‘End of road’ for axed MyCiTi firm

Lumen, the company axed by the City of Cape Town for “non-performance” on the R234 million IT contract for MyCiTi, has been provisionally liquidated – and says it is holding the municipality “primarily responsible”. Judge Lee Bozalek ruled in the Western Cape High Court last week that Lumen Technologies be placed under provisional liquidation, and to show cause by July 8 why the order should not be made final. The application was lodged by Questek, one of the subcontractors on the MyCiTi project. Judge Bozalek noted in his judgment that although Questek had obtained substantial awards and cost orders against Lumen for unpaid fees, it had recovered only R2m to date.

In a previous arbitration judgment, Judge Nathan Erasmus ordered Lumen to pay Questek more than R7.7m, excluding costs. “Notwithstanding this fact those financial records of Lumen which have come to Questek’s attention reveal that very substantial sums of money have been expended by Lumen on legal fees and consultant fees to Lumen’s directors’ family members.” It was also noted that Lumen was a close corporation that was formed specifically for the contract with the city, and that it had no significant assets of its own. Brett Herron, mayoral committee member of Transport for Cape Town, said: “The decision to cancel was taken reluctantly and after they failed to respond to the final notice to correct and instead asked for another extension. I have also previously indicated that Lumen’s performance guarantee lapsed and they were unable to renew it or replace it.”

But Lumen hit back, saying the contract was dropped because Lumen had “whistle-blown” about subcontractors inflating prices. The company submitted a 15-page complaint to the Speaker about alleged misconduct by Melissa Whitehead, commissioner of the city’s Transport for Cape Town. These allegations were dismissed twice by the city council and there was no further investigation. Lumen also threatened to sue the city for damages in excess of R50 million resulting from the termination of the contract. But Lumen’s Sedicka Chilwan said “Lumen Technologies has come to the end of the road”, when asked about the provisional liquidation order.

“I hold the City of Cape Town primarily responsible. From April 2012 until February 2014, Lumen ran the MyCiTi bus controls and scheduling efficiently and the commuting public were well served. Let that be Lumen’s epitaph.” She said the city favoured the foreign companies involved in the project, and tried to replace it with another firm “in secret and without any tender at all”. Herron said the city had to cancel Lumen’s contract to reduce the risk to the city and the MyCiTi project.