Question NW795 to the Minister of Communications, Telecommunications and Postal Services
18 April 2019 - NW795
Van Dyk, Ms V to ask the Minister of Communications, Telecommunications and Postal Services
(1) What are the details of the contract that Brand SA concluded with a certain company (name furnished) to act as its digital marketing agency from 2014 to 2017; (2) what are the details of the relationship between certain persons (details furnished); (3) on what basis was the specified company appointed to conduct digital marketing for Brand SA when a certain company (name furnished) provided a cheaper quote; (4) why did the tender amount of the digital marketing services of the specified company increase from R15 million to R33 million; (5) whether any steps were taken to address the finding of the Auditor-General that the contract amounted to irregular expenditure; if not, why not; if so, what are the relevant details? NW918E
Reply:
I have been advised by the Department as follows:
1. The Avatar Digital Agency was contracted from 2014 to 2017 and was mandated to provide strategic input and guide the positioning of the brand on digital platforms. The scope of work included amongst others, management of website properties and social media platforms, content development, campaign development and execution as part of the Service Level Agreement (SLA) and contract agreed upon by both parties. A copy of the contract including SLA is attached herewith with full details.
2. The Chairperson of Brand South Africa and Avatar Digital Agency’s Chief Executive Officer belong to the same church denomination, but attend different branches in Pimville, Soweto, and Tsakane, East Rand respectively.
3. Avatar Digital Agency won a 3-year tender in 2014 to provide services as described in reply 1 above. Hetzner is not a digital marketing agency, but a web hosting services provider. To run the website properties, hosting is required amongst other services such as Search Engine Optimisation, Server set up and monitoring, framework and software updates, back up, security and quality assurance which were all encompassed in Avatar Digital Agency’s quotation. Website hosting is a sub element of digital marketing which Avatar Digital Agency outsourced to Hetzner. In 2017 when the Avatar Digital Agency contract came to an end, Brand South Africa outsourced only the website hosting services directly to Hetzner. Brand South Africa currently remains without digital marketing capability pending the conclusion of the Avatar Digital Agency matter.
4. The awarded tender amount for Avatar Digital Agency was for R18 million inclusive of vat. This vat inclusive amount was in line with the tender specifications. The amount increased to R33 million as follows:
|
DESCRIPTION/COMMENTS |
AMOUNT |
IRREGULAR AMOUNTS |
|
Original Tender Price |
R18, 000, 000 |
|
|
10% year on year increase |
R1, 860, 000 |
R1, 860, 000 |
|
14% Vat charge year on year |
R2, 780,400 |
R2, 780,400 |
|
Online digital marketing fees (3yrs) |
R4, 803, 439 |
|
|
Website Hosting fees (3yrs) |
R3, 003,176 |
|
|
Retainer fee for 4 months extended period |
R2, 758,800 |
|
|
TOTAL |
R33, 205,815 |
R4,640,400 |
As per the AGSA Management Report dated 17 July 2018, the AG found that this contract was irregular to the tune of R4.6 million.
5. Brand South Africa is taking the necessary steps to recoup the R4.6 million of overpayment from Avatar Digital Agency. Brand South Africa Management allowed Avatar Digital Agency to change the SLA to include 14% vat and 10% escalation in contravention of the original bid
document which resulted in this R4.6 million overpayment. An investigation is currently being finalised to determine those employees responsible and hold them to account.
Ms. Stella Ndabeni-Abrahams, MP
Minister