Merafong’s R69.7 million tender: Why the R34.9 million price difference?

How does a municipality that cannot reliably provide water and electricity to its residents justify awarding a R69.7 million contract when its own Bid Evaluation Committee recommended a qualifying bidder at R34.9 million?

This is the question the Organisation Undoing Tax Abuse (OUTA) wants Merafong City Local Municipality to answer following its preliminary investigation into serious procurement irregularities surrounding a five-year contract for an integrated financial management and internal control system.

The system is intended to help the municipality manage its finances, billing, revenue collection and expenditure. Yet the procurement process itself has raised serious questions about how public money is being spent.

The investigation centres on tender F(B&T) 10/09/2324, for which two companies submitted competing bids. For the purposes of this statement, OUTA refers to them as Company A and Company B.

Company A submitted a bid of approximately R34.9 million and was recommended for appointment by the municipality’s Bid Evaluation Committee.

Company B submitted a bid of approximately R69.7 million, almost double the price of Company A. Despite the evaluation committee’s recommendation, the municipality ultimately awarded the contract to Company B.

This decision raises serious questions about how the municipality evaluates tenders, spends public money and ensures that residents receive value for money.

For residents already experiencing water shortages, electricity interruptions and deteriorating municipal infrastructure, these questions cannot simply be dismissed as administrative disagreements.

Every rand spent unnecessarily is money that could otherwise be available to address the municipality’s growing service delivery crisis.

Almost R35 million more. Who authorised it, and why?
OUTA’s investigation found that the municipality’s Bid Evaluation Committee (BEC) recommended Company A for appointment following its assessment of the competing bids.

The evaluation records show:
Bidder                                                                    Bid price                   Evaluation score
Company A (Pty) Ltd (recommended bidder)         R34,858,905.90         80.00
Company B (appointed bidder)                               R69,759,060.79         0.09

Despite the significant difference in both price and evaluation scores, the Bid Adjudication Committee recommended Company B, which was subsequently appointed.

The difference between the two bids was R34,900,154.89, meaning the appointed bidder was approximately 100% more expensive than the bidder recommended by the evaluation committee.

OUTA’s preliminary findings also raise concerns about whether the applicable 80/20 preference-point procurement framework was correctly applied.

The investigation concludes that Company B’s bid should not have proceeded through the evaluation process under the applicable framework.

While the lowest-priced bid does not automatically have to win a government tender, any decision to appoint a substantially more expensive bidder must be lawful, properly motivated and supported by the procurement records.

“When a municipality is struggling to pay its creditors and provide basic services, a decision to award a contract costing almost R35 million more than the recommended bid demands a very clear explanation. This is public money.

Municipal officials cannot simply disregard evaluation recommendations without being able to demonstrate that their decisions were lawful, justified and in the public interest,” says Rudie Heyneke, OUTA senior project manager.

Conflicting technical reports raise further concerns
OUTA’s investigation also identified two conflicting technical evaluation reports prepared by the technical evaluator Investment Holdings.

One report supported the appointment of Company B, while the other recommended Company A.

According to the records reviewed by OUTA, the technical evaluator subsequently withdrew the report favouring Company B, explaining that it had been developed unilaterally and without the necessary authorisation.

Despite this withdrawal, the municipality proceeded with Company B’s appointment.

The disputed appointment was subsequently challenged by Company A, which obtained a High Court interdict in January 2024 preventing implementation of the contract pending the outcome of an internal appeal.

OUTA wants the municipality to disclose the outcome of that appeal, the legal basis for any subsequent implementation of the contract and the current status of the appointment.

These are not minor procedural concerns. They go directly to whether the municipality followed a fair, transparent and lawful procurement process.

OUTA asked for the records. The municipality failed to provide them.

As part of its investigation, OUTA submitted a formal request for information under the Promotion of Access to Information Act (PAIA), seeking records relating to the procurement and appointment. The original PAIA request was in October 2024.

Despite repeated follow-ups, the municipality failed to provide the requested information.

OUTA escalated the matter to the Information Regulator on 13 January 2025.

Although the Municipal Manager responded to the Information Regulator on 13 February 2025, OUTA still did not receive the requested records.

This failure to disclose information has prevented OUTA from fully examining the municipality’s decision-making process and establishing the extent of any financial prejudice.

“What makes this even more concerning is the municipality’s failure to provide the records we requested. OUTA has followed the legal process, including escalating the matter to the Information Regulator, yet we have still not received the information needed to properly scrutinise this appointment. If the municipality believes it followed a lawful procurement process, it should have no difficulty providing the documents that support its decision,” says Heyneke.

OUTA maintains that the municipality’s failure to provide the requested information warrants further scrutiny of its compliance with PAIA and its commitment to transparent governance.

Residents are paying the price for Merafong’s financial crisis
The concerns surrounding this tender cannot be separated from Merafong’s broader financial and service delivery crisis.

The municipality has struggled for years with poor revenue collection, unpaid creditors, ageing infrastructure and recurring interruptions to basic services. According to National Treasury records, collections fell by 31.4%, from R765.34 million in 2023/24 to R525.26 million in 2024/25.

Publicly reported figures have placed Merafong’s debt to Eskom at approximately R1.6 billion and its debt to Rand Water at approximately R1.4 billion.

These debts have placed enormous pressure on the municipality’s ability to maintain reliable electricity and water services.

Residents have endured prolonged water shortages, deteriorating infrastructure and ongoing uncertainty over essential services.

The municipality has also been subject to financial recovery interventions, including a financial recovery plan, Eskom debt-relief arrangements and an electricity distribution agreement with Eskom.

Yet serious questions remain about whether the municipality is taking the necessary steps to control expenditure, improve financial management and restore public confidence.

The irony is difficult to ignore. A municipality in financial distress has awarded a multimillion-rand contract for a system intended to improve financial controls, while the procurement of that very system is now under scrutiny.

Residents are entitled to know whether the system is working, what has been paid for it and whether the municipality received value for money.

Recovery plans mean little without accountability
Merafong does not need another financial recovery plan that fails to address the decisions and practices contributing to its financial difficulties.

Government interventions and financial assistance must be accompanied by proper oversight, transparent spending and consequences where wrongdoing is established.

OUTA is calling for:

• An independent forensic investigation into the Company B tender, including the bid evaluation process, conflicting technical reports and final appointment decision.
• A full financial reconciliation of the contract, showing what has been committed, invoiced and paid, whether the system is operational and what value the municipality has received.
• Urgent scrutiny by COGTA, Gauteng Provincial Treasury, National Treasury and the Auditor-General to establish whether the procurement complied with the law and whether it has affected the municipality’s financial recovery.
• Referral of evidence of possible criminal conduct to the appropriate investigative authorities, including the Hawks, and consideration of an SIU investigation where legally warranted.
• Public disclosure of the procurement records, including the reasons for departing from the Bid Evaluation Committee’s recommendation, the disputed technical reports, the internal appeal outcome and the current contract status.

Where unlawful conduct is established, those responsible must face appropriate disciplinary, civil or criminal consequences, and recoverable public losses must be pursued.

Municipal accountability must be a priority ahead of the elections
As South Africa approaches the local government elections, the financial crisis in Merafong should serve as a reminder that municipal accountability cannot begin and end at the ballot box.

Residents deserve answers about how their money has been spent, who authorised questionable decisions and what steps are being taken to prevent further financial losses.

OUTA is not suggesting that the R34.9 million price difference automatically represents money lost. That is precisely why a forensic investigation and full financial disclosure are necessary.

But a municipality in financial distress cannot expect residents to accept unexplained procurement decisions while basic services continue to deteriorate.

Municipal leaders, both elected representatives and appointed officials, must be held accountable for the decisions they make with public money.

The people of Merafong should not have to choose between paying for basic services and accepting questionable spending decisions. They deserve both reliable services and responsible financial management.

OUTA will continue pursuing accountability for the procurement decisions identified in its investigation and calls on the relevant oversight authorities to act on these concerns.

The municipality must release the records, explain its decisions and account for every rand spent.