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Two of the companies named in the Special Investigating Unit’s R2.2 billion lawsuit will defend themselves against the court action, but say they have yet to receive any summons.
In court papers filed on Monday, the SIU wants three companies – LTE Consulting, Khato Civils and South Zambezi – to repay the state the R2.2 billion they were paid by the water and sanitation department for the Giyani water project.
Former president Jacob Zuma asked the SIU to investigate the project following a series of reports in City Press that exposed widespread wrongdoing.
In the papers before the Polokwane High Court, the SIU also asked the court to declare the 2014 contract unconstitutional, unlawful, invalid and null and void.
Now Khato Civils and South Zambezi – companies to which LTE ceded the massive tenders – are set to challenge the SIU in court, saying they completed 95% of the work.
In August 2014, the Lepelle Northern Water board appointed LTE, on a turnkey basis, to refurbish Giyani’s water and waste water treatment plants for R92 million. The water entity later piled more projects on to the company, bringing the total value of the contracts first to R502 million, and later to R2.2 billion. LTE, which didn’t have the capacity to carry out either the engineering or the construction, ceded all the contracts to Khatho Civils and South Zambezi.
Following a series of reports in City Press about irregularities in the project, in 2016 Zuma appointed the SIU to investigate these irregularities, including the misappropriation of funds.
Responding through a statement, Khato Civil’s chief executive Mongezi Mnyani said:
“We cannot wait to have our day in court. We believe this is the greatest opportunity, once and for all, to set the record straight and clear our name.”
Khato Civils and South Zambezi, he said, were appointed by LTE Consulting to conduct designs and carry out the construction of water valves the laying of 325km water pipeline.
“For the record, Khato Civils involvement in this project is a subcontractor who was duly appointed by the main turnkey developer, LTE, who was appointed by Lepelle Northern Water. Khato Civils believes that all matters or queries relating to the validity or lack thereof, of the contract is a matter to be addressed by the water and sanitation department, Lepelle Northern Water and LTE,” Mnyani said.
“Khato Civils was merely subcontracted by LTE to perform the work based on our capacity, track record and experience to perform works of this nature as a grade 9 [Construction Industry Development Board] maximum grading.”
Mnyani said the company was appointed in 2014, and no one had ever questioned the quality of its work.
“In terms of the work that has been done, which to date represents 95% completion, over a three-year period, there has never been questions or doubts over the quality of works nor value for money,” he said.
“Our work has been world-class, quality work that has been certified by several independent project engineers from the water and sanitation department, Lepelle Northern Water, Ernest & Young (Later Fumile Consulting) and LTE.”
All invoices submitted, he said, were approved by engineers after verifying the quantity and quality of the work.
“All our payments have been subjected to the rigorous evaluation and vetting process highlighted above before any payment was made to Khato Civils,” he said.
Last month City Press reported that Khato Civils had stopped work on the project, claiming that the department had not paid it since the beginning of the year. This has resulted in the project incurring significant delays. The company has not returned to the site, said Mnyani, adding that he was a victim of the water and sanitation department.
“Throughout this project, Khato Civils has experienced serious breach of contractual provisions through extreme late payments by the water and sanitation department and Lepelle Northern Water, which eventually led to our withdrawal from the project and retrenchment of over 500 employees on September 30 2018,” he said.
“This unfortunate decision also affected over 20 local subcontractors in Giyani area who were subcontracted and paid 40% of the R2.2 billion contract. What remains to Khato Civils was value for materials used, labour, plant and diesel, 10% retention fees held by Lepelle Northern Water, 5% implementing agency fees paid to Lepelle Northern Water, 15% project management and engineering fees paid to LTE, 14% (15%) for VAT paid to Sars.”
If the SIU had any legally sound grounds to cancel the contract, it should have done so in the past four years, said Mnyani, adding that the department of monitoring and evaluation had been monitoring the project on a quarterly basis.
“The parliamentary portfolio committee on water and sanitation paid the project a visit and they expressed satisfaction with it,” he said.
Water and sanitation department spokesperson Sputnik Ratau declined to respond to allegations made by witnesses to the SIU that the department’s infrastructure deputy director-general Zandile Mathe was responsible for handing over all the work to LTE without following tender regulations.
Lepelle Northern Water chief executive Phineas Legodi directed all media queries to the department.
LTE Consulting’s chief executive Thulani Majola said the SIU was yet to serve them with the summons.
Khato Civils has noted the media report that was reported by the City Press regarding alleged court papers that have been filed by the Special Investigative Unit (SIU) in the Polokwane High Court.
We wish to put on record that Khato Civils has to date not been served with any court papers nor contacted by the SIU regarding this matter. The allegations contained in the said court papers are not new and we are very happy to have our day in court where we will be given a fair opportunity to set the record straight to put this case to rest before an independent judiciary.
For the record, Khato Civils involvement in this project is a subcontractor who was duly appointed by the main turnkey developer, LTE, who was appointed by Lepelle Northern Water.
Khato Civils believes that all matters or queries relating to the validity or lack thereof, of the contract is a matter to be addressed by Department of Water and Sanitation, Lepelle Northern Water and LTE. Khato Civils was merely subcontracted by LTE to perform the works based on our capacity, track record and experience to perform works of this nature as a grade 9 CIBD maximum grading.
In terms of the work that has been done, which to-date represents 95% completion over a three year period, there has never been questions or doubts over the quality of works nor value for money. Our work has been world class, quality work which has been certified by several independent project engineers from Department of Water and Sanitation (DWS), Lepelle Northern Water, Ernest & Young (Later Fumile Consulting) and LTE. All our payments have been subjected to the rigorous evaluation and vetting process highlighted above before any payment was made to Khato Civils.
Throughout this project, Khato Civils, has experienced serious breach of contractual provisions through extreme late payments by Department of Water and Sanitation and Lepelle Northern Water which eventually led to our withdrawal from the project and retrenchment of over 500 hundred employees on 30th September 2018. This, unfortunate decision, also affected over 20 local subcontractors in Giyani area who were subcontracted and paid 40% of the R2.2billion contract. What remains to Khato Civils was value for materials used, labour, plant and diesel, 10% retention fees held by Lepelle Northern Water, 5% implementing Agency fees paid to Lepelle Northern Water, 15% project management and engineering fees paid to LTE, 14%(15%) for VAT paid to SARS.
It must be noted that SIU investigated this project in 2016 and never stopped the project, furthermore, the presidency has been involved in monitoring and evaluation of this project on a quarterly basis. Parliamentary committee on Water and Sanitation gave the quality of works and speed a thumbs up.
When we demand payment, after not been paid for over 9 months and we pull out because we cannot sustain the project under such circumstances, we are greeted with threats to cancel the contract based on legally flimsy basis.
If SIU or any Agency had any legal basis to stop the contract, why didn’t they cancel the contract within the four years it has been operational.
For Khato, if the Department pays all outstanding amounts for work done, we would go back to complete the remaining 25kms of the 325kms bulk water infrastructure pipeline that we were contracted to perform.
We also question the rationality and intentions by the SIU to prematurely leak this information to the media without formally serving us the court papers. As we respond to this article, we have not been served with any papers by the SIU, we therefore regard this whole exercise by the SIU as affectations.
Since we pulled out of site, part of a payment overdue by over 9 months was paid, however, a substantial amount remains unpaid to-date. No business can be sustained under such circumstances. Instead of finding an amicable solution to this matter, we have noted numerous attempts at bringing us into disrepute through inaccurate and frivolous public statements including numerous investigations based on flimsy grounds intended to intimidate and embarrass Khato Civils.
We will detail all these in our formal response to the court papers once they have been served on us. We cannot wait to have our day in court, we believe this is the greatest opportunity once and for all, to set the record straight and clear our name.
Issued by: Khato Civils PTY LTD
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Makhura delivered the keynote address at the official opening of Khato Holdings’s multi-million rand headquarters at the Midway Industrial Park at Samrand on Friday. Makhura turned his attention to Khato Holdings, praising the company for the R600 million headquarters. Properties on the premises include two office blocks, home to Khatho Civils and South Zambezi and a state-of-the-art workshop.
Centurion-based civil and structural engineering consultant South Zambezi Engineering Services has grown substantially since it was acquired in 2014 by conglomerate Khato Holdings, helping Africa deliver sustainable basic infrastructure on time and within budget to promote socio-economic development.
It is with great pleasure and jubilation to inform you that, after a year-long battle with the Botswana authorities, regarding the freezing of bank accounts belonging to Khato Civils Botswana and our Executive Chairman, Mr Simbi Phiri, the court has ruled that all the accounts in question be unfrozen with immediate effect. This judgement was delivered in Botswana High Court in Lobatse on 7th September 2017.
The industry across the continent should also up its game in terms of encouraging young people to take up engineering as a viable career option, and by unpacking the wealth of opportunities the sector has to offer.
These are the view of Simbi Phiri — construction industry magnate and chairman of Khato Civils (Pty) Ltd and South Zambezi (Pty) Ltd — two of Africa’s leading construction, engineering and infrastructure development companies.
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