MoU Signing between SCOPA & SIU

Meeting report

Opening Remarks by the Chairperson
The Chairperson welcomed the Members, the delegation from the Special Investigating Unit (SIU), and the media houses that were present at the meeting.

The Standing Committee on Public Accounts (SCOPA), through section 55(2) of the Constitution, read together with Rule 245(1) of the National Assembly Rules, was mandated to conduct financial oversight over all organs of state. This included, among others, investigating and reporting on matters pertaining to maladministration, malpractice, and corruption – which often stem from procurement irregularities, poor record management, and weak leadership and governance in government departments and entities.

In an effort for the Committee to hold those responsible for misusing the state resources and money accountable and conducting its oversight mandate to strengthen accountability and consequence management, SCOPA received regular updates from the SIU on proclamations relating to maladministration, malpractice, and corruption revered by its investigations on state institutions. The Committee was particularly concerned by the lack of consequence management and delays in prosecutions, all of which resulted in the failure of the state to recover the money owed to it.

During the sixth Parliament and the Zondo Commission of Inquiry into State Capture, corruption and fraud in the public sector including organs of state, the collaboration between SCOPA and the SIU was further strengthened by the agreement reached by the Committee and the SIU in 2019 that SCOPA would refer various cases to the SIU for investigation as the Committee saw necessary. The Committee also identified with concern that, once the SIU investigations were concluded and reports were filed, they had to go back to the originator of the proclamations, the Presidency, because implementation did not reside within the SIU.

Moreover, the Presidency did not keep track of how the SIU referrals were implemented, as they often languished in government departments and state-owned entities (SOEs) without any actions being taken against those responsible for wrongdoing. The Committee then initiated a process with the Presidency of developing a matrix and monitoring mechanism for the implementation of reports for the purposes of processing to ensure that whenever a report was submitted to the affected department, entity, or municipality, disciplinary interventions and any other interventions therein were implemented. This process and mechanism were of paramount importance because some reports dated back to 2001 imply that, without implementation, the hard work that the SIU conducted amounted to fruitless and wasteful expenditure.

This intervention resulted in SOEs such as Eskom and Transnet restricting suppliers implicated in SIU investigations on their own suppliers’ databases. The collaboration between SCOPA and the SIU resulted in the completion of some of the following investigations:
- The National Skills Fund (NSF) following consecutive disclaimed audit outcomes in the 2020/2021 financial year from the Auditor-General of South Africa (AGSA);
- The Department of Public Works and Infrastructure (DPWI) portfolio in its entirety;
- Eskom Intelligence Report Commission by Eskom’s former Chief Executive Officer on allegations of corruption and financial mismanagement in the national power utility.

This was the good ongoing work that SCOPA did with the SIU, and the SIU achieved significant recoveries by combining quality investigations and civil litigations. The Unit also made numerous recommendations for disciplinary actions, referrals of evidence for prosecution, and functions such as blacklisting on recommendations for systemic improvements.

With the shared objective to guard the public person to scrutinise transactions made by state institutions, SCOPA resolved to formalise its collaboration with the SIU in areas of mutual interest, especially in the investigation and consideration of matters relating to irregular, fruitless and wasteful expenditure of public funds and the implementation of preventative measures and monitoring activities through the signing of the memorandum of understanding (MoU), setting out the terms and conditions upon which the parties will cooperate and support one another.

The purpose of the MoU is to identify the roles and responsibilities of each party as they relate to reviewing the expenditure of public funds and to put resources into strengthening financial oversight and to strengthen consequence management related to such misuse of public funds. More importantly, the signing of the MoU will assist with forwarding further certain pressing matters from SCOPA to the SIU, as the SIU does not identify specific matters to investigate. Matters referred by SCOPA to the SIU for investigation or for motivation for a proclamation include the Eskom Intelligence Report.

A Steering Committee comprising of two representatives of the Parliamentary administration acting on behalf of SCOPA and at least two representatives of the SIU will oversee the management and implementation of the agreement. This is not a political process but an administrative process, and there will be no interference from SCOPA. The Steering Committee shall, amongst others, be responsible for drafting project activities, terms of reference, setting up timelines and deliverables, costs and any other necessary activity required for the successful completion of the identified tasks. All terms of reference are to be approved by the Chairperson of the Committee and the Head of the SIU, and they will be subject to compliance with any financial prescripts if applicable.

Both parties acknowledged the importance of consultation, mutual support, and cooperation on acts such as disclosure of information, reporting, and cooperation and assistance to ensure effective financial oversight and accountability of state institutions, thereby combatting maladministration, malpractice and corruption on state resources, money, and assets.

Input by Special Investigating Unit
Adv Andy Mothibi, Head of the SIU, said that the signing of the MoU was a process considered from 2019 as an appropriate framework that would ensure continued referral of matters to the SIU for consideration and processing for investigations. This marked a significant moment to the SIU as its mandate derived from legislation, the Special Investigating Unit and Special Tribunals Act (Act no. 74 of 1996), which regulates its work and mandates the SIU to investigate serious maladministration, malpractice, and corruption. The legislation further stated that any other act that would harm the interests of the public would be the mandate of the SIU to investigate.

The SIU receives various reports from whistle-blowers, government departments, the Auditor-General of South Africa (AGSA), state institutions, as well as SCOPA, and it investigates those reports and according to its governing legislation, they appropriate the information to the President to sign a proclamation, as formally by law, the SIU can only investigate once the President signs a proclamation.

The MoU signified a framework within which SCOPA would continue to refer matters to the SIU for investigation, and it is important for the SIU to guard the public purse, which is also the interest of SCOPA to ensure that the public accounts are not put in jeopardy. The collaboration spoke to matters envisioned in the National Anti-Corruption Strategy which involves taking a ‘whole of society’ approach in the fight against corruption. Parliament and SCOPA, as arms of government, play a critical role in ensuring that the interests of the public are protected and that the fight against corruption continues unhindered.

The SIU looks forward to strengthening its relationship with SCOPA to not only investigate cases of corruption, maladministration, and malpractice, but also implement consequence management, as they move forward with developing and implementing corruption prevention measures. The SIU, as required, frequently reported to SCOPA on investigations, including matters relating to state capture. Through the intervention of SCOPA, the Presidency developed a tracking tool to ensure that government and state institutions implement SIU recommendations and, ultimately, consequence management. The referrals include, among others, that consequence management actions are taken against the officials implicated in wrongdoing, referrals to the National Prosecuting Authority (NPA), and recoveries that the SIU recovers through the High Court or Special Tribunal.

Through the Special Tribunal, the SIU not only recovered money lost to state capture, but also protected the public from further suffering at the hands of those who conduct or are implicated in maladministration, malpractice, and corruption. The SIU successfully set aside irregular and unlawful contracts between Eskom and Tegeta, saving Eskom and South Africa from losing R2.7 billion.

As part of implementing the SIU investigation outcomes and consequence management, the SIU instituted civil litigation matters in the High Court and in the Special Tribunal amounting to R64 billion. These will be the values of the contracts that the SIU seeks to set aside and ultimately recover money lost by the state due to corruption, malpractice and maladministration. This figure includes an amount of R54 billion in contracts for procurement of locomotives awarded by Transnet. A R3.7 billion tender was awarded to Tegeta, and Eskom awarded ABB the R2.2 billion tender. The ABB matter was finalised, and there were significant recoveries of over R1.6 billion from civil proceedings. In criminal proceedings, the NPA also recorded significant recoveries.

The SIU reached a settlement agreement of more than R33 billion with multinational companies that benefitted from state capture. To date, an amount of R5.3 billion was paid back from the settlement agreements and savings from reviewed contracts. The figure included the R1.3 billion paid by ABB, R178 million paid by EOH, and R244 million paid by SAP. It is important to note that, on the civil proceedings, any company that agreed to a settlement would have been on the basis that they admitted the damages that the SIU sought to recover and wanted to avoid court proceedings to save on legal costs. However, agreeing to settlements does not exonerate the companies of any further legal steps being taken against them.

Another significant outcome of the work of the SIU was the systemic recommendations to state institutions, and they continue to be implemented in the National Corruption Prevention Framework, monitoring of consequence management, and the SIU plays a role in enabling SCOPA to monitor the acts of maladministration, malpractice, and corruption and ensuring that consequence management is implemented. The MoU has various provisions and establishes the role of the SIU and of SCOPA and will ensure that the implementation of SIU recommendations by state institutions is monitored and reported on. The signing of the MoU is important to the SIU, and the SIU looks forward to the impact and results that it will produce in its mission of fighting against corruption and in the corruption-free nation that is envisioned in the National Development Plan (NDP).

The Chairperson said that anything performed under the MoU would be subject to the applicable legislation, policies, and standard operating procedures of the parties or any other terms and conditions that would be agreed upon between the SIU and SCOPA.

Discussion
Mr M Manyi (EFF) welcomed the initiative and added that it would help to establish rules of engagement. He asked that SCOPA add a few suggestions to its mandate, including the water project in Giyani, the Integrated Financial Management System (IFMS), the Beitbridge corruption, the corruption in the procurement of Independent Power Producers (IPPs), Eskom maladministration and the involvement of cartels, the South African Post Office, the Development Bank of Southern Africa (DBSA) issue, as well as the South African Revenue Services (SARS) and NEHAWU (National, Education, Health and Allied Workers Union) issue. He said that the Criminal Procedure Act does not refer to state capture, and asked that corruption should be called what it is because such terms tend to not work in law.

Mr A Lees (DA) said that this was an interesting moment in terms of formalising what was a productive relationship between SCOPA and the SIU over the past five years. The SIU was one of the state entities that was efficiently run and was able to get results even though its results did not include the prosecution of offenders directly. Looking at how far the recommendations got in the Presidency was important and needed to be continued in the future. The recoveries that the SIU made were relatively good, but there was a long way to go, as was discussed in previous meetings. One of their main challenges was that they relied on the Presidency for the consequence management enforcement, and this issue would need to be raised and pushed in the next Parliament.

The question is how the SIU is funded because, as much as it is efficiently run, it is under-resourced. The funding model of the SIU is efficient because it is results-driven. However, when the results are achieved, the money does not come in, which restricts the work of the SIU. The funding of the SIU must be re-looked so that it can continue to do its work effectively. He said that the agreement did not regulate if the SIU misbehaved, but the role of SCOPA as an oversight body included oversight over the SIU, and this needed to be tightened to ensure that the SIU maintains its standards and that no malpractice is performed by the investigative body.

Mr S Somyo (ANC) said that the issue of the SIU depending on the President to sign proclamations before conducting investigations was discussed last week and was important in the signing of the MoU because it put the Presidency as the custodian of the initiation and the outcomes of the investigation processes. The AGSA brings the audit results of state institutions to SCOPA with recommendations on what the institutions must do to deal with their internal issues, and the SIU works with SCOPA to ensure and guarantee accountability and enforce the outcomes for those who handle public funds. The role played by the parliamentary legal team was important in ensuring a standard capability to measure the legal substantiveness of the actions that SCOPA and the SIU will take. He appreciated the work done by the SIU so far in being transparent with the performances of the state institutions and for holding them accountable when they failed to meet the required standards, noting that the relationship with SCOPA would be strengthened through the signing of the MoU.

The Chairperson said that the Committee would deal with the IFMS matter in two weeks, as the Minister of Finance requested a postponement due to matters relating to the IFMS. The Committee did what it could regarding Beitbridge and submitted a report to the House. On the water project in Giyani, the Committee concluded a report and was waiting for the House to adopt it as the Committee had conducted an oversight visit and followed up with the department and entities. Eskom remains the focus of the Committee, and on the DBSA, the Committee would need to follow up on matters as it did start some work on some aspects, but it was not completed. The Committee also submitted a report to the House regarding the Post Office and would still investigate the SARS matter.

He agreed that the funding model of the SIU must be looked at and the Committee must ensure that the people who owe the SIU money pay it back. On the reporting framework, he said that SCOPA must meet with the Presidency before Parliament closes to take the issues forward. The significance of the MoU is that the AGSA is the input in terms of the reports they bring to SCOPA, and SCOPA processes those inputs, and the outputs must include referrals to the SIU where necessary. He said that they were cleaning up the reporting system of parliamentary oversight and streamlining it to ensure that there is sanity and clarity. It would be remiss of the Committee if it did not thank the AGSA and the SIU for their work working with the Committee.

He said that they had worked on the MoU since 2019 and it was not a finished product, as it could still be improved in places where the need arose. All the relevant stakeholders needed to put their heads together to ensure its successful implementation.

On SCOPA assisting the SIU, Mr Manyi said that the Eastern Cape Premier, Mr Oscar Mabuyane, found a technicality to challenge a proclamation on his falsified qualification. The matter was stuck in the Presidency. He asked the SIU whether the President signed the proclamation or not. If it was not signed, SCOPA should write a letter to the President to ensure the proclamation is signed.

The Chairperson said that the Committee was not taking over the work of the SIU. The MoU must highlight that, where there is a need for legislative reform, SCOPA does not have the competence to introduce Committee Bills, but the conveyor belt must be strengthened in that regard to ensure the flow of information with the help of the SIU.

SIU Response
Adv. Mothibi said that some of the projects mentioned by Mr Manyi had already been investigated. Some of them were being monitored to ensure that the outcomes of the investigations were implemented. The SIU was in the High Court with some of the companies involved in the water project, and the value of the litigations was up to R3.5 million. The SIU was trying to get the process to be concluded quickly so that consequence management could be enforced and to ensure that what must be done in the water project is completed speedily. The Beitbridge matter was finalised, and the implicated companies challenged the case of the SIU and they failed and were ordered to pay back the money that they got from that project. Other consequence management actions will be taken.

He said that the issue regarding IPPs was not yet on the SIU’s books and called that any information that is provided to them would be processed and investigated accordingly. The SIU continues to investigate Eskom, and there was a report that was done which was provided to SCOPA. The SIU is committed to investigate at Eskom to a point where the corruption is rooted out and to ensure that Eskom delivers on its mandate to provide electricity to the country. The SIU also investigated the SARS issue, and a report was available, but the DBSA issue was not on their records, and they would investigate if any information was reported to them.

The law guides the investigations done by the SIU, and it points out civil and criminal offences that ought to be investigated by the SIU. So, the findings state clearly whether they are criminal or civil findings, and it states clearly whether it is fraud, corruption, malpractice, or maladministration. He agreed that the SIU must improve on consequence management and speed up the conclusion of the cases, noting the challenges with the funding in most of their cases. The signing of the MoU would have an added effect on the SIU doing its work.

Regarding the investigation at Fort Hare University, he said that some of the outcomes of the litigation indicated that some of the focus areas were not within the proclamation, and the Judge said the SIU must ensure that the proclamation covers that scope. The SIU amended the proclamation, and it was being considered by the President for signature. Regarding the funding model, he appreciated the concern of the Committee and noted that the debt level was over R1 billion of state institutions that owed the SIU and were not paying it. Because of the failure of state institutions to pay the SIU, the SIU started a process of submitting progress reports together with invoices to the institutions so that they could see the services rendered by the SIU and how much they owe them. The funding model requires a review so that the SIU does not depend on the payment from the institutions to function.

Signing of the MoU
Ms Faith Ndenze, Parliamentary Communication Services, facilitated the signing of the MoU by the Chairperson of the Standing Committee on Public Accounts, Mr Mkhuleko Hlengwa, and the Head of the Special Investigating Unit, Adv. Andy Mothibi.

Press Conference
Mr Kaizer Kganyago, Head of Stakeholder Relations and Communications, SIU, facilitated the press conference session of the meeting.

A representative from Eye-Witness News asked how far the Committee was in processing the recommendations and its findings on the Eskom Intelligence Report. She asked Adv. Mothibi if he had any advice to give to the incoming SCOPA of the seventh Parliament on the signing of the MoU and on improving the relationship between the SIU and SCOPA in the years to come.  

The SABC wanted to know why there was a need for a formal MoU and asked whether cooperation between SCOPA and all entities that deal with matters relating to finances of the state was not standard procedure.

Responses
Adv. Mothibi said that it would be advisable for the incoming SCOPA to continue the trajectory laid by the current SCOPA, as there was evidence that it brought out results in terms of consequence management and the recovery of state money lost. They should also focus more on the prevention of corruption, maladministration, and malpractice. And it is important that the SIU reaches out to state institutions and recommends systemic improvements that will ensure the prevention of corruption and any other wrongdoing in the institutions. 

The Chairperson said the Eskom report would be served before the Committee on 19 March 2024, as the draft was completed. In terms of Rule 245 (4)(2)(c) of the National Assembly, the Committee must consider any reports issued by the AGSA on the affairs of any executive organ of state. So, that was why they were specific in that the Committee receives reports from the AG, has hearings in Parliament, and sends reports to the House. However, there must be an undertaking in writing that says there must be an investigation by the SIU, especially on issues relating to corruption, malpractice, and maladministration, as the Committee does not have the skills to investigate on its own. The investigative process must not be ad hoc. So, the MoU formalises the investigation process as a necessary step to ensure a seamless flow of the conveyor belt. The establishment of the special tribunal gives confidence that there will be a quickened pace of the work that is done.  

Follow-Ups
Newsroom Africa asked whether the MoU was a way to try and circumvent litigation and get to justice quicker, because departments often take longer to resolve cases. What does the MoU mean for Members of Parliament and what powers would they have in investigations?

The Chairperson said that SCOPA does not exercise oversight over Parliament and its Members, as there is an Ethics Committee. There is a Powers and Privileges Committee, and Parliament’s financial management is not done through the Public Finance Management Act (PFMA). So, all those issues reside with those Committees. SCOPA deals with the accounts of government departments and entities, so it will not position itself as a super Committee and will stick to its lane. They were not circumventing litigation but trying to establish a process of operation for all the matters before SCOPA and providing the next logical step after Parliament discusses matters. The MoU provides that structure and allows for oversight, scrutiny, and accountability in the oversight processes.

The Chairperson thanked the Members, the SIU, and the media, adding that the Committee looked forward to working together and strengthening the relationship with the SIU. He reminded the Members of the Committee’s upcoming meetings.

The meeting was adjourned.