KZN’s cowboy deals: Peggy in the middle
Damning evidence led this week in the Labour Court in Durban has lifted the lid on “bribe clauses” in contracts and the reckless spending and alleged cowboy approach to dispensing tenders for kickbacks at KwaZulu-Natal’s health department which contributed to the department, in one year, overspending its budget by an estimated R1.5-billion.
Testimony by the health department’s former general manager for legal services, Prenitha Kantha Padayachee, has also reinforced the suspicions about why charges of fraud, corruption and racketeering against the department’s former political head, then provincial health MEC, Peggy Nkonyeni, were dropped last year. Nkonyeni is known to be closely aligned with President Jacob Zuma.
She is the treasurer of the ANC in the province, and the speaker in the provincial legislature.
On Tuesday, Padayachee revealed that at a meeting in December 2007, when the department signed off on a deal with Intaka Technology for it to provide oxygen generating machines, Nkonyeni, who had been installed as provincial treasurer the previous year, had indicated to her that she was “under pressure to conclude” the deal to facilitate a “donation” from the company to the party.
Intaka is owned by Uruguayan businessman Gaston Savoi, who is charged with bribing officials in KwaZulu-Natal and the Northern Cape for tenders worth more than R86-million.
In an interview with the Mail & Guardian in 2011, he said that he had donated about R3.6-million in separate payments to the ANC, including an amount of R1-million in 2007 into the party’s KwaZulu-Natal coffers. According to Savoi, the payment was made to a Durban law firm at the request of Sipho Shabalala, then boss of the provincial treasury.
Shabalala remains in the dock with Savoi, but the Democratic Alliance is seeking reasons from the National Prosecuting Authority for its decision to withdraw charges against Nkonyeni and her predecessor in the ANC, current provincial economic development MEC Mike Mabuyakhulu, through the courts.
Nkonyeni, who was political head of the department when it overspent its budget by R1.5-billion in 2008, denied Padayachee’s claims in a press statement released this week.
In a November 2007 memo to Victor Ntshangase, the department’s general manager for supply chain management, Padayachee raised several queries about a proposed contract with Intaka for onsite oxygen supply for patients, including a “bribe clause” that stated that no money had exchanged hands between the company and department officials in the securing of the contract.
Padayachee asked, “Why is there a stipulation of a bribe? Why the need for specifics of this nature?”
Her memo also noted that there was “noncompliance with the bid specifications” of the tender in the proposed contract with Intaka as it did not include maintenance of the equipment or a warranty, and the department had to install the machines itself.
She also noted that while the Medical Control Council required the makers of medical oxygen to register with it – which Intaka had failed to do – the company had advised health officials that it was not a legal requirement.
Padayachee had also red-flagged an earlier deal between Intaka and the health department to provide water purification plants for two rural hospitals in the province.
She told the court that when approached in 2006 by then health department head Busi Nyembezi, who is also facing charges of fraud corruption and racketeering alongside Savoi, in 2006 to draw up contracts for the deal, she had “expressed concern” about the cost of the almost R10-million deal.
She told the court that the contract “should have gone the route of open tender, but did not” and that the three quotes obtained “indicated to me that the department had already decided to purchase”.
Padayachee’s submissions in the labour court, where she is fighting a three-year battle against misconduct and racism charges which she claims are trumped up because of her whistle-blowing, also appear to show how the alleged malfeasance has had a direct impact on hospitals.
Padayachee raised concerns about various other contracts entered into by the department, including the “verbal appointment” in 2009 of auditing firm Ernst & Young to investigate eight cases of alleged financial misconduct at Addington, Vryheid and Ngwelezane hospitals.
She told the court that the verbal appointment – which the department’s chief financial officer, Alson Buthelezi, had said he’d made “in terms of the common law” and for which he asked the legal services department to write up back-dated contracts – had led to another legal and financial nightmare.
This included an inadequate liability clause that exposed only the health department to any claims emerging from the investigation.
Padayachee told the court that she had previously renegotiated such a clause when enlisting the services of another auditing firm, PriceWaterhouseCoopers.
According to correspondence between the department and Ernst & Young, the investigation stalled over nonpayment of about R2-million owed to the auditing firm.
This led to Ernst & Young withholding documents, including order books from Addington Hospital it had seized during its investigation. This, according to an email from the hospital’s management, was causing a problem with suppliers and having an impact on service delivery.
Several other tenders and payments to companies and nongovernmental organisations appear to have been awarded without the proper supply chain management protocols being followed.
These included a tender to TecMed in 2008, the year the health department blew its budget.
According to the auditor general’s findings, a tender awarded to the company for R76.5-million had an actual value of R119-million and an additional tender of R44.4-million, “which did not appear to have been channeled through the normal supply chain management processes”, was awarded to the company.
In total, TecMed benefited to the tune of R175.3-million in that financial year from state contracts and, in some instances, “no minutes for the bid adjudication committee [were] provided” to the auditor general.
Both TecMed and Addington Hospital were in the news earlier this year when local newspapers reported that oncology and radiation equipment supplied by the company had been switched off since January.
According to reports, the health department had ceased paying the R400 000 a month maintenance bill to the company, claiming fraud, while TecMed alleged it was still owed about R80-million.
In a statement released on Wednesday, Nkonyeni said that “at no time did she ever exert any pressure on health department officials while she was the MEC for health to fast-track the awarding the contract for the supply of oxygen to the Intaka Holdings of Mr Gaston Savoi”.
Nkonyeni “categorically” denied allegations attributed to Padayachee. She said her office “will, however, watch the developments until the end of the proceedings before it makes a full statement on the allegations”.
Whistle-blowing cost her more than money
“This case represents my belief that my role in government as a civil servant is to contribute to a better society … to tidy up the civil service and make it competent so that it benefits the public,” said Prenitha Kantha Padayachee, the suspended general manager for legal services at the KwaZulu-Natal health department during an interview with the Mail & Guardian.
The mother of two, who describes herself as an ANC member with an “activist background who is privileged to experience democracy in my life”, is facing six counts of misconduct, including racism.
Placed on suspension on January 4 2009, the day after she was interviewed by Hawks superintendent Piet du Plooy and had handed over evidence relating to tenders awarded to Intaka Technology, Padayachee is fighting charges in the labour court that she says are “trumped up” because of her whistle blowing. She told the court that Du Plooy had described her as his “star witness” during the interview.
On Thursday, she told the court that her health had suffered ever since she had been placed on suspension and that she had had to cash in four insurance policies to pay her astronomical legal bills.
Padayachee, who is completing her doctorate in health law, told the M&G that her suspension had left her feeling “useless” and “very disillusioned and angry, but I feel I must take a stand in the interests of the public and against the abuse of taxpayers’ funds … That this involves the health department, that this involves human life, is sad.”
Padayachee’s trial will resume on November 25.