Primedia has alleged serious inconsistencies in the award of exclusive advertising rights on railway property.
Advertising giant Primedia is suing the state-owned Passenger Rail Agency of South Africa (Prasa) over the "arbitrary, capricious and non-rational" award of a multimillion-rand advertising tender.
In early 2011, Prasa gave the nod to the Umjanji consortium, an opaque grouping that Primedia alleges did not have the capacity to carry out the contract and whose make-up appears to have been rejigged following the award.
An ally of President Jacob Zuma, businessman Sandile Zungu, joined Provantage, the lead company in the winning Umjanji consortium, shortly after the tender was awarded.
Zungu said Provantage was a good investment and he played no role in winning the Prasa contract.
In addition, Strawberry Worx, a company that allegedly benefits from political connections, was introduced into the Prasa-Umjanji contract mix around the same time, in November 2011.
Kesavan Moodley, the son of wealthy Durban businessperson Roy Moodley, an ANC benefactor and a close friend of Zuma, is a Strawberry Worx director.
An executive familiar with the company, but who asked to remain anonymous, told amaBhungane Moodley was brought into the company on the understanding that he could lobby for contracts because his father had political connections.
Strawberry Worx did not respond to emailed questions and SMSs. Roy Moodley also failed to answer calls and messages.
In July 2011, Primedia Outdoor took Prasa to the Johannesburg high court to have the tender award set aside.
The Prasa contract promised exclusive media and advertising rights for all railway sites, including broadcasting services and branding at taxi ranks, train stations and on billboards.
The opportunity exposes the sites to about 3.7-million rail passengers each day.
Previously, various companies –including Primedia – had ad-hoc local contracts with Prasa to use sites based on a first-come, first-served approach.
Said Muhammed Omar, the owner of another traditional contractor, Anchor Zedo: "Companies put billboards on Prasa sites in exchange for a rental fee. If something went wrong, those companies were liable for damages and expenses."
But Prasa maintained it was not getting value and, in February 2010, invited tenders for consolidated countrywide media and advertising services. The deal would centralise control of all billboard sites and advertising on its properties.
On March 1 2011, after several extensions to the tender timetable, Prasa announced that the Umjanji Media consortium had won.
According to Prasa, the members of the winning consortium were Provantage, SK Media and a mysterious entity called the Future Growth Foundation.
SK Media told amaBhungane it was merely a listed service provider to Provantage and was never informed it was supposedly part of a winning consortium. AmaBhungane could not identify the Future Growth Foundation.
Initially, Primedia simply demanded that Prasa give reasons for the award to Umjanji, as required by the bid document.
When Prasa repeatedly failed to respond, Primedia applied for the award to be set aside, forcing Prasa to disclose details of the adjudication. The disclosure fuelled the complaint. In its court papers, Primedia alleges inconsistencies in Prasa's allocation of tender scores and other irregularities including:
- Individual evaluator scores such as 1/10 for financial viability, 5/15 for track record and 0/10 in respect of methodology were "inconceivable", given Primedia's size and long-standing role in the industry;
- The tender committee "resolved to appoint Provantage", with no mention of the joint-venture consortium or other partners;
- Prasa set conditions, including that Provantage increase its black economic empowerment participation and demonstrate its capacity in respect of outdoor advertising. It appears that Zungu and Strawberry Worx were brought in later to remedy these deficiencies;
- The company purporting to represent the Umjanji consortium was registered only after the initial closing date for tenders and only changed its shelf company name to "Umjanji Media" in January 2012; and
- The contract signed with Umjanji was not for advertising services – as the tender provided – but to act as a managing agent to secure such services.
In more than two years since Primedia went to court, neither Prasa nor Umjanji have filed their formal answers to these and other Primedia allegations.
Instead, Prasa entered into a series of legal skirmishes with Primedia, including a failed bid to terminate its use of Prasa sites it still occupies, pending the review.
Umjanji director Jacques du Preez told amaBhungane there was "no merit" to the suggestion that the tender was irregular.
Du Preez said that, as the review application was still under way, "the matter is sub judice and it would be inappropriate and disrespectful for us to comment further".
He said that Primedia and others still occupied lucrative sites on Prasa properties, despite the award of the contract to Umjanji.
Strawberry Worx's relationship with Umjanji is unclear. Du Preez said: "Strawberry Worx is not part of the Umjanji consortium and we do not purport to speak for it."
However, Prasa said in a press release: "The tender was awarded to the Umjanji consortium, which effectively means that Provantage will be responsible for all the indoor advertising at the stations, while Strawberry Worx will be responsible for all outdoor advertising at the stations and the rail reserves."
And the Strawberry Worx Facebook site states that the company, "as part of the Umjanji consortium, has been awarded the highly lucrative Prasa outdoor advertising portfolio".
Strawberry Worx's ability to deliver on the Prasa contract has also been questioned.
Primedia's court papers allege that one of its billboards collapsed on a functioning railway line near the King Edward Hospital in Durban. "Moodley and [the other Strawberry Worx director] Ashveer Dwarikapersad don't have the experience, capital or capacity to undertake the work in the Prasa tender," said the source.
Prasa spokesperson Moffet Mofokeng said there was nothing irregular about the process Prasa followed in awarding the contract.
He said Umjanji Media won the contract after scoring the highest points. "Prasa is being subjected to this by losing bidders who have for years exploited Prasa's assets and are now refusing to let go."
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