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.