Why are the lights off at PRASA?
Claims, counter claims and racketeering allegations in PRASA fencing contract
R53 million worth of solar lighting equipment was purchased four years ago to improve security at Passenger Rail Agency of South Africa (PRASA) depots. Yet it still appears to be sitting unused in a warehouse, a consequence of disregard for procurement procedures and a squabble between companies.
The waste of money and resources is just part of the bungling of a 2013 tender PRASA awarded to SA Fence & Gate which escalated from R209 million to R317 million. The initial R209 million tender was to provide fencing and related security at eight PRASA depots. This contract was then extended by R47 million when SA Fence & Gate submitted a request due to variations on the project. It was extended by a further R61 million to include solar powered lighting around the perimeter to ensure CCTV cameras would be able to detect any intruders at night.
This is according to a 2016 investigation by Werksmans Attorneys commissioned by the PRASA board under former chairperson Popo Molefe. The report states that the entire SA Fence & Gate contract — for which the company received just over R295 million in payment — was irregular as PRASA did not comply with Construction Industry Development Board (CIBD) regulations related to the advertisement of the tender. But it is in the procurement and supply of solar lighting where some of the most blatant flouting of regulations seems to have occurred.
There is also a report from an investigation into the SA Fence & Gate contract by Nexus Forensic Services, which was commissioned by Treasury.
The reports suggest SA Fence & Gate did include lighting in their original submission, as 236 lights valued at R2,471,061 were provided in the bill of quantities. But, according to the Nexus report, SA Fence & Gate was instructed not to obtain these lights, even after their contract was extended by R47 million.
Rather, “documentation indicated that an employee at PRASA committed PRASA to procure additional lights from SA Fence & Gate at a cost of R28,153,296.72,” states the Nexus report.
It would seem this employee was executive manager at PRASA’s technical division, Palello Lebaka, who Werksmans also state was central to orchestrating a R61 million addition to the initial contract. He was to be axed by then Group CEO Lucky Montana. After Montana was axed in 2015, he laid a criminal complaint against PRASA, alleging PRASA employees were guilty of corrupt activity in relation to the SA Fence & Gate tender.
There was no response to requests for comment sent to Lebaka, and Montana has stated he will not speak to the media about PRASA matters.
Direct conflict of interests
According to the Werksmans report, at the behest of consultant Thobani Msimang of Tmang Consulting — who allegedly oversaw the scoping of what was required for the solar powered perimeter lighting — a company called Top 6 Holdings was brought in to find a supplier for the lights. The supplier chosen was Beka-Schreder. Top 6 was to organise collection by SA Fence & Gate. For this service, Top 6 apparently added 10% to the cost of the lights, which meant Top 6 stood to earn between R2.7 and R2.8 million.
Yet Thobani Msimang was also one of the directors of Top 6 Holdings.
Werksmans refers to emails from Lebaka to SA Fence & Gate Chief Operating Officer George Els, as well as other SA Fence & Gate and PRASA staff, requesting a meeting on 5 June 2013 to discuss “where the details requirements going forward will be spelt out in detail (sic)”.
Msimang was copied into this correspondence.
Werksmans states that according to Alisdair MacDonald, who was contracted by Top 6 to conduct scoping and design of the perimeter lighting, Msimang told him “early on” that Top 6 would be involved in procuring the lights.
At that point, which was the 5 July meeting, Top 6 Holdings had not been registered as a company. It had still not been registered when it supplied a quote to SA Fence and Gate on 13 July based on MacDonald’s scoping. The company was only registered on 25 July 2013. An independent company search confirms this.
According to the Werksmans report, MacDonald said it seemed his services were terminated the moment he supplied the design for the lights. He stated he was paid by Top 6, but less than the agreed amount.
Once the scoping was concluded, quotes for the provision of lighting were obtained from suppliers, with Beka-Schreder chosen to provide 2,000 lights.
“It would appear as if the fact that Top 6 would be superimposed between SA Fence & Gate and the lighting supplier was already planned at the outset of the fencing project or at least since May 2013 when the ex PRASA employee Palello (Lebaka) got involved in the project,” state the Werksmans investigators.
Although Lebaka was disciplined and dismissed due to collusion with Msimang to enrich Top 6, Werksmans states “there may well have been more to the transaction” and it should be investigated by police. Werksmans further recommend that the offence of racketeering in terms of the Prevention of Organised Crime Act be considered.
However, Thobani Msimang and another Top 6 director Sizwe Mbanjwa say the Werksmans investigators never approached them for their side of the story before compiling their report.
Msimang also denied that he was brought in as a consultant. Msimang also makes no appearance in the Nexus report and the benefit of the doubt suggests it is possible that the emails in which he was copied led Werksmans to presume Tmang Consulting was involved, which may not have been the case.
Unfortunately PRASA did not respond to repeated requests for information, and SA Fence & Gate did not shed light on the matter.
Werksmans also notes that by mid-April 2014 Beka indicated to Top 6 that the lights were available for collection subject to full payment by Top 6, which was made in seven payments between February and May 2014. Werksmans states that Beka continually informed Top 6 the lights were available for collection but only six of the 2,000 lights were collected before a disagreement — the nature of which Werksmans does not specify — set in.
The Nexus investigators, however, state 24 of the 2,000 lights had been installed, despite R53,618,790.88 being paid for them by PRASA. As of 2016, the remainder of the lights were still sitting in a Beka-Schreder warehouse and it appears they are still there, although GroundUp could not obtain confirmation of this.
Beka-Schreder general manager Wimpie Ludwick would not confirm or deny the lights remain on its premises.
Ludwick said there was an ongoing court case involving the SA Fence & Gate contract to which Beka-Schreder personnel had been subpoened as witnesses, as the company’s lawyers had advised that he not divulge any information.
Top 6 Holdings director Sizwe Mbanjwa sent GroundUp a reply to questions via attorneys Snymans Incorporated.
Attorney Stephen Smith said Top 6 had no knowledge of an investigation by Werksmans nor had the company been contacted in that regard. Smith said: “SA Fence & Gate secured the award of the tender from PRASA to provide, inter alia, a lighting solution at various goods yards … SA Fence & Gate were, to the best of our client’s knowledge, not able to fulfil the lighting requirements. The reasons are not known to our client. Top 6 was able to provide SA Fence & Gate with a feasible solution, as scoped by Top 6’s consultant Alisdair MacDonald, and it was called upon to provide a proof of concept, which it did. The proof of concept was approved and SA Fence & Gate issued instructions to Top 6 to proceed to manufacture the lighting solution for later delivery.”
He said Top 6 can’t comment on GroundUp’s enquiry on the timing of the company’s registration, but the investigators never interviewed Top 6 in this regard.
He said massive storage fees were incurred due to SA Fence & Gate failing to take delivery. The fees were paid by Top 6 to Beka and the amounts paid were “not for public consumption”.
Top 6 also would not provide any clarification on the contract between Top 6 and SA Fence & Gate.
Prior to getting hold of his lawyers, Mbanjwa, in a telephonic conversation, claimed Top 6 was a black-owned SMME that had lost money on the deal due to the storage fees they had to pay to Beka-Schreder, and were innocents who got burnt by the issues between PRASA and SA Fence & Gate. Mbanjwa also claimed he had issued instructions long ago for Top 6 to be deregistered. As to his fellow director Thobani Msimang being a consultant to PRASA on the lighting element of the SA Fence & Gate contract, he provided no information other than to suggest talking to Msimang.
But Msimang states Tmang Consulting was never involved. “Tmang had nothing to do with that account,” he stated in a telephone conversation. He also said he had never been approached by the Werksmans investigators.
Via Evan van den Berg of Fasken Attorneys, SA Fence & Gate said it had not seen the Werksmans report and so could not comment on allegations of racketeering.
Van den Berg said as a result of GroundUp’s enquiry, SA Fence & Gate had approached founder of Forensics for Justice, Paul O’Sullivan, and given him a mandate to “carry out a thorough investigation in respect of the aspects of the PRASA depot contracts that are mentioned”.
In response to a question about Montana’s criminal complaint, he said SA Fence & Gate had yet to be approached by an investigating officer and believed the case was a “smoke screen” meant to deflect attention from criminal allegations levelled against Montana at the time.
O’Sullivan confirmed that he has started an investigation. “It is still in its infancy and it would be premature for us to discuss the merits … as it goes along,” he said.
Further queries sent to Fasken and SA Fence & Gate remained unanswered.
Update on 14 December: Comment from O’Sullivan was added.
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