Michael Hulley and the R10bn tender fiasco
A harsh spotlight is shining on Michael Hulley, Jacob Zuma's personal lawyer and presidential legal adviser, who was responsible for the legal integrity of a social grants megatender, now found to have been badly botched.
The South African Social Security Agency appointed Hulley in July last year as a "strategic adviser … to ensure the transparency and accountability of the tender process" and to advise it on supply chain procedures, preferential procurement and risk mitigation strategies, among other things.
But the North Gauteng High Court ruled this week that in these matters the agency's R10-billion tender process was "illegal and invalid".
Without mentioning Hulley in his ruling, Judge Elias Matojane caned the agency for several reasons. Among these were:
- Its adjudicators "irrationally and unfairly" lowered the scores of the losing bidder, Absa-owned AllPay;
- The agency "irrationally" overlooked winning bidder Cash Paymaster Services's failure to follow the bid specifications;
- The process was "fundamentally" undermined because the agency did not include a supply chain management expert on its bid evaluations committee; and
- "Unlawfully", it made no assessment of Cash Paymaster's black economic empowerment (BEE) partners.
In a peculiar twist, Matojane ruled that the tender would not be set aside, because, as a member of the Cash Paymaster camp sketched over a hearty breakfast before Tuesday's judgement: "the egg cannot be unscrambled". The contract was signed, expensive infrastructure was being rolled out and that could not be undone without prejudicing Cash Paymaster. And, the judge argued, reissuing the tender could interrupt grant payments, which would be unacceptable.
Following Tuesday's ruling, lawyers, bankers and bureaucrats flowed out of the court into Pretoria's Madiba Street, where they chattered on cellphones, fingered copies of the judgment and conjoured buoyant statements.
Serge Belamant was "delighted". As the chief executive of Cash Paymaster's parent company, the United States-listed Net1 UEPS, he rushed to the market, telling investors that the court had ruled that the contract "remains valid".
AllPay's lawyers felt "vindicated" but "disappointed".
Judging by their comments, they could be eyeing the Supreme Court of Appeal.
With scant regard for how badly her agency flunked, chief executive Virginia Petersen "noted" the finding, "importantly that 'the award of the tender [to Cash Paymaster] is not set aside'".
Is that the sound of a broom sweeping undesirable things under a carpet?
But the work of Petersen's agency leaves South Africans shifting uncomfortably in their seats. This is one of the bigger contracts to be awarded by the post-apartheid state and it was a demonstrable failure.
Is Cash Paymaster the best company for the job? Are its prices fair? Should AllPay have been awarded the contract? Can we be certain that corruption did not creep in through the loopholes left open by maladministration?
Without a clean tender process, we simply cannot be sure that our R10-billion is being spent responsibly.
At the very least, one would expect heads to roll – Petersen's in particular. Commentators have also called for Social Development Minister Bathabile Dlamini's scalp. The agency reports to her.
But what of the president's man, Hulley?
After the social grant contract was awarded in January, AllPay cried foul, applying for the contract to be reviewed and set aside.
It was during the lengthy and complicated arguments that followed that Hulley's mysterious but central role emerged. Slowly, and with obvious reluctance, the agency revealed some of the details, with help from Belamant.
Before the tender was issued last year, Cash Paymaster was suing the agency for several alleged blunders. Hulley worked for the agency to "manage" this litigation, either with defence or a settlement, Belamant said.
With that litigation largely unresolved, Petersen then flipped Hulley's role to that of "strategic adviser" on the tender, in which Cash Paymaster was then a bidder.
Aside from Hulley's political connections, this dual role might have created the impression that an award to Cash Paymaster could have been influenced by a perceived need to settle the web of litigation.
Hulley was supposed to make sure the tender process was properly and fairly run. For that he was to be remunerated at a lavish R21000 a day, but, perplexingly, the agency later told the court that Hulley did not invoice the agency. In other words, it did not pay Hulley, who "continued to advise on an ad hoc and informal basis".
One cannot help but ask why he would do that?
In any event, this is the second time the agency's tender procedure to centralise the distribution of social grants has failed. An earlier iteration of the tender was issued in February 2007 and cancelled in November 2008 on the bid adjudication committee's advice.
Highest scoring bidder
According to then-committee chairperson Norman Arendse, although Cash Paymaster was the highest scoring bidder, the agency's request for proposals was "fraught with problems [some insurmountable] … rendering the entire evaluation process unreliable".
Although neither the Arendse committee's decision nor Matojane's ruling cited any evidence of corruption, both tenders were fraught with allegations of dirty dealings.
Arendse, a top advocate, told the Mail & Guardian earlier this year that he was approached by someone with an "open chequebook", who tried to influence his committee to favour Cash Paymaster.
The M&G revealed that the approach was allegedly made by well-known sports administrator Gideon Sam, but he and Belamant denied it.
Arendse reported Sam's alleged intimations to the adjudication committee, including social development director general Vusi Madonsela. None of them reported this to the police, the matter was never investigated and it was not considered in the recent tender process.
There is that sound of the broom again.
In the wake of Cash Paymaster's victory in January this year, a secret recording emerged, reported by the Sunday Independent, in which an agency official claimed the entire process had been cooked to favour Cash Paymaster. Bribes were allegedly paid to officials. The claims have been denied and remain unverified.
Human settlements director general Thabane Zulu, who sat on the bid adjudication committee of the tender, was paid R1.4-million during the tender process. That, the newspaper alleged in a separate article, was a bribe paid by a BEE company that stood to benefit from the contract.
The denials and subsequent explanations from Zulu and the party that deposited the money were mealy-mouthed and contradictory, but again, it has not been verified that it was a bribe.
The M&G revealed that Human Settlements Minister Tokyo Sexwale's fingerprints were all over a BEE deal with Net1, sealed immediately after the tender was awarded. The deal included a BEE company bearing extensive links, current and past, to Sexwale's Mvelaphanda Holdings.
But Mvela denied it vehemently. According to chief executive Mark Willcox, "we're not involved in this deal in any fashion, any form, any way, zero, not financially, not politically".
If it was true that Sexwale's companies positioned themselves to benefit from the tender, Zulu's role in the process could be construed as a conflict of interest. And we are again brought back to Hulley.
Although he is well known as Zuma's lawyer, he is also close to Mvela through associations with Willcox and a business venture.
But, approached for comment earlier this year, Hulley was dismissive: "I have no intention of responding to any of your stories on this or any other matter because I consider your reportage to lack journalistic ethics.
"I would appreciate it if you would desist from communicating with me," he said.
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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.