SOEs’ battle with treasury exposed
The treasury encountered sustained resistance from the major state-owned enterprises (SOEs) when it tried to investigate their alleged capture by the Gupta family and their associates.
This will be spelled out in detail at the Zondo commission of inquiry into state capture.
The treasury has already said it will hand over all reports relating to its investigations reviewing contracts worth more than R10-million at Transnet, Eskom, Denel and other SOEs, specifically looking into cases where Public Finance Management Act regulations were ignored.
The commission, headed by Deputy Chief Justice Raymond Zondo, is investigating how the state was captured, including allegations of multibillion-rand contracts that were illegally awarded to the Guptas and their associates, and the alleged wrongdoing of politicians such as former president Jacob Zuma, a close friend of the infamous family.
A recent draft forensic report, commissioned by the treasury, reveals shocking details about how Eskom and Transnet contracts were awarded to Gupta-associated companies without tender processes being followed.
The treasury first conducted preliminary investigations into both entities and then opted to combine the two and to let Fundudzi Forensic Services conduct a forensic investigation, because the state-owned enterprises involved the same companies linked to the Guptas and included the same executives, such as Anoj Singh and Brian Molefe.
A 2015 treasury public sector supply chain management review document, which will be submitted to the commission when the treasury officials testify, reveals that “common governance and compliance failures with supply chain management had resulted in fraudulent activities” in the public sector. “These include fronting, bribery, nepotism, collusion, cover quoting, conflicts of interests, forgery and tender splitting.”
Sources in the treasury said the appearance of the acting chief procurement officer Willie Mathebula at the commission this week was a low-key way for him to give the commission an understanding of the procurement processes and policies.
At least two officials familiar with the treasury and who were at the centre of the resistance to state capture said Mathebula’s testimony did not hit the right notes and did not capture the difficulties and frustrations.
“The issues of state capture were during the time of Kenneth Brown, so why was he not called? He is the former CPO [chief procurement officer] and a South African,” one said.
The other said: “It is disappointing in a number of ways. Number one, the guy there now does not have a clue of the whole system [and] how it works and how it has evolved.
“He couldn’t properly link how the system was abused to capture the state, and thirdly is the issue around consequence management, the issue that the justice system was captured … There has been no consequence for anything.
The fact is that the system was abused to a point where the state has been captured.”
Treasury director general Dondo Mogajane said Mathebula appeared because the commission asked for an official with “a good overall understanding of government’s procurement policy. Willie has spent a long time as chief director responsible for procurement policy,” he said.
According to various sources, a treasury task team has been primed to assist the Zondo commission with the documents it requires on state capture. These will prove that some of the SOEs resisted the treasury’s bid to review the contracts.
When contacted for comment, many officials declined because those who will give evidence at the commission have been sworn to secrecy.
Some of the documents seen by the M&G that will ultimately be submitted to the commission include lengthy discussions between the treasury, the department of public enterprises and Transnet dating back to 2016, when the treasury demanded to inspect all documents relating to McKinsey, Regiments and Trillian contracts.
In one of the letters that reveals the tensions between the treasury and Transnet, the embattled Transnet chief executive officer, Siyabonga Gama, wrote to the then chief procurement officer, Kenneth Brown, requesting that his office withdraw its statements to Parliament that the SOE had not complied with the treasury’s requests and had not submitted documents relating to Regiments and Trillian contracts.
“The timing of this statement is equally distressing as Transnet is finalising its own credit rating assessment with S&P and Moody’s.
“We kindly request that the statement made by … treasury that Transnet has not complied with … treasury requests for documentation be corrected in Parliament and the press as it causes unnecessary reputational damage to Transnet and the government as a whole,” Gama wrote.
Transnet had told treasury investigators they could view the documentation relating to the contracts awarded to Gupta-linked companies at the department of public enterprises, which was led by Lynne Brown at the time.
As the tension over the reviewing of the contracts escalated, public enterprises director general Mogokare Seleke wrote a letter to his treasury counterpart, Lungisa Fuzile, regarding the request for the McKinsey and Regiments contracts to be reviewed.
“My urgent request to fully appreciate the issues relating to the above has regrettably been ignored. Instead, the state-owned companies [SOCs] within DPE [department of public enterprises] portfolio are still being inundated with instructions to provide information to the office of the chief procurement officer. It is also important to highlight that the information being requested predates current regime as well as the tenure of recently appointed executives … Therefore, until such time the issue is resolved, I have instructed the SOCs to avoid any engagement and sharing information on this and related matters. I reiterate my request for an urgent DG [director general] to DG meeting to deal with the matter expeditiously,” Seleke wrote.
According to a senior government official, things became so bad that, in one case, investigators from the chief procurement officer’s office were asked to leave their cellphones outside the Transnet offices where they were going to view documents.
The stand-off seemingly reached a peak in the week of August 29 2016 when the treasury issued a statement contradicting Eskom, which claimed it had co-operated in the compilation of a report on Eskom’s dealings with Gupta-owned Tegeta Exploration and Resources.
In its statement treasury said: “The national treasury would like to categorically state that its efforts have met resistance.” The commission resumes on |Friday with Mcebisi Jonas set to testify.