First published in the Daily Maverick 168 weekly newspaper.

Sleuths painstakingly recreated paper trails, traced witnesses, and gleaned forensic evidence off computers to try to uncover the extent of one of the most sordid offshoots of the Covid-19 crisis to develop in South Africa – widespread personal protective equipment (PPE) procurement fraud linked to the state.

This task, undertaken by the country’s Special Investigating Unit (SIU), has involved looking into at least 1,774 service providers.

Aside from the sheer scale of their work, investigators’ tasks were made all the more difficult because evidence – including cellphones, computers and documents – was destroyed.

Witnesses also feared victimisation and “SIU members were threatened and were intimidated by both officials and service providers.

According to data received from the National Treasury, a total of R30.7-billion was spent by state institutions on PPE between April and November 2020, of which more than R13-billion is subject to the SIU investigation.

More allegations are still being made to the SIU, and some cases are still developing, so the figures are expected to change.

These details were revealed on Friday when the SIU released an 85-page report into the status of its PPE procurement fraud investigations.

The report marks the first time the country has been provided with a detailed and comprehensive overview revealing how widespread the problem of unscrupulous PPE contracts may be.

It also provides insight into how investigators carried out tasks and the several difficulties they had faced. One of the critical recommendations the report makes is that the law needs to be tweaked to include extra precautions when influential people or their relatives benefit from PPE procurement from state institutions.

“The SIU recommends that legislative amendments be considered to provide for safeguards when state institutions are to contract with domestic prominent influential persons and their immediate family, as well as entities in which they have an interest, or are beneficial owners of,” the report said.

“All state institutions should be bound by such safeguards.”

This appeared to link to a case the SIU had investigated involving the company Ledla Structural Development (Pty) Ltd, along with 43 others, including Royal Bhaca (Pty) Ltd.

These two were in turn linked to presidential spokesperson Khusela Diko’s husband, amaBhaca king Thandisizwe Diko.

Diko, who is still on suspension as a result of the scandal, was set to face an internal disciplinary process. The SIU had raised issues over a lack of financial disclosures.

Meanwhile, in matters relating to her husband, Daily Maverick reported in October last year that the SIU had also investigated Gauteng health MEC Bandile Masuku – who is challenging his dismissal over this in court – in the awarding of a R125-million tender to Thandisizwe Diko’s Royal Bhaca.

Thandisizwe Diko, whose family was friendly with Masuku’s, had cancelled the contract over a perception of conflict of interest. But he then allegedly received payments to provide PPE via Ledla Structural Development, which was reported as a front company.

Ledla Structural Development was previously awarded a R139-million contract by the Gauteng Department of Health for the delivery and supply of PPE.

“In this matter a contract to deliver PPE was irregularly awarded … while unit prices were also artificially inflated by between 211% and 542%,” SIU head Andy Mothibi explained, elaborating on the contents of the report on Friday.

In August last year, even though the Gauteng Health Department was aware of the SIU investigation into the matter, Mothibi said about R39-million was paid to the supplier.

“This had immediate clearance and substantial amounts were moved from the bank account of the supplier to the bank accounts of two other entities, who in turn transferred/paid the funds to at least 36 other entities.

“We noted the speed and the haste with which this was done,” Mothibi said.

The contract was subsequently cancelled in December 2020 and more than R26-million of the R39-million, paid by the Gauteng Health Department, has so far been forfeited to the state.

Another high-level case the SIU looked into involved an allegation received in June last year that the Eastern Cape Department of Health had “irregularly procured 100 motorbikes to be utilised as mobile ambulances/clinics making use of Covid-19 emergency procurement procedures”.

This procurement process was dealt with as Covid-19 emergency procurement.

Only one company, Fabkomp, had qualified for one stage of the reviewing process: “Fabkomp then scored 100% in terms of Functionality and BBBEE (Broad-based Black Economic Empowerment).”

But the report said Fabkomp stated it could only supply 10 “mobile clinics” within a month after the order was signed and then only 85 units over the following three months.

“They also indicated that the remaining 15 units would also be a challenge to supply if the order was not confirmed timeously,” the report said. “Because of these reasons, the process fails to satisfy the emergency criteria.”

On top of this, it turned out that at the end of August last year the Eastern Cape’s health department “was still in the process of identifying officials who need to undergo training and obtain licences to operate these motorbikes”.

“The procurement process was found to be irregular,” the report found. “Misconduct was identified against two officials of the department.”

With the assistance of the SIU, the Hawks were investigating a criminal case.

Another SIU investigation had related to the Beitbridge border crossing and the Department of Public Works and Infrastructure.

“This matter relates to the procurement process of a service provider/contractor for the erection of a fence along the SA border with Zimbabwe, near Beitbridge,” Mothibi said.

“The SIU investigation found evidence that the procurement process was irregular. The contract has a value of R40-million.”

In September last year seven referrals were made to the relevant prosecuting authority.

The report said these were “against two entities, their directors and the project managers. The offence is fraud.” The NPA had appointed a prosecutor in the matter.

Another investigation, relating to the Temporary Employment Relief Scheme paid by the Unemployment Insurance Fund, had resulted in a whopping 75 criminal cases being opened.

These are under investigation.

“A total of 6,140 government officials were identified and were claiming from UIF to the value of R41,009,737, making use of 3,959 bank accounts,” Mothibi said.

Of these 3,959 bank accounts, 581 appeared to be linked to multiple beneficiaries.

Other red flags in this investigation were that some payments had been made to people who were dead, and others who were prison inmates.

Aside from the status of several cases, some of which were found to be baseless and were therefore closed, the report also provided fascinating insight into how some service providers and state employees scrambled to cash in on the Covid-19 crisis.

Mothibi had found that when the country went into a State of National Disaster in March 2020 because of Covid-19, some state figures in positions of authority had incorrectly thought this meant all procurement could be conducted “without compliance with any of the normal prescripts regulating public sector procurement”.

Following the declaration of a State of National Disaster, some service providers quickly registered at the Companies and Intellectual Property Commission and were used even though they had no track records.

Some service providers were in the process of deregistration when they were suddenly awarded contracts. Others used front companies so that they could be awarded multiple contracts from a department.

Instances were also flagged that could have had grave repercussions.

“Product specifications were ignored and products that were not suitable for its intended purposes were purchased and in several instances against the advice of expert opinion on the usefulness of the product.”

PPE had also been packed under false labels. Mothibi said that in certain cases, “political pressure played a role in the procurement of PPE” and there had been misrepresentations by suppliers “by not disclosing their close friendships with officials who were involved in awarding PPE contracts”.

Investigations overall had revealed disregard for law, policies and procedures.

“My observation is that the flagrant and wanton disregard is underpinned by insatiable pursuit of self-enrichment. That cannot go unpunished,” Mothibi said.

“It is disheartening to see state officials in all spheres of government, who have been called to serve the people of South Africa, being implicated in unlawful and illegal activities in procurement processes that are meant to benefit the public.” DM168

The expansive SIU investigations, which ran mostly between January and July last year, can be broken down as follows:

• 164 contracts involving 141 service providers, valued at R3.5-billion, that are complete;
• 1,541 contracts involving 777 service providers, valued at R6.8-billion, that are continuing;
• 851 contracts involving 856 service providers, valued at nearly R3-billion, that are yet to be completed;
• 38 referrals were made to the National Prosecuting Authority (NPA) and 25 cases were referred for disciplinary action;
• As of Thursday, just more than R127-million worth of cash or assets had been saved or recovered; and
• Cash or assets valued at around R160-million were earmarked for potential recovery.

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.