Status of investigations relating to Department of Water and Sanitation: SIU briefing

Meeting report

SIU briefing on DWS investigations

Adv Andy Mothibi, Head of the Special Investigating Unit (SIU), and Gina Beretta-Pretorius, Lead Investigator: SIU, took the Committee through a presentation on the status of investigations relating to the Department of Water and Sanitation (DWS).

Adv Mothibi briefed the Committee on the SIU’s key skills, including forensic accounting, forensic investigation and civil litigation. He also described the processes that the SIU usually initiated subsequent to its investigation outcomes, including the referral of evidence of criminality to the National Prosecuting Authority (NPA) and Asset Forfeiture Unit (AFU), and civil litigation in the name of SIU.

(See presentation for more details).

Ms Pretorius presented on the proclamations that the SIU had worked on, starting with Proclamation No R35 of 2008 to do with allegations at the Mhlathuze Water Board. The focus areas in the Mhlatuze Water Board case included the use of advance payments received from entities for purposes other than those intended; the failure of Mhlatuze Water to settle contractual obligations within a reasonable period of time, and the losses suffered as a result thereof; and non-compliance with prescribed procurement and tender procedures.

The SIU had made findings, including that the correct supply chain management (SCM) processes were not followed, controls and policies in place were not sufficient to mitigate the risk of financial loss suffered by Mhlathuze Water Board, and that documentation critical to the investigation was either lost or destroyed negligently or intentionally, and this had hampered the investigation. The findings had resulted in the opening of criminal cases against an employee and board members of the Board. Some officials had resigned prior to the completion of the investigation.

(See presentation for more details).

Proclamation No R54 of 2012 dealt with various allegations at the DWS. The SIU had conducted investigations into approximately 34 allegations. Issues that had been uncovered included procurement irregularities, fruitless and wasteful expenditure, irregular expenditure, fraud and theft and corruption. The investigation had resulted into 58 different referrals. The SIU had expressed concern at the DWS’s method of handling referred cases. There was a delay in the implementation of the SIU’s recommendations to discipline officials. In addition, the DWS had closed disciplinary measures on the basis of presentations made by implicated officials without consulting the SIU.

Moreover, the SIU had assisted the DWS with the oversight and recovery of monies that it had lost to Mr Senokwane, an SAP consultant who was on a contract with the Department. The DWS had lost R7.9 million to the Sundays River Valley municipality through the Amatola Water Board, which had used the municipality as the implementing agent for the Paterson Bulk Water Supply Project in the Eastern Cape.

Ms Pretorius also briefed the Committee on the status of the Vuwani investigation to do with the construction of the 800mm diameter Vuwani steel pipeline. The construction of the pipeline had been impacted by the DWS’s failure to comply with the public service management regulations with regard to SCM, failure to heed professional engineering advice and poor project management and oversight by the DWS.

Proclamation R22 of 2016 had to do with LNW, and its contract with LTE Consulting. The SIU had identified project management issues, including a failure to comply with public service management regulations with regard to SCM, failure to heed professional engineering advice, and poor project management oversight by the DWS.

On the state of service delivery in Giyani, the SIU had observed that there was no water and there had been maladministration with the Giyani project to do with the construction of boreholes. Ms Pretorius told the Committee that the SIU had experienced a number of challenges with the LNW investigation. For example, the former chief executive officer (CEO) of LNW had used the state institution’s funds to delay and challenge the SIU’s investigations.

In addition to briefing the Committee on Proclamation R22 of 2016 dealing with the Gauteng Department of Human Settlements, and the contract that it had awarded to LTE Consulting at the Sweetwaters informal settlement, Ms Pretorius referred to Proclamation R27 of 2018 to do with contracts awarded by the DWS to SAP. She told the Committee that it had investigated the DWS on allegations to do with the purchasing of unnecessary SAP licences for more than R500 million, and receiving a payment of R35 million in kickbacks. The SIU had uncovered that the contract value was approximately R950 million, excluding VAT, consisting of R450 million for the SAP licence fees, plus maintenance over five years.

(See presentation for details on other Proclamations presented to the Committee.)

Discussion

Ms S Mokgotho (EFF) asked whether the SIU had advice for the DWS on how to improve controls and policies in order to effectively manage resources and mitigate risks.

What challenges had the SIU experienced in fulfilling its legislative mandate, as derived from the Special Tribunals Act and the Constitution of South Africa, specifically in relation to the proclamations issued on DWS?

The cases of corruption involving the procurement of construction services by government departments were concerning. There was a need for a broader forensic investigation on all departments procuring construction services.

Mr X Ngwezi (IFP) asked whether the SIU pursued dismissed or resigning individuals with outstanding criminal charges.

How did the SIU receive allegations on all matters requiring its attention? What was the procedure?

Were there cases which the SIU had investigated that had gone unprosecuted? If any, the SIU had to provide examples.

There was an element of foot-dragging regarding the Mhlatuze Water Board case. The case had been open for 12 years. It was important for the SIU to fast-track the disciplinary processes.

The job that was being done by SIU was commendable. However, the fact that much of this work had not been completed -- in part due to the incompetence of other coordinating organs of the state, such as the NPA -- was concerning. The Committee had to resolve the issue of incompetence by the coordinating organs.

Mr M Mashego (ANC) also referred to the fact that the foot-dragging in the Mhlatuze Water Board case was concerning.

The liquidation of Mr Senokwanye’s business and his sentencing to seven years in prison was a commendable achievement by the SIU.

The Sundays River valley investigation had shown that there were people who had not been charged for wrong doing, despite allegations of such. Did this mean the SIU did not have sufficient evidence to charge the implicated individuals?

Prior to his resignation, Mr Phineas Legodi, the former CEO of LNW, had applied for a court interdict to stop the SIU from investigating him. The LNW Board had previously joined Mr Legodi in the interdict application. What had informed the Board’s view that the SIU had to stop investigating Mr Legodi? It was highly likely that some board members had worked with Mr Legodi.

Starting from the Sweetwaters report, the SIU had not provided the names of people who had been charged with corruption, yet it had provided the names of people charged with corruption at other institutions. Why?

On the SAP matter, the SIU had reported that there had been R500 million in kickbacks. The SIU had to clarify what a kickback was, and its position on this.

It appeared as if AECOM had illegally obtained a contract for emergency upgrades from the DWS. When it did not receive payment on time, it had removed material from the sites. What was the SIU’s position on this?

The “War on Leaks” programme had been previously discussed by the Committee, and a resolution had been taken. However, the programme was still indicated as a challenge that could not be addressed. The SIU report on the War on Leaks programme contradicted the one which the DWS had presented to the Committee in 2019.

Ms R Mohlala (EFF) said the DWS had closed cases subsequent to the issuance of the SIU report. Why? Did this mean the Department did not have capacity to investigate the cases?

The SAP contract investigations had been ongoing for two years. What were the reasons for the delay?

In the past, financial constraints had hampered the SIU’s work. Had this been resolved? How much had each investigation cost? The SIU had to use an example in its explanation of the cost of each investigation.

Did the SIU liaise with the NPA to follow through prosecution processes?

At the Mhlatuze Water Board, three employees had resigned prior completion of the SIU’s investigation. As had been asked by Mr Ngwezi, did the Department pursue resigning officials with open cases?

Mr Senokwanye was the only person who had been charged, prosecuted and sentenced for corruption. It was highly unlikely that he had acted alone, considering the fact that financial transactions within institutions, including money transfers, required the approval or authorisation of more than one official. What had happened to the other officials involved?

What was the SIU’s view on the idea of incorporating forensic auditing investigating units within government departments? Seemingly, the departments did not have the capacity to mitigate risk.

Ms G Tseke (ANC) said the Committee had previously received reports on disciplinary referrals from the DWS. The SIU report had presented new information. For that reason, the DWS had to provide a comprehensive report explaining where it was in terms of cases that had been identified in the SIU report.

Was it possible for the government to name and shame government officials responsible for corruption in order to deter their future employment at any other public institutions? Also, naming and shaming the individuals involved in corruption would enlighten the public that government officials were corrupt, and not politicians. The SIU report served as evidence to this, as it had identified several government officials.

As had been noted by previous Members, the foot-dragging of investigations by the SIU was concerning. The SIU had been proactive in dealing with the Mr Senokwanye case. What had happened?

Was it possible that the lack of leadership within the DWS had served as contributory factor to maladministration and corruption within the institution?

The CEO of Umgeni Water had resigned suddenly. What was the reason for her resignation? Had she been implicated in the SIU’s investigations?

The Committee had conducted oversight visits in Giyani, and had noticed that the water treatment plants were not working and the people living there did not have water. For that reason, it was safe to say the findings of the SIU were legitimate. The SIU had to ensure that people responsible were brought to book, since money had been stolen and spent recklessly.

Ms N Sihlwayi (ANC) said the SIU report had exposed a lot of criminal activities without providing clear resolutions. What action plan did the SIU propose to the DWS? As had been said by Ms Tseke, politicians were viewed as corrupt and had been barred from participating in the management of public funds. The absence of politicians in the management of public funds was viewed as a loophole for corruption by government officials. The SIU had to facilitate the restructuring of government processes so as to close the gaps that facilitated corruption.

The absence of financial expenditure records in the Mhlathuze case showed that the individual responsible for stealing the public funds was skillful. What had happened to the person? It was rumored that she had resigned and the money she had stolen was still missing.

How had the Sundays River Valley municipality become the custodian of R7.9 million, especially considering it was not even an entity?

The report had shown that Ms Ntandokazi Mda had not been touched, and the case had been closed. Who was Ms Mda, and why had she not been charged?

The findings against LNW were shocking, considering the fact that the entity had previously been vocal in criticising the DWS and the Minister.

There was a need to limit the powers of water entities, as they were abusing them by acting independently on matters that required the intervention or approval of the DWS.

The corruption that had been unveiled by the SIU within the water entities exposed some control weakness within the DWS. The DWS did not maintain oversight on the entities. Previously, it had talked of a monitoring and evaluation (M&E) framework. What had happened to the framework when corruption was unfolding within the water entities? The DWS had to understand that M&E was not limited to checking compliance with prescribed rules and regulations. This expanded to maintaining oversight on the activities and actions of entities, including their expenditure of money.

The fact that the R2.2 billion which had been set aside for government water projects had been stolen was deeply concerning and painful. It demonstrated a disregard for public interests.

What had happened to the CEO of LNW, subsequent to his resignation from the entity?

The Chairperson asked why the verdicts on those flagged for non-disclosure were not the same.

The Committee had invited the SIU to report on the Giyani matter. The report was pleasing. The people of Giyani had received poor leadership from both the municipality and the department through the LNW Board.

The Mopani Municipality had received and misused money for the development of water resources in Giyani. Had the Municipality been investigated?

The issue of the foot-dragging of cases was concerning in the sense that it affected service delivery. When departments and entities were being investigated, they channeled their energy and resources into the investigation.

What could the Committee do to help the SIU speed up investigations?

Mr M Tseki (ANC) asked the SIU to identify and explain the control weaknesses that had prompted maladministration and corruption to go unnoticed.

There was a need to clarify the type of pursuable referrals. Although criminal referrals were pursuable, disciplinary referrals were not.

SIU’s response

Adv Mothibi said the Committee had asked if the SIU had advice for the DWS. After submitting an investigation report to a state institution, the SIU engaged the state institution on the investigation findings, and it focused particularly on systematic issues and recommendations. Systematic recommendations focused on improvements in risk management processes, the control environment and the planning environment. The SIU had done this with the DWS, and intended to formalise the engagement. In a formal engagement with the DWS, the SIU was going to look at the systematic recommendations line by line, and formulate an action and monitoring and evaluation plan.

He said the SIU had experienced challenges with the LNW investigation. The CEO and the former LNW Board had attempted to interfere with the SIU investigation processes through the hiring of private investigative companies, and the application of court interdicts. The Minister had engaged the CEO to cooperate, but this had been to no avail. As a last resort, the SIU had had to use its powers to conduct the investigation -- for example, powers to do with search and seizure. The search and seizure operations had unveiled further malpractice and maladministration. The CEO and the former Board members faced disciplinary action. Whereas the CEO had subsequently resigned, the former Board had been disbanded. The new interim Board appointed by the Minister had promised to co-operate.

Although the CEO had resigned, the SIU had opened a civil litigation case against him. It had managed to obtain an interdict to freeze his pension.

Regarding corruption to do with government procurement of construction services, Adv Mothibi agreed that there was a need to conduct an investigation across the board. The SIU had already engaged the Ministry of Public Works on this initiative. The construction area had to receive wider attention from an anti-corruption perspective. A process for the formulation of an anti-corruption framework in the infrastructure development industry was under way. The framework was going to follow the model of that in the health sector.

The Committee had asked if the SIU pursued dismissed or resigning employees. Adv Mothibi told the Committee that resignation only ended the relationship between the employer and the employee. The SIU pursued criminal referrals through civil litigation processes. As had already been mentioned, it had pursued the former CEO of LNW. The freezing of his pension served as an example to all government officials that were involved in corruption and planned to resign, secure in the knowledge that they would continue to receive their benefits. The SIU had also noticed that corrupt government officials resigned from one government department and moved to another. One solution to this problem was to adopt section 16B of the Public Service Act, which stated that an Accounting Authority may refer the disciplinary evidence to a resigning official’s new Accounting Authority to take action against the official.

On how the SIU received cases, he told the Committee that it received cases from state institutions and departments, but mostly through its whistleblower hotline.

Mr Kaizer Kganyago, Head of Communications and Stakeholder Relations, SIU, said the whistle-blower hotline was available 24/7. The hotline number was 0800037774. The email addresses were [email protected] and [email protected].

Adv Mothibi said all reported cases were assessed as to whether they met the prescribed standards. All cases that passed the standards proceeded to the proclamation stage until they got signed off.

The Committee had asked whether there were cases that had been referred to the NPA and had not been prosecuted. He confirmed that there were such cases, but the NPA had appointed a team of dedicated prosecutors to track progress. In 2017, when the SIU adopted its new strategy, it had observed that a failure to follow up on referrals would heavily impact its work. The SIU had developed a framework with the NPA, and the NPA was taking action. Also, the SIU was taking advantage of the civil litigation process that it had control of.

Regarding the foot-dragging of the Mhlathuze Water Board case, Adv Mothibi said it had approached the NPA on the matter, and the NPA was taking action. The SIU was going to follow up and respond to the Committee in writing. It had entered into a Memorandum of Understanding (MOU) with the NPA to formalise feedback. It hoped to extend the MOU to the Hawks and the South African Police Service (SAPS).

Expanding on the foot-dragging of cases, he said the SIU’s new strategy required an investigation to take not more than one year. In cases where the investigation took more than one year to complete, the SIU issued an Interim report. In cases where the SIU made a finding of irregularity before reaching the reporting stage, it immediately took remedial action. Also, the COVID-19 investigations by the SIU had prompted it to understand the importance of completing investigations in a short time. Long investigations resulted in the disappearance of evidence.

The Committee had asked whether the CEO of LNW had taken the Minister to court. Adv Mothibi confirmed that he had, with the assistance of the former board. The current board had withdrawn from the case, and the CEO had started to litigate the matter on his own.

Regarding the inconsistencies to do with the naming of corrupt individuals in the report, he explained that the report had mentioned names of individuals that it had referred to go through disciplinary processes. This presented a minimal legal risk compared to mentioning the names of individuals it had referred to the NPA and other criminal bodies. The individuals it would have referred to the NPA had to be prosecuted and charged before their names were released to the public. In civil litigation cases, before the issuance of summons, the names of all implicated individuals had to remain confidential.

The Committee had requested clarity on the issue of kickbacks, and this could be loosely translated to mean bribes. The kickback amount that the SIU had mentioned was R35 million, and not R500 million. The investigation to do with the kickback had not been closed, and it had revealed that SAP had won the contract through irregular procurement processes. The SIU was already in the Tribunal, going through the process of recovering the money that the DWS had paid. The next step was to identify all the officials involved in the transaction. As had been said by the Committee, financial transactions required the authorisation of different officials.

Regarding the War on Leaks, the SIU was assessing whether the case passed the prescribed standard. Once this was done, it was going to issue a proclamation and immediately commence an investigation.

The Committee had asked why the DWS had cited a lack of evidence as a reason to close referred cases. Adv Mothibi said the SIU had approached the DWS on the matter, since it believed there was an existence of evidence that necessitated their referrals.

On the SAP investigations, he said the SIU had made findings and had initiated court proceedings.

The Committee had asked if financial constraints hampered the SIU investigations. Adv Mothibi responded that the financial constraints were threatened by the increase in proclamations. The SIU had engaged National Treasury on the matter. The SIU Amendment Act also sought to address the funding model, since the SIU could not depend on charging government departments. In most cases, the departments also complained of financial constraints and defaulted on their payment. Be that as it may, the SIU had a good financial position and was looking to employ forensic investigators.

The cost of each investigation was determined by the resources required. The letter of engagement that the SIU had sent to the DWS showed the overall cost of the DWS investigation. The SIU had requested to send this in writing.

Regarding the Mr Senokwanye case, the SIU investigations were ongoing, and would reveal the names of other officials involved in the money transfer.

Regarding incorporating forensic investigative units within departments, Adv Mothibi said that it was standard practice for departments to have internal investigative capacity. In cases where departments asked the SIU for assistance, it would offer it.

It was SIU’s current strategy to follow up on referrals, as a failure to follow up would result in a lack of consequence management. The SIU had created a unit to deal with pre-proclamation and post-referral matters. Its duties included follow ups.

He agreed with the Committee that the DWS had to issue a comprehensive report on the status of referrals made by the SIU.

He also agreed with the Committee on the naming and shaming of corrupt government officials.  In cases involving corrupt service providers, there was an administrative process available for the blacklisting of them.

Adv Mothibi said the DWS had deliberately delayed implementation of the SIU’s referrals.  It had written to the the acting Director-General of the DWS in October 2018, requesting the reasons for the delay.

He agreed with the Committee that a lack of leadership within the DWS had served as a contributory factor to malpractice and maladministration.

The Committee had asked why corruption within the DWS had gone unnoticed. He said a lack of consequence management within departments created a culture of impunity. There were also cases of employees colluding with their superiors to engage in fraudulent behaviour. This resulted in the limited detection of cases.

The SIU was aware of the resignation of the CEO of Umgeni Water. It was standard practice for the SIU to check whether resigning officials were not implicated in its investigations. The team in KZN had checked if the CEO was implicated in the SIU investigation, and the result had come back negative.

The people in Giyani had been denied clean water for too long. The SIU sought to attend to all of the irregularities that it had observed to avoid repetitive cases of poor service delivery.

The Committee had complained that the SIU had not provided solid or concrete observations in its report. The SIU had submitted a comprehensive report to the Accounting Officer at the DWS. The report had identified cases of serious maladministration, malpractice, corruption and conflicts of interest. In the report, it had advised the DWS to improve its risk management.

On how the Sundays River Municipality had ended up in possession of R7.9 million, he said the Amatola Water Board had used the Sundays River Valley Municipality (SRVM) as the implementing agent for the Paterson Bulk Water Supply Project in the Eastern Cape. The SIU had requested further details in writing.

Adv Mothibi said the report had thoroughly dealt with the lack of oversight, to ensure future oversight by the DWS.

The SIU had engaged the Department on the matter of disclosure forms, because the verdicts and sanctions were different for the same charges -- conflict of interest, or failure to declare. The SIU had asked the Accounting Officer in the DWS to ensure that the appropriate verdicts were applied.

Mr Leonard Lekgetho, Chief National Investigations Officer: SIU, said that the investigations into the Mopane Municipality were covered in the 2017 proclamation, as amended in 2018 and 2019. The investigations had to do with the procurement of boreholes. The SIU investigation had uncovered that the boreholes had not been constructed in accordance with the requirements. The SIU had made criminal and disciplinary referrals.

He clarified that AECOM’s sub-contractors, and not AECOM itself, had removed items from the construction site. The items had had to be replaced by the DWS at an additional cost. It was also concerning that the DWS had already paid 72 percent of the cost of the project to AECOM.

Mr Lekgetho said the approximate cost for the investigation into the SAP case had been R4.8 million. The cost of each investigation was determined by the level of resources required to complete the investigation. In most cases, investigations cost less.

Adv Mothibi said the SIU welcomed collaborative efforts with the Committee. From time to time, the SIU would report to the Committee on investigations related its area. It was also going to continuously engage the DWS on systematic recommendations.

The Chairperson thanked the delegates for their responses, and invited Members to ask follow up questions.

Ms Sihlwayi asked the SIU to make available the comprehensive report detailing its observations on the DWS.

The Chairperson invited Members to engage on the proposal that had been made by Ms Mohlala to reopen an inquiry into the DWS, since poor parliamentary oversight had facilitated malpractice and maladministration within the institution. Members agreed that this was not necessary, since the SIU had already conducted investigations.

The meeting was adjourned.