The department of trade & industry (DTI) intends to repudiate a R153m contract with Valor IT to develop a content management system for Cipro, trade & industry minister Rob Davies said on Tuesday.

This follows the suspension of the Companies and Intellectual Property Registration Office (Cipro) CEO Keith Sendwe and chief information officer Michael Twum-Darko.

Cipro’s decision to award the contract to Valor IT, a two-man outfit, was being probed by the department and several law enforcement agencies.

Briefing the media in parliament, Davies said the grounds for repudiation and any subsequent processes that might emerge were in the hands of the DTI’s legal team.

“Repudiation is not because the technical work is not there, or not up to scratch. It’s because the basis is the tender process itself, we are saying, was flawed. And that’s the basis on which we are signalling our intention to repudiate and then they will have a chance to answer our letter and then we’ll have to take a final decision based on that.”

The return date for the company’s response, if any, was 10 days from Monday, 17 May, he said.

The DTI was working with the legal team on formulating charges against Sendwe and Twum-Darko, and a host of issues arising from that.

“I think that all the issues consequential on the repudiation of the contract, we would have to be guided on those, so I’m not saying anything about what may or may not happen as a consequence of the repudiation of the contract.”

The forensic audit report established “a pattern of connections” between the companies and the individuals involved, and raised “some very serious questions” about the payment of R56m “in record time” already made.

Davies declined to comment on various allegations of fraud and corruption and possible terrorist links, saying the DTI was not in a position to assess who might be involved.

“What we have done is when we have received information of that sort we have passed it on to the appropriate law enforcement agencies.

“In the interests of procedure and fairness, I’m not going to try to preempt judgments of any adjudication processes which may follow from here.”

The report would not be made public, he said. “It’s an internal investigation. It will be used internally for the formulation of charges and in the processes that follow.”

A report of this nature “is not normally in the public domain”, and to do so could have “detrimental effects on the processes we’re involved in now”, Davies said.

Earlier on Tuesday, Cipro officials were hard-pressed to tell MPs why it gave a major tender and advance payments of millions to a three-month old company with no track record.

Cipro chief financial officer Pieter van Vuuren told parliament’s public accounts committee Scopa it was not clear how successful bidder Valor IT obtained additional information that gave it a firm advantage over other companies.

“It is something we hoped would be clarified through the investigation,” he said.

Auditor-general Terence Nombembe found that Cipro failed to follow the proper procurement process, did not take into account the financial sustainability of the company and appeared to have furnished it with confidential business information not given to other bidders.

Officials from the AG’s office told Scopa the two unsuccessful bidders complained that they were not given the same information, which was contained in an internal document.

Cipro regrettably failed to explain how this happened, they said.

Officials from the State Information Technology Agency (Sita) conceded that Valor IT was registered to do business with government despite the fact that it had not submitted company results for the required two years.

“We didn’t go into that. The instruction was more based on technology, BEE and price,” said Velaphi Zikalala, Sita’s general manager for strategic sourcing.

He was rebuked by Scopa chairman Themba Godi who said Sita had failed to apply an actual requirement, treating it merely as an optional extra.

Pressed by MPs, Van Vuuren conceded that despite Cipro being in a good position to perform this background check itself, it did not do so. “Cipro didn’t do it. We didn’t check whether it had submitted annual returns.”

Scopa members told Van Vuuren they were astounded that Cipro chose to pay Valor IT R56m in advance to develop software that had still not been put into use, and was now paying the licence fees for the unused material.

Acting CEO Lungile Dukwana said this was done because the entity was told that “without payment development of the electronic content system would not start”.

Valor IT’s contract was not suspended pending the outcome of the departmental investigation, which Davies said had cost R1m so far and had confirmed fraud and corruption had taken place.

“It has been R1m well spent,” he said. “A system that is supposed to deal with white collar crime is now the subject of an investigation, it is a huge problem.”

He had earlier pledged to announce steps to address the transgressions on Tuesday, but said investigators had asked until the end of the month to complete their work. — Sapa