20 September 2002
In March 2002, Zama was confirmed as the Preferred Bidder for the Komatiland transaction by Cabinet. Negotiations commenced with Zama to finalise the necessary legal documentation required to reach closure of the sale transaction.
Whilst negotiations with Zama were in process, Paharpur on May 20 2002, instituted legal proceedings in the High Court of South Africa (Transvaal Provincial Division) to have the decision of the Bid Evaluation Committee, the Board of SAFCOL and Government set aside. The reason for this application was that it was claimed that the integrity of the entire process was compromised, as a result of which the process was neither fair nor equitable nor competitive, as a result of the alleged infiltration of their bid.
Since the allegations made against A Nkuhlu on 7 July, 2002 in the Sunday Times, regarding alleged improprieties in the Komatiland bid process, which was award to Zama Resources (Zama), Government has undertaken stringent evaluations of the processes utilized in restructuring of the forestry assets.
Government has now received the report from the Public Service Commission, which indicates that breaches of Public Service policy have occurred, but that there has been no breach of the bid evaluation process. The report from the Auditor General is still awaited but Government believes the findings of the Public Service Commission are sufficient for it to make decisions regarding the way forward in the Komatiland transaction.
At a meeting of Cabinet on Wednesday September 18, 2002, this matter was discussed and confirms its approval of the recommendation from my department as detailed below:
Cabinet approved the recommendation to cancel the current Komatiland Forest sale process on the basis of non-compliance with the bid rules and procedures and recommence the process with requests for new bidders.
The approval would further confirm advising both Zama Resources and Paharpur that a new transaction process would commence immediately and that they could express their interest in being included in this process.
It also recommended that whilst Zama Resources and Paharpur are invited to express interest in the new transaction process, should they be found to have committed any unlawful act in the initial process, they would be disqualified from the bid new process.
The decision to cancel the current Komatiland Forest sale process is based on a breach of the bid rules and regulations, and legal advice received. I would re-iterate that the termination is based on a breach and not on any proven unlawful acts by either of the parties. Several incidents which occurred during the bidding process have resulted in the bidding process being tainted. This compromising of the integrity of the bidding process was confirmed to Government in opinions from Senior Counsel.
After lengthy discussions with our legal advisers we believe that “the entire process should be set aside”.
As recommended to Cabinet, both Paharpur and Zama have been invited to participate in the new process for the sale of the Komatiland Forest assets. This will start with the calling for expressions of interest from all potential interested parties. Again I would re-iterate that both Paharpur and Zama are welcome to be involved in this new transaction process. However, should it be found that unlawful acts were committed by either of the two bidders by any further investigation probing such unlawful acts with regard to the now cancelled process, such guilty bidder(s) will be disqualified from the new process.
The new Bid process for the forestry assets of Komatiland will commence in the near future. The process itself will be transparent and carried out within a system of stringent checks and balances. I would also record that these checks and balances are not something new that has been introduced but are based on a re-examination of the current control mechanisms within all of our restructuring transactions and, with hindsight, will be strengthened in certain areas. This will largely relate to the Chairman of the Bid Evaluation Committee being an independent and impartial member of the Bid Evaluation Committee and an independent audit being carried out on the recommendation of the Bid Evaluation Committee prior to the recommendation being forwarded to either SAFCOL or Cabinet for their respective approvals.
The Bid Evaluation Committee will have clearly defined rules of conduct during and subsequent to the bid evaluation process, which will include onerous confidentiality undertakings, the recording and minuting of all meetings, a defined process to evaluate each bid within the evaluation criteria of Government through a score card approach, which each member will complete independently and which will be collated by the Transaction Advisory team. No Bid Evaluation Committee member will have any contact with the short listed bidders except through the Transaction Adviser and will not be allowed to discuss the bid process with any party.
Once the Bid Evaluation Committee has reached a recommendation, the above process will be subjected to scrutiny by an independent audit to determine the validity of the bid process, prior to the recommendation being submitted to the SAFCOL Board.
As this process will take some time to reach a final conclusion, I would confirm that after discussion with SAFCOL, there is no concern that the Komatiland forest assets cannot be managed effectively and efficiently during this period.
In relation to the allegations against Mr. A Nkuhlu, the executive summary from the report on the investigations by the Public Service Commission is attached to this media release. The report confirmed that the rules of the Public Service had been breached by Mr. A Nkuhlu and recommended that my Department consider disciplinary against him. Prior to completion of the required charge sheet, Mr. A Nkuhlu resigned from his position within my Department. We therefore have no jurisdiction to take any action against him as the recommendations forthcoming from the Public Service Commission report were confined to a breach of Public Service Rules and Regulations and effectively the matter is closed.
In conclusion I would like to point out that since 1999, there have been 15 restructuring transactions carried out within my Department and this, is unfortunately the first instance of a process being tainted.
The restructuring process being carried out through my Department is progressing as envisaged.
The Komatiland incident should strengthen rather than weaken the ongoing and future restructuring transactions and enable us to conclude these in both an open, transparent manner and in a timely fashion for the benefit of all South Africans.
I will personally assume more critical control through the strengthening of internal audit procedures and ongoing checks and balances to reduce the likelihood of this type of situation recurring in the future.
Contact person:
Pumla Mtyeku
012 431 1133
082 903 2423