A bankrupt North West municipality spent more than R7-million within eight months on two sister companies to help it turn its financial fortunes around and their appointment is suspected to have been derived from their powerful political connections.
The Madibeng Local Municipality, with its headquarters in Brits, hired Johannesburg-based City Square to assist the municipality with financial management, including tax collection, and attorneys Ranamane Phungo Incorporated to provide legal assistance.
Municipal officials, trade union representatives and competing service providers told the Mail & Guardian the office of the minister of co-operative governance and traditional affairs, Sicelo Shiceka, “imposed” the two companies on the municipality. Ministerial spokesperson Vuyelwa Qinga has denied this. But documents in the M&G‘s possession suggest the ministry played a role in the appointment of City Square.
In a letter dated April 7 2010 requesting permission to deviate from tender processes, Madibeng acting municipal manager Dikgape Makobe refers to a meeting in November 2009 attended by members of the rapid response team from the ministry’s office.
“It was agreed that they [the response team] will identify suitably qualified service providers to assist the municipality,” said Makobe in the letter. He said City Square needed to be hired urgently because municipal administrator Eric Matlawe’s contract had only six months to run.
The tender for the work City Square was then contracted to perform was never advertised and the company continued serving the municipality after Matlawe’s contract had reached its expiry date, but was extended.
Urgency
Another undated motivation, written by the municipality’s then acting chief financial officer, Nana Masithela, who has now been suspended, requested that City Square be appointed on an “urgent basis” on a monthly contract to advise on tax collection. Both motivations were approved by Matlawe.
Documents in the M&G‘s possession show payments of R7-million to the two companies between December 2009 and August last year.
The municipality said it could not confirm the total amount spent on the two companies up to January this year, but the information would be available in two weeks.
This week the cooperative governance ministry distanced itself from the appointment or recommendation of companies to help municipalities implement its local government turnaround strategy.
The national cooperative governance department provides support only when provincial departments requested it and it is up to municipalities to appoint consultants, Qinga said.
The M&G has established that City Square and Ranamane Phungo share directors and office telephone numbers. The receptionist who answered the shared number denied the two companies were in the same building, but admitted to the shared telephone number.
Imposed companies
On several other occasions, she answered calls from the M&G in either of the companies’ names. One phone number appears on the letterheads of the two companies. Madibeng spokesperson Patrick Morathi said the municipality was not aware the two service providers were related or even shared resources because “we have not conducted any inspection”.
Efforts to get hold of the two companies over two days this week were unsuccessful and undertakings that the M&G‘s calls would be returned were not fulfilled. A Madibeng municipality staffer with knowledge of the municipality’s affairs, who requested anonymity, confirmed that the companies were “imposed” by Shiceka’s office.
“We have been questioning some of these things and we’re not getting answers. Maybe if you write about them the community will be able to make its own judgment.”
South African Municipal Workers’ Union (Samwu) shop steward July Khoza said the union had always believed the consulting companies were appointed on instructions from Shiceka’s office.
“There is nothing the municipality can do with these people. If you raise questions with the municipality, they will tell you that these people have been deployed by the office of the minister,” said Khoza. “Some of the people who are on the turnaround task team are managers of these companies.”
Madibeng has experienced widespread service delivery protests and rates boycotts. Some residents have opted to pay rates into a trust account in a bid to force the municipality to provide more efficient services.
The municipality was placed under administration after the auditor general in 2008 condemned its poor financial management, lack of accountability and poor service delivery.
Audit
Spokesperson Morathi said the municipality was conducting an audit of all service providers to see if it could either limit the scope of work or end the contracts. City Square still provides services to Madibeng.
Morathi said the municipality would reduce its use of external service providers. City Square was part of “a specific [official] instruction” related to wrapping up “some of the outstanding activities including legal firms that were used to investigate some of the internal disciplinary cases, some of which are currently linked to criminal investigations”.
Qinga said the national department did not know about any of Madibeng’s exorbitant payments to consultants. “Should that be the case, the provincial executive council will advise [the department] of such.”
Those closer to Madibeng paint a picture of a municipality that cannot afford even daily essentials. “Madibeng is sitting without photocopy paper, the cleaners do not have cleaning soap and there is no toilet paper,” said Khoza, who is based at the municipality’s Brits offices. “We have been told that the municipality is waiting for a new budget in July.”
Last year the national department paid for Madibeng’s former acting chief financial officer, Masithela, to join Shiceka on a trip to Belgium because the municipality could not afford it.
By contrast, invoices show that a trip by consultants from Johannesburg to Madibeng to collect documents cost the municipality R12 900 in a single day, December 8 2009.
In September last year the North West government announced it had extended the contracts of three municipal administrators, including Matlawe, for seven months at a cost of R3-million in total. A single administrator costs the province R150 000 a month, including travel and accommodation expenses.
At the time the North West department of local government and traditional affairs cautioned that letting the administrators go could reverse the progress of the first six months. One achievement mentioned was “stability”, but little has been said about the costs of the turnaround strategy.