‘Possible graft in contracts’

There is a possible case for collusion between agriculture, forestry, and fisheries department officials and “others outside the department”, DAFF acting director general Sipho Ntombela said on Tuesday. The indications are that “something wrong has happened”, he told a media briefing on an Ernst & Young forensic interim report on alleged procurement irregularities, specifically regarding goods and services procured by the Marine Living Resources Fund from Smit Amandla Marine Services Pty Ltd (SAM).

Ntombela emphasised that it was an interim report, and further investigations would have to be done by the relevant authorities, which could lead to action against the individuals concerned. “At this stage, the report doesn't touch on any individual who might have been involved. “The investigation that would take place from now would then look at those aspects. Is there a case of criminal intent on the part of the people that were involved?... (S)o we don't want to pre-empt that kind of a process,” he said. However, in a statement late on Monday, the department said the investigation “confirms multi-billion rand corruption in vessel management by SAM”.

“The Ernst & Young forensic report confirmed substantial evidence of irregular contracts awarded to SAM, or different guises thereof, since 1995 until 31 March 2012.” The report revealed, among others, that the agreement concluded in 2005 and subsequent extensions, between SAM and the department, failed to comply with the tender board regulations, with departmental procurement policies, National Treasury and income tax regulations, and the Public Finance Management Act. As an example, there was a contract extension entered into worth millions of rands by mere letter, without any proof of any tender process followed or supporting documentation.

“For instance, the contracts signed, particularly those signed in 2000, 2005, and 2010 were irregular and were deliberately drafted to have maximum benefit for SAM, amounting to approximately R1.6 to R2 billion. “The state had no protection in any of these contracts and the available evidence suggests complicity and corruption between government officials and Smit Amandla Marine.” These extensions also exceeded the required number of years for open tenders and were without any specified contract price. This gave rise to substantial expenditure running into millions of rands, which was highly irregular in terms of the Public Finance Management Act.

“The evidence indicates that the state was defrauded to the extent of approximately R1.6 billion, which includes invoices of duplicate payments, (and) invoices without tax or VAT. “Invoices worth up to R600 million have recently been uncovered, (which were) hidden away from the investigators and could indicate more extensive defrauding of the state. Furthermore, payments were made to SAM as recently as after the termination of the contract, after March 2012,” the department said. The Cape Times on Tuesday quoted SAM director Sithembiso Mthethwa as having said: “We dismiss these outrageous allegations and note with dismay that after more than six months, Smit Amandla Marine has not been approached by either Daff or any investigating body to respond to these allegations, despite requests for dialogue.

“Once again, we call for a formal process to defend Smit Amandla Marine and to clear our name, and we reiterate our company's willingness to participate in an open and transparent investigation into our business practices,” Mthethwa said.