/ 19 October 2009

Vets in tender crossfire

The home affairs department has accused one of its suppliers of defrauding it of close to R100-million, amid questions about the role of two Umkhonto weSizwe veterans.

In court papers before the North Gauteng High Court, Double Ring Trading 222 stands accused of billing the department US$2 451 (R17 850) per unit of satellite bandwidth, which the department alleges it had been purchasing from the government-owned signal distributor Sentech for almost the identical amount in rand (R2 450). At the current exchange rate of R7.25 to the dollar, this would amount to a markup of 725%.

The company stands accused of double-charging VAT to the department and levying a 5% administration fee without departmental consent. Double Ring 222 is part of the Nthwese Consortium which won a tender in 2006 to supply home affairs with mobile offices — trucks with a satellite connection that can take services to remote areas.

It seems to have had second thoughts about its bid to get the department to pay the R76-million it claims it is owed, as the case was withdrawn in the North Gauteng High Court this week.

The Mail & Guardian understands that the department and Double Ring met Minister of Home Affairs Nkosazana Dlamini-Zuma last week in a bid to resolve the dispute.

Double Ring chief executive Otto Moswane said the allegations made in the home affairs affidavit were false, but refused to comment further. He said the minister’s move to resolve the dispute should be allowed to take its course. Meanwhile, two Umkhonto weSizwe veterans’ attempts to negotiate themselves a 10% shareholding in Double Ring Trading have landed them in the middle of the dispute.

Moswane told the M&G that the two MK vets were negotiating the deal on behalf of the MK Veterans’ Association. However, the association this week denied all knowledge of the deal.

The department’s affidavit states that a General Nxumalo and General Pitso attended the meeting between the department and Double Ring in a bid to resolve the dispute.

The M&G has established that the two men in question are ‘General” Joshua Nxumalo (the title is a nickname) and Major-General Gerald Pitso. Moswane said negotiations over a minority stake for the men had been at an advanced stage, but had been scuppered by the dispute with home affairs.

But Kebby Maphatsoe, the chairperson of the MK Veterans’ Association, and Spokes Moseki, its treasurer, said they had no knowledge of the deal.

When the M&G mentioned the names of the two veterans, Maphatsoe said he knew them and that they were members of the association. However, they had no mandate to do business on behalf of the association. ‘This deal was not going to go to the association,” said Maphatsoe. ‘It was going to go to them.”

Contacted by the M&G, Pitso refused to comment beyond saying that ‘it was company business” and he would not discuss it with any outsiders. Attempts to contact Nxumalo were unsuccessful. Pitso said Nxumalo was abroad on a business trip.

The department first became suspicious of discrepancies in Double Ring’s invoicing in 2008 and ordered an internal investigation. This picked up the alleged fraud, based on invoicing in US dollars.

When the department queried this with Double Ring, the company claimed it was purchasing the satellite bandwidth from Ranleigh Ltd, a firm based in the Guernsey tax haven, and supplied an invoice from Ranleigh to prove its claim.

Home affairs argues in its affidavit that the invoices in its possession are suspect and concludes that Double Ring has been generating fraudulent invoices from Ranleigh to justify ‘the inflated US dollar-based prices”.

An Ernst & Young probe into the alleged tender irregularities, commissioned by home affairs, reinforced the department’s findings and recommended that disciplinary action be taken against numerous department officials over the awarding of the contract to the Nthwese Consortium.

The Ernst & Young report found that there was a ‘general disregard for the Public Finance
Management Act” and that it was apparent that the Nthwese Consortium and/or Double Ring had benefited from this.

The department began withholding payments to Double Ring, prompting the company to file high court papers in April this year to recover R76-million. Because the department continued to use Double Ring’s services, the amount it owes is closer to R120-million.

The M&G understands that the department has attempted to quantify the alleged fraud. Its initial estimate was that it owes Double Ring R20-million, implying that the alleged fraud might have cost it R100-million.

The department and Double Ring issued a joint response to the M&G this week, claiming that Dlamini-Zuma would initiate a process to resolve the dispute. ‘Both parties express their confidence in the process — as part of efforts to help find an amicable resolution to the issue at hand,” it said.

Veteran’s chequered past
The Mail & Guardian has established that the two Umkhonto weSizwe veterans involved in the dispute between home affairs and Double Ring Trading 222 are ‘General” Joshua Nxumalo and Major-General Gerald Pitso.

Nxumalo was one of the ANC’s tough men in exile and has attracted great controversy in the past, not least through his involvement in the Virodene scandal.

In 1997 Nxumalo received a stake in the company developing the controversial Aids drug for his ‘introductions” work. The ANC denied allegations at the time that the stake was earmarked for the ruling party.

Nxumalo was reported at the time to have cut his business teeth as part of his role in the ANC
underground. His ‘getting things done” approach allegedly involved stolen cars and contact with drug dealers.

He strongly denied this at the time, but not that he had been jailed in exile. Pitso, who retired from the South African National Defence Force a few years ago, was a very senior member of SANDF intelligence.