Could it be that the African National Congress’s (ANC) scramble to reassert itself in Cape Town is because the spotlight is now trained on its tendering practices when it ran the council? The new Democratic Alliance-led (DA) coalition has been naming and shaming ANC appointed officials, including the former procurement chief, in dodgy deals, fuelling resentment in the party. Speculation is rife that concern about the results of this new transparency is motivating, in part at least, the drive to shift power away from the DA leadership.
The list of past city tenders deemed to be suspicious is long. The most significant is an R8-million contract awarded to TOM Consulting, the company of the former head of the South African Local Government Association, Thoko Mokoena, to establish a jewellery centre on the Foreshore. The DA may yet reclaim millions from TOM Consulting and the then city manager, advocate Wallace Mgoqi, putting them under significant pressure.The suspended head of Executive Management, Mthuthelezi Swartz, has been charged in connection with this scandal and has been subjected to a controversial disciplinary hearing.
Other top officials appointed by the ANC fled the scene soon after they were fingered by the council’s new political bosses. The procurement director, Mabela Satekga, resigned as his disciplinary hearing was due to conclude. He was charged with forcing his subordinates to buy goods at higher prices than those offered by competitors. The former director of public engagement, Butembu Lugulwana, was charged with irregularly awarding R2-million-worth of entertainment contacts to his son from the mayoral budget. He quit the day before his hearing ended. The council is weighing up criminal and civil charges against both of them.
Tenders under scrutiny include multimillion-rand contracts for phones, parking and road building. The latter was awarded to a little-known company, BTH, with no real experience, which had to abandon the job. Then there is the controversial N2 Gateway housing project. These unresolved inquiries are fodder for political scrapping between the ruling coalition in the city and the ruling party in the province — about who handed deals to whom.
Procurement rumours
Since the scandal around Big Bay early last year, where former mayor Nomaindia Mfeketo was obliged to scrap a flawed sale of prime municipal beachfront land to, among others, members of the ANC Youth League, rumours have been swirling around the city that the top management was manipulating procurement for personal gain and patronage, creating a sense of instability within and without the council. Council officials coined the term ”Mr Ten Percent” for the official who is alleged to have orchestrated the irregularities. Depending on to whom you are speaking, ”Mr Ten Percent” was acting on his own or as part of a conspiracy.
Clearly there was a loss of faith in tendering under the ANC-led council, and the business community’s relationship with the city was faltering. Andrew Boraine, a former city manager, is chief executive of the Cape Town City Partnership, an organisation that plays a key role in connecting business with the city and its partners. He acknowledges that the city had not even stuck to its own criteria in awarding tenders.
”The procurement process was widely regarded to be in crisis and giving the city a bad name. It was reducing the confidence of business in general to do business with the city. Many firms were saying that they would not even bother to put in a bid for work,” he says.
Council reports show a procurement department now recuperating from a restructuring drive that saw it lose 45% of its staff. Of the 349 contracts above R10-million awarded in the past financial year, there were appeals against 110. This constitutes about a third of the city’s most significant awards, a serious indictment of the administration, given the complexity and cost to companies of tendering and the risk involved in lodging an appeal. The department is still so weak that it has reportedly cancelled 19 tenders in the past three months because of lack of capacity and funds.
”The officials were warning that services were getting near their limits of their capacity. Investment in services fell behind growth in demand. There was not adequate delivery and we see it in the expenditure of the capital budget,” says DA councillor Ian Neilson, the mayoral committee member for finance. ”For three years, only 60% of the capital budget was spent.”
No precedents
Because no other city council of this size has swung from one party to its opponents, there are no precedents for this retrospective inquiry into council spending. It is in the interests of the DA to show up its predecessors to justify its continued hold on the administration. Obviously spending budgets effectively is one of the major challenges in local government in South Africa, at a time when corruption and financial irregularities are commonplace in municipalities across the country.
On the other hand, some commentators perceive the DA’s revelations as a political smear strategy, fuelled by racism. The National Prosecuting Authority, for example, has chosen not to prosecute ANC provincial secretary Mcebisi Skwatsha in a controversy around a security tender awarded by the city to a company, Jama, he founded. Skwatsha told the local media that he interpreted the city’s flagging of this tender for investigation as a ”deliberate campaign” against him, reflecting anti-ANC spite rather than concern for service delivery.
It’s a view echoed by Simon Grindrod, leader of the Independent Democrats in the council. He sees much of the fuss around the investigations as political propaganda.
”The ANC in the city has not a particularly salubrious record; their last administration was not their finest. But let us not fall into the DA propaganda trap that says that all ANC is black, and that all black is corrupt, because subliminally that is the DA’s only message,” he says.
Grindrod says too much energy has been spent on forensics and audits, and too little time on service delivery, a charge the DA denies.
”It’s become almost a joke in this country that when there is no defence the race card is played. In the end we have just got to stick to our guns; we don’t have an option, really. Either we have clean government and we hold people to account, or we don’t,” says Neilson in his defence.
Alterations
Neilson argues that the DA administration has made dramatic alterations to the tendering system to improve service delivery.
For example, previously all tenders above R10-million were sent to the city manager for approval, after recommendations made by the bid adjudication committee (BAC). The DA has scrapped that, channelling decisions on all awards of more than R200 000 to the BAC, and referring only appeals to the city manager. This, Neilson argues, relieves him of much work, so that he can get on with council business.
Under the ANC, tender adjudication happened behind closed doors. Under the DA administration, the BAC is open to the public. The DA has boosted the number of its members from seven to 11, and replaced all but one of the previous incumbents.
”We have put a lot of effort into our bid adjudication committee; we have restructured it. There are now good, capable, experienced city people we can trust to do the right thing, which is to award tenders correctly, not to our friends,” says Neilson.
Until recently there had been no regular analysis of the procurement process by the city. Now the first reports are coming through, highlighting weaknesses in the system. These include difficulty in getting the BAC to meet or to get its members’ signatures on important documents, and, on a more arbitrary level, the problem of getting translations of titles and recommendations. The city has also introduced a standing committee on public accounts to monitor spending. This is a first for a municipality. Altogether a whopping R8,5-billion of the council’s R17-billion budget is spent on tendering for goods and services.
Preferential provisions
Most contentious has been the DA’s scrapping of special preferential provisions for black contractors. The DA claimed the ANC’s insistence on a minimum 30% black ownership for tendering firms was contrary to the existing Preferential Procurement Act, which already allocates points for equity, gender and disability in tendering.
”We had a notice from National Treasury in January which quoted the senior state law adviser saying that any tender system which precluded anybody from tendering was irregular and had to be removed,” says Neilson.
Now seeking alternative employment, Mgoqi is critical of the DA’s approach. He denies that his administration was inefficient, although he acknowledges that the restructuring of staff had taken its toll on the bureaucracy. He accuses the multiparty coalition of undoing his efforts to create business for black service providers.
”Clearly those who are privileged, who have been advantaged all the time, are now going to continue, all those firms who have been abusing the municipality as a honey pot. Those black firms we brought in will not touch city work now … A process of marginalisation will take place and black businesses are going to go back to the wilderness,” he says. This is a view echoed by former executive mayor Mfeketo.
One local entrepreneur, Zunade Loghdey, believes both administrations have failed on a particular tender. He bid for a lucrative parking contract in 2003, but was scooped by a newly created company, Numque, owned by a former Mpumalanga traffic cop and a relative of ANC Deputy Speaker Gwen Mahlangu, in an award that raised suspicions at the time.
He charged the council with irregularities and fought the tender award through the courts, eventually getting it overturned in the Supreme Court of Appeals in Bloemfontein in March 2006. During the time of his numerous appeals and court battles, Numque was allowed to operate on the streets of Cape Town.
Now, having retendered for the contract this year, he has been thwarted, he claims, by ”a mixture of gross incompetence and a lack of understanding of certain officials”. The council has sent him letters saying that the tender has been cancelled and suspended because of a lack of compliance. It will have to be advertised again, for the fourth time. The information in the correspondence is both contradictory and vague.
‘What is most disconcerting is that the city does not care about how much money and time and effort gets spent doing demonstrations, preparing bids, investing in technology and the cost of putting together a good tender … they are floundering around and they are wasting our money,” he says.
”If it happens with this, I am sure it happens with other tenders. People are becoming immune to this in South Africa and accepting this malaise, but why should we?” he asks. ”I am prepared to fight this all the way. I was always wary of being critical but now feel compelled to do what is right and proper.”
Business community
Unlike Loghdey, the broader business community is notoriously shy to critique the government. The executive director of the Cape Town Chamber of Commerce, Albert Schuitmaker, was not the only one who turned down an interview. He said it was too early to draw comparisons between the current and previous city-council administrations.
Fanie Bekker, of the Afrikaanse Handelsinstituut, is more outspoken. He said his organisation had received many complaints about tendering from its members. He had, in fact, battled and failed to get a meeting with the former mayor and city manager to discuss these issues.
But what is weighing most on his mind is the issue of political stability, at a time when the current administration is threatened. Already, floor-crossing has meant political and bureaucratic change has come more frequently than five-year elections would normally allow.
”There is a whole lot of uncertainty that comes to the fore when there is a political change in local government. Every time it begins, the new council replaces their senior officials. Those officials have just begun to understand the problems that business experiences, and then they go and we have to begin again with new people,” he says.
”What the politicians don’t realise is that the message of instability is carried to business across the world, which undermines foreign investment in the Western Cape, and causes damage. We have all made it our goal to get growth up by 6% to 7%, and that is not going to happen unless things settle down.”
This brings the debate to the broader point of the city’s role in developing Cape Town’s economy. Boraine wants the council to start playing a leading role in developing the city’s economy as a whole, making it attractive for foreign investment and developing black economic empowerment, in a transparent, legal way, within that.
”It must go way beyond procurement of goods and services for municipal use; you have to look at the city as a whole. My worry is that the city traditionally has only looked at this in terms of local economic development and not considered how black people can storm the commanding heights of the formal economy in Cape Town,” he says.
Strategic plans
For the city to prosper generally, Boraine argues that there needs to be longer-term strategic plans, facilitated by political leaders, that reach forward into the future by decades and hold firm, despite party-political shifts. What he sees now is a northwards drift of skills and investment as Gauteng and other metropolitan cities outshine a Cape Town embroiled in perpetual political drama. Boraine quotes a recent study showing that for every five jobs advertised in Johannesburg, Cape Town offers one.
”We are not in good economic shape; we are in a crisis and we need leadership to stand up and put forward a city-development strategy on how we are going to get out of the crisis,” he says.
This becomes all the more crucial given the challenges, both in procurement and generally for Cape Town’s economy, presented by preparations for the 2010 Soccer World Cup. For Boraine, the work being done here presents some hope, in spite of the city’s bitter party politics that he describes as ”parochial” and ”inward-looking”. The city will be involved in upgrading transport systems, building stadiums and strengthening infrastructure on a level never contemplated in Cape Town before.
”For the first time teams from the provincial and city governments are beavering away together as they have not done before in the last 10 years. If the only thing that 2010 does is hold the right people together working on good projects, then it would have been worth every cent.”
In the face of this level of national and international scrutiny, the city must swiftly build a robust tender system, without the slightest hint of corruption. It cannot allow the procurement process to become a strategic weapon wielded by its warring political factions, and put 2010 at risk. Beyond that, the relationship between the business community and the administration is crucial to service delivery, and so a fail-proof procurement system is essential in the rebuilding of trust between the city and its people.
This article was funded by the Open Society Foundation for South Africa through a media fellowship for the author