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Category Archives: Blog

The new normal, brings a new age fraudster

Read Time: 4 minutes

While businesses throughout South Africa shift more of their operations online, in a bid to become more competitive in response to the challenges of the COVID pandemic and subsequent lockdowns, it appears that fraudsters and scammers are embracing this ‘new normal’ by finding ways to exploit opportunities through on-line transactions.

Our data partner TransUnion, in their recently published playbook “Digital Fraud Strategies: What to expect and how to prepare” share insights into industry segments that have accelerated during the pandemic. Financial transactions through net banking, on-line medical transactions, on-line insurance and phishing and pharming have seen spikes of between 15% and 50% for the relevant sectors.

During lockdown, up to 1 in 4 South Africans surveyed confirmed they had experienced a COVID-19 related fraud scam, while 20% of them said they fell victim to it.

Growing Fraud Estimates

Regulatory DataCorp[1] estimate a more than 40% increase in cyber criminal activity for the two years following the Great Recession’s 2009 peak. Their findings estimate that;

  • Fraudsters take advantage of those in need of income and are more susceptible to internet and phone schemes
  • Corporate budget cuts can include security departments, leaving private data at greater risk of breach by cyber criminals
  • Skilled technology workers who lose their jobs may retaliate by perpetrating criminal acts against their former employer

A number of government departments have issued comm uniques warning suppliers and tender participants about fraudulent RFQs (request for quotations) in which suppliers have fallen victim and lost millions of Rands. A government gazette in September 2021 shared important information about the scam: “The scam involves the fraudsters using the letterhead of GPW to send out fake tender bids to companies and requests to supply equipment and goods. Although the contact person’s name on the letter may be of an existing official, the contact details on the letter are not the same as the Government Printing Works,” it said. “The banking details are in a private name and not a company name.”

Due to the accelerated adoption of digital technology and remote working, TransUnion’s playbook estimates that some of the top fraud risks that are anticipated include:

  • Synthetic identity fraud
  • Transaction payment fraud
  • First and third party fraud

In summarising their findings from data obtained from several financial crises, they propose fraud is increasing and employees are increasingly committing economic crime.

 The duration and extent of fraud can run over a considerable period of time, sometime many years. National Prosecuting Authority (NPA) regional spokesperson, Monica Nyuswa[2], said a former 62 year old SASSA employee, who had been bust for fraud lasting more than a decade, was convicted of fraud and uttering in the Middelburg Commercial Crimes Court recently.

Digital & Fraud Treatment Strategies

In dealing with the challenge of faceless contact in transactions and conducting business, organisations are expecting improvements in transaction experience by making them simple, automated, robust and complete. Organisations should adopt end-to-end point solutions for improved fraud prevention and consumer experiences.

In a fiercely competitive marketplace, reputation is everything, so protecting your organization from damaging impacts of fraud and corruption is imperative. We have developed a solution that customers have said accurately detects risks in employee lifestyle and financial behaviour to enable organisations to detect risk events ahead of time. The systems and data are intuitive to use and can be seamlessly and swiftly integrated into an organisations existing processes and reports. We have integrated bank account verification into our products so organisations need not be exposed to the types of fraudulent scams publicised by recent government gazetted warnings of new scams.

Corporate Insights Lifestyle Assessment solution uses big data analytics and automated insights to empower businesses to reliably, continually and discreetly monitor employees and vendors for early warning signs. That way you’re well-positioned to prevent potential threats by taking swift action — keeping your bottom line and ethical integrity intact. Read more here

[1] Source: Regulatory DataCorp “Technology, Cybercrime, and Recessions: An Untimely Trio”

[2] https://www.msn.com/en-za/news/other/sassa-official-bust-for-fraud-after-more-than-a-decade/ar-AAOfzGO?ocid=entnewsntp

What you should consider when wanting to detect fraud

Read Time: 4 minutes

Protecting your business from fraud and corruption is paramount, with the damage caused to your finances – and reputation – leaving long-lasting, and perhaps even irreparable, damage.

Recent allegations of procurement fraud and corruption cases in South Africa during the Covid-19 pandemic have continued to show us how prevalent fraud and corruption are in the country, with the scandals that have erupted within the health sector, in particular a timely reminder of how we need to be alert to red flags.

The reality is that fraud and corruption is often committed under your own roof – or by those closely associated with your business – andyour biggest corruption threat could be closer than you think. To detect and prevent fraud and collusion, you need to properly knowboth your employees and your suppliers.

But is your system delivering on what you think it is? You would do well to investigate, because ACFE reports that fraudsters often display certain warning signs or red flags that they are engaging in illicit activity. Is your system picking up on those warnings?

You would do well to investigate, because ACFE reports that fraudsters often display certain warning signs or red flags that they are engaging in illicit activity.

And if it is, do you know how to find them?

Only one third of companies we polled were deploying the kind of data-analytics tools that can detect fraud or waste by vendors and or employees. Another 13% had the necessary tools but were still learning to use them, while 22% had no data analytics of any kind. It’s small wonder then that traditional lifestyle assessments don’t protect businesses against fraud and corruption.

Knowing what to look for is part and parcel of protecting your business. Understanding what questions to ask is one of the first steps in ensuring you are putting together a working detection and prevention framework to safeguard your business against corruption.

Perception over reality

Speaking with decision-makers in local businesses, several themes and trends have taken shape, both in terms of what executives are looking for in protecting their businesses from fraud and corruption and the perceptions they have of traditional lifestyle audits and monitoring systems.

Recent surveys and our own research have found:

  • Nearly 20% of fraud was attributed to suppliers
  • 14% of fraud was attributed to Employees or collusion
  • Nearly 15% of employees have either undisclosed commercial interests, income or unexplained wealth
  • 95% of all businesses have experienced employee theft.
  • Nearly 40% (37.5%) of employees have stolen from their employer.
  • 3 out of 10 employee theft cases lasted for more than five years.
  • Employee fraud cases can last more than 10 years and cost an average of $5.4 million!

The executive is often concerned with the high costs of traditional lifestyle audits/assessments, consider them having a negative impact on employee moraleand time-consuming.Until now, there was no simple solution available to combat the threat of fraud and corruption.

The executive is often concerned with the high costs of traditional lifestyle audits/assessments, consider them having a negative impact on employee moraleand time-consuming. Until now, there was no simple solution available to combat the threat of fraud and corruption.

It is true that traditional lifestyle assessments aren’t reliable in detecting fraud and corruption. They are often employed after it has already occurred and they can be time-consuming and costly. Our solution, however, continuously monitors your business and picks up fraud and corruption before it happens, by ensuring you properly know your employees and suppliers.

Below the executive, in procurement, IT and legal departments, there are several valid concerns that have been revealed in our research, namely:

POPIA compliance: How does the collection of employee/supplier data comply with the POPIA Act?

Integrity of Data: Who owns the data collected? How will it be protected/destroyed?

Value for Money / Cost: Is a continuous, 24-7 monitoring system cost-effective?

IT Security: What measures are in place to protect against a security breach?

We have worked with compliance and legal experts in addition to TransUnion’s compliance and legal professionals to ensure that we provide a solution that respects the privacy of your employees and suppliers but is also compliant with POPIA and the NCA, besides ensuring that our solution delivers what you want it to do.

Ensuring your business is protected is crucial to its survival. Traditional systems do not effectively monitor fraud and corruption 24-7 and too often the damage is already done, once the red flags have been observed.

To find out how best to protect your business from fraud and corruption, get in touch and book a demo: https://corporateinsights.co.za/contact-us/

Why does fraud go undetected and traditional methods fail

Read Time: 8 minutes

In an increasingly competitive world, where more services are offered via the internet, the instances of fraud and opportunities for fraud are reported to be dramatically increasing. Under these cost focussed and tight margin business conditions, managing the costs of fraud can make the difference between profit and loss. The organizations that reduce the risk of fraud gain an important competitive advantage over those that don’t.

For more on why Auditors Fail to Detect Fraud read out previous blog
(https://corporateinsights.co.za/why-detection-systems-fail-to-capture-corruption/)

Executives Don’t Trust New Data Techniques

Astudy[i] by Deloitte Financial Advisory Servicespolling more than 2,600 executives found that fewer than a third of respondents were deploying the kind of data-analytics tools that can detect fraud or waste by vendors and or employees. Another 13% had the necessary tools but were still learning to use them, while 22% had no data analytics of any kind. The study drew upon conclusions that many managers do not understand “the power of analytics and many companies harbour an attitude of “it can’t happen here.”

Fraud among employees, suppliers and their subcontractors can take many forms. Those with the largest financial impact involves collusion between a company employee, usually in a procurement role, and an outside party and or an unreported or undetected conflict of interest. Surprisingly, the study found that data analysis is not used very much to detect corporate fraud. Considering the reams of data that is now commonly available from data and technology companies such as credit bureaus, you would believe that adopting new data techniques to detect and prevent fraud would be a slam dunk for any organisation operating in South Africa today in the wake of recent corporate fraud and state capture scandals.

Only one third of companies polled were deploying the kind of data-analytics tools that can detect fraud or waste by vendors and or employees. Another 13% had the necessary tools but were still learning to use them, while 22% had no data analytics of any kind

In South Africa, however, the number of organisations that use new data techniques to detect and prevent fraud suggest that many companies aren’t sold on the idea. Some don’t understand what analytics can do for them. Others balk at the expense. And still others feel they don’t need it unless a major fraud actually occurs. If a detection program is going to succeed, it must have access to reliable data and be trusted to perform according to expectations. Executives must have confidence the analytics will work.

So how can technology improve the efficiency of the fraud detection process?

The availability of data from credit bureaus, social media platforms and publicly available data sources provides companies with the ideal opportunity to build lifestyle assessment solutions that continually detect and prevent employee fraud and collusion. This can. Be done by identifying lifestyle behaviours that cannot be supported by individual or household earnings. By implementing this type of technology, you will be able to make risk-based decisions and enjoy the 360-degree view of fraud or corruption risk that threatens your organisation.

Some of the areas that data now exists and technology can enable you to undertake automated lifestyle assessments to detect and prevent fraud are;

  • Identity documents: to ensure that the Identity Number that employees present to you is valid, issued to them and does not belong to someone else or someone who is deceased.
  • Financial distress: to determine whether the employee is in financial distress by considering their financial status, levels of expenditure or they have a financial judgement against them.
  • Financial irregularities: Movement of money during corrupt activities is one of the key things that investigators look for when tracing corrupt practices. People involved in corrupt practices do their level best to shield their transactions from scrutiny.
  • Income that exceeds earnings: By detecting and identifying income that is materially in excess of salaried earnings that has not been declared to your organisation, could be a source of risk.
  • Spousal earnings: Financial risk indicators should be considered in conjunction with family earnings to ensure that you are not detecting false positives or genuine sources of additional income, such as from investments or independent directors’ fees. Equally, there are cases that have been discussed where business relationships and income was routed through family members or spouses. This can be an important area of consideration when you are looking for elements of collusion.
  • Mobile phones: Flag employees with unusually large numbers of mobile phones connected to their names. Determine if any of those mobile phones have been blacklisted or blocked by the mobile networks or if the number given is non-existent.
  • Politically Exposed Persons: In the wake of the Guptas and State Capture, politically exposed persons (PEPs) have greater prominence in the South African business landscape. Although not all persons who are PEPs pose a risk to business, not knowing a person is a PEP could expose you to risk or disqualify you from trading with UK or US companies.
  • Social Media Activity: Social media activity today is pervasive. Significant numbers of employees have caused damage to their employers’ reputation, sometimes resulting in crisis and financial loss as a result of social media postings.
  • Undeclared commercial Interests: Undeclared commercial interests that result in a conflict of interest are considered leading indicators of risk. You should ensure that you compare these results with your declarations of interests and remove any results for deregistered companies etc, other than companies that were liquidated through a judicial order etc.

By using technology to monitor the risks you have identified on a continuous basis, you can use the data and the results to make better risk decisions and to protect the reputation of the company and ultimately, generate greater returns for shareholders and the community.

By using technology to monitor the risks you have identified on a continuous basis, you can use the data and the results to make better risk decisions and to protect the reputation of the company and ultimately, generate greater returns for shareholders and the community.

New Data Techniques make fraud detection more reliable

Your company should not have a one-sized fits all approach to fraud detection and the use of technology. Being overly reliant upon traditional methods or being solely tied to “in-house” systems are some of the factors that we identified as a weakness in companies we interviewed.

Here are five benefits we have found that are realised from using new data techniques to detect and prevent fraud:

  1. Increasing Productivity and Profitability
    One of the most significant advantages to using decision-making models is to exponentially improve productivity and profitability. Processing hundreds of thousands of applications in an hour is nothing for a decision-making model, whereas only a handful of applications could be properly processed by a human being.
  2. Decisions Are More Consistent
    By automating the decision-making process, you can be sure that the same methodology is used each time an application is processed. The decision-making model can even consider factors like your definition of an acceptable criminal past, if any (for example non-violent misdemeanours involving speeding), the position (accounting department, factory floor or elder/childcare), the place you are considering putting a person (locations that have been identified as risk hot spots etc), or even the Types of claims that have been filed against an individual (eviction notices, tax liens, bankruptcies)
  3. Impartial DecisionMaking
    Decision making becomes largely objective and impartial when using a decision-making model. Unintended discrimination based on subjective or unwanted factors such as race, ethnicity, age or gender can be reduced to significantly or even be wholly eliminated. We do not collect or report in our solution upon race, ethnicity, religious or political affiliation for example.
  4. Ability to Customize Your Decision-Making Model
    While scoring models are certainly not unique (we are all accustomed to looking at our credit score to ascertain whether we can afford a new house) client customizable decision-making models are certainly less discussed and less understood.
  5. Quality Reporting and Improved Governance Reporting
    The final valuable differentiator is the way that we report the results to you. You do not simply see one final “numeric score” and recommendation. Rather, you see the results of each input that goes into the decision so that you can understand what gave rise to the output of the decision-making model – the score and the recommendation. This empowers your organization to explain the results to the executive team or even to contextualise the results where your business model allows for it.

Harness the power of automated technology

Corporate Insights has developed a one-of-a-kind modular system that combines TransUnion’s big data universe with our own artificial intelligence and smart logic algorithms. It enables you to continually monitor, detect, act on, and prevent critical risks, both internally and externally.

The Corporate Insights system will allow you to protect your business from succumbing to the typical pitfalls that lead to corruption. It also comes with a host of additional benefits to ensure your company continues to operate optimally, free of the threat of corruption.

Click here to book a demonstration or call us today to find out how you can transform your business.

Harness the power of POPIA to prevent fraud?

Read Time: 8 minutes

From the start of July 2020, the Protection of Personal Information Act (POPIA) came into force in South Africa. Its objective is to ensure that personal information that is held or processed by a third party is done so lawfully and securely. Information may now only be processed if the purpose is adequate, relevant, and not considered excessive.

Organisations have approached the implementation of POPIA with trepidation, with concerns rasied about changes to ways of operating businesses and the unknown impact of increased compliance costs on profits. Is POPIA just another piece of legislation that places obligations on businesses and brings little benefit?

Few organisations know that POPIA can be used to detect and prevent employee fraud and collusion, allowing businesses to monitor risk events in a cost-effective way before events become a crisis.

Continual Monitoring Vs Cost Of A Crisis On Shareholder Value

The benefits of continual monitoring are clear. You will detect risk issues as they are evolving and prevent the risks impacting your organisation by taking appropriate mitigating action. Experts identify the need to undertake continual monitoring and by adapting your risk framework within your organisation to take advantage of POPIA, you can enjoy these benefits.

The cost of screening and lifestyle assessment has been identified as a consideration for the extent of implementation by some organisations we surveyed. Certainly, the cost of continual monitoring should be taken into consideration as you implement your risk framework within your organisation. The cost of the monitoring process depends upon several factors including the cost of the information you are collecting, the cost of the resources used to undertake the management of the framework and the costs of compiling and distributing the data within your organisation.

To find out the true cost of a Public Crisisread our previous blog
(https://corporateinsights.co.za/continual-monitoring-versus-the-costs-of-a-crisis/)

Is it better to treat an Issue Before It Becomes A Crisis?

So how long does it take for an issue to become a full-blown crisis? And how could you possibly catch it from happening? The Guardian newspaper published an article about the five identified phases of the sub-prime financial crisis that hit the global financial markets in 2008. From sub-prime to downgrade, the article highlighted five stages of the crisis to hit the global economy since the Great Depression, isolating them to the dates, 9 August 2007,15 September 2008, 2 April 2009, 9 May 2010, and 5 August 2011.

From the result of surveys conducted, the implicit answer is yes. Management and treatment of risk results in better value for a company than management of a crisis. Managing risk will require you to track and monitor leading risk indicators.

Management and treatment of risk results in better value for a company than management of a crisis.

A right to privacy

How does what we have described relate to a person’s right to privacy? Does an employer have the right to undertake the evaluations and monitoring we have discussed? Does the employer have to inform employees they are undertaking these evaluations?

Polity[i] states POPIA’s reach is wide – it regulates all organisations who process personal information – information about employees, customers, suppliers, and those who outsource key processing activities, share data offshore, or engage in direct marketing.

Personal information broadly means[ii] any information relating to an identifiable, living, natural person or where applicable, an identifiable, existing juristic person (companies, CC’s etc.) and includes, but is not limited to:

  •  contact details: such as email addresses, telephone numbers, physical addresses etc.
  • demographic information: such as age, sex, race, ethnicity etc.
  •  information relating to the education or medical, financial, criminal, or employment history of the person.
  •   biometric information: such as fingerprints
  •  the personal opinions, views, or preferences of the person
  • the views or opinions of another individual about the person
  • private correspondence sent by the person or further correspondence that would reveal the contents of the original correspondence.
  •  The name of the person if it appears with other personal information relating to the person or if the disclosure of the name itself would reveal information about the person.
  •  Processing means anything that can be done with the Personal Information including collection, usage, storage, dissemination, modification, or destruction.

A responsible person must comply with 8 conditions to lawfully process personal information[iii]

  • ACCOUNTABILITY: You will be responsible for ensuring POPIA compliance
  • PROCESSING LIMITATION: You must only process that information which you require.
  • PURPOSE SPECIFICATION: Personal information must be collected for a specific purpose.
  •  FURTHER PROCESSING LIMITATION:  Further processing of personal information (i.e., outside original purpose) must be compatible with the original purpose of collection.
  • INFORMATION QUALITY: You must keep personal information records accurate and up to date.
  •  OPENNESS You must disclose certain information to data subjects (i.e that their information is being collected, where it is collected from and how it is used
  •   SECURITY SAFEGUARDS: You must secure the integrity and confidentiality of personal information.
  • DATA SUBJECT PARTICIPATION: You must allow data subjects to access their personal information.

One way to ensure that any personal information that is obtained and therefore processed complies with the provisions of POPIA is to obtain the explicit consent of the individuals concerned while explaining why the information is required and how it will be used. This would be necessary should the person concerned not be in your employ.

It is permissible under POPIA and the National Credit Act (NCA) to obtain and use employee information for fraud detection and prevention without being obliged to obtain specific consent from the individual employees.

To comply with POPIA, you should not access information, unless it is considered to be:

  1.  non-confidential information, or
  2. it is for a Permitted Purpose or
  3. it is with the consent of the consumer (the employee in this case).

Information that is generally known by others or available to the public is not generally considered to be confidential information.  The following information is not generally considered confidential: Deeds Office information, Judgments, CIPC information concerning companies and directors, information related to trusts, landline telephone numbers and internet or social media posts or media articles as they all reside within the public domain.

A Permitted Purpose

POPIA and the NCA both permit organisations to collect and process information to detect and prevent fraud and collusion.

Employers may engage in the permitted purpose of fraud detection and prevention services as set out in Regulation 18(4)(b) of the NCA. Under the NCA, it may be possible for you in certain circumstances to access consumer and payments data of an employee for a prescribed or permitted purpose. Where an employer requires access to a consumer credit record to consider a candidate for employment in a position that requires honesty in dealing with cash or finances they are able to access such information in terms of regulation 18(4)(c) of the NCA. Section 11 of POPI refers to a permitted purpose for processing personal information and this provision is helpful to enable employers who wish to undertake risk assessments for a permitted purpose.

There are additional sections of and regulations to the NCA that assist employers to detect and prevent fraud. Section 68(1) of the NCA defines confidential information and permits employers to undertake risk assessments, provided that, the employer protects the confidentiality of that information and, in particular, only uses that information only for a purpose permitted or required in terms of the NCA.Additionally, regulation 18(4) lists the prescribed (or permitted) purposes for which a credit bureau may issue a credit report. Among other purposes, a person or employer may access a consumer credit information for the purpose of fraud detection and fraud prevention services.

Use POPIA to detect and prevent fraud and collusion

POPIA introduces more obligations upon organisations to collect, process and store personal information in a responsible manner. Equally, POPIA does not seek to limit the ability of organisations to detect and prevent fraud and collusion by employees and provides organisations with the necessary permissions to do this for permitted purposes. In such circumstances, organisations may detect and prevent fraud and collusion by employees without necessarily being required to obtain their prior consent.

Protect yourself and use our POPIA compliant solutions

Corporate Insights has developed a one-of-a-kind modular system that combines TransUnion’s big data universe with our own artificial intelligence and smart logic algorithms. It enables you to continually monitor, detect, act on, and prevent critical risks, both internally and externally.

The Corporate Insights system will allow you to protect your business from succumbing to the typical pitfalls that lead to corruption. It also comes with a host of additional benefits to ensure your company continues to operate optimally, free of the threat of corruption.

Click here to book a demonstration or call us today to find out how you can transform your business.

*What we describe in this blog is not legal advice and you should obtain advice appropriate to your circumstances. What we talk about here works for us.

PPE scandal reminds SA of ever-present corruption

Read Time: 7 minutes

The Covid-19 pandemic has left an indelible mark on people around the globe, and while the South African government initially made a positive start to its local response, the corruption scandal that erupted over the supply of PPE abruptly halted all feelings of goodwill, and for citizens, was simply another reminder of how rampant corruption was within government.

A year on from the start of the Covid-19 pandemic, we look back on the latest corruption scandal to hit our shores.

Demand leads to shortage, price hikes

Demand and high prices is what initially led government to scramble to secure enough PPEs and ironically, the shortage of PPE in South Africa came about when unusually large volumes of protective masks were sourced from South Africa in order to supply desperate Asian buyers with stock. This provided South Africa’s normally staid protective mask market with a steroid-like shot in the arm, while also leading to massive shortage when the pandemic eventually hit our own shores.

As a result, the South African government needed to import masks to shore up the supply deficit locally. Unfortunately, reports soon began to emerge that masks were being imported for amounts often between four and seven times the prices prior to the pandemic. Media reports of domestic price gouging also soon became public knowledge, with some of the country’s most trusted providers being implicated…

Data from a presentation that the Competition Commission made to Parliament in May 2020 shows the extent of the price hikes in the new protective mask market.

  • Dischem stores hiked prices for surgical masks between 46% and 261% and was fined R1.2-million by the Competition Tribunal in July 2020 for price hiking.
  • Babelegi Workwear Overall Manufacturers & Industrial Supplies in Centurion hiked the price of facial masks from R41 to R500 per box.
  •  Hennox Supplies and Sicuro Safety hiked prices for FFP1 masks tenfold. FFP1 masks are a lower-grade mask not suited for medical use.

Government scrambles to shore up supplies

The end-result was that the South African National Treasury issued instructions for the emergency procurement of PPE shortly after the declaration of a National State of Disaster by SA President Cyril Ramaphosa. This was done in an attempt to procure enough PPE and ensure that the price was set to avoid price gouging.

A set of instructions were issued to ensure all the necessary checks and balances were covered, including:

  • That any purchases comply with the requirements of the existing legislation governing financial management
  • That deviations in the case of emergencies or sole supplier awards are allowed
  • That any purchases in excess of R1-million must be reported to the National Treasury within 10 days
  • That maximum celling prices listed in the instructions be adhered to
  • That only suppliers that are registered on the National Supplier database may be used to purchase from

And if that was not enough, to ensure that there was sufficient control and oversight over the emergency application of the public purse, the instructions went further to state that the responsible accounting officer should in addition:

  • Implement and report on an internal system for financial control and risk management to account for the funds spent on COVID-19 purchases
  • Ensure that the personnel that procure any supplies are duly authorised to do so
  • Enable internal audit units to pick up on irregularities in a pro-active manner
  • Generate expenditure reports that can be scrutinised.

Where did all go wrong?

Despite the attempts to regulate the procurement process, by the close of 2020, the government anti-corruption watch dog, the Special Investigating Unit (SIU), had sprung into action with a probe into more than 600 companies involved in the supply of R7.5-billion of irregular PPE purchases by government entities.

The SIU probe revealed that, in the haste and scramble to bid for and receive tenders from government, politically connected individuals contracted in companies in which they had a shareholding, were a director or had recently formed, giving the impression that there was little regard for hiding their obvious involvement.

Some key problems that went seemingly unchecked in the bidding and procurement process that applied all or in part to a contract were:

  • Tender winner was not registered on National Treasury’s central supplier database
  • Tender winner did not have a track record in the manufacture or supply of PPE
  • Tender winner did not have an electronic footprint, website or corporate email
  • Tender winner was either a government employee or close family member of a government employee.
    Sometimes a close family member was part of the tender adjudication or tender award process
  • Addresses of the bidders were sometimes residential dwelling units rather than business premises
  • Tenderers were sitting at top a supply chain and were acting as middle men without owning or holding the stock that was supplied
  • Third party due diligence did not appear to have been undertaken on tender bidders or awardees
  • Emergency procurement instructions issued by national Treasury were disregarded

The rot goes to the top

The scandal was far reaching, and felt throughout government, with even Ramaphosa’sspokespersonKhuselaDiko implicated in dodgy dealings after her husband’s company was issued with a PPE tender and subsequently paid R80 million by the Gauteng government for supply of PPE.

The result? The Gauteng minister for Health, Bandile Masuku, subsequently lost his job, his wife who works as a member of the Johannesburg Mayoral committee and the President’s spokesperson have been placed on “special leave” pending an investigation which at the time of this article is still on-going.

Gauteng Premier David Makhura announcing that this was the biggest financial scandal to hit Gauteng since 2014and that he and his fellow MECs would submit themselves to lifestyle audits to demonstrate that their private spending is in line with their state-funded incomes. He would also produce a list of every company that has scored a COVID-19 related tender .

Following up on his claims, during December 2020, Makhura told a virtual sitting of the Gauteng Legislature that PPE corruption was undermining the government. “This does not seem like something that just happened. It seems like it was a proper plan, designed to ensure that rules are not followed. And as quickly as possible, people make a quick buck. We want the money recovered. These people must go to jail .”

In response to the national scandal, the Minister of Finance, Tito Mboweni, declared in an August 2020 address to Parliament, that government accounting officers had “flouted” procurement instructions and has increased prices by as much as “800%”. In a rear-guard action later that month, presumably after being caught asleep at the wheel, the South African Cabinet released a statement saying that all government departments would be expected to submit all procurement contracts awarded during this period to this ministerial team to be published and made accessible to the public.

PROTECT YOURSELF

Corporate Insights has developed a one-of-a-kind modular system that combines TransUnion’s big data universe with our own artificial intelligence and smart logic algorithms. It enables you to continually monitor, detect, act on, and prevent critical risks, both internally and externally.

The Corporate Insights system will allow you to protect your business from succumbing to the typical pitfalls that lead to corruption. It also comes with a host of additional benefits to ensure your company continues to operate optimally, free of the threat of corruption.

Click here to book a demonstration or call us today to find out how you can transform your business.