Johannesburg - South Africa has lost R35 billion in the last five years – through the wrongful and wasteful construction or leasing of state buildings.
Of this amount, R1.1bn was due to fraud-related activities.
The auditor-general (A-G) has repeatedly highlighted the problem of unauthorised, irregular or fruitless and wasteful expenditure by government departments.
The A-G’s report on national and provincial government for 2012/13 noted a total of R59.4bn in irregular expenditure over the three years from 2010/11 to 2012/13 by all departments. There is no breakdown for individual departments.
Irregular expenditure is spending that doesn’t comply with the law.
The Public Works Department’s financial losses are revealed in confidential documents, including a report for the year-ended March 31, 2014, which The Star has seen.
Public Works Minister Thulas Nxesi was expected to reveal the details at a media briefing on Monday.
The report was due to be released to the public when Nxesi presents it to Parliament on Tuesday.
The R34.98bn losses were uncovered during the department’s review of transactions of the Property Management Trading Entity (PMTE), dating back to 2009.
In all, about 1.3 million transactions were reviewed.
The review identified procurement processes to be among the main causes of the public funds haemorrhage.
“As a result of the above review undertaken by the PMTE and the department… there has been a significant increase in the disclosure to R34.98bn. This is a result of supply-chain management processes not adhered to,” it said.
Of this amount, R17bn – or 50 percent of the total losses – was a result of construction-related irregularities, R14.5bn was losses incurred as a result of building leases, and R2.9bn was lost to day-to-day maintenance.
The R17bn relating to construction includes an amount of R3.2bn for the appointment of consultants on the construction projects.
The report shows there had been a steady decrease in the loss of public funds since 2009.
Of the R35bn, R22.6bn was lost in the 2009/10 financial year.
Previously, R4.9bn was lost in 2010/11, R3.86bn 2011/12. The figure was R3.1bn in 2012/13 and R600m in the last financial year.
“This is an indication that the preventative, detective and corrective controls implemented have been effective in identifying and correcting irregular expenditure.”
The litany of malpractices identified include missing procurement documents; missing tax-clearance certificates; non-original tax-clearance certificates; and approving tender documents that did not meet requirements.
Others include unauthorised payments; unsigned contracts and companies submitting bid documents without the original tax-clearance certificates; awarding tenders with bids not advertised within 21 days; and unauthorised deviation from mandated procurement procedures.
“The transactions that have to date been identified to be the result of suspicious practices, amounting to R1.1bn, have all been referred to the Special Investigative Unit, the department’s Fraud Awareness and Investigative Unit,” the report reads.
Nxesi said on Sunday that his department would ensure that officials who were liable for the transgressions would be accountable.
“As public servants, we have a responsibility to ensure accountability for public resources. This has been a cornerstone of our turnaround strategy, which is combating fraud and corruption and mismanagement.
“It is absolutely essential that as a department we clean up the mess of irregular expenditure – some of the problems going back as far as 2001,” he said.
“We have to hold people accountable, charge them where necessary and subject them to an open disciplinary process. My objective here is to promote good – and accountable – governance within the Department of Public Works.
“It starts with transparency and acknowledging the problems that exist. Only then can we analyse and implement solutions.”
Nxesi added that his department was putting in place “more robust financial systems and structures” to ensure that problems did not persist and to ensure good governance.
The documents do not give details about the leases of buildings and constructions. But these losses include those incurred from leases such as the Middestad building in Pretoria businessman Roux Shabangu bought for R220m and valued at R850m, and the R246m upgrades at Nkandla.
The Star