Automated Biometric Identification System (ABIS) Forensic Investigation Report; with Ministry

Home Affairs

25 May 2021
Chairperson: Mr M Chabane (ANC) (Acting Chairperson)
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Meeting Summary

Video: Portfolio Committee on Home Affairs

In a virtual meeting, the Committee was briefed by the Department of Communications and Digital Technologies (DCDT), the State Information Technology Agency (SITA), and the Department of Home Affairs (DHA) on the Forensic Investigation Report on the Automated Biometric Identification System (ABIS) and how the entities would salvage the project going forward.

Members heard that the ABIS contract was initiated by the DHA in 2015 in efforts to migrate from the current Home Affairs National Information System (HANIS). The SITA was entrusted with the responsibility of procuring a new system. Following the awarding of the contract to EOH Mthombo (Pty) Ltd, the Auditor-General of South Africa (AGSA) deemed the R409 million contract irregular. Members expressed shock relating to the brazen corruption identified in the report with evidence that an official from SITA made available tender information to EOH Mthombo (Pty) Ltd for about a year prior to the advertisement of the tender. They said. ‘It is unacceptable that an official from SITA made available tender information to EOH Mthombo (Pty) Ltd for about a year prior to the advertisement of the tender. ‘This gave undue advantage to EOH Mthombo (Pty) Ltd to the detriment of other bidders undermining the spirit of competition’. Asked for clarity on how it was possible that the SCM policies were flouted in the presence of the DCDT and the SITA, and ‘Were there any indications that the tender committee was not doing the right thing’? Members felt that the DCDT and the DHA must ensure consequence management against officials identified to have acted corruptly during the procurement of the ABIS.

In the briefing by the DCDT and the SITA on the ABIS and the way forward, the Committee was informed that a criminal case (with case number 145/3/2021) was opened against former employees of the SITA and was commissioned by the DHA together with the Directorate for Priority Crime Investigation (DPCI / Hawks) so that it could be established whether corruption, theft or fraud has been committed regarding the ABIS tender. The SITA is cooperating with the Hawks to provide all pertinent information requested by the Hawks to conduct further investigation on this tender process. Members were pleased to hear that the SITA has worked hard to improve its internal controls in line with the recommendations made by the SAB&T and the AGSA to circumvent repeat findings. These controls include the electronic share-point platform for document, the implementation of checklists by the employees for Supply Chain Management, the ecommerce system for automated tender processes for some of the transactions, and the Oracle BI tool for improved contract management. The disciplinary actions against the SITA’s former employees (referring to Annexure A for the detailed list of employees that will be submitted to the Committee) were not instituted because these individuals were no longer employed by the SITA. Civil cases against these former employees were also not a viable option because there were no financial losses suffered by the SITA or the DHA.

Members heard in the briefing by the DHA and SAB&T on the forensic investigation into the appointment of EOH Mthombo (Pty) Ltd that the DHA together with the SITA as procurement agent concluded a tender process and appointed a service provider to design, provision, customise, integrate, do migration of existing data, commissioning, maintenance, and support of the ABIS and business process for a period of five years. The Deputy Minister of the DHA stated that the DHA has implemented measures to tighten its internal controls and that measures were put in place to resolve the issues relating to the ABIS speedily. The Committee was made aware that the DHA has heeded its call to ‘leave no stone unturned’ to recoup monies lost and will continue to hold Home Affairs to account to ensure that the guilty parties face the consequences of their actions and do not enjoy a ‘soft landing’ in a new redeployment. Members heard that the DHA had appointed Nexia SAB&T to conduct a forensic investigation and to provide responses to the findings made by the AGSA on the process followed by both the SITA and the DHA on the appointment of the service provider. Members were disappointed to hear that based on the findings of the forensic report, Nexia SAB&T could neither confirm nor refute some of the AGSA’s findings as the overall conclusion from the forensic investigation remained that the entire contract is irregular. Various recommendations for disciplinary action, and the institution of criminal legal proceedings were made.

Members were enlightened in the briefing by the DHA on the ABIS and the way forward that he DHA needed to conduct a technology upgrade on its hardware and software for HANIS which had reached its end of life in March 2014. This system had been in operation for more than 15 years and needed to be modernised and updated. Potential bidders had to be identified to assist the DHA with its aim to replace the HANIS. The Committee was displeased to hear that the audit performed by the AGSA for the 2018/19 financial year declared that the contract with EOH Mthombo (Pty) Ltd was irregular and the DHA appointed Nexia SAB&T to conduct a forensic audit of the findings to appoint a service provider for the ABIS project. On 11 February 2021 the National Treasury approved the cessation of the contract to IDEMIA.

The Committee were relieved to hear the Minister of the DHA provide assurances that if it is found that corrupt officials were still in the employ of government, measures would be taken to hold them accountable. Criminal sanctions were also put in place as consequence management.  The Committee was unanimous in appreciating the work done to investigate matters. Members called for urgent implementation of the forensic report which emerged from the investigations and pledged their support for the recommendations of the forensic report that both criminal and institutional disciplinary actions should be urgently implemented. The Committee noted the progress to recoup any monies due from service providers and said it awaits a detailed progress report on the matter. Members welcomed the establishment of the Electronic Document Management System at the SITA to ensure the safety of the procurement information which was hitherto a major shortcoming around the contract. The Committee has for its part committed to invite the three stakeholders back to a meeting before the end of 2021 to update the Committee on progress in implementing the recommendations of the forensic report. The Committee has also committed to monitor the implementation of the ceded contract and the positive impact this will have on providing services to the people.

Meeting report

Nomination of Acting Chairperson

The Committee Secretariat noted that Chairperson Bongo is on leave. This necessitated the election of an Acting Chairperson for this meeting. If more than one person is nominated, the Committee would have to vote. Mr M Chabane (ANC) was elected as the Acting Chairperson.

The Acting Chairperson convened the virtual meeting and welcomed Members and the delegations from the Department of Communications and Digital Technologies (DCDT), the State Information Technology Agency (SITA), and the Department of Home Affairs (DHA).

The purpose of the meeting was for the Committee to be briefed by the DCDT, the SITA, and the DHA on the forensic investigation report on the Automated Biometric Identification System (ABIS) and how the entities would salvage the project going forward. Another item on the agenda was for Members to be updated on the Committee’s preparations for its oversight visit to the Government Printing Works (the GPW).

The delegation from the DCDT consisted of Mr Nonkqubela Jordan-Dyani, Director-General (DG), Ms Zaytoen Anthony, Parliamentary Liaison Officer, Mr Rendani Musetha, Chief Director: SOC Oversight and Enterprise Development, and Mr Mlindi Masologu, Deputy Director-General: Information Society and Capacity Development. Ms Stella Ndabeni-Abrahams, Minister of Communications and Digital Technologies, and Ms Pinky Kekana, Deputy Minister of Communications and Digital Technologies, were also in attendance.

The delegation from the SITA consisted out of Mr Luvuyo Keyise, Executive Caretaker, Mr Ntutule Tshenye, Executive National Consultant, and Mr Freddie Mitchel, Executive for Internal Auditing.

The delegation from the DHA consisted out of Dr e Aaron Motsoaledi, Minister of Home Affairs, Mr Nzuza Njabulo, Deputy Minister of Home Affairs, Mr Tommy Makhode, DG, Mr Gordon Hollamby, Deputy Director-General (DDG): Finance and Supply-Chain Management, Mr Thomas Sigama, DDG: Civic Services, Mr Thulani Mavuso, DDG: Institutional Planning and Support, and Mr Modupi Ka Mdluli, Chief of Staff.

Briefing by the DCDT and the SITA on the ABIS and the way forward

The first item on the agenda was for the Committee to be briefed by the DCDT and the SITA on the forensic investigation report on the ABIS and how the entities would salvage the project going forward. Mr Luvuyo Keyise, Executive Caretaker of the SITA, presented the briefing to Members.

Overview of the ABIS tender

The SITA assisted the DHA with the procurement of the ABIS in 2017 as part of its procurement processes. This was done through two phases including the Request for Accreditation process (RFA 1412/2016) that was concluded on 12 September 2016 and the Request for Proposal (RFP 1498/2016) and the tender award stage concluded in July 2017. As a result of the tender process, the successful bidders were the NEC Africa (Pty) Ltd; Accenture (South Africa) (Pty) Ltd; Ernst & Young Advisory Services (Pty) Ltd; and EOH Mthombo (Pty) Ltd. These bidders qualified for the accreditation phase and were accredited to respond to the RFP-process.

The SITA’s Bid Adjudication Committee recommended the appointment of EOH Mthombo (Pty) Ltd for R409 million as a preferred bidder to the Accounting Officer of the DHA in July 2017. During the 2017/18 financial year, the AGSA raised a finding on non-compliance with the Public Finance Management Act 29 of 1998 and its prescripts as the tender Masterfile was missing. The Masterfile was reconstructed for audit purposes, but some of findings remained in the AGSA’s management report. The DHA appointed SAB&T to investigate this procurement process and a final investigation report was presented to the SITA on 1 March 2021. Subsequently the SITA solicited a legal opinion on implementation of the SAB&T recommendations.

Progress on the implementation of recommendations by the SAB&T

A criminal case (with case number 145/3/2021) was opened against former employees of the SITA and was commissioned by the DHA together with the Directorate for Priority Crime Investigation (DPCI / Hawks) so that it can be established whether corruption, theft or fraud had been committed regarding the ABIS tender. The SITA is cooperating with the Hawks to provide all pertinent information requested by the Hawks to conduct further investigation on this tender process. The SITA worked to improve its internal controls in line with the recommendations made by the SAB&T and the AGSA to circumvent repeat findings. These controls include the electronic share-point platform for document, the implementation of checklists by the employees for Supply-Chain Management, the ecommerce system for automated tender processes for some of the transactions, and the Oracle BI tool for improved contract management.

The disciplinary actions against the SITA’s former employees (referring to Annexure A for the detailed list of employees that will be submitted to the Committee) were not instituted because these individuals are no longer employed by the SITA. Civil cases against these former employees are also not a viable option because there were no financial losses suffered by the SITA or the DHA. The Hawks is conducting a full investigation into this matter. There are three individuals that are in the employ of the SITA, where management is considering action to be taken considering the actions taken by these employees over five years ago.

Discussion

The Acting Chairperson thanked the DCDT and the SITA for the presentation made to the Committee. The Committee noted that Members will be provided with the detailed list of the SITA’s employees implicated in disciplinary action relating to the ABIS tender. He noted that the discussions will commence after all the briefings have been made to the Committee including that of the SAB&T and the DHA.

Briefing by Nexia SAB&T on the forensic investigation into EOH Mthombo (Pty) Ltd

The second item on the agenda was for the Committee to be briefed by the DHA and the SAB&T on the forensic investigation into the tender award and appointment of EOH Mthombo (Pty) Ltd in relation to the ABIS project. Mr Bilal Jetham Director of Nexia SAB&T presented the briefing to the Committee.

Remarks by the Minister of Home Affairs

Minister Motsoaledi stated that the ABIS contract was initiated by the DHA in 2015 in efforts to migrate from the current Home Affairs National Information System (HANIS). The ABIS contract was designed to modernise the biometric systems of the DHA to bring it in line with a modern era with the goal of integrating it into the existing systems of the DHA. The SITA was entrusted with the responsibility of procuring a new system following the awarding of the contract to EOH Mthombo (Pty) Ltd. Following the award of the tender, the AGSA deemed the contract of R409 million as irregular.

Introduction and background:

The purpose of the briefing was to provide feedback to the Committee in respect of the findings, conclusions, and recommendations for the forensic investigation conducted on the Accreditation Phase (RFB 1412/2016) and the Award Phase (RFP 1498/2016) relating to the ABIS contract.

The DHA, together with the SITA as procurement agent, concluded a tender process and appointed a service provider to design, provision, customise, integrate, migration of existing data, commissioning, maintenance, and support of ABIS and business process for a period of five years. The audit performed by the AGSA during the 2018/2019 financial year declared that the contract was awarded irregularly. The DHA appointed Nexia SAB&T to conduct a forensic investigation and to provide responses to the findings made by the AGSA on the process followed by both the SITA and the DHA on the appointment of the service provider.

The scope of the investigation included the following: the conducting of interviews with the staff members with the DHA and the SITA to get an understanding of the Supply Chain Management (SCM) processes, a review of the findings with the review of the findings of the AGSA that led to the irregularity on the ABIS contract, the review of compliance with SCM regulations, to hold interviews with all the stakeholders, the review of all relevant documentation, and the review the impact of the change of sub-contractors during the contracting

Stage of the evaluation process. Nexia SAB&T reported that it experienced the following limitations during its investigation into the tender award for the ABIS project:

-The DHA provided Nexia SAB&T with a reconstructed Masterfile in respect of the accreditation phase as the original file could not be located. The file contained minutes of meetings that appeared to be created for the purpose of the file. In addition, the minutes were not approved, the attendees of the meetings were not listed, the resolutions were not captured; and the required declarations of interest and secrecy were not completed by the attendees.

-According to the SITA they only kept the data for employees for up to six months after termination of their employment, and as such the investigators were unable to obtain information for the erstwhile Chief Financial Officer of the SITA.

-The SITA indicated that the digital imaging for its Programme Manager (who was now deceased) was not done after he had retired, and this information was therefore not available.

-Nexia SAB&T cannot guarantee the authenticity of the information as investigators were provided with copies and not original documentation. Not all documentation requested for analysis was made available. The copies of physical bid documents were not the same as electronic versions and were incomplete. Various employees from both the SITA and DHA involved in the procurement process were no longer employed by the entities. In addition 17 versions of contracts were made available by ENSafrica which had to be reviewed to determine the reasons for the change of sub-contractors.

The findings of the forensic investigation

Regarding SCM compliance, Nexia SAB&T made the following findings:

-The RFB 1412/2016 was advertised on 22 April 2016 on the National Treasury e-tender Publication, Government Tender Bulletin & SA-Tenders. The briefing session was held on 6 May 2016.

-Amendments to the RFB and the bid closing date were not published in the media originally utilised for publishing the RFB. The SITA submitted a request for Business Case to DHA (12 May 2016), more than one year after the request for assistance to the SITA, and after the advertisement for the bid was published and the compulsory briefing session held.

-The delay in submitting the business case was caused by the specifications that had to be drafted and included in said document. A total of 16 proposals were received with one disqualified for late submission. Bidders who did not submit their B-BBEE and Tax Clearance Certificates had seven days to provide them from the closing date of the tender. No evidence was found to confirm whether bidders did make these submissions.

-The Administrative Compliance process indicated that all 15 bidders were qualified in terms of the process. It was found that Supercom, Indra Technology and Thornburn were not compliant as they did not supply all the required documentation. During the technical evaluation it was found that attendance registers of meetings were provided but minutes of meetings were not kept, and the technical scoresheets provided were illegible which prohibited a recalculation from being conducted.

-Bidders had to be financially solvent and had to provide three years’ worth of audited financial statements (AFS). On 17 July 2016, the BEC members deliberated on whether it should be allowed to request bidders to provide individual AFS as a group or if a consolidated AFS could be provided. It was advised that it is allowed in terms of the SITA’s SCM policy. The DHA noted that the re-evaluation process followed did not constitute clarification but a request for additional information and should not be allowed. It was going to give an unfair advantage to these bidders and that the process was compromised. On 4 August the AFS were requested from Altron, Accenture, Indra, and EOH Mthombo (Pty) Ltd. The re-evaluation indicated that Accenture, Sizwe Africa, Supercom, NEC, Mediro, E&Y, EOH Mthombo (Pty) Ltd, and Barone, Budge & Dominick (BBD) were solvent. The analysis indicated that EOH Mthombo (Pty) Ltd provided group financial statements and not bidder financial statements. The additional information requested from the four bidders does not constitute clarification as additional information was provided. These bids should have been declared non-responsive as they did not provide the correct information. The request was inconsistent as bidders who did not submit AFS for the whole period was not requested to provide same. The FEC was negligent in that they requested additional information, which was in conflict with the SITA’s SCM policy, where information for clarification could be requested.

-Despite failing to adhere to the prescripts of the legislation policies and documents, Accenture, EOH Mthombo (Pty) Ltd, EY and NEC were recommended to participate. Nexia SAB&T’s review performed indicated that only the NEC complied with the requirements and should have been accredited.

-Nexia SAB&T does not agree that the process was fair as the information requested from the four bidders did not constitute clarification but additional information. A review of the SITA’s Internal Audit report found that no finding was made in respect of the request for additional information. The SITA misrepresented their own policy when they requested the bidders to submit additional information whereas the bid document was clear in that the bidder had to submit their AFS.

In addition, ENSafrica was appointed by the Chief Executive Officer of EOH Mthombo (Pty) Ltd to investigate its dealings with government bodies. ENSafrica provided correspondence found on the server of EOH Mthombo (Pty) Ltd in respect of the ABIS project. Communication was found between the EOH Mthombo (Pty) Ltd and the SITA between 25 August 2015 and 22 February 2017. On 8 September 2015, the Strategic Account Executive of EOH Mthombo (Pty) Ltd wanted to know how it was going with the ‘frieken DHA’, to which the Principal IT Manager of the SITA responded that they were discussing modernisation and that there was something for them. Several opportunities were identified and correspondence was entered into regarding the future tender that involved irregular compensation for confidential information.

Regarding the RFP 1498/2016 processes, Nexia SAB&T made the following findings

-The specifications were not approved in line with the SCM policy. The RFP advertisement fully met the requirements to advertise as per the SITA’s SCM policies and the requirements in terms of the Regulations of National Treasury. The bid closing and opening process was in accordance with requirements of the SITA’s SCM policy.

-At least three officials from the SITA tender office were present during bids closing and opening. Since not all the relevant documentation was received, Nexia SAB&T could not confirm whether the NDAs and Declaration forms of members of the BSC and BEC were not completed or whether they were merely outstanding. For transactions valued between R 100 million and R 500 million, where the SITA acts as a procurement agency, the EPC must refer its recommendations to the BPC in terms of the DOA. The BPC supported the recommendation by the EPC to submit the recommendation for the award of the contract to EOH Mthombo (Pty) Ltd to the DG of the DHA for approval.

-The SITA’s SCM policy provides that all tenders to a value of more than R 100 million must be subjected to an external audit processes integrity review and probity check before submission for approval by the adjudication committee. The SITA appointed the Business Innovation Group (BIG) to conduct the external audit. The DHA appointed a service provider called Audit and Risk Management Solutions (ARMS) to audit the procurement processes for the ABIS contract. The ARMS indicated that the SCM processes to appoint EOH Mthombo (Pty) Ltd were found compliant with the SCM policy.

-It was a mandatory requirement that all hardware and software proposed in the solution must have a life cycle of at least five years from the date of procurement. EOH Mthombo (Pty) Ltd indicated in their submission that all hardware is supplied with an extended warranty. It was found that all the bidders complied with the technical functionality criteria one of which was the requirement of an active solution. Various differing viewpoints were raised on the bidder’s submissions regarding this requirement by the external auditors and technical experts appointed by the DHA and the SITA.

-The DHA appointed a company called Gartner to review the RFP process including the bill of materials. The BAC of the DHA supported this recommendation to the DG of the DHA. The subcontractors indicated in the contract between EOH Mthombo (Pty) Ltd and the DHA differed from the subcontractors based on which EOH Mthombo (Pty) Ltd was accredited.

-EY was a main bidder during the 1412 accreditation phase, however during the 1498 closed tender process EY did not submit a proposal; instead they were listed as a subcontractor for EOH Mthombo (Pty) Ltd as part of their submission. EY withdrew from the subcontractor agreement with EOH Mthombo (Pty) Ltd after meeting with representatives of EOH Mthombo (Pty) Ltd where EY realised that subcontracting for EOH Mthombo (Pty) Ltd was not financially worthwhile. EOH Mthombo (Pty) Ltd appointed ABACUS in the place of EY. Erstwhile Chief Financial Officer of the SITA until September 2018 and the Chairperson of the EPC for the ABIS tender process informed Nexia SAB&T that after leaving SITA she did train for EOH Mthombo (Pty) Ltd through ABACUS.

-Nexia SAB&T could not confirm the date on which EOH Mthombo (Pty) Ltd appointed ABACUS however, it was established that the first work order for ABACUS was dated 22 January 2018. ABACUS charged EOH Mthombo (Pty) Ltd approximately R 15 million of which R 7 million was an overcharge. The removal of the PM work from the scope of EY resulted in only R 8.1 million in fees for EY which was not financially feasible for EY.

The financial implications of the tender process were outlined to the Committee. Evaluation of the tenders received indicated that the lowest acceptable tenderer was EOH Mthombo (Pty) Ltd who quoted R409.89 million to implement the ABIS project in 12 months. The proposed costing of EOH Mthombo (Pty) Ltd was the closest to the budget of R380 million, whereas the proposed costing from Accenture and NEC were over R200 million more than the proposed budget. Based on the findings the entire contract is irregular and as such all payments made to date should be regarded and reported as irregular expenditure. Payments made to EOH Mthombo (Pty) Ltd in respect of this project up to 26 February 2020 amounted to over R283.43 million.

An analysis of the payments revealed that on the 27 March 2018, the DHA made an overpayment of R5.71 million to EOH Mthombo (Pty) Ltd. This occurred when the invoice amount was captured as R6.35 million instead of R634 624.89. The CFO of the DHA confirmed that the account from which the overpayment was made was an interest-bearing account. The overpayment was ultimately refunded by EOH Mthombo (Pty) Ltd to the DHA on 16 September 2019 which was approximately 18 months after the overpayment. This means that the DHA lost interest on this amount that EOH Mthombo (Pty) Ltd may have benefited from.

The system of internal controls at the DHA and the SITA is ineffective as documentation requested was not readily available and files had to be reconstructed. This was blamed on employees that had left the employment of these entities. EOH Mthombo (Pty) Ltd, E&Y and Accenture should have been disqualified as their bids were unresponsive and did not comply with the procurement principles. The available evidence indicates that the SITA’s Principal IT manager communicated with EOH Mthombo (Pty) Ltd before the ABIS project commenced and during the drafting of the specifications.

Confidential documents of the DHA - including the proposed budget for the project - were provided to EOH Mthombo (Pty) Ltd and should not have been made available to them. This information placed EOH Mthombo (Pty) Ltd in an advantageous position and rendered the process unfair and non-competitive. Applying the procurement legislation and policy prescript all bidders except for NEC should have been disqualified during the accreditation phase (RFB 1412/2016). EOH Mthombo (Pty) Ltd, EY and Accenture should not have gone through to the second phase of this project because they did not pass the first phase of accreditation. The specifications were not approved before the bid was advertised and the evaluation process followed was in order. However, EOH Mthombo (Pty) Ltd received the project business case - including the budget - prior to the closing date for the bid and as such their bid price was closest to the project budget. The possibility exists that EOH Mthombo (Pty) Ltd was privy to further confidential information regarding this bid since there was communication between EOH Mthombo (Pty) Ltd representatives and a SITA employee. The project did not comply with the expected timeframes and is still in progress. The DHA implemented precautions and relied on recommendations from the SITA as procurement agency even though officials from the DHA were present on several committees during the evaluation processes for both phases.

Recommendations from Nexia SAB&T

Based on the findings of the forensic report, Nexia SAB&T either confirm or refute some of the AGSA’s findings, and the refuted findings do not have a material impact on the overall conclusion. However, the conclusion from the forensic investigation remains that the entire contract is irregular. In addition to these findings, the following recommendations were made by Nexia SAB&T:

-The DHA should closely monitor the processes followed by procuring agencies to ensure that they comply with legislation and regulations as well as all internal policies and procedures.

-Procurement committees should ensure that all mandatory conditions of a bid are adhered to and that bidders are disqualified immediately should they not comply with any of the said requirements.

-The terms in the RFB and RFP processes should be written clearly in respect of documentation to be submitted as it caused confusion and led to the unjustified qualification or disqualification of bidders.

-It was recommended that the DHA should investigate the overpayment to EOH Mthombo (Pty) Ltd further and identify the officials who should be held accountable and be disciplined. Although EOH Mthombo (Pty) Ltd may take disciplinary action against the employees who were in its’ employ at the time of the irregularities, the company can still be held vicariously liable for its employees.

-Cognisance must be taken of the fact that EOH Mthombo (Pty) Ltd assisted in the investigation when any of the above were considered. EOH Mthombo (Pty) Ltd has advised that they be consulted for assistance and support during any criminal investigation and legal action that may be instituted against the relevant parties. EOH Mthombo (Pty) Ltd is in the process of taking the necessary appropriate action against employees who have identified in irregularities relating to state contracts.

-The DHA management should improve the control environment to ensure that legislation and regulations are followed for the retention of documentation and all information relevant to the tender process. The Senior Procurement Officers should file all tender documentation in respect of bids in the Master File. The Project Manager must be copied in all correspondence for each bid to ensure that information received from all parties relevant to the tender process - such as prospective bidders, procuring agencies, and committee documentation - are available should the Senior Procurement Officer not be available to provide such.

-It was recommended that the DHA should discuss possible disciplinary action with the SITA against the relevant employees for failing to ensure that the amendments to the bid document for bid RFB 1412/2016 was published on the media where it was originally advertised. In addition, disciplinary action against the relevant employees for recommending the approval of the bid specification to the DG of the DHA on 13 December 2016, although the specifications were not approved by the BSC to whom the specifications were presented on 12 December 2016.

-Possible disciplinary action should be instituted against any officials of the DHA involved in the overpayment and for failing to prevent the overpayment of R 5.71 million to EOH Mthombo (Pty) Ltd which resulted in a loss of revenue to the DHA.

-Disciplinary action to be taken against the BEC Facilitator for her role during the accreditation phase in terms of paragraph 13.14 of the SITA’s SCM policy, and against the Secretariat Function for Bid Committees for failing to ensure that comprehensive minutes were kept for the meetings held on 17 July, 28 August 2016, and 1 September 2016, as it did not hold the names of attendees. Disciplinary action to be considered against the applicable officials in terms of paragraph 13.12.1 of the SITA’s SCM policy relating to the Adjudication / Award Functions in that they did not ensure that the scoring was fair, consistent, and correctly applied whilst conducting the financial status evaluation.

-Disciplinary action to be considered by the SITA against the persons consulted during the evaluation process in that they failed to apply the SITA’s SCM policy correctly when they conducted the integrity assessment for internal audit and this resulted in additional information requested from four bidders.

-Disciplinary action to be considered by the DHA and the SITA against the BEC members employed by the entities respectively, in that they did not ensure that the technical evaluation was fair, consistent, and correctly applied and for failing to adhere to the prescripts of the bid document and relevant legislation when they recommended the accreditation of Accenture, E&Y and EOH Mthombo (Pty) Ltd, whilst they did not comply with the bid requirements.

-The DHA should consider the possibility of instituting legal action against the implicated entities and persons who may be found to be implicated in the DHA incurring irregular expenditure, or who may have received payments not due to them.

-The DHA should consider obtaining a formal legal opinion on the question of whether a valid contract was ever concluded and if the contract between DHA and EOH Mthombo (Pty) Ltd should be declared null and void. This can also be addressed together with the civil action against the various parties.

-The DHA should consider obtaining legal advice on the possible action to be taken (if any) against the SITA in respect of the irregular expenditure that was incurred.

-The DHA should consider obtaining legal advice on whether it may be able to recover the fees that were paid to the SITA to act as the procurement agency for the DHA.

-The DHA should consider recovering the interest loss of R299 864.25 (simplified calculation) through the overpayment of R5.71 million to EOH Mthombo (Pty) Ltd from the DHA officials who were responsible for the overpayment. In conclusion, Nexia SAB&T agreed that the entire contract is irregular.

Briefing by the DHA on the ABIS and the way forward:

The third item on the agenda was for the Committee to be briefed by the DHA on the implementation of the recommendations made by Nexia SAB&T and the progress made regarding the ABIS project. The briefing was presented by Mr Tommy Makhode DG of the DHA.

Introduction and the recommendations from Nexia SAB&T:

The DHA reported that the HANIS currently holds the fingerprint records for all persons residing within South Africa these being citizens, permanent residency holders, other (residency) permit holders, refugees, contract workers as well as persons detained due to residing illegally in South Africa. As part of modernising the DHA and provision of the bedrock for e-government, the process of designing the back-end applications (the HANIS and the NPR) into a single holistic National Identification System (NIS) was conceptualised.

The DHA needed to conduct a technology upgrade on its hardware and software for HANIS which had reached its end of life in March 2014. The system has been in operation for more than 15 years and the DHA wanted to modernise and update the system. Potential bidders had to be identified to assist the DHA with its aim to replace the HANIS. The required infrastructure and hardware platform and related software should enable the DHA to save costs and have seamless maintenance and support services for this environment. It was expected that the required environment would be expandable, allow integration and be scalable to accommodate the National Identification System (NIS) with ease. The tender process followed for the appointment of a service provider for the design, provision, customisation, integration, migration of existing data, commissioning, maintenance, and support of an integrated ABIS and business processes for the DHA. The DHA and the SITA concluded the open tender process in accordance with the SITA Act and awarded Bid RFP 1498/2016 to EOH Mthombo (Pty) Ltd. The audit performed by the AGSA for the 2018/19 financial year of the DHA declared that the contract with EOH Mthombo (Pty) Ltd was irregular. On 3 March 2020, the DHA appointed Nexia SAB&T to conduct a forensic audit to the findings made by the AGSA on the process followed by both the DHA and the SITA in the appointment of a service provider for the ABIS project.

Nexia SAB&T commenced with its work in May 2020 and a draft report was handed to the DGl of the DHA on 23 December 2020. Nexia SAB&T presented the preliminary report to the Minister and the Deputy Minister of Home Affairs as well as the DG of the DHA on 25 January 2021. Nexia SAB&T were requested to clarify vague recommendations as they would have been difficult to implement. The final report was presented on 15 February 2021. The Minister of Home Affairs wrote a letter on 17 February 2021 and accordingly informed the Chairperson of the Committee on the status of the report. The Minister of Home Affairs wrote a letter to the Chairperson of the Committee on 8 March 2021 requesting him to present the report to Members during this meeting.

It was reported that Nexia SAB&T made the following recommendations:

-The DHA should appoint legal counsel to advice on the current contract with EOH Mthombo (Pty) Ltd. Internal processes of the DHA and the SITA for internal controls should be strengthened.

-Disciplinary action against the officials from the DHA and the SITA officials for requesting additional information instead of clarifying information should be taken. The DHA should recommend action against former officials from the SITA and EOH Mthombo (Pty) Ltd that colluded on the bid.

-A criminal case is opened by the DG of the DHA with the DPCI and the Hawks so that it can be established whether corruption, theft, or fraud has been committed in the ABIS tender.

Progress to date on the ABIS project and the ceding of the contract

Regarding the recommendation that the DHA should appoint legal counsel to advise on the current contract with EOH Mthombo (Pty) Ltd, it was reported that a legal opinion was received on 9 April 2021. It should be clear that the individuals identified in the report and who are currently still employed by the DHA as having been involved in any of the impropriety ought to face disciplinary proceedings as soon as possible. Insofar as it appears that criminality may have taken place, particularly with the provision of information and documentation to which EOH Mthombo (Pty) Ltd was not entitled, the matter should be referred to the National Prosecuting Authority for purposes of a criminal investigation and prosecution. There are several contraventions of not only statutory criminal provisions but also common law crimes which have been demonstrated in the report. These matters must be investigated and must be referred to the applicable authorities to take the necessary action. The DHA is best suited to refer the matter for further investigation.

Nexia SAB&T identified six officials of the DHA that were implicated in the report. The officials implicated were given an opportunity to make representations as to why disciplinary action should not be taken against them. Following their responses, charges are being drafted and will be served by 28 May 2021. In addition, a case was registered on 5 March 2021 at Pretoria Central station (CAS 145/3/2021). The detailed report together with the evidence file was handed over to DPCI on the 15 April 2021.

It was reported that the DHA requested condonation for the irregular expenditure that was incurred. The expenditure relating to the ABIS contract was disclosed as irregular expenditure in the financial statements of the DHA. Expenditure as of 31 March 2021 against the contract is R280.87 million. In accordance with the Irregular Expenditure Framework, the DHA made a value for money determination, opened a criminal case, and commenced with disciplinary proceedings. The DHA requested National Treasury on 12 April 2021 to condone the total contract amount as the forensic investigation is now complete. Once condonation is granted, the amount disclosed as irregular expenditure by the DHA will decrease significantly. National Treasury is still considering the request for condonation.

On 11 February 2021, the DHA received approval from National Treasury to cede the contract to IDEMIA. The DHA’s legal engagements with both EOH Mthombo (Pty) Ltd and IDEMIA were finalised and concluded the Deeds of Assignment which will govern the transitional period between the two entities. The DHA then entered into a Master Service Agreement with IDEMIA in line with all the necessary conditions and scope of the project as per the initial tender requirements.  The project execution under IDEMIA has commenced with the first phase from 1 May 2021, and is estimated for completion within a period of seven months. It was reported that IDEMIA will utilise all the hardware and software procured by EOH Mthombo (Pty) Ltd with the possibility of enhancing in certain areas.

Additional features and capabilities to perform facial recognition and latent searches as detailed in the tender. All the DHA’s data previously stored on the HANIS to be migrated to the ABIS in its totality and in a readily usable form with no duplication of data, and no compromise on the integrity of that data. At the completion of the first phase, the provision of the maintenance and support services will commence. The first phase is scheduled for May to December 2021, and on its completion, the ABIS should be fully functional and operational with all the functionalities currently enjoyed by the DHA under the HANIS. The second phase is scheduled for January to November 2022 and on its completion the ABIS should offer functionalities and biometric modalities. The third phase will commence from December 2022 onwards, at a date to be jointly agreed by the DHA and the service provider. This phase will entail ongoing technological developments as may be requested by the DHA from time to time as additional services during the term to incorporate in the ABIS such other multi-modal identification and other functionalities in keeping with developments in technology. In conclusion, the DHA recommended that the Committee note the briefing made to Members.

Discussion:

The Acting Chairperson stated that the Committee has recommended that there must be investigations into the appointment of EOH Mthombo (Pty) Ltd arising from the findings of the AGSA. The recommendations from Nexia SAB&T are clear in terms of the way forward. The Committee must establish a plan of action on how to monitor the implementation of these recommendations in the current financial year.

Mr A Roos (DA) appreciated the briefing made by all the stakeholders in relation to the ABIS project. The Committee noted and appreciated the information that was presented to Members. He also thanked the delegations for the hard work that has gone into bringing critical issues and irregularities to the attention of the Committee. He welcomed the implementation of disciplinary processes and noted that Members will await the outcome of these processes. It is crucial that these investigations proceed so that the matter can be finalised. The DCDT and the DHA must ensure consequence management against officials identified to have acted corruptly during the procurement of the ABIS. Having the ABIS and the HANIS operating in parallel is costing the DHA money which is unacceptable since there is already an application to have its irregular expenditure condoned. The briefings should have covered more details on how these millions will be recouped. The budget process has highlighted that the cause of the budget cuts are the widespread corruption and theft of taxpayers’ money because of fraudulent processes. He asked for clarity on why emails are deleted after six months given that it could be necessary for auditing processes in the current and later financial years. It is concerning that this protocol allows for evidence to be destroyed that leads to the wrongdoers getting off scot-free. ‘Are there any indications on where the employees are now after they left the employment of the relevant entities’? ‘Employees and wrongdoers should not be allowed to leave one governmental entity to avoid disciplinary processes by simply being employed by another governmental entity’.

Mr M Tshwaku (EFF) asked for clarity on how it was possible that the SCM policies were flouted in the presence of the DCDT and the SITA. ‘Were there any indications that the tender committee was not doing the right thing’? He expressed shock relating to the brazen corruption identified in the report, with evidence that an official from SITA made available tender information to EOH Mthombo (Pty) Ltd for about a year prior to the advertisement of the tender. ‘It is unacceptable that an official from SITA made available tender information to EOH Mthombo (Pty) Ltd for about a year prior to the advertisement of the tender. ‘This gave undue advantage to EOH Mthombo (Pty) Ltd to the detriment of other bidders undermining the spirit of competition’ It is concerning those wrongdoers got away with corruption by flouting the SCM policies that was in place. ‘Where was the leadership in all of this’? He asked for clarity on why EOH Mthombo (Pty) Ltd invoiced its full amount to the DHA and other entities. EOH Mthombo (Pty) Ltd had a clear and unfair advantage given by the officials of the SITA and the DHA. He asked whether the entities considered other bidders beside IDEMIA before ceding the contract. ‘Why is there not a recommendation from Nexia SAB&T stating that EOH Mthombo (Pty) Ltd should be blacklisted by the National Treasury to do business with the government’? The company has been seen to be involved in corrupt activities and implicated by the forensic report.

Mr K Pillay (ANC) appreciated the work done to investigate the matter which led to the final report with concise recommendations in the forensic investigation. He welcomed the recommendations made.

Ms L Tito (EFF) welcomed the briefings from the DCDT, the SITA, and the DHA. She asked what measures the SITA had implemented to improve its document management to cure its defect of missing files. Regarding the multiple versions of the contract that were made available by ENSafrica which had to be reviewed to determine the reasons for the change of sub-contractor, she asked for more clarity. She agreed with Mr Roos’ sentiments that wrongdoers should not be allowed to leave one governmental entity to avoid disciplinary processes by simply being employed by another governmental entity. She echoed Mr Tshwaku’s question on why there is no recommendation from Nexia SAB&T stating that EOH Mthombo (Pty) Ltd should be blacklisted by the National Treasury to do business with the government.

Ms T Legwase (ANC) appreciated the work done to investigate the matter and the briefings made to Members. She acknowledged the progress made and action taken by the DHA. She agreed with Mr Roos’ sentiments that wrongdoers should not be allowed to leave one governmental entity to avoid disciplinary processes by simply being employed by another governmental entity. She asked for clarity on what the DHA and the other entities are doing to ensure that corrupt officials are not reemployed at other entities. She also agreed with the sentiments of other Members that EOH Mthombo (Pty) Ltd should be blacklisted. Something should be done before these wrongdoers create more problems. She appreciated the work done to investigate the matter which led to the final report with concise recommendations in the forensic investigation. She also welcomed the recommendations made in the forensic report and the consequence management. 

Mr M Lekota (COPE) stated that his biggest concern is that there was no indication that the monies lost have been recouped. This is the money of the taxpayers that had been budgeted to deliver services to the people of South Africa. It is problematic that evidence is erased after six months, which undoubtedly impacts the feasibility of recovering the funds. ‘What measures are put in place to recover these monies’?

Ms M Modise (ANC) appreciated the work done by the stakeholders in the ABIS project. She welcomed the progress that has been made which has given the Committee comfort in resolving these issues. She agreed with the Acting Chairperson that the Committee must establish a plan of action on how to monitor the implementation of these recommendations to ensure that the progress is maintained going forward. The Committee urges the DCDT and the DHA to ensure consequence management against officials identified to have acted corruptly during the procurement of the ABIS, and to ensure that action is taken against wrongdoers who have broken the law and stole the taxpayers’ money for their own pockets.

Responses from the DCDT, the SITA, and the DHA:

Mr Jetham (Director of Nexia SAB&T) responded regarding the question on the 17 versions of the contracts that were presented by stating that it was working documents spanning the contractual relationship together with the amended negotiations during the process with EOH Mthombo (Pty) Ltd. There was no undue influence relating to the conclusion of the contract itself. However, the 17 versions show the high levels of analysis that was necessary to figure out the contractual changes over time.

Mr Makhode (Director-General of the DHA) responded that the DHA is in the process of recouping the money from some of the service providers that are listed in the report. Due process in terms of the law must be followed, but the DHA is attending to the matter. Regarding the DHA’s irregular expenditure, he stated that the National Treasury’s Framework provides for the action that can be taken in this regard.

Mr Keyise (Executive Caretaker of the SITA) added that efforts are made to recover the monies, and that criminal charges are instituted as part of the processes for implementing consequence management. Measures are also put in place to ensure that the monies lost to interest are recovered from EOH Mthombo (Pty) Ltd. Regarding the implicated employees who have left the employment of the stakeholder entities, he responded that if it is found that those employees are still in the employ of the government, measures are in place to hold them accountable and inform the entities and organisations they work for.

The Acting Chairperson stated that the Committee urges the DCDT and the DHA to ensure consequence management against officials identified to have acted corruptly during the procurement of the ABIS. The Committee was unanimous in appreciating the work done to investigate the matter which led to the final report with concise recommendations. In line with this, the Committee calls for urgent implementation of the forensic report. Now that the forensic investigation has been concluded effective consequence management must be implemented. The Committee is in support of the recommendations of the forensic report that both criminal and institutional disciplinary action must be urgently implemented. He thanked Members and the delegations for the contributions made to the discussions on the ABIS.

The meeting was adjourned.

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