COVID-19 procurement corruption: Inter-Ministerial Committee briefing

Public Accounts (SCOPA)

21 August 2020
Chairperson: Mr M Hlengwa (IFP)
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Meeting Summary

Video: Standing Committee on Public Accounts, 21 August 2020

The focal point of the meeting was the effectiveness of the Inter-Ministerial Committee (IMC) to expedite consequence management for the COVID-19 procurement corruption allegations. The Portfolio Committee expressed its dissatisfaction that only three of the five Ministers serving on the IMC were in attendance.

The IMC explained that it would not usurp the powers of law enforcement agencies or the parliamentary oversight function. The IMC will coordinate the data on all procurement for the response to the COVID-19 pandemic. It will ensure that all contractual agreements for COVID-19 activities are publicly available. The IMC will coordinate communication on the anti-corruption measures implemented. It will develop a plan to address COVID-19 procurement corruption and will put measures in place to strengthen government’s capacity in fighting corruption. The IMC works to improve the number of cases enrolled for prosecution, and to strengthen its communication with the public and the Portfolio Committee. The IMC is committed to ensure that all state entities and departments file their reports on its COVID-19 procurement and tenders. It will address resource and capacity constraints in entities engaged in anti-corruption measures. Thereafter the Auditor-General, SARS, SAPS, Hawks and the NPA gave inputs as well.

Committee members expressed concern about the departments and entities that have not yet submitted their information to the IMC. The establishment of additional courts was welcomed, although concerns were raised about their staffing and the current case backlog. The Committee appreciated the commitment displayed by the IMC and law enforcement agencies. Members said that it is important that the Sixth Parliament is remembered as the generation that did not tolerate corruption and dealt with it decisively. The translation of concrete results should include successful prosecution of the perpetrators of corruption and the application of appropriate and effective consequences. The patience for corruption is thin amongst the public.

Meeting report

The Chairperson opened the virtual meeting by welcoming the IMC which included Mr Ronald Lamola (Minister of Justice and Correctional Services), General Bheki Cele (Minister of the Police), and Mr Senzo Mchunu (Minister of Public Service and Administration). Delegations were present from the Special Investigating Unit (SIU), South African Revenue Service (SARS), Auditor-General South Africa (AGSA) and the National Prosecuting Authority (NPA).

The purpose of the meeting was for the Committee to be briefed by the IMC about the allegations of corruption in the procurement of goods and services for the containment and government response to the COVID-19 pandemic .The Chairperson noted that Mr Tito Mboweni (Minister of Finance) and Dr Nkosazana Dlamini-Zuma (Minister of Cooperative Governance and Traditional Affairs) were absent.

Mr M Dirks (ANC) proposed that the Committee allow the IMC to present its briefing, provided that a follow-up discussion is arranged where all the Ministers are present. The IMC have been in existence for two weeks after its establishment on 5 August 2020 so it is crucial that the Committee receive the briefing to be informed on the progress made by the IMC.

Mr Dondo Mogojane, Director-General: National Treasury, stated that the two absent Ministers are engaged in another meeting and unable to attend.

Ms B van Minnen (DA) stated that the Committee recently had a meeting with the SIU that assured Members that the investigations on the corruption allegations would be prioritised. The SIU indicated that it would report to the President every six weeks. A special debate is coming up in the National Assembly one COVID-19 corruption. It is unacceptable that the IMC is unable to fully attend because of clashing agendas. It needs to be understood by the country that the investigations into matters of corruption are prioritised. It is unfortunate to start the process with delays.

Mr B Hadebe (ANC) stated that all parliamentary committee meetings are important, and that the IMC has various engagements it needs to address. However, meeting clashes should have been tabled before the commencement of the meeting. Did the IMC Convenor, Minister Ronald Lamola, indicate the limitations of this meeting to the Chairperson?

The Chairperson stated that the IMC Convenor proposed the date of this meeting. The Committee would have had this meeting on 14 August but as it was during the parliament recess period, the meeting was rescheduled. Minister Lamola then proposed the current date of this meeting. There is no crisis as the IMC Convenor is present. Members could flag issues to the Ministers who were present. Further opportunity will be granted to engage with the IMC in its full capacity. The Executive cannot perform oversight over themselves as such oversight is a parliamentary function. This will be an introductory meeting between the Committee and the IMC to set the tone of the interaction. This Committee must ensure that the necessary checks and balances are in place and keep a close eye on the activities of the Executive.

Mr Hadebe appreciated that the IMC Convenor was in contact with the Chairperson and alerted the Committee in advance of the limitations of this meeting. The work of the Committee is critical but it is not superior or inferior to any other parliamentary committee. They must not cast aspersions that the Ministers who are not present are not taking the Committee seriously.

Mr R Lees (DA) cleared up the confusion by stating that Ms van Minnen did not imply that this Committee is more important than others. However, if an arrangement is made and the Committee accommodated the IMC by arranging a meeting, this meeting should take priority.

The Chairperson thanked the Members for the discussion. The Committee will proceed to receive the briefing from the IMC to get clarity on the work that is being done.

Opening remarks by IMC Convenor
Minister of Justice and Correctional Services, Mr Ronald Lamola, stated that the purpose of the meeting is to ensure that the Committee understands the mandate of the IMC and the route it will take to address the allegations of corruption. The IMC is not going to usurp the powers of law enforcement agencies, this Committee, or any parliamentary oversight functions. The IMC will enhance the work of these entities and empower the South African society with publicly available information and accountability. The Executive further empowers the law enforcement agencies, including the NPA and the Hawks, by making available further resources to enable it to complete its respective mandates. Explaining the mandate of the IMC, he assured the Committee that the Executive cannot conduct oversight over itself. The IMC exists to empower and enhance the work of all law enforcement agencies in fighting corruption and to fast-track the congestion of work about the fight against corruption.

Briefing by IMC on corruption related to COVID-19 pandemic
Ms Pillay Kalayvani, Acting Director-General: Department of Justice and Correctional Services, presented the briefing outlining the context to the establishment of the IMC, the purpose of the IMC, the current measures employed to address the allegations of corruption, and the role of various entities (including law enforcement agencies, SARS, NPA, National Treasury) in preventing corruption.

Context to the establishment of the IMC:
The IMC was established by the Cabinet considering the extensive reports of acts of corruption and theft of the resources allocated in response to the COVID-19 pandemic, the looting of state resources - including food parcels, personal protective equipment (PPE) to frontline officials, and the inflated prices and fraudulent redirection of funds designated to alleviate the hardships of employees and businesses affected by the lockdown and the pandemic.

The purpose of the IMC:
The IMC will coordinate the data on all procurement of goods and services that were sourced for the purposes of the containment and response to the COVID-19 pandemic. It will ensure that all contractual agreements for COVID-19 activities are publicly available. The IMC will coordinate communication on the anti-corruption measures implemented. It will develop a plan to address corruption to do with COVID-19 procurement and will put measures in place to strengthen the government’s capacity in fighting corruption.

Current measures to fight COVID-19 corruption:
A special coordination centre has been established to strengthen the collective efforts among law enforcement agencies. The SIU have been authorised to investigate unlawful and improper conduct in the procurement of goods and services and the misuse of funds allocated to fighting the pandemic. The SIU will report to the President every six weeks, with the first report due in September 2020. The State Capture Commission has been authorised to share information with law enforcement agencies to expedite the investigation and prosecution of corruption-related cases. The Health Sector Anti-Corruption Forum will report to the President about irregularities and maladministration in the health sector. SARS is investigating reports of tax evasion related to the pandemic.

Role of the IMC:
As Minister Lamola emphasised, the IMC will not infringe on the work done by law enforcement agencies. Such agencies are required to continue to perform their work independently. However, the IMC will use existing depositories to collate all information into a single database under National Treasury and monitor the submission of information. It will recognise existing mechanisms for accountability of key role-players for the timeous submission of information and monitor the implementation of consequence management where information is not submitted timeously.

A consistent publication of reports on a weekly basis will be ensured. The IMC will develop a media campaign to reach all sectors of society relating to anti-corruption measures. Lastly, the IMC will ensure the optimum functioning of the mechanisms for channelling information from whistleblowers to the multi-agency centre in line with existing laws.

Submission of information to the IMC:
To date, 29 national departments have submitted their information to the IMC, with seven still outstanding. Of the nine provincial governments, five have submitted their information. 79 state-owned entities submitted their information to the IMC. National Treasury would clarify the number of state-owned entities that have not submitted their information, as not all report independently and are bound by their own budgeting process.

Measures supported by National Treasury:
National Treasury instituted Preventative Measures Instructions to give accounting officers / authorities initiative-taking guidance on how to revisit their control environment in response to the COVID-19 pandemic. Under Draft Instruction Note 11 of 2020/21, it states that the existing procurement procedures must be complied with when procuring PPE and cloth masks. It prescribes the maximum prices for PPE and masks to prevent overpricing and to ensure the correct manufacturing procedures. An E-Tender portal will be used by the Office of the Chief Procurement Officer (OCPO).

Strengthening measures at SARS:
There is a recommendation that the IMC reviews the current process of applying and issuing tax status certificates. SARS reported that it has launched a national revenue recovery project to fast track the recovery of revenue of taxpayers awarded PPE tenders. SARS required additional resources to deliver against the increased workload of investigation into reported cases of COVID-19 tax evasion.

Strengthening the courts and the NPA:
There will be dedicated courts to deal with COVID-19 procurement corruption cases, and the budget for this will include allocations from different departments. Current data indicates that there is a 74.5% backlog of cases in the ten Specialised Commercial Crimes Courts (SCCC). These courts must be capacitated to perform their role as a dedicated court dealing with serious commercial crimes and corruption. A Steering Committee is being established to fast track the establishment of the new courts. The investigation, prosecution, and adjudication of corruption cases in these courts must improve significantly.

Strengthening measures at law enforcement agencies:
The Multi-Agency Centre (MAC) has been established to deal with fraud and corruption relating to COVID- 19 funding. The purpose of the MAC is to be more responsive in working and producing quality intelligence and passing it on in a timely manner with the goal to improve the outcomes of investigating corruption.

Further ongoing action:
The IMC continues to analyse the data on COVID-19 procurement of goods and services and to report on its findings. It works to improve the number of cases enrolled for prosecution and to strengthen communication with the public and this Committee. The IMC is committed to ensure that all state entities and departments file their reports on COVID-19 procurement processes and tenders. Lastly, it works to address resource and capacity constraints in entities that are engaged in anti-corruption measures.

Mr Senzo Mchunu, Minister of Public Services and Administration, concluded the presentation by stating that the core of the IMC’s mandate it to publicise the data it collects about the procurement of goods and services for the COVID-19 pandemic. This is not a matter of the Executive investigating itself, the Executive remains accountable to the Committee and to the wider public of South Africa.

Mr Lees stated that the abuse of COVID-19 assistance is a large matter of public concern. It must be dealt with as quickly as possible. He expressed concern about the briefing being silent on whether there is a budget for the operational costs of the IMC. It is unfortunate that money must be spent to investigate corruption during a time of crisis in a pandemic. What are the costs of the IMC?

Ms van Minnen asked which departments have not yet reported their procurement information to the IMC. On the surface, it appears that the departments that are problematic are the same ones who have not yet reported their information. On the additional courts, she requested further information on how the process will unfold. What is the time span for the establishment of these courts and how will staff requirements be addressed? Time is of the essence. There can be no delays in setting up a system if the IMC hopes to recover the monies involved in these corruption matters.

IMC response
Minister Lamola agreed that the allegations of corruption need to be prioritised and addressed very quickly. The bedrock of investigating these cases is the SCCU and it is the IMC’s task to help these institutions. It is not a new building or court infrastructure that will be established, but that an existing court will be dedicated further to deal with corruption cases. There is not a budget currently in place that outlines the IMC’s operation costs. The budget is still at its initial stages and a task team is being formulated. The Department of Justice had a three-year plan to put forward these courts across the provinces. The IMC will engage with National Treasury to prioritise this matter and address the case backlog in the SCCU. The NPA have been appointing contract special prosecutors for the SCCU to increase its capacity. The IMC is looking into the challenges faced by the Hawks and investigating how it can be of help. It is important that the IMC give the required support to these law enforcement agencies to have the necessary staff capacity to effectively fulfil their mandates.

Ms Kalayvani replied that there is not a budget for the IMC itself, instead the budget will fall within the mandates of the different departments. For instance, the IMC had budgeted for the establishment of five additional SCCU courts and there are funds within the budget for this purpose. When referring to the establishment of these courts, the IMC is not referring to building new courts but to the utilisation of existing structures. The SCCU will require more prosecutors and human resources to fulfil its functions.

Ms Kalayvani replied that the list of national departments that have not submitted their information changes daily and Members might not have received the most updated version. Departments which have not yet submitted their information include the National School of Government, Department of Communications and Digital Technologies, Department of Human Settlements, Department of Mineral Resources, and the Department of Water and Sanitation. The provincial  governments that have not submitted their information includes KwaZulu-Natal, Limpopo and North West provinces.

The Chairperson requested the IMC to provide the Committee with a comprehensive list of the departments and the state-owned entities that have not submitted their information.

General Bheki Cele, Minister of Police, stated that the nine entities involved with the task of addressing these corruption allegations will not be affected by the IMC mandate. The IMC will merely aid with the resources to enhance the investigations of these law enforcement agencies. For example, the IMC is assisting in fast-tracking the recruitment processes of the Hawks as it falls under the South African Police Service (SAPS). He called on the outstanding departments and entities to fast-track their submissions of the required information to the IMC.

Further questions
Mr Hadebe welcomed the report by the IMC and its commitment to refrain from interfering with the work of the law enforcement agencies. Has the IMC set a deadline for the submission of the information from the departments and entities that have not yet submitted? What will be the consequences for departments and entities who do not submit the information? If there is information outstanding, the IMC must be decisive in dealing with departments that do not cooperate. The IMC must assist in expediting the process. Those departments and entities that delay the process must be held accountable. He expressed appreciation that there is no additional budget for the IMC but that the funds will come from the departments.

Ms C Mkhonto (EFF) requested a timeframe for the IMC achieving its mandate. An open-ended series of activities that will not yield the desired results is not the purpose of the IMC. Are the departments and entities given the responsibility to discipline their own officials for corruption and maladministration? What will the departments do internally to assist the IMC process?

Ms van Minnen asked where the budget is coming from to fund the five additional courts to be established by the IMC. How will these courts be funded? Has the Steering Committee been established yet? Who is serving on this Steering Committee and what is its mandate?

ICM response
Minister Lamola responded that the Steering Committee’s purpose is to determine if the IMC can fast-track the SCCU expansion from the Department of Justice and Constitutional Development budget to clear the SCCU case backlog. This process must involve the NPA, Hawks, and the judiciary itself as a collaborative effort. It is interlinked with the goal of the Portfolio Committee and society to ensure a speedy resolution to these matters. The IMC is unable to present the Committee with a detailed breakdown of a budget as it is still being formulated. The Committee will be updated when the budget has been concretised. The Special Tribunal that the SIU has established is helping with the civil part of the law by finding judgments against and freezing assets of culprits involved in COVID-19 corruption. This supports the IMC stance that its work will not infringe on the work done by law enforcement agencies, but merely enhance their capacity to deal with the matters efficiently. The IMC will present a report to Cabinet with clear information and Cabinet will then establish a timeframe for the existence and operation of the IMC.

Ms Kalayvani replied that the disciplining of departmental employees must unfold within the respective departments and due process must be followed. However, it is part of the IMC’s work to track the cases where there are investigation reports that indicate that government employees were involved with corruption in the procurement of goods and services for the COVID-19 response. The IMC must track the progress of the cases to ensure that the outcomes are reported to the public and this Committee.

SIU, SARS, NPA and Hawks response
Adv Andy Mothibi, SIU Head, stated that the work of the IMC will enhance the speed at which the SIU accesses the contracts for the procurement of goods and services. The work of the SIU is based on allegations. Even though the SIU has not received allegations against specific contracts that have been made available, it would help to look at the repository should further allegations be lodged for a specific contract. The IMC will be of help to monitor the capacity of law enforcement agencies. The Special Tribunal granted the SIU request to freeze R38.7 million in the bank accounts of 40 Gauteng-based companies involved with the looting of PPE funding.

Mr Edward Kieswetter, SARS Commissioner, noted that there are areas of abuse in the tax compliance process, which must be reviewed and strengthened. The collaboration between the IMC and SARS needs to be strengthened. SARS have expanded the use of data and artificial intelligence to strengthen its case selection and management process. An enforcement committee with a strong project management discipline has been established to get a focused execution with limited resources. SARS has requested the IMC to provide it with more resources to enhance its overall capability. Resources in technical investigative areas must be significantly boosted in size. SARS is currently profiling 307 cases with a revenue loss of R300 million, including an array of both civil and criminal areas. SIU has requested SARS to help it with 300 PPE-related cases. 139 companies are under investigation for potential tax evasion. 63% of these companies were not tax compliant.

Mr Kieswetter expressed concern that companies registered for IT services or as car washes or bakeries had won PPE tenders from government. SARS is also investigating the non-disclosure of income received from government for procurement of goods and services in the COVID-19 response, the lack of filing tax returns, and fraudulent or incorrect returns. SARS is investigating tenders involving politically exposed individuals to the value of R1.2bn. If SARS is supported with additional resources, the process of addressing the corruption allegations will be expedited.

Mr Kimi Makwetu, Auditor-General, stated that at the time of the announcement of the relief package of R500bn, Auditor-General South Africa raised its hand to say that instead of waiting until financial year-end to do its work, it would be handled immediately by it. AGSA is currently finalising its initial report which will be available mid-September. In the next two weeks, AGSA will engage with the Multi-Agency Centre and the IMC to share its insights on the corruption allegations. It is the task of AGSA to share with the country what is found within the accounting records of the state, including which funds have been disbursed and under what conditions, and if there are any suspicious transactions encountered.

Ms Shamila Batohi, National Director of Public Prosecutions at the NPA, emphasised the IMC’s importance in responding to the corruption allegations. It shows a strong political will to ensure that the necessary support is given to the entities tasked with addressing these allegations. If the risks were identified and the proper mitigating measures put in place, the country would not be sitting with this massive challenge of addressing corruption amid a pandemic.

There really must be a strong focus on what went wrong with these departments, and for preventative measures to be put in place. We are spending more and more money to recover what the state has lost. The country can rest assured that the NPA fully understands its role to act without fear, favour or prejudice. The NPA appreciates the support of the IMC on resourcing. Law enforcement has come together to coordinate its efforts better in the fusion centre which have been created as a coordinating mechanism to address key challenges faced in dealing with the corruption allegations.

The NPA is on a recruitment drive to resource the SCCU and its Asset Forfeiture Unit. The investigative agencies need to be properly capacitated so the cases can come to the NPA in a speedily and thoroughly investigated manner. The NPA would welcome any assistance with its forensic analytical capacity that is desperately needed by law enforcement. Forensic work is currently being outsourced and government spends a fortune on this. It is crucial to look collectively at how these capabilities can be developed. The NPA is looking forward to the report from AGSA to enable it to identify and act on criminal activities quickly. The NPA has limited resources and is prioritising high-impact cases.

Mr Leonard Lekgetho, Chief National Investigations Officer of the Hawks, restated that there is a challenge in law enforcement capacity. One challenge is the recruitment of qualified individuals in the field of commerce, cyber, and accounting. Seventy posts have been advertised with 11 000 responding applications that are still being sifted through. The Hawks is also in the process of recruiting 200 retired or resigned officials on a short-term contract basis to assist in expanding its capacity. There is also a re-enlistment process in the greater services to attract human resources. The Hawks work closely with the SIU to ensure that criminal investigations are performed adequately. At the fusion centre, there are currently 23 fully fledged criminal dockets where arrests have been made. The Hawks appreciate that the SCCU will be capacitated by additional courts and prosecutors to address the case backlog.

Mr Makwetu stated that what the AGSA report is revealing is that money has changed hands but the amounts are nowhere near the full amount of the budget of the R 500bn relief package. Some of the funds from the relief package have not yet been disbursed by National Treasury. The only way to fortify systems and government is to build up the preventative measures to ensure that funds go where intended and are not misappropriated or abused.

The Chairperson stated the importance of getting a sense of cooperation from the law enforcement agencies and the IMC in addressing the COVID-19 corruption allegations.

Concluding remarks by Ministers
Minister Lamola expressed the IMC’s commitment to assist in reducing the case backlog at the SCCU courts. He proposed compiling a concrete report on the challenges faced in the process so that these can be addressed. It gives confidence to the people of our country that the IMC will fulfil its mandate and ensure that the law enforcement agencies are fully equipped to do their job. The IMC is committed to give the law enforcement agencies all the necessary support to enable them to fulfil their constitutional duties.

General Cele emphasised the non-interference in the work of law enforcement agencies by the IMC. The parallel work done by the IMC will merely enhance the work of these entities by providing support. The question of resources will need to be addressed to improve the work done by them. Working collaboratively will achieve more than each entity working individually. Preventative measures must be found because remedying this is more expensive than preventing corruption. We need to show the public that there are consequences for those involved with corruption.

Mr Hadebe appreciated the overwhelming commitment displayed by the IMC and law enforcement agencies. He noted the IMC’s appreciation of Parliament's role in this investigation of corruption against COVID-19 procurement and supply chain management. We want to be remembered as the generation that did not tolerate corruption and dealt with it decisively.

Ms Mkhonto stated the importance of building state capacity as highlighted by all the agencies. This needs to be done on a permanent basis and not only for COVID-19 cases. If the agencies had the critical skills referred to, there would not have been a need for the IMC to be established. Departments were required to make budget adjustments to accommodate the pandemic. Can these agencies be assisted from the resources set aside for COVID-19 to ensure these agencies are able to perform their roles adequately?

Mr M Dirks (ANC) thanked the IMC for the work it has done during its two weeks of existence. The input of the various law enforcement agencies was appreciated. It assisted in clarifying the issues at play for the public as South Africans are quite upset with having to face corruption amid a pandemic. Parliament and the Executive must show a serious commitment to fight corruption.

Ms T Marawu (ATM) stated that if the IMC is properly implemented it will go a long way to enhance the work of the law enforcement agencies by capacity building to bring in additional resources.

Mr Lees requested clarity from SARS on whether it has attempted to act on the illicit trade of cigarettes and alcohol during the time these were banned. SARS could take action to recover monies that should have come to the fiscus if there had been legal trade. If SARS is to be equipped with more resources, those are the kind of capacities that we need to see being built.

Ms van Minnen stated that it is accepted that we could not have avoided the enormous challenges of the COVID-19 pandemic. However, if better checks and balances have been put into place, we could have avoided the financial disaster of the COVID-19 corruption we are experiencing now. We also would have avoided spending additional money to hold the corrupt accountable. The IMC needs to report on its work timeously.

The Chairperson thanked the delegations for the briefing and comments. The translation of concrete results should include successful prosecution of the perpetrators of corruption and the application of appropriate and effective consequences. The patience for corruption is thin amongst the public, and Parliament has taken a tough stance against corruption. The IMC must position itself firmly and coordinate its work in this strong fight against corruption.

The meeting was adjourned.

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