Shocking price irregularities halt streetlight repairs in Nelson Mandela Bay

Key irregularities have been identified in Nelson Mandela Bay’s streetlights tender, with the electricity and energy directorate requesting the city appoint an independent auditor to review the procurement, contractual and financial processes associated with the tender.

At the end of June, the directorate took the decision to halt the streetlight repairs and installation project, as staff fear being implicated in irregular payments due to vastly differing invoices for similar work.

If approved by council, communities across the city will spend the rest of winter in darkness as thousands of streetlights remain dysfunctional. Already, councillors have complained that the lack of streetlighting leads to increased criminal activity.

Price disparities flagged

The invoice and payment disparities come as some of the 10 contractors appointed for the work charge the city R75 for stringing per span, while others have inflated the price to more than R400.

According to a report by acting executive director for electricity and energy Noluvuyo Mbangata, staff are concerned about processing the invoices as the price differences could be flagged as an audit finding.

“The core challenge lies in the significant pricing disparities in streetlight repairs and identical line items… In some cases, identical line items are priced at R75 by one service provider and R450 by another,” the report reads.

“These extreme variances undermine value for money and create procurement uncertainty, as officials are understandably hesitant to issue orders that may expose the institution to audit findings or perceptions of irregular expenditure.”

As a result, the allocated maintenance budget is rapidly depleted without achieving proportionate service delivery outcomes, says Mbangata in the report.

She says this leads to minimal visible improvements on the ground and prolonged outages and delays in restoring public lighting. Ultimately, this negatively affects service delivery and compromises the efficient use of municipal funds.

Mbangata said the streetlights contract had to be placed under a microscope because the differences were not only limited to pricing, but also extended to incomplete bills of quantities (BOQs), non-uniform rate structures and misalignment between submitted offers and contractual expectations.

The report states that such inconsistencies compromise the principles of fairness, transparency and comparability in procurement.

Reasons for audit

Given the complexity and potential implications as a result of the disparities, the electricity directorate has recommended that an external auditor be commissioned to:

• Review the procurement process and compliance with supply chain management policies;
• Assess the validity and consistency of submitted BOQs and pricing;
• Evaluate the legality of the appointment of the 10th contractor;
• Provide recommendations on contract regularisation and risk mitigation; and
• Guide the municipality on corrective actions aligned with legislation.

The report indicates that the streetlights contract was initially structured to appoint nine service providers across the designated areas.

However, following the appeals committee process and subsequent resolutions, an additional contractor was included, resulting in the appointment of 10 service providers for nine areas.

“The deviation from the original procurement outcome (nine contractors) to the current structure (10 contractors) introduces contractual ambiguity, potential non-compliance with approved procurement processes and increased risk of legal challenge from affected parties,” said Mbangata in the report.

Irregular contractor appointment

“Furthermore, it was identified that Tynite (Pty) Ltd, appointed to Area 8, submitted an incomplete BOQ with omitted rates, yet was awarded based on the bottom-line total. This has created significant challenges in contract administration, particularly in processing invoices and issuing further work.

“Subsequent deliberations and recommendations were made to rectify allocations and BOQ inconsistencies; however, these interventions have introduced further legal, financial and procedural risks.”

The report states that issues relating to Tynite require urgent intervention as it has caused uncertainty on how to proceed with revised BOQs, rate negotiations and invoice validation under this contract.

“In light of the identified irregularities and the deviations in the form of offers, it is recommended that Section 23 of the supply chain management policy version 8 be revoked or set aside for this contract, to allow a structured and legally sound reassessment of the contract, correction of procurement and contractual inconsistencies and implementation of audit recommendations without procedural constraint,” the report reads.

Section 23 refers to competitive bidding procedures, thresholds for formal written price quotations, or website publication of bid results.

The report was adopted, with the added resolution that Tynite be included in the audit probe.

Call to halt streetlights tender

Addressing councillors, Mbangata said vandalism was a reality in the city as they regularly repaired and replaced infrastructure, and a week later it had been broken.

“However, the price disparities are a big issue for us as officials, and that is why we are calling for the revocation of section 23 of the supply chain policy version 8, and this is something we have been struggling with,” she said.

“My colleagues are scared to issue orders because when we get quotations from the service providers for streetlights repairs and replacements, some are in the millions when we know how much it should cost because we have done it before.”

Mbangata said she had these concerns as a senior director and was now raising them while in the acting executive director position.

“Hence I thought to bring this item because I can’t continue with this contract as things are, due to these challenges. As a professional, I’m responsible to ensure that whatever I do is ethical and there’s value for money, and the Municipal Finance Management Act (MFMA) enforces this.

“I’m bringing this report so we can pause the contract until we get feedback from the external auditor. I can’t have my colleagues continue working under this contract because already, there are questions around it, but the reality is the rates from the contractors are the problem.”

ACDP councillor Lance Grootboom said the directorate had spent a huge portion of its budget on public lighting, while communities remained in the dark.

“Where I live, not even a single streetlight works. In fact, in the entire ward 41, and it’s the same in the northern areas. This report tells us about pricing disparities, and how the different depots the contractors are allocated to have run out of money because of this issue, which therefore means work cannot continue,” Grootboom said.

“How does one get a contract that is different from other service providers appointed to do the same work? What is going on here?”

He said he didn’t believe that the metro spent about R40-million on streetlight repairs and then blamed vandalism for streetlight failures.

“It’s a lie. We need an explanation, otherwise I will propose that we refer the matter to MPAC for investigation.”

Grootboom said the expenditure on public lighting would add to the city’s ballooning irregular expenditure bill.

DA councillor Ondela Kepe said the city spent millions on public lighting, but had nothing to show for it.

“How do we justify the expenditure to the ratepayer when half the city is in darkness? We need to know which areas have been done, how many streetlights have been repaired and how many are outstanding so we’re able to track progress.”

Kepe wrote to acting city manager Lonwabo Ngoqo on 26 April, calling for action on contract irregularities in the electricity directorate.

He said the picture painted by audit reports and Special Investigating Unit investigations was not of isolated irregularities, but of a sustained and systemic breakdown in procurement governance, spanning several years.

“These (investigation and audit) findings are not historical footnotes. They form part of a pattern that continues into more recent tenders, including high mast lights and streetlights, where the same contractors and similar irregularities are again present. Furthermore, your office is in possession of a legal opinion written by [advocate] Shaheed Patel, as instructed by Kuban Chetty Inc. on behalf of the Nelson Mandela Bay Municipality, dated 30 September 2024.”

“This opinion is not neutral, it is damning. The core findings captured therein clearly state that the tender must not be awarded because doing so would be irregular and unlawful. Why?” reads the letter.

Kepe said he had sent the letter twice and had not received a response.

ANC councillor Bulelani Matenjwa said he wanted to see the tender specifications to determine what was required of the contractors, which in turn should indicate the market-related value for the work.

“Give us the contract so we can see what was tendered for. If contractors charge outside the market value, then something is wrong and should be called in, because there’s no way they will have a different amount after they get the job, as they were appointed based on the affordability for the municipality.”

DA councillor Pieter Terblanche said the report recorded several streetlights in Kariega as repaired, when in fact, they had not been worked on yet.

“As councillors, we don’t know what to expect from the contractors because they were not introduced. We don’t know what they are supposed to do so we can track their progress. There are streets that are in the dark but are stated as repaired in this report, which begs the question — who signs off the invoices for payments for this project because so much of the budget for public lighting has been spent, but the streets are still dark.” DM