Shody procedures lead to cost over-runs

Transnet’s new multi-product
pipeline (NMPP) has not only
been hit by a rapidly increasing
budget and ever-increasing
delays, but also by irregular
expenditure amounting to
billions.
In March state transport
utility Transnet appeared
before Parliament’s standing
committee on public accounts
(Scopa) and, acting chief
financial officer, Anoj Singh,
revealed that contracts
totalling R6.57 billion were
deemed irregular.
The two contracts for
engineering, procurement and
contract management services
on the pipeline contributed a
major share of the total of R8.3
billion of irregular expenditure
disclosed in the company’s
2011 annual report.
He said, however, that
Transnet had received value
for money on the contracts,
even though procurement
procedures had not been
complied with, and, therefore,
were not classified as fruitless
or wasteful expenditure.
The first contract for the
pipeline was awarded after
an individual without the
delegated authority signed the
agreement. The second was
deemed irregular after it was
found that internal policies
and procedures had not been
followed because internal
controls in awarding the
contract were not applied.
MPs were harshly critical of
this poor management of the
risks of a procurement process
worth billions.
Transnet CEO Brian
Molefe told the committee
that the employees involved
in the award of the contracts
had left the company before
disciplinary measures could be
instituted.
He said government
guidance was needed. “As
management, we are at a
loss about what to do when
someone about to be charged
or investigated then leaves,
or when we discover after
somebody has left that perhaps
they had signed (an irregular)
contract.”
Transnet board chairman
Mafika Mkwanazi said the
company was investigating
changing its policy to prevent
employees resigning if they
were under investigation or
implicated in any form of
financial mismanagement.