Fleet company that paid Julius Malema fails to deliver on Joburg contract


A year after it signed a contract to provide the City of Johannesburg with thousands of cars, bakkies and trucks, Afrirent lags far behind target – leaving the city with a bureaucratic headache and possible service delivery setbacks.

The fleet rental company’s underperformance raises questions about the city’s decision to appoint it and subsequent attempts to justify the appointment.

Last November, amaBhungane revealed how Afrirent had paid apparent kickbacks of R500,000 into a slush fund used by EFF leader Julius Malema and his party. We later showed that Afrirent had also paid R150,000 to a separate Malema front.

The city selected Afrirent in October last year to provide much of its vehicular service delivery backbone – without a competitive bid. The deviation from procedure came after an initial tender process was beset by delays and eventually cancelled.

Citing the delays, the city used a so-called Regulation 32 appointment to bypass a new competitive bid and piggyback on a contract Afrirent already had with Mogale City.

The use of Regulation 32 drew criticism, not least as the Joburg contract was ten times the size of the Mogale contract. Afrirent had also scored poorly in Joburg’s own cancelled tender.

Performance

Joburg contracted Afrirent for 30 months effective 1 November last year at a basic price of R1.26-billion to supply 2,761 vehicles.

In September this year, previous incumbent Avis told us it was still fielding and fuelling about 2,200 vehicles, with some overlap as Afrirent brought in replacements and Avis phased theirs out.

On November 13 this year – just over a year into the contract – the city told us it had received 1,555 vehicles from Afrirent. This was still only 56% of the requirement.

When we raised its delivery record with Afrirent in July, it said: “Although Afrirent may not be a household name like some of our competitors, we have the requisite capacity and experience to deliver on the CoJ [City of Johannesburg] contract… and are confident that within the next three months, we will have finalised delivery to CoJ.”

In September, Afrirent told us that our article – the initial one that exposed its payments to the Malema-EFF slush fund – had caused Afrirent’s reputation to be “impugned, with serious financial consequences. For instance, Absa has withdrawn its R1-billion facility and some original equipment manufacturers… being reluctant to supply Afrirent with vehicles.”

Presumably, it is Afrirent’s contention that this affected its ability to supply the city.

Absa clearly took the allegations against Afrirent seriously. In mid-December last year, when the contract was only six weeks old, then acting city manager Floyd Brink wrote to a senior Absa official, referring to Absa’s concerns “about the Afrirent regulation 32 contract, the recent media article published and the subsequent announcement of the forensic investigation by the City into the procurement process”.

Brink told them that the city’s preliminary investigation had revealed “no cause for concerns… We hope that you find this in order, that this letter will assist you in whatever decision you have to take.”

Approached for comment last month, an Absa spokesperson did not deny that the bank had declined a R1-billion mooted credit facility to Afrirent, but said: “We do not take financing decisions merely on the basis of newspaper articles.”

Afrirent chief executive Senzo Tsabedze refused further comment for this article other than to claim via WhatsApp that “Afrirent has delivered to the City according to the Contract awarded”. He reaffirmed a decision in September not to correspond with amaBhungane any further.

Avis again

With Afrirent struggling to deliver on time, the city has repeatedly asked Avis, as previous incumbent, to fill the gap.

After Afrirent missed an initial three-month transition deadline of the end of January 2019, Avis’s contract was extended to the end of April. When Afrirent remained behind target, Avis’s contract was extended again to the end of September, and again after that.

The Avis extensions are telling. Last year the city justified using Regulation 32 to appoint Afrirent by saying it could not have extended the previous Avis contract to allow time for a new competitive bid after cancelling the original tender.

A legal opinion from April this year agreed with the decision to cancel the initial tender, but said the subsequent use of Regulation 32 was not the best option open to the city. The opinion was commissioned by the city’s forensic and investigations service.

There would have been “nothing untoward in obtaining further extensions” to the Avis contract pending a new competitive bid, the opinion stated. It was “legally permissible”; Avis had already had its term extended during the ultimately cancelled process; and the facts that led to that decision had not changed.

The opinion stated that the benefits of extending Avis’ term as a temporary measure “far outweighed the Regulation 32 option”.

More costly

Not only has Afrirent performed below par, the city is paying far more per vehicle than would have been the case had it gone with other options.

amaBhungane’s initial article noted that Avis had bid in the cancelled tender to supply the new fleet at a cost of R1.42-billion over the five years that the tender envisioned. That would have worked out to R23.7-million per month, compared to Afrirent’s contracted price of R1.26-billion over half that length of time, or R41.8-million per month.

City records show that when Avis’s old contract was extended from November 2018 to January 2019 to allow time for Afrirent to bring in its vehicles, the city was to pay Avis R28.6-million a month to keep providing the same service.

That translates to a saving of many millions each month when compared to the contract price for Afrirent – R41.8-million a month – for essentially the same service.

The city seems unwilling to accept that this is a fair comparison, perhaps because it shows how expensive the choice to appoint Afrirent was.

Spokesperson Nthatisi Modingoane told amaBhungane: “The city has not been billed R42m p/m to date by Afrirent and all invoices received by them are well below R20m.”

But that is only because to date Afrirent has delivered far fewer than the contracted number of vehicles and therefore can only invoice for those actually in service. And the city is still paying Avis for the balance of its needs.

The city maintains it is unfair to compare a Regulation 32 appointment with the offers contained in the cancelled tender.

Modingoane told amaBhungane: “There were other options that, in law, were available to the city, including [extending the Avis contract]. However, the latter option historically posed other unintended consequences for the city as it reflects negatively on the city, as it creates a perception of bias and entrenching the incumbent service provider in perpetuity…

“To mitigate against this perception Regulation 32 was considered a better option since there was a fair comparison of a contract that had gone on a competitive bidding process and there was an assurance that the applicable [supply chain] policies of Mogale City had been followed.”

False start

In our original article, we reported how Afrirent got off to an inauspicious start. The competitive bid process to replace the existing Avis contract was botched and had to be cancelled.

Key moments in the decision to appoint Afrirent using Regulation 32 coincided with payments that Afrirent made to the account of Mahuna Investments – a company used for the benefit of Malema and the EFF, and fronted by a cousin of his.

It paid R300,000 to Mahuna on 25 July last year, the day before it met city officials and quoted the city for its appointment under Regulation 32.

The company paid a further R200,000 before its formal selection in October.

Afrirent said that it did not know Mahuna had anything to do with Malema, claiming that the payments were for work that it had contracted Mahuna to do in Limpopo unrelated to the Joburg contract.

In a more recent article, we showed that alibi to be severely lacking and revealed that Afrirent had paid another R150,000 to Malema via a different route – this time through a front company called Santaclara Trading, exactly a fortnight after the city had notified Afrirent of its selection on October 10 last year. DM

The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB Supporter to help us do more. Sign up for our newsletter to get more.