State using courts to recover looted funds

Post Office, SABC, government departments and municipalities part of probe into missing R7bn

In an attempt to recover more than R7bn of taxpayers’ money spent on invalid government contracts, the Special Investigating Unit (SIU) is fighting legal battles in courts across the country.

Auditor-general Kimi Makwetu says that R50bn has been lost in unauthorised, fruitless, wasteful and irregular spending by government departments and municipalities. Recovering some of that money is essential if the government is to meet its service delivery promises.

In its annual report released earlier in October, the SIU said that it had prevented the government from losing R407m in dodgy transactions at the Post Office and departments of public works and correctional services. Through legal action and other interventions, the unit had three state contracts totalling R797m declared invalid and set aside in the past financial year. This included a Post Office lease contract valued at R493m and an invalid correctional services contract valued at R301m.

The SIU’s 26 current court cases, involving investigations dating from 2010 to 2017, were largely efforts to have contracts declared invalid, and to recover losses or seek repayment. They involve mostly the department of public works, but also include matters involving the departments of rural development and land reform, communications and correctional services.

The Post Office, SABC and several municipalities are also parties in some of the cases.

The SIU also identified government deals totalling R2.7bn that are being challenged in courts on the basis of evidence secured by its investigators. One of these involves a correctional services department contract of R1.3bn. Despite these successes, the SIU only recovered R34m unlawfully spent by the state in 2017/2018. It had identified R233m that could be recovered by the department of public works for “overpayments for parking bays, rental not due, lettable space not being provided, and electricity and water”.

The SIU had also referred 148 cases to the National Prosecuting Authority for prosecution in the past year. According to its

annual report, these criminal matters involve alleged corruption, fraud, forgery, gross financial misconduct and violations of the Prevention of Organised Crime Act.

It had referred 319 cases involving government employees, board members or directors of state-owned enterprises, municipal councillors, vendors, contractors and suppliers for “disciplinary, executive and/or administrative action”.

The cases included alleged improper and fraudulent conduct; fraud, alternatively theft; gross dishonesty; gross negligence; contraventions of the Public Finance and Municipal Finance Management Acts; violations of the constitution and contravention of SA Revenue Service regulations.

The SIU identified “nonimplementation of remedial action” as its biggest strategic risk. While the unit can initiate court proceedings to cancel invalid contracts and recover the money spent on them, it can only make recommendations to the government departments it investigates about action to take as it has no power to order them to do so. The SIU has less power than the public protector, who routinely refers cases to it for investigation.

“There were a number of matters where potential recoveries were identified, which we had hoped would be recovered during this financial year,” the SIU states in its annual report.

Meetings had been held with the government departments investigated, and they had promised to complete “a reconciliation of all the matters referred to them.

“We expect to see an increase in the number of recoveries in the 2018/19 financial year,” the SIU’s annual report says.

In 2018, the unit handed more than 15 of its finalised investigation reports, dating as far back as 2002, to the Presidency, which sends them to the departments or entities investigated with a request for updates on the implementation of recommendations made.

President Cyril Ramaphosa could attempt to force those departments to comply with the SIU’s recommendations.

319 the number of cases referred for disciplinary, executive and/or administrative action