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RE: The CDC responds to “R1.6bn stolen from Eastern Cap Solidarity Fund” FA - published 17 Jun 2020

RE: The CDC responds to “R1.6bn stolen from Eastern Cape Solidarity Fund” FAKE news social media article African Channel News



Port Elizabeth, 17 June 2020 – The Coega Development Corporation (CDC) wishes to unequivocally dispute the article “R1.6bn stolen from Eastern Cape Solidarity Fund” by African Channel News, dated 15 June 2020.

 

The story is fake news, factually incorrect, and misleading; it seeks to deliberately tarnish the image of the National Solidarity Fund and that of the CDC.

 

The African Channel News incorrectly quoted and made reference to allegations contained in 2018 article, which had absolutely nothing to do with the so called “Eastern Cape Solidarity Fund.”  As far as we are aware, the “Eastern Cape Solidarity Fund” does not exist; as a matter of fact, what we are aware of is the National Solidarity Fund, which was only established in 2020. 

 

As a result, it is not possible, as per the allegations levelled against the CDC, that the organisation had “stolen from the Fund” that was only established this year.  In addition, the CDC was the Implementing Agent for the Provincial Department of Roads and Public Works (DRPW) from 2010 to 2015 in terms of the Service Delivery Agreement (SDA).

 

The CDC has not benefited whatsoever from the Fund, neither has it been the recipient of any monies from the Provincial Department of Infrastructure and Public Works during 2020/21 financial year. In addition, the allegations that the CDC smuggled money out of the Eastern Cape government funding must be rejected with the contempt they deserves as they are blatantly incorrect.

 

As a matter of fact, the 2018 allegations related only to the Roads Enterprise Development Programme (REDP), which was successfully implemented by the CDC, as an Implementing Agent, and appointed by the Eastern Cape Department of Roads and Public Works (DRPW) (“the Client” or “the Department”), amongst other programmes, to implement the Roads Enterprise Development Programme [REDP] on 13 July 2010 until 31 March 2015, upon the expiry of the Service Delivery Agreement (SDA). The original article was published in the local newspaper – Daily Dispatch on 26 May 2018 with a headline “Probe into R1bn spent on roads” and was subsequently published by the City Press on 1 July 2018 with the headline “How to loot R1.6 billion.”

 

The African Channel News regurgitated unsubstantiated and outdated allegations and disingenuously made it to appear as the current story (“R1.6bn stolen from Eastern Cape Solidarity Fund”). 

 

Following the articles which appeared in the aforementioned newspapers, the Auditor General of South Africa (AGSA) year end audit paid specific attention to the Roads Enterprise Development Programme (REDP) and the allegations, including requesting all the management reports on the allegations, audited the project Accounts, recognising that the programme had terminated a few years before. During this period, AGSA reviewed the CDC financials dating back to a few years prior and found no financial transgressions on the part of the CDC.

 

Furthermore, the CDC received correspondence from the Office of the Provincial Director General of the Eastern Cape Government, requiring the CDC to cooperate with independent investigators that had been appointed by the Office of the Director General of the Eastern Cape, to investigate the allegations made regarding the REDP, the CDC involvement in particular, and other SOE’s cited in the article.

 

The investigation was undertaken by a private company, iFirm, with the actual investigation led by the Retired Major General Mzwandile Petros, former Western Cape Provincial Commissioner of the Police. Following the investigation, on 17 April 2019, a letter written and signed by iFirm explicitly cleared the CDC of any wrong doing; however, we do not know if the other SoE were cleared.

 

It is worth noting that, it’s not immediately apparent as to what is occasioning regurgitation of unsubstantiated and outdated allegations, that were subjected to an independent investigations, and found to have no substance whatsoever, in so far as these implicate the CDC.

 

The media articles on the REDP adversely implicating the CDC were followed by questions that were posed by members of the legislature, to the then Hon. MEC of Economic Development, Environment and Tourism, Hon, Mr. L.O. Mabuyane [MPL], the CDC was required by the shareholder department, DEDEAT, to respond to the questions posed by the legislature, which it did, to the best of its ability.  The CDC’s answers to the questions were read in the legislature and was accepted by the MPLs.

 

The CDC implemented the REDP between 2010 and 2015.  As a result, the organisation cannot comment on what happened subsequently when the other SoE, i.e., IDT and SANRAL got involved in this project. Thus, any suggestion of an overlap of the CDC with other Implementing Agents on the same projects with the CDC’s knowledge and participation during the CDC’s period of implementation is inaccurate, and without any basis.

 

After the Programme was taken over by the Department of Roads and Public Works, following the expiry of the Service Development Agreement (SDA), the CDC handed over all the files and servers to the department, as per their request as the Client.

 

 

 

Background to the 2018 Original Story for Information:

 

The original article was published in the local newspaper – Daily Dispatch on 26 May 2018 with a headline “Probe into R1bn spent on roads” and was subsequently published by the City Press on 1 July 2018 with the headline “How to loot R1.6 Billion.”

 

Following the articles in 2018 from the above mentioned publications, the following factual events unfolded:

 

  • During the year-end, an external audit by the Auditor General of South Africa (AGSA) paid specific attention to the REDP and the allegations levelled against the CDC, including requesting all the management reports on the allegations.  The AGSA audited the project Accounts, recognising that the programme had terminated a few years before when the SLA expired;
  • During this period, AGSA reviewed the CDC financial statements dating back to a few years prior;     
  • Pursuant to these inquiries, the CDC received correspondence from the Office of the Provincial Director General of the Eastern Cape Government, requiring the CDC to cooperate with an independent investigators that had been appointed by the Office of the Director General of the Eastern Cape, to investigate the allegations made regarding the REDP, the CDC involvement in particular, and other SOE’s cited in the article;
  • The investigation was undertaken by a private company, iFirm, with the actual investigation led by the Retired Major General Mzwandile Petros, former Western Cape Provincial Commissioner of the Police;
  • Following the investigation, on 17 April 2019, a letter written and signed by iFirm explicitly cleared the CDC of any wrong doing. However, we do not know if the other SoE’s were also cleared.

 

Facts on the Roads Enterprise Development Programme (REDP):

 

  • 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 CDC was appointed by the DRPW to implement the Roads Enterprise Development Programme [REDP] on 13 July 2010 until 31 March 2015, amongst other programmes. During this period, the CDC was the only implementing Agent for DRPW implementing the REDP;
  • 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;
  • The REDP was set up as a pioneering programme to facilitate entry of Black owned SMME into the Construction Industry beyond the traditional consulting work and construction extending to material supply, plant and equipment suppliers, the latter of which constitutes up to 65 % of the total value of creation of fixed assets. Specific attention was given to providing incubation type of support to emerging contractors to improve their CIDB grading;
  • Consequently, development of aspirant and emerging quarry, plant and equipment owners along the road corridors and covering breadth of the Eastern Cape, was central to the strategic intent and thrust of the programme;
  • For its role as the implementing Agent for the REDP, between July 2010 until 31 March 215, the CDC accounted for all the expenditures incurred; 
  • During the aforementioned period, neither the IDT nor SANRAL, had any involvement in the implementation of the Service Delivery Agreement (SDA) between the CDC and DRPW, nor did any of the two parties ever got involved in any of the REDP project meetings or coordination steering committee meetings, whilst under the auspices of the CDC;   
  • Thus, any suggestion of an overlap of the CDC with other Implementing Agents on the same projects with the CDC’s knowledge and participation during the CDC’s period of implementation is inaccurate, and without any basis;
  • For any project expenditure, a firm of duly registered professionals of consultants approve the construction certificate claim. The district engineers of the PDPW approved the payment prior to submission of the certificates to the CDC by consultants. Upon the CDC satisfying itself that the work for the equivalent value to the Payment Certificate was completed, it would approve the invoices and submit them to the DRPW Head office for the final approval, transfer funds to the CDC and consequently processing of the payments to service providers and product suppliers;
  • The NT instruction note stipulates that the management fees scales per project value range from 4.5% to 10% depending on the value of the project, with the higher value attracting a lower scale accordingly;
  • For Social Developmental projects, the NT instruction note stipulates from 8.5% to 10% for any project value;
  • For the REDP programme, the CDC levied a charge of 3.25%, which is 1.75 % lower than the lowest threshold for normal projects, notwithstanding that the REDP complies with the Social development project category, for which higher fees are permissible. In this regard, the CDC forfeited 5.25% fees, due to its concessionary pricing model for the Eastern Cape government;  
  • The Service Provider, Aqua, which is listed as one of the entities that benefitted irregularly, was not appointed by the CDC under the REDP. Consequently, no payment by the CDC was ever made to a company by the name of Aqua under the REDP;
  • The CDC is not aware of any of the projects that it had executed for the same scope as that undertaken by the CDC, neither was the organisation aware of  the work awarded to any other entity either subsequently or concurrent to the execution by the CDC;
  • The CDC is not in a position to account for what might have transpired post expiry of the SDA on 31 March 2015;
  • The two quarries, Madwaleni and Sipethu were developed and commissioned to produce road building material to supply projects stipulated within the REDP. Consequently, it would be incorrect to assume that all volumes yielded in a specific quarry were meant to be limited to one specific road, even though the establishments costs were, in the specific projects, attributed to the Sipethu N2 C90 –T125 Phase 1 and Madwaleni Hospital Road –Wild Coast Meander [Phase 2];
  • Separation needs to be made between specific individual projects and the programme which was constituted by various elements to the extent that some project elements serviced beyond one specific project, consistent with the original intention of the programme in order for the quarries to be viable; and
  • 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.
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