Jacob Zuma pal's R406m ship deal raises flag

The Department of Defence has funnelled R406-million for ship maintenance and repairs to a private company because it says it can no longer look after its own fleet.

And the fortunate recipient of taxpayers' cash is a company chaired and co-owned by the founder of the Friends of Jacob Zuma Trust, Don Mkhwanazi.

Southern African Shipyards, in which Mkhwanazi has a 48% stake together with its CEO, Prasheen Maharaj, has benefited from six naval contracts in the past three years, including a R335-million deal to refit the arms deal frigate SAS Amatola.

The department said it had had to outsource the work because of "capacity constraints" at the Simon's Town naval dockyard. But the Durban company's lucrative relationship with the military has raised concerns and prompted a call for a probe by the auditor-general.

The Sunday Times has established that:

The R335-million Amatola refit tender has ballooned to about R360-million because of "unforeseen events";

Several industry experts said the original contract amount was inflated by between R60-million and R100-million;

The cost - one of the most expensive navy refits by a private firm - prompted questions in parliament by DA defence shadow minister David Maynier. In a written response two weeks ago, Defence and Military Veterans Minister Nosiviwe Mapisa-Nqakula confirmed that R406-million was being paid to Southern African Shipyards; and

Unlike the latest frigate refit tender issued earlier this year, the Amatola tender was not handled by Armscor but by the navy's own procurement centre. Despite insisting the Amatola contract was put out to public tender, the navy has steadfastly refused to clarify queries about apparent irregularities.

Mkhwanazi and other Southern African Shipyards shareholders insist it is above board - and has nothing to do with Mkhwanazi's ties to Zuma. Responding to the Sunday Times in writing, Mkhwanazi said: "The president does not award tenders ... Any relationship with the president cannot be linked to contract awards made via a public tender process."

Maharaj described as "sour grapes" the suggestion that the deal was politically motivated.

"Every government contract we have won, whether it has been Transnet or South African Navy, has been won through a public tender process," he said.

"We don't think our offer of R335-million tender was over-priced. In fact, it was the cheapest bid received via an open public tender process," he said.

Maynier, who called for an independent probe , disagreed: "First, the cost of the SAS Amatola's refit was stratospheric and may have been inflated by as much as R100-million.

"Second, the SAS Amatola's refit brought the local shipbuilding industry to its knees because the dry dock was effectively shut down.

"And third, it's strange that [R400-million] would be sunk into a private company in Durban, rather than into the South African Navy dockyard."

Southern African Shipyards has also received a R1.4-billion contract to build tug boats for Transnet.

Mkhwanazi, a Southern African Shipyards shareholder since 2006 and Transnet director between 2010 and 2012, said he had declared his shareholding on the day he was appointed to the Transnet board.

"The tug contract awarded to Southern African Shipyards became effective on 1 August 2014, more than two and a half years after [my] tenure as a director of Transnet ended," he said.

jordanb@sundaytimes.co.za, jurgensa@sundaytimes.co.za