SIU recouping PPE funds from 16 companies

The Special Investigating Unit (SIU) and the National Health Laboratory Services (NHLS) are engaged in litigation with 16 companies to recoup more than R172 million arising from irregularly awarded personal protective equipment (PPE) contracts.

Health Minister Joe Phaahla revealed this in reply to parliamentary questions from DA MP Lindy Wilson who asked for details of irregular contracts and progress made to recover the monies from companies when the NHLS procured PPE in 2020. Wilson said about 175 PPE orders were placed to the combined value of about R993.8m and 21 of the orders were audited for possible irregular expenditure.

In his reply, Phaahla said the 175 PPE orders valued at R993.8m were disclosed in the NHLS 2020/21 financial year annual report. The NHLS had indicated at the time of reporting that the full extent of overpayment was still being investigated, he said, and the investigations could result in additional irregular expenditure found.

“This matter was finalised in the 2021/22 NHLS annual report at an amount of R791 623 789, which comprise R618.8m of irregular expenditure that relates to administrative non-compliance and R172.7m in respect of matters under litigation.” However, Phaahla said when the Auditor General SA (AGSA) conducted an audit on the NHLS’ response to the Covid-19 pandemic, it found that the entity procured some PPE items at prices in excess of the guidelines published by the National Treasury.

“This was mainly due to local and global demand and supply challenges due to Covid-19 pandemic. “The AGSA concluded that there was a potential overpayment of R19 074 000 for PPE,” he said. The minister said the NHLS had after the audit initiated its investigation in instances where the price paid for PPE was regarded as excessive and also reported the relevant companies to the Competition Commission.

He said the external auditors Nexia SAB&T had conducted an extensive audit of all Covid-19 related orders. “The auditors concluded that all irregular Covid-19 expenditure had been fairly recorded in the annual financial statements.” The NHLS had received unqualified audit opinions for both the 2020/21 and 2021/22 financial years.

Phaahla said the Special Investigating Unit (SIU) had since applied to review and set aside PPE procurement entered into between the NHLS and 16 companies and to have payments declared irregular and unlawful in the Special Tribunal. The corruption-busting body had also sought consequential relief for the recovery of monies the respondents received in relation to the impugned payments.

He said the Special Tribunal had in a judgment dated June 7, 2022, declared the respondents liable to the NHLS to repay and directed them to pay R172 742 175 including interest calculated from the date the NHLS made payment for the orders. “The case is ongoing and therefore the final outcome is pending,” he said. Meanwhile, the NHLS cancelled several major procurement service contracts.

Phaahla said the procurement of a health waste removal bid was previously advertised and cancelled due to technical reasons. “The specification is being reviewed and the bid will be advertised shortly,” he said. He also said a provisioning of laboratory coat supplies bid was advertised and cancelled because the prospective suppliers did not comply with the technical requirements and did not meet the stipulated minimum threshold percentage for local production and content.

The specifications were also being reviewed and the bid will be advertised shortly.