Dear Honourable Comrade Themba
It was with much pride that I watched members of the Standing Committee on Public Accounts (SCOPA), which you chair, grill Eskom on a KPMG report that sheds light into how, among several contracts, the Gupta Tegeta deal was structured. Apart from a few members who didn’t understand that health and safety standards could not be ascertained before a mine was in operation, many had read the forensic audit and posed pointed questions at Eskom and its Board.
The point is Comrade Themba, through the work that Scopa does, many issues are clarified to the public and facts are separated from fiction. In the recent past, through commercial media, we thought former Eskom CEO Brian Molefe signed the Tegeta deal and we learnt during the hearing that it actually wasn’t true. He got there a month or so after the deal was signed. We also learnt that there were other mines which got pre-payments, Exxaro being among them. It got in the region of R1.8bn as a prepayment. As you know, Minister of Public Enterprises Lynne Brown has called for an enquiry into the awarding of coal supply contracts to Eskom.
This is fantastic news. And my view is that all the state owned entities (SOEs) and government departments with questionable procurement practices must appear before the various committees of Parliament and answer. The two that have been in the news lately are Treasury and South African Airways where it was revealed through an internal audit, in the case of Treasury, and an Ernst & Young forensic report, in the latter, that there is institutionalised corruption at these institutions.
You will no doubt have seen an open letter I sent to Finance Minister Malusi Gigaba last week calling for him to follow in the foot steps of Brown and institute a full inquiry into these institutions. He has already pledged to investigate his department but while he ponders on SAA, I implore you and your committee to call Chairperson Dudu Myeni, her board and the executives that have overseen this daylight robbery of the public purse. You’re a fair man whose integrity remains intact and so I would imagine that we would also see former finance ministers Nhlanhla Nene and Pravin Gordhan appear to explain the alleged R4.5billion mismanagement of funds that appears in the internal audit.
Scopa members were miffed at the fact that the Tegeta contract was hurriedly put-together – “cut and paste” the KPMG report said. But we then got to hear about the treasury’s internal audit which shows that contracts there didn’t even exist. Blitz Tech, whose members had served Treasury in various capacities, had gone and started a company that came back to the department to offer services. All the looting exposed in the internal audit point to a small group of white-owned companies that have been the beneficiaries of contracts which have not followed due process.
At our national airline, SAA, we have similar rot.
SAA spends R24bn of which only 2% goes to black suppliers. The E&Y report said 60% of the contracts sampled have been conducted corruptly (my words). They maintain 60% of these contracts which are the longest running and the highest in value – have not been attained through proper procurement channels. In ordinary speak this is corruption. If only 2% of procurement goes to Black companies, it stands to reason that the bulk of the fraud that takes place and is indeed the cause of the rampant losses at SAA as identified by the E&Y report, is done by these white-owned companies.
It’s not too difficult to say this to you Comrade Themba. The much held belief and narrative in the media that corruption is black is not true. And these allegations point to that fact. We need not only challenge this narrative by exposing these companies but we must in the face of the dire consequences of corruption on small business and the general populace.
At SAA, there are a number of companies whose contracts have long lapsed and are operating on the basis of memoranda of understanding (MOUs) only. Some have been overpaid and possible collusion is cited in some of the cases. The report has been tabled in front of Parliament’s Portfolio Committee on Finance and the question is: what has been done, if anything? There has been a total amount of R705,582,427.38 which can be classified as “irregular expenditure” at SAA. How can this go unexplained?
Cases of Failure to follow correct tender processes, overpayment, no explanations for payment & collusion at SAA. Here are just a few.
- There’s an overpayment in the case of Kintetsu World Express (KWE) whose contract was “concluded informally” on 28 August 2014 and evidence of possible collusion between SAA officials and KWE
- Overpayment in case of SAA’s contract with Societe Internationale de Telecommunications Aeronatiques in 2013
- Failure to follow correct tender processes and overpayment in respect of Air Chefs’ contracts with ADJ Maintenance, Vizzini Motors, First Garments.
- CAE Inc was paid R1.1m while invoices for 2013 reflected R8.2m. Where is the explanation?
Havas Worldwide overpaid by R53, 767, 139.64
- There are allegations that the MOU between SAA and AAR and the awarding of the contract was based on a potentially corrupt relationship between AAR and SAA officials. The E&Y’s preliminary investigation has found there is merit in the allegation and recommends further investigation. In his resignation letter, SAAT board member, Barry Parsons said, in reference to this deal…”There is clearly a hidden agenda somewhere in this relationship and it requires urgent independent investigation.
- The Independent Group a few days ago reported on a case of SAA executives who had manipulated procurement procedures to benefit a contractor who got a R1.4bn tender. https://www.pressreader.com/south-africa/the-sunday-independent/20170528/281487866300860
The number of companies whose contracts have been extended without due process is endless.
Pilots Accommodation, Macquarie Deal & Conflict of Interest?
The issue of accommodation of pilots and the exorbitant costs are mind-boggling. Then there’s the Macquarie deal from which SAA leases aircrafts. Again the amounts mentioned are worth investigating. Are there no local owners from whom SAA and Mango can lease aircrafts? What are the financial implications? It turns out, former cabinet minister in President Nelson Mandela’s cabinet, Jay Naidoo and Ketso Gordhan, Pravin’s nephew, have a stake in Macquarie through J&J Group.
Comrade Themba, the deal between SAA and a company called CAE Inc for the lease of an A330 simulator will leave you dizzy; not only for the technical details involved but allegations of flouting tender regulations, overpayments, invoices paid for which there are no specific details of what is being paid and questions of whether the services for which payment was made have been rendered. Our national carrier is paying this US company billions in dollars and many of the contracts guiding this relationship could not be located by SAA management. It’s shocking. Preposterous even.
Comrade, I would take up too much of your time if I went through all the looting going on at SAA. I therefore implore you again, to please call on these public officials running the national airline to come in front of your committee and explain why this runaway corruption is allowed and how it is to be stopped.
I don’t need to tell you that our democracy must yield the fruits for which much blood and lives were lost. Our forefathers died for political freedom and economic justice and we cannot attain these goals with public officials looting SOEs and government departments and siphoning the bulk of state budgets to prop-up white-owned companies.