The Department of Water and Sanitation is BANKRUPT - JOHANNESBURG - SOUTH AFRICA

The critical department is now R4.3 billion in the red, leaving hundreds of contractors unpaid for at least seven months.

Senior executives from National Treasury, the department and a key water board told City Press a few days ago that Cabinet should place it under administration because “internal controls, project management and contract management have collapsed”.

The situation has become so dire that in late November last year, Finance Minister Pravin Gordhan called a crisis meeting with Water and Sanitation Minister Nomvula Mokonyane to discuss the department’s deteriorating finances.

The cash woes come at a time when Mokonyane’s department is facing investigations by both Public Protector Busisiwe Mkhwebane and the Special Investigating Unit (SIU), sparked by City Press investigations.

Mkhwebane, who confirmed her probe a few days ago, will investigate the R26 billion Lesotho Highlands Water Project. Mkhwebane and the SIU are investigating tender and other irregularities in the controversial Giyani Emergency Project, the cost of which has already ballooned from R500 million to over R5 billion.

What the documents reveal

Confidential emails, contracts and letters City Press obtained further reveal that:

. The department has unpaid invoices amounting to R1.7 billion for the current financial year. According to the Auditor-General, the department ended the previous financial year with unpaid invoices worth R1.1 billion.

. The same email trail reveals that the Water Trading Entity, a department unit that deals with water sales and rights, has racked up an overdraft of more than R2.6 billion.

. At least one of the contractors is suing the department for more than R400 million for unpaid invoices, which it cannot pay. More lawsuits are expected.

. The department’s cash crunch has led to the stalling of critical service delivery projects such as the Giyani Emergency Project.

. Confidential department documents dated August 2014 reveal that the Giyani project began with a R500 million budget, but contracts worth R2.2 billion were soon added to LTE Consulting’s original emergency tender without tender processes being followed. Emails, documents and letters written over the past seven months sent between LTE, water authority Lepelle Northern Water and Simbi Phiri, the boss of Giyani project contractor Khato Civils, reveal that even more contracts have since been added without tenders, bringing the total cost of the project to more than R5 billion.

. Senior officials fear the department will pay “significantly more” for all projects, as stoppages and go-slows led to massive cost escalations.

Senior bureaucrats speak out

A senior National Treasury official said “the department is bankrupt and we started raising these issues with them about seven months ago.

“Internal controls, project management and contract management have collapsed completely. The department should be placed under administration,” the source said.

The highly placed official, who was part of the team Treasury sent to Limpopo when it was placed under administration in 2012, said: “Limpopo was placed under administration for R2 billion. This is far worse.”

A senior executive in the department, who has seen financial documents presented to both the risk and finance committees, said: “Unpaid invoices amount to R1.7 billion. The Water Trading Entity has accumulated an overdraft of over R2.6 billion. The situation is ugly. The department should be placed under administration, but because of politics, I know it won’t.”

The stalled projects

The Giyani Project, intended to provide a constant water supply to Limpopo’s Mopani district, has drawn fierce political heat.

City Press has learnt that, in an effort to get rid of Khato Civils, water officials told Phiri that Treasury wanted the contract terminated. This prompted Economic Freedom Fighters deputy president Floyd Shivambu to write to Gordhan to enquire why.

But in his response dated January 11 2017, Gordhan said this claim was not true and that the project was instead “progressing according to plan” and funds had been set aside to “take it to completion”.

However, Phiri a few days ago vowed to leave the site if he was not paid the R250 million he is owed by the end of February.

Last year, City Press exposed how, in 2014, Lepelle appointed LTE to deliver a “turnkey emergency water” project in Giyani. LTE, a company with close ties with Mokonyane, was appointed without a tender process and officials justified the move saying the project was commissioned on an emergency basis, which Treasury allows. LTE appointed Khato Civils to do the construction.

Another document reveals that the department owes Vharanani Properties more than R400 million. The company, owned by property tycoon David Mabilu, has worked on two projects for the department: one a sanitation project intended to eradicate bucket toilets across the Free State and the other a water pipeline in Thohoyandou, Limpopo.

Mabilu declined to comment; however, a source close to him said he was suing the department. “He has filed papers and the matter will be heard in the Pretoria High Court next week Friday.”

ANOTHER DAY, ANOTHER SOUTH AFRICAN DISASTER, AND ANOTHER FAILING OF THE ANC GOVERNMENT. WHERE DOES THIS LEAVE YOU OTHER THAN TO PLAN TO EXIT SA!!!???

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