Treasury ‘told too late’ about contracts

The National Treasury was alerted by a listed construction company about 23 illegal contracts to rehabilitate Free State roads that were awarded in 2010, but it maintains that the R4.2 billion worth of contracts were signed before it could intervene. Delayed payments by the Free State government for work done on these contracts contributed to the liquidation this year of listed construction group Sanyati, resulting in the loss of about 2 500 jobs. In July the provincial government concluded settlement agreements with contractors owed hundreds of millions of rand for work completed on these illegal contracts. The Treasury later reached a settlement with Sanyati’s liquidators to pay it R25 million.

It is unclear if any disciplinary action was taken or criminal charges laid against any of the officials involved in awarding these illegal contracts. Treasury spokeswoman Phumza Macanda said inquiries should be directed to the national and provincial transport departments. Attempts over the past two months to obtain comment from Free State Police, Roads and Transport Department spokesman Zolile Walaza and national Transport Department spokesman Sam Monareng were unsuccessful. Information received by Business Report indicated that listed Murray & Roberts (M&R) had sought clarity from the Treasury about the legality of tenders it had been awarded. M&R chief executive Henry Laas denied earlier this year that the group had spoken to the Treasury about the legality of the contracts, stressing that it had declined the work based on its own risk assessments.

However, Macanda confirmed that one of the bidders had approached the Treasury when Business Report asked why it had not intervened. “There was indeed action taken,” Macanda said. “When one of the companies advised the Treasury of the financing arrangement that the province was implementing, some contracts had already been awarded and construction had commenced in some cases.” Macanda said the Treasury had raised the alarm with the Free State executive leadership and immediately instructed the provincial Department of Police, Roads and Transport to cancel the contracts or renegotiate the arrangements. She said the department had moved during 2010/11 to charge and suspend several officials who participated in the contract awards but the legal and other processes could be very time consuming once the contracts became active and construction was under way.

Macanda said support had been deployed to the province from the SA National Roads Agency and Development Bank of Southern Africa following the Treasury’s intervention. “A negotiated approach towards ending these irregular contractual arrangements was considered to make payments for work already done, on the one hand, but also absolving both parties of any contractual obligations,” she said. Finance Minister Pravin Gordhan confirmed in October that the 23 contracts awarded to 14 firms were illegal because they contravened the Public Finance Management Act, the Preferential Procurement Policy Framework Act and the Borrowing Powers of Provincial Governments Act.