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Discretionary public contracting: A root of corruption?
Despite the existing array of tools for promoting transparency in public procurement, the awarding of public tenders is still notoriously opaque. So far, audit reports are one of the only publicly available sources of information on public tendering dynamics. However, even these, due to their ‘strictly confidential’ nature, are rarely directly accessible. Most of the time the public feeds on indirect scraps of information leaked to the media. Even then, tender irregularities tend to be exposed only after contracts are awarded. Public information that can be used ex ante, to prevent tender corruption from occurring in the first place, is virtually non-existent. This is the root of what appears to be an increasing gap between de jure tender regulations and policies, and de facto practice by government bureaucrats (see National Administration).
Notwithstanding progressive legislation, such as the Combating of Corrupt Activities Act of 2004 and the Supply Chain Management Framework of 2003 (see Profile), audit report after audit report still indicate that the troublesome interface between government and the private sector has not yet been regulated effectively. This perhaps indicates a need for a revised approach that not only rests on sound legislative provisions but also on involving the broader public in all the critical stages of public contracting. That corruption is a product of bureaucratic discretion and monopoly in the absence of accountability is an established maxim. Public involvement would mean less discretion and monopoly, more accountability and ultimately less corruption.
Currently the decision to procure state goods or services, one of the most crucial phases of the public contracting process, is at the sole discretion of government officials. Hardly any civil society representatives sit on the decision-making panel, which enables bureaucrats to monopolise the process easily. In this arrangement, public officials are wont to attempt all sorts of undesirable acts, including advancing payments to subjectively preferred bidders even before a contract is awarded (see National Administration). Where substantial amounts of taxpayers’ money are involved, the decision to tender should be a product of extensive public consultation. In an open society, the public is perfectly entitled to question hasty public procurement decisions, particularly when the appeal to urgency has become a classic symptom of irregularity. As exemplified in this issue’s lead story (R40m tender furore) urgency is habitually used to justify departure from normal tender processes.
Access to the supplier database, prior to the issue of tender proposals, to ensure that only legitimately registered companies participate in the bidding process, is another important arena for public engagement. This could significantly reduce the not-so-uncommon phenomenon of companies that appear suddenly, almost out of nowhere and yet secure contracts. A healthy dose of suspicion towards hastily added, last-minute bidders is not inappropriate. Opening the supplier database to public scrutiny also makes it feasible to monitor closely the communication between registered companies and the procuring principal. In this way possible collusion between agents and the principal, such as instances where a company starts the work before a contract is awarded (see National Administration), could be publicly kept in check.
National Administration
R40m tender furore
The City Press published the findings of a report on irregularities in the awarding of a multi-million rand tender for the reorganisation of the Justice College. According to Dumisane Lubisi, Jackie Mapiloko and Makhudu Sefara, four officials have been implicated for awarding the contract to a company that quoted the College R23 million more than the next bidder. The report emphasised the disregard for proper tender processes shown by the officials. The contract has since been cancelled and some of the officials that were implicated have had disciplinary procedures brought against them. Full article in City Press (24 June 2007)
Majali: It was a cover-up
Sandi Majali has confessed in court that his company, Imvume Management, was just a front to channel money from PetroSA to the ANC. Stefaans Brummer reports that the allegations regarding the ‘Oilgate’ saga that were unveiled by the Mail and Guardian in May 2005 were true. According to Majali, PetroSA was the mastermind behind the plot and had approached him regarding the use of Imvume Management’s bank account. At the centre of ‘Oilgate’ is the R15 million payment by PetroSA to Imvume Management for the supply of oil condensate to PetroSA. The payment was made in advance allegedly because Majali had made the request in order to address cash flow problems within his company and honour monthly financial commitments. Until now, the parties involved maintained that PetroSA made a legitimate payment to Imvume and that they were not involved in the R11 million ‘donation’ by Majali to the ANC. Majali’s current position on the issue seems to stem from PetroSA’s apparent uncertainty in their attempts to both retrieve the debt from Imvume and to distance themselves from the scandal. Full article in the Mail and Guardian (11 May 2007)
Embattled transport Seta hit by R2m fraud
Parliament’s Labour Portfolio Committee is debating the future status of Setas that have been plagued by mismanagement and fraud. Linda Ensor of Business Day writes that the Transport Education and Training Authority (Teta) that is currently dealing with the misfortune of a R200 million loss through the Fidentia debacle was also a casualty of internet fraud to the value of R2 million. It was reported to the Portfolio Committee that an out-of-court settlement with a supplier cost the Tourism, Hospitality and Sport Education and Training Authority (Theta) R4.9 million. According to the Theta CEO, the cost of going to court over the matter would have amounted to R20 million. The supplier secured the claim against the Theta for not following procurement procedures. Full article in Business Day (20 June 2007)
State victory on Zuma diary may prove illusory
The NPA has been granted permission by the Durban High Court to issue the Mauritian authorities with a letter of request for the originals of the documents that it acquired in Mauritius in 2001. Ernest Mabuza of Business Day revealed that the judge had added that even if the Mauritian authorities agreed to the letter of the NPA this did not ensure automatic access to the documents until the Supreme Court of Appeal rules on the appeal by Jacob Zuma and Thint. Full article in Business Day (06 June 2007)
Provincial Administration
NW could nullify 10,000 bent licences
The Transport Department in the North West Province could repeal as many as 10,000 driver’s licences that may have been acquired illegally. This decision follows an investigation, which began in 2005, that discovered astounding inconsistencies in the awarding of learners’ licences in the province. According to the Citizen, the investigation revealed an environment in which fraud and corruption and “gross maladministration” could have taken place. Licence holders who may be affected have been given 14 days to contact the Transport department regarding their licences.
Full article in the Citizen (01 June 2007)
Report raps MEC over job for son
A Public Service Commission report has uncovered irregularities in the appointment of the Limpopo legislature MEC Joyce Mashamba’s son to the post of deputy manager in the human resources unit. The legislature is now calling for the Premier to sanction the MEC. Members of the legislature have also proposed that her son’s remuneration thus far be returned and that he be dismissed. The MEC’s current crisis follows the recent disciplinary process brought against her by the Limpopo legislature in which she disturbed a meeting that called into question her son’s appointment. The MEC is alleged to have barged into the meeting and attempted to assault the UIF president, Ike Kekana.
Full article in City Press (24 June 2007)
KZN whistleblowers claim witch-hunt
Two KZN ANC members have cried foul at being subjected to a disciplinary hearing for allegedly promoting factionalism in the KZN branch of the ANC. According to Niren Tolsi of the Mail and Guardian a letter has been submitted to the ANC’s national working committee appealing for its intercession at the provincial disciplinary hearing. The two members claim that the hearing is an attempt to challenge their credibility and remove them from the ANC after they disclosed that attempts were being made in the KZN branch to make it impossible for Thabo Mbeki to campaign in the province.
Full article in the Mail and Guardian (25 May 2007)
Local Administration
Chief on fraud charges
The Sowetan has reported that Chief Nyalala Pilane of the Bakgatla ba Kgafela has appeared in the Mogwase regional court on charges of theft, corruption and fraud. The state is accusing him of transferring money that was designated to his tribe into his own bank account without the authorisation of the tribe.
Full article in the Sowetan (24 June 2007) Also see Issue 29 of Umqol’uphandle-SA Corruption Briefing
Buffalo City probes staff selling jobs for up to R500
An investigation has begun into reports that officials in the Buffalo City Municipality are accepting money from job seekers in exchange for positions within the municipality. The Citizen reports that the municipal manager, Gaster Sharpley, has stated that staff who had ‘bought’ positions would be permitted to remain in their posts on the condition that they reported corrupt officials. Sharpley directed a letter to all employees communicating that he had information regarding corrupt activities relating to the filling of posts that was not confined to the human resources department. Full article in the Citizen (15 May 2007)
Former mayor faces corruption charges
Mdibanisi Tsheke, former mayor of the Govan Mbeki Municipality in Mpumalanga, is to appear in the Secunda Regional Court on charges of fraud, contravening municipal legislation and the misuse of a government vehicle. The charges are the result of a forensic audit initiated by former Mpumalanga local government and housing MEC, Jabu Mahlangu, in 2005. The report revealed that Tsheke spent taxpayer’s money to the tune of R2 million in a failed effort to remove former municipal managerThabo Mafihla from his post. Mafihla was targeted by the former mayor when he refused to rehire an official who had been dismissed for corruption.
Full article in City Press (10 June 2007)
Former mayor on fraud charges
The Citizen reports that a number of former senior municipal officials of the Mangaung local municipality in Bloemfontein have appeared in the Bloemfontein High Court on charges of fraud. The charges are a consequence of a Scorpions investigation into the municipality from 2000 to 2005 regarding apparent fraud to the value of R170 million. Former Mangaung municipal mayor Pappie Mokoena, his wife Granny, city manager Mojalefa, chief operating officer Mzwandile Silwana and Speaker Zongezile Zumane are among the accused.
Full article in the Citizen (27 June 2007)
Municipal manager suspended
Hugh Mbatha has been suspended from his post as municipal manager of the Ehlanzeni district municipality in Mpumalanga. The council is accusing him of corruption and misconduct. According to Sakhile Mokoena of the Sowetan, the allegations and subsequent suspension of Mbatha are a symptom of his victimisation for not taking instruction from the mayor in the awarding of tenders and filling of municipal vacancies.
Full article in the Sowetan (10 May 2007)
Manager in the soup – Khawula faces a litany of charges
The municipal manager for the Dannhauser municipality in KwaZulu Natal, Bhekani Khawula, has been summoned to a disciplinary committee on a number of charges. He stands accused of abuse of power and of increasing his salary package by R100,000 without seeking the approval of the council. An article in the Sowetan by Langelihle Chagwe reports that Khawula also allegedly failed to disclose to the mayor and the council timeously information relating to travel arrangements and event invitations that he attended in his professional capacity.
Full article in the Sowetan (08 June 2007)
Industry
First insider trading convict fined R300,000
Businessperson Carol Louise Botha, of Waterkloof Agricultural Holdings in Pretoria, has become the first person in South Africa to be sentenced for the criminal act of insider trading, writes Roy Cokayne. She was sentenced to five years imprisonment suspended with conditions and a R300,000 fine or five years in jail. Botha bought shares in Automakers in 1997 after she received favourable information regarding the company from a managing director of Nissan Manufacturing. Full article in the Business Report (17 May 2007)
Ex-Madiba lawyer finally pays up
Nelson Mandela’s former lawyer, Ismael Ayob, has reimbursed the ex-statesman R790,000 after a ruling by the Johannesburg High Court. A report by Jackie Mapiloko and Makhudu Sefari reveals that Ayob is, however, disputing the payment of R260,000 in legal fees. He claims that he distributed the money to Mandela’s children on Mandela’s orders. Mandela alleges that Ayob did not fully disclose the profit made from his artworks in 2005.
Full article in the City Press (03 June 2007)
Fraud costs insurance industry R850m a year, says A&G
Auto & General, the short-term insurer, has announced that the insurance industry in South Africa is losing as much as R850 million rand a year to fraud. Of all fraudulent claims in South Africa, between five and ten per cent were detected. According to SBR’s Mzwandile Jacks, the fraud consisted of claiming for items that were never lost or owned. Some 20,000 fraudulent claims to the value of R1 billion have been discovered by life insurance companies in the past four years.
Full article in the Business Report (04 May 2007)
SAA staff in credit card scam
SAA has discovered that between January and August last year 1949 fraudulent transactions valued at R14 million were effected through their call centre. The Star’s Lee Rondganger reports that a “N igerian credit card fraud syndicate” has saturated the SAA and engaged call centre staff in their operation. The scam involves the purchasing of airline tickets using the credit card details of international tourists through a ‘card not present transaction’ over the telephone. The credit card details are obtained by the syndicate from individuals working in hotels, holiday accommodation or car rental agencies. The airline tickets are then sold at a reduced cost, used for human trafficking or used to provide carriage for drug mules. Full article in The Star (10 May 2007)
Court takes R25m property out of the hands of Fidentia trustees
The chief executive of Fidentia, J. Authur Brown, has been ordered by the Cape High Court to relinquish ownership and interest in the property that he bought for his wife to run a ‘women’s lifestyle centre’ in Century City in Cape Town. The court order makes provision for the Fidentia group’s curators to sell the property and dispose of the funds as they see fit, writes Ronnie Morris. Dines Gihwala, one of the curators, stated that Brown managed the assets of the company exclusively. The deficit in the Fidentia Asset Management company is estimated at R1 billion. Full article in Business Report (22 May 2007)
Crime and Justice
Control prosecutor found guilty on 24 counts of fraud
Mark du Plessis, who was previously the Queenstown regional court control prosecutor, has been sentenced to nine months in jail. He was convicted on 24 counts of fraud after he was arrested during a police operation. When he was apprehended with marked banknotes he admitted guilt. According to The Herald, du Plessis claims that he was having financial difficulties and that is what led to his fraudulent behaviour.
Full article in The Herald (29 May 2007)
Cops for heists
The police in Mpumalanga have uncovered significant information that implicates police officers in armed cash-in-transit robberies. Their investigations were advanced when they arrested a police officer who is suspected of providing police uniforms to criminals to use during robberies on the weekend. The Sowetan was informed by the Special Tracing Team of the provincial police that they are closing in on corrupt police officers.
Full article in the Sowetan (14 May 2007)
Witnesses finger Kgantsi
The trial of former Scorpions prosecutor Portia Kgantsi, currently underway in the Johannesburg High Court, has revealed the details behind her attempt to solicit a bribe from N igerians John Afolobi and Dijbril Issa Mohamedou. She is alleged to have posed as the prosecutor for their case and offered to scrap the case if they paid her money, writes Sandra Lieberum. In a previous court appearance it was reported that when she received the money from Afolobi and Mohamedou in the police station, she had attempted to use Keith Green, a Scorpions agent designated to observe her, to take the money out of the police station.
Full article in the Citizen (22 May 2007) and Sowetan (10 May 2007)
Social Justice
State grant scam
The Department of Health and Social Development in Limpopo has unmasked a grant scam in which foreign nationals are working together with local immigration officials to obtain South African identity documents for themselves and birth certificates for their children. The foreign nationals would then access social grants with the new documents. The department is currently investigating the scam and will approach the police once it has collected evidence. Community leaders, such as traditional leaders and school principals, have also been implicated.
Full article in the Sowetan (05 June 2007)
Housing dept money goes missing
Millions of rands have gone missing in the Limpopo Department of Local Government and Housing. The Standing Committee on Public Accounts (Scopa) is placing the blame on the head of department, Sam Rampedi, after he replaced the head financial officer with an official who has a grade 12 qualification. Rudolph Phala, the Scopa chairperson, has stated that an amount totalling R22.3 million is being disputed.
Full article in the Citizen (25 May 2007)
Nursing council crisis as officials square up
A KPMG report has revealed that the SA Nursing Council, the watchdog of 200,000 nurses, is vulnerable to theft, fraud and mismanagement of funds. The report also claims that the council does not adhere to “accounting principles, tax laws” and the policies that it has set for itself. The recently appointed SANC deputy registrar for corporate affairs, Herman Dikobe, has placed the responsibility of the state of affairs at the council on the former registrar, Hasina Subedan, and other senior council members. Hasina Subedan was appointed to the position of registrar and head of administration and finances by the Minister of Health, Manto Tshabalala-Msimang, in 2000.
Full article in The Star (28 May 2007)
Alleged fraudster’s action could see him facing a prison sentence
Mlandeli Kobe has been accused of defrauding government by collecting a disability grant while at the same time receiving a salary from the municipality. Kobe was elected to the position of councillor at the Nkokobe Local Municipality in 2005. He had been receiving the R820 disability grant since 1997 but failed to report to the Department of Social Development when he started receiving a salary. Pumulele Godongwana of the City Press reports that an official from the department say Kobe could face a jail sentence if convicted.
Full article in the City Press (27 May 2007)
Cops to probe shop owners who rip off poor pensioners
Some shop owners in the Sisonke district in KwaZulu-Natal have been accused of taking advantage of social-grant beneficiaries. Cash Payment Services (CPS), which has been contracted by the SA Social Security Agency (Sassa) to manage the disbursement of social grants in South Africa, has threatened to institute legal action against shop owners involved in these activities. The Sunday Sun has reported that beneficiaries were charged R30 from R840 grants and R20 from the R200 child grants. Sassa has blamed the agreement between CPS and shop owners for the current problem. The CPS has service-level agreements with shop owners to place payment terminals on their business premises.
Full article in the Sunday Sun (06 May 2007)
Dr Chippy Fake!
The Sunday Times has discovered that Chippy Shaik’s 2003 PhD in mechanical engineering from the former University of Natal was plagiarised. The university has since instituted its own investigation and has reported that the accusations are not without merit. The university will continue with its investigation and the professors involved may face dismissal and the PhD in question may be withdrawn. Professor Malegapuru Makgoba, the vice-chancellor of UKZN, has vowed to deal with the issue without favour to any of the individuals involved. The university has informed the professors that they face disciplinary action. Full article in the Sunday Times (20 May 2007)
and Sunday Independent (27 May 2007)
Civil Society and Sport
PSL’s scandal as former top refs quit
The resignation of two referees from the South African National Referees Committee has highlighted the controversy and inconsistencies in the awarding of prizes for the referee and assistant referee of the year at the Premier Soccer League awards. Timothy Molobi of the City Press reported that former referees Phillip Masemola and Stan Stewart submitted their resignations after the officials that topped the list after the season’s assessment report were overlooked for the prizes. Instead, the R50,000 and R40,000 prize money went to people placed second and third on the list. The chairperson of the committee has admitted that the system for selecting the referee and assistant referee of the year is unsuitable and needs to be revised.
Full article in the City Press (27 May 2007)
Feedback on graft hotline disappoints
The Public Service Commission (PSC) has revealed that the National Anti-Corruption Hotline has had a considerable response from the public but government departments’ reactions to the cases reported through the hotline has been dismal. The PSC’s chairperson, Stan Sangweni, stated in a report to parliament that although the hotline call centre was very successful in recording the cases on the case management system, of the 2,296 cases forwarded to departments they had only obtained 830 reports on the investigations undertaken. Of all the cases investigated, 142 had been completed with a positive conclusion. The social development department had the lowest rate of response to reported cases, with only one response to the 240 cases reported.
Full article in the Business Day (22 June 2007) and the Star (14 June 2007)
Survey checks business corruption
The government has introduced a business survey against corruption that will assess corruption and anti-corruption processes in the private sector. The study aims to increase the understanding of corruption and evaluate adherence to the Prevention and Combating of Corrupt Activities Act. The survey comes on the back of the publication of Transparency International’s bribe-payers index in which South Africa was ranked 24th out of 30 countries.
Full article in the Citizen (27 June 2007)
Probe into decade of housing fraud
The Special Investigating Unit (SIU) has started its investigation into fraud amounting to R3 billion by housing developers and contractors in the term from 1994 to 2004. The housing director-general, Itumeleng Kotsoane, revealed that the fraud stems from government’s deficient policy in the regulation and management of funds dispensed to provinces. The SIU has been assigned R10 million by the national treasury for the investigation. Full article in the Business Day (11 June 2007)
The Supply Chain Management Framework (2004)
Gazetted in December 2003 in terms of Section 76 (4)(c) of the Public Finance Management Act (PMFA) of 1999, the Supply Chain Management Framework (SCMF) transfers the responsibility of public procurement to accounting officers in government departments throughout the country. It follows the phasing out of the National and Provincial State Tender Boards whose excessive autonomy and highly centralised functioning were deemed too risky. The SCMF is viewed as a significant tool for the fight against corruption in the procurement of goods and services in the pubic sector (see Editorial). It is envisaged that it will be applied throughout the public service. It also formalises the requirement for accounting officers and authorities to integrate supply chain management procedures into their financial systems. A Supply Chain Management Unit has been established by the Treasury to assist in the implementation of the SCMF. In order for the SCMF’s implementation to be successful, training and education is required for accounting officers and senior managers on the functions and responsibilities delegated to them.
The SCMF outlines the need for restructuring in the chief financial officer’s department or institution to incorporate a supply chain management unit. It also grants the Treasury the authority to initiate processes that aim to maintain uniformity in procurement norms and standards throughout government. Under the SCMF, the procurement of goods and services needed by more than one government department will remain the responsibility of the national Treasury if the management of the contract is in the national interest. The policy also makes an allowance for accounting officers of national departments to use provisions in either the State Tender Board or the Public Finance Management Act (1999) when procuring goods and services. Download the legislation
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"Corruption and misadministration are inconsistent with the rule of law and the fundamental values of our Constitution. They undermine the constitutional commitment to human dignity, the achievement of equality and the advancement of human rights and freedoms. They are the antithesis of the open, accountable, democratic government required by the Constitution. If allowed to go unchecked and unpunished they will pose a serious threat to our democratic state". Former President of the SA Constitutional Court (Judge Arthur Chaskalson), 2000
Umqol uphandle - SA Corruption Briefing, a monthly free e-briefing, aims to document and inform on instances of corruption in South Africa and the SADC region and assist in raising the debate around effective anti-corruption strategies - with a South African perspective. Published by the ISS - Organised Crime and Corruption Programme, Umqol uphandle highlights the results of relevant research, initiatives to combat corruption as well as a snapshot of recent corruption related stories, which have appeared in the media. Each edition features the top corruption related story from the SADC region as well as a short profile on a key anti-corruption agency, organisation or instrument.
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