How do you stop a probe into a R1bn contract? Ask state tech agency Sita


State Information Technology Agency officials and board members are accused of trying to thwart an investigation into a R1-billion contract that was awarded to IBM South Africa.

City Press has documents indicating that Sita officials tried to reverse President Jacob Zuma’s 2014 Special Investigations Unit proclamation on the three-year partnership agreement, known as the integrated supply agreement, with the multinational company and they also terminated a contract with private investigation company, The iFirm.

However, officials who played a role in the integrated supply agreement – which gave IBM a cloud computing contract on a silver platter and without any bidding process being followed in 2013 – were allowed to leave despite damning evidence of corruption. Sita also has a new board and only one member who was involved in the IBM contract, current chairperson Zukile Nomvete, remained.

Sita is now trying to get a Northern Gauteng High Court order to review and terminate the iFirm’s contract. The company was appointed on May 21 2014 to investigate the theft of computers but after doing that job, former chief executive, Freeman Nomvalo, extended their scope to also probe tender irregularities pertaining to the integrated supply agreement.

The matter of reviewing the iFirm’s contract has been before court since May 2015. The trial has not started yet nor has the court decided on a date.

Before IBM signed the integrated supply agreement, which merged all agreements IBM had with Sita into one and had the cloud computing element embedded in it, the company’s bid response to a cloud computing tender had been disqualified in November 2012.

Through colluding with Sita officials, according to details in an internal audit report dated July 3 2014, IBM managed to get the cloud computing contract via the back door when it signed the integrated supply agreement. The three-year agreement expired in March 2016.

Cloud computing is advanced IT technology that was intended to improve government’s data centre and infrastructure. Sita is the custodian of government departments’ IT needs.

The agreement was structured in such a way that IBM would not be sued for any tender irregularities because Sita inserted a clause in the integrated supply agreement that shields the company from liability. Sita’s legal department was not involved in drafting the agreement.

Evidence that whistleblowing Sita officials leaked to City Press this week showed that The iFirm had its contract cancelled when its probe began netting senior officials, while attempts were also made to withdraw the proclamation for the Special Investigations Unit to probe wide-spread corruption at Sita.

The iFirm was also starting to investigate another partnership, the Microsoft Agreement, that bore similarities to the integrated supply agreement, but could not continue.

Though Sita has gone to the high court to review and cancel the iFirm’s contract, iFirm conducted the investigation jointly with another company, New Dawn, but nothing has been said about it.

The iFirm, according to documents, was in favour of a multi-disciplinary investigation and had invited the Special Investigations Unit and the Hawks to take matters forward. It had also began a lifestyle audit of employees when former board chairperson, Jerry Vilakazi, stopped its work on December 10 2014, claiming that Nomvalo had no authority to extend iFirm’s contract.

The forensic company has not been asked to submit its report, and the focus seemed to be to get it off the investigation.

Sita spokesperson, Lucky Mochalibane, conceded that all roleplayers in the integrated supply agreement had left, and said Sita “had no knowledge” that attempts were being made to stop the investigation, particularly by iFirm, because Sita had reported the matter to the police and the Special Investigations Unit.

“Sita cooperated throughout the investigation by the Special Investigations Unit, through facilitating interviews, information, documentation [including reports] and providing affidavits where required,” he said.

However, City Press has documents indicating how Nomvalo had made a presentation to the board in August 2014 explaining why the 2014 Special Investigations Unit proclamation should be withdrawn. Nomvalo’s argument was that the proclamation put Sita into disrepute, exposed it to litigation and could impair trade relations between South Africa and the US.

Nomvalo’s presentation was shot down by former board member, Johnny de Lange, who wrote to Vilakazi and members on August 2 2014. “Chairperson … I’m truly astounded by this report by management … This proclamation means the Special Investigations Unit investigators, department of justice and our president are all of the view that there is at least prima facie evidence that the IBM contract shows the presence of serious corruption among some within Sita and IBM,” De Lange said.

City Press also has proof that the same board members, including Nomvete, took part in negotiating the IBM contract, particularly the price.

“It is common knowledge that the Special Investigations Unit reports the outcome of its investigations to the president. In the case of the investigation in question, take note that all the key roleplayers involved have left the services of Sita. Therefore no disciplinary action could be taken internally,” Mochalibane said.

IBM’s spokesperson, Pierre Fouche, did not respond to questions emailed to him on November 14 despite his office having confirmed receipt. The iFirm’s chief executive, Mzwandile Petros, said he was hamstrung by the pending court case and could not comment.

The iFirm’s probe massively contributed to the internal audit report that exposed the dodgy signing of the integrated supply agreement/cloud-computing contract.

This agreement intended to collapse all existing agreements between Sita and IBM into one, and when it was done, it had an element of cloud computing included. Sita and IBM never had a cloud computing agreement before so it should have been awarded through following a tender process.

The internal audit found that:

• The board approved the integrated supply agreement on April 30 2013 valued at R888 million without the agreement being reviewed by Sita’s lawyers;

• Former Sita chief operations officer, Khumbudzo Ntshavheni, however, signed an agreement that reflected R974 million including VAT. The amount Sita eventually approved was slightly above R1 billion and was not approved by the board;

• The agreement committed Sita to get products at a fixed price directly from IBM and issue tenders to IBM business partners. A clause in the agreement, however, said that “Sita indemnifies IBM against any claims that could arise as a result of Sita’s failure to comply with the required procurement processes”;

• Sita paid an upfront amount of R108 million on March 31 2014 for software catalogue and ad hoc projects even though this was not part of the integrated supply agreement. This projects had not been evaluated to determine if they qualified as solution to Sita’s clients (government departments); and

• The software products listed in the catalogue were also not IBM-specific products. This meant that other services providers were unfairly excluded from bidding to supply them.

“It is apparent that Sita considered the IBM agreement as an innovative, unique proposal offered by a sole supplier … when the software and other products were included in the integrated supply agreement and agreed to, IBM no longer qualified for the status of sole supplier as other resellers,” the audit report said.

The report concluded that when the integrated supply agreement was signed, tender processes were bypassed and allowed for inclusion of new and additional products and services without a fair, competitive and transparent process: “In summary, it appears that IBM, as a result of them being disqualified with the cloud computing tenders, secured alternatives in order to secure financial benefit … IBM qualified in the integrated supply agreement contract that if the tender processes are flouted by Sita, they should be indemnified.”

Sizwe sama Yende
City Press
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