OP-ED

Flashing Red Lights about tenders and governance while head of the Johannesburg Roads Agency

By Sean Phillips 25 May 2018

Cityscape, Johannesburg, Gauteng, Image courtesy of South African Tourism, Flickr, May 12, 2015

Things got off to a good start when I joined the Johannesburg Roads Agency to be involved in service delivery at local government level. But then I was confronted by serious governance concerns. Some key lessons can be drawn from my case study – which are relevant irrespective of which party is in power.

I was appointed as Managing Director and Accounting Officer of the Johannesburg Roads Agency (JRA) in May 2016. At the time Johannesburg was under an African National Congress (ANC) administration. I applied for the position because I wanted to be involved in service delivery at local government level.

The JRA is one of approximately 10 municipal entities which were established by the City of Johannesburg around 2000, as part of a process of corporatist restructuring of the city’s administration, under the “iGoli 2002” plan. As with the other entities, the JRA is a registered company with the City of Johannesburg as the sole shareholder and a Board of Directors appointed by the city. As Managing Director, I was also a member of the board. As a municipal entity, the JRA is subject to the Municipal Finance Management Act (MFMA) and Treasury Regulations as well as the Companies Act.

There is a shareholder’s agreement and service delivery agreement between the JRA and the city, which spells out the roles and responsibilities of the JRA in terms of developing and maintaining the city’s roads, traffic lights, storm water system and bridges. The JRA relies almost entirely on the city for its funding.

When I joined the JRA there were many challenges. My predecessor as Managing Director, Skhumbuzo Macozoma (now CEO of the South African National Roads Agency (Sanral)) had done a good job of stabilising the organisation and improving some aspects of its administration, which enabled me to focus on improving service delivery.

Dealing with potholes and traffic lights

As the citizens of Johannesburg will attest, the state of the city’s road, bridge, and storm water infrastructure leaves much to be desired. There are too many potholes, particularly after heavy rainfalls, and the traffic lights often do not work. It usually takes far too long to repair potholes and traffic lights. The quality of the repair work is also often sub-standard, with the potholes often breaking up again shortly after being repaired and the same traffic lights going off repeatedly.

Unsightly weeds proliferate in the concrete side-drains, reducing their functionality, storm water drain covers are often broken and storm water drains are often blocked, contributing to flooding after heavy rainfalls. Much of the city’s road-markings are faded, making it difficult to keep to one’s lane. Pavements in the city are generally in a shocking state and a danger to pedestrians, with gaping holes and trenches everywhere, left by stolen manhole and water valve covers and ill-supervised contractors appointed to dig up and repair services in the road reserve.

The poor state of the road infrastructure and traffic lights results in increased costs for motorists, increased accidents, and increased congestion, which reduces economic productivity. The JRA’s system for managing complaints from citizens is also weak – too often complaints go unanswered or complaints are noted but nothing is ever done to address the issue and no feedback is given to the complainant.

Drawing up a traffic lights improvement plan

For the first few months I concentrated on working with the other managers in the JRA to put in place a range of improvement plans aimed at addressing the service delivery challenges. I sat for many hours with the managers in the traffic lights section to identify the key causes of the relatively poor functioning of the traffic lights in the city and we drew up a medium-term traffic lights improvement plan to address the main causes. Some of the main causes included poor quality joint-work on broken cables which resulted in water ingress and subsequent shorting, a shortage of traffic light repair technicians, and power outages (largely caused by ageing City Power infrastructure).

Most of the routine road maintenance work such as repairing potholes and unblocking storm water drains is done by internal JRA work teams. We identified a range of causes of poor service delivery by the internal work teams, including an ageing workforce, under-staffing, poor or non-existent maintenance planning, and weak, non-existent, or unutilised technical manuals and standard operating procedures. To address some of these problems, we put in place a medium-term Operations Management Improvement Programme, with a focus on improving maintenance planning, quality of work and productivity. The programme involved drawing up improved standard operating procedures and on-the-job training of foremen and managers on the implementation of the improved procedures. We also developed a plan to improve the processes related to customer relationship management and responding to complaints.

Some of the service delivery problems were partly caused by challenges with other parts of the administration in the JRA, such as with human resource management and supply chain management. For example, the JRA had a history of difficult labour relations, and one of the previous managing directors had entered into an agreement with the trade unions to the effect that any policy changes of any nature would require the agreement of both management and organised labour. In other words, the JRA was co-managed by the unions.

The JRA also had a dysfunctional individual performance management system – despite the service delivery challenges described above, there was a history of more than 90% of staff being given a score of 80% or above by their supervisors every year, so that they would be awarded bonuses. Weaknesses with supply chain management included stores regularly running out of materials required for maintenance, tenders taking a very long time to be finalised, frequent non-payment of suppliers within 30 days and allegations of corruption related to some tenders. We put in place various plans and mechanisms to address these issues.

In developing and implementing these improvement plans, I had the full support of the board, the City Manager (Trevor Fowler) and my political head, Christine Walters, ANC Member of the Mayoral Council (MMC) for Transport.

A coalition government comes into power

Then the local government elections took place in August 2016. To the surprise of many, the ANC lost political control of the city. A coalition government came into power, under the leadership of the Democratic Alliance (DA). The DA was in a formal coalition with the Inkatha Freedom Party (IFP), which was given some portfolios in the Mayoral Committee, including the Transport portfolio (which includes the JRA). The DA was also effectively in an informal alliance with the Economic Freedom Fighters (EFF), because it relied on the EFF vote to obtain a majority in Council.

Between August 2016 and March 2017, I worked very well with my new IFP MMC, Nonhlanhla Makhuba, and with the new DA Mayor, Herman Mashaba. MMC Makhuba was very supportive of the service delivery improvements that we were trying to achieve in the JRA. I was impressed by the business-like approach of the new Mayor and his expressed commitment to fighting corruption. The new administration appeared to be keen to improve service delivery, and I got an opportunity to present our traffic lights improvement plan to the new Mayor. While the Mayor received the plan well, he didn’t appear to be interested in the detail or in discussing the possible causes of the poor functioning of the traffic lights. He just accepted our recommendations as they were.

A new board is appointed

By March 2017, things seemed to be going very well, with implementation of our range of improvement plans under way and the JRA having been allocated additional funding to improve the repair of potholes and the functioning of the traffic lights. However, the term of the old ANC-appointed JRA board came to an end and a new board was appointed by the city in March 2017. A few of the old board members were retained but most of the board members were new and appeared to have been chosen by the IFP (I was told by officials in the city that the MMC chose the board members).

Soon after the new board’s appointment, the new chairperson, Sipho Tshabalala, came to see me in my office in the JRA. He sat with me and went through the Board Charter with me and indicated to me that I must not award any tenders in future without involving him in the decision-making. I indicated to him that his request was illegal in terms of the MFMA. He indicated that, if that was the case, I should then consult with him “informally” before awarding tenders. I did not agree to his request.

National Treasury has deliberately made the MFMA very explicit regarding roles and responsibilities for the award of tenders in municipal entities, to reduce the risks of political interference and corruption, and to empower accounting officers, who must then be held accountable. Section 115 of the MFMA states that the accounting officer must implement the supply chain management policy of a municipal entity. It goes on to explicitly state that “no person may impede the accounting officer in fulfilling this responsibility” (Section 115(2)) and that “no person may interfere with the supply chain management system of a municipal entity” (Section 118(a)).

The MFMA therefore makes it the duty of an accounting officer to resist and prevent any interference in the implementation of the municipal entity’s supply chain management policy by any person, including, perhaps particularly, board members and political office bearers. The reason why the MFMA does this is so that the accounting officer can be held solely accountable for any procurement irregularities. Accounting officers cannot argue that they allowed an irregularity to occur because they were told by someone above them, such as a board member or political office bearer, to allow it to occur. If an irregularity occurs, the accounting officer alone is responsible and accountable. The chairperson’s wish to be involved in the award of tenders cannot be attributed to him being “hands-on”. It is illegal, regardless of whether he knew it to be so.

I explained to the chairperson that procurement processes are highly regulated by the MFMA and its subsidiary regulations and by the Preferential Procurement Policy Framework Act (PPPFA) and its subsidiary regulations. In terms of this regulatory framework, bids must be scored according to a pre-determined points system and must be awarded to the highest-scoring bidder. No-one, including the accounting officer, has the discretion to deviate from this process unless there are specific reasons for deviating, which do not include reasons such as spreading the work or giving new contractors a chance. If deviations are made, they must be thoroughly documented and reported to the board and the city and are scrutinised by internal audit and the auditor general.

Chairperson becomes very angry in the induction workshop

After that conversation, my relationship with the board chairperson was fraught. He became very angry in the board induction workshop when he found out that management was still awarding tenders without his involvement. He was hostile to the extent of shouting at me in board meetings and indicated on several occasions in front of the board that I was a failure, both as a manager and as a leader. He would obtain information from managers under me without my knowledge and present the apparently adverse information at board meetings without notice, with the aim of showing me up. I started to dread going to board meetings and found it increasingly difficult to focus on the implementation of all the improvement plans we had put in place. After one board meeting the chairperson came to my office, told me that I needed to understand that the new political leadership wanted different contractors to be appointed, and then left.

On two occasions I informed both the MMC and the new City Manager, Ndivhoniswani Lukhwareni, of my fraught relationship with the board chairperson and my view that the root cause of the tension was my refusal to involve him in the award of tenders. They both indicated to me that they thought it was wrong for him to want to be involved in the award of tenders, that they would talk to him, that they were sure he was acting out of ignorance and that the situation would improve once he became better acquainted with his roles and responsibilities as a board chairperson.

Concerns around governance issues

During this time the Company Secretary, Karen Mills, became concerned about several governance issues in the JRA. These included the issue of the board chairperson wanting to be involved in the award of tenders, of which I had informed her, and other issues such as non-disclosure of interests by some Board members; an apparent lack of independent checks of new board members by the city prior to their appointment, as required by the Companies Act; an alleged attempt by the chairperson to solicit funding from JRA service providers for an advertorial about him in a UK publication; and the chairperson’s insistence to be provided with an office and a secretary in the JRA, notwithstanding his status as a non-executive director of the JRA.

The Company Secretary and I were also concerned about a proposal by some board members, later approved by a board sub-committee in my absence, for the establishment of a Project Management Unit (PMU), which would involve the appointment of a firm of consultants to manage some of the key procurement processes related to capital works and to manage the implementation of capital works. I was concerned because the JRA already had an internal department to carry out these functions, headed by Mpho Kau, an experienced roads engineer who had previously been the Acting Managing Director. I raised my concerns with the chairperson, but he refused to countenance them, indicating to me in an email that “we must respect board decisions”. The Company Secretary and I were also concerned about the apparent undue haste of the chairperson and some board members to establish the PMU, without addressing my concerns.

According to the draft terms of reference for the PMU, drawn up by the Chief Financial Officer of the JRA on the request of the board chairperson, without my involvement, the responsibilities of the company to be appointed as the PMU would include, inter alia:

5.1 Assist the JRA in tendering of the project

5.2 Assist the JRA during tender phase and prepare answers to potential queries of the bidders

5.3 Assist the JRA in the evaluation of the bids, and prepare the bid evaluation report in accordance with the CIDB’s [Construction Industry Development Board] guidance and requirements

5.4 Assist the JRA in contract negotiations and contract award.”

These responsibilities effectively duplicated the role of the existing internal department headed by Mpho Kau, which until then had prepared and evaluated tenders and managed contracts in accordance with the relevant laws. In doing so, approximately 80% of the tender value awarded by the JRA was awarded to level one B-BBEE companies.

The Company Secretary raised her governance concerns at a board meeting, but they were not addressed. Later she raised her concerns again with the independent audit committee, which subsequently requested a meeting with the board to discuss them. After this meeting, the board took a decision that the Company Secretary must not raise her concerns again with anyone except the board itself or the audit committee of the board. Again, her concerns were not addressed. The Company Secretary then decided to inform the Head of the City of Johannesburg’s Forensic Department, General Shadrack Sibiya, of her concerns, through a formal submission in terms of the Protected Disclosures Act. The board somehow obtained a copy of her protected disclosure (General Sibiya informed me that he had not provided it to the board) and decided to suspend her for disobeying their instruction to only raise her concerns with them. They added a couple of other trumped-up (in my view) charges to the reasons for her suspension.

I was very disturbed by the board’s response to the raising of governance concerns by the Company Secretary. I was of the view that she was just doing her job – the Companies Act requires a Company Secretary to raise concerns about such matters. I therefore decided to take the extraordinary step of asking for a meeting with the Mayor to inform him of my discomfort with events at the JRA and to ask him to intervene.

A meeting with Mayor Mashaba

I subsequently met with Mayor Mashaba and the City Manager. I explained my concerns as described above, particularly the request of the board chairperson to be involved in the award of tenders, my discomfort with the establishment of the PMU and my unhappiness about the way in which the Company Secretary was being treated. At this initial meeting, the Mayor indicated that the chairperson should not have anything to do with tenders and that the board should not pursue the establishment of the PMU without addressing my concerns. He indicated that he would set up a further meeting with the MMC, the chairperson and me to address these issues. I was relieved and felt reassured that the Mayor would support me in ensuring good governance at the JRA.

About 10 days later, the Mayor convened a meeting with the City Manager, the chairperson of the board, the MMC and me. The Mayor gave us each a chance to speak. I described my concerns in detail. The MMC and city manager said that they thought there were just personal relationship issues between the chairperson and me. The chairperson said the same and that he was willing to commit to working with me and apologised if he had hurt my feelings in any way. The chairperson and MMC said that the creation of the PMU was intended to address under-expenditure on the capital budget and to improve the management of capital projects. (However, the JRA spent 89% of its capital budget in 2016/17 and would have spent more than 90% if the city had not withheld transfers to the JRA due to the city’s cash-flow problems.) The MMC defended the suspension of the Company Secretary and informed the meeting that she was very disappointed that I had approached the Mayor to intervene.

I was very disappointed in the mayor’s response

Mayor Mashaba appeared to be impressed with the chairperson’s unsolicited apology and asked me if I would be willing to similarly commit to working with the chairperson. I indicated that I was very concerned with what had been happening at the JRA, particularly with the chairperson’s requests to be involved in the award of tenders, the establishment of the PMU and the recent suspension of the Company Secretary for raising her governance concerns in a protected disclosure to General Sibiya, and I told the Mayor I would think about his request and let him know my answer in the morning.

I was very disappointed in the Mayor. I had expected him to at least confirm to the chairperson that he may not be involved in the award of tenders, that he must withdraw the suspension of the Company Secretary, and that he may not proceed with the establishment of the PMU until my concerns about it were addressed. The Mayor said none of these things. This was ironic given that the Mayor had made the entire management team of the city watch the play The Mother of All Eating by Zakes Mda, about looting on a grand scale in the roads department in Lesotho. I would have thought that his interest in the play would have made him alert to red flags being raised about potential corruption in his own roads department.

That evening I received a phone call from a political advisor to the MMC, requesting an urgent meeting. We met the same evening, and he told me that the MMC and the provincial IFP leader, BonginkosiDlamini, did not want me to resign, that they thought I had been doing a good job of improving the traffic lights and fixing the potholes. He said that Dlamini and the MMC could assist me in managing the chairperson.

He indicated, however, that I needed to be aware of two things. First, I needed to be aware that all political parties rely on tenders for party political funding (in other words, that they rely on donations from service providers who are awarded tenders). Second, I needed to be aware that the decision to create a PMU in the JRA was a joint decision of the IFP and the EFF. He said that the decision was taken because it was deemed necessary to get around Mpho Kau and his department, who were awarding too many tenders to established white contractors (which, as indicated above, was not true).

When I heard that the decision to establish a PMU was a joint decision between the IFP and the EFF, the hair stood up on the back of my neck as I remembered the newspaper reports in 2011 about the allegations of corruption by the PMU (On-Point Engineering) which was appointed by the Limpopo roads and transport department in 2009, with alleged links to Julius Malema, the leader of the EFF. The Limpopo Roads Agency PMU was the subject of an investigation by the former Public Protector, Thuli Madonsela, who found that there had been acts of corruption, fraud, maladministration and improper enrichment at the expense of the state.

The Public Protector’s investigation into the On-point PMU contract found that tender processes were manipulated to appoint On-Point rather than other bidders for the PMU contract. On-Point’s PMU appointment effectively put them in charge of awarding provincial roads contracts in Limpopo. In 2011 the Mail & Guardian reported in detail on how some of the subsequent road construction and maintenance and related consulting engineering appointments by the PMU benefited certain political leaders and their associates in Limpopo.

The night I couldn’t sleep

That night I didn’t sleep, trying to decide what was the right thing to do. I could have stayed and continued to resist the attempts of the chairperson to be involved in the award of tenders and to resist the establishment of the PMU. I thought that I would inevitably end up being suspended on what I considered to be trumped-up charges like the Company Secretary. I didn’t think I would stand a chance without the support of the Mayor or the City Manager.

The next morning, I submitted my three months’ notice of resignation, as required by my employment contract, to the City Manager and the chairperson and I informed the Mayor and the MMC of my decision by SMS and Whats App. The MMC responded to wish me well but the Mayor did not respond at all, and he has never contacted me since my resignation. When I arrived at work the following day I was met by the head of labour relations who informed me that the board had accepted my resignation but that I would be paid out for my notice period. He told me that he had been asked by the board to ensure that I pack up my belongings immediately and to escort me out of the building.

At the time of writing this case study, the Company Secretary had been suspended on full pay for six months without being charged. The board commissioned an investigation by an independent lawyer into the allegations by the board against her and into her governance concerns. I was interviewed by the lawyer. Given the lack of charges against the Company Secretary, I presume that the independent lawyer found that there was no substance to the board’s allegations against the Company Secretary. This was further substantiated when the board settled with the Company Secretary at the end of January and agreed to pay her 10 months salary as a settlement pay-out on condition that she left the entity, without ever having charged her. The settlement agreement also required her to not make any public statements about the board or remaining executives of the JRA.

I am told by former colleagues at the JRA that it is continuing with the establishment of a PMU. Mpho Kau, the highly experienced engineer who was head of the infrastructure development department of the JRA, resigned shortly after I did, for similar reasons.

Lessons to be learnt

There are several key lessons that can be drawn from this case study.

Firstly, there is a perception among some South Africans that the solution to corruption by the ANC is simply to vote out the ANC and replace it with opposition parties. This case study indicates that this “solution” might not necessarily result in a reduction in corruption. The cancer of corruption exists across South African society, in both the public and the private sectors. It is related to a general ethical crisis, in terms of which many people believe that there is nothing wrong with doing things such as manipulating tender processes to ensure that tenders are awarded to contractors who will provide funding to their political party (and possibly also kickbacks to themselves). Such actions are often cloaked in justifications such as the need to spread the work, promote black economic empowerment, or allow new people who were previously excluded to participate in tenders. If the ANC was manipulating tender processes to ensure that ANC-aligned contractors which made contributions to the ANC were appointed by the JRA, and to ensure that IFP or EFF-aligned contractors were excluded, that was wrong. However, it would be equally wrong for the IFP or EFF to manipulate tender processes to ensure that IFP or EFF-aligned contractors are given a chance now that they are in power (or, in the case of the EFF, now that they have the power to remove the governing party). Two wrongs do not make a right.

Secondly, it is likely that, for the foreseeable future, opposition parties will be unable to win outright majorities in many municipalities or provinces or at national level, and coalition governments might become common. Access to opportunities for patronage might become a key factor in negotiations for the formation of coalitions. This case study indicates that coalition governments may be too weak to deal with corruption, and all the political parties may be willing to accept this and to turn a blind eye to corruption by alliance partners if it means being able to stay in power. Service delivery considerations, such as the implementation of service delivery improvement plans and the importance of retaining experienced and highly qualified public servants, like Mpho Kau, might take a back seat.

Third, similar to Crispian Olver’s recent book How to Steal a City, about corruption under an ANC administration in Nelson Mandela Bay, this case study underlines the importance of creating transparency around political party funding. As indicated in the Public Affairs Research Institute (PARI) submission to the Parliamentary Ad Hoc Committee into the Funding of Political Parties last year, South Africa has several areas in which the funding of political parties falls well short of international best practice. Parties are not required to disclose who funds them. Donations to political parties are not required to be reported or disclosed. Likewise, in‐kind donations do not need to be reported or disclosed, nor do third party fund raising efforts.

The PARI submission explains how “political leaders and officials exchange favours with funders – for example the allocation of a housing contract in exchange for party campaign funding – which means that they “pay each other”, even if payment takes place at different times and in different ways… Such exchanges remain corrupt, regardless of the intended beneficiary, as the rules and accepted norms around the allocation process have been subverted….The term ‘political corruption’ has been used to cover instances that do not necessarily involve private gain, but instead the use of resources to benefit a political party or candidate.”

The PARI submission concludes by recommending that political parties and party members be required to report on both public and private funding received, to an independent body such as the IEC. This recommendation is vital to deal with the apparently widely-held perception identified in this case study, that “all political parties rely on tenders for party political funding”.

Fourth, the case study underlines the importance of the dividing line between the party and the state. As explained above, the MFMA provides the legal framework for this dividing line in the procurement process. However, the case study shows how the legal framework can be undermined, such as by “informally” involving people who shouldn’t be involved in procurement processes, and by making life very difficult for people who stand their ground in terms of holding the line between the party and the state. There is only so much that can be done to reduce the risk of corruption through legislation like the MFMA. Ultimately, clean government relies on political commitment. DM

Sidebar: Mayor Mashaba says action will be taken if necessary

Asked to respond, Mayor Mashaba’s office confirmed that a meeting had taken place, which followed an initial discussion with Phillips.

It is important to state that at no point was there any prima facie evidence that any corrupt activity had taken place. Irrespective of this, the Mayor nevertheless invited Dr Phillips, on several occasions, to provide any such evidence of wrong-doing, which would then be immediately acted upon.

Rather, during the Mayor’s engagement with the parties, the board chairperson explained that the board was of the view that they had an oversight role to play in the governance of the JRA, including how it operated its supply chain processes, and that the board could not find itself in a position where it was accountable for the entity’s decisions yet was unaware of major operational decisions taken by the entity.

This was their reason for their greater oversight in the organisation.

The board chairperson then apologised to Dr Phillips for any action which may have been perceived as overstepping the Board’s role and committed himself to working towards building a better working relationship with Dr Phillips.

Indeed, the Mayor found this to be a reasonable approach to the matter. Unfortunately, following this engagement, the Dr Phillips elected to resign from his position without providing any evidence of alleged wrong-doing by the Board or any of its representatives.

This was of great disappointment to the Mayor as Dr Phillips was, and continues, to be held in high regard for this leadership at the JRA. His focus on organisational performance and improvements to service delivery have been widely acknowledged.

A number of recent developments raised by through you’re the query where not the subject of engagements with the board chairperson and Dr Phillips.

In light of this, the Mayor has written to the JRA’s board to inquire on their reasons for establishing a Project Management Unit within JRA. Based on this engagement, actions will be taken if necessary. The Mayor has also enquired as to what measures are being proposed as checks and balances to prevent the kinds of abuses which have been documented in other PMUs elsewhere.

It must be said that the Mayor, has time and time again, demonstrated his willingness to act on impropriety or corruption where such is alleged to exist. His commitment towards this has been unparalleled. Indeed, this is the only administration which has taken action against members of his own administration on several occasions.

As matters stand, the complaint laid by Ms Mills remains under investigation which is expected to be completed soon through the city’s independent Group Forensics Investigations Service.”

On Friday morning, it was reported that board members at the Johannesburg Roads Agency (JRA) now have to reapply for their jobs or be replaced amid allegations of tender irregularities, internal ructions and a forensic investigation.DM

Editor’s Note: The JRA declined to respond to queries, saying that the City Of Johannesburg had indicated it would respond directly.

See the following links

The road paved with potholes – Carte Blanche

Carte Blanche’s response to Johannesburg mayor Herman Mashaba

Herman Mashaba and former JRA officials go head to head

Gallery

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