Life Esidimeni tangle has Gauteng departments in hot water

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JHBHighCourtA Johannesburg High Court judge has expressed concern over Social Development Department officials using conduit payments to’ exercise’authoritarian control’ of an NGO, and that its systems have been compromised, suggesting that the Life Esidimeni inquiry examine the matter.

Even as mental health patients were dying under the care of Gauteng Health, officials in the province’s Social Development Department appeared willing to risk the welfare of the most vulnerable in society, the High Court in Johannesburg said recently. And, says a Mail & Guardian report, these two situations may not be entirely unrelated.

The report says evidence put before Judge Brian Spilg on the actions of some officials “brings into question whether these officials within Social Development appreciate that they are custodians of funds … for the benefit of those most in need of immediate care”. He hopes the Life Esidimeni inquiry, currently underway, as well as prosecutors, the auditor general and the Treasury, will take an interest in the circumstances under which R5m meant for drug rehabilitation disappeared, and what that says about the province as a whole.

The report says Spilg took more than two hours to read what was at heart a simple civil judgment: he dismissed an application by the premier of Gauteng to hold non-governmental organisation A Re Ageng responsible for the missing R5m. It was clear in both fact and law that A Re Ageng was not liable to pay back the money, Spilg said.

But the process to reach that conclusion spawned more than half a dozen applications and counter-applications and thousands of pages of documents, which showed a pattern of behaviour that troubled Spilg, the report says.

After the Gauteng Department of Health moved psychiatric patients from Life Esidimeni centres to community-based nongovernmental organisations, at least 144 of those patients died. A report from the Health Ombudsman and evidence before arbitration hearings into those deaths have indicated a sometimes callous disregard for the lives of patients by health department officials and a breach of rules and regulations, including financial regulations, along the way.

Moving the patients threatened to leave Life Esidimeni’s facilities unused, so it proposed to the Gauteng Department of Social Development that its Witpoort Care Centre in Ekurhuleni be turned into a drug rehabilitation centre. That, the report says, was when things became strange.

The agreement between Gauteng and Life Esidimeni was marked confidential, Spilg said, even though similar agreements are not considered secret. And nobody has yet explained why it was apparently impossible for the provincial government to pay Life Esidimeni directly months after that agreement was signed and why it used “conduits” to channel millions to the new rehab centre.

The report says in total, the province paid R27m to the centre through two small NGOs, supposedly because they were already registered on its financial systems. They each took a small cut for processing fees before passing the money on to Life Esidimeni.

During court proceedings, it emerged that a normal audit would never have detected where the money actually went, Spilg said. This, among other things, puts the transactions in breach of the Public Finance Management Act.

Whether or not it amounted to money laundering, as A Re Ageng alleged, has yet to be determined, the report says. A Re Ageng, which houses victims who flee domestic abuse, acted as a conduit for R13m of those initial payments. When another R10m unexpectedly showed up in its bank account, however, it gave every appearance of scrambling to find out where the money had come from, and why. When it later learned it was again to be a conduit, it demanded paperwork to ensure everything was above board.

But, the report says Social Development officials were not happy with A Re Ageng’s attitude. Spilg said papers before him showed that the province threatened to shut A Re Ageng down without making reasonable provision for the care and counselling of those the NGO serves on behalf of the government. Officials sought to use subsidies to “exercise authoritarian control” over A Re Ageng, and there seemed to be no stopping them.

“The threat of closure if the bidding of officials is not adhered to, if established, suggests that the systems within social development have been compromised and that there is a lack of accountability and oversight at the highest levels,” Spilg said.

The report says things became even stranger when R5m of the R10m was transferred out of A Re Ageng’s Absa bank account. Spilg rejected Absa’s insistence that A Re Ageng itself must have made the transfer, saying whether or not a staffer was complicit, “outside hacking cannot be ruled out”. The money went to a small liquid fuels trading company, Kish Gas, which said it was used to buy 40,000 litres of diesel, which was then collected by 12 unmarked tanker trucks with foreign number plates.

It “cries out for investigation” why Kish would not notice that its foreign buyer would throw away R700,000 by not doing paperwork to claim back VAT, said Spilg. It should also be easy to trace the 22 accounts into which Kish distributed the state’s money. But “this court has heard nothing from any investigation” into that, he said.

The report says instead, the court heard promises of investigation from a third Gauteng government department – that of Finance. The province’s Finance MEC had been “scathing” about A Re Ageng styling itself as the custodian of government money, a job adequately handled internally by the government itself, said Spilg.

But, the report says, the Finance Department had stood by and had apparently taken no action while payment structures and systems were deliberately compromised. “While this may be as a result of poor administration in respect of service providers, the potential for abuse is self-evident,” Spilg said.

The report says the Gauteng government had previously disputed the assertion made by its own legal team that “conduit” payments are routine in the administration of its finances. In March, it promised a robust investigation of these claims.

Mail & Guardian report

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