There has been slow progress in the Special Investigating Unit’s attempts to recover R390m from businessman Robert Gumede and his companies, linked to a massive and overpriced PPE tender during the Covid-19 state of disaster.
Daily Maverick had previously reported that Red Roses Africa, also using the name Mainstreet 699 and registered in Mpumalanga, had scored a contract from the South African Police Service (SAPS) worth nearly R600m to supply hand sanitiser and masks.
At the time, Blessing Qwabe, the director of Red Roses Africa and a relative of Gumede’s, and his lawyer, vehemently denied impropriety. His lawyer described the report as “filled with, inter alia, inaccuracies, innuendos, sensationalism and assumptions”.
But an application filed by the SIU at the Special Tribunal on 26 March puts Gumede at the centre of the contract, and has provoked a bitter dispute between him and the SIU.
Daily Maverick was only recently able to obtain a copy of the application, in which Gumede is described as “a well-known businessman associated with many businesses that conduct business with government in various and vastly different aspects of trade”.
The SIU says he is a “critical player whose role appears crucial from the start until the end”, and wants the Special Tribunal to “review and set aside” the contract between Red Roses and the SAPS, and to order Gumede, Qwabe and Red Roses to repay the SAPS R390 754 000 plus interest within 30 days of the SIU obtaining a successful order from the tribunal.
It calls the amount an “unlawful overcharge”.
Although four months have passed since the SIU filed its application, Gumede, Qwabe and Red Roses have yet to file answering affidavits. But they are fighting back.
Last week, in response to questions, Daily Maverick received a 20-page statement plus annexures from them, disputing almost every “baseless unsubstantiated allegation” made by the SIU, and accusing the SIU’s chief forensic investigator of “perjuring himself for his own motives and agenda”.
The facts according to the SIU
The SIU’s case is set out in an affidavit by Jackey Mathabathe, its chief forensic investigator. Although providing much more detail and supporting evidence, it confirms what Daily Maverick first revealed in 2021 when it was noticed that Red Roses Africa received one of the largest payments to suppliers listed on the Treasury’s publicly accessible Covid-19 database.
Essentially, the SIU alleges that on 25 March 2020, five days after President Cyril Ramaphosa had declared a national state of disaster, Gumede wrote to senior official Molefe Fani in the National Treasury to persuade it to buy PPE (mainly hand sanitiser and masks) from Red Roses Africa. He is the company’s board chairperson and his nephew is its director.
His letter said his company “offers end-to-end testing and protective gear solutions against the … pandemic”.
“Through our partnership with certified, approved global suppliers of Covid-19 protective and testing products, that were supplied to Wuhan to fight the scourge, Mainstreet 699 is well positioned to supply internationally certified goods and products on an urgent emergency basis at the shortest time.”
Similar letters were sent to senior generals in the SAPS. On this basis, a procurement authorisation worth R596 720 800 00 was signed by one SM Mahlangu on 1 April 2020, with the handwritten note that “verbal authority granted Col Ngobeni on emergency delegation”.
However, the SIU said this deal violated the Constitution, the Public Finance Management Act, Treasury regulations and other laws governing public procurement.
The SIU’s investigation alleges that:
• Gumede had told the SAPS the PPE could be imported immediately from China and brought to South Africa on a “specially chartered Airbus”. But Mathabathe says “there never was any Airbus that was ready and waiting or even available … in China with the required PPE equipment….” Instead, the respondents “appeared to have been either lying or fraudulently misrepresenting the truth to SAPS so as to induce the conclusion of an urgent contract, or were only going to look for an Airbus after payment was made to them”. Gumede and Qwabe dispute this and say the source of the PPE and how it would be transported is irrelevant to the contract terms.
• The SIU says that, instead of being imported from China, the hand sanitiser was sourced from local companies, including Dis-Chem, and that far less was delivered than contracted. Red Roses was contracted to supply 90 000 25-litre containers. Gumede and Qwabe insist they fulfilled the whole contract, but they do not provide any documentation proving this. Of the 12m masks, only 2m were provided, says the SIU.
• The SIU says Red Roses Africa paid R162m to the companies that supplied it with the sanitiser and masks it provided to the SAPS, allegedly making nearly R400m in “unlawful overcharge”. Gumede and Qwabe do not dispute the amount they made from the PPE sales, but say it was reasonable – not an overcharge.
• The SIU says Red Roses Africa paid R1 150 for a 25-litre vat of hand-sanitiser inclusive of VAT, but it sold the same on to the SAPS for R5 405 – “78% above the unit costs resulting in a 370% gross profit”.
• The SIU says Red Roses Africa was not tax-compliant at the time it entered into the contract with the SAPS. Gumede and Qwabe dispute this.
• Although not referred to in the SIU affidavit, Daily Maverick also established independently that Red Roses was not registered as a supplier of PPE with the SA Health Products Regulatory Authority or the SA Bureau of Standards.
• The SIU says that, after delivery, SAPS discovered during random spot checks that some of the sanitiser was diluted to below the required 70% alcohol content. Gumede and Qwabe say this related to only one of their suppliers.
• Despite the detail in the 20-page statement, similar averments have not yet been made under oath in an answering affidavit at the Special Tribunal. This must normally be filed within 15 days of a respondent’s notice of intention to oppose an application.
A source claimed this is because efforts are under way to try to pressure the SIU senior leadership to withdraw the case. As the billionaire owner of the Guma group of companies, including IT company Gijima, and as an ANC funder, Gumede is politically connected.
The SIU contends that not only was he the main person involved in initiating and negotiating the contract with the SAPS, but he was also the main beneficiary of the profits: in total, R514 694m was paid to Red Roses Africa in three instalments between 21 April and 21 May 2020. This is not disputed by Gumede in his response to Daily Maverick.
The SIU alleges that, post-payment, these monies were paid on through his network of companies, service providers and associates – six of them are listed among the 47 respondents in the case.
Following the “money trail”, says the SIU, it found that “soon after the funds were received” they were transferred “to beneficiaries with close links to (Gumede) and with no history of supplying PPE related goods and services”. In its affidavit, the SIU invites all respondents “to demonstrate any value rendered to the SAPS and/or (Red Roses Africa) that warranted payment of the monies” to them.
Gumede himself received R4.2m, shows the SIU’s affidavit. His nephew, Qwabe, was paid only R250 987.
Mathabathe’s affidavit sums up his findings by saying: “These first to third respondents may have, through their insatiable greed, directly or indirectly caused the unnecessary deaths of frontline police officers and …certainly resulted in the theft of SAPS’ funds.”
Gumede and Qwabe’s rebuttal
Daily Maverick approached Gumede and Qwabe for comment separately. In their 20-page joint statement, they provide what they say is a detailed rebuttal of the SIU’s application.
But they add a new dimension. They allege that the SIU’s chief forensic investigator has concocted the case against Red Roses, although their letter does not say why Mathabathe – whom sources say has been a trusted employee of the SIU for nearly 15 years – would have done this.
They claim: “There has been a blatant disregard, distortion and withholding of the evidence in the SIU’s possession. We have pointed this out to … the SIU. The SIU has committed a serious abuse of process and the investigation officer … has … perjured himself for his own motives and agenda.”
However, it does not appear that any charges have been laid against Mathabathe.
Their statement repeats this serious allegation several times. It says the contract was lawful and fully performed, that Red Roses was tax-compliant, and that Mathabathe has exaggerated issues … to suit his own narrative.
An unlawful surcharge?
Their statement refers only briefly to the allegations of excessive pricing, and the “unlawful surcharge”. On how and why the R515, paid to Red Roses by the SAPS was distributed among the companies the SIU lists as respondents in its application, they say:
“The Guma Group assisted Red Roses to pay for PPE upfront since the government would only pay 30 days after delivery. The Guma companies such as Gijima have been repaid the loans.”
But it would appear that the prime motivator for the contract was the Guma Group. Correspondence annexed to the SIU’s founding affidavit shows that most of the correspondence to the SAPS and National Treasury came from senior employees of the Guma Group who are not listed as directors or employees of Red Roses.
Judging by its neglected website, created in 2020 and not been updated since September 2021, the company is not involved in business. This appears to be confirmed by its unused offices, still given as its physical address on its website.
SIU spokesperson Kaizer Kanyago confirmed “that all respondents are opposing our application”. “But we cannot comment as the matter is subjudice.”
Because the respondents’ answering affidavit has not been filed, a date for a hearing at the Special Tribunal has not been set.
Other investigations
Gumede and Qwabe say repeat numerous times in their statement that the contract was investigated and cleared by the SAPS and the Auditor-General. This is not true.
This week, Daily Maverick confirmed that an excessive pricing complaint against Red Roses Africa is still waiting to be heard by the Competition Tribunal. Spokesperson Siya Makunga said the Commission is pursuing “charges for contravention of section 8(1)(a) of the Competition Act”, which states that “it is prohibited for a dominant firm to charge an excessive price to the detriment of consumers or customers”.
“The parties are still engaged in talks on a possible settlement agreement.”
Similarly, although Daily Maverick has not yet been able to establish what is happening in the SAPS with its PPE procurement investigations, it is not true that its internal auditors “have not found any evidence of any irregularity or breach of procurement laws or protocols.” In fact, the opposite.
A draft internal audit report into PPE procurement by SAPS between March and August 2020 found 34 orders for PPE to the value of R1 620 694 361 20 were “concluded on verbal authorisation without obtaining the sufficient number of quotations”.
Mainstreet 699, the supplier of “multiple goods” in a contract of R596m, is listed as one of the companies where there was “irregular expenditure” because of “verbal authorisation and no sufficient quotations obtained”.
The report recommends an investigation.
However, Major-General Dinah Nkosi, the chief audit executive of the SAPS who signed the report, was subsequently demoted to a lesser position. Her report was never acted upon.
In 2021, the Hawks announced it was undertaking investigations into “fraud and/or corruption by the SAPS in the procurement of PPE between April and July 2020”. It’s also not clear what happened to these investigations.
The recent decision of the Special Tribunal to set aside a R257m contract for PPE between Nkhane Projects and Supply and the Gauteng Health Department, as well as the SIU’s investigation into the corruption at Tembisa Hospital that led to the killing of Babita Deokoran three years ago, suggests, however, that law enforcement authorities remain seized with PPE corruption.
See more from MedicalBrief archives:
No action yet against company which inflated PPE deal by 200%
‘Imported’ PPE for SAPS marked up 400%, sourced from Dis-Chem
SAPS officers in court over PPE corruption