Julius Malema allegedly pressured staff at Limpopo’s department of health to pay out on multimillion-rand contracts that are being investigated by the auditor general for fraud.
A cousin of the African National Congress Youth League president and another close associate both stood to benefit from the contracts to the tune of tens of millions of rand.
In February, a staff member at the Limpopo pharmaceutical depot in Polokwane, which stocks Limpopo’s hospitals and clinics with medicines and surgical supplies, blew the whistle on what looked like a sophisticated scam.
Goods were ordered in massive quantities and at grossly inflated prices, pushing the total value of the disputed contracts to more than R314‑million.
A number of investigations were started and, in April, further payments were halted.
But, although he denies it, Malema appears subsequently to have leaned on the department to pay up.
A push to pay
“He [Malema] phoned me on my cell when I was driving to Johannesburg and told me that there are young people who are complaining that the department is not paying,” Friday Mushwana, the department’s chief financial officer, admitted to the M&G last week.
“He said these young people need to be paid.”
Mushwana could not confirm when Malema contacted him.
His admission came after the M&G received a tip-off from a source close to the events, who said they had occurred in the first half of July.
The same source claimed that the office of the Limpopo premier, Cassel Mathale, had also pushed for payments to be made.
This week, Malema denied calling Mushwana: “I wouldn’t call a person I do not know. I don’t know him. I’ve never met him. I don’t remember making a call to any person about payments.”
Mathale’s office also denied exerting pressure.
Mathale and Malema are political allies and friends, and have had closely related business interests.
Mushwana spoke about Malema’s call during an interview with the M&G in Limpopo health minister Dikeledi Magadzi’s office, with Magadzi present.
Among those who won some of the disputed contracts from Limpopo’s health department were Malema’s younger cousin, Tshepo Malema, and Nthabiseng Ntshangase, who is close to Julius Malema through their shared business partner, Ali Boshielo.
The younger Malema secured a R44‑million deal to provide medicine labels, while Ntshangase scooped a R26‑million order to supply patient referral forms.
They are two of a batch of 10 orders now being scrutinised for not following “proper procurement processes”, according to Magadzi.
Creative contracts
In a process that appears to be either incompetence or fraud, the health department initially ordered medicine labels worth about R450 000 from the younger Malema, but amended the price to some R45‑million for the same number of labels.
In Ntshangase’s case, the department ordered about R260 000 worth of patient referral forms, but escalated the cost to more than R26‑million.
Though the younger Malema was not paid after the whistleblower’s report sparked investigations, Ntshangase received a payout for the lower amount in late June — weeks after the scandal broke and when payments were supposedly frozen.
She insisted, however, that the remainder of her order had been cancelled.
“They chased me away when I went with the second consignment,” she said.
“I’ve been asking them why, but I’m still waiting.”
The investigations, by the auditor general, an internal auditor and PricewaterhouseCoopers, are focusing on the price inflation and why none of the contracts was advertised.
Most were awarded on a quotation basis and not through competitive tenders.
Sky-high quantities
Also being probed is the massive size of many orders.
Several Limpopo pharmaceutical depot sources said that some supplies were apparently exported to Zimbabwe, although this could not be confirmed.
Late last year, when a supplier of anti-TB drugs failed to deliver, the national health department contracted Pharmadynamics to source an alternative.
Pharmadynamics was granted a Section 21 permit to import the drugs from India for countrywide distribution.
Such a permit is granted only in cases of an emergency and to allow the urgent purchase of medicines that have not been approved by the Medicines Control Council.
But an extensive paper trail, which the M&G has seen, shows that the Limpopo pharmaceutical depot not only claimed the entire batch of drugs when they arrived in South Africa but then requested that Pharmadynamics supply them with three times the amount approved by the Section 21 permit.
The documents show that the national health department put a stop to Limpopo’s further demands.
Another company, Beier Drawtex, was asked in January to supply wound dressings worth R167‑million, a quantity Beier Drawtex and depot staff admit was alarmingly high.
To date, they have delivered supplies worth R18‑million and have been paid R7.6‑million.
Beier Drawtex wrote to Mushwana last month, asking him to state in writing that it had not been involved in wrongdoing.
Mushwana has not yet addressed this request, according to Beier Drawtex managing director Wolfgang Beier.
Magadzi launched the investigations in April.
She insisted a number of people were involved, yet, so far, action has only been taken against Phil Setsiba, who oversaw the department’s pharmaceutical division.
Setsiba was suspended on April 14.
He is understood to be fighting the suspension, arguing that he was acting on instructions from above.
The M&G has a copy of Setsiba’s departmental “request for approval” to purchase the disputed R314‑million of medicines and supplies, dated February 8.
This shows that it was countersigned by the then head of the provincial health department, Mushwana, and other senior officials.
The high cost of labelling
On February 16 the Limpopo pharmaceutical depot ordered medicine labels worth R451Â 328 from Arandi Trading Enterprises, owned by Tshepo Malema, Julius Malema’s 26-year-old cousin.
“[Confirm] with Tshepo”, reads a handwritten note on the docket.
The order was for 6.4-million labels, at 6.1 cents each.
However, the order form did not correspond with Tshepo Malema’s undated quotation, which quotes the same price, but for 649-million labels — more than 10 labels for each South African in the country.
Total price: R44.9‑million, inclusive of VAT.
Two days after the depot issued it’s original order it generated a new order slip consistent with Malema’s inflated price, but without replicating the enormous number of labels.
This time, a R45‑million contract amount was achieved by inflating the price per label from 6.1 cents to R6.10.
A handwritten message on this second order reads: “Tshepo conf. [confirms]”.
Julius Malema associate Nthabiseng Ntshangase’s contract was similarly inflated.
Her company, Nthabiseng Investments, supplied 180Â 000 printed A4 patient referral forms.
The cost per form was mysteriously inflated from R1.30 — giving a total contract price of R233 928 — to R130, yielding a total of more than R26‑million, including VAT.
However, three days after investigations began at the depot, on April 14, Ntshangase invoiced the department for R1.30 a label.
She confirmed that she was paid out in full on her invoice for R233Â 928.
Fiona Forde is the author of An Inconvenient Youth: Julius Malema and the “New” ANC
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