Special Investigating Unit investigations in Telecommunications and Postal Services, with Deputy Minister

Meeting report

The Chairperson said the lack of progress reports from the SIU were a challenge to the Committee in its oversight work. Was the Committee allowed to see the reports to do its oversight work? It could not ask the Minister as the reports belonged to the President.

Deputy Minister of Telecommunications and Postal Services, Hlengiwe Mkhize, said that even the Department could not follow up, because the report belonged to the President and the Department felt that it had no authority to act. It did not know what to do with information in the report. The issue needed to be clarified as it was sometimes taking years to initiate legal action.

Adv Jan Mothibi, Head of the SIU, said that once an investigation was completed, the report was given to the President. A few months ago he had met with the President to discuss these processes and how the reports could be published. He said that the report was owned by the President and there needed to be discussion and agreement on the manner it would be published. To date there had been no feedback, but he would follow up on the matter.

He said that if the SIU found any evidence during its investigations, then at that point it would compile the evidence and present it to the institution. The institution did not have to wait for the final report to take action and these actions could be monitored by the SIU as well. Similarly, if a criminal element was found, then it would present evidentiary material to the Hawks for further investigation. The SIU did initiate actions to recover monies and the Committee could monitor this. The SIU also provided systemic-type recommendations. He said it was a balancing act to acknowledge that the report belonged to the President, while at the same time institutions were seeking information contained in the report. The SIU had met with the NPA so that turnaround times for cases could be improved.

He then moved on to give an update on the five cases the SIU had been involved in - which had concerned the Committee.

South African Post Office (SAPO) Eco Point lease
This report had been submitted to the President in June 2015 and referrals had been made to the NPA for criminal prosecution. In March 2016, the company had been found guilty and fined R100 000 of which R50 000 had been suspended.

A SAPO employee had contravened section 17 of the Prevention and Combating of Corrupt Activities Act related to an access control tender but the SIU had not received any feedback on the disciplinary process involving this person. There were seven other referrals for disciplinary action for misconduct and there had been no feedback to SIU on these cases.

He said that civil proceedings had been instituted to set aside the Eco Point lease based on non-compliance with supply chain management and allegations of fraud and corruption. The SIU was seeking the repayment by the landlord of all monies received from SAPO, which was currently estimated at R250m, or to at least repay all profit the landlord enjoyed or may still enjoy in terms of the lease agreement until it was set aside. The matter was being defended.

The landlord had instituted proceedings to review and set aside a report that was issued by the Public Protector in respect of the Eco Point lease. The Public Protector, SAPO and the SIU were opposing this application and the civil proceedings were on-going.

As for criminal proceedings regarding the Eco Point lease, he said the matter has been with SAPS since March 2012, but no arrests had been made to date. The SIU were liaising with SAPS and the NPA to try to expedite the matter.

He said the Asset Forfeiture Unit (AFU) had an interim attachment order of around R2m against a former employee of SAPO.

Media Corner investigation
This concerned a public awareness campaign tender around broadcast digital migration. The investigation had been finalised and a report would be submitted by the end of January 2017.

The SIU has referred seven matters to the Department for purposes of disciplinary action. Disciplinary processes were started; however there have been some challenges within the Department with respect to the finalisation of these processes. The SIU intended to refer two corruption related matters to the NPA for criminal prosecution.

In September 2014, the SIU applied to set aside the tender awarded to Media Corner and the resulting contract of R752m, based on SCM non-compliance. In addition, it sought repayment of R12m to the Department and for the full discovery of all supporting documentation in respect of payments totaling R45m. The case was defended by Media Corner. The finalisation of the civil proceedings was delayed by settlement negotiations. The Court ordered that the tender to Media Corner be set aside; that Media Corner deliver all invoices and statements of accounts issued to Media Corner by all publishers, broadcasters and other media. The remaining matters were postponed and the SIU and the Department had applied for a court date, but it was still being awaited.
 
State Information Technology Agency (SITA) investigation
This investigation involving the procurement of goods and irregular and fruitless and wasteful expenditure at SITA was being finalised and the report was due at the end of March 2017. SITA had been made aware of the SIU investigation and all payments were stopped on a contract to the value of R302 million. The R302m contract was investigated and a court case was set to be heard in May 2017 to declare the contract invalid and that it be set aside.

R405m in irregular or fruitless and wasteful expenditure and disputed payments of R83m had been identified.

There were possible criminal prosecution referrals to the NPA based on allegations of Tax Clearance Certificate fraud as well as a referral to the AFU for a R10m contract.

There were two disciplinary referrals against SITA officials who did not adhere to SITA procedures or to SCM policy. There were four disciplinary referrals against SITA officials arising from the unauthorised as well as fruitless and wasteful expenditure for the approval of a R888m contract.

Department of Communications investigation
The SIU had investigated six cases including the Department's donations for the hosting of the ICT Indaba. The investigation was finished and a report had been submitted in October 2016. The Department could request the report from the Presidency. The Presidency had said that it did give feedback to the Department.

Universal Service and Access Agency of South Africa (USAASA) investigation
The SIU investigated three allegations involving the Universal Service and Access Agency of South Africa (USAASA). These were alleged irregularities in the recruitment process and appointment of a CEO; in the granting of a subsidy to construct and expand an electronic communications network for the Emalahleni Local Municipality (ELM Project); and in the procurement and payments of goods or services for the Rapid Deployment of Public Access Facilities Programme.

The investigation revealed evidence that the appointment of the CEO of the USAASA was irregular and invalid and the SIU applied to review and set aside the appointment of the CEO of the USAASA. However, delays in court processes resulted in the litigation being overtaken by events when the employment contract expired. SIU’s view was that it had brought it to the attention of the institution and ensured proper process was followed thereafter. It did not make legal sense to follow up on a case where the contract had expired and there was no chance of getting consequential relief.

Adv Mothibi said that the investigations into the other two matters were completed in July 2015 but the report had been withheld pending the outcome of the CEO case and to see what steps the newly appointed board of USAASA would take on the first allegation. The report then went through a review process and was due at the end of November 2016. The report had identified the irregular appointment of service providers and of challenges in the systemic process and recommended that these challenges be followed up. The report was due by the end of November 2016.

Discussion
Ms M Shinn (DA) asked if it was correct that once the President received the report he was obliged to pass the report on to the Department. If criminal actions were identified, why did it wait for internal departmental disciplinary action to happen? What was the R45m, in the Media Corner case, spent on? Was the organiser suing the Department the same person as the one who had left the Department?
 
Mr E Siwela (ANC) said there was a perception that corruption was rife and that nothing was being done. There was a lack of communication that corruption was being tackled. Did the SIU have the power to enforce actions it recommended that state organs take; and did these institutions need to start investigations afresh? What could be done to shorten the time the investigations take? They took too long to finalise which made it difficult for the Department to act.

Ms D Tsotetsi (ANC) asked if the SIU had the power to arrest and prosecute. On the delays in the Media Corner investigation, she asked if preferential treatment could not be requested. How long after the completion of the report did the SIU have to present it to the President?

Mr C Mackenzie (DA) asked if the SIU identified which crimes and acts were contravened. With regards to the Media Corner case, he asked if it was against a juristic or individual person.

Ms J Kilian (ANC) called for a special tribunal to speed up the long process time. She asked about the role of the SIU and whether it had any “teeth”. When the SIU had entered the Media Corner investigation R12m had been spent and this had continued until R45m had been spent. What did the SIU do to stop the payments? There was a trend that implicated people left departments and nothing happened to them. Did the SIU request the Department to institute criminal or disciplinary proceedings against such employees? Could criminal proceedings start immediately?

The Chairperson asked what the current practice regarding remedial action was.

Adv Mothibi said that once the President received the report, he did interact with the institutions on the findings of the report and followed up on its recommendations. To avoid duplication of the follow up process, he said he would work with the President to coordinate receiving updates.

He said most of the SIU team were qualified to assess evidentiary matters and be satisfied that it could be sustained in court, as most of them had worked as prosecutors and were in a position to put materials together that would stand up in court. The SIU had set up a structure together with the NPA in this regard. The NPA remained the prosecution authority.

Adv Mothibi said that the SIU could approach the National Director of Public Prosecutions (NDPP) to delegate the prosecution to the SIU for a specific matter in which case the SIU would compile the docket. There was still discussion taking place on this.

He did not have the details contained in the invoices for the R45m, which was still being argued in court but would keep the Committee updated on the litigation process.

The woman suing the Department was not the same person as the one the Department was instituting criminal action against. The latter was an official of the Department who had acted improperly to seize all work concluded between the Department and a service provider. This instruction had led to the lapsing of a contract between the service provider and the Department and the service provider had instituted legal action against the Department.

The level of communication with the public needed to be improved. The SIU was part of the Anti-Corruption Task Team (ACTT) and had met recently with the Inter-Ministerial Committee where it had been noted that the ACTT needed to do media briefings to the public more effectively.

Currently the SIU had made recommendations and referrals and these referrals were followed up. In talks with the Presidency, the SIU had made further recommendations that there be delivery agreements instituted with the accounting authority. Internal and external audits should be included in the scope of the agreements and that there be consequences for failure to implement the SIU recommendations.

He acknowledged that some investigations took a long time to complete. The SIU engaged in project reviews and had seen positive outcomes from these reviews and would endeavour to improve turnaround times.

The SIU did not have powers to arrest. It worked in conjunction with the Hawks and SAPS in these instances. The SIU did identify crimes which had been committed and had made several referrals to the NPA for prosecution by the Hawks.

The SIU identified crimes for investigations and specified what the criminal offences were and ensured that the evidence was enough to prove such. It had made several referrals to the NPA for prosecutions for transgressions of the PFMA.

The SIU would like to believe that it did have ‘teeth’. The SIU’s unique advantage was that it could institute civil proceedings to recover monies, which hit the pocket, where its impact was felt the most.

Mr Gerhard Visagie, SIU Legal Counsel, said the power to delegate prosecution to the SIU was not in the SIU Act, it was in the NPA Act. He said that in the Media Corner case, the difference between the R12m and the R45m spent was that the service provider received R1m monthly plus an additional amount to get media buy in for the ICT Indaba project. It was this latter amount which was in dispute. The Department, together with the SIU, had made an application in this regard. The Department had already received a judgement on the invalidity of the delegation of the contract and were now in the process of seeking consequential relief. The matter was currently at this stage.

SITA had not excelled in terms of continuity, but currently under the new CEO, there had been progress.

SAPO was being monitored and a progress report would be made available. Under the new SAPO CEO, SAPO was serious about implementing the SIU report.

Mr Leonard Lekgetho, SIU Project Director, said matters were referred to the SIU by departments. In some cases when matters were referred to the SIU, other matters would be discovered during the investigations and these would also be followed up.

Adv Mothibi said that part of the stakeholder relationship strategies were that the SIU could pick up proactively on issues. For example the AG could mention significant irregular expenditure figures and the SIU could take the matter up with the Department and investigate if the irregular expenditure was due to corruption. The SIU wanted to improve its business development initiatives in this regard as well as improving communications with the public.

Ms Shinn asked if the SIU could act independently while waiting for a disciplinary case to be completed. What action was taken against people who had appointed the CEO irregularly?

The Chairperson replied saying that the whole USAASA board, the Minister and the DG had all disagreed with the appointment of the CEO.

Ms Tsotetsi asked if there were instances where the costs were greater than the monies recovered.

Ms Kilian asked if the SIU had found a need to identify trends that needed to be addressed by means of legislative changes.

Adv Mothibi replied that actions had been instituted against Media Corner as a juristic entity. Directors were still liable but it was known that companies took out liability insurance for such instances. To obviate companies making use of the business rescue provisions, it became critical to improve the speed of investigations hence the need to reinstitute the Special Tribunal so that there could be no escape loophole for companies.

The SIU did not have to wait for disciplinary hearings to be completed before criminal prosecutions could be instituted or referred, because the burden of proof was different for the two instances.

If there was no possibility of consequential relief being gained it would be fruitless expenditure. However the litigation process might have been different if there had not been a delay in the court proceedings and the court would have declared the CEO’s appointment as invalid.

The cost to investigate was part of a cost benefit analysis which was taken into account. The SIU did look at the threshold and costs to investigate but it was difficult to quantify the term ‘public interest’.

Regarding trends, he said the SIU wanted to embrace the internal capability to build capacity. When it did recommendations to state institutions, it included systemic issues and suggested improvements.
 
Mr Visagie said the SIU worked with National Treasury and considered referrals to Treasury so that entities and directors could be blacklisted. This did not apply to the case of Media Corner. There had been a suspicion of corruption but the civil litigation had not been brought on the basis of corruption.

Committee Business
The Committee considered and adopted the Committee Reports on the Telkom oversight visit and on Nemisa’s strategic plan.

The Chairperson noted that the Minister had tabled four international treaties for ratification and two of them would be considered the following week. The Committee Report on the “Cost to Communicate" public hearings would also be considered.

The meeting adjourned.