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  • State-owned water company the Trans-Caledon Water Authority on Wednesday disclosed a reportable irregularity to its bondholders on an R243 million contract.
  • A report to the company indicated that the deal, for running an acid mine drainage plant in Germiston outside Johannesburg, had involved fraud and corruption, it said.
  • It received that report in October 2017 – and has yet to explain why it didn't say anything before now.

This article has been updated below.*

In October 2017 it was told of "strong evidence of fraud and corruption" in a R243 million deal involving a crucial acid mine drainage plant, state-owned water company the Trans-Caledon Tunnel Authority (TCTA) disclosed on Wednesday.

But it made no effort to explain why it had sat on that information for more than a year.

The TCTA was originally set up to handle South Africa’s end of the Lesotho Highlands Water Project that keeps Johannesburg in water. It is now used to keep expenditure on big water projects off the government’s balance sheet, borrowing money to build dams, then paying back the loans with money raised from selling the water from those dams.

In a statement to its bondholders on the Stock Exchange News Service, the TCTA said it had learned of possible trouble with the contract in September 2016#, and had a received forensic report in October 2017.

Key findings in that report, it said, included "that there was strong evidence of fraud and corruption in the awarding of the contract" and "that there was evidence of possible black empowerment fronting or fraud".

It reported a former senior manager to the police, the organisation said.

Yet the TCTA's annual report shows that it also paid nearly R50 million on that contract as part of just under R100 million in irregular expenditure on acid mine drainage projects last year.

The TCTA said the R243 million three-year contract had been signed without the approval of its board.

The organisation did not immediately respond to questions on why it took more than a year to disclose the irregularity. But its statement stressed that its external auditors had identified the issue as reportable.

In June 2017 City Press reported on a number of issues at the TCTA, and said the R12 million of the R243 million acid mine drainage contract had been paid even before a contract was signed. Wednesday's statement shows that TCTA had by then already appointed an external forensic investigator to look into the matter, six months after its board determined that expenditure on the contract had been irregular.

The TCTA disclosed none of this in answer questions from City Press.

In its latest financial report, the 30-year-old company said it was time to redefine its role in South Africa's national water security, and that it would seek a greater role in both commissioning and running large-scale desalination and water reclamation plants.

* UPDATE: 6 December.

After initially being unable to comment on why it delayed release of the information, the TCTA late on Wednesday night said it had not delayed – because the matter had only become a reportable irregularity after its external audit had been finalised.

It denied that it had been forced into disclosure by its auditors. 

# UPDATE 2.

This article has been corrected to reflect that the TCTA said it had first learnt about issues with the contract in September 2017, not 2018 as originally reported. Business Insider regrets the error.

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