ETC agreed to pay R40m to dodgy subcontractor two weeks before winning e-tolls contract

ETC’s contract with sub-contractor Proash: flawed, massively overpaid and possibly used to pay a backhander on the e-toll collections contract

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17/03/2021 14:17:41

ETC agreed to pay R40m to dodgy subcontractor two weeks before winning e-tolls contract

OUTA has received a copy of the 2009 contract between Electronic Toll Collections (ETC) and sub-contractor Proash. This contract confirms the problems which OUTA recently raised about the ETC-Proash payments and raises even more concerns. A whistleblower sent OUTA the contract, after OUTA recently exposed the existence of the unknown contract and raised questions about its purpose (see here).

The flaws in the contract suggest that it was written as a way of paying a backhander, or as an enrichment scheme, linked to SANRAL’s award to ETC of the main e-tolls collection and management contract for the Gauteng Open Road Tolling (GORT) project (the Gauteng Freeway Improvement Project).

The contract shows that ETC hired Proash – a small business with no track record – to manage B-BBEE issues for R40 million, payable over nine-and-a-half years, signing the flimsy service-level agreement about 10 days before ETC signed with SANRAL. OUTA previously confirmed that at least R10m was paid over the first three years of the contract, but no work appears to have been done.

Concerns arising from the contract include company details, VAT records and the legitimacy of the services supposedly delivered.

OUTA has provided ETC with a copy of this contract and our concerns, to encourage an investigation into this matter.

“It is OUTA’s understanding that payments made to Proash were claimed back from SANRAL and did not form part of the GORT Project payment they received. ETC should be mindful that any funds that were spent on payments to ETC were taxpayers’ money, and therefore it is critical to establish if the agreement and payments to Proash were legitimate,” said Advocate Stefanie Fick, OUTA’s Director for Accountability, in OUTA’s letter to ETC.

“We once again give you our undertaking to co-operate with any independent investigations on this matter. We once again request that you make your findings public and also share your findings with OUTA. If you are serious about the fight against corruption in this country, we need your undertaking to act on any wrongdoing that emerges out of this matter and that you will be transparent with the findings and your report,” said Fick.

The background to OUTA’s investigation

In September 2020, a whistleblower contacted OUTA due to concerns that ETC and its international parent company Kapsch TrafficCom AG were suppressing reports of corruption, bribery and maladministration. These revolved around two matters: firstly, that ETC paid a South African company called Proash R10m over three years starting after winning the e-toll contract in 2009 but apparently received no work in return; and, secondly, that Kapsch appeared to have paid a bribe, using a South African account, to secure a traffic system in Zambia.

In November 2020, OUTA raised this with ETC. As a result of OUTA’s report, ETC hired ENS Africa to investigate. OUTA also assisted the whistleblower to report the matter to the National Prosecuting Authority.

ETC has to date failed to provide any substantive feedback to OUTA on these allegations, or explain what work Proash did.

See OUTA’s statement of 3 March 2021 on this matter here.

The new documents

After OUTA’s statement was published on this matter, OUTA received via its anonymous whistleblower platform a copy of the ETC-Proash contract and a copy of Proash’s application to be an ETC supplier.

These documents confirm OUTA’s initial concerns over the legitimacy and purpose of this contract and gave rise to additional concerns.

For links to these documents, see below.

What the new documents tell us

OUTA’s concerns about the ETC-Proash contract arising from these documents include:

  • The contractor is cited as “Proash Business Services (Pty) Ltd” (contract page 1). However there is no business registered with this name at the Companies and Intellectual Property Commission (CIPC). The company registration number reflected in the tender documents belongs to “Proash Property Investments (Pty) Ltd”, which is still the name of the business.

  • The contract is for B-BBEE advisory services, although the contract refers to this as “BB-BEEE” (Contract page 10). It’s not clear why a property company would be involved in this business. Furthermore, OUTA understands that this work was done in-house by an ETC employee.

  • SANRAL signed the e-toll collection contract with ETC on 18 September 2009 (see SANRAL announcement here). However, the contract that ETC signed with Proash is dated 8 September 2009 (contract page 9), about 10 days before the ETC contract was signed with SANRAL. The Proash directors were appointed only a week earlier on 1 September 2009 (Annexure B, page 13), yet the Companies and Intellectual Property Commission (CIPC) documents attached to the supplier application form show the appointment of these directors was submitted to CIPC only several months later on 27 January 2010 (Annexure B, page 14).

  • The contract itself also refers to being signed before ETC signed with SANRAL, for example, noting that “in the event the Customer is awarded the GORT Project” (contract page 2) and “This Agreement is subject to the suspensive condition that the contract for the GORT Project be awarded by SANRAL to the ETC Joint Venture” (contract page 4). Why was this contract signed before ETC signed with SANRAL?

  • In September 2012 and November 2012, the Minister of Transport Ben Martins provided two written replies to Parliament listing all the ETC sub-contractors. Neither list included Proash as a sub-contractor to ETC. Furthermore, neither list included any contractor for B-BBEE services, which supports OUTA’s belief that this work was indeed done in-house by ETC. The replies are here and here.

  • The contract specifies that the details of services and prices will be confidential (contract pages 2,3 and 5). Why was this information regarded as confidential, for a supposedly routine B-BBEE contract?

  • The agreement was for 114 months (contract page 12). This is nine-and-a-half years, which is longer than the contract that ETC signed with SANRAL.

  • The contract refers to the expected ETC contract with SANRAL estimated to be about R10 billion, with the contract participation goals for outsourced work set at 3% and 6% of that value; and that ETC will pay Proash 8% of the contract participation goals, which is calculated to be R40m, excluding VAT. The contract indicates this service fee is “at least 1.25 times” the market rate. (Contract page 12.)

  • The service fees included a monthly retainer of R245 614 (excluding VAT) per month (contract page 12). This monthly retainer figure matches the version provided in the previous information provided to OUTA (see here), of monthly payments of R279 999.96, which includes VAT at 14%.

  • OUTA could not find a VAT vendor in the SARS register using the name Proash Business Services or Proash Property Services or Proash Property Investments Pty Ltd (the version in the SARS certificate used in the contract) or the VAT number 4770136911 used by Proash (annexure B, page 2). This raises questions over the validity of the VAT registration; alternatively, questions about why the company stopped trading. The SARS VAT vendor register is here.

  • Even if the claimed services were provided, these payments appear to be a gross overpayment for such services, which OUTA believes were not provided in any form or substance.

  • The contract includes payments for “milestones” (contract page 12), which do not appear to be linked to any B-BBEE work. Instead, the milestones imply that Proash could influence SANRAL to approve the tolling system software and hardware design, and to commission and certify the system. Other milestones are linked to how long the ETC contract with SANRAL lasts. It’s unclear what these milestones would have to do with any B-BBEE services supposedly supplied.

  • OUTA was initially aware of ETC payments to Proash of only R10 million. This contract raises questions of how much exactly was paid to Proash.

  • The supplier application form which Proash submitted to ETC is dated July 2011, which is two years after this contract was signed (see Annexure B, page 1). How is it possible to enter into an agreement with an entity and then, after two years, the same entity applies to become a supplier?

  • The supplier application form attachments include a certificate listing Proash as an exempt micro enterprise with a level 3 BEE status (annexure B, page 11), yet the certificate spells the company name wrong (Proash “Propery” Investments), uses the wrong company registration number for Proash, and incorrectly spells the Proash address. This certificate was issued by “Independent BEE Consulting Services”, but OUTA could not find a company with this name registered at CIPC, or this business registered as an accredited verification agency with the South African National Accreditation System database.

  • The Proash auditor’s letter gives yet another version of the company name: Proash Marketing and Consulting (Pty) Ltd, using the same company number (annexure B, page 18). OUTA couldn’t find a company registered under the name Proash Marketing and Consulting.

  • The Proash auditor is Bhyat Raboobee & Company and the letterhead says they are chartered accountants (annexure B, page 18). OUTA couldn’t find a business registered under this name with CIPC,  or a registration for anyone with that name or the name of the person who signed the letter on the register run by the SA Institute of Chartered Accountants. (The SAICA register is here.)

  • CIPC records show that the person who signed the auditor’s letter is a co-director with the Proash directors in at least two businesses: Blue Nightingale Trading 214 and Silver Falcon Trading 63.


What OUTA wants

OUTA wants the contract with Proash to be investigated in detail by ETC and its independent investigator ENS Africa, and by the National Prosecuting Authority.

Furthermore, OUTA once again calls on the Minister of Transport, Fikile Mbalula, to initiate an independent and in-depth inquiry into all contracts entered into by SANRAL with regard to the Gauteng Freeway Improvement Project and the e-toll scheme.

The documents

OUTA’s letters to ETC and ENS Africa:

  • The letter of 15 March 2021 is here with Annexure A (the ETC-Proash contract) and Annexure B (Proash supplier application form).

  • The letter of 16 March 2021 is here with the annexures here and here.

 OUTA’s statement of 3 March 2021 on this matter is here.


A soundclip with comment by Advocate Stefanie Fick, OUTA's Director for Accountability, is here.

Picture: OUTA