Free State asbestos contract — how R255m was carved up

The sole owner of a company employed by a subcontractor to audit and assess houses with asbestos roofs in the Free State in 2014 has testified that he was paid less than a third of what he billed for after completing the work.

Kgotso Abel Manyike, director of ORI Group, told the state capture commission on Friday how he reached an agreement with Mastertrade 232, a company that was subcontracted by the joint venture company awarded the lucrative R255m asbestos contract in 2014.

The contract was awarded to a joint venture comprising of Blackhead Consulting and Diamond Hill Trading.

Manyike said he signed a contract with Mastertrade 232 on October 31 2014 in which ORI Group undertook to assess all the houses with asbestos roofs in the province.

Mastertrade had been subcontracted by the joint venture to do the work. Mastertrade charged R44m.

In turn, Mastertrade subcontracted ORI to do the actual work.

ORI's proposed fee structure was R21.3m for the whole project which comprised an operational budget of about R9m to R10m and a project management fee of R11m.

He said his company was only paid R6.1m.

Manyike said his company employed 184 field workers, trained by nine assistant project managers.

The field workers were paid per house and it would take up to five minutes to assess each house.

During the process 36,000 houses with asbestos were identified and a report was prepared for the Free State department of human settlements.

Manyike said the fee ORI charged was sufficient for the project to be undertaken.

Commission chairperson deputy chief justice Raymond Zondo asked what price ORI Group would have quoted per house if it were appointed as the main contractor.

He said though a similar project in Gauteng had charged R650 a house, he would have quoted half of that and still made a profit.

Manyike said payments were coming in stages and towards the end of the project, they stopped.

“I am indebted to those people that served ORI group because of this project.”

Manyike said ORI group and Mastertrade are involved in litigation for monies that Mastertrade owed to ORI Group.

Manyike said Mastertrade had approached him regarding the quotation that Mastertrade should submit to the joint venture.

Evidence leader Paul Pretorius SC asked Manyike what expenses Mastertrade would bear for its share of the R44m.

Manyike said from his experience with the company, he saw Mastertrade as a broker or a middleman. He said Mastertrade could not do the work on its own because it did not have the expertise.

Zondo asked whether Mastertrade's fee for being a middleman was half of the R44m claimed from the joint venture.

Manyike said this was his view.

“On other projects, Mastertrade has been working as a social facilitator. I mean where there is a project [it] would go to politicians and speak [on] social issues, take care of the politics.”

The commission will continue with the evidence of Edwin Sodi, CEO of Blackhead Consulting.

• An earlier version of this article referred to the value of the contract as R225m. The story has been updated to reflect the correct value as R255m. 

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