A major part of a R7bn project undertaken by Transnet to upgrade its Durban container terminal has been halted amid allegations of tender fraud, BEE fronting and collusion between Transnet employees and the suppliers.

News24 has learnt that Transnet's executive management team put the project on hold last month after it was presented with a forensic report compiled by Paul O'Sullivan and Sarah-Jane Trent of Forensics for Justice (FFJ).

Transnet has now launched an independent forensic investigation into the companies who were awarded a R3.6bn portion of the project – a joint venture named CMI Emtateni which is made up of Italian construction firm CMC di Ravenna and a company named CMI Infrastructures.

Construction magnate and former Greytown mayor Philani Mavundla is a co-director of CMI Infrastructures together with Paolo Porcelli, the CMC di Ravenna head of operations for southern Africa at the time.

In June this year he was appointed CEO of CMC di Ravenna, and is now based in Italy.

News24 understands that Transnet also registered a docket with the Directorate for Priority Crime Investigation, or the Hawks.

Transnet did not respond to detailed questions from News24 other than to refer to a press statement it had issued announcing that it had halted work on the "main marine construction works package" of the project, which had been awarded to CMI Emtateni.

CMI had been awarded the contract, worth R3.6bn, as part of Transnet's R7bn initiative to widen and lengthen berths at the Durban container terminal to allow new generation container ships to safely dock for loading and offloading.

R100m SARS debt

The contract with CMI Emtateni was signed in July 2018, Transnet said, and in August 2018 one of the unsuccessful bidders filed an urgent court application to overturn Transnet's decision to award the work to CMI Emtateni.

Transnet indicated that the report by FFJ was unsolicited.

Pending the outcome of Transnet's investigation into allegations raised by FFJ, work on the project would not go ahead it said.

The FFJ report details an extensive BEE "fronting" scheme and also shows how Transnet apparently missed glaring red flags when awarding the tender to CMI Emtateni.

CMI Emtateni has denied all allegations of impropriety in a written response through its attorneys who represent both CMC and CMI Infrastructures, the members of the joint venture.

Some of the red flags include that individuals involved in the joint venture have outstanding debts with the South African Revenue Service (SARS) totalling more than R100m – the majority of this debt belonging to Mavundla – personally and through his company, PG Mavundla Engineering.

Mavundla has been awarded several lucrative tenders including a R1.2bn stake in Eskom's Ingula Pumped Storage Scheme, the multibillion-rand construction of King Shaka International Airport and the R1bn construction of Sibaya casino.

He shot to fame when he offered to pay for the costs of the non-security upgrades to Jacob Zuma's Nkandla homestead in 2014.

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Fronting allegation 'an insult to black partners'

But O'Sullivan and Trent found evidence that suggests that some of the joint venture members would have benefited from the tender and work undertaken by CMC and its sub-contractors, without ever doing any actual work.

CMI Emtateni denied this, saying that the majority of the work, at a value of R2bn, would be undertaken by the BEE partners of the joint venture.

"The fronting allegation is not only ridiculous but is also an insult to our black partners. In terms of the contract it's an express condition that there must be an equal split between the joint venture partners," CMI Emtateni said.

CMC, it emerged, is also in financial dire straits back in Italy and the FFJ report mentions suspicions that the Transnet tender could have been a potential lifeboat for the company.

This allegation was also dismissed by the attorneys for CMI Emtateni, who strongly denied that the Transnet project was a lifeline for CMC.

This week, however, CMC filed insolvency papers in the Ravenna court, sparking fears that the construction company, which has a global footprint, was in a far worse financial position than feared.

In response to News24's queries, the company was quick to allay fears that its "so-called" liquidity problems would affect its ability to fulfil the Transnet contract.

"The so-called liquidity problems emanated from some of the clients who failed to pay CMC on time, thus affecting the servicing of our public-listed bonds timeously," the company told News24.

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Familiar names

The allegations of tender fraud rest on a few key misrepresentations and hidden liabilities that a proper due diligence by Transnet should have picked up.

FFJ highlight these in detail in its report which News24 will analyse and report on in detail in follow-up stories.

Along with Mavundla, familiar names that have been linked to allegedly dodgy government contracts and tenders in KwaZulu-Natal can be found in the lists of top officials in the various companies who form part of two consortiums who are the remaining partners in the CMI Emtateni joint venture.

CMI Emtateni said it was not aware of any allegations of irregularities regarding the directors of companies that form part of the joint venture – including (among a host of others) Mabongi Flora-Junior Mpisane, better known as Shauwn Mpisane, and her sister, Nosipho Ngubo.

News24 will profile each of the partners in the consortiums in future articles.

CMC Emtateni is made up of CMC di Ravenna (1%), CMI Infrastructures (69%), the Omame Emtateni consortium (15%) as well as the Masinya consortium (15%).

CMI Infrastructures is 51% owned by Mavundla, and 49% owned by Porcelli.

The same media statement issued by Transnet claimed CMI Infrastructures was incorporated as a company to finally seal a 10-year relationship between CMC di Ravenna and Mavundla – who claim to have worked on various projects together – but as an unincorporated joint venture.

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'End of the road' for state capture

The projects Mavundla and CMC worked on together previously include the Eskom Ingula project in Ladysmith worth around R16bn and the construction of the John Ross Highway, which runs between Empangeni and Richards Bay.

FFJ suggests that CMI Infrastructures was incorporated just before the tender documents were submitted in an effort to hide the multimillion-rand tax judgments against Mavundla's companies and those of others in the joint venture.

CMI Emtateni said that "all our BBBEE partners have provided us and Transnet with valid tax clearances from SARS and [the central supplier database]. We have not been informed by Transnet of any SARS judgments during the evaluation process, which would have penalised the joint venture during the vigorous tender evaluation process."

To date, no payments have been made by Transnet to the CMI Emtateni joint venture.

"State capture as we know it at Transnet has finally come to the end of its road, which should leave Transnet in a position to clean up and get on with the crucial job of running the railways and ports. Only a few short months ago, it would have been impossible for us to engage with Transnet and get the result we have seen," FFJ told News24 in response to queries over its report.

"However, the winds of change are blowing in South Africa. This is proof that a new era has dawned and the future for South Africa looks a lot brighter than it did under the Zuma regime."

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