Gas

Karpowership consortium: In affidavit, losing bidder claims ‘blatant corruption’, fingers Mantashe ‘associate’

By amaBhungane

29 April 2021

Daily Maverick article here

The multibillion-rand tender for the supply of emergency power was rigged by top bureaucrats and associates of Mineral Resources and Energy Minister Gwede Mantashe, a losing bidder has claimed in court papers.

How does he know? They allegedly offered him a majority share of the 2,000-megawatt programme first before most of it was awarded to the controversial Turkish-led Karpowership SA instead.

The explosive allegation was made in an affidavit deposed to by Aldworth Mbalati, the founder and chief executive of DNG Power Holdings, a company that had hoped to win a substantial part of the emergency procurement, officially known as the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

DNG filed urgent papers in the Pretoria High Court this week to challenge the bid outcome. The company’s allegations are untested and are expected to be fiercely contested.

In his affidavit, Mbalati recounts being courted by “a businessman with close ties to [Mantashe]” last July, a month before the Department of Mineral Resources and Energy (DMRE) published the bid. The businessman, whom he does not name, allegedly told Mbalati that the tender would soon be released – and that the outcome would be predetermined.

The businessman, Mbalati states, insisted that DNG “should be assisted by certain undisclosed parties should it wish to be a preferred bidder and ultimately be awarded the tender” and that he, the businessman, would be able to “facilitate the relationship with the undisclosed parties”.

Mbalati states that he refused to be associated with any collusion or unlawful conduct.

Soon, Mbalati states, he began to see what he regarded as evidence that the tender was being manipulated.

On about 26 October 2020 he got information that a representative from Karpowership SA had approached “a close family member” of Mantashe for an extension of bid deadlines.

As evidence of this claim, Mbalati attaches to his affidavit a forwarded SMS which reads: “We’ve got some intel from the main principal’ wife that our requested extension has been under consideration & they my (sic) may afford bidders a 3week delay in submission & it should be announced imminently.”

Although Mbalati is not explicit, the “main principal’ wife” is evidently a reference to Mantashe’s wife, Nolwandle.

Four days later – and just minutes before the 30 October 2020 deadline, according to Mbalati – bidders were informed that the deadline would be extended by a month.

Mbalati alleges that two days later, on 2 November, the unnamed businessman asked him to attend a cloak-and-dagger meeting, which turned out to be with a “familial relation” of Mantashe as well as a “senior official” of the DMRE and one of the official’s direct subordinates.

At this meeting, in an upmarket Pretoria restaurant called Kream, Mbalati was allegedly offered help to win the bid. He refused the offer which he claims led to a backlash that would ultimately see his company’s bid disqualified.

“I was escorted to a specific table. However, while being escorted to my table, it appeared to me that the restaurant had allowed only a limited number of guests onto its premises that afternoon. In fact, the restaurant turned out to be occupied by a single party only and appeared to have been temporarily closed to the public at large.

“At this meeting… I was asked by the Senior DMRE Official how they (being the attendees), could help in respect of the tender… I emphatically responded that [DNG] required no assistance in compiling its Bid Submissions and that the best way the attendees could help, was not to interfere with the tender process. My remarks were met with anger and vitriol by the attendees.”

Mbalati alleges the DMRE subordinate then told him, “One thing you must understand is that there is a system in this country and if you don’t work in accordance with that system you will fail, even if your project is the best, and I suspect that your project will be the best but that means that you must be part of the system.”

Mbalati says this was unacceptable and he left the meeting.

Mbalati did not identify the alleged conspirators in his affidavit because, he claims, he is pressing criminal charges against the people involved.

“I have been advised not to disclose the identities of the various individuals at this point in time. However, should this Honourable Court deem it necessary, I am willing to take the Court into my confidence in relation to the identities of the various individuals.”

Mbalati provides no evidence that Mantashe was aware of the alleged conspiracy.

In the end DNG’s bid for 1,300MW out of the 2,000MW on offer was disqualified and 1,220MW of the 2,000MW went to Karpowership SA, which intends to moor floating power stations in three South African ports for 20 years.

DNG wants the high court to reverse DNG’s disqualification and set aside the appointment of preferred bidders. Pending a full hearing, it wants the court urgently to interdict the government from contracting with the preferred bidders.

“The [DMRE’s] ultimate decision to disqualify [DNG] was arbitrary and/or capricious and was meant as a draconian punishment for [DNG’s] refusal to engage in corrupt practices,” says Mbalati in his affidavit.

“The various parties who requested me to engage in corrupt practices… did so without any shade of shame – only malicious intent to find a new avenue to plunder state resources of an already ailing economy.”

‘Undue interference’

In his affidavit, Mbalati alleges the DMRE made repeated “material and substantial” changes to the rules governing the RMIPPPP in ways that specifically favoured Karpowership SA to the detriment of competitors.

Karpowership SA was DNG’s main rival, as both offered substantial gas turbine solutions in three locations, although Karpowership’s turbines would be on ships and DNG’s on land.

The request for proposal (RFP) for the RMIPPPP was released on 24 August last year and DNG started preparing a bid alongside other hopeful contenders. The deadline for submitting a bid notification – a detailed outline of the proposed bid – was 30 October.

This tight deadline was “extremely onerous and would, as a result thereof, preclude various energy suppliers from being able to participate in the tender processes”, says Mbalati.

Many potential bidders would have fallen by the wayside because they could not practically make the 30 October deadline and knew it well in advance.

Inside knowledge of a potential extension would have been invaluable, making Mbalati’s claim about Karpowership SA’s alleged intervention with Mantashe’s wife highly significant.

If this claim is true it provides an explanation for the DMRE’s decision to give bidders a month’s extension – but to announce it at literally the last minute: around 5pm on the day of the deadline.

Mbalati states: “Moments before the Bid Notification Submission deadline, and after [DNG] had submitted material confidential information regarding its bid, [DNG] together with the other bid contenders received a briefing note… notifying them that the entire Tender timeline… had been extended by approximately a month.”

The DMRE periodically distributed “briefing notes” to bidders to answer queries and announce modifications to the rules.

Briefing notes distributed by the DMRE show that there was a request on 13 October for the deadline to be moved. The identity of the bidder making the request was confidential, but it asked for an additional six weeks. Another confidential query arrived on 28 October, this time asking for “at least 2-3 months”.

Despite this, the DMRE appears to have given no indication that it would grant an extension until the last minute, meaning some bidders, like DNG, would have already submitted their bid notifications.

Mbalati speculates foul play specifically targeting DNG.

“Given the blatant corruption that [DNG] refused to be enjoined in… the risk became real that aspects of [DNG’s] Bid Notification Submission could be (and in all likelihood was) disclosed to competitors in order to assist them.”

DNG claims this sudden concession, as well as others that allegedly stacked the odds in favour of Karpowership SA, were the result of “undue interference by third parties”.

For instance, on 19 October the DMRE had also made a major concession by dropping a requirement that bidders needed various licences in place by the end of that month. Now all a bidder needed to show is that they had applied.

As with the original deadline, this requirement would have removed many competitors from the field.

“I submit that this relaxation came as a result of the fact that the predetermined tender awardees were unable to secure the necessary licenses [sic], permits and/or authorisations within the time period,” says Mbalati.

“The briefing notes… were unlawfully utilised in order to make fundamental and critical amendments to the RFP in a predetermined effort to ensure that some if not all the Preferred Bidders could (on the face of it), meet the strict requirements of the RFP, in order to give life to the predetermined decision to appoint the Preferred Bidders as the winners of the Tender.”

Among the amendments, Mbalati claims undermined competition was the late introduction of generous exemptions from local content requirements.

He says that well into the bid process the DMRE’s independent power producer office notified bidders that bidders could be exempted from the mandatory local content percentage of 40%.

Mbalati says: “In essence, this meant that all bidders were (prior to the amendments) mandated to procure 40% of their total resources and equipment from local South African suppliers.

“This stringent requirement precluded various additional companies and organisations from participating in the RFP as they from the outset knew that they would not have been able to meet the stringent and onerous 40% local content requirement within the allocated 2 months in which the final bids had to be submitted.”

He says the losers were those companies, like his own, which could comply with the 40% local content requirement “and the South African economy as a whole”.

Mbalati points out that DNG proposed building three land-based gas-fed power plants that exceeded the original local content requirement, whereas Karpowership SA’s leased powerships were constructed wholly offshore and “would merely be moored onto various South African ports”, meaning the “ultimate benefit to be derived by the South African government and its people is of a limited nature and is reversible”.

Karpowership SA managed to get a full local content exemption for all its ships from the Department of Trade, Industry and Competition (DTIC).

Mbalaiti comments: “Again, given the historic conduct of as well as the conduct surrounding [Karpowership SA’s] bid causes me to (verily) believe that this local content exemption was similarly unlawfully and/or irregularly granted.”

‘Last words’

DNG was, according to Mbalati, still confident of its prospects until the businessman allegedly close to Mantashe once again reached out on the eve of the winning bidders being announced.

“On or about 15 March 2021 [he] sent another message to me implying that [we] had won the Bid. However, he made it clear that should I not play ball with him and his associates, [DNG] would not receive the appointment as a Preferred Bidder, [DNG] would receive nothing and [DNG] would not be considered for any subsequent Tenders,” says Mbalati.

The night before the 18 March announcement of the preferred bidders, Mbalati says, he received a call from the businessman, “informing me that the announcement of the Preferred Bidders would be the next day”.

After that, he got a message from the businessman asking him to a meeting the next day.

“At or about 9h00 on about 18 March 2021 before the announcement of the Preferred Bidders, [he] attended at my offices enquiring whether I had any ‘last words’, to which I replied that I would await the outcome. In response, [he] told me that because of my answer, [DNG] would not receive anything.”

Mantashe’s announcement of the preferred bidders took place at 4pm that afternoon and Mbalati claims that it is only after his morning exchange with the minister’s alleged associate that DNG was suddenly informed that its projects were all disqualified due to unspecified failures to meet requirements.

After being notified of DNG’s disqualification, Mbalati says he received further communications from the businessman, “enquiring as to whether I had now, given the announcement, ‘learned my lesson’. This was directed at [DNG’s] refusal to engage with corruptive elements and individuals, and was a direct enquiry as to whether the [company] was now prepared to engage in underhanded and corruptive activity in order to secure future success in its bidding endeavours.”

Mbalati says that he secured a meeting with the DMRE’s independent power producer office a few weeks later to find out why DNG had been disqualified.

Despite DNG receiving and answering numerous technical questions from the DMRE after submitting its bid, Mbalati was belatedly told that his projects suffered from fundamental defects, which the department had not raised during the preceding correspondence.

DNG was now told it had “insufficient proof of ownership of the land rights in respect of the land to be utilised”; it had “insufficient proof of sufficient water supply to the proposed areas”; it failed to “provide for an uninterrupted fuel supply” and could not give comfort that its equity funders, which included Standard Bank and RMB, had the necessary balance sheet to fund the project.

“[DNG] has good reason to believe that undue influence played a decisive role… in the decision to disqualify [DNG] from the Tender process…. The decisions in respect of the disqualification of [DNG], are wrongful and unlawful and/or were made with ulterior motives in mind,” says Mbalati.

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