In this virtual meeting, the Special Investigating Unit (SIU) briefed the Committee on the progress of its investigations into COVID-19-related procurement contracts, especially for personal protective equipment. The briefing was based on the SIU’s sixth progress report, dated 30 October; its seventh and final report would be submitted to the President on 10 December.
The SIU reported that 5 054 contracts, awarded to 2 686 service providers, were under investigation. These contracts amounted to R14.8 billion, 11% of the total COVID-19 expenditure between April 2020 and June 2021. Most were awarded by provincial departments. At the time of its sixth report, the SIU had finalised the investigations in respect of 1 461 contracts (29%), and had found irregularities in 555 of those contracts (38%), valued at R3.1 billion. The SIU had made substantial progress since then, and the investigations were now finalised in all but two provinces.
It was pursuing 44 matters, worth R1.39 billion, at the Special Tribunal. Thus far, the Tribunal had granted orders to the value of R174.5 million and had set aside contracts worth R170.41 million, preventing losses to the state. The SIU had secured R32.55 million in actual recoveries, primarily through acknowledgment of debt agreements, but it had identified a total of R471.15 million in further funds or assets which might be recoverable. It provided a detailed update on each civil matter.
It also provided a detailed update on each referral that the SIU had made for other consequence management processes. It had made 168 referrals to the National Prosecuting Authority (NPA), including 20 additional referrals since the fifth report, but many of those matters were still under consideration by the NPA or under further investigation by the Hawks. 142 disciplinary referrals had been made, including an additional 15 since the fifth report. One obstacle to disciplinary proceedings was that the implicated officials often resigned, but the SIU held that resignation should not shield individuals from being subject to consequence management. The SIU had also made 274 referrals for administrative action, primarily to the South African Health Products Regulatory Authority, and four referrals for executive action. It provided particular detail on the Digital Vibes matter, which had led to 19 criminal referrals, a number of civil cases, and a total of R12.18 million in recoveries to date.
Just as the SIU said that its focus was shifting towards the implementation of consequence management, the Committee’s primary focus was the slow pace at which other institutions acted on SIU referrals. It was particularly concerned about the slow progress at the NPA; about executive authorities and accounting officers who discounted the SIU’s findings and decided not to implement disciplinary action; and about the slow progress in blacklisting companies referred for administrative action. On the latter point, Members worried that the companies were still contracting with other parts of the state while the referrals were under consideration, sometimes for longer than a year. They asked what recourse the SIU had when it encountered obstacles from other state entities, and they ultimately decided to meet with the implementing entities to hold them accountable. The SIU undertook to investigate whether it was legally feasible for it to process administrative actions directly, rather than merely making referrals.
The IFP argued that the current tender system enabled corruption, did not ensure business integrity, and undermined the country’s developmental agenda. It also wondered whether it would be desirable to begin blacklisting individuals as well as companies. On such issues, the SIU promised that its final report would contain systemic recommendations, including considerations relevant to a review of existing public procurement legislation. There were also some questions about the details of the civil matters in the Special Tribunal, and the SIU head was asked to comment on the Public Protector’s ongoing investigation into the SIU.
The Chairperson said that the Special Investigating Unit (SIU) would be briefing the Committee on the progress of its investigations into the procurement of personal protective equipment (PPE) during the COVID-19 pandemic. The briefing would be based on the SIU’s sixth progress report on the matter, which had been submitted on 30 October. The Committee was present to probe the “crime against humanity” of COVID-19 PPE procurement. At some point, it would also need to consider the issue of whistleblower protection.
He thanked Members for the successful oversight visit the Committee had conducted at the South African Post Office the week before.
SIU briefing: Investigations into COVID-19 procurement
Adv Andy Mothibi, Head, SIU, said that the SIU appreciated the opportunity to update the Committee on its investigations into the irregularities and other procurement infractions committed during the COVID-19 pandemic. As well as PPE procurement, the SIU had investigated, for example, procurement relating to the infrastructure part of the COVID-19 response. The current briefing was based on the SIU’s sixth progress report. The seventh and final report would be submitted to the President on 10 December.
He said that as the SIU moved towards concluding its investigations, it would be focusing primarily on ensuring that consequence management was implemented. In some cases, consequence management entailed civil litigation, mainly in the Special Tribunal. The SIU also made referrals to state institutions for disciplinary action; referrals to the National Prosecuting Authority (NPA) for criminal prosecution; and referrals to other regulatory authorities. Additionally, the SIU’s final report would include systemic recommendations, which it would probably engage with the National Treasury about.
Overview of investigations
Between April 2020 and June 2021, R138.8 billion had been spent on the COVID-19 response. The SIU had investigated contracts amounting to R14.8 billion (11%). The vast majority of the contracts under investigation fell under provincial governments: of the R32 billion that provincial governments had spent on COVID-19-related contracts, R11.6 billion (36%) was under investigation.
The SIU was investigating 5 054 contracts, awarded to 2 686 service providers. At the time of the report, the investigations had been finalised in respect of 1 461 contracts (29%), amounting to R7.3 billion, and had not yet begun in respect of 7%. The completed investigations had found irregularities in 555 contracts (38%) worth a total of R3.1 billion.
Of the investigations outstanding at the time of the report, most were in Gauteng, where the SIU was still investigating 1 777 contracts worth R4.5 billion – with the high-value contracts concentrated in the provincial Department of Education and in infrastructure projects – and in Mpumalanga, where it was still investigating 605 contracts worth R572 million. Adv Mothibi said that the picture had changed immensely since the report had been submitted – all investigations were now complete or underway, and he thought that investigations had to be finalised in only two provinces.
Limitations and observations
The SIU had recorded no further limitations or observations since its last report, and Adv Mothibi said that the SIU had successfully implemented steps to mitigate the limitations that had previously obstructed its work.
Dr Jerome Wells, Chief Legal Counsel, SIU, updated the Committee on civil litigation matters arising from the COVID-19 investigations. Since the SIU’s last report to the Committee on 1 September, one new matter had been instituted in the Special Tribunal, relating to irregular contracts for the construction and renovation of a hospital and accommodation. In that matter, the SIU had obtained an interim order to freeze R7.94 million, and judgement was currently reserved on the reconsideration application filed by the service providers in question.
The SIU was involved in 47 other civil matters, worth R1.42 billion, on which it had previously briefed the Committee. Three were in the High Court; the other 44 had been instituted by the SIU in the Special Tribunal. Dr Wells provided an update on each matter, including orders granted by the Tribunal. The total value of orders granted was about R174.5 million.
Adv Mothibi discussed the emphasis that the SIU placed on conducting investigations, and pursuing civil recoveries, quickly. The SIU was pleased with the speed with which the Special Tribunal was adjudicating matters, but the pace, of course, depended primarily on the speed with which the SIU did its work.
He added that many of the respondents tended to “push back” against the civil litigation proceedings instituted by the SIU. They were entitled to due process and legal representation, but they sometimes exploited those rights to attempt to delay the process. The SIU used its legal machinery to defend against such attempts. Some respondents, including those in the Beitbridge border matter, had challenged the Special Tribunal’s jurisdiction. He was happy that, as a result of those challenges, the Tribunal’s jurisdiction was now beyond legal question.
Referrals for disciplinary proceedings
Adv Mothibi said that the SIU had made 142 disciplinary referrals to date. 15 of those were new referrals, instituted since the last report, and related to contraventions of the Public Finance Management Act (PFMA), the Municipal Finance Management Act (MFMA), or Section 217(1) of the Constitution. He provided an update on each case – the SIU regularly followed up on the status of the disciplinary hearings, and SIU officials sometimes testified at the hearings. He added that there was a trend whereby implicated officials resigned before disciplinary action could be pursued. However, the SIU believed that resignation should not absolve public servants from consequence management, and that they should still face corrective action, such as criminal prosecution, civil litigation, or the suspension of their pensions.
Referrals for criminal proceedings
The SIU had made 168 referrals to the NPA, including 20 new referrals since the last report. The charges were usually fraud, corruption, forgery, money laundering, uttering, or financial misconduct under the PFMA or MFMA; and the individuals were usually government officials, although some were private entities or their directors. He provided an update on each case, noting that nobody had been sentenced thus far, although there had been several arrests and court appearances. Most of the cases were either under further investigation or under consideration by the NPA. The Hawks and the NPA would prefer to brief the Committee directly if it wanted detailed updates on those cases.
Referrals for executive and administrative action
The SIU had made four referrals for executive action, including two in respect of Members of the Executive Council (MECs) who had since been discharged. Most recently, on 8 July, it had recommended executive action against the former Minister of Health, due to possible criminal actions, possible negligence, and other infractions related to the Digital Vibes contracts. In departments where the SIU had found irregularities, it had notified the accounting officers, and it would assess whether and how to hold them accountable after it had received their responses. It would consider making referrals to the Auditor-General, because the investigations had revealed a deterioration in the internal controls at some departments.
The SIU had also made 274 referrals for administrative action, primarily for blacklisting by Treasury. That figure included 78 new referrals since the last report, of which 67 had been directed to the South African Health Products Regulatory Authority (SAHPRA). Adv Mothibi said that, in a previous meeting, a Member had asked about the delays in blacklisting service providers, and he agreed that the delays caused problems – service providers implicated in misconduct might sign new contracts with the government in the interim.
Cash and asset recovery
The investigations had led to actual recoveries of R32.55 million, primarily through acknowledgment of debt agreements, which were used to minimise the SIU’s litigation costs. The SIU had identified a total of R471.15 million in further funds or assets which might be recoverable, including through civil proceedings. Recovered funds were paid into the SIU trust account and then back into the state institutions. Thus far, the investigations had prevented potential losses to the state worth R114.2 million, and contracts worth R170.41 million had been set aside by the Special Tribunal. Adv Mothibi outlined progress that had been made in these areas since the last report.
Digital Vibes investigation
Adv Mothibi said that the Committee had also asked for an update on the Digital Vibes investigation. He discussed the investigation very briefly, because the SIU had briefed the Committee on the matter in the past and the Chairperson had asked him to be brief. In terms of consequence management arising from Digital Vibes, seven officials had been referred for disciplinary action. 19 individuals had been referred to the NPA on charges of fraud, corruption, and money laundering, but the matter was still under investigation. The SIU had made one related referral for administrative action, and, as mentioned earlier, had also referred the former Minister for executive action prior to his resignation. A number of related civil cases were also underway – notably, the former Minister had brought an application, which the SIU was opposing, to set aside the SIU’s prejudicial findings against him. The SIU had recovered a total of R12.18 million thus far. He added that the SIU was aware that additional allegations had been made and reported, and it was investigating those.
New matters finalised
The last section of the SIU presentation dealt with the content of the investigations that had recently been finalised. Only one of them pertained to a national department – the Department of Transport – and it had found no irregularities. Adv Mothibi highlighted that there had recently been positive progress in a case involving the Kannaland municipality, and arrests had been made.
The Chairperson said that he was seriously concerned about the matters that had been referred to the NPA. There was insufficient progress at the NPA. Although he acknowledged Adv Mothibi’s suggestion that the NPA should brief the Committee directly, he suspected that such a briefing would lack detail. That was the biggest problem with the process – the SIU conducted very comprehensive investigations, but there was no progress once the matters reached the NPA. The Committee could meet with the NPA and hear about any progress it had to report, but he was “not holding [his] breath.”
Ms B Van Minnen (DA) thanked the SIU for the extremely comprehensive presentation and for its work. She agreed that the Committee should meet with the NPA – the public expected to see people face consequences for PPE corruption.
She asked about the so-called “door-to-door” matter involving the OR Tambo municipality, in which there had been a default judgement followed by a rescission (see slide 27 and 43). What had been the basis for the application for rescission? The process would be prolonged if this sequence was repeated in other cases.
Dr Wells replied that a default judgement had initially been granted. However, the respondent had subsequently approached the Special Tribunal and raised certain inadequacies on the part of its legal representation. The judgement had been rescinded on that basis. The Tribunal would now set a trial date, and the matter would probably be heard in the first quarter of 2022.
Adv Mothibi agreed that the SIU had to be vigilant about rescissions. Of course, the court made the decision, but the SIU ensured that they were not just granted “willy-nilly.”
Ms Van Minnen said that the briefing had not been clear about the Beitbridge Border matter (see slide 33-34). Could the SIU clarify? There currently seemed to be a lot of “legal theatre” in that matter.
Dr Wells replied that the SIU had applied to interdict or restrain the respondents from claiming the relevant funds, and to secure a commitment that the respondents would not claim the outstanding funds owed to them. Usually such an application would be accompanied by an application to review the setting aside of the contract, but that had not occurred in this case. The SIU had subsequently withdrawn the initial application because it had reached an agreement with the respondents. The terms of the agreement were that the respondents would not enforce the provisions of the contract and demand payment, and the SIU would bring a review application concerning the setting aside of the contract. The SIU had thus brought such an application. Before that review application was heard, however, the respondents brought an interlocutory application challenging the jurisdiction of the Special Tribunal. The interlocutory application had been dealt with successfully – the judge had confirmed that the Tribunal had the jurisdiction to hear review applications and to order remedies in terms of Section 217 of the Constitution. Thereafter, between 4 and 8 October, the review application itself was heard. The judgement in respect of that application was reserved. In summary, the application to interdict had been settled, and the jurisdictional point had been dealt with; the review application had been heard but judgement had not yet been delivered.
Ms Van Minnen asked about the extent of actual recoveries of funds and assets. How much was subject to a court order at this point, and what steps were being taken to reclaim further funds?
Dr Wells replied that most of the orders granted involved setting aside the contract or restraining pension funds. The presentation recorded the “value” of those orders (see slide 42-44), which was either the value of the contract or the value of the pension benefits. For example, in SIU v Fabkomp and others, the R10.15 million contract had been set aside – the department in question had not yet paid that contract, and it had been interdicted from doing so (see slide 43). Likewise, in SIU v Modiko Thabang Selemale and other, the order had frozen a pension worth R100 000 (see slide 44). In other cases, the “value” of the order might be funds that had been preserved.
Answering the implied question about how the orders translated into actual recoveries, he said that the actual amount was subject to litigation. Most of the matters listed were still being litigated, in order to establish just and equitable relief. The granting of the order was thus not necessarily the conclusion of the matter. For example, in SIU v Selemale, the order had restrained or preserved the pension worth R100 000, but the SIU had had to issue summons to recover the damages in excess of R100 000. So there was pending litigation in which the SIU would have to demonstrate what was just and fair compensation for the losses that the relevant department had suffered. Thus the same matter was also listed elsewhere in the presentation, alongside other matters ongoing in the Special Tribunal (see slide 41).
Adv Mothibi added that the SIU’s final report would clearly indicate “money in the bank” or concrete recoveries. The total value of orders granted was about R174.5 million, but Dr Wells and the rest of the legal team continued to work on those matters, because the orders had to be executed. As indicated by Dr Wells, the next steps depended on the nature and content of the order granted. These were indicated as “next steps” in the presentation (see slide 42-44). For example, if the order related to the payment of a contract, then it might be an interdict preventing the relevant department from making further payments. Thus the presentation also listed losses prevented – funds that the SIU had prevented the state from paying out. Those amounted to about R114.2 million (see slide 84). Generally, when the SIU found irregularities in a contract, it instructed the relevant state institutions not to pay the funds out anymore, subject to an application in the Special Tribunal to set the contract aside. Once the SIU received an order setting the contract aside, then the funds would finally not be paid out – essentially, payment would then have been cancelled, as opposed to only suspended. Thus when an order interdicting payment was granted, the main case still had to go to the Special Tribunal so that the contract could be finally set aside. Dr Wells had used the example of SIU v Fabkomp, also known as “Scootergate.” In that case, the SIU had met with the provincial leadership, who had said that the funds had not been paid out to the service providers. But the SIU had not left the matter there, because it wanted to address all the legal risks. Thus it had gone to the Special Tribunal to ensure that the contract itself was cancelled. Once the contract was cancelled, the state had legal certainty that it would not have to pay those funds.
He said that there was also a list of actual cash or asset recoveries (see slide 81-82), secured primarily through acknowledgment of debt agreements – those were listed separately in the presentation in order to frame another process that the SIU used to recover funds. In general, many matters were still under adjudication, as the presentation showed. The SIU had to make sure that all the processes were carried to their conclusions, but it understood the need to extract areas where it was certain that funds had been recovered and were being paid back. Thus the presentation highlighted R32.55 million in actual recoveries; R114.2 million in losses prevented, subject to adjudication by the Special Tribunal; and orders granted to the value of R174.5 million.
Ms V Mente (EFF) asked what recourse the SIU had when it found evidence of irregularities or misconduct, but the relevant state institution refused to act on the SIU’s referral because it was satisfied that there had been no irregularities or misconduct.
Adv Mothibi replied that the SIU engaged repeatedly with such institutions. However, at the same time, a state institution’s decision not to take up a referral was an administrative action, and the SIU reserved the right to review that decision. If the SIU was not satisfied with the institution’s response, it recruited its legal team to take steps to review it – the review process was the SIU’s immediate legal recourse in such cases. However, there had not been many cases where that had been necessary.
Ms Mente asked what resource the SIU had when there were matters that the NPA was “taking forever” to prosecute. It appeared that the PPE issue was not being treated with appropriate seriousness. The NPA and state institutions seemed to have a “laissez-faire” attitude in this regard. She acknowledged that there were remand dates for some matters, but there had not been successful prosecutions so far. How did the SIU ensure that culprits were successfully prosecuted?
Adv Mothibi replied that the SIU and the NPA had signed a memorandum of understanding (MOU). Under the MOU, both the SIU and the NPA had to review all the referred cases to assess progress and so on, and the SIU was available to provide additional evidence if the NPA needed it. In practice, the NPA usually referred matters to the Hawks if additional evidence was required. Thus the Hawks were now being brought into the MOU. The SIU would copy the Hawks into the referrals it sent to the NPA, which would help facilitate administrative efficiency. When additional evidence was required, the SIU worked closely with the Hawks. The briefing had provided updates on various cases, and the SIU would continue to follow up with the NPA in the context of their MOU.
Mr B Hadebe (ANC) said that he welcomed the report and the progress that had been made, but he was also concerned. In past meetings, he had registered his concern about the delays in concluding the 274 referrals for administrative action. This report also painted a bleak picture in that regard. Some referrals had been made in November 2020 and now, over a year later, remained “under consideration” at SAHPRA. He did not understand how it could take longer to consider blacklisting than it had taken to investigate the matter and make findings. Why was it taking more than a year to consider these referrals? There had to be some fundamental obstacle which the Committee was not aware of and which was causing the delays.
Adv Mothibi replied that the SIU shared Mr Hadebe’s concerns about the slow pace of blacklisting, such as at SAHPRA and the Competition Commission. The matters referred for administrative action were not handled “end-to-end” by the SIU. An example of an end-to-end SIU process was the civil litigation process – the SIU handled those matters from beginning to end. Whenever it referred matters to other entities, inefficiencies began to crop up. However, it was of course the regulators who had the authority to take administrative action. He suggested that the Committee could meet with SAHPRA and the Competition Commission directly to probe the delays. The state institutions themselves also had a key role in the process – the SIU made referrals to the state institutions who had contracted with the relevant service providers, and it was those institutions which had to decide to take action and blacklist the service providers.
He said that there was potentially another option, which was for the SIU to take on the process, instead of merely referring matters to the other entities. If the SIU could assist in processing the administrative actions, it would certainly do so diligently and ensure that the matters were concluded quickly. It could either directly institute the administrative actions itself, or it could work with the state institutions on processing the actions. He proposed that the SIU should look into this option and obtain legal advice as to whether, as an interested party, it had the legal standing to institute the blacklisting process. It could report back to the Committee on Friday.
Mr Hadebe was concerned that the companies referred for administrative action might still be contracting with the state while the referral was under consideration. Were such companies still participating in tender processes or otherwise benefitting from the state? Was there no way of preventing that from occurring? He understood the principle of the presumption of innocence, but, in this case, he thought that there should be some kind of a moratorium on the companies until the relevant matters were resolved.
Adv Mothibi replied that it was possible that such companies were still doing business with the state, which was undesirable. The SIU could check – it would consult with Treasury and report back to the Committee. In general, delays in blacklisting and other regulatory interventions sent the “wrong message” to companies.
Mr Hadebe was also dissatisfied about the referrals for executive action (see slide 66-67). In every case, the relevant official had left his office – for example, two MECs had been discharged from office. Was that the outcome that the SIU wanted when it made referrals for executive action? Was it satisfied with that outcome? Once someone resigned or was discharged, he faced no further executive action or consequences. Mr Hadebe did not think it was adequate and proportionate punishment for an official to be released from his duties without any further consequences, especially when his actions had damaged the reputation of his organisation and of government.
Adv Mothibi replied that, in his view, resignation was not sufficient. As a principle, a resigned official should not be absolved from wrongdoing nor shielded from civil and criminal action. That principle should be applied consistently to everybody, whether an official or an executive authority. People should be subject to criminal charges or to civil litigation as merited by the evidence, even if they had since resigned from their positions. The SIU had cited former executive authorities in court papers at the Special Tribunal, and it had also made referrals to the NPA.
Ms N Tolashe (ANC) said that, as always, she appreciated the comprehensive report and the progress that the SIU had made – a lot of work was being done. She had also wanted to ask about the recourse when an official resigned. She thought that SCOPA should get involved in matters where the implicated individual had resigned without being subject to further action. It should ask whoever was responsible to explain the rationale for allowing the individual to evade consequences – especially if that individual had been implicated in corruption.
She said that she was pleased that the SIU did not report any legal obstacles to its own work, but she was concerned about the very slow progress at the NPA. She would like the NPA to brief the Committee on its COVID-19-related cases. The Committee had to be made aware of any challenges that the NPA faced, so that it could help address them.
She was also concerned about cases where referrals had been made to state institutions or executive authorities who were not doing much to take action or who had decided not to take action at all – for example, because the official was viewed as a consultant rather than an employee (see slide 47). She thought that, in such cases, the relevant decision-makers should be called before SCOPA to explain their rationale and to be warned that they would be held accountable if they became obstacles to eradicating corruption. She knew that in their State of the Province addresses, every premier had committed to fighting corruption, so they could not allow corruption to take place under their watch. There were also disciplinary referrals that the SIU reported were still under consideration by the state institutions. How long was required for consideration? She was worried that the institutions would not be able to implement disciplinary processes if they delayed too long, because the law set out clear timeframes for such processes. In general, when the SIU encountered obstacles among political heads or officials, those individuals should be summoned to the Committee, so that the Committee could help the SIU to do its work. It should hold those meetings as early as possible in 2022, if not this year. A year from now, there had to be demonstrable progress in fighting corruption, especially PPE corruption. The public were beginning to worry about the pace of the state’s efforts in this regard.
Similarly, she agreed with Adv Mothibi that regulators like SAHPRA should be called before the Committee, alongside Treasury, to account for their progress on blacklisting service providers. She was not sure what the regulators’ “excuse” was. They should appear before the Committee to explain the delays and share the challenges they were facing, as well as how and when they planned to overcome those challenges. The companies that had been referred for blacklisting – including those which had allegedly defrauded the government – were presumably still doing business with the government. This was how most corruption occurred – companies took advantage of the weaknesses in the government’s controls, and were effectively allowed to “do as they wish.” The relevant administrative processes were carried out by human beings, not by machines, so the Committee could and should speak to the individuals who were not doing their jobs. It was unacceptable for it to take more than a year to make a determination about blacklisting.
She said that this part of the process was out of the SIU’s hands, so she did not think the Committee should waste its time pursuing the delays with the SIU. However, the Committee had the power to summon anybody who appeared to be involved in corruption or who appeared to be failing to act against corruption. The SIU had done its part, and now other government entities had to do their part, but, currently, they were not. The Committee should meet with the other entities to get the full picture and identify any obstacles to eradicating corruption, especially in respect of the PPE procurement contracts. The public wanted to see people imprisoned for their role in corruption.
Adv Mothibi replied that the SIU appreciated Ms Tolashe’s words of encouragement. It would continue to do its work, including by following up on matters that it had referred to other institutions. The SIU was an “interested party.” It had spent money on the investigations and therefore was invested in their outcomes. That was why it continued to follow up with the other institutions, and that was why it was preferable or even ideal for matters to be referred back to the SIU if more evidence was required.
The Chairperson said that over reliance on the tender system was a big problem for the South African economy. The tender system allowed businesses to grow “willy-nilly” – overnight, a business could be registered and begin to function through tenders. There was, of course, a need to expand access to business opportunities. Yet some of these companies could not even be traced to a physical address – they ran from somebody’s bag in a restaurant in a mall. The tendering system was not building the capability of the state, nor was it building the capability of businesses. It was a “quick money-making scheme” with poor checks and balances, if any at all. It did not ensure that businesses, economic growth, and development were viable and sustainable. It was a major problem. He could register a business by that afternoon and submit a bid tomorrow – if he was well connected, he would receive a tender by Friday. The state did not verify the credibility, integrity, and “legitimacy” of the businesses that it contracted with. Knowledge, skills, and expertise were overshadowed by political connections and political expediency. It was a major problem and was derailing the country’s developmental agenda. The tender system created unnecessary “middle men,” and inflated costs – there might have been instances where masks had cost the state R50 instead of R10, because the state was “beneficiating incorrectly.” The country would not grow its economy by “throwing money at so-called businesses.” Addressing these challenges would require attending to questions of business integrity. Did the current tender system not contribute to the problems that were currently evident? He assumed that the SIU would have to consider that question in its final report.
Adv Mothibi replied that the SIU would of course comment on the tender system in its final report, especially in the context of the Public Procurement Bill. Through its investigations – not only into PPE procurement but in all its work – the SIU had gained a lot of experience of irregularities and corruption in the procurement system. Almost 95% of all SIU investigations focused on irregular procurement processes. Corrupt individuals and entities targeted the procurement system for obvious reasons – that was how they could gain access to the state’s money. The SIU would certainly take a position in its final report. It was necessary to seriously review and reconsider the current system, so that appropriate measures could be implemented to prevent corruption in the future.
The Chairperson said that, just as Ms Tolashe had said that administrative processes were run by people, businesses were run by people. Yet the state did not blacklist people. If the state blacklisted one company, but not the other five companies that belonged to the same individual, that individual remained in the tender system and could continue to exploit its vulnerabilities. That was an issue that had to be dealt with. Perhaps the state should blacklist individuals, so that they could not resurface under a new business as though they had not previously been part of a corrupt company.
Adv Mothibi replied that the Chairperson’s suggestion reminded him of the concept of piercing the corporate veil, which was well established in company law. The concept applied when the court decided to hold the directors of a company directly accountable for the company’s misconduct. Thus directors could be declared delinquent and so on. It was not far-fetched that once a company was blacklisted, one of its directors might establish a new business and continue to contract with the state under that guise. He thought that there was an opportunity to hold directors accountable. The SIU would take the Chairperson’s proposal seriously, and its legal team would review the blacklisting process as it worked towards its final report. As he had said, the final report would outline the risks that the SIU had observed around the tender system, as well as possible mitigating strategies, and it would also endeavour to contribute to the legislative process in respect of reviewing existing public procurement legislation.
The Chairperson said that the Committee looked forward to the final report. He wanted to take up an issue that Adv Mothibi had alluded to earlier – what costs had the SIU incurred so far during its investigations? Also, during the briefing, Adv Mothibi had mentioned the SIU trust account. How much was in that account?
Adv Mothibi replied that, while preparing the presentation, he had not received indication that the SIU’s current costs differed materially from the costs it had reported in previous meetings with the Committee. However, he needed to confirm both the costs and the status of the trust account. He suggested that the SIU could respond in writing on Friday.
The Chairperson agreed. He also thought it would be appropriate for Adv Mothibi to comment on the investigation that the Public Protector was conducting at the SIU. The Committee principally wanted to ascertain whether the SIU was cooperating with the investigation. Very serious allegations had been raised, and transparency was important to guard the SIU’s integrity.
Adv Mothibi said that the Public Protector’s investigation was mainly based on a letter that a former SIU employee had written in August 2020. That letter had been sent to the President and to the SIU’s executive authority, the Minister of Justice and Correctional Services, and the same letter had now been sent to the Public Protector. The Minister had already investigated, and had provided feedback to the SIU on the outcome of the investigation. The same letter had also found its way into the Sunday Times in 2020, and the SIU had responded. Likewise, the SIU had cooperated with the Minister’s investigation and was now cooperating with the Public Protector.
He said that the SIU was satisfied that every allegation in the letter was baseless. The letter’s intent was to damage the SIU’s reputation, but he guaranteed that integrity, good administration, and good governance were at the centre of the SIU’s work. The letter referred to some former employees who had since left the SIU, and it raised a point which he thought the Committee had asked about in the past, involving PPE procurement valued at around R36 000. The Auditor-General had looked into the procurement matter and had concluded that there were no irregularities. In short, the SIU would cooperate with the Public Protector, and it was confident that it would be able to demonstrate beyond any reasonable doubt that there was no basis to any of the allegations in the letter.
The Chairperson said that the Committee would await the outcome of the investigation. He said that at a recent meeting about the Unemployment Insurance Fund (UIF), the Committee had asked the SIU to meet with the UIF within ten days. Had that meeting been held or scheduled?
Adv Mothibi replied that the SIU had met with the UIF on Friday. There had been a dispute because the acting Commissioner had said publicly that the SIU had not finished investigating about 6 000 employees. However, in the meeting on Friday, the SIU had provided evidence that it had investigated those matters, and the Commissioner had apologised. He was glad that the Chairperson had raised the issue, and he looked forward to the Commissioner having an opportunity to retract his statement on the record.
The Chairperson reminded Adv Mothibi that he had asked the SIU and UIF to send the Committee a briefing note after they met – that was outstanding. He thought it was important to provide clarity on the dispute, to avoid confusing the public and unnecessarily undermining trust in state institutions.
The Chairperson acknowledged Members’ suggestion that the Committee should follow up with various departments and entities. He suggested that the Committee should pursue that after its meeting with the Presidency the next evening. The Acting Minister in the Presidency had written to the Committee to say that the Presidency was not in a position to talk about the SIU reports on PPE procurement, because the reports submitted to date were only progress reports and the final report had not yet been submitted. The Presidency had wanted to postpone the meeting on those grounds. However, the Chairperson disagreed strongly with that position. In the six progress reports, the SIU had made substantive and final findings, and those required action – even if one wanted to call it “progress action,” for lack of a better phrase. He thought it would be reckless, irresponsible, and a dereliction of duty for the government not to address those matters until the end of the process. He had therefore decided that the meeting had to proceed. The Presidency received and was custodian of all SIU reports, and the Committee needed to know how it planned to respond to the findings. To commission investigations without acting on their outcomes was “fruitless and wasteful expenditure.” He did not approve of the “kicking for touch” he was observing.
He said that, after meeting with the Presidency, the Committee would schedule the follow-up meetings that Members had suggested. He guessed that those meetings would take a whole week, given that there was a long list of municipalities, departments, and entities that the Committee would have to meet with. He asked the Committee secretariat to work with the SIU in going through the six SIU reports to select areas of consequence management in which referrals had been made. The meetings would probably take place after the recess in early 2022 – perhaps the second week of February. He thanked the SIU delegation for the update and for their good work.
He said that, the next day, the Committee would also attend a joint meeting with the Standing Committee on the Auditor-General, at which the Auditor-General would brief Members on the PFMA audit outcomes. Because the Auditor-General was briefing Cabinet in the morning, the joint meeting would start around 11 a.m. The Chairperson suggested that the Committee should meet at 9 a.m. to adopt its outstanding minutes and reports.
Mr S Somyo (ANC) asked whether there would be any value in meeting with the Presidency the next day in the absence of the Minister in the Presidency, who had accompanied the President on his trip to West Africa. Why had the Committee not agreed to postpone the meeting until the Minister could be present?
The Chairperson replied that, to his knowledge, the Minister would return in time to attend the meeting. He had not been notified to the contrary. Mr Hadebe had raised an important point about the turnaround time for the implementation of the SIU’s recommendations. This was the SIU’s sixth report on PPE procurement, and, as Mr Hadebe had said, some of the matters were more than a year old. In the interim, executive action had been taken, a minister had resigned, and so on. The Committee’s view had been that it needed to assess whether the SIU reports were being implemented, and it was the Presidency, which received the SIU reports, which led the implementation. That had been the rationale for arranging the meeting with the Presidency. However, the Committee could decide to postpone, and instead meet with the Presidency after the SIU had submitted its final report.
Mr Somyo said that he did not disagree with the rationale for holding the meeting, but the Committee should ensure that it used its time wisely, so it should confirm that the Minister was going to attend.
Ms Tolashe proposed that the Committee should proceed with the meeting if and only if the Minister attended. That approach would accommodate Mr Somyo’s concerns as well as the Chairperson’s. The Committee was entitled to assert its authority – the Presidency had been “duck-and-diving” when the Committee sought to meet with it. That seemed incorrect, and the Committee should in fact raise that directly with the Presidency.
Mr Hadebe suggested that, after the meeting ended, the Chairperson could ascertain whether the Minister would be present, so that Members knew before the end of the day whether the meeting was going to proceed. He agreed that such a meeting was overdue.
The Chairperson asked the Committee secretariat to confirm that the Minister himself, not the acting Minister, would attend the meeting. The Committee would communicate with Members once it had received a response. Ms Tolashe was correct that it had been difficult to secure a meeting with the Presidency on the SIU matters, and that was disheartening. The Presidency was also handling the matter involving the Director-General at the Department of Public Works and Infrastructure.
He said that Members probably had to be released to prepare for the important debate, occurring shortly, on the Constitution Eighteenth Amendment Bill.
The meeting was adjourned.
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