Along with corruption amounting to hundreds of millions of rands related to emergency procurement made under the Disaster Management Act last year, the Special Investigating Unit (SIU) also uncovered the possible existence of a syndicate that targets both the state and its service providers.
SIU head Andy Mothibi said in a report that the unit stumbled on the existence of the syndicate - and its attempt to bamboozle unsuspecting businesses and the state - through referrals for contracts to investigate tender corruption. Instead, they discovered an elaborate scheme that involves the creation of government purchase orders and invoices for fictitious products and services.
In this case, it was R1.3bn worth of contracts at the South African National Defence Force (SANDF), Mothibi said. These are now being investigated by the military police.
"The really interesting part is the syndicate aspect of it, and the fact that they were also targeting unsuspecting businesses," Mothibi said, adding that the involvement of employees of the SANDF could not be ruled out as the fictitious documents were created with proper stationery.
The SIU could not probe any further because the information fell outside the proclamation issued by President Cyril Ramaphosa when he ordered an investigation into all government procurement of personal protective equipment (PPE) during the state of disaster, Mothibi said.
But the matter has been referred to the military police for further investigation.
Asked for comment on the matter, SANDF spokesperson Siphiwe Dlamini said: "I have spoken to all relevant sections that deal with procurement, logistics, compliance, finance and risk management, including internal audit, and all have no knowledge of the matter you have raised."
The modus operandi involves the advertising of false tenders for specific engineering products. Upon searching, interested parties are diverted to an online agency that can procure the products.
When applying for the contract at the department, the bidder is given a purchase order that encourages them to place an order with the supplier and pay for it - unaware that the "department" and the supplier are the same fraudster.
The difference here was that there was also an attempt to get the state to pay on the fictitious invoices, Mothibi said.
"The finance division of the SANDF were vigilant enough not to make payment on these invoices and no loss was suffered by the state."
The report, the SIU's first into progress made to investigate R13.3bn worth of procurement by government departments between March and November last year, was made available to the public on Friday.
This amount was just over 43% of all Covid-19 procurement by the South African government in that period.
To date, the SIU has identified 2,556 contracts awarded to 1,774 service providers for investigation, and Friday's report only covered 164 completed cases, with a value of R3.5bn.
A further 1,541 cases, with a value of R6.8bn, are still being investigated, and more than 800 investigations are yet to be started.
Addressing the media on Friday, Mothibi described the scale of corruption related to the emergency tenders as "unprecedented", saying it was rivalled only by corruption at state-owned entities. "The scale of it really tops what we've done before," he said.
Among the completed investigations is the R139m PPE supply tender the Gauteng department of health awarded to a company with links to the husband of a top politician in the province, and which led to the dismissal of health MEC Bandile Masuku and the suspension of Ramaphosa's spokesperson, Khusela Diko.
By the time the SIU stopped the payments, the department had paid R32.7m to the company, and this amount was dispersed to the account of 37 other entities.
In December, the special tribunal set up to expedite civil corruption cases involving Covid-19 contracts ordered that the contract be set aside, and monies lost in the inflated contract be recovered from all the respondents in the matter. This includes from the state pensions of the department's CFO, Kabelo Lehloenya, and head of department Mkhululi Lukhele, who both resigned.
Masuku has launched an urgent court bid to have the SIU referrals - the basis of his dismissal by Gauteng premier David Makhura - set aside, which the SIU is opposing.
In another matter, the SIU applied for the cancellation of a R10m contract awarded by the Eastern Cape department of health for 100 motorcycles with sidecars to transport patients in rural areas. This was after the process was found to be not fair or transparent.
Also in the Eastern Cape, the SIU is recovering R4.8m that the OR Tambo district municipality paid to a service provider for a door-to-door Covid-19 awareness campaign allegedly conducted last year.
Thus far, Mothibi said, more than 38 cases have been referred to the National Prosecuting Authority for criminal prosecution.
The SIU has also lodged 15 civil cases involving contract amounts totalling R365m with the special tribunal set up to hear Covid-19 corruption cases. The state has so far recovered R127m through the tribunal, and the bulk of this comes from the Gauteng department of health's awards.
Mothibi said the SIU had identified a further R260.6m that could be recovered by other means, including when service providers acknowledge liability to the state.
"In that instance the SIU and the state institution concerned will look at this and ensure this is quantified correctly. If the state institution is satisfied, then we will enter into an acknowledgement of debt," he said, adding this did not in any way immunise the service providers from criminal prosecution.
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