SIU investigations into Covid19 PPE procurement by state institutions

Meeting report

The Chairperson welcomed the members to the meeting as well as the delegation from the Special Investigating Unit (SIU). He said it was important for the Committee to interact with these reports and interrogate them in light of the questions at the Zondo Commission on the role of Parliament. He wanted the Committee to interact with these reports, process them accordingly and make sure that Parliament was at the core of dealing with these issues. This Committee needed to perform its oversight and accountability roles.

Briefing by the Special Investigating Unit on the outcomes of investigations into allegations on the Covid-19 PPE procurement by State institutions, proclamation R23 of 2020

Adv Andy Mothibi, Head, SIU, and a delegation from the SIU briefed the Committee on the outcomes of investigations into allegations on the Covid-19 PPE procurement by State institutions, proclamation R23 of 2020. The presentation detailed the ongoing investigations by the SIU into PPE procurement maladministration, malpractice and corruption. The presentation detailed Covid-19 expenditure per National Department and per Provincial Health Departments. The limitations facing the investigation were raised with serious concern. Details of civil litigation, the outcomes of investigations and the matters which were finalised were also discussed. While the investigations are still underway and the SIU continue to submit reports to the President and continue to execute on the outcomes and follow up on the referrals to ensure that there is consequence management. The SIU would take all the necessary steps to ensure that losses suffered due to irregularities, corruption and maladministration were recovered and returned to the State.

Covid-19 expenditure per National Department April 2020 - October 2020

SASSA was the National Department with the highest expenditure on Covid-19 during the period with a total of R6 billion being spent. The second highest was the Department of Defence with R2 billion being spent. National Departments spent a total of R13.5 billion on Covid-19 related expenses.

Covid-19 related spending per Province by Health Departments, Department of Basic Education and other Covid related spending April 2020 – October 2020

The province with the highest amount of Covid-19 expenditure was Gauteng with close to R3 billion being spent. KwaZulu-Natal was the seconded highest spender with just over R2 billion spent. Over R2.5 billion was spent by the Department of Basic Education in all nine provinces.

Limitations

• Very limited original documentation was kept by the State institutions relating to the appointment of service providers for the procurement of PPE.

• Destruction of evidence (documentation, hardware devices such as computers and mobile phones).

• Some of the officials at the State institutions worked on a rotational basis so there were delays in collecting the required documents. Some State institutions also had to close their offices because of Covid-19 infections.

• There was non-co-operation from many of the officials, particularly the officials in the SCM and the Finance departments. This was largely because of their involvement in the irregular procurement process.

• Local politicians’ involvement in the administration of municipalities.

• Unavailability of witnesses because of Covid-19, specifically staff that had to be interviewed at

hospitals. Witnesses also had to quarantine.

• Witnesses fear victimisation and/or feel unsafe and are hesitant to be interviewed, provide

statements and/or evidence.

• SIU members were threatened and were intimidated by both officials and service providers.

Contracts under investigation

• Allegations were received from various sources including State institutions.

• Matters were prioritized based on potential outcomes to be realized in the shortest amount of time based on available resources.

There was a total of 51 Covid-19 Allegations received by the SIU. There were 34 allegations from Gauteng, 26 allegations from KwaZulu-Natal, 17 from the Eastern Cape, 16 from Mpumalanga, 12 from the North-West, 12 from Limpopo, 11 from the Free State, nine from the Western Cape and one allegation from the Northern Cape.

Allegations were received in respect of 189 State institutions and entities. The SIU obtained documents in respect of the approved allegations and from that 2556 PPE contracts awarded for Covid-19 related services were identified for investigation. These contracts were awarded to 1 774 service providers. By value, 26% of these contracts have been finalised, 51% are currently being assessed and 22% have yet to commence.

Legislative changes recommended

• The SIU recommends that legislative amendments be considered to provide for safeguards when State Institutions are to contract with domestic prominent influential persons and their immediate family, as well as entities in which they have an interest, or are beneficial owners of.

• All State Institutions should be bound by such safeguards.

• It is not suggested that the mere fact that someone falls in this category would render the contract unlawful, but it should be a prerequisite of all supply chain management processes that a disclosure must be made that a potential service provider falls within the category set out above.

• Failure to make such a disclosure must be unlawful and should constitute a statutory cause of action to attack the validity of the process.

• Intentional non-compliance with such a prescript should be a criminal offence.

Discussion

The Chairperson thanked Adv Mothibi for giving the presentation. He said it was quite clear that it was the worst of times. It seemed as if there was a total disregard for due process. There was an erosion of the state’s machinery to govern within the parameters of the law. There was a systematic collapse and certain people were ‘hell-bent on undermining the public purse’. He was not shocked but every time he heard about these allegations it unsettled him. He appreciated the detail that Adv Mothibi gave in the presentation. The members would have to apply their minds in how it would process this information. He would make a few suggestions at the end of the meeting on a way forward. It was clear that the Committee had its work cut out but he was sure that the Committee would be equal to the task. He asked the delegation from the SIU how much were these investigations costing it The cost of corruption were the resources, knowledge, skills and expertise that had to be used to pursue these matters. There were also financial implications. There needed to be a keen appreciation for what corruption does. The cost of corruption was astronomical. He wanted the SIU to work out that figure so that it could raise the consciousness of the Committee as to why it was crucial that these things were avoided. The money the State spends to recover money could be used elsewhere if corruption did not happen.

Mr A Lees (DA) said it was a very big subject and he thanked Adv Mothibi for the presentation. He said that in the course of history it may well be remembered that this corruption, by both officials and associated businesses, would be looked upon as a crime against humanity. It was so evil. It deserved to be dealt with in the most robust way possible. Before Covid-19 the SIU already had an overload of work. He wanted Adv Mothibi to provide him with comfort that the work of the SIU, in general, was progressing as well as the work on corruption was progressing. The State was giving R10.5 billion to SAA. Was the State allocating sufficient resources to the SIU to do the work properly? The very slow pace of prosecutions and convictions was a concern for the Committee. It was known that the NPA was horribly under resourced. The entire annual budget was about a quarter of what the latest allocation to SAA was. Was the SIU able to cope, not just with PPE, but with all the cases it was dealing with?

Adv Mothibi said that the delegation would work on the figures. He just asked the CFO and the reporting team to work on the cost and come up with a figure. He explained how the SIU would work out the figure. As the SIU entered into investigations, it also allocated resources per investigating officer. The SIU costed the level of resource allocated in relation to the rates the SIU charges. The figure it would come to was an indication of the work that the SIU did. The other costs, over and above the cost of investigations that was charged, were the legal costs. The SIU would give the Committee an indication of the legal costs involved as well.

He responded to Mr Lees’ question about the SIU’s workload. He confirmed that the SIU did have other projects that were ongoing. Notably the SAA, Eskom, Transnet and others like Denel. The SIU has tried to do its best to reallocate the resources from other projects to deal with Covid-19. It had attracted such huge public interest. It was incumbent on the SIU to turn the investigations around as quickly as it could. Lives were at stake. PPEs had to be procured otherwise the lives of healthcare workers, or any other frontline workers, would have been at risk. The other procurement for Covid-19 like for infrastructure attracted so much public interest that the SIU was enjoined to turn around the investigations as soon as possible. This was why the SIU was able to present the results of the investigations to SCOPA. Some investigations were still ongoing.

He then discussed the issue of resources. The SIU had been on record saying that the resources could be improved. That was why in the budgeting process the SIU submitted its resource requirements through the Department of Justice to National Treasury. The SIU projected its resource requirements before Covid and when Covid arrived those projections had to be revisited. There was an increase in the proclamations and the SIU had to ensure that it revisited its cost and resource requirements. The SIU did that and had presented it. With the fiscal constraints that has been experienced, the CFO could indicate that the SIU had not escaped the budget cuts like any other State institution. The SIU still hoped that National Treasury, through the Department of Justice, could respond to its resource requirements. How did this affect the other investigations? The SIU did have teams that were still part of those other investigations. The SIU was still able to report on entities like Eskom and SAA. In those investigations the SIU was not moving as quickly as it wanted to because of the resources allocated to Covid-19. To mitigate that, the SIU did have a panel of service providers that they were put in place. The SIU knew that it was pricey to contract service providers but this also coincided with the population of the SIU’s new structure that was developed after the restructuring. The reason some provincial heads could not attend today because those interviews were prioritised. The provincial heads were busy with those interviews. That structure will be populated and the SIU would review where it was in the next two weeks. The SIU would review and assess how the other projects were unfolding. Those other projects were not standing still. They were being investigated with the need for further resourcing. The SIU got it from the panel of service providers as prudent as possible so that lots of money was not spent on service providers but rather recruit permanent heads to improve on the resourcing of the SIU.

Mr Lees said that the Committee needed to be grateful for Adv Mothibi for doing the best that he could in trying to make things work given the resources. It seemed clear that the resources of the SIU were inadequate. Despite the Committee raising this issue a number of times over the past year and a half there has been no relief for the SIU. He said Adv Mothibi was doing a great job but there was a concern of what happened when the SIU entered into these agreements and recovered money. What action was taken against the people who have been involved in the misdemeanour to prevent them from ever doing business with the State again? Was it possible for them to be faced with a criminal charge for their actions? Recovery of the money was very important but was that the end of the journey for these evil people? Or was there a process to have them criminally convicted if that was the nature of the offence? These people should be blacklisted so that they were not able to do business with the State again.

Adv Mothibi said that the agreements that the SIU entered into, such as acknowledgement of debt and acknowledgment of liability which ensured payment, did not absolve the service providers or the employees that were involved in those irregular processes from further criminal prosecution. Up to date the SIU had not referred the blacklisting aspect. That aspect would happen subsequently. The SIU needed to speed up the blacklisting aspect. He explained the blacklisting process. The SIU would refer to the accounting authority the view that this service provider was guilty of irregularities and the nature of it. The SIU was of the view that the State institution concerned had to start the blacklisting process because it was their responsibility. It was an administrative law process where the institution enters into a process to give the service provider an opportunity to present their case and then ultimately a decision was made to blacklist. The SIU noted Mr Lees’ comments and concern. At the next project review the SIU would have to fast-track those blacklisting processes. The service providers were not absolved from criminal prosecution where evidence was found. The acknowledgment of debt only dispenses with the civil process and that was why the SIU engaged with the State institution to make sure that it was the accurate amount that had been suffered by the State institution that was due and payable. Once that was done the SIU dispensed with the unnecessary litigation costs. The criminal prosecution and other outcomes, such as blacklisting, would have to be executed.

Ms B Van Minnen (DA) thanked the SIU and its unit. If fraud and financial irregularities was an Olympic sport, then South Africa would have a podium position. She had a few clarity-seeking questions. She raised the issue of the Ledla Structural Development. Although the SIU worked very fast and moved quickly there was still at least R14 million unaccounted for. Given what was already happening, and there was an investigation in place, were actions being taken against the people responsible for making the irregular transfer of R38 million? Was that being tracked or was it part of the court case that was now being concluded? It was worrying that although people know what was in the pipeline, those payments were still made. This indicates a deliberate intention to disperse monies irregularly and fraudulently. She then discussed the legislative changes that were presented. The legislative changes dealt with people of prominent local influence. How far were those legislative changes from being finalised? Those legislative changes were pertinent and there was a lot of public discourse about that. The Committee last week dealt with the Department of Public Works, the Beitbridge border fence and the two companies involved. There was an enormous reluctance from both the DG and the Minister to clarify what was actually happening with those companies. The Committee heard excuses that there were numerous other contracts with those companies, that there was a great deal of money involved and that the companies had not behaved irregularly in any other respect. It seemed that the Department was intent on frustrating the SUI’s attempts to blacklist such companies. What were the SIU’s powers vis-à-vis Departments who were trying to evade this kind of responsibility?

Adv Mothibi responded to the Ledla Structural Development. The contract was for R139 million. The SIU stopped the payment of R100 million. R39 million was paid and R24 million had been forfeited to the State. There was a R14 million gap. He was in the process of reaching out to the legal team because it could only be from the judgement that they had drawn the rationale of why there was a gap. He wanted the SIU’s legal team to look at that and at the end of the session it would provide an explanation.

He then discussed the Beitbridge fence. The view of the SIU was that the contracts were irregular and that the special tribunal has got the jurisdiction to hear this matter. The issue of blacklisting would follow on the conclusion of the process. When the processes had been concluded then a blacklisting process would begin. In the Beitbridge matter, the findings were made but the contracts had not been set aside yet. The case was in court at the moment. Once the judgement is handed down then SIU would be in a position to get the order that the contract has been set aside. The SIU worked with the legal principle that a contract was valid until it was set aside by a court of law or a tribunal. Once it was set aside the SIU would complete documentation that it would send to the Department and say that the company had to be blacklisted. He was not aware that those companies had other contracts and he would check that. If need be the SIU would open up the investigation to reach out to those contracts as well.

The Chairperson said it was reported to the Committee that Magwa Construction and Trans-Caledon had 19 projects with the Department of Public Works to the value of R400 million. That was what Ms Van Minnen was referring to. The Committee would source those details and send them to the SIU.

Adv Mothibi responded that the SIU would appreciate that information and would then act on it appropriately.

Ms Van Minnen said that her question on the progress of the legislative changes relating to prominent local persons still needed to be answered.

Adv Mothibi said that the FIC, on reading the SIU report, proactively reached out to the SIU. The SIU’s legal team was arranging a session with the FIC to start this process and go through the legislation. The SIU and FIC would discuss this point and look at the inefficiencies in legislation, look at the safeguards necessary, look at the current legislation and then make the recommendation. National Treasury would also have to be engaged on the matter. The SIU would update the Committee on the progress made so that the matter could be tracked within the legislative process.

He responded to the question whether actions were being taken in the Ledla Construction matter. He assured Ms Van Minnen and the Committee that actions were being taken. Some of those actions were included in referrals against the CFO, the Head of the SCM, the Head of the Department and the MEC. Currently, those actions were being taken and the SIU was monitoring the disciplinary processes. A criminal investigation was underway to unearth corruption. The Hawks and NPA were pursuing that investigation with the support of the SIU.

Ms V Mente (EFF) said that she had a concern with the collusion that took place between the Department and the primary service provider to inflate prices. There was a tendency for certain businesses that did not have the proper criteria to be in business with the State. However, these companies source the material that was needed by the State from companies that do qualify to provide such services. Those companies will quote the proper prices in line with the regulations of Treasury. The primary service provider, that was in contract with the State inflates prices and colluded with the officials of the State. When the subcontractors met the requirements and provided the services properly then what becomes of the SIU’s intervention? What did the SIU do to make sure that those companies who were not part of the corruption were not affected? What was the process between the SIU and the Department after freezing the accounts of the primary service provider and then freezing the pensions of officials?

Adv Mothibi said that the Department did come across instances of collusion and inflation of prices. In Gauteng, there had been an inflation of prices to the region of up to 400%. When the investigation revealed that it raised questions and the SIU was required to act accordingly. He used Ledla Construction as an example. Initially the Department of Health was contracted with Royal Bhaca but when allegations were raised against the company it pulled out. The Department then brought in Ledla. It was discovered in the investigation into the irregularities that Ledla was actually a proxy of Royal Bhaca. Royal Bhaca did not actually withdraw from the contract with the Department. When the SIU traced the monies that were paid to Ledla it was found that the funds were distributed to other companies. That was where the issue of subcontracting arose. When the SIU did the investigation its focus was on the entity that has contracted with the State institution. If there were indications of subcontracting and the subcontracts were only affected because of the corruption and collusion at the top then there would be legal remedies available to the subcontractors. The subcontractors could pursue a civil suit against the entity that had contracted irregularly with the Department. If the evidence possibly reveals that there was a subcontractor the team would investigate how much the subcontractor charged, where the material was sourced from and how were others prejudiced in the process? If there were others who were prejudiced in the process because of the main contractor, the subcontractor’s legal avenue would be against the main contractor. The legal interaction of the SIU ended with the main contractor. If the contract was set aside then that was where the legal relationship ends. He provided a further example. If an entity contracted with the main contractor, assuming there were no irregularities in this case, and the contractor fails to deliver because the subcontractor did not come to the party on time. The main contractor could not say it did not deliver because of the subcontractor. The State could not institute an action against the subcontractor because the legal arrangement was between the State and the main contractor. If there were companies that found themselves in this quagmire even if they did nothing wrong because of the company it was associated with. The legal recourse would be against the company that cause the whole quagmire. He was not sure if he was clear but he was speaking from the legal principles and the legal relationship.

Ms Mente said that it was clearer. The presentation mentioned under the SIU’s limitations the destruction of evidence and the unavailability of officials so that they could prolong the process. From her point of view that was trying to defeat the ends of justice. She wanted confirmation that part of the report the SIU sent to the NPA mentioned officials who were trying to defeat the ends of justice? Sometimes these Departments have explored ways of trying to get out of the mess that they had created when they see that they have been caught. Was that made clear? She wanted the SIU to provide the Committee with a list of officials who tried to avoid being caught. There was always an intention behind every action. Those officials’ intentions were either to resign or get into the good books of the relevant authority so that they could be sent to another Department. She wanted the Committee to receive that list and wanted to know if the charges were clear in terms of the names of the accused? She then discussed when people made admissions of debt. That meant that they were admitting to being guilty. There was also the issue of those people being blacklisted. What comfort could the SIU give the Committee about removing people who have admitted guilt? The SIU always did its work thoroughly. For example, the SIU was working with the FIC to try and make legislative recommendations. What was the relationship between the SIU and National Treasury regulations in terms of blacklisting these people? Was there a document the Committee could use which the SIU was using to blacklist to make sure that these people, as well as the officials involved, do not come back again?

Adv Mothibi said that the destruction of evidence was mitigated by the fact that the SIU was able to trace, through the computers seized, and use other investigative methods to ensure that the evidence was collected. There were incidents where evidence was destroyed. He proved an example. Recently the SIU saw a building burn in one of the Gauteng warehouses. It was reported in the media. The SIU was busy investigating as part of the infrastructure investigations. That building was part of the SIU’s investigations. There were other examples where evidence was destroyed without using fire. The SIU could try and reconstruct evidence as best as possible. If the documentation has been destroyed, by fire or any other means, the SIU expected that the evidence would have been backed up the Department. The backup should be electronically available. In instances when the evidence did not get backed up then unfortunately the evidence was missing. In those instances, the SIU then had to make systemic recommendations. The SIU had to ensure that it pursued a criminal case. In the warehouse example he provided earlier a case had been opened up. The Hawks were investigating whether it was arson. The SIU did find instances where people deliberately performed acts that were meant to defeat the ends of justice.

He then discussed the unavailability of officials. In many instances the investigating teams would approach the witnesses and enter into an arrangement with them based on their willingness to cooperate with the investigation. The SIU should not, at all times, ‘go cap in hand’ to ask and request a witness that has been identified to be critical to the investigation. With immediate effect the SIU used its powers to subpoena the witness or the document and then the question of unavailability gets dealt with. Then it was seen that officials start cooperating because if they did not respond to the subpoena then there were other legal consequences. In those instances, where the witness has been playing truant and made themselves unavailable with the intention of defeating the ends of justice a referral that could be done. That was taken into account when the teams identify that there has been a deliberate attempt to defeat the ends of justice. It should form part of the referrals to NPA. It would also be included in the charges for disciplinary processes. He made a note on that matter. The SIU had not mentioned the names of those charged because of the legal risks. The SIU would be able to provide that list to the Committee. He had requested that the team put that list together to be submitted to the Committee.

He then responded to the questions on the acknowledgment of debts. Those were an admission of guilt in a sense. He mentioned that the SIU was waiting for the courts to declare the contracts awarded at the Beitbridge fence to be irregular and then it could start the process of blacklisting. In the case of the acknowledgement of debt this was an admission of wrongdoing then the SIU should be in a position to immediately refer its recommendation for the department or the municipality to institute a process to blacklist. That was another process that was envisaged in the administrative law processes. The SIU should be in a position to refer immediately once the acknowledgement of debt was entered into. Although it was the responsibility of the State institution to do that, the SIU could then also involve National Treasury immediately so that they were also sighted in that process.

Ms N Tolashe (ANC) said that she appreciated the improvements the SIU had made since the previous meeting. She discussed the work the SIU did versus the resources that were used. The SIU was doing valuable work for the country. Could the Committee be assured that the SIU had resources at its disposal so that nothing could prevent it from moving forward? She heard Adv Mothibi mention that sometimes officials did not cooperate especially those who were in the SCM. Did the SIU monitor those officials to see if they were suspended? The SIU needed to send a message that if people were involved with corruption they would be investigated until they were proven guilty or not guilty. Those people could not remain at work because they might continue doing the same thing and be more vigorous than before. Adv Mothibi mentioned that in KwaZulu-Natal the SIU requested the Department of Social Development to stop paying the service provider. Was there a tool that the SIU could use to make sure that did happen because in the Committee’s experience when recommendations were made there were other ways to bypass that recommendation without the Committee knowing? Was there a way for the SIU to make sure that that instruction was being honoured?

She then discussed the issue of corruption in the South African Defence Force. The Military Police were now investigating. Did the Military Police have the same power as the SIU? She feared a situation where parallel processes would be happening. She wanted more clarity on the matter. She was worried about a situation where the team investigated and it did not find any wrongdoing. Could it be checked if the whistle-blowers were genuine or were they mischievous? Sometimes there were tensions in Departments. She was concerned that the SIU was being used to fight people’s battles. Was there a way for the limited resources to not be used for a situation that did not end up as an investigation? How could the SIU avoid those unnecessary expenses? She then discussed evidence that was burned. What happened when the SIU discovered that there was no backup evidence? Whoever was the Head of the Department, in that case, should be liable because there cannot be a situation where valuable information was not backed up somewhere else. She wanted to hear more because this was going to be a challenge. 

Adv Mothibi said he had asked his legal counsel to work out the figures on the Ledla Structural matters. He responded to the question of the resourcing that the SIU was using. He assured the Committee that the SIU was able to progress this investigation in the timeline that it had had indicated. The SIU aimed to conclude all the matters that were being investigated in the next six months. It was a tight timeline but the SIU had looked at the resources and looked at how the teams could be supported. He assured the Committee that the investigation would be progressed. At the moment the SIU was populating and filling the structure that it had. The SIU was also using the panel of service providers that it had. The SIU wanted to use those service providers less and less because it was costing a large amount of money. The SIU could not stop it completely because there were some experts that it did not ordinarily employ like engineers and quantity surveyors. The general skills that the SIU needed, it should have in-house. As the structure was populated it should be able to have that. This included other projects that were not related to Covid-19. In those projects the SIU sought to keep them going based on the prioritised outcomes. Of course, the SIU could improve on those projects to ensure that they were fully resourced.

He then responded to the question on the officials who were not cooperating. He provided an example. If the SIU started investigating the Gauteng Department of Health, the investigators would move in having identified who could assist the investigation and would then approach the person and take a statement from them. More often the investigations started off like that and did not use the peremptory legal conditions. When the SIU realised that someone was not cooperating it then used its SIU powers to subpoena. Ultimately the officials did not cooperate because they were not legally forced to cooperate. It was an observation the SIU made over time that if the investigators went in and depended on the willingness of officials to cooperate then the SIU did not always get them to cooperate until they were forced by law to cooperate with the investigation. If the SIU identified that an official, for example in the SCM, would hamper the investigation if they remained present at the office it would recommend to the head of the institution to suspend the employee in question. Most often the Heads of the Department do listen to the recommendations of the SIU and do take that action.

He then discussed the stopping of payment in KwaZulu-Natal. The KwaZulu-Natal team had reported formally that the Department had informed them that it had stopped payment. The SIU needed to monitor that that payment was not made contrary to their undertaking. The SIU may need to put measures in place and verify with the Department which would include financial auditors so that the payments of the Department could be audited. The SIU needed to satisfy itself that there had not been any payments. He would take up that matter with the KwaZulu-Natal team and provide a report to the Committee. He then discussed the SANDF. When this matter was looked at the SIU’s Chief National Investigating Officer interacted with the Military Police. The Hawks needed to be involved because organised crime was involved in the matter. The syndicate was an organised crime.

He was informed that the Military Police had similar powers to the Hawks and SAPS to investigate. The SIU said that it would stay close to the investigation and ensure that it reached the appropriate outcome. He discussed the SIU’s assessment of allegations. The SIU ensured that there was no ‘fishing expedition’ where the allegations were palpably unsubstantiated even at the first submission.

The SIU had a focused case management team that received the allegation. The team assess the allegation and tests it against what the SIU needed to investigate. After the team did that the SIU would find a legal base to investigate. The conclusion of no wrongdoing was made after the SIU had gone through the documentation, through the process and testing it against the allegation. The SIU would then come to the conclusion that there was no wrongdoing in the process. The issue around those who were likely to use the SIU for personal interests was often determined at the first stage where the allegations could not be substantiated. There were various cases that were closed because they did not pass the test of being within the SIU mandate. In many instances there were community-related complaints and those would be referred to the Public Protector. In some instances it was matters related to regulatory processes and that would be referred to specific regulators. There was that risk that people could be out on that ‘fishing expedition’ but the SIU had checks and balances where the allegations were tested.

He then discussed what would happen in instances where the SIU found that there was no backup evidence. He said that it had never really occurred because the documents that the SIU normally need would also be on the server. When the SIU got the laptops and cell phones it was able to trace the documents appropriately. In the case where the SIU could not find those documents anywhere the team would say it could not find the documents and that they would close the investigation. He instructed the team that the investigation did not end there. The team needed to find out if there had been poor record keeping. The SIU needed to find out who was responsible for that record keeping. There was an obligation on every State institution to safeguard the records and the appropriate people needed to be identified so that the appropriate action could be taken, including the Head of the Department. The obligation rested from the CEO downward to ensure that there was adequate backing in the organisation.

Mr B Hadebe (ANC) welcomed the presentation by the SIU. He raised questions on the limitations of the SIU. The presentation said a limitation was the involvement of local politicians in the administration of municipalities. Were these local politicians part of the municipality or were they outsiders? The Local Municipal Systems Act was very clear about councillors being prohibited from interfering with administration. If there were outsiders getting involved, then that was tantamount to ‘municipal capture’. Which municipalities have been captured? What has been done? Has this matter been brought to the attention of the Municipal Council to act decisively against this capture? The responsibility lied with the Municipal Council to act and to act decisively. He wanted Adv Mothibi to provide clarity on that matter.

Adv Mothibi provided an example form the North-West Province. There was evidence that a donation was given out contrary to the municipal rules. The SIU referred the matter to the MEC concerned. The MEC concerned has undertaken that he would follow up. It was an administrative referral. There were incidents of political interference in other provinces. When the SIU finalised those processes the Committee would be appraised on which provinces and which municipalities had been investigated. He mentioned the two referrals that were presented in the report. The referral was made to the MEC and action has been taken. It was a limitation for politicians to be interfering with the State administration process. He would check with his delegation if there were further examples and then he would submit that in writing to the Committee. The SIU had already raised the matter at the JB Marks Local Municipality with the MEC so that action could be taken. He would go and check if there were other examples. If the process was at a stage to be finalised the SIU would report on them.

Mr Hadebe said that the second limitation he wanted to discuss was in relation to SIU members that were threatened and intimidated by both officials and service providers. This was a very serious matter. It was unacceptable for those who think they could loot the State coffers to have the audacity to threaten or intimidate SIU members for doing their job. What steps have the SIU taken in this regard? Has the SIU dealt with these threats harshly? The threats needed to be dealt with immediately. He wanted Adv Mothibi to be specific in which areas and in which instances these threats have occurred. The Committee wanted to know what it was dealing with and did not want the truth to be sugar-coated.

The Chairperson said that Mr Hadebe’s question was very important because it ran parallel to the issues that the Auditor-General previously raised. Auditors were intimated when doing their work. If this was becoming a culture across these institutions, which were meant to be working in those spaces, it needed to be dealt with. He said anyone who does not take the Committee seriously dare not do that. The point Mr Hadebe raised was important in light of what the Auditor-General had raised with the Committee. The Chairperson wanted Adv Mothibi to deal with the matter substantively.

Adv Mothibi said that in the Free State one of the SIU’s investigators was intimidated and threatened. The SAPS had to be involved and do a threat analysis. The SIU acted based on the informed threat analysis that was done by SAPS. It was documented. Measures had now been put in place. SAPS would provide the threat assessment and tell the SIU what to do. The SIU then had to take steps to ensure that its members were protected. The SIU did what it needed to be based on the assessment and the member was now under protection. From time to time investigators indicated that to go in a certain area they would need further protection. The SIU acted based on the merits of the case and the assessment received from SAPS. He discussed when the SIU conducted search and seizure. The SIU members were not be armed. Search and seizure by its nature was intrusive and there were push backs and attacks in retaliation. In the Western Cape, the SIU did a search and seizure in one of the municipalities. The team indicated that there were people standing outside and were aggressive. He called the provincial commissioner to provide a security unit to go with the SIU team to conduct a search and seizure. That was the kind of collaboration that the SIU had to deal with these threatening instances. The SIU continued to monitor the space. The example of the incident in Bloemfontein came at a high cost. The security measures that were put in place there were quite costly. It was incumbent on the SIU, as a responsible investigating agency, to make sure that its investigators were protected. In cases where it was picked up that there were threats the SIU acted and ensured that its employees were protected.

Mr Hadebe discussed the issue of the limited documents kept by State institutions. Has the SIU checked up on the provisions of the procurement policies of these State institutions in relation to record keeping? There should be a certain duration where documents and records for any contract were kept safe in case there were appeals. If there was insufficient information, that was tantamount to maladministration and noncompliance. Any State institution found to have committed such should be taken to task and held accountable. Maladministration could not be tolerated or allowed. The Committee once engaged with the inter-ministerial task team that was launched on 6 August 2020. Its main purpose and function was to collect and gather information in relation to all Covid-19 procurement. Has the SIU asked the task team to assist and provide information when there were instances of limited information? The SIU needed to work in collaboration with all the structures that were put in place to deal with the issue of Covid-19 allegations and corruption. Has the SIU taken this matter forward? Were the culprits identified? Was the inter-ministerial task team assisting in availing information?

Adv Mothibi responded to the question of missing documents. The investigating teams should look beyond any official who says that the documents were not available. The investigation should not end there because there were legal requirements that required State institutions to keep records. The SIU looked at that legislation and at the timeframe within which the records should have been kept. Often when the documents were no longer being used they were stored offsite. Most of the State institutions lead the SIU to where the documents were stored and provide them. In some cases, documents were not provided at all contrary to the legislation which required State institutions to keep records for a certain period of time. The SIU would then find who was responsible for safekeeping. If that person could not be identified, then the accountability falls on the accounting officer or the accounting authority. That would be a failure of the organisation to keep the records as required by law. The SIU had been in contact with the work of the IMC and it had been very helpful. The IMC collated all the Covid-19 contracts and the repository of all those contracts was at National Treasury. SIU had reached out to National Treasury and received a list of those contracts. That list only gave the contracts and did not go further to provide supporting documents which would be kept by the State institution. The SIU did receive cooperation and support from the IMC.

Mr S Somyo (ANC) said that the report detailed the civil matters related to Covid-19 expenditure. He said the President had formed the Fusion Centre. Through that Fusion Centre all State organs that dealt with matters of law enforcement met together and looked at those matters. Therefore, the SIU forms part of that unit. Some of the information would come from the Auditor-General. Last year, the Committee met the entire team that operated through the Fusion Centre. The Committee was told that about 80000 matters had gone through that centre which required some investigation. He thanked the SIU for their own operational initiative on the matters that related to civil issues and the success rate thereof. How far had the SIU gone to balance up all the matters that were reported at the time? He heard that the focus team was looking into about R13 billion expenditure. That had been reduced due to the investigations as they found others that were not liable in terms of criminality that had been alleged in those contracts. He discussed the success rate of such units. This element was only in relation to civil litigation matters which was limited to R13 billion plus R30 billion expenditure on matters that related to PPEs. He said that the SIU ran from national to the different provinces. Has the SIU ever had an assessment looking into the success or failure of handling these matters at the provincial level and national level? Certain matters were handled nationally and other matters were handled provincially. Was there a scale that could demonstrate the qualitative functionality at both national and provincial level? The President had made issuance for those matters to be investigated and the results of such issuance measures would demonstrate how far the SIU has gone. The matter might not need the SIU. It might need the Committee. He wanted the matters of criminality to be discussed taking into account operational expenditure. He wanted more information on the finalisation of those matters because it related to the good governance of the State. 

Adv Mothibi explained that the SIU was part of the Fusion Centre. The SIU did have the ACTT meeting the previous day. The SIU did receive reports from the Fusion Centre. The SIU report did not cover the Fusion Centre report. Those reports were submitted separately. Most of the matters the SIU reported on would have been reported to the Fusion Centre. The Committee should consider asking the Fusion Centre to submit its own report to see how it was progressing. The previous day, the Auditor-General came to the ACTT and submitted their second report which they issued. The Fusion Centre would take the information coming from the Auditor-General’s report into account to see how to take the investigations forward.

He then discussed the issue of the R13 billion. The SIU got the expenditure figures from National Treasury. It had been confirmed and reconfirmed. The figure of R30 billion was taken from National Treasury. The R13.3 billion that was under investigation was the value of the contracts which allegations referred to. That figure was based on the contracts that the SIU was investigating. The SIU provided a picture of the R13 billion, the status of the investigations and percentage of investigations complete. That was an attempt to show, that as of 25 November 2020, the SIU finalised 164 contracts to the value of R3.5 billion. That translated to 26% of investigations completed. Perhaps the SIU needed to have a line that said at the end of the investigation period vis-à-vis the investigations where there were no irregularities what the value was of those and factor that into the figures. The SIU needed to do a further calculation of the matters that were finalised and what the value of those were.

The SIU had offices in all the provinces except the Northern Cape. The SIU was working to establish an office in the Northern Cape. At the moment the Northern Cape was serviced through the Free State office. Some matters were tended to by the North-West and other matters were tended to by the Western Cape. The SIU operating model was such that each provincial office had its own structure. The provincial head had the responsibility to assess the business that comes out of the province so that the resourcing of the province also talked to the business of the province. The provincial heads have done the same for Covid related cases. The provincial heads have allocated resources to the Covid-19 investigations as against the allegations that were relevant for their provinces. The national level of the SIU had its own structure. There was a national team that looked at national entities like Departments and SOEs. That team was the one that needed further resourcing. At the moment there was transfer pricing of resources. The national team was part of the new structure that was still being resourced and was currently borrowing resources from the provinces. The charges of those resources get allocated to the province. The SIU had a transfer pricing model that it used for resources that were used by the national team. From the business analysis and business operations the SIU was satisfied that the structure that has been put in place will enable the SIU to do the assessment of whether a certain province or national needed further support. The SIU found that this model works well. He said that the matters relating to expenditure required the Committee to give it consideration.

The Chairperson said that Eskom was a perennial headache and that the situation was frustrating. He asked Adv Mothibi how much the investigations cost the SIU. The Committee needed to gauge the cost of corruption and how much it was costing the fiscus. He also wanted to know if the people who were meant to be paying the SIU were paying it. The Committee would have to interact again with the IMC, chaired by Minister Lamola, because the Committee had raised the matter of resources with them. National Treasury needed to make a special dispensation under the current circumstances for this kind of work. He proposed that, given the gravity and vastness of the PPE corruption, the Committee designate Friday for all PPE-related matters because it had permission to meet on a Friday. ‘It was like eating away at an elephant, bit by bit’. The Committee should do this so that it did not lose sight of its other work. The Committee had just received the audit outcomes of the SOEs and the AG was still coming back to brief the Committee on audit outcomes of other Departments and other entities. The Committee still needed to finalise its inquiries and other issues. The Committee would do its normal work on Tuesdays and Wednesdays and Friday would be the day to deal with PPE-related matters. The Committee would also use Friday’s to receive briefings from the SIU, Departments, IMCs, the ACTT and NPA. He wanted to make that proposal as the meeting was being affected by loadshedding. How much money was the SIU spending? What was the SIU’s bill?

Adv Mothibi said he had requested the CFO to do some number crunching. He asked the CFO to appraise the Committee on the costs involved.

Mr Andre Gernandt, Chief Financial Officer, SIU, said that the cost incurred up until the end of December was about R70 million. This figure was made up of the different operational resources used in the SIU. There were about 125 full-time equivalents working on the Covid investigations out of a possible 300. The SIU estimated that figure because on a monthly basis those workers were working full-time on it. At the end of March, the end of that financial year, this would go up to R120 million. This excluded the legal costs. The SIU would have to come back to the Committee on the estimates on the legal costs. This figure excluded the civil litigation costs. Initially in order to recover the SIU engaged National Treasury to see whether it could receive central funding. The SIU was not successful in receiving central funding. Up to date, of the 84 institutions that were currently being investigated the SIU was not able to sign many letter of engagements. There has been push back on that. The SIU would further engage National Treasury to see if there was any way it could receive central funding on the costs incurred. This was on the R120 million plus the civil litigation costs. That was the summary of the costs involved. 

Adv Mothibi said that the SIU Legal Counsel would be able to respond to the questions relating to civil judgements. 

Dr Jerome Wells, Chief Legal Counsel, SIU, responded to the question that related to Ledla. The contract was valued at R139 million. The amount paid was R38 million by the Department into the account of Ledla. Within six days the FIC managed to freeze the amount of R26 million in various accounts. There was an amount of R14 million which within a period of three days dissipated. That amount was being investigated by the SIU concerning whether there was value for money in terms of the beneficiaries of those payments made. He alluded further to the judgement. R26 million was placed under restrain. The tribunal then forfeited R24 million to the State whereof R2 million was discharged. That meant that the court, or the special tribunal, found that only R2 million of the R26 million that was under restrain was of value for the Department. There was an investigation pending on those monies that were dissipated through these various accounts.

Mr Hadebe said that when dealing with figures it was very difficult to be brief. He asked a question in relation to the cost for the SIU to conduct its work and recover the money versus what has been indicated as being recovered thus far. He wanted to know what the cost of corruption was. On 20 October 2020, the Committee was given a report from April to August. In that report, it was R15.6 billion that was spent and R10.5 billion under investigation. Today the report indicated that R30.7 billion was spent. That meant since last year an additional R15.1 billion has been spent. He was concerned. At that time, it was only R10.5 billion worth of cases that were under investigation. Today it was indicated that there was R10.3 billion worth of cases that were under investigation. An amount of R259.6 million has been referred to the Special Tribunal in order for the cases to be set aside and contracts to be terminated so that money could be recovered. Given what has been spent thus far by the SIU in doing their work it was a very low figure to recover only R259 million. Adv Mothibi indicated that the figure was around R300 million to date. He wanted to know why the figures of recovery were this low. There were 141 service providers and 164 contracts that were investigated to the amount of R3.5 billion and only R300 million was recoverable. Was the State getting value for money in chasing after these thugs and criminals who have defrauded the State? Given the figures in front of the Committee he thought there was no value for money. He was not suggesting that the SIU do not go after these criminals. He was appealing to the SIU to expeditiously resolve these cases because it was costly and the State was recovering less.

Mr Somyo said he had asked a question earlier on about the comparative success provincially and nationally. He wanted the SIU to make time for such an assessment and analysis. He wanted to know how the SIU’s teams were performing considering the gravity of the matters that were facing them. The referral of matters to the SIU was general. The expectation was that the SIU would deal with those matters not knowing that some of those matters were categorised based on importance. What sort of measure did the SIU have to scale the success? Last year December, the Committee met certain municipalities in one of the provinces. In that province the mayor spoke passionately and emotionally about the destruction that was caused by the municipal manager of that district and certain things that were happening. About R50 million was viewed as being involved in irregular expenditure with regard to PPEs. The same manager was previously in another municipality and committed some fraudulent acts. The SIU had been involved in investigating and making referrals. The same individual was still involved with the State in another form and doing the same thing he did previously. The effectiveness of the measures taken after the findings was a problem. How should national assist the provinces to arrive on a finality on certain matters? 

Ms Tolashe had a follow up question based on the response by the CFO. She was worried about the response. He reported that there was a lot of pushback which was expected would happen. There were also negotiations between the SIU and Treasury. She proposed that the Committee meet with the Minister of Justice and the Minister of Finance to discuss these reports. These programmes taking place were no longer Departmental programmes or a particular institute’s programme. This was a national programme and people were looking forward to see Government dealing with the people who have been alleged to have been involved in corruption. There should not be any kind of trouble between Departments. Treasury was notorious for not cooperating. When entities wanted money then Treasury would come up with all sorts of stories. She suggested that the Chairperson convene a meeting between these various Ministers to find out if they were ready to support the SIU with the work it did. This matter needed to be elevated so that the Committee would be able to see if there was going to be a breakthrough. These Departments needed to work together to assist the SIU. There was an impression that all was good between the Departments but that was not the case. The Chairperson should hear exactly from the Ministers whether those negotiations were going to bring about positive outcomes. This nation would not forgive Parliament if it did not deal with corruption. To deal with corruption the machinery, like the SIU, needed to be oiled and it needed to be checked on that the machinery was working. People doing this kind of work needed to be encouraged to work harder.

The Chairperson acknowledged the point made by Ms Tolashe. The Committee did need to interact with the IMC, chaired by Minister Lamola because it also incorporates Treasury. The Committee would have to develop an operation framework on how the Committee would interact with PPE, Covid-19 and vaccine related matters. South Africa was dealing with the AstraZeneca headache. While the Minister clarified some aspects this morning there was a veil of secrecy with regard to procurement and expenditure. This was something the Committee needed to take very seriously. Those matters needed to be pulled out of the shadows. Transparency needed to become a part of the normal culture of Government. There was still no response from the Department of Health or National Treasury on the correspondence sent last week for a public and open process of tendering on the matters of storage and distribution. It becomes even more important after the briefing by the SIU because there was a deliberate flouting of due process and intimidation. The list just becomes endless. Prevention was better than the cure. These are the things that the Committee needed to deal with. The fact that the SIU, since December, has spent R70 million on investigations and other processes was concerning. That was R70 million that could have been used elsewhere if these things had not happened. The SIU did need to be capacitated in order to fulfil its responsibilities and meet its obligations. The Committee had its work cut out and was equal to the task. The Committee would have to have its own family meeting and make a determination on how to proceed. The Committee had a lot of work before it because the elements of corruption prevail. The Committee needed to meet with the NPA because it was only after successful prosecutions that deterrents become entrenched. The picture painted in the meeting this morning was a bleak one. The Committee was not dealing with people who were ignorant of the law. These people knew exactly what they were doing because they knew exactly on how to bypass the law. These were people who knew the loopholes in the PFMA and Treasury regulations. National Treasury needed to step up so that the holes could be plugged. That was the issue before the Committee. The Chairperson thanked Adv Mothibi and the team for the good work that they were doing. It was encouraging. The SIU was taking a step in the right direction in the fight against corruption. The Committee appreciated the SIU’s patience in the meeting this morning. 

Adv Mothibi agreed with Mr Hadebe that there was an urgent need to speed up the recoveries. The SIU would take all the necessary steps to ensure that all the losses were recovered speedily. The SIU’s speed would be informed by the scheduling of matters by the Special Tribunal because the SIU was at their mercy. The Special Tribunal has proved to be such an important tool in the fight against corruption. If the Special Tribunal was not set up then he was sure that the SIU would not be at a stage where it could report of any recoveries up to now. He was really glad that the Special Tribunal was working with the SIU because it afforded the SIU an opportunity to speed up the recoveries.

He then responded to the question about why the recoveries were so low. Since 25 November 2020, the figure was R259 million at the Special Tribunal. It has now gone up to R365 million. The actual money recovered was R127 million. In page 35 and 36 of the SIU’s report there were areas that spoke about potential cash or assets to be recovered. The SIU had stopped payments and there was an acknowledgment of debts. Those amounts totalled more than R118 million which could likely be converted into an actual amount recovered over the next few weeks. It was still a potential amount because the process was still ongoing. He assured the Committee that the SIU would work on that. He then responded to Mr Hadebe’s question of whether the SIU was getting value for money. The value proposition of SIU was delivered in various outcomes. Those were the outcomes that were presented. The money recovered was one of the outcomes and it was an important one. The prosecutions, the disciplinary hearings of the responsible people and them being taken out of the system were also outcomes. Regulatory issues and system improvements that the SIU recommended to the State institutions to improve the administration of the State also formed part of the value proposition. The SIU believed that it showed value for money and of course the SIU should improve particularly in the area of recoveries. He was clear to the legal team that the recoveries needed to be fast tracked. The investigation teams needed to speed up the findings on those contracts so that the matters in the Special Tribunal could be increased. The next time the SIU appeared before SCOPA that was the one figure that should indicate significant improvement. The message of speeding up the recoveries so that money could be returned back to the State would be taken seriously by the SIU.

He responded to Mr Somyo’s question on how the different teams perform. The SIU did have performance measurements within the organisation. That was more individual performance management that the SIU was seeking to improve. Organisational performance could only be measured through the APP targets that the SIU had. The SIU needed a clear instrument to see if it was getting its money’s worth in a particular province. The SIU needed to look at whether it was getting return on investment. The SIU would define an instrument that would help determine that. At the moment the SIU was using the targets described in the APP. Those were used as contributors by provinces to the ultimate APP targets. He noted the comments made by Mr Somyo and said that the SIU was trying to improve its performance management system. The SIU had reached out to the Department of Public Service and Administration because it needed an indicator that identified if an official was dismissed from a specific Department. That official needed to be monitored so that they did not appear in another Department. The Department of Public Service and Administration was working on that and was working with the SIU on dealing with employees who perform business outside of their employment. The Department was also working on conflict-of-interest issues and referrals for disciplinary hearing. The SIU was pleased that the system seems to be coming together. A holistic approach was needed to ensure that an impact was made in this area. He welcomed Ms Tolashe’s view. The SIU would continue to reach out to National Treasury. Covid-19 created an unexpected impasse and Government had to pull resources together. Normally the SIU would enter into a letter of engagement, which would contain the resources and the costs, with the specific Department that was being investigated. During the period of Covid the SIU was not able to do that and that was why it went to National Treasury to centralise the engagement process. The SIU wanted its costs to be defrayed from a central account. The meeting with the DG would still be coming. The CFO was reaching out to the other DDGs in National Treasury. The SIU believed that some headway would be made. The meeting with the Ministers would be welcomed and he was sure it would assist the process. He appreciated the opportunity to brief the Committee.

The Chairperson thanked Adv Mothibi for his responses. The Committee would need to devise an operating model. If Fridays were not available to the Committee, it would then have to have the ‘graveyard sessions’ and meet in the evenings to deal with PPEs and the SIU report. The Committee needed to remember that while the SIU was given permission to make the reports public and submit it to the Committee.  These were ultimately reports that were sent to the Presidency. It was the Presidency, as the repository of these reports, that must determine processes of implementation and monitoring the implementation of processes. Receiving this report today did not, in any way, preclude the Committee from interacting with the Presidency. The seriousness of this matter was at that level. The action step to allow for public release was a noble one. That was in line with accountability and transparency. That did not abdicate on the responsibility of ownership. The reports cannot be ownerless. The Committee needed to make a determination on the provincial matters and would be interacting with the provincial heads. The Committee was dealing with one municipality in KwaZulu-Natal with pending SIU matters. That also needed attention. This kind of corruption, and on the grand scale that it had happened, and the abuse of processes in a pandemic which resulted in an unnecessary loss of life was a crime against humanity. That had to be a motivation for the Committee to deal with these matters at a quicker pace than before. If the Committee allowed the PPE fraud and corruption to slide, then he could not imagine the amount of fraud and corruption that would take place when the vaccine was rolled out. The devils of corruption were at play and would stop at no lengths to put lives at risk and did not care if lives were lost. The common effort has to be ensuring people were held accountable, that there was consequence management, prosecutions and the recovery of money. He thanked the members for their strength and resilience in today’s meeting. ‘The extent of corruption stinks to the rafters of the high heavens’. The Committee needed to develop a model to process with these matters and unpack them. He told the SIU that when the next report was available the Committee would want to receive it. The Committee needed to check whether the planning and implementation of its programme was consistent with the latest findings. The Committee would meet with the IMC on PPE matters and on the issue of vaccines. The Committee needed to deal with all of these issues because ultimately it was the public purse that was hit hardest. The Committee was often told that it was not moving with the necessary speed but that was because the Parliamentary rules only engaged the Committee at the end of the process. The proactiveness of the Committee so far was a model that needed to be kept going. The Committee should not wait for these reports months down the line. How the Committee was currently engaging with matters was quite constructive. The Committee would process this report, alongside the other reports, and take the necessary actions. The first port of call would be for the Committee to meet with the NPA on those issues. The Committee had a comprehensive list of when disciplinary processes should have taken place and would be engaging with those as well. The Committee would be engaging with the provinces as well.

The meeting was adjourned.