Contracts and appointments awarding multi-million-rand municipal housing allocations to three private contractors under the eThekwini Metropolitan Municipality’s Human Settlements Infill Housing Programme have been declared constitutionally invalid and set aside.
The ruling, handed down on 5 August (and amended on 6 August) by Judge M Victor in the Special Tribunal, followed an investigation by the Special Investigating Unit (SIU) under Proclamation 32 of 2020 into long-running procurement irregularities within the municipality.
The matter centred on the participation of three private entities: Woodglaze Trading (Pty) Ltd (trading as Lady Brick Block Property Development), Madupha Business Enterprise CC, and Ready Homes CC.
The housing initiative, launched in 2000 to develop vacant land in the Phoenix area for lower- and middle-income home buyers, degenerated into a series of procurement failures spanning over two decades.
The Tribunal found that Madupha Business Enterprise CC and Ready Homes CC were introduced into the development programme without public advertisements, competitive tenders, or evaluation by municipal Bid Evaluation and Adjudication Committees. Instead, both entities had functioned as informal subcontractors or recipients of redistributed sites.
Woodglaze Trading was originally appointed in 2005 to replace an underperforming contractor, but its contract was repeatedly extended and renewed, most recently in 2021, without the periodic statutory reviews required under Section 116(3) of the Local Government: Municipal Finance Management Act (MFMA).
Addressing arguments from the private contractors regarding the SIU’s delay in launching the review, Judge Victor acknowledged that while the SIU’s delay was unreasonable in certain respects, the interests of justice and the severity of the constitutional breaches demanded that the matter be heard. The judge emphasised that municipal procurement cannot occur “by accretion, substitution or informal continuation” in violation of Section 217 of the Constitution.
In fashioning a remedy, the Special Tribunal sought to balance the rule of law against the protection of innocent third-party beneficiaries and home buyers.
The appointments, contracts, and participation arrangements for Woodglaze, Madupha, and Ready Homes are declared unlawful and set aside.
The Tribunal declined to issue blanket profit disgorgement or accounting orders, citing a lack of evidence that the developers acted fraudulently and the potential harm to third-party home buyers. Contractors are permitted to complete and sell housing units where construction had already commenced prior to the judgment.
The respondents are strictly prohibited from starting construction on any new dwellings under the invalidated agreements.
eThekwini Municipality must initiate a fresh, legally compliant competitive bidding process if it intends to continue housing developments under the Programme.
