SAPS COVID-19 SPLURGE
Now for the big fish: Competition Tribunal finds hand sanitiser supplier to SAPS guilty of excessive pricing
After a judgment that has taken nearly two years, the Competition Tribunal has found BlueCollar Occupational Health, and its partner Atletico Investments, guilty of excessive pricing of hand sanitiser it sold to the SA Police Service during the Covid-19 pandemic – and fined it R3.5-million. The judgment opens the door to a similar case against Red Roses Africa, a company that sold more than R500-million of hand sanitiser to the police at a much higher price.
The Competition Tribunal’s finding relates to the urgent supply of 10,000 25-litre containers of hand sanitiser to the SA Police Service (SAPS) during the early months of the pandemic in April 2020.
According to a statement issued by the Tribunal on Monday: “Hand sanitiser became crucial in mitigating the spread of Covid-19 and this resulted in SAPS needing to urgently procure hand sanitiser at very short notice for its members who were at the forefront of enforcing the lockdown restrictions nationally and to protect the public from the spread of the coronavirus.”
It calls BlueCollar Health’s conduct “particularly egregious when one considers its social consequences – it exploited a pandemic by charging excessively for hand sanitiser that was crucial for the combating of the pandemic”.
BlueCollar Health, which is registered on the National Treasury’s Central Supplier Database, supplied hand sanitiser which it had bought from third-party suppliers, without adding any value to the product itself.
According to the statement, “The Competition Commission received a complaint from SAPS against several firms – including against BlueCollar – that responded to individual SAPS requests for quotation.”
What the statement does not say is that the complaint came from a whistle-blower and arose as a result of an internal audit that was later suppressed. The author of the audit, Major-Gen DT Nkosi, was also effectively demoted.
BlueCollar Health had supplied SAPS with 10,000 25-litre containers of hand sanitiser at a price of R3,550 (including VAT) per container. The Commission says this was “a mark-up of 120%” per 25-litre container of hand sanitiser and earned a gross margin of more than 50%. The excess profit or “overcharge to SAPS” amounted to more than R9-million.
But despite this, the Tribunal’s penalty is only a paltry third of the overcharge, suggesting that unlawful price gouging pays.
In response to this, the Tribunal’s statement notes the Competition Act places a cap on the maximum penalty that may be imposed on a firm, but notes that according to the act, “a person who has suffered loss as a result of a prohibited practice (in this case SAPS), may commence action in a civil court for damages arising out of a prohibited practice.”
However, it seems highly unlikely that SAPS will take further action, particularly as its internal investigations into Covid-19 procurement corruption seems to have ground to a halt.
In response to questions sent to the SAPS Supply Chain Management (SCM) division asking whether it would take action to recover the overcharge, we were told “the divcom advised that we refer you to SIU”.
Now for Red Roses Africa
Daily Maverick has been awaiting the outcome of this case with interest after we uncovered a much larger case of price-gouging from the sale of hand sanitiser to SAPS by a company named Red Roses Africa Pty (Ltd), at the time of sale going under the name of Mainstreet 699 (Pty) Ltd.
Read more in Daily Maverick: Competition Commission and SIU investigate police’s disinfectant supplier Red Roses Africa
Initially, Red Roses Africa (RRA) told us that it wasn’t being investigated. However, on 11 October 2021, the Competition Commission’s spokesperson, Siyabulele Makunga, told Daily Maverick that the investigation into RRA “is completed”. He said the reason for the delay in referring the matter to the Tribunal was that “we are waiting for the Tribunal’s decision on the two cases on price-gouging in public procurement that we prosecuted”.
Both these decisions have now been handed down.
Read more in Daily Maverick: Competition Tribunal finds SAPS mask supplier guilty of price gouging
Makunga has since left the Competition Commission. However, in response to questions about whether RRA would now be referred to the Tribunal for prosecution, as he had suggested, Commissioner Doris Tshepe gave a very different response – one that directly contradicts Makunga.
Commissioner Tshepe told us that the investigation into RRA is not complete, saying that it would only be referred “if we found that Red Roses contravened provisions of the Competition Act. We do not know when the investigation will be completed”.
Asked whether there had been any developments since the correspondence with Makunga in October 2021, she said: “Yes, the Red Roses submitted information we have been waiting for and the investigation team is analysing it.”
Tshepe was asked to clarify this contradiction, but failed to do so at the time of publication. It does, however, again beg questions about why it took the Tribunal two years to make a ruling on Blue Collar, and why the Commission is still investigating a complaint first made in late 2020.
SIU report to be made public next week?
On another front, the road is rapidly running out for Red Roses. In July 2022, its misdemeanours were included in the Second Final Report by the Special Investigating Unit (SIU) to President Ramaphosa on its investigations carried out under Proclamation R23 of 2022 (covering investigations undertaken between December 2021 and 30 June 2022).
That report included preliminary recommendations that the RRA/Mainstreet 699 matter be referred to the Special Tribunal “to set aside the contract”; to the NPA “for possible corruption” and SAPS “for disciplinary action”. However, at that point, the investigation was still listed as ongoing.
The very final SIU report of its investigations under Proclamation R23 (there have been eight so far) was handed to the President on 15 December 2022. It is expected to contain final findings and recommendations on how to proceed against Red Roses.
At this point, it has still not been made public, despite numerous requests we have made to the Presidency. However, according to Vincent Magwenya, spokesperson for the President, the legal department in the Presidency has now promised that it will be released, “tentatively next week”.
We look forward to reporting on its findings. DM/MC