R23m tender fraud exposed

A multimillion-rand tender fraud scam involving officials at the Premier’s Office in KwaZulu-Natal has been uncovered by the government’s internal audit unit. The Mercury is in possession of a forensic report implicating two senior officials and two junior staff members in tender fraud of about R23 million. It is understood that the report has been submitted to Premier Willies Mchunu. Dated March 18, 2017, the report details how, between 2012 and 2016, officials allegedly colluded with suppliers to circumvent tender processes in favour of four companies. The Mercury has the names of the implicated officials and companies, but these have been withheld due to legal considerations. “The investigation emanates from an anonymous undated letter requesting a full investigation,” states the report.

Among other things the whistle-blower had stated that there was “a high level of cover quoting” whereby officials shredded or threw away quotations from potential service providers to pave the way for their preferred bidders. The two junior staff members had, with the authorisation or condonation of the senior officials, processed most of these tenders while managers responsible for those tasks were sidelined. According to the report the two junior officials “nominated, invited and evaluated the quotations of suppliers in the transactions under review”. “We found that the transactions that were processed by (the two junior officials) were premised on fraud, bid rigging, cover quoting and corruption,” stated the report.

In one instance the investigators found that a well known Durban-based catering company was awarded 59 orders amounting to R8m, between 2013 and 2016. In some of those transactions, related to the said catering company, documents were processed after services were rendered “in order to create the impression that the procurement processes were followed when this was in fact not so”. On its website the catering company lists, among others, Sars, eThekwini Municipality and Metro Rail as its clients. It is further alleged that processes were circumvented by three of the four officials to ensure that they favoured the catering company. One of the two junior staff members also awarded tenders amounting to R517 000 to a company owned by her uncle. It was also found that the same staff member allegedly had “control over the affairs” of that company, however she did not disclose her relationship to the company. That company, which is based in Pietermaritzburg, and at least three others were awarded tenders outside of their municipal districts, investigators found.

This is despite the supply chain management (SCM) policy of the Office of The Premier stating that “service providers from the municipal district where catering is to be provided must be appointed to do such catering in order to promote local development. “We found that the (companies) had consistently rendered catering services outside of their municipal districts. These entities were awarded very few orders within their municipal districts,” reads the report. The investigations further revealed alleged collusion in the bidding for tenders. One official was found to have authorised irregular expenditure of more than R12m. “(His) failure to take appropriate steps to prevent irregular expenditure as well as his authorisation of the irregular expenditure in question makes him liable to be charged with financial misconduct,” the audit unit recommended.

The report recommended the suspension of the implicated officials, saying that one of them has allegedly instructed staff at the SCM unit not to co-operate with the investigation. It was further recommended the director-general in the Office of the Premier report the matter to the police. When contacted for comment on Wednesday, Ndabezinhle Sibiya, the spokesperson for the Premier’s Office, said Mchunu would comment at the right time. “We must, however, state that at the State of the Province address the premier committed to clean governance,” Sibiya said.