Blunder: Treasury director general Dondo Mogajane and Finance Minister Enoch Godongwana. (David Harrison)
The government wants to settle a nearly R500 million lawsuit after failing to pay a now liquidated company for services rendered — despite the treasury repeatedly acknowledging the 17-year-old debt.
According to Pretoria high court filings, liquidators for Double Ring — which had more than 350 employees when it closed shop at the end of 2016 — said the treasury had to compel the home affairs department to pay its nearly $2.1 million debt which had ballooned because of interest.
The minister of finance Enoch Godongwana is cited in the legal application.
The debt followed Double Ring’s services to the home affairs department from October 2007 to March 2008, which involved installing an information and communications technology hub in Tshwane.
The contract stated that the payment would be in dollars.
The parties argued the case on 30 January.
The Mail & Guardian has seen an internal note from the Tshwane state attorney’s office in which the government acknowledged that a settlement of the debt was “possible” but that the process of settling should “[form] part of the court proceedings”.
The state attorney’s office represents the government in all lawsuits for and against the state.
The interest incurred amounted to more than R494.4 million.
The lawsuit
In his founding affidavit for the application, Double Ring liquidator Johannes du Plessis said the Public Finance Management Act directed the treasury to “issue instructions … regarding the settlement of claims”, and “must enforce” the payment of legitimate debts.
Du Plessis argued the treasury had issued an instruction and a circular in June 2016 and March 2018, respectively, which regulated the Act.
The instructions said failure by accounting officers to pay creditors within 30 days amounted to “financial misconduct”.
The March 2018 circular added that should organs of state fail to pay on time, the treasury should intervene when disputes arose.
“The treasury was at all times fully aware of the breaches of the third respondent [then treasury director general Dondo Mogajane] of the Act, and despite appeals to [the] treasury over a period of 12 years from 2009 to 2021, it has failed to act to stop the breaches and to save taxpayers’ money as the Act obliges it to do,” Du Plessis stated.
Mogajane left the treasury in June 2022 when his five-year contract came to an end.
In their court papers, the liquidators provided evidence of a letter dated 20 January 2009 written by Andrew Donaldson, the treasury’s public finance deputy director general, who said that the home affairs department owed more than R15.84 million to Double Ring, which faced bankruptcy because of the non-payment.
The more than R15.84 million stems from the nearly $2.1 million which was owed to Double Ring at R7.50 to the dollar.
Donaldson wrote: “The national treasury has since engaged the department to establish the validity of the claim.
“The CFO of the department has confirmed the amount owed to you and confirmed the matter is receiving his attention, and … he has been in constant discussion with you over the matter.”
On 18 April 2009, then home affairs director general Mavuso Msimang, who is now deputy president of the ANC Veterans League, agreed that the department owed its creditor.
He said it would “pay all amounts not in dispute into the nominated [attorney] trust account, and we propose that the parties meet thereafter in an attempt to resolve all other outstanding issues”.
In June 2021, a year before the liquidators filed the lawsuit and 12 years after Msimang’s admission, Du Plessis wrote a letter to Mogajane telling him that the government had allowed the disputed amount from the interest incurred to climb to more than $33.7 million as of May 2019 — R494.4 million at R14.64 to the dollar.
“This amount has been needlessly incurred by the department due to the officials’ refusal to settle the matter … as the debt remains outstanding.”
The liquidators, in their application, allege Mogajane’s “failure” to enforce the Act had inflated the debt.
In his affidavit, deposed in March 2022, Du Plessis said the original $2.1 million debt, which was “undisputed”, had doubled to about $4.2 million in October 2021 because of the in duplum (double the amount) rule — invoked when the interest accrued exceeded that initial amount owed.
This brings the undisputed amount owed to Double Ring, excluding interest, to more than R63.7 million at R15.20 to the dollar.
“The wasteful expenditure incurred by the fourth respondent [the home affairs department] on just this one sum due is therefore R46 472 380.80.
“This is an undisputed amount and only a small part of the money due and payable to Double Ring by the fourth respondent but it illustrates the enormous and needless waste of public funds,” Du Plessis asserted.
(Graphic: John McCann/M&G)
Treasury cannot intervene
Mogajane, in an answering affidavit on behalf of the finance ministry and the treasury, said each government department at the national and provincial level was an “organ of state” with an “obligation to honour its contracts and to pay for the goods and services” it procured.
He said the treasury could not, in terms of the Act, “[assume] upon itself the adjudication of disputes between organs of state and their service providers”, adding that was “specifically reserved for courts by section 165 of the Constitution”.
Regarding Donaldson’s January 2009 letter saying the home affairs department should pay Double Ring, including the subsequent confirmation three months later by Msimang that the department would pay, Mogajane said that was a “fact-finding exercise”.
He said the treasury’s views on the payment were “purely made to assist the parties to resolve their dispute and are not binding on either party”.
“It is mind-boggling that the applicants have wasted many years and spent a lot of energy and resources attempting to coerce the treasury to perform a function it is not enjoined by legislation,” Mogajane contended.
He said the liquidators should have filed an application against the home affairs department in the high court, “if they felt [strongly] about the case or if there is merit to their claim against the department of home affairs”.
“That they have [not] done so and elected to bring this frivolous application [against the treasury] points to a lack of confidence in their cause against the department of home affairs, a further reason the treasury cannot be compelled to force payment by the department of home affairs,” Mogajane stated.
Judgment in the application has been reserved.