There’s much negativity about BEE, and the way it requires companies to farm out work to people who have little to offer other than the approved skin pigmentation.

But naysayers overlook the fact that BEE holds numerous benefits for the economy: A few well-connected people become obscenely rich very quickly; employment is created, firstly within the public sector, in the form of functionaries whose lot it is to check whether companies are complying with BEE, and secondly in the private sector, in the form of the gofers (compliance officers – or whatever they’re called) who get to tick little boxes for their employers; and, of course, prices go up as companies pass on the cost of all this excess to consumers.

Then there’s that oft-overlooked benefit to companies – they get to pass the buck when things go belly up.

When MTN embarked on a R510m construction project to build “cell-phone remote hubs” in East London, Kimberley and Worcester, they might have been expected to appoint a large one-stop shop like Murray & Roberts or Grinaker to run the project. But no, MTN chose as its main contractor an outfit called Umbutho Civil and Electrical CC.

A strange choice, because at the time Umbutho had a Construction Industry Development Board level two grading, which allowed it to handle public sector construction projects to the value of R600,000. (Umbutho now has a grading of six, allowing it to handle such projects to a value of R10m, still far short of the value of the MTN project, which requires a top grading of nine.)

Another peculiarity of Umbutho is that its membership is on the small side – as in one person. The lonely man is Diau April Mokoena, though it appears he is more commonly known as Casca. What exactly his construction qualifications are we can’t say, because he refused to talk to noseweek.

We do know that he relies heavily on an employee called Elias Mabitsela, who’s been involved in a number of MTN projects over the years, and who’s been connected with various companies: Dilhase Consulting Engineers, Tiger Projects, 3D and Mothapo Consulting Engineers. Mabitsela was the guy who signed up Umbutho’s various sub-contractors for the MTN project (in other words, the companies that actually did the work), although he apparently didn’t spend too much time on site.

Much finger-pointing took place when MTN’s R510m contract to build cell hubs went spectacularly wrong

Noseweek wasn’t allowed to talk to Mabitsela either, but we understand that he enjoys the finer things in life -until recently he had an Aston Martin, but has recently upgraded to a R2.5m Maserati.

One of the people Mabitsela signed up as a sub-contractor for the Worcester hub (worth R170m of the R510m) was Pieter Swart, who has a small civil engineering business called Smart-con. Swart’s business has an annual turnover of some R2m, so when on 26 November 2008 he landed a R14m contract to build a 200sqm MTN building that would house power generators and electrical, telephone and computer equipment, he was very happy indeed.

But not everyone lived happily ever after. Although Smartcon finished the work it was contracted to do, Umbutho short-changed it by a testicle-squeezing R1.8m. And, although an MTN project manager by the name of Thys van der Merwe did at some point assure Swart that all would be paid, new project manager Stefaans Potgieter subsequently made it very clear to Swart that he would have to sort out his beef with the business he contracted with, Umbutho.

So arbitration proceedings are underway, with Swart alleging that Umbutho failed to do much right: it failed to make building plans available; it refused to attend site meetings; it prevented Smartcon’s access to the architect and quantity surveyor; it prevented the principal agent from approving works done by Smartcon; it failed to make payments; it refused to approve works for payment; it failed to do inspections; it interfered with Smartcon’s building operation; and, when the relationship soured, it refused Smartcon access to site.

Umbutho’s defence is predictable enough: the work wasn’t done properly and, even though Umbutho owes Smartcon a small amount, Smartcon owes Umbutho much more. Now Umbutho’s giving Swart the run-around, claiming that the arbitrator, quantity surveyor John Powell, must be replaced, and that the matter should go the legal route. So yes, the kind of tactics that the party with the greater resources adopts when it wants to wear the other one out.

Things haven’t gone too smoothly in East London either, where Umbutho sub-contracted civil engineering work to a business called Inyati Construction. Once again Mabitsela was the front man, and once again he didn’t spend too much time on site, leaving supervision to a fellow called Wilson Javangwe.

According to Inyati’s Collan Nicholas, Inyati’s experience with Umbutho was as frustrating as Smartcon’s – the quantity surveyor appointed by Umbutho, one Sibusiso Mthembu, didn’t come up to scratch; complaints made to Umbutho were simply ignored; and it was made very clear to Nicholas that no complaints were to be addressed to MTN. Nicholas says that his company’s down by some R400,000. Not only did Umbutho withhold retention money of R250,000 for a mere R15,000 dispute, but Inyati has also been landed with all sorts of special materials that it ordered at Umbutho’s request and which it then rejected. Nicholas says that if the matter isn’t resolved soon he’ll have to sue. He also reckons that the East London project is at least five months behind schedule.

Noseweek asked MTN about the appointment of Umbutho, about rumours of the dismissal of an MTN procurement manager, and about rumours that MTN has had to bail out one main contractor who failed to perform (not Umbutho), to the tune of R21m.

MTN communications head Bridget Bhengu responded thus: “The appointment of Umbutho was preceded by a transparent, fair and rigorous tender process… Seven contractors were invited to submit tenders as per our normal BEE procurement guidelines… The evaluation was based on the following criteria: technical specification, price and BEE… Umbutho were awarded three sites on the basis of having satisfied the criteria… With regard to contractors meeting certain CIBD grading before they can be awarded certain value contracts please note that this requirement only applies to the public sector… With regard to MTN taking responsibility for complaints … MTN is not party to the sub-contracting contractual arrangements entered into between Umbutho and its sub-contractors and cannot be involved in their disputes… With regard to whether a procurement director was fired within the past two years, we would like to confirm that two procurement general managers resigned from their positions over the past two years and their resignations were normal and amicable.” Nothing on the claim that MTN had had to bail out a main contractor to the tune of R21m.

Despite MTN’s failure to take responsibility for Umbutho, Swart has reason to believe that the company is keen to sort his case out and that some offer will be made. MTN’s lawyer, Quinton Pieterse of Bowman Gilfillan, Cape Town, was not prepared to confirm this.

Perhaps MTN will be a bit more sceptical next time it has a big project on the cards, as in “BEEn There, Done That”. Next time you go through your MTN bill, you’ll have a slightly better idea of why you’re paying so much.

This article was taken from the December 2010 issue of Noseweek