Civil litigation valued at more than R259-million has been instituted by the Special Investigating Unit (SIU) to recoup some of the R13.3-billion spent on alleged corrupt Covid-19-related procurement by state institutions.
On Friday, at a briefing in Tshwane, SIU head advocate Andy Mothibi revealed that, of the R30.7-billion that the treasury said was spent by state institutions between April and November last year, R13.3-billion was under investigation.
Mothibi said this followed President Cyril Ramaphosa declaring a national state of disaster in March last year to combat the Covid-19 pandemic, which led to emergency procurement that the SIU found grossly flouted basic supply-chain management laws and standards.
The allegations reported to the SIU involved, among other matters, the irregular procurement of personal protection equipment (PPE), hospital and quarantine sites, catering services, disinfecting equipment and motorised chairs.
The alleged corrupt contracts included the contentious “ambulance scooters” from the Eastern Cape, as well as the R139-million Gauteng health department contract that was awarded to Ledla Structural Development, which the SIU alleges, was a “proxy” for Royal Bhaca — the company owned by Thandisizwe Diko, the husband of suspended presidential spokesperson, Khusela Diko.
Mothibi said 1 774 service providers were probed, and that the investigation of 164 contracts, valued at a total of R3.5-billion, have been finalised. About 1 500 contracts are still being investigated, with a combined value of R6.4-billion, and probes into 851 contracts have yet to begin, Mothibi said.
“It is important to note that more allegations continue to be received by the SIU relating to the PPE-contracting environment,” he added.
Mothibi detailed alleged gross misconduct during the Covid-19-related procurement processes.
“It appeared that persons in positions of authority within some state institutions believed that the declaration of the national state of disaster meant that all procurement is automatically now conducted on an emergency basis, and without compliance with any of the normal prescripts regulating public-sector procurement,” Mothibi said.
“But they didn’t realise that even an emergency procurement must still be conducted in accordance with certain minimum prescripts to ensure, in as far as possible, that such processes remain fair, equitable, transparent, competitive and cost-effective, as prescribed by [the Constitution.
“The evidence also pointed to us that various officials merely rubber-stamped decisions taken by the authorities; accepted and gave effect to unlawful instructions from officials more senior than them, which resulted in the complete breakdown of the checks and balances protection normally afforded by, among others, the principle of segregation of duties,” Mothibi continued.
“It further appeared that certain officials within state institutions don’t trust the procurement process undertaken by the national government.”
The SIU found that certain service providers legally registered their companies only during February and March 2020, and could not have had demonstrable track records.
Mothibi said that companies awarded contracts were not registered on the central supplier database. Certain service providers were in the deregistration process when they quoted and were awarded the contracts.
“The type of goods supplied were not consistent with the nature of the business for which companies [were] registered on the CIPC [Companies and Intellectual Property Commission], and they should not have been requested to quote for the services that were required.
“Product specifications were ignored, and products that were not suitable for its intended purpose were purchased, and several instances against the advice of expert opinion on the usefulness of the product,” the SIU found.
The investigative directorate found that political pressure played a role in the procurement of PPE in some instances. It also appeared that the names of the service providers were determined before the supply-chain-management process commenced. The delivery of substandard PPE that did not comply with the technical specifications in the invitation to submit quotations was also uncovered.
“Furthermore, certain PPEs were not packaged according to predetermined standards. We found that there was no attempt to negotiate with suppliers in bringing the prices within the thresholds provided by the national treasury,” Mothibi said, adding that massive overpayments were made.
The SIU had approached the Special Tribunal to freeze assets of people believed to have received irregular contracts, as well as the pensions of former civil servants, who would resign abruptly when they realised that the investigating unit was on their trail. This included the sudden resignation of Gauteng health department’s former chief financial officer, Kabelo Lehloenya, in May last year.
In total, Mothibi said, the SIU had instituted civil litigation to the value of more than R259-million as of November last year.
The SIU has instituted civil proceedings against Ledla Structural Development, which the investigation found had inflated prices between 211% and 542%.
The Gauteng health department made a payment of about R38.7-million to Ledla in August last year, after which the company allegedly emptied its bank accounts immediately.
“We found that, once that payment was made, there was an immediate clearance, or substantial amounts were moved from the bank account of the supplier [and] the bank account of two other entities, [which], in turn, transferred and paid the funds to at least 36 other entities.
“We noted the speed and the haste at which this was done. And, of course, this, to us, indicated that we needed to move with speed,” Mothibi emphasised, adding that the Financial Intelligence Centre had assisted with the Ledla investigation.
Mothibi said R26-million of the R38.7-million paid to Ledla had been forfeited to the state from the accounts of more than 20 companies accused of having secured irregular PPE contracts.
The SIU has made 25 referrals to various state institutions for disciplinary action for misconduct and the contravention of the supply-chain management policies and sections of the Public Finance Management Act and the Municipal Finance Management Act.
The names of the officials involved can be made public only when the disciplinary proceedings have begun.
The SIU also said that criminal prosecution would also be sought and that it was working with the National Prosecuting Authority to achieve this.