Durban - A forensic investigation into allegations of impropriety at the Private Security Sector Provident Fund (PSSPF) linking several big companies found that the organisation had engaged in irregular appointments of service providers and inflation of prices.
The PSSPF provides services to more than 800 000 members, which include retirement, disability, death and funeral benefits, appointed through financial firms such as African Unity Limited, Core Astute, Salt Employee Benefits, Soonder Incorporated, and Vendicure.
Forensic experts Ngidi Business Advisory was commissioned by the Financial Sector Conduct Authority to investigate widespread corruption and maladministration in the PSSF’s procurement processes.
The investigation found instances of improprieties earlier this year, leading to background checks being conducted on all board of trustees and PSSPF service providers.
Independent Media’s Special Investigations Unit, which accessed the report, learnt that the board appointed service providers who had inflated membership prices and who had poor experience in the industry, where they (the board) could have chosen companies with better track records and lower costs.
The report further exposed board members who were providing services to the fund, making millions, even though the PSSPF’s procurement policy prohibits it.
The Ngidi investigation began with the appointment of Salt. Salt was paid more than R17 million before the fund even received any of its services. To date, much of the work promised by Salt remains incomplete, the report confirmed.
It all started when the tender process was conducted irregularly in 2016. Salt was appointed to provide administrative services to the fund.
Ngidi questioned why the board had chosen Salt over other service providers, like Alexander Forbes, which did not need an upfront payment or did not charge for transfers and implementations of data, and Sanlam, whose take on fees was far less.
Salt had charged higher fees for both active and inactive members and had requested R17.1m, an upfront payment which was far higher than what Sanlam would have charged the fund.
There was also no evidence found substantiating the total of R17.1m paid to Salt.
When questioned, former board chairperson Cobus Badenstein, who approved the invoices at the time, did not make himself available for a response and asked for written questions instead, the report confirmed.
The PSSPF’s actuary, Peter Theunissen, told investigators that the members’ information was expected to be 100% accurate and completed but Salt only completed 87% to date. Theunissen said that the pricing also needed to be investigated as it seemed to be too high for what he called a “copy and paste” exercise.
Salt’s appointment was found to be signed in a closed bid process as the investigation found no evidence of surveys conducted with other companies, despite numerous requests.
There was also no evidence indicating that a written substantiation for a closed bid process in the procurement was submitted and approved by the board, in line with the procurement policy, and no evidence that the references provided of companies were indeed contacted.
Soonder’s attorney Asmitha Mothilal said its offices had been retained by Soonder Inc, and other companies involved in the matter. “Our clients have solicited the services of Tayfin Forensic and Investigative Auditors, who are in the process of addressing the report.
“Considering that this matter is soon to become sub judice, our clients will refrain from commenting on the content of the report. However, they reserve their right to do so at the appropriate time and in the appropriate forum,” she said.
The report also states that it was discovered that service provider African Unity participated more than once in the tender process using different names, meaning that the irregularity compromised the fairness of the procurement process, and the company had an unfair advantage over other service providers that responded to the bid. African Unity was also allowed to increase its offering for the disability benefit to R120 000 during the evaluation phase of the procurement process, the report confirmed.
African Unity responded but did not name directors.
“African Unity was appointed in 2018 and is still currently providing services to the fund,” the company’s marketing department confirmed. When questioned about participating more than once in the tender process, the company said it was not aware of that.
“We submitted the tender on behalf of African Unity Life Limited as per the prescribed process which was overseen by the statutory managers of the fund.”
The chartered principal executive officer of Vendicure, Mzwandile Peter Zibi, was also fingered in the investigation as all the payments made to service providers were by his company.
He was at the time of appointment rendering secretarial services while serving on the board. The report found that no contract was concluded between Vendicure and the fund, and that the allocation of all these services to Zibi was irregularly done through a decision of the board.
Other irregularities that were discovered at PSSPF was that of their junior secretary, Kele Zibi, being appointed to do work alongside secretary Judy Shabangu. Zibi, who confirmed that she did not have the necessary experience and qualifications for the job, was later found to be the daughter of the fund’s public officer, which is irregular as the fund does not allow the hiring of family members.
Speaking on behalf of the fund, Mzwandile Peter Zibi said that it was no longer dealing with Soonder Inc. He did not comment further.
Makhubela said the investigation had been finalised and the findings had been provided to them by the statutory managers, adding that the FSCA considered the findings in the report, in conjunction with its own findings from the on-site inspections, and was in the process of initiating appropriate regulatory action/proceedings against those involved.
“The FSCA has initiated regulatory action/proceedings against certain individuals following the findings made in the report, which the FSCA accepted, and further based on findings made from the FSCA’s own inspections. These proceedings are still ongoing and the FSCA cannot disclose further information in this regard.”
Independent Media’s Special Investigations Unit