National Treasury reviews R69 million City of Cape Town power transformers contract

The National Treasury will conduct a bid review of the R69 million contract awarded by the City of Cape Town to Hitachi Energy South Africa four months ago for the installation and commissioning of power transformers.

Responding to parliamentary questions, Finance Minister Enoch Godongwana said the National Treasury has requested the relevant documents from the City of Cape Town as mandated by the Municipal Financial Management Act (MFMA).

“The National Treasury is currently in the process of conducting a bid review on the indicated tender,” Godongwana said.

He was responding to MK Party MP Mzwanele Manyi, who asked whether his department intended to initiate a formal bid review of its own accord, given the scale of the tender, and the empowerment weighting and preference points were transparently and correctly applied.

Manyi had also wanted to know whether the losing bidders, many of whom are based locally and are black-owned entities, were fairly evaluated and whether adequate due diligence was undertaken.

The inquiry centred on whether due diligence was conducted, given Hitachi's apparent history of compliance sanctions. This included a 2015 settlement with the United States Securities and Exchange Commission, which stemmed from improper conduct related to South African energy contracts.

Godongwana said the Office of the Chief Procurement Officer has noted the allegations; however, it has not been made aware of any sanction by any institution in South Africa against the supplier. 

“National Treasury will only be able to make an assessment following the conclusion of the bid review that is currently being conducted,” he said.

On Friday, some parties represented in the council of the City of Cape Town welcomed the review of the Hitachi contract.

Ndithini Tyhido, ANC leader in the City of Cape Town council and Dullah Omar regional chairperson, said the initiative taken by the National Treasury was actually what was required for most of the tenders awarded by the DA-led City of Cape Town.

“There is an abuse of the tender system by the City of Cape Town. That is why the ANC, in recent months, has made a call for the Municipal Public Accounts Committee (MPAC) to be open to the public,” he said.

“We believe that MPAC is where Capetonians and the country as a whole are going to see for themselves that the City of Cape Town is not as proficient in financial or tender management as portrayed in the media.

“It is the view of the ANC that National Treasury or the president must issue a proclamation that authorises the Special Investigating Unit to come and investigate the City of Cape Town,” added Tyhido.

GOOD Party secretary-general Brett Herron said while they cannot predict the outcome of the review process, it was an important intervention by the national government to protect the integrity of procurement processes and the spending of public funds.

“The legislative regime governing local government provides for significant oversight powers, but far too often the relevant provincial and national departments, charged with exercising oversight and sometimes approval powers, do not bother.

“This failure to intervene, even when concerns like this are raised by the MK Party and members of the public directly with the national or provincial oversight authority, are too frequently ignored,” Herron said.

When approached for comment, the City of Cape Town said: “The city is looking into the particulars of this enquiry but requires more time to gather accurate input.”

Godongwana said the National Treasury, as custodians of the MFMA, noted that the Act provided that the accounting officer must ensure that the municipality has and maintains an effective, efficient, and transparent system of financial and risk management and internal control.

“It is, therefore, incumbent on the accounting officer to conduct due diligence processes on all suppliers as part of the risk management and internal control processes.

“Furthermore, the National Treasury issues regulations and circulars to municipalities regularly on best practices that municipalities should implement,” said Godongwana.

Manyi had also asked the minister about mechanisms his department has put in place to ensure that the municipal procurement processes did not merely tick‑box B-BBEE compliance, but actively prevented fronting, misrepresentation, and the sidelining of black‑owned local bidders.

Godongwana said the National Treasury continuously monitors the implementation of all its regulations and prescripts by conducting quarterly compliance questionnaires, which were assessed and followed up.

Requests are issued to municipalities where discrepancies are noted and further information is required, he said.

Godongwana also said municipalities were encouraged to comply with the legislative requirements governing municipalities at all forums and engagements. 

“The National Treasury makes inputs and recommendations to municipalities where non-compliance was identified.”

mayibongwe.maqhina@inl.co.za