SANRAL BOARD STATEMENT ON THE NON-AWARD OF TENDERS
23 May 2022
Introduction
This is the SANRAL Board statement in response to media reports concerning the cancellation of tenders amounting to R17.473 billion.We must begin with a disclaimer that it is totally inappropriate for matters to do with tenders to be debated publicly by bidders on those tenders and the organisations concerned. Over the past week bidders on tenders not approved for award by SANRAL have gone public and disseminated negative information about the Board’s decisions in relation to those tenders.Regrettably, the media reports contain a number of comments, some of which demonstrate a lack of full and proper understanding of how decisions on procurement at SANRAL are made. It is of utmost importance that the SANRAL Board ensures that there is compliance with procurement processes in all forms – inclusive of compliance with binding resolutions – in order to uphold the applicable fiduciary duties. As a Board, we have a responsibility to uphold and enforce proper governance. We all have seen organisations fail because of problems at the governance level. Ineffective governance has compromised the ability of many SOEs to deliver on their core mandates. The SANRAL Board, for at least the time we are here, will not go down that path.
The Board of SANRAL generally plays no part in the awarding of contracts. Contracts above the value of R750 million are placed before the Contracts Committee of the Board for review and noting after the adjudication of tenders by the Management Bid Adjudication Committee (MBAC). The Contracts Committee considers, amongst others, the proactive assurance reports on such contracts that are compiled by the proactive assurance structures. If there are unresolved matters between the proactive assurance structures and MBAC, or a difference of opinion between the SCM Committees, those matters are escalated to the Board by the Contracts Committee for decisions by the Board. The Board seeks legal opinion as required and makes the appropriate decision to either note the adjudicated award, or to note but not approve the intention to award, as is the case with the tenders at issue. Although the Board is not be operationally involved in the awarding of contracts, as SANRAL’s Accounting Authority, it must account for decisions at SANRAL, and therefore the Board must exercise appropriate oversight, which includes ensuring the implementation of the law, regulations, resolutions and policies.
Constitutional and PFMA Imperatives
The SANRAL Board as the accounting authority is enjoined by Section 51 of the Public Finance Management Act, 1999 (“PFMA”) to, inter alia, ensure that SANRAL has and maintains:
- an effective, efficient and transparent systems of financial and risk management and internal control;
- an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective; and
- a system for properly evaluating all major capital projects prior to a final decision on the project;Accordingly, the SANRAL Board is authorised and empowered by the Constitution and the PFMA to ensure it safeguards the integrity of the procurement processes within SANRAL. In keeping with this, the SANRAL Board adopted the resolution of 28 January 2020, detailed later in this document, for the reasons already mentioned
Zondo Commission
In its conclusions and recommendations in relation to a major state-owned company, the Zondo Commission repeatedly refers to Section 50 of the PFMA as a section violated by the accounting authority of that public entity, leading to the Commission recommending criminal prosecution for members of the then Board of that public entity. The Commission highlights, among others, the following obligations – in terms of the PFMA:
– The obligation to act with fidelity, integrity and in the best interests of the public entity in managing the financial affairs of the entity
– The obligation to take effective and appropriate steps to prevent irregular expenditure, fruitless and wasteful expenditure not complying with the operational policies of the public entity
The Commission goes on to cite Section 86 (2) of the PFMA which criminalises wilful or grossly negligent failure, on the part of members of accounting authorities to comply with Sections 50 and 51 of the PFMA.
We invoke the Zondo Commission because it seems some of the bidders for the tenders SANRAL has decided to readvertise have learnt nothing from the Commission. They think we are still in the past when bidders could apply public and political pressure on public organisations to award them tenders irrespective of the provisions of the PFMA. This is how state capture was born, and it is how SANRAL will end up captured – if it isn’t already – if none among its accounting authority, management, staff and stakeholders respects the legislative prescripts pertaining to public procurement.
Attacks on the SANRAL Board
Over the last week this Board has been subjected to public vilification, intense emotional blackmail and veiled intimidation by being told it had cancelled Presidential projects, and how it should have gone to National Treasury and our line Minister when it found any matters of concern with the tenders. The subtext of this attack is that we have undermined these important people and structures by not endorsing the proposed awards, and therefore we must be dealt with as brainless, delinquent and intransigent children.
In shameless and selfish efforts to turn the South African public against us, we have been presented as killers of the construction industry and portrayed as suppressors of job creation. What is deliberately hidden from the public is that we have, in two of the tenders, thwarted the very killing of part of that industry and the very suppression of job creation for ordinary people.
We have frustrated the total irregular exclusion of subcontracting in the Mtentu tender and the reduction, by a massive 50%, of the routine 30% subcontracting in the GFIP tender. This exclusion and reduction – which were decided by unauthorised individuals and structures without Board approval – combined amount to subcontractors, and these are SMMEs of designated groups, being denied and deprived of +/-R2billion in business opportunities. This amounts to thousands of South Africans denied job opportunities.
It is this Board which is defending those economic participation and empowerment rights of those people but, to fool the public, some of the bidders have angrily created the impression that they have the best interests of those people at heart when in fact those SMMEs and local communities would be largely kept out of benefiting from the projects if this Board had not seen through this injustice and allowed the current tenders to be awarded as they were proposed to be.
They say this Board is killing the industry. We invite you to objectively check the record of awards and payments made to the industry over the past three years of this Board’s stewardship of SANRAL. The facts are that over the past three years – based on records from our Management – SANRAL has awarded a total of R16.1 billion to the engineering consulting part of the industry and R27 billion to the contracting part. Overall, if you consider the industry in its totality, over the past three years, SANRAL has awarded just shy of R50 billion to the industry. One of the leaders on the attack on this Board has received, during the said three years, 21% of the R27 billion awarded in construction contractor jobs. In fact, some of the major players in the industry have, as recently as last week, announced maintaining a record order book, thanks in part to SANRAL tenders.
Because the facts contradict this nefarious assertion that we are killing the industry, we can only surmise that this is nothing but a gambit aimed at breeding government and public antipathy towards a Board which is frustrating plans for the external influence over this public entity.
Please check SANRAL awards and payments over the recent past and you will be shocked to see that the some of the leaders of the attack on this Board are the very entiities which have been benefiting more than others from SANRAL procurement. The question we must ask, and answer, then, is if this recent non-award hasn’t interfered with the culture of entitlement. How else can we explain the amount of vitriol spewed at this Board for executing its fiduciary duty to the organisation and the people of South Africa?
We place on record here today that our response to any bid tendered has always been, currently is, and will always be based solely on the law. We therefore consider the invocation of the President, our Minister and National Treasury in this matter by some bidders to be mischievous and bordering on illegality. Procurement disputes are not adjudicated upon by those individuals and structures but by the law courts. Procurement disputes are not resolved through public pressure via the media but through the objectivity and independence of our country’s law courts.
The invocation of authorities above this Board to not-so-subtly compel it to endorse proposed awards it has refused to endorse is a blatant call for the corruption of public procurement, which requires that as an accounting authority we must apply our minds independently of any external influence and act only in terms of relevant legislation and policies in pronouncing on tenders. We may, under no circumstances, involve the President, our Minister, National Treasury and indeed any other individual or structure outside properly appointed independent advisers who have no interest in the bids in making those determinations. It is for that reason that our Minister heard for the first time about our decision on those tenders at a meeting of the Presidential Infrastructure Coordinating Commission, which structure itself only got to hear about our decision when it requested an update on the status of economic recovery projects.
