Government in buying local spin

A National Treasury textile tender is being challenged for flouting local content rules, then deliberately covering up the problem. The contract value is not specified, but Treasury documents indicate the disputed amount is worth about R36 million. Court papers show a list of problems: the contractor hired by the Treasury is accused of importing yarn instead of using local products as national policy dictates; the contractor is acting as a front for another business that does the work; and the contractor is linked to a senior military official. The contract is being challenged by Da Gama Textiles, based near East London, Eastern Cape, and is due to be heard in the Pretoria High Court on Tuesday.

The case is brought against the government, effectively the Treasury, which handed out the contract and Seardel Investment Corporation, Seardel Group Trading, and Eye Way Trading. All the respondents are opposing the case. Just on Monday, Minister Ebrahim Patel publicly touted the successes of the Local Procurement Accord signed by social partners in October last year. “Indeed, increasingly we see local procurement as a centrepiece of industrial policy and of our counter-cyclical macro-economic policies,” Patel told a Proudly SA summit in Gauteng. The court papers indicate that the Treasury is flouting that buy-local policy. Da Gama chief executive Kelvyn Breetzke said in an affidavit that the tender issued by the National Treasury was for a year’s supply of fabric known as greige, which is woven from cotton polyester yarn spun from other raw materials. The contract is for April this year to March next year.

Da Gama bid but lost out to Eye Way, which doesn’t produce the yarn itself but buys it from a Seardel division. Cosatu’s textile union is understood to have an indirect stake in Seardel. The contract expressly called for “locally manufactured goods with local raw material or inputs”. This is in line with a government decision to buy local to support the ailing textile industry. Breetzke said Eye Way was using imported yarn, which was cheaper than local yarn, so Da Gama complained to the Treasury. The Treasury told Da Gama that Eye Way complied with the contract specifications so the contract would not be cancelled. Da Gama then got the record of decision (ROD) on the contract. The ROD showed that the Treasury told Eye Way about Da Gama’s complaint, which then promised to use locally spun yarn.

Breetzke said the ROD showed that the Treasury knew that Eye Way was using imported yarn, but told Da Gama that it was keeping to the contract specifications. “Under the circumstances, it has become apparent from the ROD that the National Treasury has sanctioned the continuing breach by the fourth respondent [Eye Way] of the special conditions of contract relating to the use of locally manufactured products, to the prejudice of all other tender bidders, and to the prejudice of the local textile industry, which is under extreme pressure to survive in the light of competition from cheaper imports,” said Breetzke. He said it appeared the Treasury was “intent upon permitting the delivery of a product which does not comply with its tender specifications”, and that about 40 percent of the contract had already been delivered.

The court documents make it clear that Eye Way is not producing the goods itself but buying them from the Seardel business. A declaration of interest document acknowledges that one of those connected to Eye Way is Enoch Mashoala, who was listed as the SANDF’s chief of human resources. Mashoala, who was a major-general, is reported in a defence force journal as having retired earlier this year. Documents on the Treasury website indicate that Eye Way’s share of the tender is for textiles for Correctional Services and the SA Air Force, and that Eye Way’s share is worth about R36m. Mashoala’s wife Nomathamsanqa Cordelia is one of the two Eye Way directors. The declaration notes that Eye Way also in the past year got state tenders to supply textiles and gumboots to Correctional Services, and animal and dog food.