State weaves a web with dirty money
The Special Investigation’s report into R14.3bn worth of Covidrelated procurement irregularities names the companies and people involved, revealing how hundreds of officials have become entangled in corruption.
Eighteen months of investigation by the Special Investigating Unit (SIU) into alleged corruption, which involved nearly 10% of the government’s R152-billion expenditure on goods and services meant to combat the Covid-19 pandemic, has culminated in a report that implicates hundreds of officials – from ministers and those in senior positions to dirty officials.
The 737-page report, which was released on 25 January, corroborates much of Daily Maverick’s investigations and reportage.
In total, 224 government officials have been referred for disciplinary action, 386 people have been referred for prosecution by the National Prosecuting Authority (NPA) and 330 companies have been recommended for blacklisting.
The report stems from the investigation of 5,467 contracts awarded to 3,066 service providers, which involved R14.3-billion – about 9.4% of the R152-billion the state spent on Covid-19 expenditure between April and September 2020.
Investigations into 4,549 contracts have been finalised, of which 2,803 – or 62% – were found to be irregular.
The staggering scale of the alleged corruption spans the provinces, municipalities and departments and the deals range from personal protective equipment (PPE) procurement to fumigation, catering, water supply, temporary homeless shelters and field hospital construction.
The SIU lists the people and companies that have been investigated and implicated, including businesses that were only registered on the Companies and Intellectual Property Commission (CIPC) when lockdown was imminent and “thus would and could not have had demonstrable track records”. Companies were awarded contracts even though they were not registered on the government’s Central Supplier Database (CSD) and the type of goods and services supplied were not consistent with the nature of the business registered on the CIPC and CSD.
The SIU noted the splitting of bids to meet quotation thresholds, suppliers not registered with the SA Health Products Regulatory Authority (Sahpra) supplying medical equipment, and companies that were not tax-compliant being awarded contracts.
It points to cases where product specifications were ignored or products that were not suitable were procured.
“It appears that persons in positions of authority within provincial government believed that the declaration of a ‘national state of disaster’ meant that all procurement is automatically now conducted on an ‘emergency’ basis, and without compliance with any of the normal prescripts regulating public sector procurement,” the report says.
The SIU investigation was undertaken by presidential proclamation in July 2020.
The public release of the SIU report sets the clock ticking for President Cyril Ramaphosa to turn tough talk on corruption into speedy and decisive action.
In his statement on the release of the report, Ramaphosa said: “This investigation targeted individuals and institutions who believed they could exploit a moment of national vulnerability to enrich themselves and those with whom they colluded to abuse public resources. It is unacceptable that so many contracts associated with saving lives and protecting livelihoods were irregular, unlawful or fraudulent.”
He did not set out what he planned to do next, stating only: “As regards prosecutions, the Presidency trusts the NPA will exercise its discretion diligently and expeditiously.”
But the SIU will need more than just statements to finalise the 18% of the cases it is still investigating. The unit is considering applying for an extension of the President’s initial proclamation to expand its scope.
The SIU expects to submit a supplementary report to Ramaphosa at the end of June.
The latest report, signed off by SIU head Andy Mothibi, details the limitations of their investigations. It raises alarms that holding the line against corruption is under strain.
“In many instances, the SIU received only partial records and had to go back for more comprehensive records…”; “there was also a delay in the submission of some documents by the state institutions”; and “Witnesses fear victimisation and/or feel unsafe and are hesitant to be interviewed, provide statements and/or evidence”, the report states.
Clear, too, are limits to the SIU’s powers. Its measures have not been taken seriously in some cases, with the report noting disciplinary action that drags on interminably or has seemingly few consequences for ignoring the unit’s recommendations.
The costs of the investigation stand at R310.2-million. Of this, R216-million is outstanding and the SIU estimates that costs will climb with ongoing litigation of some cases. This comes against budget cuts to the unit of R150-million, which will continue for the next three years.
The SIU justified its costs with the successes of 45 cases before the special tribunal for corruption, fraud and illicit money flows with a combined value of R2.1-billion.
It has recovered R34.2-million and set down actual cash and assets to be recovered at R551.5-million. It says the value of potential loss prevented by the investigation amounts to R114.2-million and contracts set aside add up to R170.4-million.
(Mis)communications deal
Although the SIU report does not include details of ongoing investigations into allegations received by the SIU after the timeline set for matters to be included in the final report, it confirms much of what has already been reported in the media.
The most notable example is the case of Digital Vibes, the Department of Health (DoH) and ANC NEC member and former health minister Dr Zweli Mkhize.
In 2020, Pieter-Louis Myburgh, a journalist at Scorpio, found that Tahera Mather, Mkhize’s friend and former personal spokesperson, and Naadhira Mitha, Mkhize’s former assistant, were allegedly part of a looting frenzy enabled by a questionable communications deal between media company Digital Vibes and the Health Department.
The SIU report says “this matter has been fully investigated and the SIU issued its report to the Honourable President on 30 June 2021. The value of the contract under investigation and the SIU findings and outcomes have not been included in this final report.”
Irregular PPE contracts
It was announced just over a year ago that former presidential spokesperson Khusela Diko was to face an internal disciplinary process after concerns raised by the SIU about a lack of financial disclosures.
The Sunday Independent had alleged that Diko’s late husband, amaBhaca Chief Thandisizwe Diko, had sought tender contracts through his company, Royal Bhaca Projects. These allegedly irregular contracts were related to the provision of PPE for the Gauteng Department of Health (DoH).
Dr Bandile Masuku, then Gauteng Health MEC, was fired in October 2020 for “failing in his executive functions”. The Gauteng DoH had awarded contracts worth about R125-million to Royal Bhaca.
The SIU investigation “found that both Royal Bhaca and Ledla were irregularly awarded contracts by the Gauteng DoH, which were based only on the arbitrary decisions of the former CFO of the Gauteng DoH, Ms Lehloenya, and without following any competitive bidding process.”
On 24 February 2021, the SIU referred evidence in support of a criminal charge of fraud against the Ledla and Royal Bhaca directors to the NPA. A prosecutor has been assigned to the matter, the report says.
Through the Special Tribunal, the SIU recovered just more than R16.6-million on 10 December 2020 and a further amount of almost R7.5-million. On 10 February 2021, the SIU declared the amount of R99.2-million – the remainder of the contract amount of Ledla – to be invalid and not owing.
Sanitising schools scandal
A Maverick Citizen investigation found that, between June and August 2020, the Gauteng Department of Education (GDE) spent more than R431-million on sanitising schools.
This money was paid in sundry payments to hundreds of companies, many of which appear to have no expertise or prior involvement in the cleaning industry.
The SIU “was able to confirm that each of the 270 service providers [was] irregularly appointed” and that “the officials involved contravened Section 217(1) of the Constitution as the procurement processes were not fair, equitable, transparent, competitive and cost-effective”.
In this case, the SIU made four referrals for disciplinary action and one criminal referral for corruption.
Laboratory liberties
What started as a boastful post on social media by high-flying businessperson Hamilton Ndlovu ended badly in September when the SIU and the National Health Laboratory Service (NHLS) were granted an order to freeze Ndlovu’s properties and a trust account worth R42-million. Daily Maverick reported at the time that the SIU was investigating corruption allegations involving eight companies linked to Ndlovu.
The SIU’s recent report says their investigation “uncovered a web of interlinked entities, all purporting to operate independently. However, in essence, the entities were all the alter egos of Mr Ndlovu.” The “available evidence” indicates that Ndlovu “is both the direct and indirect beneficiary of the funds received from National HLS”.
In this case, eight disciplinary referrals were made to the CEO of National HLS and 11 criminal referrals were made to the NPA.
Pandemic property
The alleged opportunism and financial misconduct of the Johannesburg Property Company (JPC) was also covered by Daily Maverick. The JPC contracted service providers for deep cleaning and sanitation at the city’s Metro centre, taxi ranks and markets.
According to the report, the emergency procurement process was flawed and it appeared that the four service providers were handpicked by JPC officials. Disciplinary and criminal referrals were made against five employees.
The SIU has also instructed the office of the State Attorney to brief counsel to lodge an application to review and set aside the four contracts concluded by the JPC that were valued at R18.6-million.