Company sues municipality for millions over blacklisting

An electrical company is claiming R30-million from the eThekwini Municipality after it was “blacklisted” from any tenders, at the behest of an alleged crooked official.

While lawyers acting for the City have drafted a “confidential” settlement agreement and said in correspondence that it was a done deal, it appears that the City manager is reluctant to sign it.

The matter between Double Daily Trading, trading as Pholobas Projects – a “tender entrepreneur” – has been in court three times in as many weeks.

Each time it has “stood down” or been adjourned for a day for city manager Sipho Nzuza’s signature.

However, on the last occasion last week, it was adjourned without a date. Judge Anton Van Zyl ordered in the KwaZulu-Natal High Court in Durban that the papers be served on him personally.

Pholobas Projects approached the court for an order declaring that it had been unlawfully blacklisted by the City. It initially asked for R44-million.

Director Bekezela Ngcobo said his company had an “unblemished record” when it was granted contracts to disconnect illegal electricity connections in the city in 2011.

However, these were later unilaterally cancelled after an “unlawful and fatally defective investigation” launched by one of the City’s revenue protection senior managers.

‘Surprise audit’ in parking lot

Ngcobo claimed the manager had only wanted one outcome – that his company be blacklisted – and that the manager has abused his power and had a vendetta against him.

“We reported him to the City Integrity and Investigation Unit.”

A copy of the “confidential” investigation report was obtained through court processes and has been attached to the court documents.

It emerged during the hearing that the manager had conducted a “surprise audit” on the firm before all employees had reported for duty. The audit was done in the parking lot, where they had gathered every morning and not on site.

He deemed that there were not enough staff to handle the contract as per the rules of the tenders and reported this to the Bid Adjudication Committee. The contracts were cancelled.

The report concluded: “The investigation proves that (the manager) and Ngcobo had a close relationship, which ended in a fall-out, leading to a vendetta against Pholobas Projects.”

According to the report, his termination of the project was unprocedural and his actions were a breach of trust. In addition, his action prejudiced the municipality as it will now be liable for legal fees and is at risk of a civil claim by Pholobas Projects, the report stated.

Initially, the municipality opposed Pholobas’ claim of R44-million. Senior legal advisor Sazi Ngubo said the factual basis of the amount claimed was unclear and there had been no blacklisting.

But it then changed tack. According to correspondence between lawyers for both parties, the company revised its claim to R30m and the lawyers representing the City accepted this.

‘Strictly confidential’ agreement

A term of the agreement was that it should remain “strictly confidential”. The money would be paid in full and final settlement of the claim.

It was also recorded that “no formal steps” were taken to blacklist the company and it could again apply for tenders “without fear of exclusion”.

February 2 was the day it was supposed to be signed.

But two weeks later, there was still no signature and no money.

In his application for the order to have the agreement declared valid, Ngcobo said the “blacklisting” stifled business and could effectively shut down the company.

“There are ongoing tenders being published, but we are barred from tendering,” he complained.

A revised agreement for R25-million has now been placed in the court file.

Responding to questions, the City’s communications head Thozi Mthethwa said the manager responsible was facing a disciplinary inquiry.

“The matter is currently being discussed by both parties concerned. We believe an amicable solution will be reached.

“The accounting officer is aware that the sum involved is large and all efforts will be made to recover it.” — News 24

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