Irregularity allegations in WCED IT tender award; with Deputy Minister

Meeting report

The Chairperson welcomed the Department of Communications and Digital Technology (DCDT), the Western Cape Education Department (WCED), the State Information Technology Agency (SITA), and Cliffe Dekker Hofmeyr (CDH). The meeting had been convened to address allegations of tender irregularities in awarding an information technology (IT) tender by the WCED. The Committee needed to investigate what had transpired with the allocation of this particular tender, to check if all laws were abided by, and to see what current actions were being taken to address the alleged irregularities. 

WCED presentation

Mr Ian Steyn, Legal Advisor: Department of the Premier, Western Cape government, addressed the tender award by the WCED to Blue Network Consortium (BNC), the subsequent SITA investigation, and the CDH forensic report. 

He said the WCED required local area network (LAN) services for schools in the Western Cape, and SITA, as the procuring entity, had issued a bid to the market. WCED officials had served on the SITA bid specification and bid evaluation committees. SITA had recommended that the WCED award the tender to BNC. According to the WCED, they were not aware of any irregularities when making the award, and the contract between BNC and the WCED remained in place. 

The WCED was advised by SITA concerning allegations of tender irregularities, and had assisted with the investigation, and government officials were interviewed by CDH. The WCED subsequently requested supporting documents and information from SITA. 
In December 2023, SITA had advised the WCED to launch court proceedings, which were withdrawn by SITA in April 2024. The SITA forensic investigation was conducted by CDH, which identified certain irregularities within the tender procurement process, but found no findings against WCED officials. The WCED had not accepted the findings and recommendations made in the CDH report. The Attorney General of South Africa (AGSA) had also found that the tender process may constitute reviewable irregularities. 

According to the WCED presentation, there was no legal basis for terminating the BNC contract, and it produced no adverse effects on the WCED education mandate. It claimed that no unsuccessful and aggrieved bidders had challenged the WCED tender award, and said that it would continue to honour the contract unless valid reasons forced them to terminate it. The WCED was considering the findings of the AGSA. 
[Refer to presentation document attached for more details]

SITA presentation

Ms Makano Mosidi, Chairperson of SITA, and Mr Matodzi Ratshimbilani, non-executive director, conducted the SITA presentation. 
Ms Mosidi said that, through a round robin resolution process, SITA had recommended to the WCED that the tender be awarded to BNC. She said that before the previous SITA board was dismissed, they had been requested to investigate possible irregularities within this tender, which was subsequently given to the current board. The CDH forensic report had been seen as a draft report that had not yet been finalised. The SITA board took a resolution to get a legal team to review the CDH report. The completeness of the report was important to SITA. The erstwhile board of SITA deliberated on the issue and resolved that those implicated would have a chance to respond, the draft report would be shared with the WCED, consequence management would be followed, and they would reconsider the decision to recommend BNC.   

Mr Ratshimbilani addressed the findings of the CDH report. Four irregularities were presented in the CDH report, including alternative solutions and two pricing options, local content, the disqualification of Dimension Data, and issues with the board round robin process for approval. CDH themselves had never presented this report to the erstwhile SITA board. One of the recommendations was that SITA should do a process of self-review, but he said that it would not be possible to review a process that was ultimately decided by the WCED. 

Mr Ratshimbilani explained the Senior Counsel legal opinions on the CDH findings. On the two-pricing irregularity, counsel did not find grounds to constitute an irregularity. On the issue of local content, the counsel requested the guideline that the Committee had before them to determine whether they were at liberty to determine bids under this rubric in the manner they had. This would have helped counsel to determine if this ground would be sustainable. This information was never given to counsel. 

On the issue of the disqualification of Dimension Data, the counsel agreed with CDH. This disqualification was led by the WCED. On the round robin resolution, SITA was not able to sustain the irregularity allegation as grounds for a review before the courts, because the board had subsequently ratified it. Mr Ratshimbilani said that there were a number of contentious legal conclusions to the issues, and that the SITA board was still deciding how they ought to proceed. 

Mr Mondli Gungubele, Deputy Minister of Communications and Digital Technologies, said that some SITA board members were interested in contributing to the discussion, which was allowed by the Chairperson. 
Mr Luvuyo Keyise, non-executive director of SITA, wanted to put on record that the slides presented by Ms Mosidi were not approved by the board, and wanted to record his discomfort with the information presented. The board was conflicted on the information presented. He said that other board members accepted the recommendations of the CDH report, and recommended that the current report and recommendations be given to the Special Investigating Unit (SIU). 

Deputy Minister Gungubele said that the CDH recommendations should either be taken on by the SITA board, or that the matter ought to be resolved in court. The current board was “doing something in between” by not taking it to court while also rebutting it. 
[Refer to the presentation document attached for more details]

CDH Presentation 

The CDH presentation was conducted by Ms Tendai Jangara, director at CDH, Mr Hilary Chapfuwa, forensic accountant at CDH, and Ms Yvonne Mkefa, director of CDH. 

Ms Jangara said CDH had been brought in to investigate accusations of irregularities within the tender process. SITA had asked CDH to assess the entire procurement process. It was important to note that there had been a previous procurement process for these services in the past, but it had been cancelled due to irregularities. Ms Jangara commented that, regarding the current irregularities, some board members did not avail themselves for the processes undertaken by the CDH. 

Mr Chapfuwa went through the procurement process. Bids were opened to bidders for the tenders and were to be submitted to SITA, and various extensions to the closing date were made to the tender process for various reasons. Ten of the 11 bidders had made it to the next stage. Three bidders were successful in the following stage, and then two bidders continued, and eventually, the award was made to BNC. 
Ms Jangara explained the irregularities identified by CDH. The first irregularity concerned the alternative solution and two pricing options. BNC was the only bidder that submitted two pricing options, which was seen as an anomaly. Bidders were allowed to propose alternative solutions to the existing Xirrus IT solution, but this alternative solution was ambiguous. Bidders were also required to submit specific forms which BNC did not fully complete. The two pricing options allowed both BNC proposals to be evaluated, which was viewed by the CDH presentation as “unfair and uncompetitive,” as bidders were “not evaluated on an equal footing”. 

Ms Jangara said that bidders were required to confirm compliance with local content requirements, with a prescribed local content target of at least 90%, with a failure to complete the document resulting in the disqualification of the bid. This requirement was neither vague nor ambiguous, as three bidders had responded correctly. Other bidders had declared the local content of the electrical cables, together with other non-designated products used in the project which were not supposed to be declared. This resulted in a local content percentage which was lower than the prescribed minimum of 90%, which was considered a ‘hybrid’ model. 
The third irregularity concerned the disqualification of Dimension Data. Ms Jangara said that CDH had found that Dimension Data was unfairly disqualified from the bidding process.  

The fourth irregularity concerned the board's round robin process for approving the recommendation for the award. Eight of the 14 board members(57%) had voted in favour of the resolution in a round robin process. The Company Secretariat had incorrectly tallied the votes and incorrectly deemed the process to be complete. The written resolution was also not signed by all members of the board, making it inoperative until the board confirmed it. It therefore remained inoperative until its ratification on 30 May 2023. The voting did not meet the minimum threshold of 70%, as prescribed by SITA's Memorandum of Incorporation (MOI), meaning that SITA had not complied with its own MOI and governance processes. 

CDH had provided recommendations for the SITA board to reevaluate its recommendation of the tender due to the aforementioned irregularities. It claimed that the SITA board members should fully engage with the procurement processes, and those who awarded the tender should be held accountable. The Company Secretariat and executive should also be held accountable for their roles. CDH had also recommended that all tenders be drafted with clear and unambiguous language so that all bidders have equal opportunities. 

[Refer to the presentation document attached for more details]

Discussion

Ms L Ngobeni (Action SA) thanked the Committee and the Chairperson for the speedy response in bringing this matter to their attention. She also thanked CDH for the thorough nature of their forensic report. She noted the importance of bringing these matters to their attention so that their recommendations could be addressed. 

Despite the identified irregularities, she wondered why the WCED had been nonchalant about proceeding with this tender. She was also interested in finding out more information about BNC, as no specific details about them were available. She also wondered why BNC had received the tender despite not having completed certain forms, and agreed that the situation may need to be dealt with by the SIU. 
She said the Committee should know who in the WCED was involved in the tender adjudication process. In the past, tenders were developed to suit particular ends, and she worried that this could be such a case. BNC was the only bidder who had a two-pricing option anomaly and still got awarded the tender, which needed to be investigated. She was also curious why the Minister was not in the meeting to provide further information regarding these irregularities. She said that “heads must roll” to ensure correct and future accountability. 

Mr S Louw (ANC) wondered why the SITA board had attempted to contest the conclusions of the forensic report brought by a reliable legal organisation like CDH. It was clear that the advert for the bid did not include the chance to include two pricing options, and the WCED had been selective in its assessment of these issues and continued with the process, despite these anomalies. He said that the role of all those involved, including officials and SITA board members, should be investigated, and that they should write to the Hawks and the SIU to take this matter further. 

Ms C Jordaan (DA) brought up a point of order, saying that the use of the word “hardegat” (used by the previous two speakers) was not a good word to use in parliamentary settings, and said that the word “stubborn” would have been preferable. She asked that the previous word be withdrawn. 
The Chairperson said it would be valuable to ascertain the literal meaning of the word, which she assumed to mean ‘stubborn’. She asked the support team to check if any other literal meaning of the word existed to assess whether it was inappropriately used in a parliamentary setting.  

Ms Jordaan was concerned about the differing views within the SITA board, and agreed that the SIU or the courts should get involved. She also asked about the information that bidders received during the bidding process. What had SITA done to ensure that the requirements for the bidding process were unambiguous? She referred to the importance of oversight of the SITA board, and wondered whether there were any conflicts of interest between the SITA board and the winning bidder, and whether these disclosures had been made. 

Dr D Christians (DA) noted the WCED’s refusal of any claims of irregularities regarding the awarding of the tender, and acknowledged that the Department had conducted its internal processes with due diligence. She said that while CDH had highlighted procedural irregularities, they did not implicate specific people in these irregularities. Given the importance of the issue, it was important to assess the CDH report and not only address the procedural technicalities, but how they affected the material results of the process. Conclusions should be drawn based on solid evidence and not procedural technicalities, and these technicalities may not have any material impact on the fairness of the procurement process. Considering the CDH report, could CDH please provide the Committee with specific examples of how these irregularities materially affected the fairness and competitiveness of the procurement process? How did the refusal of certain SITA officials to participate in the investigation impact the reliability of the CDH findings?

Ms Ngobeni said she had not intended to offend the Committee with vulgar language, and said that she understood the meaning of the words that she used. She expressed her commitment to representing the people of South Africa, and not just her political party. 
She said that SITA was a problematic entity that needed to be brought to book. Its systems were outdated, and they needed to be held accountable to many bodies of government for how they managed their business. SITA could not be left unanswerable to this Committee, and should be held responsible for their shortfalls. 

The Chairperson read out the concerns of Ms P Ncube (MK), who was having internet connectivity issues. Ms Ncube was interested in why the WCED continued to honour the awarding of the tender and to continue to support corruption. How did the Department justify working with companies that did not comply with tender processes correctly? What corrective measures had been taken to ensure that corruption was addressed in tender processes? 

The Chairperson also aired her own concerns and comments. She said it was unfortunate that the SITA board had come to the Committee with disagreements about the SITA presentation. She also agreed that the Minister should have been in this Committee meeting to respond to this issue and provide information to the public. SITA was critical for IT resources across many departments, but she questioned whether the current board was fit for this purpose. Regarding accountability, should the board not be held accountable if it was the body that recommended the tender to the WCED?

She claimed that the board appeared not to be impartial in awarding the tender and said that their appointment of a legal firm could not be seen as an unbiased action either. She also asked why SITA had withdrawn the court application concerning the tender process. SITA lied to the Committee when they said the CDH report was incomplete. CDH had said that the report was complete and if SITA did not agree with its findings, they should have taken the situation to court. She claimed that the legal team brought by SITA had been a way of covering up the issue. 

The Chairperson said that SITA was denying facts about the tender procurement process. There appeared to be many loopholes and lies within the SITA presentation. Mr Ratshimbilani had been part of the committee that approved this process, which was a conflict of interest. 
She said that the two-pricing issue was an immediate red flag, but the process had nonetheless continued despite knowledge of this irregularity. SITA had to be aware of this as the party that set the criteria. This had material consequences, as it had put BNC at a greater advantage compared to other bidders. The tender was still awarded to BNC despite this anomaly, and therefore officials affiliated with this process could not be exempt from accountability. 

The Chairperson noted the importance of the requirement of local content as a way of empowering local producers. Bidders saw this requirement as discretionary. Why was it considered a requirement in the tender process if it was discretionary? Regarding the previous dismissal of members of the SITA board, she asked how some members were allowed back onto the board without due process. She wanted more information about how the issues within the SITA board were being handled. 

This tender affected the provision of educational services that could affect the quality of learners’ education. Answers needed to be provided to this issue, and other advisers were required to probe this issue for the sake of accountability. She said that the tender should be cancelled if there were serious irregularities. She was concerned about the instability of the SITA board, and said that some things that were told were lies and needed to be clarified. 

Responses

WCED

Mr Steyn said that the contract between the WCED and BNC was still in place, because the current irregularities were not viewed as constituting an overturning of the tender award by the Senior Counsel. The WCED could act only if there were reviewable irregularities that took place in the process, and it was still reviewing the situation. It did not intend to absolve itself of responsibility, as it had followed internal processes and based its decision on SITA’s recommendation. 

The Chairperson said that the fact that there were no reviewable irregularities was confusing, as the presentation had found issues that could constitute probable irregularities. 

Mr Steyn said that the findings of the CDH report became available to the WCED only a few months after the award was made to BNC. Some findings overlapped between the CDH and AGSA reports, and the WCED was still working on reviewing these findings and assessing what should be done about the contract. 

The Chairperson rebutted the contention that the CDH report was received two months after the contract was awarded to BNC, but the expenditure of the tender was not halted. Despite possible irregularities with the tender, the WCED did not halt the process. 

SITA

Ms Mosidi said that the nature of the SITA board, as it stands, was not by their design. All individuals on the board were competent and aimed to be transparent. They had received evidence that the CDH report was a draft report and thus incomplete, as a SITA director was still being pursued for an interview by CDH. Regarding the withdrawal of the court application, she said that members on the board during that time would be better suited to answer questions on the withdrawal. While the CDH report should not be set aside, it should be completed before decisions are made. 

The Chairperson asked whether or not Mr Ratshimbilani had a conflict of interest in the tender process. 

Ms Mosidi said that she was unable to answer with certainty, as everyone had had a hand in the process. She acknowledged the importance of transparency if anyone had conflicts of interests, and said that a court review may be necessary. 

Mr Ratshimbilani said that whatever issues the board SITA board may have, they were the accounting authority in the situation. There was no other board to deal with the situation, and they therefore could not abdicate their responsibility. There was conflict, but it was not hidden, and they were attempting to remedy the issues within SITA’s board. The board still needed to decide on a conclusion from the current information. As it stands, no final decision has been made, but they are in the process of finalising the issues. Regarding the withdrawal of the court application, he was unable to answer at this stage, but he was of the strong view that it was not possible for SITA to review that part of the contract, as administrative action was taken at the client level, but they stood to be guided and would pursue the issue. 

Ms Nolitha Pietersen, a member of the SITA board, said she believed herself to be the only board member that had been there from the start of the issue. It had been obvious that there was conflict within the board, and concerns were indeed raised, but it was a minority view which had been “drowned out”.

She said that the board could not reach a consensus regarding SITA’s involvement in the tender procurement process. She worried that the SITA board was too involved in the process. She reiterated the fact that while there were conflicts, opinions were split when it came to this issue in particular. She also noted that two months remained of the board's term, which had the potential for amending issues within the board. She said the previous managing director (MD) had been suspended at a particular committee meeting because of things said, and she was worried that this could happen again. It was important to protect the role of the MD to ensure accountability. 

Mr Keyise said that the Western Cape government had received the final report from CDH even before BNC could start doing any work. Regardless of when the contract was signed, they had the necessary information. The Western Cape government was asked to be cautious since they had the information from the report. He said the WCED would not have entered into a contract with BNC without SITA’s recommendation, and that the WCED had no interest in going to court about the issue. He said that more information was required regarding board suspensions as people could not be suspended and reinstated without explanation. All of those decisions had been made without basic information from the MD. He hoped the Minister would ensure that CDH recommendations were implemented, as they had not yet been set aside in a court of law. 

The Chairperson said that people should be protected in committee meetings, and that information given in meetings should not serve as a basis for disciplinary action. 

Mr Simphiwe Dzengwa, MD of SITA, believed that SITA and the WCED should have gone to court together, and proposed that they go for a declarator at court and request jointly that educational services continue until a new tender was put in place by SITA. Issues related to the tender should be addressed and the shortcomings identified by CDH should be attended to, and both parties should support each other rather than being on opposing sides. 

He believed that if SITA and the WCED worked together to address this issue, it would ensure that school children were not disadvantaged. It was on this basis, for the sake of working together, that the court application had been withdrawn so that discussions could jointly take place. However, the WCED had decided not to challenge the matter in court. He therefore appealed to the ministry and the Committee for aid on this issue. He feared that a court process would take long, and that the entire tender budget would be spent by the time the issue was properly addressed.  

Regarding the SITA suspensions, Mr Dzengwa said that there were resolutions taken by the board that the suspended colleagues be brought back. No details were provided about whether the charges had been dropped or not. He also had not received a mandate to continue disciplinary action. The previously suspended individuals had gone back to their positions. One of them was a legal officer who had helped to provide the legal opinion in a report that had made findings against him, and Mr Dzengwa questioned whether this may be a conflict of interest. He said that the other person who came back was a procurement officer. Issues within the agency had had a paralysing effect on the organisation, limiting their movement forward. 

Deputy Minister

Deputy Minister Gungubele said that if the board went against the findings of the CDH, they should go to an established institution like a court, rather than providing their own legal opinion. Just because there may not have been an aggrieved bidder, it does not mean that irregularities should be ignored. He said they should either go to court, or they should implement the findings and recommendations provided by CDH. He said the impression that the MD had been clandestinely appointed was incorrect. The board needed to stop doing things that could be viewed as illegal, and their issues should be sorted out in court. 

CDH

Ms Mkefa said that there was a contention that the charges could not hold, and had been withdrawn. She said that the charges were not withdrawn, but that the SITA board did not provide the requisite authority for the matter to progress. Once the matter was regularised, the processes would proceed. Regarding the suspension of the head of legal, there was an arbitration award rendered on 30 October, but the suspension had been lifted prior to that point. The other suspension had been uplifted without an award and without the matter being finalised by the Commission for Conciliation, Medication and Administration (CCMA). 

Ms Jangara said that it was bound to be a technical process when reviewing the procurement processes. The issue was whether there was compliance with the various technicalities involved in the procurement process. For example, regarding the two pricing options, BNC did not respond correctly and did not properly complete the local content documentation. While Dimension Data had responded correctly, they were disqualified, which was irregular. Despite its irregularities, the BNC bid had been allowed to progress, and BNC stood in two positions to win the tender due to its two pricing options. 

She reaffirmed that the round robin process was not completed correctly, and CDH did not agree that the ratification of the process amended any other issues. Each of these irregularities had material effects on the procurement process, and had affected the final results. Regarding the claim that CDH was still interviewing SITA board members for their report in 2024, Ms Jangara said that this claim was incorrect, as all interviews had been concluded by October 2023. 

Closing remarks

The Chairperson said she would not allow any follow-ups because of time constraints. She aired her concerns about the irregularities mentioned. She would engage with other Portfolio Committees so that issues at the board level could be addressed. Other advisory opinions would be procured to amend these issues. 

She then focused on the adoption of the minutes of the 26 November meeting. The minutes were adopted, proposed by Mr Louw and seconded by Ms P Xaba-Ntshaba (ANC). 
The meeting was adjourned.