KZN family-run business in hot water over failed R230 million deal

A leaked report into the financial affairs of the Amatola Water Board (AWB) in the Eastern Cape has revealed how its suspended chief executive was involved in the manipulation of tender pricing with controversial KwaZulu-Natal based transport and logistics company Crossmoor Transport.

The investigation, commissioned by the Department of Human Settlements, Water and Sanitation, alleges that Amatola’s former chief executive, Vuyo Zitumane, manipulated supply chain management (SCM) processes in the appointment of certain service providers, among them Crossmoor.

However, Zitumane claims to have been misled by Crossmoor executives, who, she says, failed to deliver on the supply of emergency water tanks when interventions were announced to assist the poor in Butterworth. One of the key focus areas of the investigation was the emergency supply of rainwater tanks, involving Crossmoor. The R230 million procurement plan included the installation of rain-harvesting tanks in the Eastern Cape, and about 400 suppliers attended the briefing session.

“The chief executive was informed by Rand Water that they were using Osher Fuels and Crossmoor to supply tanks; she provided him ( Amatola's head of supply chain) with the contact details of the two suppliers, and he approached them for quotations,” said the report. It was found that there was a WhatsApp message, which was sent by Zitumane, in which she authorised the head of supply chain management to approve an order to Crossmoor. The following was recorded in the message: “Clayton National has taken trucks and tanks from Crossmoor, and if we don’t move with speed, we will not get the tankers.

"I am authorising you to give an order of 500 per each as emergency procurement today before 13.00. When I report to the board that must be done.” It was then revealed that Crossmoor submitted a quotation dated March 26, 2020, worth R7 million. The report’s preliminary findings found that the quotes of service providers appointed for drought intervention projects, rainwater harvesting and the provision of water tankers “were done at materially inflated prices”. “It is evident that the SCM processes were manipulated to facilitate the appointment of specific service providers,” reads the report.

The investigation, by Open Water Advanced Risk Solutions, claims to have obtained images of computer equipment, data storage devices, email and server information and cellphones which were being analysed to check if further irregular transactions needed to be identified for investigation. “We have identified projects in the Projects and Development Directorate which will be further investigated, including the appointment of project managers and contractors. “We are further continuing with the analysis of the financial statements and lifestyle auditing of executive directors and members of the previous board,” said the company.

The quotation, which was directed to the organisation, was accepted by Zitumane on March 26, with the following handwritten note: “Approved on emergency due to non-availability of stock locally. This is approved on condition that the supplier has stock locally by 30/3/2020”. Investigators charge they obtained a comparative quotation from Roto Tank (Pty) Ltd (Roto) to determine the current market price for a 5 000- litre tank. According to Roto, the market price for one tank is R3 884 as opposed to the price of R7 090 charged by Crossmoor, therefore being R3 206 more than the current market price per tank and R1.6m for 500 tanks.

Further information revealed that although the tender specifications provided for a JoJo eco stand, investigators were informed that Crossmoor insisted on providing 1m metal stands at a rate of R7 300. “However, we were informed that they reneged on this commitment and subsequently supplied eco stands. We obtained a comparative quotation from JoJo tanks to determine the current market price. The price of an eco stand is currently R1 275 per stand, and therefore, the price submitted by Crossmoor exceeds the market price by R6 025 per stand charged and R3m for 500 units,” said investigators.

Crossmoor was found to be unable to provide the required stands, which resulted in Amatola Water cancelling its order. “However, this was after they had already delivered 150 tanks. We were informed that, owing to the unavailability of 5 000-litre tanks at the time, Crossmoor delivered two 500-litre tanks as opposed to the 5 000-litres in respect whereof the order was issued.” The investigation reported that Amatola cancelled Crossmoor’s order due to non-delivery issues. Crossmoor is a transport and logistics business based in KZN, owned by the Naicker family, who include; Alvin, Inderan, Lutchmee and Poonsamy Naicker.

Zitumane, commenting on the allegations, said: “We had drought interventions to implement. We were going to buy 1 500 JoJo tanks for the Butterworth area for the needy and disabled. "We went through an open tender process. We were advised to follow the emergency procurement process but opted for an open process. Out of 200 bidders, 83 suppliers were selected who complied. Then, on March 23, there was a Covid-19 intervention which had to be implemented.”

According to Zitumane, Crossmoor lied and said it had tanks when it did not. “They lied from day one. They even lied about drivers being sick with Covid-19. I gave them an ultimatum that if they did not deliver, we would cancel their order. They said to us that they had 85 tanks, but it is clear that they did not. When they did not deliver, I said cancel that order because they lied. There were no transgressions made because it went on an open process,” she said.

This week, the Human Settlements, Water and Sanitation Minister, Lindiwe Sisulu, told journalists her portfolio was taking stringent action against those who were found to be corrupt and had brought the department to the brink of collapse. She said advocate Terry Motau SC, who conducted the investigation into VBS Mutual Bank, had been appointed to investigate and review all instances of fraud and corruption in the department. Responding to questions through its lawyers, Crossmoor said: “We entered into this contract with Amatola Water Board in March 2020. The contract was completed meeting all expectations.

"However, to date no payment has been received. We are in conversation with them regarding unmet payment from Amatola - there is an amount of R2 million owed to Crossmoor as per our contract. We can attest to our own governance and compliance in the establishment of business agreements through all the correct channels. We stand by our company’s ethos of integrity and Crossmoor is looking at all opportunities to assist in the battle against Covid-19 and its rampant effects on our communities.”

Family-run Crossmoor was in the news recently when its financial director, Sandra Munsamy, was abducted from her black Range Rover on the M13 in Pinetown in May last year, allegedly by men who demanded a R140 million ransom for her release. She was rescued more than five months later by the Hawks.