Water desalination contractor Herman Smit believes his pending court action against the City of Cape Town will reveal, among others, that the city has long been ‘cooking the books’ to hide dangerously high sewage levels in the sea around Cape Town.
A few months ago, Cape Town’s water desalination contractor Herman Smit turned in desperation to his lawyer and said, “Now I’m going to steal Patricia’s words: I need to get out of this abusive relationship!”
As MD of Quality Filtration Systems (QFS), the company contracted by the City of Cape Town to build the desalination plant at the V&A Waterfront, Smit had spent the past year in dispute with the City of Cape Town over outstanding payments of R20 million due to his company. By now his disenchantment must equal that of former mayor Patricia de Lille who said the same about her relationship with the DA-run city.
|Inner workings of the desalination plant|
Smit’s company is taking the city to court because QFS hasn’t been paid for the past eight months despite having produced 181 million litres of salt-free water up to the end of January.
While desalination might no longer be considered the best solution for Cape Town, Smit wants his contract honoured.
His case is expected to blow open a much bigger story relating to allegations that the City of Cape Town has been hiding information about the real state of Cape Town’s water quality; that, since 2015, the city has been quashing evidence about sewage spills and algae bloom in the ocean; that sub-quality water is going into the city’s system because it is pumping millions of litres of raw sewage into the sea. And as a result of the city’s alleged deviousness, the sea-water quality detailed in the desalination plant tender documents was incorrect.
The saga also raises numerous questions which Noseweek will address in upcoming editions, such as why the city’s water quality data is not publicly available and why it is not peer reviewed.
“I am convinced the City of Cape Town deliberately misled us by not divulging the true raw water quality, so as a result, our design was based on a false water quality in the tender,” Smit told Noseweek.
He believes the city is trying to make his company the scapegoat for its own mistakes in failing to test the seawater at the Waterfront or acknowledge warnings about its bad quality.
“If we’d had the correct information, we would have known beforehand that we would have to install additional technology to handle the sewage spills and high algae blooms – at extra cost.
“If the city had put the true water quality information in the tender document, they would have had to acknowledge that they have a sewage problem in Table Bay. Now they are saying the contract says we have to install a plant that is robust enough… but you can’t manufacture any plant to be robust enough for what we faced.”
QFS was contracted in January 2018 – at the height of Cape Town’s water crisis – to provide one of three desalination plants to provide fresh drinking water from sea water using reverse osmosis technology.
The V&A Waterfront plant was built at QFS’s expense, was completed in March 2018 and came online at the end of May last year. QFS says the company’s plant has, since then, injected into the city’s water reticulation system more than 181,000kl of water, within the required standard specifications of SA National Standard 241 part 1.
QFS is claiming that although the city has sold the water on at an augmented price, so far it has only paid QFS R4.2m.
Additionally, the city is currently penalising QFS for not producing water “although QFS have been waiting for instruction from the City to inject, the network pressure is 2 bar higher and the feed water quality is in dispute. The calculations for penalties are so wrong that the City is now sending the company invoices”.
The City of Cape Town now claims that the water it sold on at this rate was not to specification. QFS is claiming that the city was aware that the raw water they were tasked with desalinating was contaminated before the tender was awarded to QFS.
The company has also accused the city of non-compliance with water safety regulations and of failing to conduct routine tests of the local seawater quality and identify any potential health risks.
Smit believes the city is covering up “for not doing their job beforehand”. “They don’t want people to know that they knew about the raw sewage in the beaches. That’s what they are hiding,” he told Noseweek.
QFS claims that the original contract was valued at R53m and that, to date, the company is owed R20m.
Due to the contractual disputes the plant is lying dormant, not producing water. The city has indicated it is willing to pay amounts certified by the city’s engineers, but the contract does not allow for certification.
QFS went into a five-day mediation process with the City of Cape Town but that ended in April without consensus being reached. Smit claims the city dragged the process out for months, arriving armed with a team of five lawyers for mediation alone, and has blocked the mediation report from being made public.
When Smit, accompanied by his business partner, Musa Ndlovu, visited Noseweek’s offices to discuss the pending court battle, the duo looked tired and stressed.
Smit told Noseweek he feels disillusioned and constantly anxious since the dispute started.
“We feel like abused kids. The only thing left for us now is to go to court and tell our story,” said Ndlovu.
“This has been the most stressful year of my life,” continued Smit.
“We’ve been building this business for 23 years and to date, besides this one, we have never had a contractual dispute. I’ve never been in a court. Now I’m confronted with all these contractual disputes. We wanted to help. We spent our own money. Every day that we survive this ordeal is a miracle.”
Smit described how, when the city was suffering a severe water shortage at the end of 2017 and Day Zero loomed, he had jumped at the opportunity to get involved. “People were panicking… and the city was calling on private companies to assist.”
Smit said that when the city resolved to use desalination as a means of augmenting water supply, his company had placed a tender.
“They gave us eight weeks to construct the desalination plant. We partnered with an Australian company and worked day and night to complete it.”
However, said Smit, the tender data that the city provided to be used in designing the desalination equipment did not cite warnings received by the city from researchers relating to contamination of the water.
He has since learned that in September 2017, the University of the Western Cape’s Prof Leslie Petrik had issued a warning to the city’s desalination tendering committee that the tender document was “inadequately specified to produce safe, potable water”.
“In the tender document, there is no disinfection step. Hence it is highly likely that the recovered water may still be contaminated with chemicals, priority pollutants, bacteria or viruses etc after the reverse osmosis process, given the quality of the water in such close proximity to the marine outfall pipe in Green Point, that will need to be treated to drinking quality.”
Petrik, a senior professor of environmental chemistry at UWC, along with other researchers from Stellenbosch University and UCT, warned in a research article published in the South African Journal of Science that the water recovered from desalination might still be contaminated with traces of complex pollutants after desalination and probably presented a public health issue. The article made front-page news in several South African daily newspapers.
At the same time, Petrik wrote to the Environmental Affairs department in Pretoria, urging them to not grant an application by the City of Cape Town to discharge effluent into the coastal waters at Hout Bay, Camps Bay and Green Point. She cited numerous concerns of civic groups in Cape Town as well as legislation pertaining to water disposal that was being contravened.
Some excerpts from her letter:
“The results of water tests conducted by the City of Cape Town at Camps Bay and Clifton Beach show that levels of E.Coli and Enterococcus often exceed the permissible limits and on occasion reach critically high concentrations. Our own independent research has confirmed very large spikes of bacterial contamination on the city’s beaches and in the ocean in the vicinity of the marine outfalls, mainly due to inadequate dispersal of the excessive volumes of sewerage being pumped into the ocean by the marine outfalls which continue to operate unabated.
“Due to population increase, there is a growing amount of detergents, disinfectants, antiseptics, shampoo, toothpaste, deodorants, dyes, pesticides, paint, medications like antibiotics or painkillers, herbicides and weed killers, stimulants like caffeine, etc that are daily going into the sewers from domestic, light industry, hospitals and commercial operations in the city and suburbs.
All these products contain toxic chemicals that do not break down readily in the environment.
They are persistent in the environment and bio-accumulate. They are far more harmful than the microbes in the sewerage itself, causing feminisation or sterility of fish populations, cancers, growth deformities, foetal abnormalities, hormonal disturbances, etc. These compounds bio-accumulate in marine organisms, and are being passed up the food chain to humans who eat fish and mussels etc, ultimately causing the same effects in humans.
“Currently there are plans afoot to build desalination plants along the very oceanic seafront areas which are affected by pollution from the marine outfalls in Cape Town. Desalination is very expensive and not designed to remove persistent pollutants, nor viruses; merely salt.
“The continued release of the untreated sewerage through our marine outfalls is barbaric, considering the harm it is doing to our marine ecosystems and to the population who use our marine amenities...”
Smit said that during the commissioning phase, QFS characterised the water and noted contaminants that were not included in the tender data and wrote a letter to warn the City of Cape Town but the city ignored them.
So QFS installed extra equipment at their own cost to curb the abnormal variance in feed water quality… and construction was completed on 13 March 2018. Their water quality was independently tested and it complied with the South African National Standards 241 quality.
Smit said his team were baffled when, “on 26 March, we said, ‘guys we inject (pump the water into the network) tomorrow’, only to have the city reply, ‘no, you can’t inject’.
|Diagram showing how reverse osmosis works|
“Day Zero was supposed to be 20 days away. They didn’t want to take the water or pay the rental. We had spent R30m on the plant.”
QFS is arguing that, according to the contract, the City of Cape Town should be paying back their capital every month from when the plant was ready.
“We couldn’t understand… we immediately wrote them a contractual letter and said ‘why are you not taking our water?’. “In hindsight we were very naïve... we should have realised they knew something about the water coming in that we didn’t know. When we tested the water and showed them it was different, they ignored us. I said, ‘you can’t ignore us, this is completely different from what is in the tender’.”
Permission to inject was finally granted on 28 May but the city requested that only 25% of the water be injected. Permission to inject 2MLPD was finally granted in September 2018. But QFS has not been paid for eight months and now the plant is lying dormant.
The legal wrangling is complicated, however a dossier of documents from QFS, including the timelines for contractual disputes, can be read here.
In layman’s terms: the contract was for a “fixed portion” (the rental of the plant) and for a “variable portion” (the water produced). “According to the contract, regardless of what happens, if we have proven we placed the plant, the City of Cape Town are bound to pay the rental amount…”
QFS wants the contract honoured – and to be paid the monthly rental for the plant. “The contract reads, that, from the first month we are ready, they must pay us back our capital every month. They’ve not done that.”
Smit claims that the city has not provided any reasons for not taking the water, despite numerous attempts to solve the dispute which has been going on since August. “We have been stonewalled throughout the process.”
Smit has reluctantly resorted to court action.
“We believe the big issue is with incoming water quality… it changed considerably over the months … it is completely different from the water quality they put into the tender documents… they didn’t want to use the water as it was contaminated. Instead of saying, ‘listen guys, we now have information that the water is contaminated’, they got us to run the plant – and then penalised us because we didn’t produce full volumes.
“In hindsight, we see they didn’t want to take the water as they were scared we would not be able to produce good quality water out of the raw sewage coming into the harbour.”
The drama is expected to play out in the court process – which is also expected to blow a lot of information into the water, so to speak.
Smit is not backing down:
“We tried for months to convince the city before resorting to legal action. We put our company at risk, borrowed money, as a small SME. We really put our hearts into this thing, as we wanted to help Cape Town.
“We test the water on an hourly basis. It is completely different to the water quality they put in the tender documents. Surely we shouldn’t foot the bill for water which was out of specification coming into the plant?”
QFS is currently surviving on other contracts. “But this saga is causing a big dent to our cash flow as it’s a huge project. Every month we have this massive debt repayment and we’re not getting anything back from the City. The cash flow problem puts a strain on us going out after other business.”
Shortly before going to press Smit notified Noseweek that Quality Filtration Systems had terminated their contract with the City of Cape Town.
Champions of new technologies in water treatment using home-grown equipment
Herman Smit grew up in Johannesburg and graduated with a BSc from the University of the Free State, then gained a post-graduate degree in biotechnology from the University of Potchefstroom (now North West University). He lives in Somerset West.
Interviewed by Noseweek, Smit spoke passionately about the 27-strong company he started in 1996 and built up to become a leader in membrane technology.
His biggest passion is water re-use. “Every town in South Africa could potentially reuse their waste water. It’s affordable and it’s been done for years overseas. We want to localise what’s already being done in other countries. With our technology, we could decentralise the treatment of water to reduce the pumping of water all over the place. We want to educate people that you can take waste water in – and drink it from a glass on the same plant. It’s a mind shift.
Ndlovu, a mechatronics engineer who became a director of QFS in 2017, is currently researching the operating costs of running membrane plants compared with conventional plants.
“QFS has always championed new technologies and tried to bring to South Africa the best of what the world offers and then manufacturing locally,” said Smit.
|Musa Ndlovu and Herman Smit|
“We believe the future is in new technologies and our aim has always been to make these affordable for the SA market… and to create jobs.
“Reverse osmosis technologies for desalination and reuse have only recently become buzzwords here, but we’ve been advocating these types of applications for 20 years.
“We’ve had some resistance from the more conventional fraternities in the country who kick against the new technologies because our water treatment fraternity is very civil oriented.
People can build dams and big structures but they haven’t done the big leap into the new technologies which are internationally renowned.
“For example, 70% of Israel’s irrigation and fresh drinking water comes out of desalination. We are so far behind and we have this massive coastline. If you look at the amount of water we reuse it’s a drop in the ocean, compared to what is happening internationally.
“In Singapore they recover 100% of their waste water. They call it new water. It’s a perception thing! We are the only company in South Africa that has taken domestic waste water back to drinking water standards. We did a plant in Beaufort West in 2010 and one in Ballito in 2018 for direct re-use of water. We’ve done another plant to take the water to irrigation standards in the De Doorns valley.
“We’ve successfully installed more than 40 plants – a combination of desalination, re-use, industrial waste water and mine water – in South Africa, including a big project for ArcelorMittal’s waste water.”
Smit described his efforts to “get intervention and make sure a local SME doesn’t go under because of mistakes made in the City of Cape Town. We’ve written to Xanthea Linberg, Anton Bredell and Alan Winde. We’ve met with the head of the red-tape reduction unit. We’ve exhausted every political avenue we can. Everyone says the DA is the party that promotes jobs, small businesses, red tape reduction and is anti-corruption. They’ve done nothing for us. You build a business for 23 years with no contractual disputes… and now this.
“When I look at the South African landscape, many of my peers in water treatment are leaving the country because of difficulties with government tenders.
“We’ve stuck it out and abided by all the conditions. I don’t know of another company that has the technology we do, and can implement it. We can do so much to help. We’ve done all the groundwork. The rest of the people are packing for Perth but we’re still here.
“Now I am wondering what’s keeping me here.
“We are all so obsessed with energy at the moment. There are many alternative solutions for energy but none for water. You can’t make water.”
Statement issued by the City of Cape Town in response to a list of detailed questions submitted by Noseweek (which remain unanswered):
The City of Cape Town was advised on Tuesday 7 May 2019, by Quality Filtration Systems (QFS) of their decision to terminate the [V&A Waterfront desalinated] water supply contract with the City and pursue legal action.
1. The City is disappointed with this unilateral decision and is now considering the legal ramifications. Given this latest development, we consider it opportune to state our version of events, notwithstanding the City’s reluctance to debate contractual matters in the media. [This is no mere “contractual matter: this is a matter of grave public concern! – Ed.]
2. The City would like to state upfront that QFS has been paid to date for the actual amounts of drinking water delivered to the City since May 2018. [A half-truth – see response below. – Ed.]
3. It should be noted that in terms of the contract, the City does not own the plant and equipment. QFS were responsible for the cost of establishing the plant, which cost would have been recovered by QFS through the sale of water to the City. [Another half-truth.]
QFS was awarded the tender on 8 January 2018 for the establishment of a small temporary desalination plant at the V&A Waterfront to be operated by a suitably experienced water treatment specialist team for a period of two years.
4. A requirement of the specification was that the plant would be able to cope with normal variation in seawater quality conditions likely to be encountered at a selected site at the V&A Waterfront, close to the harbour entrance.
5. The contract was awarded to QFS to produce and deliver 2 million litres of potable water per day in accordance with the South African National Drinking Water Quality Standards (SANS 241:2015 Parts 1 & 2).
6. During May 2018, the plant started delivering water to the City. However, between May 2018 and January 2019, QFS were unable to fully comply with their obligations in terms of the contract. This led to various contractual disputes with the supplier, which culminated in the institution of a mediation process in January 2019.
7. It is now public knowledge that the confidential mediation process failed to resolve the various disputes. In terms of the Mediation Agreement, there was no mediation report required.
8. The City made every attempt to find a workable resolution with QFS and during the mediation process placed a number of proposals on the table. Each of these were rejected. The City has done everything possible to protect the service provider’s interest while staying within our mandate to meet the requirements of the Municipal Finance Management Act.
In light of the termination of the contract by QFS, the City is in the process of taking legal advice on the way forward.
9. The Strandfontein and Monwabisi desalination plants cont-inue to operate. [Questionable – see response below.] The City is committed to augmenting its water sources using desalination as per the City’s recently published Water Strategy.
[More likely an entire and integrated reassessment of the city’s water and sewerage situation by competent professionals is called for – in a hurry. That can only happen after a few obvious incompetents have been fired. – Ed.]
Herman Smit of Quality Filtration Systems (QFS) responds:
How the council has lied:
1. On 9 May 2019, the City, via its legal representatives Webber Wentzel Attorneys, formally accepted the termination without raising any issue of wrongful termination.
2. A fixed rental of R1.5m per month, regardless of water usage, was determined in our contract. This rent was never paid by the City. Dirty water and too-high pressure on the city’s water system caused the underproduction. We were lied to about feed-water quality. Now they [the city] are penalising us for their default. This statement is false and misleading. In May the City took only 25%, then penalised us for the 75% deficit! The City has an amount of almost R21m still unpaid to us.
3. Mayco member for informal settlements, water and waste services Xanthea Limberg was reported explaining that the new high water tariffs are because of the fixed rental fee that had to be paid to desalination contractors! To avert a day-zero scenario, the City pleaded with local and international businesses to assist in the implementation of emergency measures. Council did not have the capital.
But ever since it became clear that the drought had been relieved by natural means, the City has fought to free itself of a contract which it believes it no longer needs, despite its actions resulting in a R50m-plus-financial-loss for QFS.
4. The seawater data was provided in the tender document. It is important to note that the City had appointed a firm of engineers, in 2015, to conduct a long-term study required to facilitate the installation of desalination plants. It is clear that after two years the engineers had conducted no study whatsoever and it has now become clear that the information provided in the tenders was hurriedly garnered from various sources such as CSIR data that was completely inadequate and outdated.
The City did not disclose to us that, shortly before tenders were called for, they had privately been made aware of multiple independent studies that had conclusively revealed vastly different marine conditions to those advised by the City in its tender specifications. Tenderers were given only two weeks to assess the data supplied. The research withheld from us had advised the City that the plant it was proposing for the Waterfront would not cope with the severely adverse and heavily contaminated marine conditions in the bay.
5. Compliance with SANS 241 part 2 is the legal responsibility of the City of Cape Town as the Water Services Authority. The City had failed to conduct routine water tests in the bay/harbour area. It has since been proven that the tests that have been conducted have been deliberately withheld, not only from QFS, but from the residents of Cape Town.
6. The City has, in a written statement, verified that QFS had fully commissioned the Waterfront Plant on 13 March 2018. The City was in breach of the terms of the contract in not requesting that QFS supply water directly after it had verified the commissioning.
The reason for this has now been clearly identified: The City has a policy of discharging massive volumes of untreated sewage into the sea around Cape Town. From March 2018 until May 2018, the City was belatedly attempting to deal with the high level of contamination in the water. When no solution could be found they made the issue the problem of QFS and laid the blame firmly at QFS’s door.
Had the City advised us timeously of the poor state of the sea water and the extraordinary levels of contamination which it had been made fully aware of, the plant tendered would have been designed to deal with the high levels of contamination – at a higher cost.
The City are fully aware of the reason why QFS could not comply and have made no effort to answer the charge that they were fully aware of the high levels of contamination in the sea water. The City simply denied three separate research studies which found that its policy of discharging untreated sewage water into the sea had resulted in severe contamination of the local marine environment. The levels of contamination are so excessive that Professor Leslie Petrik advised that even once treated, the water still presented a severe health risk to end users.
The City ignored this advisement placing hundreds of thousands of residents in harm’s way.
7. The City is fully aware that a mediation report would have laid bare these facts, so it took unreasonable measures to prevent the mediator from issuing a report, which would have served to make the public aware of the facts of the matter.
8. The only effort made by the City has been to frustrate and delay the resolution of the matter.
9. It is public knowledge that neither the Strandfontein nor Monwabisi plants are operating at anywhere near capacity and were shut down for the entire month of November 2018 as a result of poor feedwater quality.
Xanthea Limberg has been forced to make visits to Khayelitsha to address residents’ concerns related to illnesses attributed to the quality of the water provided by the local desalination plant.
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