News24 | POWER CONNECTIONS | R64m paid for R32m project: Hawks target more alleged City Power graft

• News24’s ongoing Power Connections investigative series features in the Hawks’ latest raid on City Power.
• The cash-strapped electricity company’s senior executives face possible criminal charges for alleged widespread corruption.
• Despite City Power denying that a raid happened, the Hawks confirmed that a “seizure” occurred at the entity.
• For secure, anonymous communication with News24’s investigations team, click here.

City Power’s payment of R64 million for a contract worth R32 million is part of the Hawks’ latest raids and ongoing corruption investigations into the broke City of Johannesburg-owned power utility.

Highly placed sources told News24 that arrests of the entity’s executives, including CEO Tshifularo Mashava, were imminent as the Hawks finalised their investigation into corruption worth around R500 million.

On Thursday, the Hawks descended on the electricity entity’s headquarters on the southern outskirts of the Johannesburg CBD as they intensified their high-level probe at City Power.

This followed the Hawks’ first raid on City Power in July, when they began investigating alleged fraud and corruption at the cash-strapped power entity.

According to internal City documents, City Power had a negative bank balance of roughly R16.3 billion, underscoring its dire financial position.

On Thursday, several Hawks investigators, travelling in at least three vehicles, descended on the entity with a search-and-seizure warrant to download purchasing orders, contract details and tender files, among other potential evidence, for a new contract to buy electrical transformers for power reinstallations in several Gauteng municipalities.

Transformers transfer energy from one electrical circuit to another using electromagnetic induction.

News24 has seen the evidence that the Hawks’ investigators stated in internal documents detailing alleged corruption and price inflation.

An administrative file titled “Gauteng Invoice Calculator” showed a line item for the “replacement of priority transformers at various municipalities”, stating that R32 million would be paid for this project.

News24 knows the company’s name, but to protect the investigation’s integrity, it will not be disclosed yet.

However, purchasing orders that form part of the Hawks’ evidence showed that City Power paid its contractor R64.4 million, more than double what the entity said it would cost, without changes to the scope of work.

READ | POWER CONNECTIONS | R500m corruption - Inside the Hawks’ City Power investigation

The transformers were bought as part of the Gauteng Energy Response Plan, which sought to reconnect several townships in the province to the grid after months and years without power.

City Power was nominated as the programme’s implementing agent for the provincial energy plan.

The alleged inflation of prices during the procurement of the transformers has drawn interest from the Hawks’ investigators, who sources close to the investigation said were readying to make arrests “soon” at City Power.

News24 has established that Mashava, the entity’s chief executive, leads the list of senior managers believed to be facing arrest for allegedly overseeing the supposed graft.

Price inflation features prominently in the Hawks’ case docket, including possible bribery when an R8.6 million quote for the supervisory control and data acquisition system, or SCADA, ballooned to R100.6 million without the job specifications changing or additional purchases for the John Ware substation in the CBD.

The SCADA system is sophisticated hardware and software technology the electricity company uses to remotely monitor, control and operate its electricity network.

In May, News24’s ongoing Power Connections series revealed that the purchase of all the equipment and software for the monitoring system would cost, at the top end, R7.1 million.

According to City Power’s quotes, the remaining R1.5 million (from an initial allocated R8.6 million) would be for the system’s engineering design, construction, installation, testing and commissioning.

However, more than R100.6 million was paid to Central Bridge Construction in December 2023, when the equipment and software technology cost suddenly shot up from R7.1 million to more than R61.2 million.

READ | POWER CONNECTIONS: City Power board launches corruption probe after News24 exposé

A staggering R17.5 million was paid for installation, despite City Power’s highest sourced quote being R120 000 to deliver the system; and R8.7 million was paid to the contractor for the engineering design of the system, which the municipal company had projected to cost a meagre R960 000.

This brought the subtotal to roughly R87.5 million, with the remaining R13.1 million being value-added tax.

City Power spokesperson Isaac Mangena said the Hawks “visited” the entity on Thursday and denied that it was a raid, saying the investigation began last year.

Mangena added:

He did not respond to detailed questions about the alleged inflated prices detailed in the Hawks’ evidence, the expected arrests of the power company’s senior management and whether Thursday’s raid was evidence of brazen graft at City Power.

Instead, Mangena reiterated that the entity had not been raided, saying that “no items were taken, including documents and devices”.

“In fact, the Hawks have formally requested that some of our executives deliver laptops next Thursday, which indicates that the urgency referenced has been overstated.”

He directed further enquiries to the Hawks, saying: “If you maintain that the visit constituted a raid, we encourage you to engage the Hawks directly and obtain evidence of any material that was confiscated during the raid.”

However, Hawks spokesperson Warrant Officer Thatohatsi Mavimbela said their Gauteng office conducted “a search and seizure in terms of the Cyber Crime Act”.

Under the act, the seizure involves downloading financial, supply chain management and related information from an entity’s SAP system.

READ | Hawks raid City Power Joburg HQ in R500m corruption investigation

Mavimbela added that the criminal counts the Hawks were looking to charge the City Power suspects with included contravening the Municipal Finance Management Act, the Prevention and Combating of Corrupt Activities Act, and the Public Finance Management Act.

The Hawks also seized at least four payments made to a financial firm, Masego Consulting Investment Trading, which had received a total of R55 million authorised by Mashava’s office. These payments were part of an outsourcing arrangement for managerial responsibilities, even though such tasks are outlined in the job descriptions of high-earning City Power executives.

The outsourced work included creating a business and financial case for establishing a new department, organising a business breakfast and compiling professional reports for the entity.

Masego’s director, Tebogo Moatshe, previously denied that her firm had received R55 million from City Power, saying the consultancy “provided deliverables beyond the scope of City Power’s teams”, adding that she “tailored solutions that would not undermine or replace any permanent roles held by City Power employees”.