PPE ‘proxy’ contract cancelled

The Special Tribunal has set aside the dodgy Covid-19 contract to the alleged proxy of Royal Bhaca, the company owned by the husband of President Cyril Ramaphosa’s former spokesperson, Khusela Diko.  

Royal Bhaca was awarded contracts amounting to R125-million from the Gauteng department of health. When the contracts were cancelled, a company called Ledla Structural Development, an alleged proxy for Royal Bhaca, received a payment of over R38-million from the department.

Diko’s husband, Thandisizwe, is the sole director of Royal Bhaca and the scandal saw erstwhile Gauteng Health MEC, Bandile Masuku — a close friend of the family — becoming embroiled in the Covid-19 corruption saga. All parties separately denied wrongdoing.

Masuku will reportedly appear before an ANC disciplinary hearing at Walter Sisulu House in Johannesburg later this month. 

In its judgment, the tribunal concluded that the contracts awarded to Royal Bhaca and Ledla were not transparent, competitive and cost effective and that the R38-million paid to the latter company were the proceeds of an unlawful contract

It also found that senior officials in the department colluded with Thandisizwe Diko in awarding the contracts.

In August, the Special Investigating Unit obtained an order interdicting the Gauteng health department from making further payments to Ledla Structural Development and 39 other companies that it alleged were involved in fleecing the state. 

The same order also interdicted the Government Employees Pension Fund from releasing pension money and benefits to the former departmental chief financial officer, Kabelo Lehloenya, pending the institution of civil proceedings before the special tribunal. Lehloenya is accused of having signed off on irregular PPE contracts worth billions of rands.

The matter was last heard by the special tribunal, the statutory body mandated to recover public funds corruptly siphoned from the fiscus, in November. The SIU said the tender that saw Ledla pocketing millions from the state was irregularly awarded at grossly inflated prices.

(John McCann/M&G)

The SIU concluded that the contract by the Gauteng department of health to Ledla was part of a cover-up to try to hide that it had awarded the contract to Royal Bhaca. This was because of the embarrassment the scandal would cause the MEC and the presidency, the SIU said.

Earlier this month, SIU head, advocate Andy Mothibi, told the Mail & Guardian: “We found that the contract was irregular. In our findings, although they allege that Royal Bhaca was withdrawn, we found that they brought in another company called Ledla Structural Development and that’s the one that now got the contract.”

Mothibi added that the SIU is still building a criminal case against Masuku. “We would like to make sure that the investigation is done effectively so that when NPA [National Prosecuting Authority] decides to charge, it would be on the evidence that would return an appropriate charge,” he said.“And of course, we prefer that those people must be found guilty. So the evidence should be the one that supports the verdict of guilt.”

Masuku has denied that he had a hand in appointing service providers, saying he was the one who called for an audit of his department’s Covid-19 procurement.

But in a letter to Gauteng Premier David Makhura in October, Mothibi said the SIU found that Masuku was actively involved in the decision that the Gauteng department of health would act as a central procurement agent. Masuku should have known that his department had a long history of irregular expenditure, he added.

The MEC’s support of the proposal “may have been for nefarious purposes (e.g. to ensure control over procurement processes … and to benefit himself potentially, his wife or their friends)”, the letter reads.

The Royal Bhaca and Gauteng contracts are not the only ones under investigation by the SIU and due to be heard before the special tribunal.

At last count, the SIU was looking into more than 1 000 Covid-19 related contracts worth about R10.5-billion.   

“At the time of the second report to the president, which was on 14 October, about R223-million was already identified to be recovered. All that is at the special tribunal for the contracts to be set aside and for us to recover the losses,” said Mothibi. 

But based on the records before the tribunal, Ledla Structural Development got the most significant slice of the PPE pie, at about R139‑million. Other companies’ contracts that the SIU wants the tribunal to set aside include LNA Communications, which received a contract worth R3.9-million, and Phathilizwi Training Institute’s contract worth R4.8-million.

Wednesday’s judgment orders the SIU to commission a forensic report analysing documents relating to amounts received by Ledla Structural Development and others. The report should also determine by how much prices charged by the accused were inflated.

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Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

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