National Treasury on procurement of PPE for COVID-19

Finance Standing Committee

05 August 2020

Audio: National Treasury on procurement of PPE for COVID-19

Video: JM: Standing Committee on Finance and Select Committee on Finance, (NA and NCOP) 05 Aug 2020


nstruction Note No 5 of 2020/21
Instruction Note No 7 of 2020/21
Instruction Note No 8 of 2020/21

Meeting Summary

The Standing Committee on Finance and the Select Committee on Finance met jointly via a virtual meeting to receive a briefing from National Treasury on the procurement of personal protective equipment and other Covid-19 related purchases by national and provincial departments, state-owned entities and local government institutions in the light of apparent evidence of corruption in the supply of such goods. The Minister of Finance and his deputy were in attendance.

The Minister advised Members that if all parties had followed the correct procurement processes, they would not have been having that particular conversation. The country had re-prioritised the budget in the face of the Covid-19 epidemic and National Treasury had issued the necessary National Treasury Instruction Notes about how to acquire the material for the fight against the pandemic, particularly the personal protective equipment. In an ethical society, everyone would have followed National Treasury Instruction Notes. It had become clear that there was a prima facia case to be made that not in all instances had the Instruction Notes been followed. The Executive Authority should have addressed that failure with the relevant Accounting Officers. Secondly, it was up to law enforcement authorities to follow up on those companies that had been awarded tenders and had not acted inappropriately. There were matters that Accounting Officers had to deal with, but there were also criminal procedures to be followed by the law enforcement agencies. The Minister and the provincial MECs of Finance would have to consider the case of the politically exposed persons and deal with them.

In order to be transparent, all details of the companies that had won a Covid-19 related tender  with any organ of state would be published, including the cost of the contract, the names of others who had tendered and the date of establishment of the company that had won the bid. Processes would have to be tightened as, in some instances, trust had been broken. The Executive Authorities and Accounting Officers had to take the matter forward immediately, not in a year’s time. The Minister added that South Africa could learn from the common platform and common pricing set by the African Union for all countries purchasing materials.

National Treasury had issued various Instruction Notes since the Disaster had been declared by the President for both the Public Finance Management Act and the Municipal Finance Management Act organs of state. Of the Supplementary Budget of R145 billion, R122.4 billion had been allocated to the various departments, local government and other entities of state. The Auditor-General would begin to audit the Supplementary Budget immediately and not wait until the end of the financial year.

National Treasury announced that the Emergency Procurement for PPE and protective clothing had been concluded because there was no longer a shortage of supply. National Treasury would indicate the price that could be paid for goods and would make available a list of those who could supply the goods. Normal procurement regulations applied. At no stage were government officials were forbidden to supply to government. In addition, departments and entities had to start automating and modernising procurement management. A ICT platform would be developed so that departments and entities could procure more consistently and efficiently.

Members had many questions for the Minister and the Director-General of National Treasury. Members asked what active steps would be taken when it became clear that people were making huge amounts of money from the Covid-19 procurement process. What would be done about it? What steps would be taken against those individuals who were stealing from the people?

Members wanted to know the timeline for publishing details of personal protection equipment contracts, the names of those companies that had won the contracts and those that had not won the contract, why not and so on. When would National Treasury finalise that? What guidelines had been given to departments at all levels to deal with expenditure on Covid 19? Was there a price list with a price for each item? Had departments complied with the guidelines and price list and if not, why not? What had National Treasury done in that regard? Was there a guideline in relation to localised procurement? How much had been allocated to Covid-19 and how much had been spent?

Why had National Treasury allowed departments to procure instead of creating a centralised procurement system, knowing the risk of decentralised procurement? What controls were in place to deal with inflation of quantities? Was there no system that could automatically identify companies that had directors linked to the state? If a spouse was linked to the state, how was adjudication made in that regard? What was the National Prosecuting Authority doing?

The Members asked if there were procurement policies for the Solidarity Fund or whether it had been given the right to develop its own procurement policies, independent of National Treasury. What would happen if an Accounting Officer had deviated from the prices? What was being done to recover that money where there was clearly unlawful expenditure? Could National Treasury give an example of action taken against a single Accounting Officer through the processes of consequences in terms of the PFMA or the MFMA?

Other Members were concerned about why early warnings of corruption had not been taken seriously. Members had concerns about the personal protective equipment donated by Ace Magashule to Cuba. Who had procured the equipment and where had it come from?


Meeting report

Opening Remarks
Co-Chairperson Maswanganyi requested the Committee Secretaries to verify Members present. He presented the agenda and explained that the meeting had been convened to get information from the Minister and his officials about procurement during the Covid-19 pandemic. He welcomed everyone: Members of the Standing Committee of Finance and Members of the Select Committee of Finance, the Minister of Finance, Deputy Minister, DG of National Treasury and officials, as well as the media, stakeholders and members of the public. There were around 90 people online. The meeting had been called to discuss a matter of public interest about the personal protective equipment (PPEs) and related Covid-19 expenditure.

Co-Chairperson Maswanganyi noted that the world was facing an epidemic that was leading to the decline of economies globally, and in SA in particular. Government had imposed a lockdown which had restricted economic and social activities. That had resulted in the economic performance further deteriorating.
Pre-lockdown, the economy had been in a technical recession and there had been a downgrade by rating agencies. Businesses were closing down, there was a rise in food prices, a rise in unemployment, inflation and uncertainty. There was also a rise in inequality and in poverty. That was mitigated by an increase in government expenditure. Government had come up with a lot of measures, including the COVID-19 Loan Guarantee Scheme guarantee, distribution of food parcels, R350 grants and PPEs. Government had borrowed money from the IMF and other banks.

In the midst of the interventions, there was a public outcry in relation to food distribution and PPEs and other Covid-19-related expenditure. It was important for the Members to receive the briefing from the Minister on the genesis of where government had embarked on the Covid-19 expenditure and how the expenditure was to have been managed. Members hoped that the tendering process had been fair, competitive, equitable and transparent. As the country was losing jobs, what was government doing about localisation and local content, including promoting local industrialisation? That could happen if goods were procured from abroad, outside SA. He was not saying that international trade should be closed down, but if there were goods that could be manufactured in SA, why were they not manufactured in SA? In the main, he was talking about the PPEs. There was a public outcry over procurement by national departments, provincial departments, local municipalities and public entities.

Co-Chairperson Maswanganyi noted the letter issued by the DG of National Treasury, Instruction No 7, regarding guidelines for the procurement of PPEs, but problems had been witnessed in the past weeks and there had been a public outcry. What steps had been taken so far and what steps would be taken to deal with the matter? He requested the Co-Chairperson to make some opening remarks.

Co-Chairperson Carrim said that he endorsed what his Co-Chairperson had said. The two Committees were not the only Committees to deal with the matter. After the recess, the Health Portfolio Committee would need to look at it and the Portfolio Committee on Justice and Correctional Services. It would be interesting to see how the new inter-disciplinary structures dealing with corruption would work. That Committee could ask the Special Investigating Unit (SIU), not about specific details of ongoing cases, but for progress reports. The Portfolio Committee on Police would also need to address the matter. The Finance Committees would work with the other Committees because it was not National Treasury’s responsibility alone for monitoring procurement.

He added that the Co-Chairpersons would not prescribe but as Co-Chairpersons they would suggest some broad direction. Co-Chairperson There should be an ongoing programme for monitoring the issue and that the Committee should receive regular reports from National Treasury and meet with the Department at least once a month. The Committees needed a medium term and long term approach in conjunction with other Committees.

Co-Chairperson Carrim stated that the Committees should not only look at things subjectively and who was doing what and then dealing with those people using the appropriate law enforcement services. One should also look at the objective circumstances and ask why people were doing that. What were the objectives circumstances? One came back to the situation already dealt with by the Finance Committees and that was the need to transform the economy to allow people to participate and grow in the private economy. People should not rely on the state sector. The economy should create space for new people.

He had heard the President use harsh words about scavengers and hyenas and the Chief Whip in Parliament had spoken about the barbaric behaviour of people who did things under the current circumstances. The Committee should be very action-orientated after the discussion and obtain the necessary information. Parliament should be decisive.

Co-Chairperson Maswanganyi agreed that Members had to be objective and not look only at the negative side. Lots of lives had been saved and lots of people had received food parcels and a whole range of interventions, which had mitigated the impact on the poor and, especially, those who were unemployed, particularly following retrenchments. Lots of good work had been done in relation to Covid-19, but it was clouded over by the malfeasance.

He informed the Minister that he had been invited to explain what had been done in relation to Covid-19 procurement, but the situation was not entirely negative. To be honest, he had seen lots of lives being saved and lots of good work being done by the state in regards to Covid-19 and if Parliament did not acknowledge that, the health workers would think that Parliament did not appreciate the work that had been done. They would be devastated. Nevertheless, there were those who were taking advantage of the situation, both in business and officials, especially those in supply chain management.

Opening Remarks by Minister of Finance
Minister Tito Mboweni stated that he had organised a choreography regarding the submission. He would make a few remarks and then the DG would make the presentation which had been prepared and sent to the Committees in advance, after which the Deputy Minister, Dr Masondo, might wish to say something and then he would hand back to the Co-Chairperson. He would make closing remarks at the end of the conversation.

As a second point, the Minister said that the Members might recall that when he had risen in both Houses to present the supplementary budget, he had made the following statement: No sooner had he announced the budget for Covid-19, than the thieves would begin to assemble at the door for the purpose of stealing. He noted how prophetic that was.

The Minister stated that the country had been facing the devastating epidemic and had to re-prioritise the budget. The re-prioritisation of expenditure items towards the fight against the epidemic had been an important step that had to be taken. He thanked both Houses of Parliament for walking with National Treasury until the Adjustments Appropriation Bill had been passed. It had not been easy but everyone had walked along with him and National Treasury, whether they had voted in favour or not, as they had participated in the democratic process in the passage of the Bill.

He explained that the DG had issued the necessary National Treasury Instructions about how to go about acquiring the material for the fight against the pandemic, particularly the PPEs. The Instruction Notes were there. In an ethical society, one would have expected everyone to have followed National Treasury instructions to the letter and procurement would have been in line with the Treasury Instruction. The National Treasury Instruction Note states clearly: the description of item, suppliers name, unit price, total price, whether the price was in line with National Treasury Instruction. If all parties had followed the tender process or the procurement process, he would not have been having that particular conversation with the Members. The National Treasury instruction had given very clear direction to all Accounting Officers and all Heads of Department (HoDs), and at the end of the day, it was the working together of officials at National Treasury and the Accounting Officers that ensured that procedures were followed. He added that it also behove the Executive authorities at national and provincial level to ensure that the Accounting Officers did what they were supposed to do. It had become clear that there was a prima facia case to be made that not in all instances had the National Treasury Instruction Note been followed. That became the subject of the administrative system, the subject for the political Executive Authority to follow up with the Accounting Officers. Secondly, it was up to law enforcement authorities to follow up on those companies that had been awarded tenders illicitly. There were matters that Accounting Officers had to deal with, but there also criminal procedures to be followed by the law enforcement agencies.

Faced with the situation, the DG had issued further instructions but those had not been followed. One question was whether the companies were properly registered with the Companies Registration Office, with the SA Revenue Services and had departments followed a competitive process. The administrative investigation had to show which companies had competed and that one particular company been awarded the order based on a particular merit score following a competitive process. The departments had to demonstrate that to National Treasury.

The Minister stated that he would be having a conversation with the MECs of Finance the following day to try to find out whether all the processes had been followed, and if they had not been followed, why they had not been followed. He would ask who had broken the rules. He and the MECs of Finance would be insisting that all those contracts would have to be published for the public to see. Full details of the companies that had won a tender had to be published, including the cost, others who had tendered and the date of the establishment of the winning company. They would have to consider the case of the politically exposed persons (PEPs) and deal with them. One could talk about a centralised procurement system, and the DG would speak about it. He would address that matter at the end because it was very clear to him that the processes had to be tightened. Trust had been broken in some instances. The Executive Authorities and Accounting Officers had to take the matter forward immediately. They did not have a year to do that.

He added that as that process went forward, he had to praise that which was good. In particular, he had to appreciate the common platform and common pricing set by the African Union for all countries purchasing the materials and the country would take learnings from that. He would talk about next steps at the conclusion of the conversation with the Committees.

Presentation by National Treasury
Mr Dondo Mogajane, Director-General, NT, explained that National Treasury had issued various instructions since the Disaster was declared for both the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA) organs of state. Section 76 of the National Treasury Act gave him authority to issue Instruction Notes.

In relation to the Instructions regarding Covid-19, he asked Members to cast their minds back to February and March 2020 when the budget that had been presented and soon thereafter the President had declared a Disaster and announced the Covid-19 lockdown, and then the country had known that Covid-19 was upon it.
The DG listed the Instruction Notes issued for both the PFMA and the MFMA institutions. He also noted that all the items required for Covid-19 were not new but had been bought by the state on an ongoing basis and so National Treasury had provided a list of suppliers who had previously supplied the goods. He reminded the Members of the competition for supplies across the world when countries had seen the quantum of PPEs that would be required. Of the Supplementary Budget of R145 billion, R122.4 billion had been allocated

New controls were being considered following discussions between the Auditor-General and National Treasury and they would jointly issue a “Preventative Guide” that would advise departments and entities on how to follow the Instruction Notes. The Auditor-General would begin to audit the Supplementary Budget immediately and not wait until the end of the financial year.

The DG announced that the Emergency Procurement for PPE and protective clothing had been concluded because there was no longer a shortage of supply. National Treasury would indicate the price that could be paid for goods. National Treasury would make available a list of those who could supply the goods. He noted that government officials were forbidden to supply to government.

The DG stated that departments and entities had to start automating and modernising procurement management.  An ICT platform should be developed so that departments and entities in rural areas could not be charged more than those in urban areas. He would keep the Committee informed about the progress in developing an ICT application for procurement. Tighter controls were required to deal with politically exposed persons and anti-corruption methods had to be put into place. Accounting Officers had to be held responsible for paying higher than list prices and for fraud, and law enforcement had to deal with those who had infringed laws.

Remarks by the Deputy Minister of Finance
Dr David Masondo, Deputy Minister of Finance, said he was looking forward to guidance from the Members. Obviously, South Africans expected National Treasury to manage their money prudently but in certain instances some government departments and local governments had betrayed the trust of people in so far as the way in which public finance had been managed. A lot of preventative and reactive measures had been put in place by government and Parliament to run public finances prudently. On the preventative side, there were a number of controls that departments had, including laws, rules and Instruction Notes and good Accounting Officers but, despite the preventative measures, there were some people who were not providing a good service for South Africans.

He agreed with Mr Carrim that there should be a separation of subjective and objective conditions that led to the problems of mismanagement and corruption in the state. He said that people did matter so if there were wrong people in institutions who continued to betray the trust of the people, government would not be able to change the objective conditions that existed. Part and parcel of talking about preventative measures was the issue of who was in the institution in so far as good Accounting Officers could prevent the kind of things that had happened. In some institutions, those things had not happened. In some institutions, government was not fully winning the war in the fight against the thieves, despite all the laws and instructions, but government would be doing more. A lot of the things had come to notice after the fact but Chapter 10 of the PFMA was clear that anyone who was betrothed with the responsibility of managing public finances had to face consequences for not doing what was expected of such a person.

The Deputy Minister noted that, as far as reactive measures were concerned, and trying to find the thieves,  one did need to follow forensic audits, etc. but he was worried that the money that should be spent on services to the public would go to chasing criminals, inside and outside of government.

He concluded by informing the Committee that National Treasury was looking forward to the guidance and criticism of Members as the South African public relied on MPs to represent them and to ensure that National Treasury managed public finances responsibly.

Co-Chairperson Maswanganyi called for comments and questions.

Dr D George (DA) stated that Members had already seen a large amount of corruption in the procurement of PPE. It was largely anecdotal evidence that was coming out but it was clearly a very big problem and he was sure that everyone wanted to eradicate that. Given that the country was in such a crisis and there had been corruption, he asked National Treasury what active steps it would be taking when it became clear that people were making huge amounts of money from the process. What would be done about it? What steps would be taken against those individuals who were stealing from the people?

Mr G Hill-Lewis (DA) referred to slide 13 which referred to new controls being considered. The Minister had said he would like departments and entities to publish details of PPE contracts, the names of those companies that had won the contracts and those that had not won the contract, why not and so on. He requested a specific commitment for the timeline of that process. The sooner the better. What was the timeline for that? When would National Treasury finalise that?

Secondly, he noted that COSATU had not presented to the Committee but he had read through a submission that COSATU had sent to Members complaining that it had written to the Minister about some of those things as far back as May 2020 but had received no reply from the Minister’s office. That was a common experience of the lack of professionalism or courtesy from the Minister’s office. He had also written to the Minister in May proposing the creation of a special Inspector General for Covid-19 expenditure with powers to interdict and act proactively to stop some of those things that were now being exposed. He had also received no reply. One struggled to ever get a reply from the Minister’s Office. How should MPs contact his office? Why did the Minister’s office never respond to communication? Some of the COSATU proposals and his ideas could have stopped much of the corruption as it had been enormously predictable. It should have been foreseen that a large sum of money to be spent without procurement controls because of the emergency would have led to corruption.

Mr Hill-Lewis noted that the Deputy Minister had spoken about the undermining of public trust. It could not be underscored how greatly that trust in government, National Treasury and the governing party had been undermined. He thought that the President himself should address Parliament on the matter. He appreciated the Minister’s willingness to account for the matters, but he did think that ultimately the President was accountable.

Mr D Ryder (DA; Gauteng) congratulated the Minister and the Deputy Minister for appearing and the Co-Chairpersons for calling the meeting. That put the Co-Chairpersons in a different category from some of the other people. He apologised if he appeared agitated and angry but he had come out of a nine-and-a-half hour session of the NCOP the previous day where the Budget had been passed. In doing so, it had become incredibly obvious that Members of the ANC in the NCOP were tone deaf and they had not heard what the public had to say. There had been a massive swell of anger but everyone was now angelic and the Members who had sat through eight votes of non-confidence in the former president and had decided to disband the Scorpions were now taking an anti-corruption stance. They now said that no one agreed with corruption, but it was all lip service.

He stated that the thickest book in the set of books for municipalities was the MFMA. That and the PFMA and the Treasury Memoranda and Instructions were filled with regulations and instructions on how to procure and yet there was failure on a daily basis and people were sick of it. There were people already earning R1 million salaries but who were making more money by acting corruptly. There had to be urgent action. If the PFMA and MFMA could not allow National Treasury to do its job, then there was a huge problem. The regulations had been carefully refined over the past 26 years but he had not seen a single person jailed for corruption. The only thing that was stopping it was the political will. The Minister had to be given teeth. Something had to happen. Not one arrest had come out of the Zondo Commission. What was the National Prosecuting Authority (NPA) doing? He noted that the NPA had been given additional powers and the NPA had found that exciting. But, there were no actual consequences.

Mr Ryder appreciated the work that had gone on behind the scenes in National Treasury and the day’s presentation but everything that National Treasury did was no more than a minor hurdle for someone to get over and to carry on with the corruption that the person had been busy with for so long. The problem was that it was so difficult for the average company to enter into tender with government that the only people who did so were those with nefarious motives. The reality was that to jump through all the hoops of the PFMA and the MFMA had a massive cost implication and that was why a R3 pen cost R23, and that was a good deal with no corruption. There was a cost to compliance. Government needed to seriously consider how it did business. Regulations were good but when regulations were so over-burdensome that they prevented good people from doing business with government, there had to be a re-think.

Mr K Morolong (ANC) stated that to say Members were discouraged by the rampage and corruption associated by Covid-19 would be an understatement, but Members were more interested in consequence management. Why had National Treasury allowed departments to procure instead of creating centralised procurement, knowing the risk of decentralised procurement? Corruption occurred when there was an inflation of quantities of goods that were never delivered. What controls were in place to deal with inflation of quantities? Was there no system that could automatically identify companies that had directors linked to the state? He had thought that National Treasury’s CSD (central supplier database) system could detect those things. Why were those systems not used to stop officials doing business with the state? If a spouse was linked to the state, how was adjudication made in that regard?

Mr F Shivambu (EFF) said he had not heard what the DG was saying about Instruction Notes and Guidelines that had been given to all departments and what should actually happen. The DG seemed to be complaining a lot about the archaic system and wanting to learn from the private system which was responsible for the mess in the public sector. He did not know what had been done, so he had some questions for the DG. How much had been allocated to Covid-19 and how much had been spent? What guidelines had been given to departments at all levels to deal with expenditure on Covid 19? Was there a price list with a price for each item? Had departments complied with the guidelines and price list and if not, why not? What had National Treasury done in that regard? Was there a guideline in relation to localised procurement? Were there procurement policies for the Solidarity Fund or had it been given the right to develop its own procurement policies, independent of National Treasury? What would happen if an Accounting Officer had deviated from the prices? What was being done to recover that money where there was clearly unlawful expenditure? There had to be consequences that National Treasury could implement immediately. It was not an issue that could take a long time. What actions were being taken against officials who had deviated from instructions at all levels in all spheres of government?

Mr Shivambu suggested that, instead of getting National Treasury to self-regulate and create mechanisms to deal with the issues and prevent it, perhaps Parliament should have a mechanism to closely monitor all expenditure relating to Covid-19 pandemic procurement. With the Guptas, Parliament had taken too long to react. Perhaps Parliament should convene a meeting with all the departments and find out if they had adhered to the price list and if there was no consistency with the price list, then consequences should be enacted. It would be better than simply complaining and reporting all the issues to National Treasury which had demonstrated that it did not have capacity as it had come to Parliament to say that it was thinking about and ICT system.

Something had to be done about politically exposed persons. The NEC (ANC National Executive Council) had said that there was nothing wrong with politically connected persons, be they husbands, spouses, boyfriends, girlfriends of state officials, doing business with the state.

Mr Shivambu said that there was a need to build capacity to procure. There was no need for a middleman. National Treasury should build the capacity to procure all the PPEs and essentials needed to fight Covid-19. Middlemen or women would simply raise prices exorbitantly.  Outside of trying to praise National Treasury, the Committee should look at its capacity to monitor its own regulations and guidelines as to how money should be expended in relation to Covid-19. If National Treasury had a law or instruction and people did not comply and yet there was no consequence, there was no point in the law or the instructions. National Treasury had not done anything and should take responsibility for not doing anything. The only intervention had been in relation to the IT tender in Gauteng at the start of lockdown. Nothing else meaningful had been done. National Treasury had to take responsibility for the corruption in all the departments because it did not have capacity. What law permitted National Treasury to engage with Imperial Logistics or Business Unity South Africa which did not have any legislative power to deal with procurement?

He was not convinced that National Treasury was the solution. The task of stopping corruption had to be dealt with by Parliament immediately, and not later.

Ms N Abrahams (ANC) said that it became frustrating that Members of the various parties raised issues after National Treasury had already spoken, and she was sure that Treasury also wanted to respond. She proposed that after Members had spoken, the Co-Chairperson should give Treasury an opportunity to respond, even if it was on a limited time basis.

Her issue was that of the tender and whether it could be made open and transparent. That was how the current government was different from past governments which were not open and transparent. The ANC was not saying there was no corruption. The NEC had made a bold statement, saying that it was embarrassed. Everyone knew and could see that a lot was happening but she agreed with the Member who had called for consequences.

Ms Abrahams alleged that there was a corruption network in the supply chain management (SCM) of the departments. She had been told by SMMEs that when they won a tender, they had to give a percentage of the money allocated to the tender to an SCM official. National Treasury had to strengthen internal audits to mitigate that within the departments, nationally, provincially and at local government level.

She added that B-BBEE remained relevant but in the midst of evidence of widening inequality amongst black SAs, she had to ask if it was working or whether government needed to come with another plan which would do the same thing but close the gaps.

Mr W Wessels (FF+) said that it had been completely predictable that the current corruption involving Covid-19 funding and also PPEs would take place. Prices had always been inflated in the procurement process. There had been fronting and service providers were procured to offer services that they had never offered in their lives. That had just become worse in the crisis. Corruption Watch had written to National Treasury in April 2020, alerting the Department to the enormous possibility of corruption happening under the emergency procurement regulations. Why had those warnings not been taken seriously? In April and May 2020, invoices with inflated prices had circulated on social media and in the mainstream media, but now, all of a sudden, the Members, government officials and even the President, were shocked at the corruption. Now there was a panic about corruption but political parties, organisations and the public had known about it all along. 

He stated that the corruption was much broader and not only PPE or Cov-19 related. During the lockdown, contracts had been awarded under the emergency procedures, even though the contracts had had nothing to do with Covid-19.  One example was the SAPS (IT) system at the Department of Labour. All of a sudden, all of the red tape had been cut and the contract had been awarded to a company that had never provided IT services before. That had to be investigated.

Mr Wessels noted that a few Members had raised the issue regarding public trust. Another question that had to be answered was where the PPE donated by Ace Magashule to Cuba had come from. Who had procured the PPE and where had it come from? The matter could not be hushed as public trust could not be restored if those questions were not answered.

He was adamant that the only way to curb corruption was to ensure successful prosecution and to jail those found guilty, especially politically exposed officials and leaders. No regulations would curb corruption. There was nothing wrong with the PFMA and the MFMA. It was some of the best legislation in the world but there had been contravention for years and years and no one had been held accountable. The DG had spoken of holding the Accounting Officer (AO) accountable but holding an AO accountable did not mean a golden handshake and no disciplinary or criminal procedures, nor did it mean allowing the person to resign and then appointing the person to another position in another department of government or another municipality. That was what had been happening for many years and that was why the country was facing a pandemic of corruption. There had to be a far greater focus on that area. Accounting Officers had to be really held accountable. There also had to be a focus on recovering the funds.

Ms M Mabiletsa (ANC) was concerned about goods not being acquired in time. She suggested that young people should produce locally.

She noted the DG’s comments on the proposed new measure of centralising procurement. That should be debated because it would not be the solution. De-centralised procurement was intended to facilitate the economy in poor and rural provinces. It facilitated localisation. The problem was that there were other oversight bodies that were not doing their work at local municipalities. There were other oversight bodies at local and regional levels. Democracy was all about ensuring oversight, decentralisation and empowering poor communities. Government procurement was important to transform the economy, decentralise the economy and to achieve equality. Also, if everything was centralised, then those who did not have the gadgets, would be unable to tender. The Members should debate the thing of centralising.

Mr E Njadu (ANC; Western Cape) had a concern while listening to the presentation as he noticed an emphasis on procedure and guidelines but in terms of accountability, there was the PFMA and the MFMA which were Acts that guided expenditure. Each department had to have internal control and internal auditors. Were the guidelines effectively aligned with the PFMA and the MFMA so that one could not ignore the Instructions? One had to be conscious and look at the facts. Each department should give a detailed account of each and every item that had been procured so that one could have a clear picture. To root out corruption, one had to have a detailed record and report. That was necessary for MPs to fulfil their roles.

Mr S du Toit (FF+; North West) stated that a matter not yet raised by Members was that of fruitless and wasteful expenditure. The Department of Basic Education had sanitised schools which had then stood empty for months and which were then were sanitised again before learners started school. It was common knowledge that the virus did not live for a long time. It was necessary to ask who had given the instruction to sanitise those areas that did not need to be sanitised.

Co-Chairperson Carrim agreed that the issue of Instruction Notes was fine as far as he could see and Treasury had done what it was expected to do in terms of Instruction Notes, but it was not having an effect. National Treasury alone could not be held responsible for the corruption against government as a whole and the criminal justice and law enforcement sectors had to deal with that.  But he wanted more from National Treasury. Had any action been taken against a single Accounting Officer through the processes of consequences in terms of the PFMA or the MFMA? He had not heard of anyone being held accountable.

Co-Chairperson Carrim reminded Members that COSATU had supplied them with a set of documents in which there was reference to shoddy PPE equipment. The consequences of that could be very severe. Was action being contemplated – and if so what - against suppliers who had provided equipment that was below standard which had resulted in people becoming sick and dying. Had any action been taken against a single Accounting Officer through the processes of consequences in terms of the PFMA or the MFMA?

He stated that Members across the political lines thought that National Treasury should give consideration to COSATU’s proposals. Why had Treasury not responded to the proposals? The COSATU proposal for the immediate establishment of rapid response courts to deal with corruption (based on the model used during the 2010 Soccer World Cup) was a good one. Did National Treasury have the capacity to implement the proposals?

He added that there was a view from Mr Ryder that the ANC was tone deaf. The Opposition seemed to suggest that certain people were pre-disposed to be corrupt. He was sure that Mr Ryder did not think that way, but some of his colleagues did. That was what had made ANC Members so defensive in the NCOP sitting the previous day. He did not want to share certain things publicly because he did not have a mandate to do so but in the ANC discussions about corruption before the sitting, there had been strong opposition to corruption. The ANC had come across the way it did in the NCOP because the entire debate was not about the budget and appropriations and proposals relating to it, but the debate had been simply about the corruption issue and while that was important, the purpose had been to debate the Bill.

Co-Chairperson Carrim informed Mr Ryder that 3 500 delegates at Polokwane had decided to disband the Scorpions so he could not hold one or two people responsible for that decision. He himself still did not know if it was right or wrong but 3 500 delegates had decided on it. Mr Ryder should focus on the issue, which was that, across political divide, people were angry. It was not only Mr Ryder who was angry. He should not make that subjective. Everyone was angry, even the Minister, as seen in his words when he had begun speaking. Look at the words of the Minister, the President and the Chief Whip of the ANC. They could not all be insincere. No party was stupid enough to be so tone deaf in the circumstances.

He agreed that Members had to see action, especially from the Justice Sector. Would the new structure set up to deal with corruption deliver? The Portfolio Committee on Justice and Correctional Services was responsible for ensuring that happened, not the Finance Committees. He agreed with the Deputy Minister that government could not spend hundreds and thousands and millions of Rand on investigations. Members had to look to the future or the same situation would occur in the future. What were the structural conditions that allowed such corruption to happen?  It was the highly monopolised economy. In such a situation, a new bourgeoisie would turn to the state to make money.  There had to be space for people to grow in the private sector. Middlemen or rent-seekers would not create a new industrial or manufacturing class. The B-BBEE would have to be reviewed. That was the point that he was making; not the subjective view that one needed the right people in the right places. The subjective response was that some people were inherently corrupt. He repeated that Mr Ryder did not think that as he was not that sort of person, but what he had said bordered on that.

Co-Chairperson Carrim stated that immediate action was needed and he thought that every Member of the Committee thought that. A medium-term strategy and a longer term strategy were needed but the economy had to be restructured, transformed and de-racialised to allow the new entrepreneurs to operate in the private sector.

He added that he was not in any way rationalising the horrific, horrific corruption. The President had put it well when he had spoken of hyenas and scavengers and the Chief Whip was correct when she said that it was barbaric.

Co-Chairperson Maswanganyi invited the Minister to respond.

The Minister stated that he had a closing choreography. The DG would respond and then he would make the final remarks.

Response by National Treasury
Mr Mogajane thanked the Members for their questions and comments which would ensure that Treasury modified its plans accordingly and came up with an approach that would be a better production that the one that they had and which would avoid all the loopholes that were currently in the plan.

Mr Mogajane responded to the question on slide 13 of whether National Treasury would be able to publish the tenders and contracts. He believed that, in the interests of transparency, the details should be published because it was public procurement and in the public domain. The details of how and when the information would be published still had to be resolved but National Treasury had indicated that it would be published.

Regarding COSATU, Mr Mogajane stated that he had personally sat in the online meeting with COSATU and letters had been exchanged. The Parliamentary Officer of COSATU, Mathew Parks, who was attending the current meeting, could confirm that a meeting had been held. The Member should get the facts straight. The second Instruction issued by Treasury had taken into account the input of COSATU. There had also been engagement between the Secretary-General of COSATU and Deputy Minister Masondo.

He informed Committee Members that centralised procurement was not possible as National Treasury could not procure everything. The majority of the R1.4 trillion voted in went to the procurement of a huge range of goods from pencils to petrol. Procurement took place on a daily basis and provinces had their own procurement processes, officials, departments, etc. and there were certain standard processes for specific departments such as the Department of Health, and things such as PPEs were part of that system. Systems were in place to ensure that departments could procure.

He had heard some Members say that National Treasury should centrally procure but other Members had pointed out that there could be challenges if National Treasury attempted to take over procurement. However, National Treasury could determine the price of goods to be purchased for a transversal contract. Treasury was trying to determine how that would work. He had heard the concerns that National Treasury might not have the capacity and that it was not optimum in terms of numbers and skills because Treasury dealt with the whole of the state, including all departments and public entities. Its capacity would never be enough but the system had been designed so that accountability was delegated in some areas through provincial treasuries as per the law. Provincial treasuries should be performing in terms of the rules and regulations. The provincial legislatures had a role to play as per legislation and should be held accountable, as should municipalities and department heads. The capacity would never be enough at National Treasury and hence the system was designed to delegate accountability to provinces. Provincial legislatures had oversight committees and Accounting Officers were accountable

Mr Mogajane explained that the design of the state was such that National Treasury’s role was limited but nothing prevented National Treasury from intervening with regard to procurement at any level whenever required, as per legislation. Treasury did intervene as and when required. For example, if Treasury was alerted to a problem, it would intervene.

In terms of the Covid-19-related budget allocated to the departments, Treasury had attempted to list the amounts but Mr Mogajane reminded Members that PPEs etc. were goods normally procured by certain departments. In the current situation, the issue was the quantum and the amounts to be dealt with. In addition, the funds that National Treasury had allocated had been supplemented by provincial governments. He would provide the numbers as requested by Mr Shivambu but from a spending side, the classification of certain goods had to be corrected and so a number of general entries had to be made.

Mr Mogajane informed Members that in Instruction Note No 7 of 2020/21, the Office of the Auditor-General indicated that all Covid-19 expenditure had to be separated from all other expenditure so one would be able to see Covid-19-related expenditure. In a normal environment, one only picked up irregular expenditure or fruitless and wasteful expenditure at the end of the year. The PFMA dictated that departments had to supply expenditure on a monthly basis, and on a quarterly basis, National Treasury published that information. One would see the budget and expenditure but no irregularities for the month or the quarter. The irregular expenditure only came at the end of the year. And that was why, as part of a special regime, National Treasury and the Auditor-General had agreed not to wait until the end of the year but to audit immediately to understand what had been spent and Treasury would also be able to identify who had been paid for the goods. In the Instruction Note, departments and entities had been instructed to report any expenditure above R1 million on Covid-related goods. Some departments were not doing that and that would be investigated.

He confirmed that Members were correct that National Treasury could not monitor every single expenditure item. It was not humanly possible. That was why the accountability lay with the Accounting Officer. He explained, as an example, that if a DDG in National Treasury bought 5 000 cloth masks and spent more than R25 per mask, he, as Accounting Officer, had to demand an explanation from the CFO and the DDG who had placed the order. And he had to take action, if necessary. If he had not taken action in such a case, then the Minister of Finance would have had to act against him as he had failed to act. National Treasury relied on the Accounting Officers to be accountable. As a real example, using an account that had been in the media, the legislature in Gauteng had to deal with inappropriate expenditure on Covid-19 goods by one of its departments. The Head of Treasury in Gauteng had to be held responsible because she had not taken action against the Accounting Officers. Authority and accountability given in law had to be acted upon. Disciplinary action had to be taken against those who had deviated from the price list.

Mr Mogajane informed Members that the Minister of Finance was a board member of the Solidarity Fund. As DG, he had not issued any guidelines regarding the Solidarity Fund but he had held a meeting with the board chairperson and the CEO to ensure that the prescripts were in line with government policy of maximum value for money. He had personally contributed R30 000 to the Solidarity Fund so he, as an individual, wanted to see the Fund operate efficiently and that the value for money process was in place.

Instruction Note No 3 was issued in relation to the Imperial Medical Services and Business Unity South Africa situation. The Instruction Note had been withdrawn because there were challenges in respect of who was getting preference. That Instruction Note was replaced with Instruction Note No 5, following engagement with COSATU, the Solidarity Fund and many other fora because the process had not worked in the way that it should have.

Mr Mogajane stated that the Minister would address the issue of politically exposed persons but he could comment on middlemen. The whole of government should take responsibility to build local capacity and give opportunities to SA entrepreneurs and not pay middlemen. Access and opportunity had to be given to those who were able to supply the required equipment. Government recognised the requirements of B-BBEE so that an opportunity could be given to everyone who could supply the goods.

He concluded on that note and handed over to the Minister of Finance.

Co-Chairperson Maswanganyi indicated that Mr Hill-Lewis wished to say something.

Mr Hill-Lewis informed the DG that he had been quoting directly from the presentation by Mr Parks, Parliamentary Officer of COSATU, to the Committee, so the DG should get his facts straight.

Mr Hill-Lewis was adamant that the question of time had to be finalised. Everyone agreed that the information should be published. The Western Cape had already published the information. It was a question of when national government was going to require the publication of information. He proposed that the DG should get back to the Committee within three days with a date when the departments, etc. had to provide the information and publish it on their websites.

Co-Chairperson Carrim repeated his question about how many Accounting Officers had undergone consequence management. Did the DG know of any AO’s who were in the process of being held to account?

Mr Mogajane responded that no Accounting Officers had faced consequence management but that would happen as he and the Auditor-General unpacked what had happened in the departments. National Treasury had heard of people being suspended.

Co-Chairperson Carrim suggested that DG should be asked to provide a progress report within 10 days.

Co-Chairperson Maswanganyi agreed.

The DG stated that, within 10 days, he would provide information to Parliament.

Response by Minister
Minister Mboweni said he determined to put aside the political disagreements and deal with the issues before them. The key question was: What were the next steps? The DG had indicated which administrative steps would be taken. Members should pay attention to those steps which were in the submission before them.

There were also political questions about whether Members’ correspondence had been replied to or not. He would not go into the detail of the privilege that Members had of Parliamentary Questions and not bombarding his office with letters. With a Parliamentary Question, he could answer the questions publicly so that every MP could read his replies. One also had to be careful of people who came to the Committee and said that they had had no replies while, in parallel to that, they were holding meetings and discussions with National Treasury. That was disingenuous. The Minister added that some, even in trade unions, promoted their own industry and so Treasury had to be careful that it did not become a victim of lobby groups in whatever form.

Minister Mboweni agreed that the issue of timelines to require details of contracts won was urgent and should not take too long. During the meeting, the MEC for Finance in the Free State had sent him the list of companies that had received contracts in the Free State. The list had been published in Tender Bulletin No 17 of 17 July 2020. The trouble with the Tender Bulletin was that it did not tell who the directors and shareholders were. One needed to deconstruct the shell of a company and see who was inside the shell. He would be having that conversation with provincial Ministers of Finance the following day.

He stated that the discussions could not leave a vacuum in the administrative systems which would continue as indicated by the DG. The state, being the largest buyer of goods, had a lot of capacity to influence the direction of the SA economy, so it was important that the procurement system worked in tandem with the political system. The political system had national, provincial and local levels of government and at each sphere of government, there were Executive Authorities and Accounting Officers and if Treasury followed through the political and administrative system, it should be in a position to control the procurement very well.

As the DG had said, as Minister, he had responsibilities to ensure that there was no behaviour that was inappropriate and unfair in National Treasury and if such behaviour occurred, he had to deal with it. The Minister stated that he had a responsibility to check on the DG and if the DG engaged in illegal behaviour, he had to report him to the appropriate law enforcement authorities. That should apply to all local and provincial Executive Authorities.

The system also provided for oversight by elected Members of Parliament and representatives at local and provincial levels and any Member of Parliament, provincial or local representative who felt that nothing was being done about an illegal activity could report anyone, if there was evidence, to law enforcement.

The Minister invited any suggestions to strengthen the capacity and ability of National Treasury. He was not averse to that but as things stood; he had no reason to believe that National Treasury was incapable. It consisted of a team of highly competent individuals who were well-equipped to perform their functions. The overall direction in which the country was going would require the strengthening of political systems, strengthening the role of public representatives and Executives, strengthening the role of auditing and accounting, and strengthening the prosecutorial systems to ensure that any malfeasance was taken care of.
He was concerned about the fact that nothing had happened to the people who had looted the Giyani water project. That matter had been raised with the prosecutorial authorities. Indeed, the same applied in many other situations around the country. Law enforcement had to take action.

The Minister thanked the Co-Chairpersons for giving him the opportunity to have the conversation with the Committees. He had tried, as far as possible, not to do any politicking. He would leave that for another day because the matters that they were dealing with were so serious that it required everyone to work together to right the wrong but, in the process, not to taint every contract with the same negative tone because it was not the case. Everyone should also be aware that when someone was allocated a contract, it was not a gift. It involved spending the funds in an appropriate way.

The Minister noted that as the Solidarity Fund had received funding from the state and citizens, the Committee should seek an audience with the Solidarity Fund and ask the board to inform the Members what it had done with the funds.

Co-Chairperson Maswanganyi thanked the Minister, the Deputy Minister, the DG and officials of National Treasury. He repeated that not everything was corrupt. He wanted to pay homage to front-line workers, be they health workers, members of the security cluster, law enforcement, or disaster management. He wanted to pay homage to all public servants who had had to work very hard to assist the Command Council. He knew of officials who worked over weekends to ensure that even funerals complied with the regulations. Many officials were very honest in their work. He also paid homage to those service providers who had been honest and had played their part in supplying services to the state, especially in relation to Covid-19. The meeting could not be concluded with the impression that all service providers were corrupt. The Committee would not be part of any statement that said that all suppliers were corrupt. Officials in supply chain management who were in the network of corrupt service providers had to be isolated and something had to be done to cleanse those networks of corrupt officials and service providers. He gave credit to those officials who had worked hard and honestly.

 He reminded everyone that, as much as they wanted the Auditor-General to get into full swing, the internal audit committees had a responsibility to do their work. The Auditor-General had limited staff and could not do everything and deal with year-end audit outcomes. It would be wrong to condemn B-BBEE and blame that for all the corruption. It would be wrong to say that black economic empowerment was responsible for all the corruption.

Co-Chairperson Maswanganyi said that, as noted by the Minister, the state was the biggest employer and had enormous buying power and it should be a platform to empower the previously disadvantaged. The President sometimes talked about the capability of the state which should be used to empower small enterprises. It was important that small businesses could come onboard. The Committees frowned on narrow black empowerment and wanted to champion an inclusive economy. He told the Minister that localisation was very important. The Rand should circulate within the country and support the creation of jobs and enable SARS to collect revenue. The Rand should not leave SA to create jobs in other countries at this stage.

He reminded Members that they had an outstanding meeting with the Solidarity Fund and asked the secretaries to arrange a joint meeting with the Solidarity Fund and National Treasury after the recess. The police agencies should also be invited as National Treasury could not arrest people. Members had raised issues of law-enforcement.

Co-Chairperson Maswanganyi referred to the issue of cooperative governance. The Committees would have to be cautious in making recommendations to National Treasury as it did not have the powers to take over provincial or local government. Chapter 3 of the Constitution spoke of three spheres of government which were distinctive, intra-dependent and inter-related and those spheres had to be respected. The country no longer had a central government as before 1994, nor were there tiers of government. He would be hesitant to advise that National Treasury should centralise all Covid-19 procurement. There would have to be protocols if one sphere of government were to be taken over by another sphere. That could be unconstitutional. However, Members wanted to see consequences for those who had done wrong and Parliament would continue to play its oversight role in that regard.

He suggested that he and co-Chairperson Carrim should find a date for the proposed meeting. He thanked the Minister, the Deputy Minister and the DG for their attendance and contribution to the discussion.

Co-Chairperson Carrim suggested that National Treasury should meet with the combined Committees every four weeks and submit a report every two weeks. It was not necessary for the Minister or Deputy Minister to attend those meetings. The Trade and Industry and Police Portfolio Committees could sit in a joint meeting. He also suggested that he and his Co-Chairperson should write to the Chair of Chairs suggesting that Portfolio and Select Committees hold the Criminal Justice system far more accountable. When the Finance Committees met with National Treasury and the police structures, the relevant Portfolio Committees should be attendance. It should not appear as if the Finance Committees were taking over the role of any other Committee.

He also requested that the researchers send unanswered questions to National Treasury for written responses.

Committee minutes

Co-Chairperson Maswanganyi warned Members that many sets of minutes had to be approved.

Co-Chairperson Carrim explained that the two Committees would discuss the minutes jointly but each Committee would propose and vote for the adoption of the minutes separately.

The following sets of minutes were read.
23 April 2020
30 April 2020
05 May 2020
19 May 2020
09 June 2020
25 June 2020
01 July 2020
03 July 2020
07 July 2020
14 July 2020
22 July 2020
28 July 2020

The above sets of Minutes were adopted by the Standing Committee on Finance without amendments.

The above sets of Minutes were adopted by the Select Committee on Finance without amendments.

The minutes of 30 June 2020 were adopted, with technical corrections, by the Standing Committee on Finance.

The minutes of 30 June 2020 were adopted, with technical corrections, by the Select Committee on Finance.

Closing remarks
Co-Chairperson Carrim thanked his Co-Chairperson for doing most of the chairing and he thanked the Members for their participation.

The meeting was adjourned.