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Coega sets record straight on alleged involvement in looting of R1.6 billion

Jul 3, 2018
Coega sets record straight on alleged involvement in looting of R1.6 billion

The Coega Development Corporation (CDC) says it has noted with the greatest of concern misleading media articles implicating the organisation in a corruption scandal amounting to R1.6 billion "with the objective to tarnish its image regarding the Roads Enterprise Development Programme (REDP)".

"It is also concerning that the CDC has not been presented with the so-called 'a series of reports Treasury compiled detail how a string of companies, individuals and national government agencies – including the Independent Development Trust (IDT), SA National Roads Agency Limited (Sanral) and the Coega Development Corporation (CDC) – allegedly helped themselves to more than R1.6 billion, which was meant to build roads, schools and houses in the Eastern Cape'," explained Simlindele Manqina: CDC Corporate Communications & Stakeholder Manager. 

"We are currently studying these unfortunate and misleading allegations that have been levelled against the CDC."

The allegations were contained in a weekend report by a national newspaper alleging that money was originally earmarked for mobile classrooms, roads and social housing, but instead found its way to the pockets of officials to buy fancy cars, smart clothes and for wining and dining at expensive restaurants.

The Democratic Alliance (DA) in the Eastern Cape is demanding answers 

Manqina said that in due course, the CDC will provide a detailed feedback on each specific allegation regarding the organisation’s involvement on the REDP.

"However, it should be pointed out that ALL THE FILES REGARDING THIS PROJECT AND THE SERVER WERE GIVEN TO THE DEPARTMENT OF ROADS AND PUBLIC WORKS (DRPW)(“the Client” or “the Department”) upon their demand as our client when some of these projects were pre-maturely terminated or scope reduced by the department of roads and public works without proper justification," he described.

"Coega has thus contacted the Department to have access to the files to prepare for an appropriate response. Coega has never been party to any corrupt activity or collusion. Our record speaks for itself. We have in the past reported any indication of corrupt activities."

Manqina added that the extent of the CDC's response would be based on the information provided by our Client. However, the following are specific matters in the media, which allegedly implicates the CDC in wrongdoing for which the organisation intends to respond in due course:

  • ”the CDC spent an “excessive R101m on stones for 23km of road;”

Response: Information will be extracted as to the actual payments made and materials supplied to which projects. The files in the possession of the Client will verify the information

  • “In addition, the department awarded a large chunk of road construction projects worth R914m to the IDT, Sanral and the CDC – all at the same time;”

Response: Coega does not have access to this information, and will request such from the Client.

  • “We have identified two projects where the description is indicated as quarrying of materials for lengths of 12.3km and 11.1km, respectively. The contact value is R57.1m and R44.3m – 

Response: The final amounts paid will be confirmed once access has been obtained to the files as previously stated.

  • “Investigators discovered that the department paid Aqua about R139m for 10 projects, which had been awarded to Coega;”

Response: Coega does not have access to this information, but we wish to emphasise that Coega delivered according to the given mandate and SDA. Access to the files and servers which were removed by the Client will clear this.

  • “The Department paid R320m to Aqua and other companies for 10 projects which also have been awarded to CDC;”

Response: Coega does not have access to this information as it was controlled by the Client.

  • “The Department paid other companies excluding Aqua, the IDT and Sanral – about R304m for the same roads the CDC was asked to build,”

Response: Coega does not have access to this information as it was controlled by the Client.

"We cannot speak on behalf of other organisations and the department of Roads and Public Works, which should be contacted for information," Manqina said.

He said that whilst studying these allegations, the CDC thought it prudent to provide the following summary:

(a)    The CDC was appointed by the Eastern Cape Department of Roads and Public Works (DRPW) to assist in the implementation of a three-year Enterprise known as the Roads Enterprise Development Programme (REDP). The organisation was appointed from the FY 2011/12 – 2013/14. 

(b)   As far as the CDC’s appointment on the project is concerned, it was over a period of three FY’s. Our appointment covered six districts within the Province of the Eastern Cape, mainly Joe Gqabi, Alfred Nzo, OR Tambo, Chris Hani, Amathole and Sarah Baartman [previously known as Cacadu]. Therefore, due to the nature of the Programme our services were multidisciplinary in nature.

(c)    After the Programme was taken over by the Department of Roads and Public Works, following the Service Development Agreement (SDA) the CDC handed over all the files and servers to the department, as per their request as the Client. As a result, the CDC were not in a position to provide information on any enquiries, instead referred all the enquiries to the Client. In addition, in terms of the SDA with the Client, if information is requested by third parties on the REDP programme, such enquiries should be referred to the client.  Therefore, we would have had to notify the Client to forward such information to National Treasury.

"To this end, the CDC’s appointment as an implementing agent and according to the SDA was centered on two aspects: (a) accelerate the service delivery of roads infrastructure and related services whilst; (b) enhancing the socio-economic development and transformation in the industry," Manqina explained.

"Therefore, amongst the identified Key Performance Indicators (KPI) by the REDP, were, amongst others, SMME development, job creation, training of personnel on the REDP and SMME service providers to ensure skills development." 

Below outlined is a table of the KPI’s:

         KPI

Target

Actual

% Compliance

Jobs Created

5000

6747

135%

Contractors Upgraded

300

172

57%

Database Maintenance

766

426

56%

 

The above KPI’s and actual performance are an indication of the difficulties encountered in the programme. Some of the challenges experienced by the CDC included:

  • Reduced budgets by the DRPW - leading to portfolio of projects and scope being reduced over the duration of the programme,
  • Non-funding of some projects – leading to the premature closure of some projects,
  • Payment delays from DRPW to Coega - Payment of invoices to service providers exceeded 30 days and had dire consequences to the emerging and developing service providers who were dependant on a regular cash flow to execute their works.

"Noting the above challenges, the CDC raised these challenges with the DRPW and did everything within legal limits in terms of the SDA to manage the project as a responsible implementing agent."

(d)   As regards the fees charged, the CDC was paid a management fee of 3, 25% on expenditure incurred and certified by the department. Therefore, payment of fees to CDC were checked and verified by the Department of Roads and Public Works as per the SDA prior to any payment being made.

The 3,25% paid to the CDC for management fees was in actual fact below the National Treasury stipulation on management fees that apply to Implementing Agents, which ranges between 4.5 % and 10%. This was done because this programme was classified as a Reconstruction and Development Programme.