Covid-19

BLANKET SCANDAL

KZN department abused Covid-19 procurement provisions, provincial treasury report finds

KwaZulu-Natal Premier Sihle Zikalala. (Photo: Gallo Images / Darren Stewart)

The KwaZulu-Natal provincial government held a special media briefing on Tuesday acknowledging widespread collusion within its Department of Social Development (DSD) and blatant misuse of Covid-19 emergency procurement provisions.  Evidence revealed a pattern of tenders dished out to the hand-picked cronies of department officials, and of service providers being paid upfront without purchase orders being issued.

The findings uncovered at least R29.4-million in questionable payments, but if one had to take into account the ease, and level of seniority with which the dodgy payments were processed, a deeper dive into the department would likely uncover graft on a far heftier scale.

Premier Sihle Zikalala used the same briefing to absolve the province’s Department of Education (DOE) from allegedly buying personal protective equipment (PPE) for schools at exorbitant prices, claiming a “forensic investigation” done by the provincial treasury had cleared the DOE. The same investigation had found the DSD’s processes to be tainted.

Although Zikalala said he would be willing to release the actual forensic report – not simply his statement on it – he said it first had to go through certain “processes”, including alerting those implicated.

Nevertheless, the evidence released at the briefing regarding the provincial DSD revealed a pattern of tenders dished out to the hand-picked cronies of department officials, and of service providers being paid upfront without purchase orders being issued.

GOUGED: KZN education department pays top prices to get schools sanitised and equipped by Monday

The investigation concluded the financial loss to the department for blanket and PPE purchases was R15.8-million and R13.6-million respectively. The evidence also revealed incorrect products procured without any penalties and exorbitant pricing, late delivery, forged invoices and, as the final insult, a failure to deliver the “emergency” goods to vulnerable households as the stock was still being housed in unsecured warehouses, resulting in some going missing or being damaged.

“Owing to the seriousness of the allegations, in April this year the KwaZulu-Natal Provincial Executive Council resolved to assign the provincial treasury to investigate alleged irregularities in the procurement of PPE worth R19-million and blankets worth R22-million by the Department of Social Development. This included, among others, hand sanitisers, pocket wet wipes, face towels, soaps,” said Zikalala, reading from a prepared statement about the investigation.

“The evidence presented in the reports is deeply concerning. While at this point it is not a reflection of either guilt or innocence of any party, it is critical that those who have to answer on these allegations will need to be held accountable. The report will also assist law enforcement authorities to ensure justice and accountability.

“As the Provincial Executive Council of KwaZulu-Natal, we have a huge responsibility to ensure that any allegation of state looting in the name of Covid-19, is scrutinised and investigated accordingly, with no compromise when it comes to consequence management.”

Shortly after the country entered its coronavirus lockdown on March 27, the provincial DSD procured 48,000 blankets to distribute to various shelters, which mushroomed as a result of municipal authorities hauling the homeless off the street and into “secure” locations.

Often in large tents, the homeless were fed and provided with mattresses. To accompany this, the department purchased several personal care items. The blankets, measuring 220 x 240cm, which normally retail at between R250 and R400 each, were purchased for as much as R559 each from six handpicked service providers. Some were not of the required specs.

…Zikalala said that as with the PPE contract, the service providers were paid in full, but did not deliver the blankets within the stipulated time, nor did they incur any penalties for this.

On April 6, The Witness newspaper exposed the purchase of the blankets, which was so egregious that it prompted an almost immediate response from the province. By 8 April, the Democratic Alliance had placed parliamentary questions in the KwaZulu-Natal Legislature looking for answers. The department was summoned to Cabinet to report, and the provincial government banned all departments from using emergency powers to procure goods without the consent of the provincial treasury.

By 15 April, Zikalala announced there would be an investigation into purchases of the blankets and PPE. Further reporting by The Witness established that Sanele Dlungele, the director of Ngome Steam Pot, one of the companies appointed to procure Covid-19 items including sanitisers and blankets, is the fiancé of Neli Bhengu, a deputy director in the office of KZN DSD MEC, Nonhlanhla Khoza.  

Shortly after the scandal broke, the DSD defended the purchase, with spokesman Mhlaba Memela claiming the allegations were probably the result of disgruntled competitors that were bitter after not being awarded the contract. Memela told The Mercury newspaper on 8 April that the blankets were to be distributed to homeless shelters across the province.

While the forensic investigation found gross mismanagement in both the procurement of PPE and blankets, the biggest scandal of the entire episode took place a month after the procurement, with only 10% of the blankets being distributed. The rest were lying in an insecure location, some had gone missing, and others were damaged.

“The investigators noted that 4,982 blankets out of the 48,000 were distributed as at 8 May. From this observation, the investigators discovered that over 43,018 blankets were left in storage centres with uncontrolled access; and some have been damaged and unaccounted for, amounting to possible fruitless and wasteful expenditure as per the PFMA. 

“The investigators found that… the department officials did not have an adequate and effective inventory management system in place to control, monitor stock levels, account for distribution of blankets and ensure completeness of stock on hand,” said Zikalala.

He said that as with the PPE contract, the service providers were paid in full, but did not deliver the blankets within the stipulated time, nor did they incur any penalties for this.

“The investigation uncovered that procurement was not done through a system that is fair, transparent, competitive and cost-effective.”

Among the report’s recommendations was that disciplinary action be taken against officials directly involved in the abuse of Covid-19 emergency procurement provisions, for failing to allow for competitive bidding instead of just nominating the preferred suppliers, for neglecting supply chain management protocols, and for illegally backdating documents to cover their tracks.

Previously, Daily Maverick reported that the KwaZulu-Natal DOE purchased PPE for its approximately 6,000 schools on or above the threshold recommended by National Treasury.  However, Zikalala maintained that the department did not go beyond the maximum prices recommended.

Zikalala said cases would be opened with the SAPS, and that the public would be kept appraised through regular briefings.

“As government, we would like to state that we are unwavering in our commitment to clean and good governance, and ensuring that each and every cent of taxpayers’ money is spent efficiently – especially, given the tough economic climate in which we find ourselves. 

“It is very unfortunate and totally unacceptable that today we deal with allegations that parts of our service delivery machinery may have been used to serve personal interests at this most critical time when we have to save lives.”

But Zikalala said the KwaZulu-Natal DOE had been cleared of any possible wrongdoing with regards to PPE procurement for schools, and that the correct procurement processes had been followed. He said the department had potentially saved the government fiscus an astonishing R75-million.

“It has been established as a fact that the department also grappled with the issue of prices due to volatility in the market and the depreciation of the rand.  It is against this background that Treasury introduced a maximum price to be paid by institutions across the country for selected Covid-19 PPE items and cloth masks.  The limitation of the maximum price by the Treasury is that it only covered the unit cost but excluded the warehousing, packaging, and transportation and delivery costs.

“In view of the fact that costs for packaging, warehousing, transportation, delivery and VAT were not factored in the maximum price, the department had to negotiate with appointed service providers to accept the department price offer as inclusive of everything. “

He said the department essentially had to set the maximum price of all PPE at 85% of Treasury’s maximum pricing guidelines in order to provide enough of a cushion in the department’s budget to finance warehousing, packaging, transportation and  delivery costs

“If one were to take the matter of 15% warehousing, packaging and transport delivery costs to its logical conclusion, the department saved more than R75-million,” said Zikalala.

The provincial education department had previously reported it had budgeted R422-million on PPE procurement; however, R75-million is 15% of R500-million, meaning the actual cost could have been much higher.

Previously, Daily Maverick reported that the KwaZulu-Natal DOE purchased PPE for its approximately 6,000 schools on or above the threshold recommended by National Treasury.  However, Zikalala maintained that the department did not go beyond the maximum prices recommended.

“In fact, most of the order prices are much lower than the prices that were recommended by National Treasury. There is a trail of evidence that indicates that the department’s approach yielded savings to the government. This is very important in the current constrained fiscal environment,” he said.

Daily Maverick has requested a copy of the report. DM 

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