Firm accused of reckless trading may face blacklisting

Two multimillion-rand eThekwini contracts awarded to a recruitment firm formed after its parent company had been liquidated are being scrutinised by the city. The company may soon be blacklisted by the city and stripped of the contracts. That’s if city manager S’bu Sithole has his way. Sithole announced his intentions in an interview with The Mercury last week. Three weeks ago a Mercury investigation uncovered how Phumelela Business Consultants was awarded a three-year R12 million contract to recruit temporary staff for the Durban ICC, just a few weeks after being liquidated. According to court papers, Phumelela owed money to Sars for unpaid VAT, PAYE, skills development levies and UIF dating from 2011. There were attempts to settle the debt, but these were rejected by Sars, which in October 2012 took a “money judgment” against the firm for R31.9 million. This was almost two years before the tender in question was advertised.

When Sars was unable to attach assets of any value, it launched proceedings in the Durban High Court, obtaining a provisional liquidation order in October 2014. The company was finally wound up by court order on June 8, 2015. The contract was awarded to Phumelela on June 26 that year. A few months later the ICC contract was transferred to newly-formed Nonto HR Solutions, a company owned by directors of Phumelela. Then in June this year Nonto HR Solutions was awarded a R14 million contract to recruit temporary staff for Moses Mabhida Stadium. Nonto HR had, according to Sithole, “piggybacked” on the Durban ICC contract when, through Section 32, it was given the Moses Mabhida Stadium contract. Section 32 of the supply chain management regulation authorises a state organ to procure goods and services under contracts “secured by another state organ”. “In the light of the developments that have come our way, we are reviewing the awarding of that contract; in fact, for both contracts. Should there be a need, the company will also be reported to the blacklisting committee,” said Sithole.

The city, he said, had not been aware of Phumelela’s dire financial straits. “We did a very legitimate contract, whatever we’ve done was above board,” said Sithole. “But in the light of new evidence that’s come our way, I’ve asked the city integrity and investigations unit (CIIU) to investigate the issues and give me their recommendation.” In an SMS on Sunday, the director of Phumelela, Nompumelelo Elizabeth Ngidi, refused to comment to The Mercury, saying the company would not discuss the matter through the media. She threatened legal action “in the event that any contents of your article are defamatory”. “Any response to any queries raised by the city shall be dealt with between the city and ourselves. Our rights herein remain fully reserved, including our right to institute legal action against you, and the publishers of your newspaper,” she said.

IFP councillor Mdu Nkosi and DA provincial and eThekwini caucus leader Zwakele Mncwango have welcomed Sithole’s move. Nkosi said: “I think he’d be doing his job by doing that. I fully support him because it is obvious there is something amiss here. I believe the investigation will prove this.” He added that any implicated officials should also be held to account. “Hopefully the CIIU will investigate the matter with integrity,” he said. Mncwango said the investigation was a “commendable move”. “If I were to advise, I would say, let the city investigate the contract. You don’t want to only investigate the company, only to find that the city was involved. We must not act on emotion.”