Two companies accused of overcharging the South African Police Service (SAPS) for hand sanitiser have appeared at the Competition Tribunal in the first COVID-19 excessive pricing case involving the public sector. According to the Competition Commission, the companies made a 54% profit, about R14m, on the cleaning product.
A Business Day report says in March 2020 the police ordered 81,000 units of hand sanitiser from a small firm that had never sold sanitiser before and that had neither the supplies nor the money to provide it. According to the investigation, the R287m tender – in excess of the police’s personal protective equipment budget of R140m – took only 24 hours to be decided.
Bluecollar Occupational Health bid for a R287m tender to sell 81,000 units of sanitisers in 25l quantities, but this was later downgraded to 10,000 units in a deal worth R35.5m. After the tender was accepted, it approached Ateltico Investments for funding.
Regulations gazetted in March 2020 by Trade & Industry Minister Ebrahim Patel prevent firms selling essential goods required for the pandemic from increasing their mark-ups by more than 10% during the State of National Disaster.
The tribunal has been asked to find both Bluecollar and Ateltico guilty and fine them as much as 10% of their turnover.
The Business Day report says in its defence, Bluecollar argued that it is not a dominant firm as it had never provided sanitiser before and therefore cannot be guilty of excessive pricing. The firm’s advocate, Kristy Wilson, told the tribunal the company did not actually make a 54% profit as claimed, saying most of the money it made went to paying back debt it incurred to finance the deal. She said the profit was about 18%.
For its part, Ateltico Investments argued that it should not be joined to the case as it was not involved in the process to bid and set prices for the product. It was only brought into the deal a week later to help provide finance to Bluecollar.
Under cross-examination by the Bluecollar advocate, police administrator Stephen Mahlangu – who put out the tender – admitted that no negotiations on the prices of the sanitisers were entered into and no one checked whether the firm had sanitiser in stock before awarding the tender.
The advocate for Ateltico Investments, Jonathan de Wet, accused the police of being “thoroughly and incredibly incompetent” at best, or at worst that there “was corruption involved in the deal”.
[link url="https://www.businesslive.co.za/bd/national/2021-03-01-police-accused-of-incompetence-and-corruption-in-tender-process/"]Full Business Day report (Open access)[/link]