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A Durban high court judge has ordered eThekwini mayor Zandile Gumede and city manager S’bu Sithole to file affidavits naming all of the officials involved in the awarding of a dodgy tender. The officials bungled the award of a three-year, R80million water loss insurance tender. Judge Dhaya Pillay wants the supply chain, bid evaluation committee members and all officials involved in awarding the water loss protection tender to pay the city’s litigation costs. He ordered they be informed of the judgment by the end of January. Westwood Insurance Brokers, which secured the tender but failed to get a renewal in January, took the municipality to court when the tender went to South West Brokers, which had an operating profit of just R17 000 the previous year. The city did not disclose why Westwood’s bid failed, but it later emerged that South West had enlisted an underwriter, Marsh Professional Indemnity Insurance, which was not registered with the Financial Services Board, a crucial error that should have disqualified them.
“The bold font to emphasise the underwriter must be registered with the FSB leaves no room for any other interpretation but that Clause 3 was directory. If a tenderer failed to comply, its bid should be disqualified without further consideration,” said Pillay. Contacted for comment yesterday, Sithole said he had not yet received the judgment and would look into the matter with the city’s legal unit. According to the court judgment, South West is run by managing director Mluleki Mathemba. In April, he had tried to enlist Westwood’s underwriters, New National Insurance Companies, through the Rajab brothers, but they rejected the offer. Mathemba had approached the Rajabs without the city’s knowledge and had tried to enlist New National as underwriters, stating their current underwriter’s BEE rating was not good.
Handing down judgment on Thursday, Pillay said the tender award to South West was “highly questionable” and suggested bias or potential fraud. “It became clear from Westwood’s founding and supporting affidavits the award to South West did not secure the residents and ratepayers against water loss,” said Pillay. “Who then would protect the residents and ratepayers against the risk of water loss? This called for a practical, immediate solution.” Pillay said there were unexplained and unjustified preferences in the move. “The reasons for the decision - bias, incompetence, negligence, fraud or some other cause - are immaterial. There was a lack of transparency and accountability by public officials and those performing a public duty,” he said. “Exceptionally, in this case, the majority of victims of the travesty would have been the insured residents and ratepayers who had no voice in these proceedings.
“Their interests had to be protected. Regrettably, not enough is done to secure public participation in matters that concern them. “The consequences of unconstitutional conduct by eThekwini officials could not be foisted on the insured residents and ratepayers. Nor could the court be held to ransom by deference to the principle of the separation of powers when institutions violated their powers,” said Pillay. The judge said the officials had been repeatedly warned by the city’s legal adviser, Sbusiso Shezi, who had compiled a memorandum on the advice of the City’s technical assessment team. “Mr Shezi’s memorandum confirmed South West had failed to submit proof of underwriting insurance called for in Clause 3; instead it had submitted ‘a Quotation for Professional Indemnity’ that was apparently ‘valued at R1.5 million’,” said Pillay. He said the memorandum by Shezi showed that the officials were aware they had to disqualify South West and yet they did not.
“In the light of Mr Shezi’s legal advice and compelling case for disqualifying South West’s bid, those who supported the bid cannot plead ignorance of the law. “The question for them is why they supported the bid notwithstanding this advice.” The judge commended Shezi and the technical assessment team and said had their advice been followed, the unlawful awarding of the multimillion-rand tender to South West would have been avoided - preventing “costly litigation at the expense of the public purse”. Pillay said taxpayers should not incur the costs of the litigation. “A way has to be found to indemnify them against all costs that eThekwini has to pay arising from this matter, including its own attorney and client costs,” said Pillay.