1 774 service providers under investigation for PPE corruption spree, SIU report reveals
Johannesburg - The Special Investigating Unit (SIU) says it has uncovered a six months looting bonanza between January and July that cost the state R13 billion.
This is the information contained in the report that was released by the organisation this week.
The SIU looked into the procurement of Personal Protective Equipment since the Covid-19 pandemic and found instances of serious maladministration in connection with the affairs of the state institutions, improper or unlawful conduct by officials or employees, and unlawful appropriation or expenditure of public money or property.
According to the report, at least 1 774 service providers are under investigation concerning the looting bonanza. At least 164 contracts awarded to 141 service providers have been finalised to the value of R3 billion, while 1 541 contracts awarded to 777 service providers are still under investigation.
The contracts are estimated to be over R6bn with a further 851 contracts awarded to 856 service providers to the tune of nearly R3bn are yet to investigated.
As of February 2, 2021, the unit has been able to recover/save the government over R120 million and made 25 referrals for disciplinary action against officials. At least two referrals have been made for executive or administrative action, and 38 referrals have been made to the prosecuting authority.
The investigation followed allegations in the Gauteng Department of Health where tenders were being awarded to friends and families of politically connected individuals. However, the investigation looked at all PPE tenders in the country where whistle-blowers came forward with information.
While releasing the report, SIU head, advocate Andy Mothibi said the investigations revealed that political pressure played a role in awarding tenders to particular companies.
In many of the cases, he said officials merely rubber-stamped decisions made by senior officials while others did not ensure that normal Supply Chain Management (SCM) controls were followed.
Among the high-profile cases that caught the public's attention was awarding a R125m contract to Royal Bhaca, owned by King Madzikane ll Thandisizwe Diko, the husband of President Cyril Ramaphosa's spokesperson, Khusela Diko. The Sunday Independent reported on the matter and the subsequent R80 million payment made to Ledla Structural Development.
The report found that the R139 million contract with Ledla was irregularly awarded by the Gauteng Department of Health while unit prices were also artificially inflated by between 211% and 542%.
The department was criticised for making a R38 million payment to the entity and clearing the funds immediately while SIU investigations were under way. The report found that "substantial amounts were moved from the bank accounts of the supplier to the bank accounts of two other entities, who in turn, transferred the funds to at least 36 other entities."
This publication also reported in August how the daughter of Limpopo ANC deputy chairperson Florence Radzilani and the wife of a senior official in Premier Stan Mathabatha's office were among the beneficiaries of the province's irregularly awarded Covid-19 PPE contracts.
Ndivhuwo Radzilani's construction company, Ndia Business Trading, was awarded a R1.1 million contract to supply PPE to the Limpopo Department of Health. Another notable beneficiary was Susan Managa, the wife of deputy director-general for institutional support in the Premier's Office, Eddie Managa, who allegedly scored contracts worth R2.2m.
The Eastern Cape's R10 million spending spree on motorcycles with a side-car to transport patients also caught the public's attention. The report found that the process was not fair, competitive or cost-effective. The province was also charged close to R5 million for door-to-door services in the OR Tambo Municipality.
The report acknowledged the public outcry of such contracts and added that there was nothing wrong with people benefiting from such.
"Currently, such involvement does not necessarily render the awarding of contracts to such people, or entities that they are involved in, unlawful and such contracts must be scrutinised for compliance with the principles of section 217 (1) of our Constitution and the PFMA and the MFMA," the report said.
However, it called for additional safeguards for institutions to prevent state institutions contracting persons with political connections.
"The SIU recommends that legislative amendments be considered to provide for safeguards when the State Institutions are to contract with domestic prominent, influential persons and their immediate family, as well as the entities in which they have an interest, or are beneficial owners of."
The report further found that companies that were awarded contracts, were not registered on the Central Supplier Database, and some were only registered days before the State of National Disaster kicked in, and the country was placed under hard lockdown.
Government departments were found wanting in terms of pricing. The report found that they did not negotiate better pricing and went with whatever was said by the would-be suppliers. The very same suppliers also charged for Value Added Tax (VAT) while they were not registered or compliant.
"Our report found that there was no attempt to negotiate with suppliers in bringing prices within the thresholds provided by Treasury. This resulted in overpayment for goods. The Departments lack basic control measures that will establish correct product delivery. In several instances, we found under-delivery of items. There appear to be no verification protocols on supplier registration details. This has resulted in several suppliers claiming VAT when they were not registered with Sars as VAT vendors," Mothibi said.
In the report, it was further found that 6 140 government officials had been claiming from the Unemployment Insurance Fund (UIF). They had claimed R41 009 737, making use of 3 959 bank accounts.
"Of the 3 959 bank accounts identified, a total of 581 bank accounts were associated with multiple beneficiaries. Seventy-nine exceptions were identified relating to members of the South African National Defence Force (SANDF). A total of 59 SANDF members received payments to the value of R327 630," Mothibi said.