Service providers greased palms of Works officials

Senior Department of Public Works officials accepted huge sums of money and luxury cars from service providers to whom they had awarded tenders worth billions. They each received between R50 000 and R100 000 cash and /or cars before awarding the tenders or immediately afterwards. Individuals or companies that benefitted from “negotiated” lease agreements bought supply chain management unit officials “gifts” and cars such as Golf 6 GTIs, according to the Special Investigating Unit (SIU) preliminary report into tender corruption and irregularities in the department.

These “gifts” were never declared to the department by the recipients, who either appointed the service providers or procured their goods. The SIU report painted a picture of massive corruption in the awarding of tenders and failure to comply with SCM guidelines. It revealed that the department had been paying millions of rands a month in rent for unoccupied buildings on behalf of client departments without their knowledge. This happened in cases where officials went on to sign multi-year lease agreements with certain companies despite client departments having expressed no interest in the identified buildings.

Public Works manages and administers government buildings on behalf of the taxpayer. The SIU report is part of on-going investigations into tender irregularities in the department’s national offices, as well as regional offices such as Johannesburg, Pretoria, Limpopo and Mthatha in the Eastern Cape. Public Works Minister Thulas Nxesi’s legal advisor, Phillip Masilo, confirmed the contents of the SIU report this week. He said the department would lay criminal charges against 10 senior officials and request the court “in the next few weeks” to declare the questionable lease agreements null and void.

“Most of the charges relate to such misconduct, and generally that is corruption. You can’t be receiving benefits from service providers where there is a link to show you were involved in their appointments or procurement of their goods,” Masilo said. Masilo said the department suspended five officials as per the report’s recommendations. These included the department’s former director-general, a deputy director general, a director and two officials from the Johannesburg region. Masilo said their subsequent disciplinary hearings were expected to be completed by the end of this month.

He refused to release their names, saying he did not want to undermine the department’s disciplinary hearing against them or prejudice the suspects because they had not yet been found guilty. However, Masilo insisted the SIU findings were incriminating. “These are cases where you see movements in the accounts. That is the only way you can prove it. But what happened is that the SIU also went on to conduct lifestyle audits. From the lifestyle audits you can see that certain people have been living beyond their means. Someone earns R10 000 but has been spending R50 000 a month. Where does that person get the money?” Masilo said questionable lease agreements, dating back many years, had cost taxpayers more than R1 billion He said the department hoped to recover R300 million from service providers, current and former officials.

Masilo said the SIU’s fortnightly briefings to Nxesi revealed shocking acts of corruption, adding “you would think we have contained the situation, but something new comes out”. Nxesi, who was brought in last year to try to clean the mess, recently admitted to corruption in his department. It has repeatedly received an adverse audit opinion – a disclaimer. Masilo said Nxesi brought in private auditors in December to assist the department in registering assets. Apart from deployment of Finance Minister Pravin Gordhan’s task team, Nxesi requested that other departments second financial and governance experts to rescue the department.

Among other things, the report revealed that:

• There was “corruption” generally and failure to comply with the Public Finance Management Act (PFMA).
• The department paid more than market-related prices for buildings.
• Supply chain management officials failed to declare their financial interest in the companies they awarded tenders to.
• They were in contact with service providers before awarding the contracts.
• Twenty lease agreements in the Johannesburg region alone were questionable.
• The same region paid R30 million for six unoccupied buildings on behalf of client departments without their knowledge.

President Jacob Zuma asked the SIU to probe the department last year after Public Protector Thuli Madonsela found that a R1.6 billion contract to lease two buildings for the police had been irregularly awarded to property mogul Roux Shabangu. The businessman is challenging the matter in court. The controversial contracts have already cost Public Works Minister Thulas Nxesi’s predecessor, Gwen Mahlangu-Nkabinde, her job. It has also led to the suspension of National Police Commissioner General Bheki Cele pending the outcome of a board of inquiry into his fitness to hold office.