This time last year, Net1 UEPS Technologies disclosed that it was being investigated by the US justice department under its Foreign Corrupt Practices Act.
The R10bn contract awarded by the South African Social Security Agency (Sassa) to one of Net1’s subsidiaries, Cash Paymaster Services (CPS), to distribute social grants to more than 15m beneficiaries raised many red flags. And yet no South African authority has initiated a local investigation. Corruption Watch calls on the Hawks to do so.
At the time of the announcement, CPS, Sassa and one of the unsuccessful bidders, Absa’s AllPay, were embroiled in litigation over the awarding of the contract.
AllPay’s court papers alleged major procedural flaws in the tendering process, including allegations of corruption. On the basis of the procedural irregularities, the high court in Johannesburg found the tender award to be illegal and invalid. However, for fear of disrupting the entire grants system, it permitted the contract to remain in place.
Despite the finding of illegality, and despite the determination of the US criminal justice authorities to probe the allegations of corruption, South African criminal justice authorities declined to investigate further on the wholly unconvincing basis that the court had, for want of an appropriate remedy, kept the tender in place.
CPS appealed. In a far-reaching though unpersuasive judgment, which in effect condoned breaches of tender regulations, the supreme court of appeal reversed the finding of illegality by the lower court. It decided that the tender irregularities were inconsequential.
One year after the announcement of the US investigation, the constitutional court has handed down its judgment. The ruling, a resounding victory for corruption fighters and anyone concerned with upholding the rule of law, makes it clear that deviations from fair processes in public procurement may all too often be symptoms of corruption.
Why is this so important? Because the judgment recognises that failure to follow a straightforward set of rules generally occurs for a reason.
In the process of assessing and investigating reports of corruption, Corruption Watch has found, and submitted to the court in its intervention, that deviations from standard procedures, especially without good reasons being proffered, are strongly indicative of corruption. In other words, when the process of awarding a major tender is flawed, it is wholly appropriate to ask why.
Was it because officials were grossly negligent in the performance of their task? Or were the tender regulations flouted because, by so doing, the outcome of the award was skewed in a direction that the tender committee favoured? And if so, why did it favour this particular direction?
Like all clandestine conspiracies, one seldom immediately stumbles across a witness who saw the brown envelope changing hands. First one sees the flawed process. Then one asks why. Then the police investigation begins. And then the brown envelope appears.
And so, we are calling on the South African authorities to do just that — probe the irregularities. Find the brown envelope. Why is it that Sassa failed in its obligation to investigate and confirm the empowerment credentials of CPS’s equity partners? Why is it that Sassa changed the requirement for biometric verification?
As with all reports of corruption in public procurement that we receive, it is important to situate tender anomalies in the context of any other suspicious conduct. That context played out in the high court, the appeal court and the constitutional court. Though not part of the final judgment, it is relevant for the purpose of attracting the attention of our police and prosecutorial authorities.
Here are a few examples of such dubious conduct: Sassa admits that at least one of its officials received spa treatments in Stellenbosch paid for by none other than the independent process monitor tasked with ensuring the integrity of the tender process. No explanation was provided for why the independent process monitor paid for the spa treatments, nor why the official in question accepted them.
President Jacob Zuma’s lawyer, Michael Hulley, was appointed by Sassa as a “strategic adviser” to the tender, at a cost of R21 000/day! But Hulley at no stage rendered an invoice for his services. It begs the obvious question: who paid Hulley?
Running roughshod over tender rules — which the highest court in the land has now clearly disavowed — coupled with suspicious conduct, surely warrants a full-scale investigation.
- Nicola Whittaker is head of legal and investigations at Corruption Watch
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