Shawn and Sbu Mpisane leaving the court. File Picture:SANDILE MAKHOBA

DURBAN - IRREGULAR awarding of contracts, non-compliance with supply chain management procurement processes and the late payment of suppliers have cost the eThekwini Municipality a clean audit.

Once such irregularity related to the awarding of a multimillion-rand housing project to power couple Shawn and Sbu Mpisane before procurement processes had been finalised.

Allegations of duplicate payments on the project have also emerged.

Auditor-General Kimi Makwetu gave the city a financially unqualified report for the 2016/17 financial year.

According to the auditor-general’s website, an entity receives a financially unqualified audit report if the financial statements contain no material misstatements but, unless a clean outcome is expressed, it means findings have been raised on either reporting on objectives or non-compliance with legislation.

According to sources within the municipality, there was a “technical error” with a contract that was awarded to  the Zikhulise Group, owned by the Mpisanes, in the latest financial term.

In January 2016, Zikhulise was awarded a contract to build 2 000 houses in Umlazi. The company has been involved with multibillion-rand housing schemes with the city since 2013.

“Zikhulise was awarded the contract while it was trading as a close corporation but by the time the city manager signed the letter of award, the company had changed to a proprietary limited,” said the source.

The contract was also red-flagged in the municipality’s internal audit report, which was sent to the former city manager S’bu Sithole in August 2016, and seen by the Sunday Tribune.

In the report, former chief audit executive Philip Ntsimane said Zikhulise performed work while the procurement process was still in progress, which was against the principles of fairness and cost-effectiveness.

The contract had been awarded through the Section 36 process of supply chain management regulations, which allows for deviation from normal tender processes when awarding contracts, especially in emergency situations.

“Duplicated payment for work done and claimed on the previous contract and expenditure of R14.2m, also related to the project, could have been avoided had precautionary measures been taken to prevent this expenditure from being incurred.

“Therefore the expenditure appears to be fruitless and wasteful,” said Ntsimane in the report.

He recommended the matter be further investigated by the city’s integrity and investigation unit.

EThekwini reportedly awarded contracts worth R1.1 billion to the Mpisanes between 2014 and 2016, including the Umlazi housing project.

Opposition parties the IFP and the DA alleged that the chairperson of the audit committee, Londiwe Mthembu, had hidden reports from the city’s executive committee.

EThekwini IFP executive committe member Mdu Nkosi said he was not surprised to hear about the audit report.

“We all expected it. It would have actually raised questions if we received a clean audit report. The eThekwini Municipality has not done well in managing its businesses and finances. There are too many shenanigans happening in the municipality,” claimed Nkosi.

His sentiments were echoed by the DA’s Zwakele Mncwango, who said they could not conduct oversight because the audit committee was allegedly “captured” by the ANC.

“We have raised concerns about the issue of compliance and the flouting of processes, but no one listened. If we have an audit committee that is independent and not captured by politicians such risks would have been prevented,” he said.

Mncwango was also not optimistic about the possibility of things improving in the next financial year.

“This is the beginning of a mess and next year we might get a qualified audit because the supply chain management unit is loaded with irregularities and our audit committee is not doing their job to correct errors. Instead, they hid reports,” he said.

EThekwini spokeswoman Tozi Mthethwa confirmed that Zikhulise was the contractor currently on site in Umlazi, but denied any knowledge of both the audit reports.

Shawn Mpisane had not responded to the Sunday Tribune’s numerous requests for comments, at the time of going to print.