This is how KZN government squandered almost R30m on dodgy blanket tenders

Published Jul 22, 2020

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Durban - Allegations that the Covid-19 pandemic was being used to loot state coffers came to fore yesterday, when KwaZulu-Natal Premier Sihle Zikalala revealed millions had been lost to the province in irregular procurement.

A forensic investigation has revealed that thousands of blankets that cost the provincial government more than R15million have been lying in a storage unit, damaged and unused for months.

It found that there had been an abuse of the Covid-19 emergency procurement provisions, and efforts to “cover up” included attempts to backdate submissions for awards to service providers.

The blankets were procured by the KZN Department of Social Development and were meant for the homeless and needy.

While 48000 blankets were ordered and paid for in full, only 4982 blankets were distributed, the investigation found. It also highlighted that invoking the Covid-19 emergency provision procurement may have not been justified.

The investigation into the alleged irregular procurement of blankets and personal protective equipment (PPE) did not reveal the names of those service providers. However, it called for the immediate suspension of a number of high-ranking government officials implicated in the scandal.

The investigation found that the procurements were not done through a fair, transparent, competitive and cost-effective system.

During the lengthy media briefing, Zikalala reflected on the findings and recommendations of the investigation.

He said it found that a needs analysis had not been done prior to so many blankets being procured.

The order for 48000 blankets was issued to four service providers in March this year for R16million.

While each service provider was asked to provide a quote on the same specifications, the investigators noted that the price of the blankets varied from R350 to R559.

“The investigation found that there was no evidence to suggest that the department had considered the difference in pricing to determine the reasonable value; or negotiated any discount rates with the service providers, considering that the blankets were procured in bulk,” Zikalala said.

The investigation further established that the suppliers misrepresented the specifications of the blankets and that most blankets supplied were not in accordance with the size specifications.

It also appeared that two service providers operated from their homes, which are listed as their business addresses.

Zikalala said the approximate financial loss to the department as a result of the misrepresentations was R15.8m.

In addition, some service providers did not deliver blankets within the stipulated period but were paid in full without any penalties being served, Zikalala said.

The investigators also discovered that only 4982 blankets out of the 48000 were distributed as at May 2020, and that more than 43018 blankets were left in storage centres with uncontrolled access.

“And some have been damaged and unaccounted for amounting to possible fruitless and wasteful expenditure as per the Public Finance Management Act,” he said.

In addition, department officials did not have an “adequate and effective” inventory management system in place to control, monitor stock levels, account for distribution of blankets and ensure completeness of stock on hand.

“The investigators found contradictions in the procurement process adopted by the department from the sourcing of service providers, the invitations to quote, the receipt of quotations to the payments made to service providers, the delivery of blankets and the specifications of goods procured.

“These revealed inconsistencies, contradictions and non-compliance with the process.

“Based on the above, the report concludes that there was evidence of the abuse of deviation procedures in terms of the emergency and urgency provisions, and the entire process should be deemed irregular,” Zikalala said.

The investigation called for disciplinary action to be taken against the acting accounting officer at the time, the acting director general, the chief financial officer, the acting SCM (supply chain management) manager, the chief directors and the SCM officials.

In a separate investigation into the procurement of R13.6m worth of PPE, also by the Department of Social Development, Zikalala said the report highlighted significant irregularities that were caused by “inadequate and ineffective systems of internal controls” in the department.

These included purchase orders for PPE issued to 11 service providers prior to approval of the procurement.

He said it was concerning that the names of most of the companies were given as an instruction by senior management to junior officials without following proper supply chain management procedures.

Some service providers also exceeded the minimum amount of purchase as regulated under Treasury instruction notes and, in some instances, quotations were changed three times. On each occasion the quantities of the items were reduced in order to reduce the total cost of procurement.

“However, most noticeably there was no reduction of the pricing per unit,” he said.

As a result, the investigation concluded that all payments made to the service providers, amounting to R13630229, were irregular.

Zikalala said that had the department applied the regulated prices and processes correctly, it would have saved more than R2.2m.

Some service providers were also paid in full on May4, while the delivery of goods happened a week later.

“It is an anomaly to pay for services not rendered, but effect payment in advance. The investigation also noted that some service providers invoiced the department for goods not yet delivered,” Zikalala added.

The investigation recommended that disciplinary action be instituted against the various officials involved.

Zikalala said it was concerning that the investigation also revealed that prices had been inflated and some service providers were not compliant in respect of documents specified in the invitation to tender.

The investigation recommended that the cluster chief directors also be subjected to disciplinary processes for contravening their duties and for violation of relevant procurement processes.

Zikalala indicated that those implicated would be suspended, if need be, and promised that the entire report would also be handed to the SAPS to investigate criminal charges.

He added that those service providers would be blacklisted.

“Once you have done wrong, you must face the music,” he said.

The Mercury

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