eThekwini Municipality councillors fear that their ability to monitor errant officials awarding contracts to family and friends could soon diminish. Picture: Archives
Durban - eThekwini Municipality councillors fear that their ability to monitor errant officials awarding contracts to family and friends by abusing Section 36 of the supply chain management (SCM) regulations could soon diminish.

These concerns arose this week as the municipality considered whether contracts awarded under the controversial clause should continue to come before exco members for scrutiny – a safeguard implemented following allegations of abuse of the regulation in the Manase report released in 2013.

Section 36 regulations allow for deviation from normal tender processes in the awarding of contracts in situations deemed to be emergencies or when there is only one supplier.

However, the process has in the past been abused by municipal officials who use it to award contracts to friends and families. Many contracts flagged by the auditor-general for transgressing procurement rules are awarded under Section 36.

The issue was raised during an exco debate on Tuesday about the sourcing of parts for the eThekwini bus fleet under Section 36 – the DA was scrutinising the contract.

City Manager Sipho Nzuza. Picture: Archives

The city manager, Sipho Nzuza, reminded exco members that the decision to award a Section 36 contract belonged to staff, not politicians. He said dealing with Section 36 was an administrative function of municipal staff.

eThekwini Municipality chief financial officer Krish Kumar said even when there was wrongdoing, councillors were not expected to be held accountable.

Mayor Zandile Gumede’s spokesperson, Mthunzi Gumede, said the municipality would seek a legal opinion on whether Section 36 contracts should continue to be brought before exco members.

“There was a reason why the contracts are brought before exco, but we will be seeking a legal opinion on whether this should continue, but our priority is to strengthen oversight,” he said.

However, opposition parties said bringing Section 36 contracts before exco and council was an important oversight step that allowed them to keep check on officials’ conduct.

“We are going back to the days of the Manase report,” DA leader Zwakele Mncwango said, in reaction to the possibility that exco’s oversight role might diminish.

“The Section 36 contracts do not really have to come to exco because it’s tender awards, but we took a decision in view of the fact that there is concern over the abuse.

“It was becoming clear officials were abusing Section 36 because they knew they did not have to go to tender and they could award contracts to friends. In the Manase report, that is where it became clear that corruption happened through Section 36 because there is no one monitoring as contracts were a straight award,” he said.

IFP leader Mdu Nkosi said the party wanted contracts awarded under Section 36 to come before exco for noting as an oversight measure so that contracts which did not officially qualify could be rejected.

“It is important to remember why these contracts had to come before exco in the first place. Some of these contracts were abused by officials,” Nkosi said.

“We want to continue to monitor that process, because very often we caught something wrong with the contracts long after the fact.”

Former municipal manager Michael Sutcliffe. Picture: Archives

Former eThekwini municipal manager Mike Sutcliffe said when he was the city manager, reports only went to council after the decision had been taken, as councillors are not allowed to involve themselves in supply chain processes.

Sutcliffe said councillors’ fears that their oversight role might be undermined were unfounded as it was not their responsibility to scrutinise contracts.

“If something wrong or corrupt happens, it is the municipal manager who will go to jail,” he said.

What the report found

The Manase Report released in 2013 after an investigation into fraud, corruption and maladministration at eThekwini Municipality found that some contracts, awarded through Section 36 of the Supply Chain Management regulations process, had been irregular.

These included three contracts, worth a combined R83m, awarded to H2O Networks.

* The first contract of R293 000, for a pilot project for the laying of 1.5 km of cable, was awarded despite the company not having a valid tax certificate.
* The second contract of R27.4-million, was found to be irregular as the company failed to pay the required surety bond and also because it had been paid R15m in advance, on the day the contract was signed.
* The third contract was worth R53m but the municipality failed to notify the State Information Technology Agency as is required of all contracts for IT goods and services above R50m.
* In 2015, the Mercury revealed that further contracts awarded by eThekwini Municipality officials using Section 36 of the Supply Chain Management regulations were “blank cheques”.

Then public protector Thuli Madonsela visited eThekwini to investigate the abuse of the contracts and demanded documents dating back 10 years.

It was noted there was an “alarming increase” in Section 36 procurement transactions and some of these transactions had included tenders awarded as “blank cheques” with no value ascribed to the contract.

The Mercury