Coega says it’s fake news that ‘R1.6bn stolen from Eastern Cape Solidarity Fund’

Special Economic Zones

The Coega Development Corporation (CDC) says it has been made aware of a disparaging and misleading FAKE news article by African Channel News, dated on or round 15 June 2020.

“Firstly, the CDC supports the integral role played by the media, we strongly believe adherence to responsible and ethical reporting should form the basis of the work done by journalists,” the CDC said.

“It is however, worth noting, that the supposed article is void of the fundamental basics of good journalism, i.e., identification of the reporter, verification of facts & provision of commentary to the subjects of the story.

“None of which have been adhered to by the Journalist including affording to the CDC an opportunity to respond to the allegations.

“This leaves us to conclude that the FAKE news story seeks to deliberately inflict harm on the reputation & good name of the CDDC through inaccurate, misleading and unfair reporting.”

It said that it is the organisation’s position not to engage FAKE news.

“However, in this case, we have seen a deliberate and sustained attempt to unfairly tarnish the image of the organisation on social media with the regurgitation of unsubstantiated and outdated allegations dating as far back as 2018,” the CDC said.

“It is for this reason that we decided to furnish the media with the facts & our responses related to the original article published in the local newspaper – Daily Dispatch on 26 May 2018: Probe into R1bn spent on roads and subsequently the City Press on 1 July 2018: How to loot R1.6 Billion.

It said that following the articles in 2018 from the above-mentioned publications, the following chain of events unfolded:

·   During the Year-End external audit, Auditor General of South Africa (AGSA) paid specific attention to the Roads Enterprise Development Programme (REDP) and the allegations, including requesting all the management reports on the allegations, audited the project Accounts, recognising that the programme had terminated a few years before;

·   During this period, AGSA reviewed the CDC financials dating back to a few years prior;     

·    Pursuant to these inquiries, the CDC received correspondence from the Office of the Provincial Director General of the Eastern Cape Government, requiring the CDC to cooperate with independent investigators that had been appointed by the Office of the Director General of the Eastern Cape, to investigate the allegations made regarding the REDP, the CDC involvement in particular, and other SOE’s cited in the article;

·  The investigation was undertaken by a private company, iFirm, with the actual investigation led by the Retired Major General Mzwandile Petros, former Western Cape Provincial Commissioner of the Police; and

·  Following the investigation, on 17 April 2019, a letter written and signed by iFirm explicitly cleared the CDC of any wrongdoing.

Facts on the Roads Enterprise Development Programme (REDP):

·    The CDC was appointed by the Provincial Department of Public Works (PDPW), amongst other programmes, to implement the Roads Enterprise Development Programme [REDP] on 13 July 2010 until 31 March 2015. During this period, the CDC was the only implementing Agent for PDPW implementing the REDP;

·   The REDP was set up as a pioneering programme to facilitate entry of Black owned SMME into the Construction Industry beyond the traditional consulting work and construction extending to material supply, plant and equipment suppliers, the latter of which constitutes up to 65 % of the total value of creation of fixed assets. Specific attention was given to providing incubation type of support to emerging contractors to improve their CIDB grading;

·   Consequently, development of aspirant and emerging quarry, plant and equipment owners along the road corridors and covering breadth of the Eastern Cape, was central to the strategic intent and thrust of the programme;

·   For its role as the implementing Agent for the REDP, between July 2010 until 31 March 215, the CDC accounted for all the expenditure incurred; 

·   During the aforementioned period, neither the IDT nor SANRAL, had any involvement in the implementation of the SDA between the CDC and PDPW, nor did any of the two parties ever get involved in any of the REDP project meetings or coordination steering committee meetings, whilst under the auspices of the CDC;   

·   Thus, any suggestion of an overlap of the CDC with other Implementing Agents on the same projects with the CDC’s knowledge and participation during the CDC’s period of implementation is inaccurate, and without any basis;

·    For any project expenditure, a firm of duly registered professional firm of consultants approve the construction certificate claim. The district engineers of the PDPW approved the payment prior submission of the certificates to the CDC by consultants. Upon the CDC satisfying itself that work for the equivalent value to the Payment Certificate was completed, it would approve the invoices and submit them to the PDPW Head office for the final approval, transfer funds to the CDC and consequently processing of the payments to service providers and product suppliers.

·   The NT instruction note stipulates that the management fees scales per project value range from 4.5% to 10% depending on the value of the project, with the higher value attracting a lower scale accordingly;

·    For Social Developmental projects, the NT instruction note stipulates from 8.5% to 10% for any project value;

·   For the REDP programme, the CDC levied a charge of 3.25%, which is 1.75 % lower than the lowest threshold for normal projects, notwithstanding that the REDP programme complies with the Social development project category, for which higher fees are permissible. In this regard, the CDC forfeited 5.25% fees, due to its concessionary pricing model for the Eastern Cape government;  

·   The Service Provider, Aqua, which is listed as one of the entities that benefitted irregularly, was not appointed by the CDC under the REDP programme. Consequently, no payment by the CDC was ever made to a company by the name of Aqua under the REDP;

·   The CDC is not aware of any of the projects that it had executed had, for the same scope as that undertaken by the CDC, been awarded to any other entity either subsequently or concurrent to the execution by the CDC;

·   The CDC is not in a position to account for what might have transpired post expiry of the SDA on 31 March 2015;

·  The two quarries, Madwaleni and Sipethu were developed and commissioned to produce road building material to supply projects stipulated within the REDP, consequently, it would be incorrect to assume that all volumes yielded in a specific quarry were meant to be limited to one specific road, even though the establishments costs were, in the specific projects, attributed to the Sipethu N2 C90 –T125 Phase 1 and Madwaleni Hospital Road –Wild Coast Meander [Phase 2]; and

· Separation needs to be made between specific individual projects and the programme which was constituted by various elements to the extent that some project elements serviced beyond one specific project, consistent with the original intention of the programme in order for the quarries to be viable.

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