Special Investigating Unit on its Annual Report 2010/11

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Justice and Correctional Services

11 October 2011
Chairperson: Mr L Landers (ANC)
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Meeting Summary

The Special Investigating Unit (SIU) presented its Annual Report for 2010/11 and a summary of its activities to the Committee. The SIU had grown in capacity, and now included forensic accountants and lawyers. It had been through an organisational redesign process over the last two years, and was now using project management methodology. It maintained close cooperation with other bodies, including the Public Protector. It had, in the past financial year, focused on large-scale fraud and corruption, shifting away from the multiple small cases of the social development and transport investigations in the past. It was concentrating on procurement-related fraud and corruption and was trying to improve all systems to prevent corruption, including building the capacity of all state departments in corruption investigations. It had about 668 funded posts, and 130 staff were on short-term secondment from private companies to provide short-term interventions and skills transfer. It was expected that the staff would increase to 706 in the next three years. It was working closely with the Hawks in the Anti Corruption Task Team, and with the Department of Public Service and Administration, as well as the Multi-Agency Working Group on Procurement in the finance cluster. It had challenges with employment equity but was working to improve this. The numbers of investigations over the last few years was tabled, and new indicators were being formulated to measure the large-scale investigations, which would include indicators on its contributions to arrests, and the values of contracts in which irregularities were found. The proclamations issued in the last year were tabled. There were 60 current and 22 active proclamations. It was currently investigating about R9.1 billion worth of contracts, and had already found 306 conflicts of interest, to the value of R3.4 billion. In the first quarter of 2011/12, 43 irregularities were found to the value of R1.4 billion, and 45 conflicts to the value of about R99 million.

Specific projects and findings were outlined, in relation to investigations into the South African Police Service (SAPS), Department of Public Works, Department of Arts and Culture, South African Broadcasting Corporation, Tshwane Metro, Ekurhuleni Metro, Department of Rural Development and Land Reform, Department of Human Settlements and Department of Social Development. One of the main challenges in dealing more effectively with corruption lay with the current model, which was largely dependent on the integrity of the Accounting Officer, who had control of the investigations, disciplinary actions, and internal audit, so that if the Accounting Officer was not willing to cooperate, the system was ineffective. There was also a need to better coordinate new initiatives. A response must be formulated urgently to the Constitutional Court’s ruling in the Glenister matter, and to find a way to locate overall accountability for a consolidated assault against corruption, including prevention and enforcement. There was also a need to amend the SIU Act and although some amendments that would enable the SIU to pursue civil litigation even where departments were unwilling to do so were included, a recent legal opinion also required a further amendment so that the SIU could charge State departments for its services. Although this had been done in the past, it was apparently incorrect since the SIU Act did not specifically allow for it, and because about half of the SIU’s income emanated from these contracts, there was a need to regularise the position urgently. In the meantime, National Treasury had agreed to approve a further budget allocation of R97 million to enable the SIU to continue with these contracts and work in the short term.

The financial statements and projected statements were tabled, showing little significant increase in budget, other than for inflation, although project funding was likely to grow, and expenses would also remain more or less the same. The SIU had received an unqualified audit since inception in 2001, with no emphasis of matter for the last six years. The revenue and expenditure trends were outlined.

Members were generally satisfied with the reports, and a DA Member expressed the view that the SIU was probably ideally placed to give effect to the Glenister judgment. They were also in support of the cost-recovery model, but questioned how the opinion had come about, what impact it had immediately, including on the work done for Eskom, and why this had not been isolated by the Auditor-General. They questioned the investigations instituted against Mr Hofmeyr, and called for a status report. They asked if the scale of corruption could be estimated, and noted the National Treasury’s estimates that about 20% of the annual procurement budget, or about R25 billion a year, might be involved. The SIU stressed that although good rules, regulations and policies were in place, there were insufficient numbers of investigators, and inconsistent application of consequences, with worrying trends that investigators might also be persuaded to not report on some issues. The delays in issuing proclamations, and the process, were questioned, and Members also asked for updates on Eskom, the social grants investigations in KwaZulu Natal, and the recommendations made by the SIU. Members also asked for comment on issues cited by the Auditor-General in relation to internal controls for performance, although it was not a matter of emphasis. The Chairperson expressed his personal view that there was probably the need for a central coordinating body to deal with corruption, and other Members thought that some mechanism must be found to follow up on the implementation of SIU recommendations, and asked what criminal actions had been pursued successfully. They asked for a list of premiers who had failed to respond to requests in relation to proclamations. They also questioned some matters in Eastern Cape municipalities, and suggested that the SIU should brief the Portfolio Committee on Cooperative Governance on the problems in local government. 


Meeting report

Special Investigating Unit Annual Report 2010/11
Mr Willie Hofmeyr, Head, Special Investigating Unit, noted that the presentation contained slides on the Special Investigating Unit (SIU) mandate and legal scope, but would not present them in any detail, as they remained largely unchanged from previous years. He noted that the SIU had been growing in capacity and now included forensic accountants and lawyers. It had been through an organisational redesign process over the last two years. It was trying to work on project management methodology, which still posed some challenges, although it had been quite successful. He noted that about half the SIU funding emanated from a National Treasury (NT) grant, and the other half from different state institutions who paid the SIU for its services. The SIU was trying to build the capacity of the State to do investigation. It had close cooperation with a number of bodies, and had increased its engagements with the public accounts committees at provincial level. It also worked with the Public Protector, as there were sometimes overlapping mandates.
The focus of the SIU was on large-scale fraud and corruption, and there had been a shift from the multiple small cases in the past, characterised by the investigation into social grants. There was now increasing focus on procurement-related fraud and corruption and giving assistance in improving systems to prevent corruption.

Mr Hofmeyr noted that the vision, mission, values and goals remained unchanged. In the previous year, the SIU had tried to align its processes more closely with the Government Outcomes, particularly Outcomes 3, 5 and 12. The strategic objectives also remained largely unchanged from the previous year (see attached presentation for details).

Mr Hofmeyr presented the strategic overview for the last three years. The SIU had found itself in a difficult situation with the onset of the recession, because a number of departments with whom it was working and being paid had sought to cut down on their expenditure in investigations. However, the SIU had actively sought extra work. It was, as mentioned before, focusing on building capacity in the State to deal with corruption investigations. The SIU had grown from about 67 to 600 people in nine years. The new operating model had helped it to cope with some extra demands. One important initiative had been negotiation with large private investigating companies to try to second additional staff to the SIU, and there were now about 130 people from the private sector working for SIU, to provide short-term interventions and skills transfer. It was busy also with a recruitment drive but in the short term the short term interventions had helped to delivery results.

The establishment was currently 668 funded posts, but this was expected to grow to 706 in the next three years. About 40% of the current year’s expenses were covered by project funding. It had 441 full time operational staff, of whom 25 were working full time with the Hawks in the Anti Corruption Task Team (ACTT) and 11 with the Wasps (the new unit in the Department of Public Service and Administration (DPSA) dealing with disciplinary matters). The permanent posts filled had decreased, from 594 in 1007/8 to 522 in the last financial year, due to uncertainty about project funding.

The SIU was aware of the need to improve its employment equity. The forensic industry was traditionally dominated by white males, many drawn from the South African Police Service (SAPS) Commercial Branch. It was difficult for the SIU to compete, at a salary level, with the private sector for skills. It had started its own trainee investigator programme and a leadership development programme. Ambitious targets were set for achieving employment equity, although this remained a challenge at senior management level. Details of the management profile were tabled (see slide 14).

Mr Hofmeyr outlined the SIU’s participation in other initiatives. It was working with the ACTT in the Justice Cluster, and the Multi Agency Working Group on Procurement in the Finance Cluster, to try to deal with systemic issues and early detection of corruption. The DPSA’s new unit was based in the Governance Cluster.

He noted, in respect of performance, that the SIU had been in a period of transition over the last few years. The areas highlighted in yellow, on the performance slides (see attached presentation for full details) resulted from the large multi-instance investigations into driving licences and social grants, which were scaled down in the last financial year, so these indicators had dropped. However, there was now a focus on procurement investigations, although this would not necessarily show quick results. The SIU had been formulating indicators that would measure the new work. One of the indicators examined what the SIU was contributing to the completed investigations, for the Justice Cluster outputs. A target was set that it should contribute to around 85 of the 100 arrests, which was an ambitious, but achievable target. Another indicator, included after discussion with National Treasury, looked at the value of the contracts where irregularities were found. In the current year the targets were perhaps too ambitious. The SIU was also looking at internal indicators, including the value of contracts where potential irregularities were identified, the value of contracts under investigation, and the value of contracts where irregularities were found.

In the past year, 18 proclamations were issued by the President, of which 15 were new investigations, and the housing and social grant investigations were renewed. In the current financial year, it had also received proclamations to investigate the Midvaal Local Municipality and the former Department of Roads and Transport in Eastern Cape. Between 10 and 15 further investigations were in the pipeline. There were 60 current and 22 active proclamations. Other growth areas for investigation included procurement, public works, rural development and land reform, parastatals, local government, education and health.

Mr S Swart (ACDP) asked what the difference was between investigations and proclamations.

Mr Hofmeyr explained that one proclamation may set out a number of different areas for investigation, such a general proclamation on the Department of Rural Development and Land Reform that could cover land reform and land redistribution investigations.

The SIU had previously said that there were about R15 billion worth of contracts capable of being investigated in the country. It was investigating about R9.1 billion currently. It had found 306 conflict of interest matters, to the value of R3.4 billion, which was more than expected. In most government departments, conflicts of interest were a significant problem. In the first quarter of the current year, 43 irregularities were found to the value of R1.4 billion, and 45 conflicts to the value of about R99 million.

Mr Hofmeyr then outlined some specific projects. The SIU was working with the Public Protector on the SAPS Head Office leases, and steps had been taken to have the leases, worth over R1 billion, terminated. Another major focus area related to the build programme, where it was found that 33 entire new police stations were being built on quotes, not tenders, and the value of contracts exceeding R330 million. These investigations emanated from whistleblower reports to the Independent Complaints Directorate. There were widespread problems, including lowest quotes not accepted, lack of any quotations from the winning bidders, cover quoting and Black Economic Empowerment (BEE) fronting, conflicts of interest and actual payments exceeding budgeted costs.

In relation to the Department of Public Works (DPW), the SIU was looking at the entire functioning. At least R35 million was paid to entities where DPW staff had undeclared business interests. The SIU had investigating construction of accommodation at border posts, where the value of contracts was R374 million, but some contracts were cancelled due to problems with the sites, yet the contractors received “outrageous” cancellation fees. In one ongoing investigation, an amount of R217 000 had been paid as monthly rental for a house in Pretoria, with R7 million paid in rental over the last three years. Priority investigations were being conducted into leased accommodation, specific contracts, conflicts of interest and general supply chain management irregularities, totalling R3.3 billion. A report had been given recommending disciplinary and criminal action.

The SIU had largely completed investigations into the Department of Arts and Culture, where it had been asked to look into misuse of funding ringfenced for the 2010 Soccer World Cup. About R26 million was shifted from the earmarked World Cup budget and used for unauthorised expenses, and even where funds had not been shifted, R16 million was used for non-World Cup projects. The SIU had reviewed 39 projects and had recommended halting many, which would result in R8.3 million savings. However, much of the money already spent could not be recovered, because it was paid to communities. It had found numerous irregularities in the process.

The SIU had been involved in major investigations into the South African Broadcasting Corporation (SABC) over the last eighteen months. The Auditor-General had initially found 20 instances where employees had conflicts of interest, and the SIU had now found another 20. Eight criminal cases were laid, and five had been finalised.

Tshwane Metro was a new investigation, where 65 officials had been identified who had interests in companies doing business with the Metro, and R185 million was paid in total to those companies. There were other procurement investigations in excess of R80 million. Irregularities included deviations from tender specifications and service provider payments, and the amount involved was over R400 million.

In Ekurhuleni Metro, the SIU was reviewing tenders to the value of R500 million. One of the payments, to the value of R37.8 million, was made without any delivery notes. There were also investigations into ICT contracts, where a former director had not disclosed his relationship with a company, had entered into contracts with that company to the value of R32 million, had resigned from the Metro and was now working for that company.

The proclamation given to the SIU in relation to the Department of Rural Development and Land Reform (DRDLR) covered both the grants applications and expenditure irregularities. The SIU was first trying to secure all documents, given the fact that there were significant problems, and it was busy scanning over 50 million printed documents. It had already worked with the Hawks and Asset Forfeiture Unit (AFU) and had investigated three officials and a KwaZulu Natal businessman on fraud and corruption charges relating to the irregular awarding and administration of land reform grants, totalling R500 million. Farms worth R36 million had been forfeited.

In relation to the Department of Human Settlements (DHS) the focus had moved away from public servants receiving subsidies unlawfully, to investigation of construction contracts. At least 50% of the projects were problematic in some way, ranging from payment to contractors for houses that might not exist at all, or were incomplete, seriously defective, or in conflict the quotations. The total value of contracts under investigation here was over R2 billion.

The investigations in the Department of Social Development (DSD) social grants had been scaled down significantly, although the new Chief Executive Officer had requested that they continue. The SIU had looked into procurement at the South African Social Security Agency (SASSA). As a result of its investigations, the former Chief Executive Officer was fired and was likely to face criminal charges.

Mr Hofmeyr then outlined the challenges to dealing more effectively with corruption. One of the main issues related to the current model, which was largely dependent on the integrity of the Accounting Officer in the departments, who had control of the investigations, disciplinary action, and internal audit. If, as was not uncommon, there was a problem with that person, then the whole model was problematic. This was why the initiatives being taken by the Department of Public Service and Administration were so important, as disciplinary cases would essentially be taken out of the control of the Accounting Officer. There were engagements with National Treasury as to whether it could assume the responsibilities of the Accounting Officer if that person refused to try to recover amounts owing.

A further challenge was the need for better coordination of the many new initiatives. A response was needed to the Glenister matter in the Constitutional Court, which sought to ensure South Africa’s compliance with the United Nations Convention against Corruption, and which required the establishment of a dedicated agency with sufficient safeguards to ensure independence. There was a need to locate appropriate overall accountability for a consolidated assault against corruption, including prevention and enforcement efforts. The SIU was participating in these discussions, through its relationship with the Hawks.

Mr Hofmeyr also noted that there was a need to amend the SIU Act. Some of these amendments were already included in the Judicial Matters Amendment Bill, which had been presented to Cabinet, but was not yet before Parliament. The SIU had not been able to litigate civilly for a number of years, where the Accounting Officer of a department was unwilling to do so, and one of the amendments would enable the SIU to proceed with civil litigation even where the relevant department did not support this.

Mr J Jeffery (ANC) interjected that other amendments were also needed, and he suggested that these should be inserted now, as once the Bill was tabled in Parliament it would be difficult to include them.

Mr Hofmeyr said that he would raise this with the Minister. This Bill had been through Cabinet several months previously.

Ms M Smuts (DA) pointed out that Cabinet was not generally averse to reconsidering the matter.

Mr Hofmeyr confirmed that the Minister of Justice and Constitutional Development was looking at further amendments.

Mr Hofmeyr then moved on to outline the budget growth and project income. He noted that the SIU had first begun to collaborate with other State departments in 2003/4, when 37% of its budget had been covered by the investigations paid for by the Department of Correctional Services. This had grown when the Department of Social Development project was instituted. The income from State institutions had stayed relatively stable since then, and already the SIU had budgeted to receive about R150 million from these investigations, there was a large demand, and about half of the SIU budget was now received from project income.

However, he noted that the SIU had recently obtained a legal opinion that it could not in fact charge other State departments for its services, because this was not specifically authorised by the SIU Act. That, naturally, raised huge concerns, because of its dependence on this income. The opinion stated that for an interim period, and on condition that there would be an amendment to the SIU Act in this financial year, the SIU could continue to receive money from departments where arrangements were in place. That did not account for the R60 million to be received from new investigations. The SIU was to insert a suitable amendment into the Judicial Matters Amendment Bill, which hopefully should reach the Committee shortly, and would regularise the position. In the meantime, it was unable to enter into new cooperation agreements, although it had hoped to sign contracts to the value of about R90 million. In respect of the current financial year, National Treasury had agreed to give additional funding of R97 million for this financial year, to compensate for the loss of revenue, and enable the SIU to take on additional work. In the future years, SIU was to request a permanent increase in its current budget, to reduce its reliance on contract funding. It had received excellent support and commitment from the Ministers of Finance and Justice, National Treasury, and the Director General of the Department of Justice and Constitutional Development (DOJ).

Mr Hofmeyr then tabled the financial information over the last three years, and gave projections for the following three years. There was no significant increase shown in revenue, other than inflation growth, although the project funding was likely to grow. The expenses were also largely the same (see attached presentation for full details and comparisons). The SIU had received an unqualified audit since inception in 2001, with no emphasis of matter for the last six years. Its budget allocations were received as a transfer from the Department of Justice. If the SIU did receive the funding it asked for, it was likely to be able to create about another 200 jobs.

He also outlined the revenue and expenditure trends (see attached presentation). In the last two years, SIU had followed an aggressive savings drive, reducing accommodation and car rentals, limiting telephone use and recovering all private call costs. He concluded that the SIU had made more impact in the procurement area in the past two years. There was a massive increase in the demand for assistance. The capacity to deal with all matters effectively remained a challenge, but its coordination with other institutions was improving.

Finally, Mr Hofmeyr added that the SIU was involved in the joint initiative between National Treasury and the Anti Corruption Task Team to tackle one department at a time, from a law enforcement and systemic problem perspective, to try to achieve a turnaround. It was at the moment concentrating on the Department of Health in Eastern Cape. Much effort had gone into that, and there was good buy-in from the National Minister and Premier, and this should show good results.

Discussion
Ms M Smuts (DA) congratulated the SIU and repeated her view that this was one of the organisations that should be used to give effect to the Glenister judgment, in creating the unit required. She was pleased to see the capacity expansion and the range of multi-disciplinary skills, which indicated that there would continue to be good progress.

Mr Hofmeyr said that if a new anti-corruption unit was set up, the SIU would like to be part of it.

Ms Smuts asked him to expand on this.

Mr Hofmeyr explained that a number of players in government would need to be involved, including the SIU, Asset Recovery, the best model for Asset Forfeiture, a prevention component, and a public awareness and education component. He believed that the issues raised in the Glenister matter must be resolved soon, and the SIU would like to be involved in the debate on the optimum model. The National Planning Commission had also looked at this, engaging with a range of role players in the debate.

Ms Smuts added that Parliament should also comment.

Ms Smuts said that the cost-recovery model seemed to be a good one, and she would be happy to support that.

Ms Smuts asked for comment on the corruption charges laid against Mr Hofmeyr, expressing her opinion that these were attempts to “neutralise” him, and asked about the current position.

Mr Hofmeyr said that the charges laid by Mr King emanated from a plea bargain proposal by Mr King, after which Mr King complained to the National Director of Public Prosecutions (NDPP), and the National Prosecuting Authority (NPA) had asked the SAPS to investigate both Mr Hofmeyr and Mr Myburgh. A docket was opened and he had made a warning statement, through a private attorney. The charges had been dropped. The charges laid by the union NEHAWU had been outlined on page 37 of the Annual Report, specifically the report of the Audit Committee. The Auditor-General and Internal Audit Unit of the SIU had done extensive investigations into the tender processes and procurement issues that were raised in the allegations. The Auditor-General was satisfied on the issue, and had not expressed any concerns about the criminal allegations and serious administrative issues. However, the SIU had had a debate with the Auditor-General about procurement through a certificate, which was done in cases where it was not practical, or was too urgent, to follow the normal procedures. That procurement had to be reported to National Treasury and the Auditor-General. In the past, SIU had understood that it was necessary to report only when the R1 million mark was reached, but it now was following the Auditor-General’s view that this must be reported as soon as the expense was incurred. The Audit Committee noted that it had commissioned its own investigations into the allegations. It confirmed that, having investigated the issues, it was satisfied that there was no basis to suspend Mr Hofmeyr or ask him to step down. The SAPS had liaised with the NPA on this matter, and he had not been asked to make any statements.

Mr S Swart (ACDP) asked if the SIU could estimate the scale of corruption against the national budget.

Mr Hofmeyr responded that it was difficult to do so, but one suggestion by National Treasury was that it might amount of about 20% of the annual procurement budget, or about R25 billion a year. That could well be a reasonable estimate. This figure, however, would relate not only to cases involving corruption, but also those where there had been over-payments or a failure to monitor service delivery properly. A significant amount of money was being lost that should be spent on service delivery. He added that it was also necessary to consider the ideal that should be invested into investigations. The model used in Hong Kong suggested that about 7 000 people should be assigned mainly to investigating corruption, but that did not happen in South Africa. The rules, regulations and policies were good and strong, but the reality was that if there were not strict consequences, or enough people assigned to investigate and hold people to account, then the culture of impunity would spread quickly. Prevention, education and awareness around corruption remained major challenges. Despite the growth in the SIU’s own capacity, and the use of the private sector to investigate, these were major issues in South Africa. There were also worrying trends that the corruption was spreading also to investigating organisations, who might be “persuaded” not to investigate some issues properly. The Prevention of Corruption Act contained a provision that an Accounting Officer or Senior Management employee who failed to report suspicion of corruption was guilty of a criminal offence, but this provision did not appear to have been enforced to date. The Accountant General had now hand-delivered a letter to every Accounting Officer drawing their attention to these provisions, and providing the names and contact details of those to whom such suspicions must be reported.

Mr Swart asked about the liaison between the AFU and SIU, noting that the AFU could be taking action on the amounts over-spent by the National Youth Development Agency (NYDA). However, he wondered if the delays before proclamations were instituted was a problem for the SIU.

Mr Hofmeyr responded that although it was sometimes frustrating for the SIU to have to wait until a proclamation was issued before it could act, matters were now moving faster under the current Minister. The issuing of proclamations would, however, take some time, because SIU would generally motivate for a widespread investigation and would have to isolate sufficient allegations for such an investigation, typically into “all procurement transactions”, so it could not cite merely one or two examples. The advantage of SIU’s close collaboration with SAPS was that the ACTT could also start investigations. The SIU had created capacity to deal much more effectively with corruption and it was quite optimistic that this would improve.

Mr Swart noted that when the SIU last appeared before the Committee, it had referred to Eskom investigations and conflicts of interest, and he asked for an update on this.

Mr Hofmeyr noted that part of the reason that the Eskom investigations had not progressed was that it was Eskom itself who had obtained the opinion in relation to payment of the SIU, which had concluded that the SIU should not proceed with these matters. National Treasury had now, however, provided the money for the investigation to continue. It would be included in a new proclamation.

Mr Swart noted that the media had carried reports about investigations into the social grants, and concerns had been raised in the KwaZulu Natal Provincial Legislature that civil servants who had transgressed, but had then signed acknowledgments of debt, apparently were not required to pay any interest, and faced no disciplinary action, allegedly in terms of a national resolution. He asked if this was correct, commenting that if it was, it must be a source of frustration to the SIU.

Mr Hofmeyr said that this matter was reported on previously to the Committee. About 44 000 public servants had managed to access public grants. If all had been fired, this would have had a huge impact on service delivery in the DSD. The SIU had made recommendations that sterner action be taken, but this was eventually coordinated nationally through the Department of Public Service and Administration. He was not sure that there was a national resolution on the matter. There were, however, different levels of illegality. Some of the civil servants had lied about their income to access the grants, and all of them had been prosecuted for fraud, and about 90% were found guilty. The second category had qualified for the social grant when they applied, but had failed, as they should have done, to inform the DSD when their income increased so that they would no longer qualify, although it was possible that they may not have been specifically informed of their obligation to report. Here, disciplinary action, but not prosecutions, were recommended. The third category had qualified for social grants, because they were part-time or low-paid employees such as cleaners, who were within the means test figures, although they were civil servants. Money was recovered from all those not entitled to the grants. Interest was levied. A huge amount of effort had gone into the recovery and there was good cooperation from DSD, and later from SASSA. He had his own qualms about those in SAPS who had committed fraud and remained employed as police officers, but this was something that the oversight mechanism should look into.

Mr J Jeffery (ANC) congratulated the SIU on its positive performance. He asked when the legal opinion in relation to funding was received.

Mr Hofmeyr said that the first legal opinion was obtained by Eskom, as part of good governance investigations, in about June 2011. The AFU subsequently obtained its own two further legal opinions, both of which confirmed the Eskom opinion. Several meetings were then held with National Treasury and Justice. The SIU had been concerned about the impact on its staff, and this finding was only communicated recently, once the SIU had been assured of a short-term solution.

Mr Jeffery noted that two comments by the Auditor-General were noted in the Annual Report, but not reported upon specifically by the SIU. Item 18 of the Auditor-General’s report expressed concern about oversight responsibility on internal controls and strategic objectives. He asked how this was being addressed, and made the point that it should have been mentioned in the presentation.

Mr Hofmeyr said that all departments were finding it a challenge to deal with the increasing vigour of the Auditor-General’s investigations. This was not actually raised as an emphasis of matter, and the SIU was initially informed that the Auditor-General (AG) would not express an opinion on the performance information. This related to performance, as the SIU had not linked specific performance targets, internally, to every objective, although it had focused on overall performance delivery targets. The SIU had engaged with the AG on this point and it would be resolved in the current year. The SIU was caught a little unaware on that point, and it was a technical matter, with no misperformance or incorrect reporting.

Ms D Schäfer (DA) asked if the relationship with Nehawu, referred to in the Annual Report, was established before or after the complaint against Mr Hofmeyr.

Mr Hofmeyr said that generally there had been a good and constructive relationship with Nehawu, and he thought that there was no real cause for concern.

Ms Schäfer noted that comment had been made in the last Annual Report about the house for which R217 000 a month rental was being paid by the DPW, and asked why there seemed to be no change on this. She asked to what extent the SIU could prevent expenditure, and whether the DPW was cooperating in investigations.

Mr Hofmeyr assured her that the payment of rental had been stopped in the past year. Recommendations had been made to the DPW and he hoped that it would soon take action on this and a number of other cases.

Adv S Holomisa (ANC) asked if there was anything preventing the SIU from pursing civil actions.

Mr Hofmeyr responded that the SIU had no problem where a department would agree to take civil action, and in the past, the SIU had assisted departments proactively in pursuing civil litigation, as it had some experienced advocates, to try to minimise the chances of loss. However, there was a problem where the Accounting Officer of a department was unwilling to act, either because s/he was close to the person being sued, or for fear of having his or her own position questioned.

Adv Holomisa asked for clarity on slide 25, and asked why “the decision by SAPS” would need to be taken.

Mr Hofmeyr agreed that this slide was inelegantly phrased, and in fact SAPS had referred matters to the NPA for a decision on whether to prosecute in the SABC matters. The SIU was not running the investigation. Although the prosecutor was involved closely from the beginning, a formal decision on prosecution needed to be taken.

Adv Holomisa asked why the AG had not raised questions about the payment to the SIU by other State departments in the past. He asked what the AG’s view on the matter was, and whether it meant that each time SIU had work to do, the National Treasury would need to pay.

Ms Smuts also asked for further clarity on the opinion, and questioned why Eskom had obtained it, as it had apparently requested SIU to do the work.

Mr Hofmeyr answered that essentially the AG used the same model and therefore may not have considered the issue specifically. The SIU had done an investigation for the AG and National Treasury, for which it had been paid, since there was an assumption that this was in order, and in fact the investigations and their income had been reported upon as an achievement over the last eight years. The SABC investigations were the first done on a for-profit State entity, and this was followed by a request to investigate Eskom. However, Eskom had a range of corporate governance problems and during the debate on these, the issue of payment to the SIU was raised and the legal opinion was obtained to comply with corporate governance principles. Eskom had been helpful in the past, and there was no negative aspect to this.

The Chairperson said that he, personally, felt that there should be a central coordinating body to deal with corruption. He asked how many cases had been referred for prosecution by the SIU since its formation in 2001. He also referred to the comments that there might be problems with the current process, and thought that a central coordinating body may well provide a solution. Some gaps may be related to SAPS’ lack of capacity. It did not make sense if the SIU was doing excellent work but there was no follow up.

Mr Jeffery said that although the responsibility of the SIU presumably ended when recommendations were made, he wondered who the Committee could approach for a more comprehensive report on what ensued.

Mr Hofmeyr said that he would give thought to that issue. The Director General of DOJ had also questioned how tracking could best be done. He noted that the Standing Committee on Public Accounts was more frequently calling the SIU to attend, with departments, at meetings, and would ask the departments which of the recommendations were implemented. SIU did try to follow up on recommendations, and would also offer assistance, but a more systematic approach might be useful.

Mr Hofmeyr then noted that in respect of the Output 5 cases, 26 arrests had been made, about eight relating to the Savoy matter. Two or three related to the farm in KwaZulu Natal, one was in relation to Land Bank and one related to a stationery contract. A former mayor of Manguang was currently being tried. A case against a pharmaceutical company was instituted in Eastern Cape. Some Ekurhuleni officials were being prosecuted and there were other major cases in the pipeline, including SASSA officials.

Ms Schäfer asked how many times the SIU had asked for proclamations to be issued that were refused.

Mr Hofmeyr responded that this had never happened. There were no real problems with the process of the proclamations themselves at Ministerial level, but in practice, the view of the Premier was sought on matters relating to the provinces, and there had been a number of cases where no response was received from a Premier. The new Minister had recommended that investigations could be instituted even where no Premier’s consent had been given.

Ms Schäfer asked to be provided with a list of premiers who had not answered.


Mr Swart asked for further explanations about the Eastern Cape Local Government investigations, where assistance had been given since September 2009 yet no proclamation appeared to have been issued, and what the difference was between this and the North West municipality issues.

Mr Toyo Mnqeba, Head: Business Support, SIU, said that the Eastern Cape matters were referred to the SIU by the MEC for Local Government, but not all the matters were of a serious enough nature to warrant applying for a proclamation. The SIU had essentially just done some preliminary investigations to assist the department.

Mr Swart questioned whether the Annual Report reflected this correctly, and suggested that the outcome of the investigations should have been noted.

Mr Mnqeba took his point.

Mr Jeffery questioned the reference to revenue from exchange transactions investigated for Eskom and asked if the amounts already paid by Eskom would be repaid, in light of the opinion obtained by Eskom.

Mr Hofmeyr said that the amounts had been paid up front, and although much of the pre-investigation had been done, there was an unspent portion, which Eskom had not requested should be repaid now.

Adv Holomisa questioned page 29 of the Annual Report, which referred to the SIU making a recommendation for suspension of a municipal employee, which was then lifted. He questioned the point of the proclamations, if the investigations and recommendations of the SIU were simply ignored.

Mr P Modipa, Programme Manager, SIU, said that the SIU had found irregularities in an IT contract since the Supply Chain Manager had a conflict of interest, and had recommended that the latter be suspended. By this time, however, the Municipality was placed under administration. The Administrator had implemented the suspension and SIU was helping SAPS with the criminal investigation. However, after the local government elections, a new Council was established, which lifted the suspensions of three officials, without consulting with the SIU. The MEC for Local Government had been apprised of this, and was to apply for a section 139 (of the Municipal Systems Act) intervention at the Madibeng Municipality and would deal with this issue.

Mr Jeffery said that this report underpinned the need for more comprehensive follow-up reporting. He wondered if it was possible to categorise the local government problems.

Mr Hofmeyr said that it was of structural concern that problems and oversight were of great concern at local government level, and in most cases bodies to oversee problems at this level were not in existence.

Mr Jeffery wondered if this matter should not be reported to the Portfolio Committee on Cooperative Governance, and that it should be suggested that the SIU should give a presentation to that Committee.

The Chairperson agreed.

Mr Hofmeyr said that SIU had been doing a lot of work with the Department of Cooperative Governance at national level, and was also assisting with its inspectorate. However, there were constitutional challenges as to how to deal with this sphere of government.

The Chairperson expressed appreciation to Mr Hofmeyr and his team for a job very well done. The Committee would like to follow up on the issues identified, and would try to speed up the legislative changes.

The meeting was adjourned.


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