Sat, 21 Sep 2019

The Special Investigating Unit (SIU) is investigating a massive cost escalation on a contract to install fencing and information systems in South Africa's prisons. The value of the contract ballooned from nearly R477m to over R1.5bn in seven years.

The procurement process in awarding the contract to SA Fence and Gate is also under investigation by the SIU. The contract is between SA Fence and Gate and the Independent Development Trust (IDT) - an agency which is tasked with managing social infrastructure projects on government's behalf.

The cost escalations are set out in an April 2018 report to National Treasury from the IDT. News24 has seen the report.

Irregularities in the procurement process have been widely reported, and was flagged by National Treasury as problematic several years ago. While the cost escalations on the contract have been alluded to in the past, News24 can now reveal the full extent of the spend.

Treasury told News24 that only the accounting officer on the project could take the necessary steps if wrongdoing is uncovered - Treasury is not empowered to cancel contracts like this.


SIU spokesperson Nazreen Pandor told News24 that the investigation started in September 2017 and is expected to be completed in June 2019.

Despite the cost escalation, some of the work stalled in January 2018 due to payment disputes between the parties.

Treasury has also confirmed to News24 that it asked for another update on the status of the project, but none was forthcoming from the Department of Correctional Services. The department said it could not comment on the issue as it is before court.

SA Fence and Gate told News24 that the parties were trying to negotiate an amicable solution.

The payment dispute "critically affected" the completion of work at St Albans in Port Elizabeth and Westville in Durban, according to the document.

Correctional Services spokesperson Singabakho Nxumalo told News24 that while the department could not comment on the issue because of the legal dispute, he could confirm that "all our facilities have sufficient measures of security".

News24 sent questions to the IDT on May 14, and they have yet to respond.

The contract, signed in 2012, was to install high security fencing at 13 correctional facilities as well as integrated security systems. As of March 2018, over 17% of work was still outstanding at St Albans, and over 21% of work was still not finished at Westville.

This was supposedly because SA Fence and Gate suspended work over non-payment issues.

A closer examination of the numbers show that some of the cost escalation took place over just a few years.

Inflated contracts

For example, at Pollsmoor in Cape Town, the original contract value was R56.6m. When the contract was finished, in January 2015, R173m had been spent.

The value of the contract almost doubled at Umzinto in the space of three years, and almost tripled in three years at the Mthatha Correctional Facility. It tripled at Goodwood in the same time period, and doubled at Harrismith.

SA Fence and Gate was unable to explain why the value of the contracts escalated in this way.

Shawn Phillips, Group Legal and Compliance Manager for the Sasstec group of companies, SA Fence and Gate's parent company, told News24: "...we must record that due to the sensitive and high security nature of the project, we are bound by confidentiality agreements with the employer and accordingly, we are not entitled to simply share every detail of the project with you let alone to allow it to be reported on."

He said the company and its partners had carried out the work as instructed and "we cannot comment on the costs associated and we suggest that you direct this enquiry to the IDT for response".

He said the parties were currently discussing ways to resolve the matter amicably.

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