POLICE CORRUPTION

SAPS blew R1.6bn in irregular PPE expenditure from March to August 2020, confidential internal audit uncovers

By Marianne Thamm 30 May 2021
Caption
National Police Commissioner General Khehla Sitole. (Photo: Gallo Images / Darren Stewart) | Simon Dawson / Bloomberg via Getty Images

The report points to a serious lack of management, stating that ‘the principal safeguard against fraud, misstatement and irregularities is an effective system of internal control’.

Marianne Thamm

A confidential South African Police Service (SAPS) risk-based and compliance draft internal audit report has unearthed a massive R1.6-billion in irregular personal protective equipment (PPE) procurements by the SAPS that took place in just six months of 2020.

The amount includes R11-million paid out on a verbal order in May 2020 to a “non-profit” company, Dr Love Foundation, “who could not be traced on Treasury’s Database of Small Business Development”, the audit noted. 

The tender for cloth masks and sachets of hand sanitiser was awarded after “the supplier wrote a correspondence to SAPS stating that his foundation intends to offer services and assistance to SAPS in the current fight against the pandemic”.

The 27-page “Draft Audit Report, Division Supply Management 2020/21, File Reference C23/3/21”, dated September 2020, covered transactions from March 2020 to August 2020 and which did not form part of the Auditor-General’s sample.

The delegation of authority within the SAPS does not provide for verbal authorisation on transactions of more than R500,000. Despite that, “Thirty four (34) orders to the value of R1,620,964,361.20 were issued on the basis of a verbal authorisation, and without obtaining sufficient number of quotations,” reported Major-General DT Nkosi, SAPS chief audit executive. 

The audit was performed in accordance with the SAPS Internal Audit Plan for the year ending 31 March 2021 and as approved by the audit committee.

Covid-19 Procurement of Personal Protection Equipment Report


The draft audit was sent to nine members of the SAPS top leadership, including National Commissioner Khehla Sitole, Lieutenant-General Francinah Vuma, Deputy Commissioner: Asset and Legal Management; and Lieutenant-General Sindile Mfazi, Deputy National Commissioner, Crime Detection.

The review found that “current key controls in respect of Covid-19 procurement of PPE were not effective”.

  • Matters requiring “urgent” attention were the 34 orders, which included five to the value of R86,302,500 and issued to suppliers who were not tax-compliant.
  • Two suppliers for orders totalling R15,000,000 for cloth masks, the report found, were not on the database for Small Business Development, contrary to Treasury regulations.
  • Suppliers too, the report found, had overcharged the department on VAT and transport, resulting in a financial loss of R5,200,000.
  • “There was a material deviation from the price list approved by National Treasury as some of the suppliers charged the department more than the ceiling price.” This had resulted in a “material loss” of R354,698,420.

The report has recommended that all procurement orders which were authorised verbally within the division supply chain management and where sufficient quotations were not obtained “are registered, investigated and accounted for accordingly in line with the National Treasury framework on Irregular Expenditure”.

It also recommended that a forensic investigation should be instituted to determine whether there was any intention by suppliers to defraud the state.

The report points to a serious lack of management, stating that “the principal safeguard against fraud, misstatement and irregularities is an effective system of internal control”.

In this instance, the chief investigator could also find “no evidence on file to suggest these procurement cases were duly evaluated prior to obtaining verbal authorisation”.

For example, an order totalling R95-million and dated 2 August 2020 issued to Emergency and Response Equipment had been “wrongfully awarded”, the audit found.

“The bidder (Tekenberg) who was the lowest in price of R91,500,000.00 was unfairly disqualified on the basis that paragraph 2.10 on page 3 of the SBD 4 was incomplete,” the audit found.

Emergency and Response Equipment had also submitted an invalid sworn affidavit, noted the report.

Another order totalling R2.4-million was issued on 1 July 2020 to Vusimuhle Projects, which was also not tax-compliant. 

Two other orders, dated 5 and 20 April 2020 for R16,250,000 and R6,402,500 were issued to Tsutsumani Business Enterprises, another tax non-compliant supplier.

The same pattern was found for two 4 April 2020 orders, one for R59-million to Tsa Bophelo Medical and the other for R2,250,000 to supplier Peo Ya Africa, whose “overall tax status could not be determined”.

The report looked at an order dated 3 April 2020 to the value of R36,052,500 that had been issued to Related IT Connexions.

“According to the Written Price Quotation submitted on the closing date of 29/03/2020, the unit price including VAT was R20.9 for a quantity of 100,000 surgical masks. 

“This was followed by a supplier pro-former [sic] quotation dated 30/03/2020 with the quantity increased to 1,500,000 at the unit price of R20.90 VAT inclusive which brings the total value of the transaction to R31,350,000.00.” 

Verbal authority had been given for the procurement and the amount recorded was “R36,052,500 which is R31,350,000.00 plus 15% VAT. Therefore an amount of R4,702,500 was overcharged,” the report highlighted.

Another supplier, Basarwa Construction, had been issued an order to the value of R3,795,000 and dated 3 April 2020, overcharging SAPS by R495,000.

“Furthermore, the quotation was received on 02/04/2020 while the closing date for the quotation was 01/04/2020. However, the quotation was processed and business was awarded to the supplier.”

The Dr Love Foundation, a non-profit company, was awarded a contract for R11,025,000, as stated earlier, on a mere verbal order in May 2020.

The review found overall that prices charged by suppliers of various PPE orders “were not in line with the National Treasury tariffs” relating to Covid-19 procurement.

“While we take note that value was received on the delivered items, “the difference in prices cost the Department a financial loss of approximately R163,944,42o”.

The unit price of R3,640 paid to company WE Network and Telecommunication per 5l of scrub soap, noted the review, “appeared to be inflated”.

The Divisional Commissioner of Supply Chain Management, Major-General Johannes Riet, wrote on 19 January to the Chief Financial Officer, Lieutenant-General Avhashoni Ramikosi, “articulating the need and budgetary requirement in response to Covid-19”.

These needs, noted the report, were based on the “strength of 190,000 members as well as awaiting trial prisoners.

“The majority of the procurement files did not have functional approval. Therefore it is not clear in the procurement fille how needs were determined prior to advancing service providers for quotations and acquisition of goods,” noted the audit.

The absence of an audit trail “made it impossible for us to determine whether the needs arose from end-users’ requests on stock shortages”.

With regard to the procurement of “surgical sterile gloves” meant for the Department of Health only, the review found that: “There is no motivation in the files substantiating a need to utilise these types of gloves. We noted with great concern that orders issued to some suppliers were not prescriptive in terms of correct description of the gloves needed as stated in the request for quotation.”

Invoices from suppliers did not contain descriptions of the goods, it was found.

The report has recommended that all procurement orders which were authorised verbally and for which sufficient quotations were not obtained be “registered, investigated and accounted for accordingly in line with the National Treasury framework on Irregular Expenditure”.

The audit noted that “management has the responsibility to interrogate, beyond the sample size that internal audit had identified, findings/deviations in order to take appropriate actions based on the recommendations by internal audit”.

It also noted that the findings in the report should not be considered “exhaustive”, but should serve to highlight “potential effects” of the issues identified and “possible remedial actions”.

Risks to the Strategic Objectives of the SAPS needed to be managed “to an acceptable level”, concluded the report. DM

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All Comments 23

  • The report confirms what is already well known. That the biggest criminals in this country are to be found among lying politicians, followed closely by the upper echelons of the SAPS.

    • Well the Motsepes and Oppenheimers got their tax break and the ANC connections got their backhanders so it seems everyone is happy! That is, everyone except the taxpayers in this country…who once again get shafted, the poor who get given bugger-all, and the white minority who have to just suck it all up as “punishment for apartheid”!

  • I thought we were a lot further down the line. The recommendation is for forensic investigation. I thought we were way past this stage. Still a long way to go. The word corruption not mentioned but rephrased as forensic investigation should be instituted to determine that suppliers intended to defraud the state. This reads too soft. Missing is that members of the Police and Suppliers acted fraudulently.

  • This helpless hopeless feeling reading all this all the time with no consequences to the guilty aliens , complete madness comes to mind .
    Personally, I think we’re done !

      • I could not agree more. As ALL taxpayers we just continue to feed the rot with absolutely no end in sight and no consequences. It is both disgusting and frightening!!!

  • With a known crook right at the top of the police (Minister Cele), what is expected? Integrity? You must be joking. That is not in the vocabulary of the ANC and their cadres.

  • One cannot help to think that State Capture seems to be a national strategy aided and abetted by warnings to perpetrators instead of criminal charges in accordance with the laws of the land for the theft.

    • Our politicians and senior bureaucrats must have thought they had won the jackpot when the incompetent National Disaster Committee took over, such huge opportunities arrived for wholesale theft. Our incompetent President continues to look like the rabbit caught in the headlights. Ironically he is the best of a bad bunch.

  • A rudimentary sum reveals the following: R1600 000 000 ÷ 200 000 people = R8 000 per person ÷ 6 months =R1333 per person per month. One liter sanitiser retails at approx R50 per liter. This leaves R1283 per month for masks. Medical grade (surgical) masks retails at R200 for 50. In other words R250 per person per month is quite adequate to protect a person. More than R1 000 per person per month wasted on people who spend more time fighting each other in courts, losing dockets, don’t investigate anything properly, have bigger vehicle scrap yards than steel dealers and need security companies to protect its property. And we are expected to respect them and their political bosses. The game is up for SA.

    • Well put Gerhard. Puts it in perspective. I have NO respect for the majority of them and none whatsoever for the ANC and its corrupt cadres, although there are some police men and women who try to do a decent job in impossible circumstances (no vehicles, no support, no pens). I feel sorry for them.
      The rest are a joke, but the joke is on us.

      • Well at least we now know why police stations lack working vehicles, pens, etc. Clearly working tools can’t be prioritised when there are opportunities to steal money.

  • So why are these people still in their jobs? If the ANC officials and SAPS top management put as much time and effort into doing their jobs as they do into manipulating tenders SA might start working again. BTW where are you Cyril with all your big talk, it’s as bad under you as it was with Zuma.

  • @MarianneThamm, @BrankoBrkic & @FerialHaffajee – This reporting is misleading and well below the standard that we expect from Daily Maverick!
    1. Accounting 101 – “Irregular Expenditure” does NOT equate to “Blew”/”wasted”/”lost” – your headline is factually incorrect and misleading to the Public. You even have the correct figures for what part of the total R 1.6 billion was material over-expenditure in the report and it is horrifying…. but it is certainly not the entire R 1.6 billion.
    2. Context – During the early parts of the Covid-19 lockdown (i.e. State of Emergency), National Treasury (NT) allowed all government entities to follow emergency and urgent procurement procedures for the procurement of PPE. To help this process NT gazetted maximum prices for various types of PPE. This allowed the procurement of PPE on Quotations above R500k without following a tender. The revised “rules” by NT caused massive confusion in Supply Chain offices everywhere and combined with the Panic caused by the Covid-19 Pandemic and a resultant mad rush and competition to procure PPE by every government department, many private companies and the public….. procedures, checks and balances often fell out the window.
    Certainly there were many opportunistic tenderpreneurs that took advantage of this confusion and relaxing of the rules by NT and undoubtedly there was some corruption involved and a lot of mismanagement but PLEASE your reporting should not be sensationalist and misleading!

  • So instead of pulling a rabbit out of the hat to clean things up, they carry on putting money into the hat. And the Hat carries on regardless!

  • The biggest ‘surprise’, is that so many people seem surprised by these events!! At the very outset of this pandemic and PPE tenders, it was simply a case of “how much” was going to be misappropriated and stolen. It’s only a matter of time before we’ll learn which government officials are connected to this R1.6 billion overspend!

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