Under investigation
Watchdog will not get additional budget funding until probe into irregular expenditure is completed
The National Treasury has initiated a forensic investigation into the Competition Commission’s dodgy procurement practices. The probe will dig into the financial affairs of the watchdog’s top executives to explore whether anyone is receiving kickbacks from external legal or IT service providers.
The investigation, which will cover a period going back three years, has been sparked by the Treasury’s concern over the commission’s repeated overspending, findings of irregular expenditure by the auditor-general (AG), and media allegations over the commission’s suspicious procurement patterns.
The commission will not receive its final medium-term budget allocation until the investigation is wrapped up, which the Treasury hopes will be at the end of May. This means that an additional R125m earmarked to enable it to investigate cartels and anticompetitive behaviour using its expanded mandate under the new Competition Amendment Act, will remain on ice.
Meanwhile, the commission’s medium-term allocation has been cut by R32.4m and the wages of senior management have been frozen as part of the Treasury’s overall cost-cutting drive.
Details of the investigation are contained in a letter from the Treasury’s economic services directorate to the department of economic development, which houses the commission. A copy of the letter was leaked to the FM.
The Treasury has confirmed the authenticity of the letter and that it has requested the economic development department to institute a forensic audit.
The FM has been at the forefront of media allegations against the commission, starting with an exposé last July which probed why Ndzabandzaba Attorneys was being channelled so much commission work and whether a patronage network existed.
The Bryanston law firm was founded by Anthony Ndzabandzaba after he left the commission, having worked in the cartel division for several years. He was suspended in mid-2015 by then deputy commissioner Oliver Josie over his work performance but was reinstated by current commissioner Tembinkosi Bonakele while Josie was on sick leave.
It was subsequently revealed through parliamentary questions posed by DA MP Michael Cardo that Ndzabandzaba’s firm earned almost R72m from the commission between January 2015 and mid2018. During the first two years of this period, the firm was channelled 70% of the cartel cases outsourced by the commission.
Quizzed on these issues in the portfolio committee on economic development late last year,
Bonakele became rattled and lashed out at the “interference” of politicians and the “bias” of the media.
At the time, economic development minister Ebrahim Patel appeared reluctant to take the issue seriously, saying in parliament: “There are some challenges here and there that we must address, but in dealing with those we don’t break down institutions in order to solve little problems that the commission may have, or to deal with the issues that the AG has raised.”
However, from the leaked letter it’s clear that the Treasury takes the matter very seriously indeed. It expresses “concern” that the commission accumulated deficits in the past three financial years of almost R150m, wiping out a surplus built up over many years.
These persistent deficits were incurred despite big budget hikes and many engagements with the Treasury about controlling its expenditure.
“Findings by the AG regarding irregular expenditure during 20172018, coupled [with] several allegations in the media regarding the appointment of service providers, perpetuate [our] concern,” the Treasury states.
While Cardo is gratified that a forensic investigation has been instituted, he fears that if it’s conducted by the economic development department it will be a “whitewash”.