The South African Public Protector 30th June 2024 released reports on investigations it has conducted within the first quarter of the year, the published report included Emfuleni’s local municipalities’ alleged irregular appointment of Opulentia financial services, JV Fezi Auditors and Consultants to offer insurance brokerage services without guidelines and proper supply chain management, procedure and policies.
An anonymous complaint was lodged on the 17th of September 2020, who according to the report “alleged, among others, that the municipality irregularly appointed Opulentia even though the company failed to make the shortlist”. The complaint further stipulated that a recommendation by Bid Evaluation Committee (BEC) to appoint Lateral Unison which scored the highest in the bid was ignored.
The Public Protector additionally indicated that Emfuleni from 06 May 2019 embarked on a bid process to procure short-term brokerage services but on two occasions the BEC that was appointed was dissolved and discontinued before the processes were finalized although by law the tender was not cancelled.
It was discovered that evidence shows, some of the municipal personnel collaborated to bend rules to appoint Opulentia and invoked a regulation that allow for the procurement of goods or services under which contracts have been secured by other organs of state (Regulation 32 of the Municipal Finance Management Act (MFMA), out of which the tender was awarded to Opulentia based on its existing contract with Matjhabeng Local Municipality for short-term insurance brokerage by conspire of the then Chief Financial Officer of the Emfuleni municipality Andile Dyakala without municipal council resolution.
The Regulation 32 states that “the goods or services that are procured by the organ of state must be exactly the same in every respect, including the terms and conditions as that required by the municipality or municipal entity. The municipality or municipal entity will rely on the open competitive bidding process that the other organ of state undertook in appointing the service provider, thereby saving on the administrative efforts and costs”.
The PPSA evaluation found that:
“The Municipality did not act in accordance with Regulations 13(1) and 13(2) of the Preferential Procurement Policy Framework Act, which require organs of state to give the stipulated reasons for the cancellation of the tender and publish a notice in the newspapers and on the municipality’s website where the original tender was advertised”.
And furthermore the evidenced gathered by the Public Protector revealed that:
- The municipality opted to utilise Regulation 32 under a contract secured by the Matjhabeng Local Municipality without ensuring that the contract periods are aligned. Furthermore, the terms and conditions differed in that, there were additional costs incurred through the brokering services for short-term borrowing.
- The Municipality did not follow the terms and conditions of Section 45 of the MFMA in that, they did not obtain a resolution from the Municipal Council approving the debt agreement.
- Paragraph 34 of the municipality’s approved Supply Chain Management (SCM) Policy does not provide for the procedure to be followed when procuring goods and services under contracts secured by other organs of states, as contemplated in Regulation 32 of the MFMA;
- Section 217 of the Constitution was flouted. The section requires that when an institution enters into contracts for goods and services, it must follow a system which is fair, equitable, transparent, competitive, and cost effective. The tender to Lateral Unison was already in place on 04 February 2020, when Mr Dyakala used Regulation 32, to appoint Opulentia whilst Lateral Unison was still contracted to provide the same services to the municipality.
And the PPSA based on evidence obtained during the application concluded that:
- The functionaries of the municipality procured the contract in terms of Regulation 32 of the MFMA without cancelling the initial advert as required by Regulation 13 of the PPPFA.
- The contract was not in compliance with Regulation 32 of the SCM Regulations in that the terms and conditions were not the same and the period of the contract were misaligned.
- The appointment of Opulentia for the provision of insurance brokerage services was irregular and not in accordance with section 217 of the Constitution, 1996 and section 62(1) and 78(1) of the MFMA.
In light the Emfuleni municipality had already launched its internal Probity Audit Report in February 2020 six month before a complaint was lodged with PPSA as stated by the public protector which concluded that:
- There was a lack of an appropriate procurement plan;
- There was also a lack of monitoring and oversight of the functionality of the bid committees which resulted in a non-functional SCM bid committee;
- The bid committees had inadequate capacity and skills to evaluate complicated bids and the analysis of financial information;
- There was a lack of and/or ineffective communication within the SCM related structures within the municipality;
- There was no monitoring of the bid validity period and there was also a continuation with the bidding processes while the tender was no longer valid; and
- The issue of wasteful expenditure having been incurred in terms of cost attached to normal competitive bidding processes was also identified.
The PPSA did not take any further legal action against employees implicated in the investigation because the Emfuleni municipal had already implemented action on the matter internally based on “its own internal practice and prescripts, within its sphere of administration.
