The energy department’s chief financial officer has been served with a precautionary suspension notice for a controversial deal linked to the government’s nuclear build programme.
Yvonne Chetty was asked in a letter on May 19 to provide reasons why she should not be suspended.
The suspension notice relates, in part, to payments made to Empire Technology, a company that was awarded a R171-million contract to develop a management system for the nuclear programme.
In September 2016 the Mail & Guardian revealed details of the tender awarded to the company owned by Shanthan Reddy – whose father, business tycoon Vivian Reddy, has often spoken openly about his relationship with President Jacob Zuma.
There were red flags all over the deal from the beginning.
For starters, there had been no government decision on whether to proceed with the controversial nuclear deal at the time it was awarded. Next, the contract did not go out to tender; the department instead relied on an existing Free State government tender held by Empire Technology to enter into the contract.
Now it has been confirmed that:
- The auditor general has labelled the original Free State tender “irregular” and, as a result, the one awarded by the department of energy would be too. It remains unclear whether either state entity will challenge this;
- The contract value of R171‑million was nearly triple that of the Free State deal of R60‑million and would have required treasury approval for this substantial deviation. The treasury confirmed this was not done at the time; and
- Empire Technology’s Free State contract had already lapsed when the department of energy entered into its deal with the company, suggesting there was no valid contract in place when it signed the deal in March 2016.
Documents perused by the M&G show that former energy minister Tina Joemat-Pettersson – one of the casualties of Zuma’s controversial Cabinet reshuffle in March – had placed a moratorium on further payments to the company following a meeting in January this year.
Other concerns within the department related to members of a steering committee who had allegedly been “kept in the dark” on many aspects of the project, especially relating to documentation such as the service level agreement.
By then, Empire Technology had received payments totalling R98‑million, the first of which was R22.8‑million, paid two months after the contract was signed. The last payment of R51.6‑million was made on February 6.
Some insiders believe that Chetty, a highly regarded executive, has been made a scapegoat in this matter and that she had merely acted on the instructions of “higher-ups” in the department. Chetty referred queries to the department, but said she is challenging her suspension.
Meanwhile, documents seen by the M&G suggest that the department’s director general, Thabane Zulu, played an important role in the awarding of this contract. The new energy minister, Mmamoloko Kubayi, on June 1 seconded Zulu to head up the Strategic Fuel Fund.
Based on the documents, Zulu seemingly invited Empire Technology to pitch for the job – and personally signed the initial contract barely two months after his official appointment as director general in 2015.
On December 21 2015, Empire’s Yuri Mohan wrote to Zulu: “Dear Sir … We are in receipt of your letter … and acknowledge your request for approval to participate in contract number FSPT001/14/15. We hereby provide our approval and consent for such participation.” It appears the company was responding to a letter from Zulu.
Just over two weeks later, on January 7 2016, Zulu sent the company an official letter confirming its appointment subject to certain conditions, including the conclusion of a service level agreement.
Attempts to obtain comment from Zulu were unsuccessful. Mohan said contractual terms did not allow the company to comment.
The M&G report triggered an investigation by the treasury, which has also flagged the fact that the Free State contract with Empire Technology involved the development and implementation of a supplier database management system, whereas its contract with the department of energy included “other functions” that differed from the scope of work required in the original contract.
In addition, the auditor general, in a report on the Free State provincial treasury under the heading “Irregular Expenditure”, noted: “The department procured IT-related goods and services without consulting the State Information Technology Agency … as required by the Act.”
The Empire Technology contract was one of 16 contracts awarded in preparation of the nuclear build programme. Joemat-Pettersson provided details of each of those, which ranged in value from R341 000 to Empire Technology’s R171-million contract.
The department of energy said it was not in a position to respond to questions at short notice. This article will be updated should it choose to comment.
Department mum on Zulu
The Mail & Guardian sent a list of questions to the energy department, asking about the status of the Empire Technology contract, on May 24.
On June 7, the department confirmed this contract was under investigation. It also stated that the work the firm had been contracted to perform had not been completed. The department did not answer questions relating to how much it had paid the company to date.
On Wednesday, as new information came to light, additional questions were sent to the department, about the reasons for the precautionary suspension of its chief financial officer and the role played by Thabane Zulu, the department’s director general, in the awarding of the contract.
The department did not respond and billed the M&G’s inquiry as unreasonably late in view of the limited time provided for comment.