City of Joburg overpaid Dimension Data by close to R1bn, investigations reveal
The City of Joburg (COJ) overpaid an IT service provider close to R1 billion in what has been termed wasteful expenditure. That is according to a forensic investigation that looked into IT contracts the City had entered into between 2011 and 2017.
Whistle-blowers have also lifted the lid on other ICT contracts that they say were rip-offs the City should never have entered into.
The report compiled by Grant Thornton found that the City paid Dimension Data (DD) over R900million irregularly for ICT upgrades between the years 2010 and 2017.
“It is recommended that the amount of R925566691.17 be reported as irregular expenditure in terms of section 32(4) of the Municipal Finance Management Act by the accounting officer,” the report said.
It further added that corrective action should be considered against former accounting officer Phumudzo Siphuma “for the issuing of illegal instruction to a subordinate”.
Among the illegal instructions issued, Siphuma told administrative assistant Kgomotso Morebodi to “initiate a request for (an) framework order for DD without any documentation whatsoever”, in 2014.
“Morebodi alleged that it (money) related to a wide area network (WAN) and local area network (LAN) for an amount of approximately R109 737 278. She provided us with an email addressed to Mr Siphuma wherein she requested the latter to provide the approval for the order and relevant supply chain management documentation. The email also mentioned that he had ostensibly instructed her to create the order without this documentation,” continued the report.
“We identified numerous change orders in the payment batches. The service level agreement for contract A387 made provision for the use of change orders. The change orders related to the various functional areas as awarded to DD. There was no list available reflecting the detail of change orders from the COJ, nor was a reconciliation performed by COJ in order to establish whether the change orders exceed the contingency amounts awarded.”
The original price for the contract was set at R39 203 641.92 and subsequently ballooned to the R1bn mark. Sources in the city have told the publication that despite the recommendations of the report, DD was paid a “settlement agreement” worth over R100m last October.
“We still don’t understand how they were paid despite the findings of the report,” said a source.
The sources said the DD “shenanigans” were just the tip of the iceberg as all ICT contracts in the City were riddled with corruption. Former Johannesburg mayor Herman Mashaba, this week told the publication that 90% of the ICT contracts in the City were flawed.
“I know we had quite a few dodgy contracts. The IT contracts of the City, all of them signed by an acting manager at the time. We even requested at one stage to General Sibiya to talk to Trevor Fowler to tell us what was happening. All of them had issues. The level of corruption in the IT department was overwhelming. It was just one of those departments that were driven to run crazy,” Mashaba alleged.
He added that when they were looking into the contracts and wanting to reconcile with regard to what they were paying for, this resulted in its system being shut down by DD last November.
Mashaba said they were held to “ransom” and couldn’t operate. “DD at one stage stopped the system because we were refusing to pay, wanting to reconcile,” the system. He said he was shocked when he learnt that the City was outsourcing its IT services, something that he believes contributed to the high-scale corruption.
“The entire IT department was outsourced. We relied on these companies. We had to get an IT person to set up our own infrastructure. That’s when DD didn’t like what we were doing and they started to put pressure on us,” he said.
The appointment of DD and EOH Mthombo raised eyebrows within the City as they were both the highest in terms of pricing during the evaluation period. Papers seen by the publication indicate that DD charged the City R410992445.41, while EOH Mthombo charged R485 221 915.31.
The two companies were part of four shortlisted ones that made it to the final stage of evaluation. The four shortlisted companies were EOH Mthombo, Nambiti Technologies, DD and Gijima Holdings who were each subjected to rigorous technical and functional evaluations.
Nambiti Technologies charged R464 6 5 2 5 9 8 . 8 0 , while Gijima Holdings charged R272 133 411, competing for the same contract.
The City was taken to court by Gijima after losing out on the contract.
Gijima claimed that its evaluation points were given to DD and EOH Mthombo to ensure they won the tender.
The City failed to respond to specific questions relating to the DD contracts and settlements.
Spokesperson Nthatisi Modingoane said: “Thank you for your query. The City wishes to clarify that there were no three contracts which were terminated with the company in question. It should also be emphasised that the City has no knowledge of the payment of R144 million mentioned in your query for service rendered.”
Despite the City not knowing about any payment, DD said it was not owed any amounts and was continuing to render services to the City.
DD’s head of communications, Pearl Mngomezulu said: “Dimension Data can confirm that there are no outstanding payments owed to the business by the City of Johannesburg, and it continues to provide technology services in line with its contractual obligations.”
EOH declined to respond to specific questions as well. Chief risk officer Fatima Newman said as a matter of policy, and in terms of their confidentiality and non-disclosure agreements with the City, “EOH may not comment on the content and terms of the contract you have raised in your enquiry”.
“While we can confirm that we are in ongoing discussions with our client about this contract, it needs to be noted that your enquiry below reflects several factual and material inaccuracies (about) which we will only be able to provide more information with the consent of the City of Johannesburg,” said Newman.