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Durban pays double for housing contract

Senior municipal official Derrick Naidoo. Photo: Sandile Ndlovu

Senior municipal official Derrick Naidoo. Photo: Sandile Ndlovu

Published Sep 16, 2015


Durban - An eThekwini Municipality housing contract, which saw two companies being paid close to R30 million for what appeared to be doing the same work, could see two controversial former senior municipal officials, Cogi Pather and Derrick Naidoo, facing a possible criminal investigation.

At an exco meeting on Tuesday it was revealed that the city’s integrity and investigations unit (CIIU) had recommended that the city lodge a criminal case to find out why the second contract amount was almost equal to the first one, which had been near completion when taken over.

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But while Pather was unavailable for comment, Naidoo strongly rebutted the accusations. He pointed out that “the magnitude of the poor workmanship we were dealt with” by the first contractor drove the costs needed to fix the buildings. (See his full response below.)

Glaring questions have also been raised about why the city has now agreed to pay the failing contractor a further R2.4 million. This is despite the city’s winning a court case against the company.

Pather, the former housing head, and Naidoo, the deputy city manager for infrastructure, were at the helm of the city’s housing department when it awarded an R18 million contract to DKS Holdings to build houses for the Umlazi Glebelands Hostel Complex in 2005. The two are no longer with the municipality. They were named in the Manase report on fraud and corruption, but both denied any wrongdoing.


At Glebelands the city had found defects in the work carried out by DKS, including doors cut into irregular shapes and narrow passages. DKS was asked to submit a programme of how the work was going to be completed and corrected.

When this was not done, the contract was terminated, with DKS having already been paid R15.3 million. DKS went to court challenging the cancellation of the contract and the court ruled in the city’s favour.

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Mochu Civils was then awarded a contract for remedial work, costing R14.2 million.

The municipality also withheld R2.4 million from DKS in 2007 to cover remedial work.

According to the CIIU report, DKS director Mandla Khumalo sued for damages but abandoned this because of financial problems.

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He then made representations to mayor James Nxumalo and the city’s municipal public accounts committee, in June last year, for an out-of-court settlement.

The CIIU was mandated to investigate the matter and concluded it in January this year. It was only submitted to exco on Tuesday.

The municipality said in a statement on Tuesday that exco had recommended that DKS be paid, as the company was in financial difficulties and facing liquidation.

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“In an effort to ensure administrative fairness, the CIIU recommended the refund of the retention and sureties to the contractor as well as the outstanding payments to the contractor resulting from invoices that was submitted but not paid.”

According to the CIIU report, its investigation sought “to establish reasons for the project appearing to have huge defects even though it was deemed 95% complete and payment effected in this regard”.

The report says: “If indeed there was poor workmanship by DKS, our former officials as well as the outsourced management team were party to fraud in that they would have misled the municipality into believing that value for money was received.”

The report also questioned why the second contractor was paid close to the initial contract price for remedial work.

The report said that Mochu Civils appeared to have been appointed to do a complete revisit of the project.

The investigation also sought to “to establish the apparent poor performance by the professional team which led to the council’s interest not being safeguarded”. Professionals and city staff were also to be interrogated by the CIIU, but it said Pather and Naidoo were not forthcoming with the investigators.

Approached for comment, former municipal manager Michael Sutcliffe questioned why the municipality had agreed to an out-of-court settlement with DKS after a ruling in the municipality’s favour.

He did not want to comment on the recommendation of a criminal investigation into the award of the tender to the second contractor.

However, he said that often when remedial work had to be done it led to a structure having to be demolished if the initial work had not been up to standard.

Responding to the recommendations, Derrick Naidoo rejected accusations of wrongdoing in the process of awarding the contract to an another contractor to remedy the workmanship of DKS Holdings.

“I clearly recall taking my management team to the site to inspect the work done by DKS and we were shocked at what we found. The flooring was not done properly, the walls were warped and were not straight and the entire work was shoddy. What should have been a housing project in completion was nowhere near habitable. We then followed all quality assurance processes and awarded the contract to the alternative provider to fix the workmanship of DKS Holdings, so that we could provide quality housing for people to live in. There was absolutely nothing untoward about the process, and the fact that we had to pay R14 million to another contractor is evidence of the magnitude of the poor workmanship we were dealt with,” said Naidoo.

A lawyer by profession, Naidoo also questioned why the city had chosen to settle out of court with DKS Holdings, given that it had already won the court case. “The critical question is, why settle when the city won? This happened after my time, and the current management needs to answer to taxpayers on this decision. If anything, they should be instituting a counter claim to recoup the money spent on fixing the shoddy work, not settling with the same company,” added Naidoo.

Pather could not be reached for comment on Tuesday.

The Mercury

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