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 citisens, 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.
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