Exclusive: R378m prisons tender scandal

2016-04-14 06:01


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Johannesburg - In its first bold move, South Africa's new tender regulator has instructed the prisons department to cancel an "irregular" tender of R378 million awarded to an ANC benefactor.

Documents obtained by News24/Netwerk24 show how prisons boss Zach Modise defied requests by the newly-established office of the chief procurement officer (CPO) to review the processes followed in awarding a contract for an inmate management system to Integritron Integrated Solutions.

National Treasury, under which the CPO falls, has now instructed Modise to apply steps to cancel the contract. Any fruitless and wasteful expenditure incurred through cancelling the contract should be recovered from Modise personally.

Integritron is part of the Sasstec group of companies that has benefited richly from government tenders awarded to its affiliates.

SA Fence and Gate in particular has been awarded government tenders worth billions of rands by Eskom, the Department of Correctional Services (DCS) and the Passenger Rail Agency of South Africa (Prasa).

SA Fence and Gate is an ANC donor and belongs to the governing party's Progressive Business Forum (PBF).

Preferential treatment

When it was formed almost a decade ago, the PBF emphasised that members would not receive preferential treatment when government hands out tenders because of its donations to the ANC.

But at a PBF dinner late last year, President Jacob Zuma encouraged companies who do business with the state to donate money to the party.

"I always say to business people that if you invest in the ANC, you are wise. If you don't invest in the ANC, your business is in danger," Zuma said in October.

Sasstec is partly owned by politically-connected businessman Moya Nape and ex-home affairs chief director of IT, Patrick Monyeki. The biggest shareholder of the group is CEO Geoff Greyling and his family.

Despite numerous deficiencies with its tender to the DCS, Integritron's bid was the only one considered by the department when it awarded the lucrative contract for an integrated inmate management system.

The successful bidder would have to supply and maintain an electronic record keeping system for all the country's prisoners.

Industry experts feared that the system would become the default operating backbone of the entire criminal justice sector and that all future projects would have to be compatible with Integritron's prisons system.

This would place Sasstec and its companies in prime position to capture future contracts in the prisons, police and justice departments.

But Kenneth Brown, the CPO and senior member of Finance Minister Pravin Gordhan's treasury team, may have put a spoke in the wheel by ordering a full investigation into the awarding of the tender by Modise and his department.

An investigation into the tender by the auditor-general's office is also under way.

Flawed tender process

In a report submitted to Modise on March 11, Brown's colleague Solly Tshitangano details the flawed process that led to the tender being awarded to Integritron:

• Nine bids were received, but only Integritron's was adjudicated after the department disqualified the eight other bidders, including Vodacom and HCL Axon;

• Integritron did not disclose conflicts of interest with its subcontractor, Xtreme Intelligence Systems;

• Integritron does not have the capability to complete the project and only put forward projects undertaken by its subcontractor as proof of previous experience;

• Integritron, with a level two broad-based black economic empowerment (B-BBEE) status, effectively fronted for Xtreme Intelligence Systems, with a much lower level four B-BBEE status. Xtreme would conduct the core functions on the project and Integritron would only perform "peripheral functions".

National Treasury also found that Modise had acted negligently by disagreeing with the CPO's advice "before conducting any probity to establish if the bid was properly evaluated and adjudicated".

Treasury, through Tshitangano, further advised Modise to institute disciplinary proceedings against the chief financial officer of the department, Nick Ligege.

In his previous job as CFO of the Municipal Demarcation Board, Ligege allegedly committed serious tender irregularities.

This was only discovered once Ligege had left for the DCS and the disciplinary charges against him were being prepared. These would be forwarded to Modise "for further processing".

READ: Correctional Services tried to overpay R300m for IT system

• This is a developing story. More to follow.

Read more on:    prisons  |  corruption  |  tenders  |  government spending

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