The R63.7-million lawsuit slapped on the treasury by a company that went into liquidation partly due to a 12-year-old home affairs department debt, points to the treasury’s ineptitude in enforcing its own payment regulations. The treasury itself has labelled the lack of timeous payments by government departments as “counterproductive” to economic growth.
Documents that form part of the application filed in the Pretoria high court on 25 March by Double Ring’s liquidators show that both the treasury and the home affairs department acknowledged the debt owed by the latter to the company but that, despite its acknowledgment, home affairs still has not paid the service provider.
The failure to pay was tantamount to “financial misconduct” and a “criminal offence” as set out in the Public Finance Management Act (PFMA), according to the high court papers.
Double Ring, which its liquidators said had more than 350 employees, was wound up at the end of 2016.
This application comes against the backdrop of an August 2021 report from the treasury for the 2020-21 financial year, which showed that government departments were regressing on PFMA regulations, which stipulate that state institutions should pay service providers within 30 days of receiving invoices.
Home affairs was the worst of the 10 national departments that regressed, paying 351 invoices after the stipulated 30-day period in the 2020-21 reporting year.
The treasury report added that the lack of timeous payments was detrimental to the sustainability of small businesses, and was “counterproductive to economic growth”.
The lawsuit against the treasury relates to services provided by Double Ring from October 2007 to March 2008 to supply and install an information and communications technology hub at home affairs offices in Tshwane, Gauteng, to enable the department to provide services to rural areas.
Moeketsi Nonyane, the former project manager at home affairs who handled the Double Ring project, deposed an affidavit on behalf of the liquidators stating that the company had provided the services as per the agreement between the department and the company.
“I personally oversaw the installation of the ICT hub at the premises of [home affairs]. I personally went to the site with senior most and technical managers from [home affairs] to inspect the ICT hub and saw that it functions as per the … expectation,” Nonyane stated.
According to the agreement, the department would settle its debt to Double Ring in US dollars. The amount owed to the service provider in 2008 was nearly $2.1-million, or about R15.8-million when the average exchange rate was about $1:R7.57, with 5% interest.
Johannes du Plessis, one of the liquidators, stated in the founding affidavit that, assuming the application of the in duplum rule — a legal term meaning interest accrued is capped at double the original amount — the debt owed by home affairs as at November last year was nearly $4.2-million, or about R63.7-million at an average exchange rate of R15.10 for one dollar.
“This is an undisputed amount and only a small part of the money due and payable to Double Ring by the fourth respondent [home affairs], but it illustrates the enormous and needless waste of public funds,” Du Plessis argued.
As part of the evidence of the alleged debt owed to Double Ring, the liquidators annexed various communications from both the treasury and home affairs, showing both departments’ acknowledgement of the money owed to the service provider.
For example, Andrew Donaldson, who was then the deputy director general of the treasury, wrote to Double Ring in January 2009 saying his department had investigated the complaints of home affairs not paying its debt, and had found that it was indeed in arrears.
The home affairs director general at the time, Mavuso Msimang, wrote a letter to Double Ring in April 2009 acknowledging the department’s debt, adding that it would “pay all amounts not in dispute” to a trust account nominated by the company.
After the department again failed to pay Double Ring, the treasury wrote another letter to home affairs in June 2010, ordering its then director general, Mkhuseli Apleni, to pay the company.
“We [treasury] recommend that the director general of the department of home affairs seriously considers settling this matter along the lines of the the letter of 18 April 2009, as we are of the strong view that that letter is binding on the department of home affairs,” wrote Jan Breytenbach, who was the treasury’s chief director for norms and standards at the time.
But payment has not been made, and the liquidators, in Du Plessis’s affidavit, want an “order” directing the treasury to enforce section 38(1) of the PFMA, which states that departmental accounting officers “must settle all contractual obligations and settle all money owing, including inter governmental claims within the prescribed or agreed period”.
Du Plessis added that departmental accounting officers who did not adhere to the provisions of section 38(1) of the PFMA committed “an act of financial misconduct, a criminal offence in terms of section 86(1) of Act.
The Mail & Guardian sent questions to the treasury and home affairs department on Tuesday, both of which acknowledged receipt and indicated that they would respond. The two departments had, however, not responded by the time of publication.
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