Contractors Meeting with North West Portfolio Committee on Roads, Works and Transport at the Provincial Legislature in May 2018.
The Vuk’uphile Contractor Development Programme is a national public works programme aimed at transforming the construction industry by giving small black-owned companies training and support. But in North West it was hi-jacked, allegedly to buy votes, leaving contractors stranded and in debt.
Sixty-five contractors chosen for the North West province’s 2014 Vuk’uphile Upliftment Programme hoped it would help them expand their skills and businesses. Instead, the three-year programme fell apart after just six months, allegedly because of financial mismanagement and disputes, leaving them worse off than before.
The direct cause of the collapse was a last-minute decision by the provincial department to force the inclusion of 18 000 Expanded Public Works Programme (EPWP) workers into Vukuphile, when its R800-million budget did not provide for them.
Contractors now suspect the inclusion of the EPWP workers may have been a cynical move to curry favour with voters in the provincial elections of May 2014.
And unexpected support for that theory has come from deputy minister of public works Jeremy Cronin, who said “that’s what we strongly suspect”.
The start of Vuk’uphile coincided almost exactly with the start of the North West’s destabilisation by mismanagement and corruption during the term of former premier Supra Mahumapelo.
Contractors who spoke to amaBhungane called Vuk’uphile “the Vrede of the North West”, comparing its failure to the agricultural development programme in the Free State that was crippled by looting by Gupta-linked officials.
Five months after the elections, all 47 contractors’ projects that involved the EPWP workers were called off.
The contractors complained that since the programme was summarily suspended, the North West department of public works has refused to engage them or compensate them for what they say is a breach of their contract.
They accuse the department of corruption and mismanagement, while also questioning the role of consultants hired for the project, the Australasian engineering multinational Aurecon.
To add insult to injury, while contractors have been left high and dry, the department has paid a settlement of roughly R100-million to Aurecon after terminating their contract.
“Who gave the instructions for the 18 000 EPWP workers to be incorporated?” asked one contractor from Taung. “That person should be held accountable.”
That is, indeed, the R800-million question.
‘They sold us a dead dream’
“I wonder where I would be if I wasn’t sold the dead dream that was Vuk’uphile in North West province,” Rustenburg contractor Mpule Mathobela, wonders out loud.
When Mathobela showed up on site for his first Vuk’uphile Contractor Development project in April 2014, he had high hopes for his ten-year-old company, MM Mining and Construction.
As a grade 2 contractor on the Construction Industry Development Board’s (CIDB) register of contractors, he had the capacity to do contracts worth no more than R650 000.
Though business was going well – his Vuk’uphile application showed his previous year’s turnover was R11-million – Mathobela had his sights set on bigger things for MM Mining and Construction.
He hoped one day to compete with South Africa’s “Big Five” construction companies, the historically white-owned CIDB Grade 9 firms that build the country’s biggest highways, bridges and stadiums.
His successful application to the Vuk’uphile Contractor Development Programme in the North West was meant to be his start.
If things had gone according to plan with Vuk’uphile, Mathobela would have completed three annual projects and training courses so that he could move up at least three or four levels on the Register of Contractors.
Having graduated to level 5 or 6 in 2017, he would have been eligible to tender for projects worth at least R6.5-million.
However, in October 2014, after six months of Vuk’uphile, the North West Department of Works Roads and Transport suspended the programme.
What followed were four years of delays, setbacks and growing financial difficulty for Mathobela and the other small and medium-sized companies who signed up for Vuk’uphile.
After pouring large sums of their own money into the project, most have been left in varying degrees of debt.
Mathobela was one of 65 affected contractors who have called for the provincial department to pay them for for the work they did on Vuk’uphile, including what is known as “standing time” –when work on site is suspended – and compensation for breaching their contracts.
He says he poured more than R2-million into the project. Vuk’uphile caused him such severe cash flow problems that he has lost his tax clearance certificate and has struggled to tender for other projects since.
Comparatively speaking, MM Mining & Construction is one of the better-off companies, because it is still operating at the same CIDB level. Others could not maintain their CIDB gradings and have fallen off the register, forcing them into liquidation.
Several contractors told amaBhungane that they were defaulting on their home loans. One lost his home and is living in his storeroom among his tools and supplies.
Vuk’uphile is a national project that is managed at provincial level. It is designed to address lagging transformation in the South African construction industry, where less than 40% of top-tier (grade 5–9) companies are black-owned, according to a CIDB report released in January.
News reports have boasted of Vuk’uphile’s success in provinces such as Gauteng, where more than 100 graduates have completed the programme.
When amaBhungane first met Vuk’uphile contractors in January this year, they described the last four years as “agony” and wanted to know who was responsible for their suffering and why it had happened.
They brought evidence gathered from their own independent investigations, assisted by sympathetic staff at Aurecon and North West public works.
Based on this, they suspected department officials of financial mismanagement and corruption related to Vuk’uphile.
“Our sources say the project promgramme’s value was more than a close to a billion. Where did that money go? They didn’t spend it on us in just six months,” said one.
Mbulelo Tundzi, head of community programmes in North West, was the particular target of their anger, frustration and suspicions.
Tundzi, who managed Aurecon and the contractors directly, issued the cancellation notices for the Vuk’uphile projects, and the contractors say he has since refused to meet them.
Tundzi told TV news channel eNCA that the cancellation was “a directive from Province”.
When amaBhungane contacted Tundzi for clarification on who issued the directive, he refused to comment and said he was in the hospital.
Some contractors suspect Tundzi of mismanagement. According to news reports, his record at the North West public works department is not unblemished.
In 2012 he was hauled before a disciplinary committee to account for his involvement in a controversial R600-million property deal, which the department approached the courts to overturn.
In 2016 he was among the 20% of the department’s top managers suspended for alleged misconduct, following a forensic probe.
Photo: Mbulelo Tundzi
Online reports do not specify the outcome of either case, and amaBhungane’s questions about the outcome of the investigations went unanswered by all government officials.
In fact, over six weeks of investigating this story, amaBhungane contacted about ten senior officials in the provincial and national departments of public works to find out who issued the directive that broke Vuk’uphile financially.
These included provincial department head Pakiso Mothupi; provincial head of communications Matshube Mfoloe; national head of communications Reggie Ngcobo; deputy director general of the national EPWP Stanley Henderson; as well as spokespersons for the minister and deputy minister – Thamsanqa Mchunu, Thando Wababa and Sabelo Mali – and deputy minister Cronin himself.
As well as attempting to contact the officials on the phone, questions were sent by text message and email.
Mothupi referred amaBhungane to the national department, while Ngcobo and Mali referred us to the province. Mothupi, Mfoloe, Henderson and Wababa did not respond, while Mchunu refused comment, shouting: “I don’t have time for this!”
It provided a small taste of the run-around and buck-passing that has characterised the last four years for the supposed beneficiaries of Vuk’uphile.
The contractors say Mothupi refused to meet them for over four years or offer definitive updates on the status of the project.
The contractors finally met provincial officials ion July 2018, after an eNCA news bulletin featuring the plight of the contractors renewed public interest.
Provincial Department gone rogue
Cronin, at least, was responsive.
He said in a phone call: “You probably know more than me about this [failure of Vuk’uphile]” before adding that “the national department may not have been responsible for the project but it’s in our interest to communicate about it”.
Cronin said the North West public works department “went rogue” and refused to follow national guidelines. The national office had even advised against hiring Aurecon as a consultant on Vuk’uphile, but provincial officials did so anyway.
During another phone call, Cronin read out a 2015 letter from Henderson, the national EPWP boss, to Vuyo Mbulawa, then acting head of the provincial department.
The letter detailed how the national department received numerous complaints from Vuk’uphile recruits and no response from the North West. It requested an “intervention and response on issues raised”.
On Tundzi’s conduct during and since the project, Cronin said: “Yes, he is one of the provincial officials who was responsible for the programme and was completely non-cooperative and non-communicative.”
Asked to comment on the contractors’ allegation that Mahumapelo’s office used Vuk’uphile as an electioneering stunt, Cronin said: “That’s very likely the case. We too, strongly suspect that’s what it was.”
Cronin explained that other than send letters to provincial officials, the national department did not take action because it has “no constitutional mandate for oversight of the province”.
“We do enter into a memorandum of agreement on certain projects, but on Vuk’uphile the North West declined to sign it.”
Aurecon or Aurecan’t?
While national and provincial departments point the finger at each other, there is a third party that should account for its role in the Vuku’phile meltdown: Aurecon.
The company’s role was to mentor and train the contractors as well as monitor the sites on behalf of the department. But when the suspension notices for Vuk’uphile were issued, Tundzi allegedly told the contractors that this was the result of a dispute between the department and Aurecon.
The contractors say they were promised work would resume when the dispute was resolved, but that this only happened in 2017, once their Vuk’uphile contracts had expired.
Tundzi later told eNCA that the dispute was over whether Aurecon was delivering “value for money”. So the contractors were shocked to learn that the company had instituted arbitration procedures that ended in the department paying a “plus-minus R100-million negotiated settlement” to Aurecon.
The company would not reveal the original value of its contract.
Kalay Maistry, Aurecon’s marketing and communications business partner, denied that Vuk’uphile was disrupted by a dispute between the company and the government.
Instead, she placed the blame squarely on the “inclusion at the last moment of 12 000 EPWP workers into the programme at short notice, which would eventually increase to 18 000”. This had caused “cash flow challenges” that eventually brought Vuk’uphile to its knees.
Mathobela remembers the financial and logistical challenges that came with being responsible for about 150 EPWP workers. “We could tell when we started our first projects that things were not going to plan,” he said.
He and other contractors expected to split about 5 000 EPWP workers among them. But when the programme swelled to 18 000, they were placed under serious financial strain.
Each had to transport about 150 workers hundreds of kilometres from the rural areas where they lived to and from the site on a daily basis at their own cost.
His first project was to build a rural road in Leeudoringstad. As the site moved to different stretches of the road, the cost of transporting workers grew.
As part of what Mathobela described as “strict safety requirements”, each company was compelled to hire six full-time supervisors and cover their salaries, accommodation on site and transportation to and from weekly training classes in Mahikeng.
Some contractors took out loans to cover the costs, confident that their work on Vuk’uphile and after they graduated from the programme would keep them in the black.
The Leeudoringstad road, originally scheduled to be built in six months, ended up taking two and a half years because the department kept suspending work.
“At one point we were on site, not working, just directing traffic for six to seven months,” Mathobela said.
A civils contractor from Taung, complained that under the contracts, EPWP workers from various locations had to be on site at 7am each day. “It was a logistical nightmare.”
He and other contractors purchased trucks to transport the workers, believing they were making an investment for the three years of Vuk’uphile and beyond.
The contractors say they were initially assured that the department would cover all costs related to the project, but within the first few months Tundzi sent instructions through Aurecon that they should cover project-related costs, including workers’ transport and accommodation, and issue invoices through Aurecon for reimbursement.
But there were long delays between invoicing and reimbursement. When they did come, the repayments were smaller than the full amount for which the contractors had invoiced.
Some contractors told amaBhungane that they started to suspect Aurecon was creaming off the top of their payments, and found it odd that they were submitting invoices addressed to the government through a third party.
Maistry denied that Aurecon withheld funds from the Vuk’uphile companies. She said that the contractors submitted payment certificates to Aurecon, which collated them and submitted a consolidated certificate on their behalf to the department, which then paid them through the company.
She added that the department “did not have the capacity to timeously process all the contractors’ payment certificates, which was a crucial element for the successful implementation of the development programme”.
The contractors said that they began to fall behind on paying loans, salaries and taxes. While they were still struggling to sort out payment issues, Tundzi declared the suspension of the programme.
“When you’re running a business and you don’t get paid, it has a ripple effect. You need to get paid so that you can pay SARS, salaries, invoices and loans. If one of those things don’t happen, you’re in trouble. If you don’t have a tax clearance certificate you can’t even tender,” remarked Mathobela.
Asked if, in its capacity as a consultant, Aurecon had warned or advised the government that the inclusion of the EPWP workers was not feasible, Maistry referred amaBhungane to a letter written to the former head of department.
The letter covers the cost implications of introducing and initial group of 12 000 EPWP workers into Vuk’uphile, rather than the final number of which grew to 18 000. It does not include warnings that financing EPWP workers might not be feasible or could break Vuk’uphile.
Maistry said: “It was never intended that all workers would be employed at the same time, but rather on a continuous basis as the department identified workers that they enrolled into the programme. The department was responsible for the administration and management of EPWP projects and workers.”
She also claimed that Aurecon did not know the official budget for Vuk’uphile, as “the department never provided a final budget despite our numerous requests to do so”.
So why did Aurecon agree to oversee a project without a budget?
“Aurecon has substantial experience in Labour-Intensive Construction projects. It was only possible to finalise the actual value after projects for the various learner contractors had been identified,” said Maistry.
According to Aurecon, their working relationship with the North West department of works broke down after the department settled only six of Aurecon’s 18 invoices and disputed the rest.
Tundzi told eNCA the dispute was “related to value for money and deliverables related to this programme”.
After a dispute resolution process initiated by the company, Tundzi said the department settled out of court for about R100-million.
The department also told Aurecon that it could take over the running of the project and work with recommended Aurecon personnel to “undertake the demobilisation of the programme with immediate effect”.
Tundzi told the beneficiary contractors that the programme would continue when the legal dispute was resolved. But the Vuk’uphile contracts lapsed before the resolution, in December 2016.
For this reason, contractors are demanding that they are “bought out of their contracts just like Aurecon”.
They also want the department to compensate them for the time work was suspended, or “standing time.”
A promise still unfulfilled
Mathobela said that when the department suspended the programme, the road building contractors left the roads unfinished. “This was an embarrassment to the department so they called us back to finish the projects.”
Again, MM Mining and Construction was relatively better off than the landscaping, road and sign maintenance and construction contractors, whose projects were completely terminated. And under their three-year Vuk’uphile contracts, they were not allowed to take on other work.
Compensation for standing time lies at the heart of the Vuk’uphile beneficiaries’ fight with the department.
They are disputing claims in a January 2016 press issued by the department’s Matshube Mfoloe.
The release is titled “A promise to pay up fulfilled lives up to its promise to pay emerging contractors”.
In it, Mfoloe claims to have “paid more than R30-million in less than two months to 47 contractors under the Vukuphile Constructor Development programme. All except for three companies were paid before the Christmas period with the remainder fully paid by this month.”
The contractors say this was thoroughly misleading, because the repeated suspensions meant they were on site for much longer than reflected in the payments.
“For contractors whose projects were stopped, the department paid for work done. Those of us who finished our projects were paid the value of the contract,” Mathobela said.
“If I complete a project that takes two and a half years, and I’m paid for a six-month project, what does that do to my bottom line? I was paying salaries for way longer than was budgeted for.”
The learner contractors that were paid only for work completed have a similar complaint.
They say that they should be compensated for standing time for all of the months when Vuk’uphile was suspended, from 2014 until the end of their contracts in 2016.
Redress
As the plight of the contractors begins to draw official and public attention, there has been no mention of an investigation into the mismanagement of Vuk’uphile and its funds.
When amaBhugane first met with Vuk’uphile contractors in January 2018, they had pursued every possible avenue. They contacted the presidential hotline, the national department of public works and the Public Protector’s office – without visible progress.
Then, within a few weeks of news channel eNCA’s feature on Vuk’uphile in May 2018, the contractors were invited to a meeting with the North West provincial legislature.
This was intended to be their first confrontation with with the officials who allegedly bungled the Vuk’uphile programme. Tundzi, Mothupi and their team were nowhere to be seen.
After her office had sat on the case for two years, Public Protector Busisiwe Mkhwebane personally stepped in.
At a July 3 meeting called by Mkhwebane in Rustenburg, the learner contractors faced senior public works officials for the first time since the programme was suspended four years earlier.
“We are here to discuss redress,” Mkhwebane announced.
Representing the provincial department was Mothupi, public works MEC Mmule Johanna Maluleke, and the department’s legal advisers. Tundzi, the only official involved in Vuk’uphile, again went AWOL.
The Public Protector at her hearing with the contractors and the North West Department of Public Works in July 2018.
Of the 65 contractors, 30 attended. Mathobela, who has become the official spokesperson for the Vuk’uphile contractors, explained: “We are here because we were able to borrow money or get a lift.
“Others have no means to get here, others have given up and maybe many don’t even know about our meeting. One of our group has already died.”
The department asked for 30 days to respond to the contractors’ complaints, but were limited to seven days by Mkhwebane.
After she confirmed that the contractors had been severely prejudiced by the handling of Vuk’uphile, they left the meeting feeling cautiously optimistic. They were particularly encouraged by her insistence that government should plan to restart Vuk’uphile.
Perhaps this year, the political changes in North West will work in their favour.
Mahumapelo has stepped down, the province has a new premier and has been placed under administration by national government.
Cronin admitted that, “Until section 100 [the administrative take-over] and the new state of affairs, we didn’t have a handle on it [Vuk’uphile] at all. We’re now dealing with many issues in that province, this is just one small part of problem.”
But if it’s difficult to imagine any lasting changes in the North West if bureaucrats who oversaw its collapse over the last four years are allowed to continue running the show.
So far, no senior officials have stepped up to exorcise the ghosts of the past.
Mkhwebane said at the meeting and in a letter afterwards that “should [her] mediation and conciliation fail the Public Protector shall conduct a full investigation of the complaints”.
When amaBungane asked Cronin if his department will investigate where Vuk’uphile’s money went and take measures against the officials who bungled it, he could only say: “I hope so. I’m not sure.”
No one is more hopeful than the Vuk’uphile contractors.