South African executives disagree over need for open tender for Eastern Cape broadband contract

14 September 2018

Mergers, Acquisitions and Financial Results

South African Treasury chiefs are at odds over a ZAR 3 billion broadband tender for the Eastern Cape, Mybroadband reported. There have been two letters, one rejecting and the other approving a contract between Liquid Telecoms and the Eastern Cape government, written by senior Treasury procurement executive Willie Mathebula, and acting accountant-general Zanele Mxunyelwa.

The City Press reported that the Eastern Cape provincial government wants to piggyback off the approved broadband contract for the Western Cape, being handled by Liquid Telecom. Other officials say it should go out to public tender.

City Press said that Treasury rules allow for this type of piggybacking to save time and money. In February 2017, another procurement executive, Schalk Human, advised that the contract should be put out to public tender. In November 2017, Mathebula again advised the Eastern Cape government to put the contract out to tender, saying the scope and scale of the project required an open tender process.

One of the main points of contention is how the contract is made up, and whether the differences mean that it does not qualify for piggybacking. The Western Cape contract was worth ZAR 3.9 billion over ten years and was fully priced from day one. It covers 1,875 sites, and so far, after four years, ZAR 310 million has been paid.

The Eastern Cape contract is worth ZAR 3 billion and requires an up-front payment of ZAR 228 million with milestone payments amounting to ZAR 1 billion, which are not linked to anything. The department has already paid ZAR 180 million in the past year, with three sites connected that are not live, the City Press reported. The contract is for 2,700 sites. In May, however, Mxunyelwa approved the contract, saying she found nothing wrong with the process.

Citing correspondence documents it has seen, the City Press said that the Easter Cape government had signed a contract with Liquid Telecom a month before receiving notice that its request to deviate from normal procurement procedures was rejected.

Source: City Press