/ 5 August 2011

How Julius Malema pulls tender strings

How Julius Malema Pulls Tender Strings

Julius Malema is doling out state tenders to his pals through a company that is part-owned by his family trust.

The Ratanang Family Trust, founded by Malema, the ANC Youth League leader, holds shares in On-Point Engineering, which administers a large part of the multibillion-rand budget of Limpopo’s roads and transport department.

This means that Malema has at least indirect influence over who is awarded tenders from a three-year budget allocation of reportedly R4.6-billion — although he, On-Point and the department deny it.

In 2009, the department set up a programme management unit (PMU) to take over many of the department’s functions in planning, contracting for and overseeing road works.

In a twist at odds with Malema’s stance on nationalisation, it outsourced the running of the unit to On-Point for three years at a fee of R52-million.

Since then, companies linked to Malema, his business partner in On-Point, Lesiba Gwangwa, and his friend and political ally, Limpopo premier Cassel Mathale, have shared in some of the contracts administered by the unit.

While there is no evidence of bribery, these revelations come in the wake of City Press allegations about a businessman who allegedly paid a tender kickback into the Ratanang Family Trust. Malema has flatly denied taking kickbacks.

Anatomy of a scam?
On-Point, which is headed by Gwangwa, is a sister company of SGL, which started out as Segwalo Consulting Engineers in 2002. Segwalo Consulting, SGL and On-Point overlap — they have used the same address and telephone numbers in Polokwane, and Gwangwa has been a director or member of each of the entities over the years.

Malema was a director of SGL in 2009 and 2010, but resigned around the time the public protector investigated the company to see if he had unduly influenced the many tenders awarded to it.

While the public protector, Thuli Madonsela, found no evidence that he had manipulated the tender process, she reported that much of the required paper trail could not be found.

Malema’s association with the SGL surfaced again this year when his opponents bemoaned what they called the “SGL-isation” of politics when they tried to prevent him from getting a second term as the head of the youth league.

Although he continues to deny any involvement with SGL he now admits he is a shareholder in On-Point through the trust, but he refuses to disclose the value of the shareholding and denies any involvement in company operations.

However, the following web of tenders, exposed in the PMU’s records in the Mail & Guardian‘s possession, raises a number of questions:

  • Late last year, Segwalo Consulting, which was then headed by Gwangwa but has since been deregistered, was appointed as consultant on a road maintenance contract worth R5.2-million administered by the PMU.

    Gwangwa denies any wrong-doing. Speaking through his lawyer, Mpoyana Ledwaba (who performs certain legal services for Malema’s family trust), he said: “We are made to believe that the contract was awarded during 2008 by the Roads Agency of Limpopo, but was later transferred with many others to [the roads and transport department]” — when the PMU came into effect. Gwangwa said the conflict of interest was then flagged “in writing”.

  • Another of On-Point’s directors, Arthur Mpotseng Phetla, who is listed as the sole owner of Mpotseng Infrastructure, was awarded six tenders towards the end of 2010 with a total value of R5.2-million.

    But Phetla claimed he was never a director of Gwangwa’s firm. “I don’t know how my name appeared there,” he said. “I was never a director of On-Point, neither then or now.”

  • A Malema family member has also benefited. Earlier this year his younger cousin, Tshepo Malema, was paid just over R1-million to fix potholes in a local road. The younger Malema said that, although it was true, the PMU did not award the contract.
  • Malema’s friend Tebadi Collins Foromo was paid R917 000 about the same time as Tshepo Malema and also for fixing potholes. Although he confirmed this, he denied he was a friend of Malema’s and denied allegations that until recently he was Malema’s Polokwane driver.

    “He’s my leader. He’s not my friend. And if they thought I used to drive him in 2004, 2005 and 2006, it’s because I had a car,” he said.

  • Mathale also appears to be just a step away from the PMU’s tendering process. Helen Moreroa is reportedly the romantic partner of Selby Manthata, who Mathale said in an interview earlier this year was his business partner. Moreroa is also the business partner of Mokgadi Kgohloane, the premier’s wife, in a string of companies.
  • A company Moreroa owns, Oceansite Trading, won a R6.2-million tender for roads maintenance last year.

    There is no evidence to suggest that she is a player in the construction industry. Rather, local business people say she is both politically connected and a “friend” of On-Point.

    Again, Gwangwa denied any “conflict of interest” or knowledge of a relationship with Oceansite that would lead to one.Moreroa refused to respond to questions of a possible conflict and Mathale also distanced himself from any such suggestion. The premier’s spokesperson said: “If people do business, it is not the premier’s business.”

    His wife could not be reached. Manthata also went to ground.

  • Manthata’s company, Selby Construction, has been awarded at least two tenders: one for R7.7-million, the other for R11.7-million. The first was awarded on May 17 2010, the same day Oceansite won its bid.

It appears that On-Point is effectively doling out deals to friends and allies through the PMU. According to insiders, some of the tender adjudication meetings take place at The Ranch hotel on the outskirts of Polokwane, and Gwangwa, or other representatives of the PMU, frequently attend.

Gwanga was adamant that he had “no authority” to award tenders — which was echoed by the provincial minister for roads and transport, Pinky Kekana. She said that was not the case, — “our procurement processes are watertight” — and, if any representative of the PMU attended those meetings, it was only to “render technical support”.

Deconstructing RAL
Until 2009 the bulk of the work that is carried out today by the PMU was done by the Roads Agency of Limpopo (RAL).

According to industry leaders, the parastatal performed well and was widely regarded as efficient, though its critics say they favoured only a handful of companies.

Soon after Mathale’s administration was sworn in half way through that year, the parastatal came under the whip of the roads and transport department — a significant chunk of the agency’s budget and some of its core functions were transferred to the department, PricewaterhouseCoopers was called in to investigate allegations of corruption (as yet unproven), and the PMU was established.

The tender to administer the unit was advertised in September 2009, the same month On-Point was created as a company in its current form and just days before bids were due to be submitted.

Gwangwa was appointed to the company’s board on September 16, an address was registered on the 24th, the company was named on the 25th and bids were due to be submitted on October 1.

In the following weeks the contract was awarded to On-Point, which by then, was only weeks old and with no track record, despite the terms of reference stating that technical experience and capacity was “a minimum requirement” for a successful bid.

The winning team should have included “architects, quantity surveyors, civil engineers, structural engineers and project managers” with experience in “the design and construction of roads”, which were among other requirements specified in the tender document.

Gwangwa’s team was apparently lacking in capacity and, although he listed engineers among them, none had road experience.

Charles Kawanga was one of the engineers presented as an experienced and skilled engineer as part of On-Point’s bid.

But he was a former director of SGL who had long since resigned. He later lodged a complaint with civil engineering authorities about the fact that his name was being improperly used by On-Point.

It is not clear why the On-Point team won the tender. There were 16 bidders and the M&G asked the department to reveal the shortlist. It agreed to do so but the list had not arrived before going to print.

‘Yes, we are close to On-Point’

Julius Malema has admitted that he is behind On-Point Engineers, the firm that runs the programme management unit in Limpopo’s roads and transport department.

“Yes, we are close to On-Point,” he said. “We are shareholders as a family” through “the [Ratanang Family] Trust”.

His words put an end to nearly two years of speculation about his links to the company, which has been associated with a string of government tenders.

But Malema insisted that he did not “participate actively” in the day-to-day running of On-Point and did not influence the tenders the company had won or was awarded.

“At On-Point I’ve never done that. I do not know what happens at On-Point. I just queue when the dividends are due.” Then he quickly corrected this: “And not me, the trust does that.”

The Ratanang Family Trust is named after Malema’s son, who is its only named beneficiary.

Malema played his hand in an interview last week during research for an upcoming book about his life and his politics. He was aware that part of the interview could be published in the M&G.

The interview took place in the wake of an allegation in City Press newspaper that Malema had demanded that a businessman pay R200 000 to the trust as a kickback for a tender — an allegation Malema denied.

Malema refused to reveal the extent of the trust’s shareholding in On-Point or the amount the trust earns in dividends.

“I’m not going to tell you anything about that,” he said. “I’m a participant. That is what is important.” — Fiona Forde

Fiona Forde is the author of the soon-to-be released An Inconvenient Youth: Julius Malema and the “new” ANC

Responses from the various interested parties

Julius Malema
The ANC Youth League president denied he was able to influence tender awards through the Ratanang Family Trust’s shareholding in On-Point.

“You are talking to the wrong person. Being a shareholder does not mean we know what is going on in the company. I am not involved in the running of the company and I can’t respond to what I don’t know. I am just a shareholder — the trust is a shareholder.”

Limpopo department of roads and transport
Spokesperson Thesan Moodley said: “We were not aware, nor were we interested [in Malema’s interest in On-Point], as the information would have been irrelevant to the prescribed supply-chain management process.”

Questioned about On-Point’s competence at the time of the bid, he said: “Based on the evaluation criteria they were recommended for appointment, having met the requirements as contained in the tender or bid documents.”

That On-Point was formed days before the bid was not a problem, he said: “It is not unusual for companies to establish vehicles to respond to opportunities as they arise.”

Commenting on certain contracted companies’ ties to Malema, Limpopo Premier Cassel Mathale and On-Point staff members Lesiba Gwangwa and Arthur Mpotseng Phetla, Moodley said: “[The programme management unit] only participates on invitation to render technical support during once-off evaluation processes convened in the context of a bid evaluation.

“[It] does not serve in the bid adjudication [committee] and therefore under no circumstances shall [the unit] award contracts on behalf of the [department]. Our procurement processes are watertight as they comprise several officials from different directorates and sometimes — external support.

“All committees are required in terms of the law to declare any possible or potential conflict of interest. If necessary, an appointed member has to recuse himself or herself from the process.”

On the transfer of duties from the Roads Agency of Limpopo to the department at the time the unit was formed, Moodley said: “In fact, [the agency] remains with the huge responsibility of building or upgrading roads in the province. The department took the decision to consolidate the split maintenance functions to make it easier to manage them and also to build on unified support to the programme.”

On-Point’s lawyer, Mpoyana Ledwaba, said that as a shareholder Malema did not participate in the company’s day-to-day to activities. He was adamant that On-Point and the programme management unit did not “have any authority whatsoever to award tenders and has never awarded any tender”.

But the terms of reference for the bid stated that On-Point’s responsibilities would include “evaluating” and “selecting” successful bidders.

Ledwaba dismissed allegations that the company did not have the technical capacity for the contract at the time of the bid.

He said On-Point had partnered with “reputable institutions in preparation of [the] bid [and] both national and international partners in executing the project” and supplied a list of partners, including architects, engineers and IT experts. Apart from the civil engineers, it is unclear which of them were part of On-Point’s bid in October 2009.

Ledwaba added: “Contrary to your views, the team has turned around a previously underperforming department, which is now able to meet and exceed its set targets.”

Although company records indicate that On-Point was only activated from a differently named shelf company days before the bid, Ledwaba said it “was established long before the tender was advertised, to pursue various potential business opportunities”. — Craig McKune and Fiona Forde

In the original version of this article, it was incorrectly stated that lawyer Mpoyana Ledwaba administers Julius Malema’s family trust. In fact, Ledwaba performs certain legal services for the trust. Any inconvenience is regretted.

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