Battleground 2: Gordhan's R500 billion tender war

2016-05-26 09:32
Adriaan Basson

Adriaan Basson

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Adriaan Basson

Having been assured by the heads of both the Hawks and the National Prosecuting Authority that his arrest was not imminent, Finance Minister Pravin Gordhan now faces a new onslaught.

This time the salvo was fired by his Cabinet colleague, Justice and Correctional Services Minister Michael Masutha.

At the heart of the latest high-stakes war between Gordhan and the government is South Africa's R500bn tender budget that should be used to deliver basic services by procuring goods and services that will create jobs and lift millions of people out of poverty.

Unfortunately, millions of these tender rands disappear into the pockets of politicians and civil servants who buy fancy German cars, houses in private estates and have offshore bank accounts.

Willie Hofmeyr, the former head of the Special Investigating Unit (SIU), told Parliament in 2011 that corruption cost the country about R25bn per year (the value of 250 000 low-cost houses).

In 2014 President Jacob Zuma officially announced the establishment of the office of the Chief Procurement Officer (OCPO) in National Treasury during his State of the Nation address.

"Weaknesses in procurement, management and operations systems that undermine the efficiency and effectiveness of government will be addressed," Zuma said. "One of the key steps, which is already underway, is to centralise procurement under the Office of the Chief Procurement Officer in the National Treasury."

Zuma cited the centralised procurement of school furniture in the Eastern Cape.

Buying power

Four years after the OCPO was established in Treasury, not all government procurement has been centralised under Kenneth Brown, South Africa's first chief procurement officer. Brown is a former teacher who joined National Treasury in 1998. In 2013, Gordhan appointed him the country's tender czar.

In his latest progress report, Brown lists his successes as the establishment of a central supplier database; the establishment of an eTenders portal for government; and concluding 57 transversal contracts for items such as vehicles and hospital equipment. This means common goods purchased by government in bulk.

Although these achievements shouldn't be sneezed at, government departments and entities have managed to hang onto their buying power. Enter Masutha, who is refusing to cancel a dodgy R378m IT tender awarded by the prisons department to Integritron Integrated Solutions.

Earlier this year, Brown wrote to Zach Modise, the prisons boss, after the OCPO reviewed the awarding of the R378m "integrated inmate management system" tender to Integritron Integrated Solutions, an affiliate of the Sasstec group of companies.

Another Sasstec company, SA Fence & Gate, received a R476m fencing tender from the correctional services department (DCS) in 2012.

Brown received complaints about the awarding of the tender by the DCS after it had emerged that all other bids, eight in total, were disqualified during the adjudication process.
He told Modise to cancel the tender. Modise refused.

Conflict of interest

Last month News24 revealed that Brown had told Modise that he would be held liable in his personal capacity for any fruitless and wasteful expenditure incurred through cancelling the contract.

What did Brown and his office uncover?

According to a confidential Treasury report by Brown's colleague Solly Tshitangano (the man who blew the whistle on Limpopo's textbook tender scandal), the winning company did not disclose conflicts of interest with a subcontractor; does not have the capacity to complete the project and fronted for a subcontractor with low BEE credentials.

One would think Masutha would be outraged that such a company could be building what some think is destined to become the IT blue print of the entire criminal justice system. Not so.

At a meeting of Parliament's Standing Committee on Public Accounts (Scopa) in March, Masutha lambasted his ANC colleagues for daring the question the awarding of the R378m tender. This was after Tshitangano had briefed Scopa on Treasury's findings on the matter.

Masutha questioned the legal standing of Scopa – Parliament's main body to keep checks and balances on how the state spends its R500bn tender budget – in questioning the awarding of the tender.

He was heavily criticised by senior ANC MPs Vincent Smith and Mnyami Booi, who emphasised Parliament's oversight role two weeks before the Constitutional Court did the same in the Nkandla case.

In an unusually heated exchange, Booi told Masutha he was effectively telling Parliament he did not want to account to them. He expected better leadership from the minister. "Taxpayer money had to be protected. Scopa was following correct procedures," said Booi, a former ANC chief whip.

Smith said he expected every member of the ANC to ensure every cent of taxpayers' money is spent on service delivery.

The meeting ended with Scopa agreeing to refer the matter to the Auditor-General.

Letter to Masutha

Realising his chief procurement officer was being ignored, Gordhan penned a letter to Masutha on April 11 in which he "advised [Masutha] to ensure that the contract is cancelled". He further "advised [Masutha] to ensure" that Integritron and its associates are restricted from conducting business with government and that disciplinary charges are brought against Modise and members of the bid committees.

Two weeks after News24 revealed Brown's intention to stop the tender, Sasstec and all its affiliates, including Integritron and SA Fence & Gate, applied to the North Gauteng High Court for an interdict against Gordhan, Brown, Tshitangano and Masutha to prevent them from cancelling the tender, distributing Brown's report or defaming the "good names" of the companies.

Early this month, the court struck the matter from the urgent court roll with costs. It will now be placed on the normal motions roll.

Shortly after News24 published Gordhan's letter, Masutha issued a statement in which he objected to our headline that Gordhan had "ordered" him to cancel the tender. The finance minister's letter "merely contained advice", he said.

Read the letter and decide for yourself what Gordhan meant.

The thud of Masutha's statement was in his last paragraph: "It is quite disheartening and somehow condescending that such an insinuation could be made, where one Cabinet Minister could be instructed or ordered by his colleague to cancel a contract under his administration."

Wasn't that exactly the Zuma administration's point in establishing the OCPO?

Ultimately it's not about the difference between the words "order" and "ensure". It's about the R500bn and Treasury's attempts to ensure R25bn isn't wasted on Mercs, fancy houses and offshore bank accounts.

- Basson is editor of News24. Follow him on Twitter: @adriaanbasson

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