South Africa


#BosasaGate: These contracts should be terminated — now

#BosasaGate: These contracts should be terminated — now

The allegations of fraud and the corruption between Bosasa and senior state officials is neither novel nor new — despite the shocking nature of recent testimony at the Zondo commission. The allegations date back to the findings of the 2001 Jali Commission and the 2009 SIU investigation into procurement irregularities between the Department of Correctional Services and Bosasa, write Nikita Lalla and Ricardo Pillay.

Daily Maverick’s Ferial Haffajee reported last Friday that Africa Global Operations (previously known as Bosasa Operations) is still active across the public sector with existing government contracts and will stand to score about R415-million from the state this year. The immediate reaction is to question why the state has not immediately terminated these contracts, to prevent any future, fruitless or wasteful expenditure. The answer is simple but requires action.

The allegations of fraud and the corruption between Bosasa and senior state officials is neither novel nor new – this despite the shocking nature of recent testimony at the Zondo commission. The allegations date back to the findings of the 2001 Jali Commission and the 2009 SIU investigation into the procurement irregularities between the Department of Correctional Services and Bosasa.

As early as 2001, the Jali Commission found that senior officials in the Department were implicated in corrupt activities. Following its initial investigations in October 2002, the SIU’s mandate was extended by the Department in May 2006, to consider procurement irregularities, and conduct a forensic audit into the department’s tenders and RFQs.

By 2009, following the SIU’s investigations into four major government contracts awarded by the department to Bosasa, senior officials were once again brought under fire for corrupt activities. The total value of these Bosasa contracts for catering services, access control, the supply of televisions and fencing was about R1.76-billion. The SIU reported that the four contracts were awarded irregularly, deviating from the established Treasury Supply Chain Management Policy. This report was handed to the Minister of Correctional Services, Mapisa-Nqakula and the NPA in September 2009, calling for both civil and criminal proceedings.

A decade later, questions are raised as to why civil remedies against Bosasa and senior corrupt officials were not pursued; why those contracts were not terminated; and why does Bosasa (as a service provider suspected of corrupt activities) continue to receive government contracts in sums reaching more than a billion rand.

The answer from the Zondo Commission – anyone who may have acted or had the power to act was allegedly “paid off” not to do so.

Agrizzi’s reported testimony that “every single contract was tainted with bribes and corruption. I wouldn’t say that they were all awarded because of corruption. But once they were awarded, corruption crept in because someone had to be taken care of”, places new evidence beyond the findings of the 2009 SIU investigation into the four Bosasa contracts.

So with this evidence in hand, what next?

South African procurement laws empower organs of state to terminate procurement contracts if it is found that there were irregularities or the contracts were concluded in contravention of the applicable laws. This means organs of state have a duty not to submit to an unlawful contract and to oppose a counterparty’s (like Bosasa) attempt to enforce it. Simply put, contracts which contravene legislation are void if concluded by fraudulent means. A failure to terminate those contracts will be seen as conduct which is inconsistent with the Constitution and is subject to scrutiny and attack by the courts, and civil society at large.

These laws also state that the accounting officers of organs of state are equally obliged to ensure their conduct is consistent with those procurement laws. They are expected to avoid carrying out their procurement functions in a manner that is inconsistent with a fair, equitable, transparent, competitive and cost-effective procurement process.

The obligation is on the organ of state to approach a court which is empowered to review its decision, to set aside the award of an irregular tender. This, however, is fraught with difficulty and may take years before a result is achieved.

The termination of a contract for corrupt or fraudulent practices, however, takes a different and less complicated route. It is imperative that any steps to terminate must be in accordance with the contract and relevant laws, to avoid an unlawful termination resulting in a possible claim of repudiation by Bosasa.

Organs of the state have a duty to investigate any abuse of procurement processes by its officials or the tenders, if evidence shows such abuse, they are entitled to terminate those contracts. The National Treasury Instruction SCM Note 3 of 2016/17 empowers accounting officers or accounting authorities (who are usually senior officials within those organs of state) to investigate any complaint or allegation of abuse of the Supply Chain Management System within 14 days of receiving the complaint or allegation; for the investigation to be completed within 30 days; and to implement the recommendation of any remedial action following an investigation report within 14 days.

This then justifies the rejection of a bid, cancellation of a contract, and importantly restricts a service provider (suspected of such corruption or fraud) from doing business with the state or claiming damages, resulting from an unlawful repudiation of a contract.

For the four contracts that were subject of the 2009 SIU investigation, immediate termination is justified. However, notwithstanding, the findings of the Jali commission, or the evidence under oath before the Zondo commission, any immediate termination of the current Bosasa contracts is premature. Organs of the state are required to first investigate all allegations of corruption in respect of each and every existing contract with Bosasa, and only once those investigations are concluded and findings made, can they cancel those contracts.

If steps were taken to investigate the allegations of the corruption at Bosasa from the start of that evidence presented to the Zondo commission, the Bosasa contracts could be terminated within the next two months. DM

Nikita Lalla is Chief Executive, Head of Department, Construction, Infrastructure and PPP, LNP Attorneys Inc. Ricardo Pillay is Director and Team Leader Construction, Infrastructure and PPP Department LNP Attorneys Inc.


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