SASSA, with Minister: hearing on irregular, fruitless and wasteful expenditure

Public Accounts (SCOPA)

23 November 2016
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Minister of Social Development, the Auditor General and the Hawks were present for the  hearing on of irregular, fruitless and wasteful expenditure in the South African Social Security Agency (SASSA).

SASSA was asked to explain the irregular expenditure involving R316 million (CPS contract), R414 million (physical security), R233 million (Trifecta/Delta Office lease), R75 million (SAB&T) and R20 million in other irregular expenditure.

SASSA was asked to explain the fruitless and wasteful expenditure of R4.4 million (damaged vehicles), R1.2 million (Mikondzo event) and R3.5 million (for which no details were provided.

Assurance was sought that the insourcing of payment of grants to beneficiaries by SASSA in place of Cash Paymaster Services (CPS) would happen from 1 April 2017.

The Committee showed discomfort with some of the answers provided by SASSA and urged them to be prepared take accountability for their actions. SASSA indicated in the meeting that most of these contracts were concluded by former employees Dr Virginia Petersen, Mr Frank Earl and the late Mrs Botha, thus the Committee did not many answers they expected to be answered However the Committee assured SASSA and the Department that consequential action will be taken in the future and investigations will reach a conclusion.

Meeting report

The Chairperson noted that a lot of hearings had been scheduled on irregular, fruitless and wasteful expenditure as a priority. SCOPA had received a lot of cancellations from government entities which brought some uncertainty as to whether they were still coming. He pointed out that they have taken a decision as Parliament that it is mandatory to ensure that whoever is not performing their job, should be held accountable.  As a Committee we cannot have a situation of amending the legislation every year when the law is clear, therefore there is a problem that needs to be dealt with.  He welcomed the Hawks and emphasised that their presence was important so that they would monitor the proceedings and determine whether an investigation should take place.

SASSA Irregular Expenditure
CPS contract; R316 million
Mr T Brauteseth (DA) noted that the Committee had issued a set of questions to SASSA and asked them to respond. He referred to the SASSA presentation with regard to the amount (R316 million) that was paid and approved by the AG and then subsequently rejected by the AG as irregular and expenditure and that positioned some objections by Treasury. He asked SASSA why Virginia Petersen was absent from the meeting.

Mr Thokozani Magwaza (CEO of SASSA) responded that her contract expired end of May so she is no longer with SASSA.

Mr Brauteseth asked why they did not bring her along so that she could make her own statement.

Mr Magwaza replied any questions that had been directed to her, she would refer them to SASSA highlighting the fact that she is no longer working for SASSA. He had thus decided to take charge of everything as CEO and respond to the questions.

Mr Brauteseth moved along and said the R316 million was paid to Cash Paymaster Services (CPS) in June 2014 and asked if that was correct.

Mr Magwaza agreed that it was paid.

Mr Brauteseth said that the justification for the payment is it was paid to cover registration of beneficiaries and asked if this was correct.

Mr Magwaza said it was correct.

Mr Bauteseth asked if the CEO was there at the Department at that time and who was available to answer the question with regard to this amount.

Mr Magwaza replied he was at the Department when he started in 2013 as Deputy Director General then in 2015 he became the acting Director General. He highlighted that the CFO was there at the time and he will assist with answering some of the questions.

Mr Brauteseth asked the CFO why was procedure not followed in reference to the R316 million payment which is also the fundamental objection made by the Auditor General and Treasury.

Mr Tsakeriwa Chauke (CFO of SASSA) replied that it was followed, this was an authorized payment. There was a procedure within SASSA to make payments. The payment of the R316 million was authorised in terms of the delegations that made the payment. What the AG had a problem with was the approval of the variation order in 2012 which at that time we did not necessarily go to Treasury.

The Chairperson interrupted Mr Chauke and asked him to explain from that point why that was not done.

Mr Chauke asked if he could give a brief background as context.

Mr M Booi (ANC) made a point of order and asked Mr Chauke to answer the question that was asked and follow orders from the Chairperson.

The Chairperson said to Mr Chauke that he should answer the questions as directed and other matters will be dealt with later in the meeting. He said Mr Chauke was wrong. It has already been determined that procedure was not followed. We want to know “were you asleep on the job, or was this deliberate?” What the Committee needs is an explanation that will convince them why the Department did what they did when the rules are there.

Mr Chauke said the process was not followed because the accounting authority made an “urgent decision” at that time about the additional R316 million. He commented that only 9 million beneficiaries were included in the original contract.

Mr Brauteseth asked if he was now talking about an emergency contract, yes or no.

Mr Chauke replied yes.

Mr Brauteseth said the contract started around 2011/2012 and CPS was awarded a R10 billion contract. This issue arose around the argument from CPS that they had put in a tender to register 9 million recipients but there were actually 15 million recipients so they needed another R316 million. He asked if he was correct.

Mr Chauke replied yes.

Mr Brauteseth asked, when they decided to make the payment, did anyone in the Department at any stage refer to the Service Level Agreement (SLA) and the contract.

Mr Chauke replied yes, the executive responsible for that function did.

Mr Brauteseth asked who the executive was at that time.

Mr Chauke replied it was Mr Frank Earl [Executive Manager: Corporate Services].

Mr Brauteseth asked whether Mr Frank Earl was present.

Mr Chauke replied he had left SASSA.

Mr Brauteseth noted that once again there is another person who is responsible for the payment of the money not present in the meeting and asked if it was correct.

Mr Chauke replied yes.

Mr Brauteseth asked if there was anyone present at this meeting that was involved in that decision.

Mr Chauke replied yes

Mr Brauteseth asked who was involved.

Mr Chauke replied he got involved at a later stage but not at the initial stage.

Mr Brauteseth asked Mr Chauke if at any stage he advised that there was a problem because the Service Level Agreement clearly states that CPS would register all beneficiaries “including children.” [Reads from SLA]. Who was responsible for this contract, and who should have been looking at the SLA?

Mr Chauke replied he considered the attachment that was part of the document which had a projection of 9.2 million, not the numbers that were actually done by the end of the project.

Mr Brauteseth asked if Mr Chauke looked at the SLA.

Mr Chauke replied yes, he did.

Mr Brauteseth said in terms of the SLA a beneficiary shall bear the meaning assigned to it in the Act and includes children (see document). Now the argument with CPS was that their original document never included children because the recipient is somebody who is entitled to it and beneficiary is somebody who receives money. He therefore asked why he did not point out to CPS that in the original document there was an agreement to include children as it is in the contract. He asked him to give reasons.

Mr Chauke replied as he had indicated the SLA was considered but the numbers that were on the bid was 9.2 million and they were not included in the projections, neither were the children and that it is the interpretation of SASSA.

Mr Brauteseth asked how many beneficiaries and recipients existed in 2011/2012.

Mr Chauke replied around 22 million.

Mr Brauteseth asked Mr Chauke if he was saying that in 2014 they issued an invoice which purported to say that CPS did not intend to register everyone. However, going back two years an agreement was signed with CPS that said everyone needed to be registered and, according to the SLA, "including children". He asked how he thought that 9 million was going to be enough when at that time he thought that 22 million people had to be enrolled.

Mr Chauke replied that at the time when the projections were done, the beneficiaries were only considered without including the projections for the children. Once the tender was being concluded that is when it was realised that the numbers excluded children and the children were brought in because they were important part in the process.

The Chairperson welcomed the Minister of Social Development, Ms Bathabile Dlamini.

Mr Brauteseth said the bottom line is the SLA defines beneficiary and recipients and includes children. Did you advise that the SLA was clear on the matter of beneficiaries, all beneficiaries and recipients were included, and that CPS was "taking a chance”. 

The Chairperson said "SASSA dropped the ball". He asked Mr Chauke if he is adamant this contract was concluded in the right way.

Mr Chauke replied that on his engagement as CFO, they had the very same discussion and with the documentation provided and the interpretation. He understood that CPS’s interpretation - that they had to register 9 million people according to the bid documents - was the right one.

In reply to Mr Brauteseth asking if Lungu Ncwana helped him to reach that decision, Mr Chauke said he did not know him.

Mr Brauteseth asked who was responsible for: the amount of money paid to CPS that was different from the contract; the failure to report the expenditure to the Treasury; the failure to make an addendum to the contract.

Mr Chauke replied it was the executive who was responsible because they had to do the variation on the contract and the decision was taken by the accounting authority. The executive was Frank Earl and Virginia Petersen was the CEO of SASSA.

Mr Brauteseth asked if he knew were Frank is currently working.

Mr Chauke replied he has not been in contact with him.

Mr Brauteseth asked if anyone could advise why Frank’s contract was terminated or ended.

Mr Chauke replied he did not know the reason why he left SASSA. More so, no one from the Corporate Services could give reasons for why he left SASSA.

Mr Brauteseth asked if they were saying that the person who is in breach of the rules effectively walked away with no action taken.  

[There is a discussion and it appears Mr Earl had moved but still works in government.]

Mr Brauteseth asked if this is how government works,  is it a revolving door? A person in breach walked away from their position, is in another part of government now, and faced no consequences. Virginia and Frank both faced no consequences?

Mr Chauke replied he would not say he walked away because the process of the R316 million was finalised.

Mr Brauteseth said that it has been over two years and Frank, assumingly with Virgina, made a decision to make a payment of R316 million which subsequently become problematic. He asked if SASSA could confirm if any consequence measures were taken on both Frank and Virginia.

Mr Chauke replied nothing has happened yet since the matter has not been concluded.

Physical Security: R414 million
Mr Brauteseth moved to the issue of the physical security contract of R414 million. He pointed out that he is concerned that the CFO has been answering a lot of the questions yet the CEO is the accounting officer. He then asked if they could give some sort of sense as to what happened with regard to the security contract of R414 million. He asked how this contract was allowed to roll over seven times until 31 January 2016.

Mr Magwaza replied that when the CFO started with SASSA, the contract had just been awarded to the service providers and he queried the procedure that was followed at that time. Thus he requested that instead of the three years that had been set down it should actually be six months. By the time that the six months ended, the former proceedings had not been finalised hence the contract was extended.

Mr Brauteseth therefore referred his next question to Mr Clifford Appel, the former CFO of SASSA, who was present in the meeting. He asked him to explain why he could not get this contract right eight times in a row because a six-month contract for four years constitutes eight times.

Mr Appel said he joined SASSA when the matter had been concluded and when he looked at the process done he knew that this was not in compliance with the rules. Treasury had made it clear that an advertisement was required in the tender bulletin and in the media, and that part was missed. Thus he reached the decision that the right procedure needed to be followed. The first six months eventually passed then at that stage it was realised again that there was a problem. There were issues around whether the supporting documentation had been submitted according to administrative compliance. The documents should be certified so in view of that we said that some of the companies that participated in the bid should be excluded, which was done. However the accounting office side said those companies should have been considered as well but it was argued that due to non-compliance, there would be no consideration.

Mr Brautesesth asked why it took four years.

Mr Appel said he joined SASSA after the process had been done.

The Chairperson said the question asked is why it took that long and asked Mr Appel to give some insight on how they got it wrong and if there were any problems or resistance.

Mr Magwaza asked the Chairperson if Mr Chauke could take over and respond to that question.

Mr Chauke replied after the failure, SASSA conducted four separate searches to appoint security companies. Certain security companies were found to be good in one region, but not in another. The process was decentralized to the provinces. We thought this was odd. How could they pass muster in one place, but fail in another. The bid committee visited the sites, when they were not approved and then conducted other searches. Thus, when there was no approval, it went back on the market and the period of the six-month contract had to be extended.

Mr Brauteseth said it is important to look at who suffered prejudice. Other security companies that were excluded from the process for four years suffered prejudice. Due to your inefficiency, admit that you have excluded other companies from the process and the question is still why this could not be covered within four years. We have to draw inferences. You excluded some companies to benefit others by obfuscating the process.  The inference drawn is whether you were trying to exclude other companies so that you could benefit others, so was it done deliberately?

Mr Chauke replied no.

Mr Brauteseth asked if it means that as an administration they were unable to put together a proper functioning system.

Mr Chauke replied yes.

The Chairperson said you are telling us that as the CFO you could not run a decent tender process for four years. If this is true, “you should resign today” because you have just admitted to incompetence in that process over four years.

Mr Chauke replied saying they did ask for assistance from National Treasury.

The Chairperson asked whether, in the tender they had set, they were looking for one company to service the whole country or a company in each province.

Mr Chauke replied they were looking for one company in each province.

The Chairperson asked how one company that applies in one province ends up applying in another province yet they required one company in each province.

Mr Chauke replied the awards for the contract were supposed to be done by the accounting officer, therefore the accounting officer had a preview of what happened in another region which was not consistent to what happened to another region, yet the specification was the same.

[It was noted that Treasury had commented that just because there was conflicting information from the some of the companies, this should not have prevented them from appointing other security companies bidding for the tender.]

Trifecta/Delta Office Leases: R233 million (55 min)
Mr Brauteseth asked if SASSA could give some clarity on the leases.

Mr Magwaza asked if the CFO could give some insight on that.

Mr Brauteseth showed some discomfort with that request and said to the Chairperson he was very concerned why the CEO is quiet and not responding to the questions yet he is the accounting officer, he should take responsibility as the accounting officer.

Mr Magwaza responded and said he acknowledged the fact that he should take responsibility and as he mentioned earlier he takes responsibility as the accounting officer of SASSA.

Mr Chauke explained that in 2006, SASSA consolidated provincial departments’ assets and liabilities into one national department. There was an agreement aligned with section 23 of the SASSA Act that required consolidation of assets and liabilities in the provinces within SASSA. In the Northern Cape there were four leases for offices and one in North West. These were 10 year leases that SASSA took over. The Auditor General asked for the documentation of the process followed in taking over these leases. Unfortunately, we could not get the documentation on the processes. We could only get the final lease agreements. These were confirmed leases for 10 years, leading to this significant expenditure of R233 million accumulated from 2006-2015/16.

Mr Brauteseth asked if the actual irregularity was in the negotiation of the leases.

Mr Chauke replied yes.

The Chairperson asked who own Trifecta Delta.

Mr Chauke responded after no one could answer, and said he does not know.

The Chairperson asked if John Block rings a bell.

Mr Magwaza replied yes, it does, because this issue has been in court and there were people who were found guilty and waiting for a sentence. John Block is one of the people found guilty and taking into consideration of what happened in court, these offenders were the shareholders of this organisation.

Mr Baruteseth said there is no need for assumptions yet and asked if the John Block case is linked in any way to the Trifecta Delta issue.

Mr Magwaza replied he would not know.

The Chairperson interrupted him and said he should know.

Mr Chauke responded and said there is a link. The understanding from the investigation was that the court case that has been concluded was phase one. There are two phases to the John Block case. Our lease was not in phase one which has been concluded. Our lease is in phase two of the Hawks case. However by reading the documents, SASSA’s leases were not directly involved and formed part of other leases that had to be done. A linkage is there primarily because the person who dealt with this was the one helping SASSA to finalise the leases.

Mr Brauteseth asked what the link is.

Mr Chauke replied part of the Hawks investigation included documents concluded by the late Ms Botha. Ms Botha was the head of the Social Development Department and then she became the Chairperson of the Social Development Portfolio Committee.

Mr Brauteseth asked what the suspected crime was when the Hawks investigated.

Mr Chauke replied it is corruption.

Mr Zane Dangor, Social Development Director General, took over the response and said the important thing to note is the timeline because SASSA was established in 2006.  The contracts were taken over by SASSA and the former Head of Department tried to obtain the required documents and contracts but failed to do so, because these leases were concluded before the consolidation.

Mr Brauteseth said what he is trying to establish who is responsible and if anyone sitting in SASSA needs to face these consequences.

Mr Dangor replied it is difficult to answer because this happened prior to the formation of SASSA.

SAB&T: R75 million
Mr Brauteseth asked for an explanation as to how they irregularly awarded this contract. Who was the highest scoring bidder and why did SAB&T get the award for this contract.

Mr Chauke replied the highest scoring bidder was Nexus Forensic Services (Pty) Ltd. SAB&T was awarded the contract because it was the decision of the accounting authority after considering the recommendations made by the Bid Evaluation Committee (BEC) and the Bid Adjudication Committee (BAC). However BEC‘s recommendation preceded both and was later turned down in court.

Mr Baruteseth asked who the accounting authority was that time.

Mr Chauke replied it was Dr Virginia Petersen.

Mr Brauteseth said so Dr Petersen was in charge of another interesting contract. He asked what SAB&T was responsible for with regards to investigations because they were awarded a three-year contract.

Mr Chauke replied they were responsible for the fraud investigations within the Department.

Mr Brauteseth asked SASSA to explain what the internal audit team looks like that required SASSA to spend R74 million. He also asked if they share the audit team or SASSA has its own internal audit.

Mr Magwaza replied that SASSA has its own internal audit team. The reason there was the need for another company to investigate is that it is public record, that there is “so much fraud in SASSA” and there are cases presently in court.

The Chairperson commented so does that mean that you cannot trust your own people in the audit team.

Mr Brauteseth asked for an insight and overview of the internal audit team in SASSA.

Mr Chauke replied it is headed by an executive and he could not remember the exact number of officers.

The Chairperson interrupted and asked why he does not know the number of internal audit officers needed in terms of the structure. He should know the capacity they need and the quality that is monitoring the system.

Mr Brauteseth asked the CFO if he knows what is happening in the internal audit team.

Mr Chauke replied he knows and explained that the focus area is around the supply management team and they have looked through the review of the existing policies in SASSA. There were a number of unfilled positions and we adopted a “co-source” model to the audit.

The Chairperson interrupted and said the inference is that the internal audit had to be outsourced to SAB&T.

The Chairperson said SCOPA is very keen on internal audit processes.  He encouraged them to build up on their internal audit team. They must give this attention and cut down on very expensive consultants that we cannot afford.

Other Irregular expenditure: R20 million
Mr Brauteseth went through the spread sheet on the rest of the irregular expenditure, and pointed out that SASSA states that everything will be “presented at the loss control committee.” Other than that, they make no comment on whether the cases have been investigated, or money was recovered, or the matter is in court or if there has been disciplinary action. Only one case states it has been referred to debt collections. These are matters from 2013, not last week. He is concerned about no consequences.

Mr Brauteseth asked about the R6.7 million pay out to a former CEO. He asked who the former CEO was and what the circumstances were for that payment to be made.

Mr Magwaza replied the former CEO was Mr Fezile Makiwane. The amount was paid after he lodged a complaint through his lawyers about his reputation being tarnished because he was failing to get a job after the court found him not guilty of corruption. The State Attorney lawyers advised SASSA to make a settlement rather than go through a court process and the negotiation landed on R6.7 million.

Mr Dangor said Mr Makiwane was the first CEO of SASSA and he was dismissed by the Minister on suspicion of corruption however SASSA could not prove those claims and the court found him not guilty.

Mr Brauteseth asked if effectively the R6.7 million should be directed to the Minister because the Minister initiated the action.

Mr Brauteseth said that there were very concerning issues raised about Dr Petersen who should be investigated.

Mr Brauteseth asked the CEO if they can give assurance or comfort that they are on point about insourcing and SASSA will be able to take over this.

Mr Magwaza replied that they were busy dealing with the take over and they feel confident that they will be able to make the grant payments. He acknowledged that there are things that they will have to outsource such as banking because they do not have a banking licence and security but registrations and administration they will be able to do. He assured them that they are in the process of finalising everything and come 1 April the people will be paid.

Mr Booi asked the CEO to give an overview of what he is planning. He also mentioned that he is concerned over the CFO’s reluctance when he could not give the Committee insight on what is happening in the internal audit team and the number of officers in the structure. He asked them just to give a clue of the way that  the syndicates are operating.

Mr Magwaza replied that the issue of fraud within SASSA is in the public domain hence so many cases are being investigated. He noted that he was appointed with effect from 1 November but he was also aware of what was taking place within SASSA, as the former acting DG.

Mr Booi said the CEO is responsible and asked him to give the Committee and the public confidence on how he will tackle these issues.

Mr Magwaza replied that luckily he has been in SASSA as an acting DG involved in the establishment of the inspectorate that was appointed. The person in charge was busy with the investigations and with that they are confident that they can put their hands on the issue of fraud.

Mr Brauteseth asked what suppliers will be used.

The CEO did not comment except to say that they are busy finalising the people who will be paid.

Mr Booi also made a comment to the CFO and encouraged him to answer all questions. He pointed out that in all the reports there were no consequences and the Committee expects them.

Ms N Mente (EFF) said her concern is the irregular expenditure of the R414 million that was paid to security companies. She asked if within their system they have considered employing security officers permanently because that will be far less than the amount that has been outsourced.

Mr C Ross (DA) said there is need for a commitment from the executive authority with regards to enforcing compliance and need to have more detail and commitment about insourcing. When we look at the 1 April deadline, we need a transparent process. In terms of insourcing this huge responsibility, there should be more detail and with regards to law enforcement SASSA should ensure that they comply with regulations. He said since 2012 there have been cases of fraud and a lot of SASSA officers have been suspended but there is still the same trend in 2016 which means this is serious. He appealed to the Minister in her political will and her real will to enforce compliance with the law.

The Chairperson asked the CEO to respond to the questions that were raised.

Mr Magwaza replied that with regards to consequences, he will ensure that there are no more actions without consequences within SASSA. With regards to the syndicates, he said they are sitting outside with the help of people internally. Some of the issues are already being investigated by the Hawks. In terms of security, he said he was referring to the cash-in-transit system not the security guards at the gates. The intention is to run away from the cash-in-transit system so that people will obtain their money from the ATMs but at the moment SASSA cannot diversify and appoint armed security guards at this point. With regards to compliance he would take that matter seriously and strengthen the internal audit.

Ms B Masango (DA), from the Portfolio Committee on Social Development, asked why the payment of R316 million was paid as an emergency.

Ms R Capa (ANC) Chairperson of the Portfolio Committee on Social Development said as the Committees makes observations, working together, she believes that the CEO and CFO have learnt lessons already because they have been in SASSA all along. It is critical that funds given to a particular Agency are no longer in control of the Department of Social Development (DSD) so that it will be easy to notice a movement of the funds in and out.

Ms T Chiloane (ANC) asked why the R316 million expenditure was condoned then later withdrawn by Treasury.

The Chairperson asked National Treasury to respond.

The National Treasury representative said the granting of the expenditure was later withdrawn because that the trouble was that they were not originally given all of the information. The CEO at that time only gave a verbal account. Treasury asked for a report on top of the questions that were raised. In the information in the report that came through, there were inconsistencies. That is when they decided to withdraw condonation. Questions were raised whether it should be fruitless and wasteful expenditure rather than irregular expenditure.

Mrs Chiloane said based on the response by the National Treasury, there is need for clarification about those inconsistencies because the presentation document says the matter is still to be heard in court. So the matter went to court after National Treasury raised questions about the inconsistencies. She asked SASSA to explain these inconsistencies.

Ms Capa asked Treasury if the Department was fully briefed that there was this withdrawal. She commented that all these questions should have been directed at previous employees. The new CEO for SASSA should not have to answer. She asked if about the CEO whether she handed over all the information so that there would be no more inconsistencies. How many cases of fraud are being investigated?

The National Treasury representative replied that there were number of engagements and meetings not only on the R316 million contract. One of the reasons that would be given was that such and such company had tendered and when we would check in those provinces, it would be discovered that the company had been disqualified. Therefore that shows the inconsistency. With regard to the R316 million, after the court said it was invalid and R316 milllion should have not been paid at all, therefore the argument is whether it is fruitless and wasteful expenditure or irregular expenditure.

The Hawks responded that for SASSA there are six cases being investigated and ten for the Department of Social Development.

Fruitless and Wasteful Expenditure
Ms N Mente (EFF) led the questions and pointed out that the Annual Report stated on page 85  that “fruitless and expenditure means expenditure was made in vain and would have been avoided if reasonable care had been exercised.” She turned to the observations made by the Auditor General on page 68 about non-compliance with the legislation and asked why they did not comply with the legislation.

Mr Magwaza replied that those are the things that as an executive that they will be looking at as they take over looking at the consequences. He agreed that the ball was dropped on this.

Ms Mente went on to the other observations on internal controls on page 5 of the presentation document. SASSA mentioned that the Auditor General’s findings were for this year only. Yet they have been confirmed that these are from  2006 onwards and the internal audit did not pick that up. She asked what the internal audit was doing and why they did not pick that up.

Mr Chauke replied that the internal audit does work at improving the internal controls. What has been a problem in SASSA was the unit itself. However the internal audit unit has been capacitated since 1 January. They appointed a senior manager to be responsible for compliance.

Ms Mente asked about leadership. How frequently did the executive call the managers to their offices to account.

Mr Magwaza replied he can only talk about what he will implement. He will ensure that this will be taking place and since he has been in SASSA he has not seen it happen.

Ms Mente gave a breakdown of the R10.9 million fruitless and wasteful expenditure: R4.4 million for vehicle damage, R1.9 million for the Mikondzo event, but the remainder of R3.8 million is unknown.

Mr Chauke replied the amount that was not included is for protection services that were for the Minister and other members of DSD who went to Brazil to meet with South African drug mules in prison there. When the Minister returned to South Africa, there were threats made against her, and other people within DSD. They needed extra protection services. SASSA had a contract for protection that they gave to DSD. DSD has not paid SASSA back for this contract.

Ms Mente asked who is responsible for that wastage since it is not disclosed.

Mr Chauke replied the matter is under discussion with SASSA and DSD.

Ms Mente asked the Chairperson to assist on when the report can be made to inform the Committee on how and who will recover the money.

The Chairperson said if they are failing to reach a conclusion on this point he should just acknowledge that they were disagreeing.

Mr Chauke agreed that SASSA and DSD were disagreeing.

The Chairperson asked if DSD received the services.

Mr Chauke replied yes.

The Chairperson asked why DSD was not paying if the services were rendered and they knew about the money.

Mr Dangor replied this is something that they will have to look into and finalise.

Mr Magwaza replied there were threats that were sent on the Minister’s phone and other officials in the Department who went to Brazil. So when he was told about the situation he asked for proof from the previous CEO and asked the SASSA CFO and the DSD CFO to sit down and finalise the issue.

Ms Mente noted that there is still no confirmation on a date by when the Committee can receive a report.

Mr Dangor said they will get feedback by next week Wednesday 30 November.

R1.2 million: Mikondzo event
Ms Mente said there was an event worth R1.2 million and it was supposed to be addressed by the executive authority and they could not deal with it. She asked who is responsible for the payment.

Mr Chauke informed the Committee that at there was an executive that was supposed to attend the event but had other commitments. There were negotiations to postpone however the other service providers had already delivered services so it was too late.

The Chairperson asked the Minister to comment on the issues raised including the Mikondzo event.

Minister Bathabile Dlamini said she could not attend the event because she had been deployed by the office of the President and she could not refrain from that responsibility. She also said Deputy Minister Hendrietta Bogopane- Zulu could not attend the meeting as well. She will ask her office to make a note of where she was deployed on that day so that they confirm the deployment. She said it is regrettable that it had to happen.

The Chairperson asked if there was any communication from the Office of the President to show that they could not defy the direct order from the Office of the President. He also pointed out that R1.2 million is a lot of money to be lost by cancelling an event.

Minister Dlamini said unfortunately there was no written letter to indicate that there was communication from the Office of the President. She did not write to the President and inform him of the loss suffered.  She apologised on her part.

Minister Dlamini went on further to talk about the security tender and continuing rolling over the contract with one company for a long time. She was shocked to get a rejection after the condonation on the matter, which made it unfair and that led to a questioning of Treasury’s efficiency. She said the supply chain went through the process and did a due diligence in various offices. However security companies with a good track record were deemed not to be fit for this position and this happened after receiving communication from the Auditor General. In that regard, she advised to start the process again. She highlighted that the challenges faced by the Department are when the Department’s officials talk to Treasury officials. You will find people who are not employed in government saying if you do not approve the decision of the past tender, Treasury will suspend all the security companies for six months and you will need a new company. She said that it happened and they received a letter from Treasury. On SAB&T, she said immediately after receiving the letter from the Auditor General, they stopped SAB&T services because the issues raised were understood. The matter was then discussed with the official concerned and the matter was taken to court.

The Chairperson asked how long the period was between when SAB&T started working and when they stopped.

The Minister replied it was for eighteen months.

The Chairperson asked how long the tender was supposed to be.

Mr Chauke replied the duration was for three years for R75 million.

Minister Dlamini said fraud matters, SASSA and Department both sit down to discuss suspending people. Action has been taken on such matters and she gave the example of the Kwazulu Natal case where there was a syndicate involving foster care grants being awarded to people who do not exist.

Minister Dlamini referred to the R316 million and said it will a protracted war because when they were busy with the registrations, CPS had to make home visits and hospital visits, had to run the registration process for more months, and had to run the registration process until the evening and CPS had to transport employees home. She said maybe what was done was wrong but a lot of money was saved even though it does not justify any wrongdoing.

The Chairperson said he would want to think that the fundamental problem was poor planning. SASSA planned for 9 million beneficiaries. That was a thumb suck when there were already 22 million beneficiaries. He asked if the insourcing of grants would be as poorly planned. Will they have lots of six month contracts that get perpetually rolled over? He wanted her assurance that they will be ready.

Minister Dlamini requested time to report on this process separately. Her wish is that by the 1 April all matters will be controlled and finalised. She said the “workstreams have started.” We are looking at issues, and solutions, and readiness, value chain, performance, efficiency, compliance, and cyber space. SASSA has developed the IT section.

The Chairperson thanked the Minister for her comments and time and released her as she had another engagement. Minister Dlamini left the meeting.

Ms Mente continued with the Mikondzo event and asked the accounting officer who will be responsible for the R1.2 million which was wasted.

Mr Magwaza replied it is a difficult question to answer since the meeting was cancelled due to absence of the Minister.

Ms Mente said that is not acceptable and one cannot allow it to create precedent. She said that if a person is given a directive and they go anyway and fail to indicate that there is an event costing millions and nothing is put in place to ensure that public money is safeguarded, then there is a problem.

Mr Booi made a point of order. He said if the accounting officer cannot tell us who was responsible then he should be accountable.

Mr E Kekana (ANC) said the law gives guidelines and it is clear in the PFMA that the responsibility is for the accounting officer. The regulation says the accounting officer must take all effective means to collect monies due in the Department. Therefore there is no way he can say he cannot take responsibility.

Ms Mente reiterated the point made and referred the CEO to section 38 and 52 of the PFMA to guide him.

R4 million: Vehicles damage
Ms Mente asked how many officials who cost SASSA R4 million have been fired.

Mr Chauke replied none have been fired however there were cases where they are recovering the money.

Ms Mente asked if the money has already been recovered.

Mr Chauke replied the money is still part of the monthly deductions of the officials.

The Chairperson asked how much has been recovered so far.

Mr Chauke replied he did not have the exact figures.

The Chairperson asked the CFO and the CEO if they had prepared for this presentation as they had been sent a letter with the questions that had to be reported on.

Mr Booi said they are both reluctant yet they have the PFMA that guides them so they must take accountability.

Ms Mente referred to section 38(d) of the PFMA which says, “The accounting officer is responsible for the management including the safeguarding and the maintenance of the asset”. Vehicles are some of the assets of the organisation.

Ms Mente referred to the R1.9 million which has no details. She said the Committee is being undermined because the R1.9 million recovery does not state from whom it is being recovered.

Mr Chauke replied the R1.9 million is taken from the debt in the system that is being serviced through a month instalment.

Ms Mente said within the R4 million, R2.1 million went down the drain because people were found not to be negligent. She asked for a breakdown of the cases because R2.1 million is too much unless all accidents were a write off and the Department is replacing them with new cars.  She requested them to provide the Committee with a breakdown from all the nine provinces explaining all the accidents by 30 November.

Mr Magwaza confirmed that they will provide the details

She asked about the investigations taking place. She asked for the number of cases that are within the Special Investigating Unit (SIU), for those cases finalised and the ones who have been arrested. On the cases within SASSA, how many disciplinary hearings cases have been held and how many have employees have been dismissed.

Mr Magwaza requested that they bring the information when they report back in writing on 30 November.

Ms Mente agreed.

Ms Capa said we dealing with historic issues and these questions should have been answered by the former CEO of SASSA who would clarify most of these matters.

Mr Booi made a point of order said the Portfolio Committee should be allowed to exercise their power as Committee and ask questions.

The Chairperson asked Ms Capa to continue with her question.

Ms Capa went on to say that if the former CEO had all these allegations against her and her contract expired, please explain why she was allowed to leave without taking accountability first.

Mr Ross commented about the Mikondzo event that it is a serious issue that shows financial mismanagement and it still needs a proper report and answers. He pointed out that it is a serious offence in terms of section 38(d) of the PFMA because this was supposed to be immediately reported on. He commented on the remark made by the Minister that she was shocked by the withdrawal of the condonation of the contract. Treasury has that right in terms of section 216(2) of the Constitution.

Ms Chiloane asked if they used a service provider or SAPS for security after Brazil.

Mr Magwaza replied it was a mixture of SAPS and private security.

Ms Chiloane asked if SAPS invoiced them and how much it was.

Mr Brauteseth made it clear that after this engagement, these matters will be taken very seriously and investigations will be initiated.

Ms Masango said her question about why the R316 million was an emergency contract was not answered.

Mr Magwaza showed concern about the Trifecta Delta contract and said that they have been corrupt why perpetuate another contract instead of cutting ties with them. On the R4.5 million spent on the security of the officials threatened they should submit a report from SAPS next week Wednesday. The Chairperson asked the CEO to respond.

Mr Magwaza replied on the private security after Brazil, that one of the officials was the Head of Communications as well as the children of the Minister. The matter was handled by a private service provider and SAPS.

Mr Dangor elaborated further and said that what transpired was that the Minister and some of the officials travelled to Brazil to visit the South Africans that were imprisoned for drugs. Following that trip there were some threats to the Minister and the Chief of Communications who were the main ones. The security was provided for the threat assessment. He was also threatened work but he was not covered by the protection.

The Chairperson asked for a proper report from SAPS.

Ms Chiloane asked for the correct amount.

Mr Chauke replied the amount involved was R3.5 million because it was an emergency. However the emergency was not necessarily on the payment but on the variation to do the work.

Ms Chiloane showed some discomfort and asked whether the drug matters is within mandate of SASSA or the Department. She does not understand because the bill was supposed to be forwarded to SASSA and then it could not pay so what really happened in the transaction.? Does SASSA owe the Department or vice versa because responsibility for the Minister should be covered by the Department.

The Chairperson said in his understanding SASSA made the payment and now they are demanding payment from DSD.

Mr Kekana said to the accounting officer if you need assistance you can ask for it. He went on to talk about the accumulative figure of R42.7 million on wasteful expenditure. He referred to the figures in the report and said they do not tally. He said that interpretation of the document is difficult because there is no mention of the activity which should be a very important part of the explanation. He asked for assistance on that. He noted that a case removed, he asked why there was no explanation. On the last column it states the irregular expenditure ais to be presented to the LCC so does that mean that your investigations are done to date.

Mr Dangor replied that the previous LCC committee had not been sitting to consider and regularise expenditure that is legitimate. So once the committee is dysfunctional it is difficult to go further with the investigation. So from now and January, we will look at which cases are legitimate and which cases have been investigated so that there is engagement with consequential management.

Mr Kekana asked if the DG was saying the information is not correct.

Mr Dangor replied that the information is correct but was has been presented to the LCC has not been taken because they have not been sitting to make decisions.

The Chairperson asked if the information was incomplete.

Mr Dangor said yes it is correct but incomplete.

The Chairperson said because of time constraints, the Committee should wait for the information until the next meeting. The Chairperson thanked the members and delegates for coming.

The meeting was adjourned.

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