with established United States metering company Itron, which separately won the much smaller R50-million contract for the centralised data management "back end" of the system.

Edison was one of the businesses that paid to be at the ANC's Mangaung conference in December and Reddy has long been a vocal supporter of Zuma.

Reddy stepped in to fund part of Zuma's Nkandla homestead in 2003, when the president's former associate Schabir Shaik ran into difficulties.

He featured prominently in the report by auditors KPMG on Zuma's benefactors that was prepared for Zuma's abandoned corruption trial.

Reddy reportedly paid R450 000 for a table at the ANC's anniversary gala dinner in Durban in January, when Zuma made the controversial remark that "wise" businessmen who supported the ANC could expect that "everything you touch will multiply".

Edison replies
?Edison executive director Bazil Govender, responding on behalf of Edison and Reddy, hit out at suggestions that the firm had been favoured.

"We are fully aware of the company [that has] complained to the M&G, because they tried to pressurise us into partnering with them after the award of the contract," he said.

"They threatened to go to the press, to make an issue of this award. We rejected this approach because we believe it was highly unethical.

"We are lodging a formal complaint to City Power to fully investigate this serious breach of ethics."

He shrugged off Edison's relative inexperience with smart metering, saying that the company was working with an experienced partner in Itron: "We believe we offered the best solution to City Power."

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