Johannesburg - Public Enterprises Minister Pravin Gordhan, during his term as finance minister, allegedly swept complaints of maladministration and tender irregularities under the carpet when it surfaced that an information technology (IT) company - Budge, Barone and Dominick (BBD) - appointed during his time as commissioner at SA Revenue Service (Sars), was done so illicitly.
Documents obtained from two former high-ranking Sars officials, whose identities are known to Independent Media, suggest that allegations of corruption and instances of financial mismanagement surfaced when he took over the Ministry of Finance after Trevor Manuel’s term ended.
In the whistle-blower’s documentation, BBD was awarded a contract without an open tender process but through an exemption.
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The same company, through what officials have termed as “a dubious open-ended tender process” that has lasted “for time immemorial” (dating to 2006) has access to all the intellectual property of the Sars’s IT department through a source code which is the base and is used in the development of the IT system.
The company is alleged to have handed over the original source code to revenue service but kept a copy for themselves without permission, meaning that a private company effectively has access to all taxpayers’ sensitive information.
The same source code was used to develop the IT system at Home Affairs. According to the whistle-blower: “The source code is the initial algorithm used to develop a system which makes it the intellectual property because that is what the system is at its foundation. You cannot make changes to the system if you do not have the source code.
“Although this looked clean on the surface, there are a number of issues which violate the Public Finance Management Act (PFMA)” the whistle-blower added.
“The procurement exemption is in violation of the PFMA in that the PFMA regulations only allows varying to only 15% of value or scope. This means that the value could have been only increased by R16.5million to R126.5m, strangely it now sits on R1.4billion.”
According to documents, the prolonged exemption has been in place since 2006 without an open tender being put in place.
As a consequence of the contract, the whistle-blower claimed that BBD also owned the intellectual property (IP) of the Sars’ IT department, which could explain why the company has had an open-ended tender with the institution for 12 years.
“The situation has resulted in Sars spending close to R7billion on IT as costs continued to escalate despite there being no tender process. The IT tender was also extended to the Department of Home Affairs.
“The IT of Sars is in the hands of a private company, of which, if the contract is cancelled, BBD will walk away with the IP which includes the data of every single tax-paying citizen in South Africa,” said the whistle-blower.
When contacted for comment, BBD confirmed that it had a contract with Sars subject to the usual confidentiality provisions as defined by the revenue service.
It did not confirm nor deny that it owned or has access to the IP of the Sars IT Systems. The firm referred all questions back to Sars.
Independent Media has been able to establish the following facts on BBD from available documentation:
* BBD has been operating in South Africa for more than 30 years and is 51% black-owned.
* Sphere Holdings owns a 49.9% stake in BBD. Jabu Mabuza, the chairperson and chief executive of Eskom, holds a 10% stake in Sphere and was their executive chairperson in a transaction approved in March 2015, according to a report on Sphere Holdings website.
* However, at the Zondo Commission of Inquiry he testified that he held a 6% stake in Sphere worth R26m.
BBD develops the front-end system for Interfront, a commercial IT entity owned by Sars. Interfront was brought into Sars during Gordhan’s tenure at a cost of R72m without a proper due diligence being followed, according to the whistle-blower.
BBD was brought into Sars after global firm Accenture won a R1bn contract in 2006.
The whistle-blower added: “To put it in simple terms, if you look at what happened to the ANCs website, where the people who managed the website owned the IP of that site, BBD is in a similar situation which owns the IP of the Sars IT department.
"Sars does not control the intellectual property of its IT. If it goes out to tender, they lose the IP. It will leave sensitive information of taxpayers in private hands.
"This information can easily be used to start something like a bank because they have taxpayers' information. Information of taxpayers is a matter of state security and it is in private hands.”
Queries sent to the National Treasury during the course of the investigation found that the department was never made aware of, nor was authorised to look into allegations of tender irregularities during Gordhan’s tenure. This is despite of complaints being lodged by former senior Sars executives against the open-ended tender between Sars and BBD.
In a response to questions, Treasury said it was not aware and did not conduct a review or an investigation into allegations of tender irregularities and flouting of the PFMA while Gordhan was commissioner at Sars.
The department also denied that any of its officials were complicit in hiding instances of gross financial mismanagement under Gordhan’s tenure as finance minister.
Sars did not respond to queries regarding the contract despite follow-ups being made.
When contacted for comment during the course of the investigation, Gordhan instructed his spokesperson Adrian Lackay to send the following response: “I’m advised to inform you that we will not respond to agents of state capture or those actively working to advance nefarious agendas in the media, or public attacks to malign and disrespect the reputations of good honest people.”
He did not respond to follow-up questions sent to his lawyers either.
*Special Investigations Unit