Municipality in hot water over R1.8m refund

The ANC-led full council of the eThekwini municipality overturned a decision of its executive committee and approved a R2.4 million payment to a building contractor – despite evidence that an insurance company put up R1.8 million as surety. The DA, which brought the evidence to exco, said it was angry the ANC exco members back tracked on the decision to pay the contractor. Caucus leader, Zwakele Mncwango, said they were considering options and could approach the Public Protector. The payment was for sureties the building contractor DKS Holdings said it had put up shortly before being awarded an R18.2m contract to build houses at uMlazi’s Glebelands Hostel in 2005. DKS Holdings had its contract with the city terminated after it failed to meet various obligations. Another contractor was appointed and, despite being paid R15.3m, DKS took the city to court. It lost but in June last year approached Mayor James Nxumalo and the city’s municipal public accounts committee for an out-of-court settlement.

The city’s integrity and investigations unit launched an investigation and last month recommended that R800 000 in retention money and R1.6m surety be released to DKS. This week, before the matter was to be brought to council to be ratified, Mncwango presented Exco with a letter from Constantia Insurance Company that said it had paid the municipality a R1.82m surety bond on behalf of DKS in 2008. A letter written by Jeremy Pillay, an underwriter at the Constantia Insurance Company and seen by the Daily News, said any money recovered must be paid to them. Pillay confirmed he had written the letter and that the company had paid the surety. A copy of the surety bond and a letter from the municipality acknowledging receipt of the payment was attached. “At a special exco meeting (before full council on Wednesday) it was agreed the matter would be withdrawn after I showed them the evidence. They agreed, not only on what I showed them, but on the legal advice given to them by the city’s legal team.

“However, when they got to full council, they changed their minds and approved it. The ANC caucus bullied the mayor and the executive into taking this decision. Something is not right here and it smells dodgy and of back hand deals. We need to get to the bottom of this,” Mncwango said. Speaker, Logie Naidoo, confirmed that council took a different decision to exco. He said the council had not taken a “carte blanche decision” but had weighed its options. “The ANC caucus decided that this matter is eight years old and that we should take the decision to pay DKS. There was a proviso that said, if there is verifiable evidence, not a councillor or a politician but an independent person who can provide information that that there was a payout, then that won’t be implemented. This was an in principle decision and we could not drag it on for any longer,” he said. Naidoo questioned Mncwango’s intentions and wanted to know who his source was.

“Is this genuine? Where does it come from? Is it another contractor, the insurance company or somebody else? Councillors are prohibited from meddling in the administration of the council affairs. It is a very narrow line of what you can do and cannot do. We do not know how he obtained that information or who he has met or if he has broken the code of conduct of councillors,” he said. Former city manager, Mike Sutcliffe, who was at the helm when DKS was awarded the contract, said the city needed to re-look the payments to the company. “The city is exposing itself, in various ways, first from a potential claim from this insurance company, who could say that this is fraudulent as the city has taken money from us and is now giving our money to someone else.

“Second is that councillors have taken a decision that they are not competent to take. It is not up to councillors to deal with issues like that but the professionals. It is crazy that the city wins a court case and then basically says ‘oh well we are sorry that we won it and we are going to pay out the people that we beat in court’. “It creates a precedent and it mean in future that anyone who does not do work properly for the city can have a claim against the city and not the other way around,” he said.