eKurhuleni municipal mismanagement exposed

By Kwazi Dlamini

When municipalities neglect to follow procurement processes, the end result is a large sum of irregular expenditure, meaning that it does not conform to any applicable legislation or regulations.

In June 2017, auditor-general Kimi Makwethu released his municipal audit findings for 2015/16, and while he alluded to a slight improvement in the overall results, he expressed disappointment that local government had failed to maintain the promising five-year momentum which had built up between the 2010/11 and 2014/15 financial years.

What was lacking, Makwethu said, was basic principles of accountability, built around a central theme of strong internal control and good governance – if these are in place, municipalities should be well geared to live up to the expectations of the communities that they serve.

But irregular expenditure by municipalities increased by 51% in the 2015/16 financial year to an astonishing R16.8-billion, compared to R11.1-million in the previous year‚ the auditor general revealed.

One of the culprits was Ekurhuleni Municipality which, the Auditor-General revealed in its 2015/16 report, did not take reasonable steps to prevent irregular expenditure, while the accounting officer did not exercise adequate oversight responsibility regarding compliance with laws and regulations.

In 2015 Corruption Watch (CW) received a report alleging that Ekurhuleni Municipality had unlawfully appointed as municipal manager one Khaya Ngema. His appointment, according to the report, was followed by numerous tender irregularities and the municipality consequently lost a lot of money.

Our reporter said that Ngema was appointed on 17 August 2009 as the manager of the municipality, for a five-year period until 16 August 2014 – a letter of appointment provided by the whistle-blower and seen by CW specifies this date. However, the country held municipal elections in May 2011, and in terms of section 57(6)(a) of the Local Government Municipal Systems Act, the municipal manager’s (MM) contract may not exceed a period ending one year after the election of the next council of the municipality. This means that his term of employment should have ended, at the latest, on 17 May 2012.

Ngema’s appointment therefore exceeded the legislative agreed terms.

Bending the rules

The newly appointed MM then went on to appoint the municipality’s CFO to be his deputy and also to chair the bid adjudicating committee (BAC). This practice was improper because the MM is supposed to be part of the BAC and appointing his deputy as chairperson implies that he cannot himself be part of BAC. This has procurement implications because the deputy MM may not sign for tenders above R10-million. According to our reporter, since Ngema’s arrival in 2009 all tenders above R10-million were signed off by the BAC chaired by Ngema’s deputy – a clear breach of process.

The appointed chairperson of the BAC, Khaya Myeza, as CW was told, also committed corrupt activities by fraudulently giving out a tender for supply, installation and maintenance of the intelligent metering system to a firm named Lesira Teq. Myeza was dismissed in 2012 for these activities and his replacement, Mesuli Mlandu, the CFO successor to Myeza, was appointed acting BAC chairperson with effect from 23 July of the same year. Mlandu as the new BAC chairperson supposedly had to continue to evaluate tenders above R10-million – which were meant to be approved by the MM.

However, CW was also told that Mlandu refused to evaluate tenders above R10-million, referring them rather back to the MM. We understand that he was tipped off by someone within the municipality that if he signed those tenders he would suffer the same fate of his predecessor.

On 31 August 2012 a Mokwedi Mokoena from the office of the executive manager sent a letter to Mlandu confirming the re-routing of the evaluation process and also attaching a form to be used by the BAC for sourcing approval. (The letter to Mlandu was seen by CW.)  In November 2012 Ngema, in a letter submitted to CW, presented to all heads of departments and general managers an order that all tenders above R10-million be assessed by more than three people, in the interest of “broadening the checks and balances in the evaluation process”.

Too little too late

In May the following year the South African Local Government Association sent a circular to all executive mayors, speakers, council whips and managers regarding the issue of contracts for municipal managers. The circular also emphasised adherence to section 57(6)(a) of the Local Government Municipal Systems Act.

Mondli Gungubele, Ekurhuleni mayor at the time, outlined to the council that the MM’s contract should have been terminated prior to the elections of 2011. The council, after a meeting, agreed that the appointment date was correct but the termination date was not – but also decided it was unfair and unjustifiable to not renew Ngema’s contract, as the municipality performed satisfactorily well.

Gungubele stressed that the municipality might face legal challenges for breach of the Labour Relations Act, as there was by now a reasonable expectation on Ngema’s part that his contract would continue – after soliciting legal opinion, however, the council decided to terminate Ngema’s contract one year after the next local government general elections in 2016, to bring it into line with the statute.

This decision was challenged in the High Court in 2015 by Lucas Madikwane, a supplier of the Ekurhuleni Municipality, and it was ruled that the contract extension occurred without compliance with the Local Government Municipal Systems Act. The court also ordered that Negma’s contract be terminated as of 17 May 2012.

Corruption exposed

Ngema’s violation of the regulation regarding the BAC was also exposed in a September 2012 letter sent to the National Treasury. The Treasury labelled Ngema’s act of appointing his deputy as chairperson of BAC as negligent and pointed out that it was Ngema who changed the procurement system when he arrived at the municipality.

It was also alleged that Ngema misrepresented the municipal financial statements of 2011/12 by citing an incorrect irregular expenditure amount of R119-million while it actually amounted to R7.2-billion, from awarded tenders valued at more than R10-billion approved by the deputy MM between 17 August 2009 and 31 August 2012.  Ngema apparently then went on to quote the same figure for 2012/13.

On 27 March 2014 Ngema received a submission from the Municipal Property Assessment Corporation regarding the annual financial statements for 2012/2013 and they raised issues of concern on matters including deviations, violation of supply chain management policy and leadership accountability.

Corruption Watch sent the municipality questions, asking what the council’s plan was to recoup monies that were lost to the mismanagement of funds, and whether remedial or punitive action was taken in this regard, among others.

Our attempts to get the Ekurhuleni Municipality to account and clarify the issues raised went in vain as the municipality never responded to questions sent to them. Further attempts to get feedback and inquire with the municipality about the questions sent to them, as recently as February 2018, were also unsuccessful as the phone rang unanswered multiple times in the mayor’s office. However, Ngema no longer works as the MM, according to the Ekurhuleni website.