Johannesburg - Buoyed by a “great victory” in which a judge confirmed its findings and set aside a multimillion-rand Covid-19 personal protective equipment (PPE) contract, the Special Investigating Unit (SIU) has vowed to press ahead with current investigations and recover all the money illegally received by the beneficiaries.
SIU spokesperson Kaizer Kganyago said the judgment against a front company for Royal Bhaca – owned by the husband of presidential spokesperson Khusela Diko’s husband, Chief Madzikane II Thandisiwe Diko – was an important milestone for the SIU in its fight against tender irregularities and malfeasance.
“This is the first judgment around the PPE contracts. It is a great victory for us because it has set aside the contract that was not complying with the law. We are going to forfeit the money to the state – meaning we will take the money from the bank because the contract is not going to happen,” he said, adding that investigations were still continuing with all contractors involved.
The Special Tribunal of SA ruled this week that the R125 million worth of PPE contracts awarded to Ledla Structural Development by the Gauteng department of health in March were illegal.
The tribunal ruled that the controversial contracts, for which Ledla was paid more than R38.7m, be reviewed, set aside and cancelled, with the funds forfeited to the state.
Presenting his judgment on Thursday, Judge Billy Mothle said the cancellation was based on the grounds of illegality. In July, the Sunday Independent revealed that Royal Bhaca Projects was illegally awarded contracts worth R125m by the Gauteng Department of Health on March 30 – days after President Cyril Ramaphosa announced a Covid-19-related national lockdown.
The Dikos and officials from the Gauteng health department later claimed that Royal Bhaca’s contracts were later cancelled. However, following a public outcry, Royal Bhaca was illegally substituted by Ledla, which emerged as a proxy and received contracts and payments of similar value.
Former Gauteng Health MEC Bandile Masuku became embroiled in the tender irregularity scandal and was subsequently fired by Premier David Makhura, after an SIU preliminary report on his involvement was released. Masuku is challenging the SIU report in court.
In his judgment, Mothle found that the contracts awarded to Ledla and Royal Bhaca were not transparent, competitive and cost effective.
“They were not acquired in terms of the prescripts of section 217 of the Constitution, the PFMA (Public Finance
Management Act) and the regulations thereof as directed by the national and provincial treasury. The award was not compliant with the system of delegation of authority in respect of the limits to the extent of amounts authorised to be procured,” said Mothle.
The matter was taken to the tribunal in August by the SIU and it involved 39 other companies that were contracted to deliver PPE to the provincial health department.
The SIU launched an urgent application, wherein it sought urgent interim relief on three orders:
The cancellation of a contract unlawfully awarded by the Gauteng Department of Health; The preservation of specified amounts of money held in various bank accounts, distributed by Ledla; and the request for an interdict prohibiting pension funds and retirement benefits to former Gauteng health department chief financial officer Mantsu Kabelo Lehloenya.
Mothle said Ledla was not registered on the National Treasury central database for supply of medical goods and its substitute to Royal Bacha occurred in a corrupt manner – with at least one official from the provincial health department being involved.
“It is thus the finding of the tribunal, on the basis of the aforementioned reasons, that the conduct of one or more or all of the senior officials of the department involved in the procurement of Covid-19 items, acting with Mr Diko in awarding the two contracts to Royal Bacha and one to Ledla, was unlawful as contemplated in sections 2 (2) (a), (b), ©, (d), and (e) of the Act. Consequently, the Ledla contract falls to be reviewed, set aside and cancelled on the grounds of illegality,” Mothle added.
He said Ledla and its directors, including Rhulani Lehong-Mboweni, failed to explain how they were offered a bid while they were not on the government’s central supplier database.
He confirmed that Ledla also inflated prices, as previously reported by the Sunday Independent.
“I am thus not persuaded that Ledla and its directors acquired R38.7m lawfully from an unlawful contract in whose award it was complicit. That it acquired the amount of value and that being complicit, it and its directors did not know that the amount was proceeds of an unlawful activity.
“I conclude that Ledla’s preserved amounts in the bank and those of its directors must forfeit to the state,” he said.
Mothle also ruled that all suppliers that were paid by Ledla must face a preservation order, adding that the person who paid the suppliers was not a director or an employee of Ledla but Khusela’s cousin.
“Upon receipt of this amount (R38.7m) and on the same day, Ledla transferred a large portion of the amount into various bank accounts belonging to the second to fourteenth respondents, in different amounts. The disbursements of the funds in Ledla’s bank account were directed by Mr Sangoni, who was neither a director or employee of Ledla. He is a cousin and a family member of Mr Diko’s wife.”
Mothle said K Manufacturing and Supply was used to launder money when it received an amount of R16500000 on August 3, and it was directed to transfer R8 500 000 to Sangoni’s Zakheni Strategic Solutions. K Manufacturing was again directed to distribute the remaining R8m to five companies and three individuals.
K Manufacturing’s director couldn’t be reached for comment. The payments were as follows: The third respondents, Mediwaste Packaging (PTY) Limited received R3470000 from Ledla on August 3. On the following day, August 4, Mediwaste transferred various amounts to the bank accounts of nine businesses entities and three individuals, cited as twenty to thirtyfourth respondents.
Atturo Tyres (PTY) Limited, cited as the fourth respondent, also received R1426000 from Ledla on August 3. It distributed part of it within 48 hours in various amounts into the bank accounts of three individuals and two business entities, cited as thirty-fifth to thirty-ninth respondents.
Between August 4 and 5, Mothle found, Ledla directly transferred various amounts into the bank accounts of the business entities and individuals cited as fifth to fourteenth respondents.
“With the exception of Mr Sangoni’s Zakheni company which was not cited in the application, all the respondents that received part of the R38m within the rapid distribution trail from Ledla between 3 to 5 August, had their bank accounts subjected to the preservation order, to the extent of the amount received.
“In order to recover the loss of the amount paid by the department, the SIU sought as relief, the forfeiture of the state, of the monies held in the banking accounts under preservation order,” read the judgment.
All of the implicated parties failed to respond to the written questions, calls and text messages requesting comment this week.
Chief Madzikane and LehongMboweni, one of Ledla’s directors, did not respond to the questions sent by the Sunday Independent on Thursday.
Mothle also ruled that an interim interdict prohibiting the payment of pension fund and retirement benefits to Lehloenya, who was the Gauteng Department of Health’s chief finance officer at the time of the awarding of PPE contracts, be extended pending finalisation of action proceedings.
Lehloenya referred questions to her lawyer, Eric Mabuza, who said he had received an instruction to appeal the judgment.
“We will set out all the grounds in the notice of leave of appeal,” said Mabuza.
Sunday Independent