Ekurhuleni: High hopes trashed as millions promised to community contractors evaporate

A R1.2-billion Ekurhuleni waste management project to upgrade small-scale community operators into viable businesses has ended in acrimony over broken promises, dashed hopes – and a puzzle over where much of the money went.

Month after month, John Buthelezi (not his real name) and his little team emptied bins, picked up litter, cleaned the streets of Ekurhuleni and emptied containers. Buthelezi had been promised that after five years, he would have R3-million in his bank account, two trucks and access to business qualifications. 

The five years ended on June 30. But Buthelezi’s dream of running his own successful waste management company is not likely to happen. 

The father of three from Katlehong is one of 45 participants in a R1.2-billion City of Ekurhuleni waste removal mentorship project. He has not emerged empty-handed: he now owns a truck and received a R250 000 payout. But this is a far cry from what he had been led to expect after five years.

Buthelezi is part of a group of Community-Based Contractors (CBCs) who have alleged – both in interviews with amaBhungane and in petitions to the municipality – that the project short-changed them. 

They argue that money that ought to have gone to the CBCs may instead have been retained by five well-established companies hired to mentor them.

The mentor companies were paid fees ranging between R130-million and R450-million, from which they were to fund the development and operations of the community businesses – but for which they have never properly had to account.

The 45 CBCs and six recyclers were appointed in 2017 to render comprehensive refuse removal services in specific areas around Ekurhuleni. 

They would be guided by five well-established companies, referred to as the Development Contractors (DCs). 

The project’s objectives were to create employment, involve the community in cleaning their own areas and develop small-scale businesses. 

By the end of five years, these small businesses would have a favourable banking profile, own their plant and equipment, and have the financial muscle and business know-how to go on their own. 

Despite the project’s noble intentions, it appears to have failed for three reasons:

– A lack of oversight by the municipality, which repeatedly neglected to ensure that its requirements had been implemented.

– The municipality signed contractual relationships with the development contractors in charge of mentoring, but none with the CBCs themselves.

– The CBCs have no access to key financial information. The development contractors have been left to interpret open-ended contractual arrangements in their own interests.

The municipality has not responded to repeated questions from amaBhungane, nor to complaints from the CBCs.

How the project was to work

In November 2015, the municipality invited bids from well-established BEE companies in the Ekurhuleni area. The bid document did not define entry requirements to qualify for the tender; bidders were to be chosen on the basis of the working model plans they submitted. 

But there was an additional factor: there had already been a similar five-year project which had ended unsatisfactorily. Instead, as the tender document stated: “The selection process shall give preference to the outgoing CBC’s for the 2010/15 financial years as they did not derive the anticipated benefits from the previous project.”

The municipality awarded five development contractors the contracts at the beginning of July 2016, to run for five years. Each would oversee a specific section of Ekurhuleni’s sprawling metropolitan area.

The development contractors’ responsibilities included recruiting their own CBCs from the neighbourhood; developing an operational plan to cover acquisition, operation and maintenance of plant and equipment; producing  costing projections that would ensure profitability; controlling and administering the contract.

The development contractor was also expected to arrange training and development programmes for the CBCs.

According to a document detailing payments to various Ekurhuleni projects, the five appointed development contractors were:

MCC Security and Before Dawn joint venture
Paid: R467.6-million 

MCC Group was established in 1996 and is involved in construction, waste management and security. The company website says it operates in four provinces and is mainly engaged in government projects.

MCC partnered with Before Dawn Property Development, a waste management services company that also offers construction and property management services. The companies were contracted to service Tembisa, Daveyton and Etwatwa. 

Sungu Sungu
Paid: R241.6-million
Owned by Thabang Khomo, a businessman said to be politically connected in Ekurhuleni. The company is also a contractor in controversial Ekurhuleni chemical toilet projects.  Sungu Sungu services Kathlehong and Dukathole.

*Read Ekurhuleni toilet tender 2.0: same old s**t?

Miya Mdluli
Paid: R229 million
Operates in the Vosloorus area. Not much is known about it.  

Vusimuzi Trading and Njabs
Paid: R131.9 million
Vus’muzi is owned by Chavier Sibiya, who was a former councillor in Tsakane. This is a joint venture with Niabs. The two service the Tsakane and Langaville areas.

Gundo and Nokeng
Paid: R130.2 million
Gundo and Nokeng formed a joint venture that collects rubbish in the Thokoza and Palm Ridge areas. It has received local prominence due to media reports relating to protests against poor performance on this contract. 

What the CBCs expected in return

The terms of the tender specified that each CBC head should receive a minimum monthly salary of R30 000. 

By the end of the contract, each CBC would own at least two 19 cubic meter compactors with bin liners. Compactors are the huge trucks used by waste disposal services around the country. The illegal dumping team would get to own a compactor and a 10-ton tipper truck. 

They would also receive training in business skills, resulting in a formal academic qualification equivalent to NQF6 level.  

In addition, the CBCs expected to receive a pay-out of the profit accruing to the CBC, which was pegged at a maximum of “15% of the total costs excluding monthly drawings”. 

Day to day running of the project

The tender specifications gave considerable detail to the CBC’s responsibilities.

These included door-to-door refuse removal to at least 12 000 service points per week, litter-picking, removal of illegal dumping, bulk container services in certain areas and employing locals from the same work area.

“The community-based contractor must be and stay actively involved and committed to the project for the duration of the contract,” the tender documents stated.

The CBCs were to report daily to the development contractor on work done and supply evidence such as pictures. At the end of the month, the development contractors were supposed to compile reports and submit invoices to the municipality. The CBCs invoiced their development contractors for their own salaries and the general workers’ wages.  

According to one CBC, drivers were paid R12 000 a month, team leaders R5 400, runners R4 500 and litter pickers R4 000 a month. 

Our informant (‘Buthelezi’) explained that for about two years, his CBC only received the salary payments. The development contractor would handle other running costs such as plant and equipment hire, office rental, stationery, personal protective equipment, accountants, lawyers and human resources specialists. 

“So at the end of the month in my bank account I will, for example, get R300 000.  I would have to minus my salary and the workers’ wages and return the rest of the money to the DC within 24 hours. 

“Something we fail to understand is how is this building a relationship with a bank if every month a large amount come in and then almost immediately it goes out,” said Buthelezi. 

How the money was spent remains opaque, but some idea can be gleaned from an invoice from Gundo and Nokeng which amaBhungane has seen. 

Watch: AmaBhungane journalist Tabelo Timse takes us through her investigation.

For each of five CBCs, Gundo and Nokeng would invoice R300 000, or R3.6-million over the year. But this figure was higher than the CBCs actual expenses. The CBC would draw down sufficient money to pay staff and overheads, then return the rest to the development contractor.

Multiply R3.6-million by five CBCs and and five years, and we arrive at a figure of R90-million. We know that Gundo and Nokeng were paid R130-million over the five years, leaving a gap of R40-million. 

Although we do not know their other expenses such as buying trucks, office rental, fuel and maintenance and other sundries, these seem unlikely to have come to close to R40-million. 

Complaints that were ignored 

AmaBhungane conducted extensive interviews with various waste collection CBCs mentored by different development contractors. None was willing to be identified, fearing victimisation. 

An amaBhungane analysis of documents we have seen suggests that the heart of the discontent is the difference between the bid specifications, which set out the roles and responsibilities of the development contractor, and the service level agreements which followed.

 For example, according to the bid specifications, each refuse removal CBC must be supplied with two waste collection trucks. However most CBCs received only one truck . (The exception being those working for Sung Sungu.) The recyclers received one bakkie (other than one recycler from Before Dawn who did not receive a vehicle at all). 

Another issue is the secrecy around the five-year investment of funds on behalf of the CBC and how the profit due to them was actually accounted for.

In 2019 a compliance report was compiled by a former waste department official who analysed Gundo Nokeng’s services following public complaints.

He concluded, “Neither the CBC or their financial advisors are aware of the intricacies of the Thokoza Palm Ridge approved financial plan or whether it is being monitored or evaluated against projected targets and milestones.”  

The disgruntled Gundo Nokeng CBCs say they were shocked to find out their investments were less than R300 000, when they were expecting a pay-out close to R3-million. 

The project manager for Gundo Nokeng, Vongani Shirilele, defended the deviations in a response to amaBhungane. 

He said the bid document was simply a guiding a tool for adjudication of the tender. The actual operational guiding manual was the service level agreement.

Shirilele declined to give details on how the investment pay-out was calculated, saying only that it was based on the financial plan submitted to the municipality. 

The municipality did not respond to questions. 

AmaBhungane analysed invoices and found other contradictions. 

For example, the CBCs contracted to MCC-Before Dawn were paid R21 000 a month instead of R30 000. These CBCs had also not received their final salaries and investment payouts. “We have no idea where the investment money is, if it exists,” said one CBC.

The chief executive of Before Dawn, Velani Magagula, declined to answer questions, citing a non-disclosure agreement with the municipality that prevented him from revealing anything about the contractual relationships without “the express prior written consent of Council”.

Training in business skills

Despite the onerous daily work requirements, the CBCs were also expected to attend classes. The development contractor was tasked to ensure that each beneficiary would be trained in business skills and attain a minimum NQF6 qualification from an accredited institution during the five years. 

The Gundo-Nokeng CBCs say they were expected to register at Unisa, but they had objections to distance and online learning. “Most of us have matric. We are not used to laptops and prefer old school learning. We organised a trainer ourselves, but the development contractor rejected this,” said one. 

Shirelele from Gundo Nokeng said the CBC’s preferred trainer was four times as expensive as Unisa. Despite this, after negotiations on the price, training was approved.

Shirelele said it was the CBCs themselves who lacked interest in the training and never replied to emails asking them which course they would like to pursue.

The recycling project

The recycling project was treated separately from the waste disposal projects, with different specifications, but was part of the same tender and aimed at training recycling cooperatives or small medium and micro enterprises.

The bid document specified that the development contractor was to implement a training programme in office administration and business administration. “The members of the cooperatives shall be given all the necessary support by the development contractor to ensure the sustainable running of their business,” stated the bid document.

The development contractor was to ensure that the public offloading facility provided by the municipality was equipped with office facilities. The waste recycling site was to be provided with equipment including balers and plastic granulators. 

The development contractor was also to arrange a standing agreement between recycling cooperatives and recycling companies to secure buyers for the material. The money derived from selling material from the recycling centre would be for the cooperative account. 

Although the bid is very clear on the responsibilities and expectations of the development contractor to the recycling CBC, it appears that each mentor had its own interpretation of the specifications.  

Recycler Kenneth Tshabalala, the one person willing to speak under his own name, said that, at the end of the contract he only received a Mahindra bakkie.

“For years we complained to the municipality about this project and how we were being treated by the development contractor but nothing was done. Some of us have been labelled as trouble makers because we asked questions, and we have been threatened with dismissal and that we won’t get our benefits.”

“I was not getting a salary and I have no investment payout to look forward to.  Honestly this project is a scam after all these years I have nothing to show for it,” he said.

Tshabalala added that the facilities with baler machines and plastic granulators never materialised.

The tender document specified that each development contractor implement a community outreach programme which would teach environmental awareness. 

But the service level agreement said nothing about community outreach, and according to Tshabalala and other recyclers, this never happened.

Monitoring and evaluation

The project’s failure to deliver on empowerment benefits can be attributed to a woeful lack of oversight by the city of Ekurhuleni.

This was despite the bid specification that there should be should be supervision, monitoring and evaluation.

The bid documents required monthly meeting between officials, development contractors and CBCs. However the CBCs claim that meetings were only convened when workers protested or when there was a dispute.

Exacerbating the lack of oversight, the municipality had a contract with the development contractor, but none with any of the CBCs. Each CBC had a contract with the development contractor, and then another with their own general workers. 

“It’s like the municipal officials released themselves from any responsibility and this is why there were many protests around this project. There were mixed messages and aggrieved parties didn’t know where to go for help,” Tshabalala said.

He said politicians and officials got involved after media attention, but did not solve anything. 

Another CBC said municipal officials did not respond to their requests for a meeting to discuss the outcomes of this project. “How do the officials and politicians know we received what is due to us. They are only relying on the DC’s reports.” 

A new contract, but not new hopes

The contract ended on June 30. A new waste removal tender has been issued to replace it. But the new tender requirements have dashed the hopes of CBCs who were hoping that this time, they could be development contractors themselves, based on their five years of experience.

According to the new bid specifications, a bidder must have at least nine waste removal trucks, R3-million in annual turnover and a minimum of 37 workers, including general workers, drivers and safety officers. 

“After participating in this project, we don’t even qualify to subcontract on this new one because we don’t have enough equipment or financial muscle. All we can do is to apply as another employee … because we have the experience,” said one CBC. 

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