KURUMAN – The High Court in Kimberley has issued a stinging ruling against the Ga-Segonyana Local Municipality in Kuruman and its municipal manager Martin Tsatsimpe, setting aside a major public procurement contract and ordering a tax consultancy to repay millions of rands in inflated fees.

In a judgment delivered on 8 September, Judge President Pule Tlaletsi and Acting Judge Willem Coetzee declared both the award of Tender 06/2023-’24 for Value-Added Tax (VAT) recovery services to MNK Tax Advisory Services (Pty) Ltd and an interim month-to-month contract between the parties constitutionally invalid.

This follows findings of the Human Rights Commission earlier this year that show a municipality struggling with infrastructure, administration, and financial management.

The legal challenge was brought by competing bidder Maximum Profit Recovery (Pty) Ltd, which sought to review the municipal decisions.

In August 2023, the High Court had previously set aside an earlier VAT recovery tender awarded to MNK. Although the court granted a four-month suspension of invalidity, expiring on 17 December 2023, to enable the municipality to rerun the tender, municipal officials failed to conclude a lawful procurement process in time.

Illegal arrangement extended

Instead, Tsatsimpe allowed subsequent tender invitations to lapse whilst continuously extending MNK’s services under an interim month-to-month Service Level Agreement. Under this illegal arrangement, MNK continued to collect a lucrative 10% commission on all VAT refunds recovered from the South African Revenue Service (SARS).

When the municipality issued the bid (Bid No. 06/2023-’24) in May 2024, both Maximum Profit and MNK submitted bids. Maximum Profit tendered a significantly lower fee rate of 4%, whereas MNK sought 10%.

To evaluate bidder functionality, tenderers were scored on prior VAT recoveries for Grade 4 municipalities between 1 January 2023 and the bid closing date, requiring a minimum threshold of R90 million for maximum points (50 points). Maximum Profit submitted documented recoveries totalling R91.35 million for Fetakgomo Tubatse Local Municipality.

In July 2024, the municipality’s Bid Adjudication Committee (BAC) formally recommended awarding the contract to Maximum Profit at its 4% rate. However, Tsatsimpe refused to approve the recommendation. He repeatedly referred the matter back to the BAC, insisting on unrequired appointment letters and demanding that specific past recovery amounts be excluded.

Yielding to administrative pressure, the BAC arbitrarily docked R6.15 million from Maximum Profit’s score, reducing its total to R85.19 million. This lowered Maximum Profit’s score to only 20 points and resulted in its disqualification, allowing the municipality to award the contract to MNK at the 10% fee rate.

Court condemns Municipal Manager’s actions

The High Court heavily admonished Tsatsimpe, finding that he “simply failed to properly and purposively consider Maximum Profit’s documents” and improperly introduced irrelevant considerations to force an outcome in favour of MNK.

The court similarly struck down the month-to-month contract extension. The municipality attempted to justify the interim contract under Regulation 36 of the Municipal Finance Management Act (MFMA), which permits emergency deviations from competitive bidding.

The bench rejected this defence, ruling that any alleged urgency was entirely “self-created” through administrative inefficiency and intentional delay. The court noted that it “defies logic” for the municipality to pay MNK a 10% commission when a competitor offered the exact same services at 4%.

Whilst the court declined to substitute its decision by directly awarding the tender to Maximum Profit due to time constraints, it took firm corrective action against the public funds paid under the illegal month-to-month arrangement.

MNK ordered to repay excess commissions

Holding that MNK was not an innocent party because it knowingly participated in an unlawful contract extension, the court ordered MNK to repay 6% of all commissions received from 18 December 2023 to the date of the order. MNK is allowed to retain only 4%, matching Maximum Profit’s competitive tender rate, to ensure public funds are protected from excess profiteering whilst recognising services rendered.

ALSO READ: Rioolfrustrasie in Wrenchville: ‘Mens kan dit nie meer vat’

Furthermore, the respondents were ordered jointly and severally to pay Maximum Profit’s legal costs on Scale C, including the costs of two counsel. To enforce oversight, the court directed the Registrar to forward copies of the judgment directly to Premier Dr Zamani Saul and the Executive Mayor of Ga-Segonyana Municipality.

Human Rights Commission report exposes service delivery failures

The report by the South African Human Rights Commission (SAHRC) that details service delivery failures within the municipality was handed to Saul in April this year.

A primary issue is service provision across the municipality’s 33 villages. Refuse collection and sanitation reach three villages, whilst electricity goes to six. The municipality relies on Ventilated Improved Pit (VIP) toilets and pit latrines.

A Department of Water and Sanitation audit shows 65% of residents lack access to water sources. In Kuruman, residents report paying monthly availability fees whilst going days without water. Outages relate to pump vandalism, lack of infrastructure protection, and shortages of spare parts for repairs.

ALSO READ: Wrenchville and Kuruman unite against ongoing service delivery failures

The municipality spends more on financial services rather than infrastructure. The report cites expenditure of R22 million on financial management consultants, R11.4 million for IT systems and payroll, R6.7 million in Auditor-General fees, and R5.4 million in legal costs. The municipality carries an unauthorised, irregular, fruitless, and wasteful expenditure balance of R69 million from the 2023/24 financial year.

Communication between residents and officials remains an issue. The report notes billing disputes, such as accounts for meters that exceed usage, and highlights poor conduct by officials during meetings, unresponsiveness, and lack of communication. With illegal dumping, road degradation, and police investigations into municipal employees, the commission concluded that failures impact the health, safety, and dignity of residents.

ALSO READ: JTG Municipal Manager’s legal challenge fails as court backs suspension