Johannesburg - The South African National Roads Agency (Sanral) on Tuesday, vowed to act against “irregular, fruitless and wasteful” expenditure, which has accumulated to a staggering R1.165 billion.

Sanral appeared before the Standing Committee on Public Accounts (Scopa) for the second time in its history. Sanral revealed that it had awarded routine road maintenance contracts totalling R827 million to 12 companies not registered with Companies and Intellectual Property Commission (CIPC), a contravention of the Public Finance Management Act.

Routine road maintenance contracts are awarded for three years and renewable for two years, subject to satisfactory performance.

Sanral said these contracts were a great incubator of small, medium and micro enterprises (SMMEs) and in line with its policy of ensuring that a significant amount of work is awarded to SMMEs.

Sanral's acting CEO Koos Smit said it was committed to good governance and stringent financial controls. “The committee pointed out some shortcomings and we acknowledge that we need to improve our internal processes,” Smit said.

Read also: Sanral to withdraw civil damages claims against firms

“We will do so, and have already instituted disciplinary action against several officials for failing to adhere to our processes.”

This year, Sanral received its 13th unqualified audit from the Auditor General (AG).

Smit said the finding of irregularity was made because neither the Preferential Procurement Policy Framework Act (PPPFA) nor its regulations defined the lowest acceptable price. He said Sanral had, over the past 11 years, used a method to determine a viable lowest acceptable price with the AG's knowledge of the rationale, and that no findings from the AG or complaints from contractors had been made during that time.

“As a result, Sanral developed and introduced a statistical method to establish the lowest acceptable price for each routine road maintenance contract,” Smit said. “This method is independently calculated by the University of Pretoria for every contract and allows for the appointment of a contractor with the most realistic rates at which SMMEs can do work and be financially viable.”

The Democratic Alliance has called on the Minister of Transport to launch an investigation into why key legislation was flouted in the awarding of these contracts and whether any other companies not registered with CIPC were also awarded contracts by Sanral.

But Smit said the AG declared the method non-compliant with the PPPFA only in 2013. “We respect the comments made by Scopa members. We have been rectifying the irregularity in a phased approach as we had contracts in place that we left to run their course in order not to incur cancellation claims,” Smit said.

“The last contracts will expire in 2017. New contracts have since been awarded to the lowest price and in line with PPPFA.”

In 2015/16 Sanral awarded 210 contracts worth R14.8 billion for new works, rehabilitation and maintenance projects. Smit said SMMEs earned a total of R3.5 billion, of which R1.9 billion went to more than a thousand black-owned enterprises. Sanral's projects created the equivalent of 15 721 full-time jobs.

AFRICAN NEWS AGENCY