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HomeMedico-LegalPPE corruption probe shows 'insatiable pursuit of self-enrichment'

PPE corruption probe shows 'insatiable pursuit of self-enrichment'

The Special Investigation Unit (SIU) probe into R13bn of public spending on coronavirus in South Africa has found evidence of political pressure, price inflation, and fraud, fuelled by an "insatiable pursuit of self-enrichment", Polity reports. The investigation looked into more than R13bn of spending, just a slice of total COVID-19 expenditure of R30.7bn.

The SIU launched the probe in July after a flood of whistleblower submissions alleging irregularities in the procurement of personal protective equipment (PPE) and hospital supplies like beds and wheel chairs.

The investigation found evidence of tax fraud, the use of shell companies to win multiple contracts, instances of price inflation of up to 500%, and political pressure put on managers to break procurement laws, SIU head Andy Mothibi is quoted in the report as saying.

"It appears that persons in positions of authority in some state institutions believed that the declaration of the state of emergency meant that all procurement is automatically conducted on an emergency basis," Mothobi said.

"The SIU investigations have revealed a flagrant and wanton disregard of the applicable law, policies and procedures. My observation is that the flagrant and wanton disregard is underpinned by insatiable pursuit of self-enrichment."

The investigation will be concluded in the next six months, Mothobi said.

The SIU said that to date, contracts with a value of R365m had been sent to a Special Tribunal formed to hear the cases. It added that about R260.60m in cash or assets were seen as recoverable.

 

The SIU has made 38 referrals to the National Prosecuting Authority (NPA) for prosecution for fraud, corruption and contravening supply chain management policies, TimesLIVE reports Mothibi disclosed. As at 25 November last year, the SIU had instituted civil matters at the Special Tribunal to the value of R259m for review, which includes the recovery of state funds in relation to corrupt activities associated with the State of Disaster.

The proceedings before the Special Tribunal also include the freezing of the pensions of officials who have resigned from their positions while investigations were proceeding. The rand value of actual cash and/or assets recovered as at 4 February was R127m, said Mothibi.

 

Nearly two dozen companies that scored from Thandisizwe Diko's “proxy” company after it received millions from the Gauteng Health Department last year have been ordered to forfeit the money to the state, says a TimesLIVE report. The Special Tribunal – probing alleged corruption in the acquiring of PPE for the Gauteng Health Department – has ruled that 21 companies (listed in the report online) that benefited from the tender awarded to Ledla Structural Development must forfeit the cash they received.

In total, according to a tribunal statement, about R18.5m will be forfeited, with the money “allegedly spent wrongfully in the procurement of PPE”.

In court papers last year, the SIU described Lela as ‘proxy’ to Royal Bhaca, a company belonging to Thandisizwe, the husband of Kusela Diko, who was President Cyril Ramaphosa's spokesperson at the time of the COVID-19 outbreak.

According to claims the SIU laid out in court documents last year, the company was reported to have made an 800% mark-up on PPE sold to the government. Special Tribunal court documents state that Ledla became a ‘substitute’ when it became public knowledge that Royal Bhaca had scored a multimillion-rand contract from the Health Department. The Dikos are family friends of ousted Gauteng Health MEC Bandile Masuku, who was at the helm of the department at the time.

The scandal ultimately led to the sacking of Masuku, who has since challenged his dismissal in court. Judgment has not yet been handed down in that matter. In a statement, the Special Tribunal said the forfeiting of these funds was aimed at recouping some of the R38.7m allegedly spent in the wrongful procurement of PPE.

The 21 companies are said to have received varying amounts, with some getting as little as R10,100 but others receiving much more.

 

Sleuths painstakingly recreated paper trails, traced witnesses, and gleaned forensic evidence off computers to try to uncover the extent of one of the most sordid offshoots of the COVID-19 crisis to develop in South Africa, reports Daily Maverick. This task has involved looking into at least 1,774 service providers.

DM reports that aside from the sheer scale of their work, investigators’ tasks were made all the more difficult because evidence – including cellphones, computers and documents – was destroyed. Witnesses also feared victimisation and “SIU members were threatened and were intimidated by both officials and service providers.

According to DM, the report marks the first time the country has been provided with a detailed and comprehensive overview revealing how widespread the problem of unscrupulous PPE contracts may be. It also provides insight into how investigators carried out tasks and the several difficulties they had faced. One of the critical recommendations the report makes is that the law needs to be tweaked to include extra precautions when influential people or their relatives benefit from PPE procurement from state institutions.

“The SIU recommends that legislative amendments be considered to provide for safeguards when state institutions are to contract with domestic prominent influential persons and their immediate family, as well as entities in which they have an interest, or are beneficial owners of,” the report said. “All state institutions should be bound by such safeguards.”

DM reports that aside from the status of several cases, some of which were found to be baseless and were therefore closed, the report also provided fascinating insight into how some service providers and state employees scrambled to cash in on the COVID-19 crisis.

Mothibi had found that when the country went into a State of National Disaster in March 2020 because of COVID-19, some state figures in positions of authority had incorrectly thought this meant all procurement could be conducted “without compliance with any of the normal prescripts regulating public sector procurement”.

Following the declaration of a State of National Disaster, some service providers quickly registered at the Companies and Intellectual Property Commission and were used even though they had no track records.

Some service providers were in the process of deregistration when they were suddenly awarded contracts. Others used front companies so that they could be awarded multiple contracts from a department.

Instances were also flagged that could have had grave repercussions. “Product specifications were ignored and products that were not suitable for its intended purposes were purchased and in several instances against the advice of expert opinion on the usefulness of the product.”

PPE had also been packed under false labels. Mothibi said that in certain cases, “political pressure played a role in the procurement of PPE” and there had been misrepresentations by suppliers “by not disclosing their close friendships with officials who were involved in awarding PPE contracts”.

Investigations overall had revealed disregard for law, policies and procedures. “My observation is that the flagrant and wanton disregard is underpinned by insatiable pursuit of self-enrichment. That cannot go unpunished,” Mothibi said.

“It is disheartening to see state officials in all spheres of government, who have been called to serve the people of South Africa, being implicated in unlawful and illegal activities in procurement processes that are meant to benefit the public.”

 

Mothibi described the PPE corruption as “unprecedented”. “My observation is that the flagrant and wanton disregard is underpinned by insatiable pursuit of self-enrichment. That cannot go unpunished.”

Mothibi is quoted in IoL as saying that the officials acted with corrupt intent to unduly benefit themselves and their friends and or relatives to the prejudice of the state and the public. He warned if corruption was not tackled by all, it had the potential to weaken the state’s capacity to deliver basic services like water, electricity, roads, housing, healthcare and education.

"I appeal to public servants and those in position of power and responsibility to serve the people of South Africa with integrity and pride.”

 

Eyewitness News reports that the SIU assured South Africans that state officials implicated in illegal procurement processes will be punished and a clear message will be sent to those with corrupt intent to benefit from the poor. Mothibi said corruption must be rooted (out) in (all) spheres of society: “Those outcomes must be attended to so that punishment is also meted out.”

He said they would also be recovering the monies owed to the state in various provinces and had already begun the process in Gauteng. “This was a R139m contract, of it, R26m has been forfeited to the state.”

The SIU said investigations into the dodgy PPE procurement tenders continued and more reports would be released in the future.

 

The SIU has found evidence of political pressure in the awarding of PPE contracts by some state institutions, reports The Citizen. “In some instances, we found that the evidence indicated that there was political pressure that played a role in the procurement of PPE. It also appears that the names of service providers were determined before the Supply chain management process commenced,” Mothibi said.

The SIU head said Treasury procurement guidelines were largely ignored by officials, resulting in overpayments and a complete breakdown of the checks and balances put in place.

Mothibi said government officials failed to exercise their oversight over the procurement process. He said certain officials appeared not to trust the government’s processes because of a perception that the processes created monopolies to the exclusion of small and black-owned businesses. But Mothibi said this was not true.

“The evidence also pointed to us that various officials merely rubber-stamped decisions taken by the authorities, accepted and gave effect to unlawful instructions from officials more senior than them, which resulted in a complete breakdown of the checks and balances protections normally afforded by, among others, the principle of segregation of duties,” he said.

There was also no attempt to negotiate with the suppliers. “This resulted in overpayments that we have found for the goods that were supplied,” Mothibi said. The SIU found that some products were not suitable for procurement and substandard PPE was also delivered.

Several departments lacked basic control measures to verify the numbers of goods brought, while some companies were not registered with SARS as VAT vendors.

 

The Democratic Nursing Organisation of SA (Denosa) said health-care workers were owed an apology by those involved in the multimillion-rand PPE tender corruption. According to a TimesLIVE report, the union said: “Health-care workers are owed an apology, explanation and a recourse from both government and implicated companies over this malaise, because many are still feeling the hard knock-on effects of infection while family members of those who died have lost breadwinners and parents permanently.

“Those companies who supplied substandard-quality PPE have set health-care workers up for failure and placed their lives on the line. We call for the monies that have been retrieved successfully to be returned (so they can be used) to buy quality PPE to safeguard health-care workers as the country has been warned of a possible third wave of COVID-19.”

Denosa said the fact that corruption of this nature was able to be carried out showed that the lives and wellbeing of health-care workers were never a priority.

 

In another revelation of PPE greed and irregularities, the City of Johannesburg has been reviewing reports about PPE expenditure of its service provider divisions City Power and Pikitup. According to Rapport, councillors heard that City Power spent R3,000 per 100ml on bottles of hand sanitiser available on Clicks’ shelves for R30.

The utility paid R1,150 per mask made out of material and overpaid a supplier for 17 boxes of disposable gloves. The quote was for R5,000 per box (it is available on Takealot at R225 a box), but the city paid even more – R5,570 per box.

Pikitup’s report revealed that it paid a provider four times more than the quoted amounts.

Seven companies received contracts to sanitise the metro’s buildings on 7 August last year at a cost of R154 per square metre.

The report said the figures were revealed in an internal audit of COVID-19 expenditure. The audit has not yet been completed, but the identified transactions have been referred to the SIU.

 

[link url="https://www.polity.org.za/article/south-african-probe-finds-evidence-of-political-pressure-fraud-in-covid-19-contracts-2021-02-05"]Full Polity report (Open access)[/link]

 

[link url="https://www.siu.org.za/wp-content/uploads/2021/02/R23_of_2020_Final_report_on_matters_finalised_for_public_release_05022021.pdf"]SIU report[/link]

 

[link url="https://www.timeslive.co.za/news/south-africa/2021-02-05-siu-recovers-r127m-from-dodgy-ppe-procurement-tenders/"]Full TimesLIVE report (Open access)[/link]

 

[link url="https://www.timeslive.co.za/news/south-africa/2021-02-04-those-who-illegally-scored-from-millions-paid-to-diko-proxy-company-must-pay-it-back/"]Full TimesLIVE report (Open access)[/link]

 

[link url="https://www.dailymaverick.co.za/article/2021-02-06-siu-investigating-corrupt-covid19-ppe-tenders/"]Full Daily Maverick report (Open access)[/link]

 

[link url="https://www.iol.co.za/news/politics/ppe-looting-underpinned-by-insatiable-pursuit-of-self-enrichment-siu-head-80e17acd-d69d-4d9f-af4a-33b90bf7ed4b"]Full IoL report (Open access)[/link]

 

[link url="https://ewn.co.za/2021/02/05/siu-says-officials-implicated-in-ppe-corruption-will-be-punished"]Full Eyewitness News report (Open access)[/link]

 

[link url="https://citizen.co.za/news/2436665/government-officials-faced-political-pressure-to-award-ppe-tenders-siu-probe-reveals/"]Full report in The Citizen (Open access)[/link]

 

[link url="https://www.timeslive.co.za/news/south-africa/2021-02-05-ppe-corruption-shows-health-workers-were-never-a-priority-says-nursing-union/"]Full TimesLIVE report (Open access)[/link]

 

[link url="https://www.netwerk24.com/Nuus/Gesondheid/hierdie-botteltjie-reiniger-kos-r3-000-20210206"]Full report in Rapport (Restricted access)[/link]

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