DMRE Update on all outstanding forensic reports and consequence management matters

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Mineral Resources and Energy

31 August 2021
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

The Portfolio Committee on Mineral Resources and Energy met virtually with the Department of Mineral Resources and Energy to receive an update on all outstanding forensic reports and consequence management matters.

The Committee was briefed on investigations into delays in the National Solar Water Heaters Programme; irregular expenditure involving subsistence and travelling costs; and the illegal sale of the Strategic Fuel Fund’s strategic stock. Other investigations focussed on state-owned entities falling under the Department. They were the Central Energy Fund Group; the South African Nuclear Energy Corporation Group; the Mine Health and Safety Council; the National Energy Regulator of South Africa; the South African Diamond and Precious Metals Regulator; MINTEK; the National Nuclear Regulator; the Council for Geoscience; and the African Exploration Mining and Finance Corporation. 

The Committee’s discussions focussed on consequence management for misconduct such as fraud and corruption; fake qualifications; irregular expenditure; improper procurement processes and the unlawful awarding of tenders. Concerns were raised about the resignation of employees before disciplinary processes were concluded. Members inquired about the recoupment of monies wasted and lost, the cost of investigations and the value of contracts deemed irregular and set aside or amended.

Questions were asked about PetroSA’s failed Ikhwezi well drilling project; the Department’s failure to produce June mining figures for StatsSA; and the illegal sale of the Strategic Fuel Fund’s strategic stock. Members expressed concern about the extent of irregularities across the Department’s entities and questioned whether enough was being done to ensure that wrongdoers faced consequences.

Meeting report

Opening remarks

The Chairperson welcomed everyone to the meeting. He commented that they were meeting at the end of August, the month in which the heroic struggles of women in South Africa were celebrated. However, this should not be the end of the campaign against gender-based violence and femicide. More and more gruesome acts of femicide were being seen and Committee Members needed to make sure that they made their mark in whatever activities that they were engaged in. 

It was noted that apologies had been received from Mr Arico Kotze, Committee Secretary, and the Minister of Mineral Resources and Energy, Mr Gwede Mantashe, who was attending a National Coronavirus Command Council meeting.

The Chairperson said that when the Committee started with Zoom meetings it was very difficult for him to communicate because of network difficulties. At some point there had been a debate about whether, if a chairperson could not participate in the meeting but could hear what was happening in the meeting, they could write in the chat function. There had also been an occasion where the Committee had to appoint another chairperson. He did not want to do this now, as he thought that the Committee had come a long way since then. Thus, he would be switching off his camera to consolidate the network.

He said that part of the work of Committee Members was ensuring accountability.  This included issues of consequence management. Therefore, the Committee had called the Department of Mineral Resources and Energy (DMRE) so that they could see the progress made in matters that related to forensic investigations and outcomes. The meeting was therefore to get a briefing on those areas where there had been an undertaking to act. Part of the work of the Committee was to ensure that, where errors had been committed, there must be corrective action.

Deputy Minister’s overview

Dr Nobuhle Nkabane, Deputy Minister of Mineral Resources and Energy, said that the Department’s progress report on forensic investigations and consequence management would reflect on various issues related to solar water heaters, subsistence and travelling costs, fruitless and wasteful expenditure, and the Strategic Fuel Fund (SFF) forensic investigation into the sale of strategic stock. The presentation also encapsulated a report on various entities insofar investigations and consequence management were concerned. Policies, procedures, systems, and governance structures were in place, and internal controls were reviewed and strengthened from time to time to ensure accountability. For all the entities, the problem statements, findings, and outcomes were captured in the presentation. 

Presentation on Consequence Management Processes within the DMRE & its Entities

Adv Thabo Mokoena, Director-General (DG), DMRE, introduced the presentation and provided an overview. Mr Lucas Mulaudzi, Head of Strategy, presented the details of the presentation, including the Department’s update on investigations and consequence management focusing on the National Solar Water Heater Project; irregular expenditure involving subsistence and travelling costs and the sale of SFF strategic stock. He gave an overview of forensic investigations focussed on the Central Energy Fund (CEF) Group; the Nuclear Energy Corporation of South Africa (NECSA) Group; the Mine Health and Safety Council (MHSC); National Energy Regulator of South AFrica (NERSA); the South African Diamond and Precious Metals Regulator (SADPMR); Mintek; the National Nuclear Regulator (NNR) the Council for Geoscience (CGS); and the African Exploration Mining and Finance Corporation (AEMFC).

The Committee was told that in the period under review, the Department did not conduct any forensic investigations in three identified regional offices - Mpumalanga, Limpopo and North West. 

With regard to the Solar Water Heaters Programme, Members were told that, following a Cabinet decision to refer an investigation into the delay in the implementation of the programme to National Treasury, a service provider was appointed in March 2021. This investigation was at an advanced stage and would be finalised at the end of October 2021.

A matter relating to irregular expenditure arose from an anonymous letter alleging that a Mr Madubane had obtained his Mining Inspector Certificate improperly. The DG instructed that an investigation be conducted by Audit Services which found that the manner in which Mr Madubane obtained his Mine Manager’s Certificate of Competency was irregular and his certificate was withdrawn. Further consequence management was to re-deploy Mr Madubane to the position of Rock Engineer at Head Office. He was dissatisfied with the outcome and took the matter to the High Court where it was held that the decision taken by the Minister suffered from procedural defects in that Mr Madubane was not allowed an opportunity to respond to the Audit Services report. Further advice was sought from the State Attorney, who advised that a de novo investigation should be commenced with. Internal Audit was of the view that such an investigation might pose serious challenges and lead to the same finding.

With regard to DMRE officials implicated in the forensic investigations into the sale of SFF strategic stocks, the Department had briefed the Office of the State Attorney to appoint a Senior Counsel. This matter was still ongoing and the disciplinary process would be concluded by the end of November 2021.

An overview of forensic investigations at state owned enterprises (SOEs) disclosed that out of the 11 entities reporting to the Department, only the CEF Group, NECSA, MHSC, SADPMR and NERSA had conducted forensic investigations into allegations of fraud, corruption, and maladministration. At the rest of the entities, the misconduct cases they dealt with were primarily related to the flouting of internal human resources processes and requirements. Some forensic initiatives had progressed significantly with the support of expert third parties. The Department continued to work closely with law enforcement agencies to bring perpetrators to book.

The CEF’s forensic investigations related to misstatements and impairments in the annual financial statements, insubordination, alleged money laundering, and failure to implement the Solar Water Heater Project. The final report had been issued, the consequence management process was underway and would be finalised by October 2021.

Forensic investigations at the African Exploration Mining and Finance Corporation (AEMFC) related to the violation of procurement policy and procedure, unauthorised overseas trips and mismanagement of AEMFC strategic projects, as well as abuse of power by the AEMFC CEO. The board appointed Gobodo Forensic Accountants to investigate all allegations in the second quarter of 2019. The AEMFC CEO was found to have transgressed procurement policies and mismanaged company resources. The CEO and three executives were dismissed. One senior manager resigned before disciplinary processes were instituted. The CEO was blacklisted from future employment with the State. The CEO had approached the Commission for Conciliation, Mediation and Arbitration (CCMA) and the matter was in arbitration. The other executives that were dismissed had also approached the CCMA. AEMFC had instituted legal proceedings against the asset management company, Innovent, in the High Court to set aside the unlawfully awarded tender.

Forensic investigations at PetroSA related to serious allegations of mismanagement that were brought to the attention of the PetroSA board in relation to the human resources function, procurement and contracts, feedstock processes, and shutdown processes. A final report had been issued and consequence management processes had been initiated, which should be completed by October 2021.

The Committee was also briefed on PetroSA's exploration project, Project Ikhwezi.  Members were told that external consultations and investigations were initiated by the board. In March 2011 there was an enterprise risk management review which was meant to provide assurance that no critical risk had been overlooked. This was followed by several more reviews of risks and of project governance as well as contracts entered into by PetroSA. (See slides 14 and 15 of the attached presentation.) In 2015/2016 there was an investigation into PetroSA performance for the financial year and the R14.5 billion impairment charge. Reports had been prepared. However the reports were protected by legal privilege. Current investigations by the Directorate for Priority Crime Investigation (Hawks) related to payments and were ongoing. Affidavits and information were being provided.

The SFF forensic investigations concerned 10 million barrels of strategic crude oil that were unlawfully sold to a number of trading companies without the proper authorisation. The report was currently with the Hawks. The consequence management process had commenced and was at a sensitive stage. The Hawks were handling the criminal case and the SFF continued to render support when called upon. An appeal against a High Court ruling on the sale of the stocks had been lodged.  The SFF had filed its supporting affidavit and the opposing parties were expected to file their papers in due course.

Another investigation related to the disposal of 10 million litres of diesel to a Zimbabwean company, Line Petroleum, with no trading licence in Zimbabwe. Line Petroleum did not honour the contract.  Guidance was being sought from the Hawks on possible charges. The consequence management process had commenced and was at a sensitive stage. Line Petroleum was taken to court and SFF won the case. The possibility of initiating proceedings against Line Petroleum was being considered, but the prospects of recovery were low.

The NECSA’s forensic investigations concerned its subsidiary, Pelchem which received a disclaimer of audit opinion for the 2019/20 financial year. The basis for the disclaimer included among others matters, irregular expenditure which had accumulated over years, non-adherence to National Treasury guidelines and regulations, as well as internal procurement and finance policies, a lack of consequences for officials involved in irregular expenditure, and fruitless and wasteful expenditure. The consequence management would be determined at the end of the investigation, which would  be finalised by 31 September 2021.

Another NECSA investigation concerned a whistleblower report that an NTP Radioscopes (NTP) employee had awarded a two year contract without following the due procurement process. The investigation was expected to be finalised by 31 September 2021.

Also being investigated were two contracts which were reported by Internal Audit to have been awarded without following the supply chain management and preferential procurement processes.  The amounts involved were R27 million and R17.5 million. The investigations would be finalised by 31 September 2021.

The MHSC forensic investigation concerned alleged misconduct by the former CEO in the procurement of services relating to climate survey. A disciplinary hearing was finalised and the matter was reported to law enforcement. The former CEO took a claim of unlawful suspension and termination of employment to the Commission for Conciliation, Mediation and Arbitration (CCMA).  The CCMA case was still pending. Disciplinary action was also taken against the personal assistant to the former CEO. That matter too was taken to the CCMA and was still pending. There was also an investigation into allegations that the Former Audit and Risk Committee Chairperson did not disclose pending criminal charges of fraud and corruption. The matter was reported to the National Treasury, and relevant bodies. The investigation was finalised and her contract expired during the consequence management process.

The NERSA forensic investigations concerned allegations that the CEO conspired with employees to increase his salary, as well as the unilateral approval of 34 Renewable Energy Independent Power Producer (REIPP) generation licences in contravention of sections 8 and 9 of the NERSA Act. A disciplinary hearing was held and there was a settlement agreement to terminate the services of the CEO on 27 August 2020. The Chief Financial Officer (CF0), who was implicated, resigned prior to the conclusion of the investigation.

Discussion

Ms V Malinga (ANC) thought that the Department’s presentation had been heard before but could not recall whether it was earlier in the current year or late in the previous year. From what Mr Mulaudzi had presented, she did not get the sense that the Department was really intending to impose consequence management. Putting aside the cases where law enforcement agencies were involved, one person with fake qualifications was moved to the head office. If someone had fake qualifications, it meant that the Department had investigated them and found the qualifications to be fraudulent. The institution from which the certificate had come should also be taken to task. Such a person could not be moved from one position to another with a fake qualification and still earn a salary. Perhaps she did not understand what the Department meant by consequence management. It should mean that the Department recouped the money such a person earned using the fake qualification, being about R700 000, not moving the person.

With regard to the Ikhwezi project, the Committee had not been told how much was spent on litigation. Were the litigation bills footed by the Department or National Treasury? On the Pelchem issue and their 2019/2020 financial year irregular expenditure, where were the personnel that did the procurements wrongly? Were they charged or suspended? She did not get this from the presentation. It hindered investigations if the people who were being investigated were still in the employ of the entity. She had never heard of such a situation as had occurred with NTP where an employee received a tender of R27 million. Was this employee still employed by NTP?

At NERSA, the CEO had collaborated with employees to increase his salary. This seemed to be normal in the Department. Where was this CEO? Had the amount of the increase been recouped from the CEO? Had the NERSA CEO faced the same consequence management as the CEO of the AEMFC who had been dismissed and blacklisted? PetroSA was a pain. There were gentlemen’s agreements where people took voluntary severance packages. They collapsed the entity and were then given a voluntary severance package. Which entity in the CEF Group was not under forensic investigation? The CEF was a very bad parent and was not even supposed to have kids.

Mr J Lorimer (DA) complimented the Chairperson on calling for the presentation. The astonishing array of misconduct in the entities was quite shocking. Referring to slide 12 dealing with the AEMFC, he said the Committee had heard about the violation of procurement policy and procedures. Could the Committee be told more about the company, Innovent? What kind of company was it and what was the tender worth? There was a lack of clarity on how many people had been dismissed. The first bullet point on the presentation read that the CEO and three executives had been dismissed, and the second bullet read that three executives were dismissed and one senior manager had resigned before disciplinary processes were instituted. How many people had gone and under what circumstances? On slide 21 about the MHSC, could the Committee have more detail on the climate survey procurement and how much the tender was worth?

Mr Lorimer requested more detail on the disclosure of confidential information at the SADPMR which was the subject of disciplinary action. What information was disclosed illegally? To whom was it disclosed? All of this pointed to a problem with capacity and controls, and the hiring of staff across the entities. Some of the occurrences were astonishing in that somebody in charge of the Audit and Risk committee, being the chairperson, was faced with charges of fraud and corruption and did not disclose it. This led to the question of how a person was selected for that position. It hinted at a serious problem with appointments across the entities, which possibly stemmed from incapacity. Another serious failing of the Department  was the failure to supply June mining figures to StatsSA. This was almost unprecedented. Was this a result of incapacity or misconduct by employees? Was this going to be a problem going forward? 

Ms P Madokwe (EFF) expressed worry and disappointment. The report painted a picture of a department that was not really serious about consequence management and holding corrupt and fraudulent people to account. One of the slides had spoken about the fact that out of 11 entities, there were forensic investigations at only three, and that at the others, matters were dealt with internally. Were there any investigations of the internal matters that had been flagged? Even internal matters or those deemed to be minimal had implications for the rest of the Department and how it functioned. It would have been helpful if the report had given the Committee detail on when the other cases were brought to the attention of the Department and how much money was involved. It was important to know when the cases were opened so that the Committee could track how long it took for the Department to respond to them. If the Department was going to be very slow and lenient, it would mean that even those people who had not yet committed fraud would know that there were no measurable consequences and would also do what others had done.

If someone committed a crime and then resigned, did it absolve them from answering for their crimes? Regarding the Audit and Risk Committee Chairperson at the MHSC, the report said that her contract expired before consequence management. What did this mean? Did it mean that that person then got off scot-free? Regarding the re-employment of Mr Madubane, she assumed that he had used his power or proximity to get a licence. The Department’s consequence management was that this person was then redeployed and still needed to be paid by the taxpayer. What was the logic behind the redeployment?

Mr K Mileham (DA) concurred with a number of points raised by Members but had some concerns. On a number of slides, under the heading ‘key findings and impact’, it was said that a report had been issued. A report was not a finding; a finding was that something did or did not happen and that a person was found guilty or not guilty. He was tired of the Department and departmental officials coming to the Committee and saying that a report had been issued but not telling the Committee what was in the report. This did not help the Committee to conduct the oversight that they needed to do. A comment was made on the PetroSA slides that issues were subject to legal privilege, and that therefore the Committee had no authority to look into them. He asked that the Committee get a legal opinion in this regard because firstly, as he understood it, the State was a shareholder in the matter so legal privilege did not apply to the State. Secondly, as a parliamentary portfolio committee, the Committee had authority over every aspect of State activity. Legal privilege did not apply. He had a serious concern that legal privilege was being used to obscure or deflect the Committee’s investigation away from things that people did not want the Committee to look into.

He was also concerned about the number of forensic investigations and legal matters, particularly within the CEF, PetroSA, and the SFF. He asked for a report from the CEF and its subsidiaries on how much had been spent over the past ten years on forensic investigations, legal advice, legal support, and legal action arising from forensic investigations. What was the value of contracts that had been deemed irregular and set aside or otherwise amended because of irregular procurement processes or irregular activity within these entities? He had the feeling that it was not hundreds of millions of Rands, but billions of Rands. On NERSA, he noted that the issue with the CEO was resolved by him leaving office. In the slide pack that the Committee had received the previous night it said that there was a settlement agreement with the CEO and that he had resigned. It struck him that a settlement agreement would not be agreed to if the person was guilty of misconduct. Was an investigation conducted into the CEO’s unilateral awarding of REIPP contracts? Was an investigation conducted into the CEO’s awarding of a higher salary to himself? If so, what were the findings of the investigation? Were they tabled before the Board? What was the Board’s decision in this regard?

The Chairperson said it had been a resolution of the Committee that it should request that the Department present on the overall issue of consequence management, instead of dealing with one issue at a time. He did not want to sound as if he was taking credit for something that all Members had put their heads to. He said that he would ask his questions after the Department’s response.

Department’s responses

Ms Patricia Gamede, Deputy Director-General (DDG): Corporate Services, said that there was a crisis in the Department in terms of crashed systems and infrastructure. This was the reason for the failure to present mining statistics on time. There was a problem of finding funding for new servers.  The Department was trying to find a solution as soon as possible.

Ms Ntokozo Ngcwabe, DDG: Mining, Minerals and Energy, said that she was responsible for the statistics. Unfortunately, she could not do the statistics if the servers were not available as she could not access or process data. The Department’s hands were tied.

Mr David Msiza, Chief Inspector of Mines, responded to the matter regarding Mr Madubane’s qualifications. As a brief background, the Department had at one stage investigated fraudulent activities that involved the certificates of competence that were administered by the Department. The Department administered and issued those certificates in terms of the Mine Health and Safety (MHS) Act. At that time there were allegations that some people were acquiring those certificates irregularly or through the payment of bribes. The Department investigated this and there was consequence management against the officers that were dealing with the certificates. During the course of taking action, an anonymous letter was written to the Minister and the Director-General was requested to investigate the allegations about Mr Madubane’s certificate. The investigation indicated that Mr Madubane had applied for an exemption on the Mine Manager’s Certificate of Competency.

The Mine Manager’s Certificate was written in three parts: Part A was the technical part which dealt with Geology, Surveying, and Engineering, Part B dealt with mining, and Part C dealt with the law. Mr Madubane had applied to be exempted from Part A and B, and the anonymous letter said that this was done irregularly. The investigation also showed that this was done irregularly. There were disciplinary hearings and the certificate was withdrawn. Legal steps were then followed and Mr Madubane took the matter to court. If a certificate was withdrawn, one could not be a principal inspector. Mr Madubane had been moved because the Department had been legally advised that if they took action against him there would be legal consequences for the Department. At the time it had not been proven that he had done anything wrong in terms of the certificate itself. This was a concern for the Department and they were taking legal steps to try to finalise it quickly.

On the MHSC and the climate survey, it had been brought to the attention of the current Board that irregularities were taking place at the MHSC. The board ensured that an independent entity was appointed to investigate those allegations. A report was presented to the Board. The report said that the procurement of service providers to do the climate survey and provide a workshop to assist the MHSC office was done irregularly. The irregularities concerned the use of a travel agency and the possible payment of bribes.

Other issues then started to be revealed through a hotline system in use at the MHSC. One concerned the Audit and Risk Committee Chairperson. When she was appointed to the position in 2016 there was a pending fraud and corruption case against her. The MHSC claimed to have done background checks but the investigation clearly showed that this had not been done properly.

The possible irregular expenditure on the climate survey itself amounted to around R480 000. However, expenditure involving the travel agency was closer to R30 million. The Department was taking action against the relevant people. However, the board had realised that there were a lot of things that the previous board had sat on, some of which had not been disclosed. There should have been proper controls to prevent this from taking place, and the current board was ensuring that there was improvement and enhancement of controls. The CEO and his personal assistant were implicated, and disciplinary processes and actions were taken against them, after which they took the Department to the CCMA.

In response to how the Audit and Risk Committee Chairperson had got through the selection process, the Department itself was shocked that this had happened. The Department was insisting that the MHSC review how background checks were done. While the board was taking action against the chairperson, her contract expired. As the chairperson was a service provider to a government entity, the Board then reported the findings to the respective associations, as well as the National Treasury, so that they could take the necessary steps in terms of the law.

Ms Zanele Sibisi, Interim CEO, AEMFC, said that the matter of the supply chain processes that the AEMFC had referred to in their report was the outcome of a finding from the forensic audit done by Gobodo. This had to do with a tender that AEMFC issued in 2017 for the procurement of mining machinery. AEMFC appointed a service provider that, four months into the contract, was then not able to meet the requirements of the tender. The evaluation process had been flouted. The value of the tender was about R310 million. Only 40 percent of the value was delivered. AEMFC acted on the outcome of the investigation. Some of the charges involved the CEO and some involved the executives that were involved in the evaluation of the tender. As a result, three executives had left, including the chief audit executive. Not only the executives were implicated; there were also procurement officials that were implicated and dealt with. Presently, all of the executives had been dealt with and all of their cases had been finalised with dismissals and pending arbitration with the CCMA.

Mr Cecil Khosa, CEO, SADPMR, said that the cases related to the SADPMR were associated with three senior managers who were charged with disclosure to a third party of sensitive and confidential information that belonged to the entity. The three senior managers were suspended in 2020 as they were found to have been in breach of their employment contracts. Following the hearing, the chairperson of the hearing had recommended their dismissal. The officials were then dismissed with effect from 24 June 2021. During the investigation there was a recommendation that there should be a forensic investigation into what had transpired in order to determine the extent of information that was taken. The cost of the investigation was R62 158, and other costs related to the initiator and the chairperson of the hearing were still being updated. During the period when the senior managers were suspended, they were paid their salaries in full in terms of policy. The matters were now being dealt with at the CCMA. The applicants had asked for a settlement. The SADPMR did not agree to any settlement as they felt that they had a very strong case. The SADPMR had been issued with a certificate certifying that the dispute remained unresolved. The SADPMR was now waiting for the former employees to indicate if they were pursuing the matter through the arbitration process. Should the former employees not be satisfied with the outcome of the arbitration if it were to happen, they would then have the right to approach the Labour Court.

Adv Nomalanga Sitole, CEO, NERSA, dealt with the question about the former CEO of NERSA having increased his salary. The CEO had been in an executive manager position within the organisation and assumed his position of CEO with a salary of an executive manager for a couple of months. He had then realised that the other full-time regulator members that were at the same level as him, were earning a salary that was higher than his. He had then asked the NERSA CFO and the executive manager for human resources to increase his salary to the same salary level as the other three full-time regulator members. Procedurally, this was not supposed to be done. A letter adjusting his salary was supposed to be received from the Department, and the adjustment would be done at the time the letter was received.

NERSA had received a letter adjusting his salary, and his adjusted salary was within the adjustment he had already instructed the staff members to make. There was then an adjustment for the period within which was supposed to have received the adjusted salary. An investigation had been done by an independent company called TM5 Incorporated. The Board adopted the recommendations that were made in the report, one of which was that action should be taken against the NERSA CEO and three employees that were involved in the adjustment of his salary. The NERSA CFO and the executive manager for human resources had resigned prior to a charge sheet being served. A charge sheet was served on the NERSA CEO. He then requested that he would rather not go through the hearing and instead settle the matter. This was how the process of settlement was started and finalised.

Mr Pragasen Naidoo, CEO, PetroSA, said that Members were correct in saying that Project Ikhwezi was quite a historical matter that had been progressing for a significant time. Following the internal investigations, the relevant consequence management was initiated. Subsequently, there were quite a few ongoing investigations ongoing by the Hawks. PetroSA was currently providing all of the information requested by the Hawks and was following up on the progress of the investigations. To date, PetroSA awaited feedback on those investigations and as soon as feedback was received the PetroSA board would certainly take the necessary action. On the issue of legal privilege, he assured the Committee that PetroSA had taken action. PetroSA had a board meeting scheduled in the next couple of days and would raise the matter and respond accordingly on how they could address access to the information and take further action – especially given that the matter was quite historical in nature.

Dr Ishmael Poolo, CEO, CEF, said the CEF had initiated investigations as soon as matters came to light, whether in the form of reports or otherwise. The CEF would go back ten years and compile a report of all forensic investigations for the Committee.

Mr Loyiso Tyabashe, CEO, NECSA, confirmed that the people who were identified in the forensic reports were still in the employ of the organisation. At the commencement of each and every forensic investigation, NECSA did an assessment of the risk of obstruction of access to relevant information that might be used for the investigation. This was weighed against prematurely and sometimes incorrectly putting people on suspension. It had been ascertained that no obstruction of justice was foreseen at that point of the investigation. NECSA was close to completing both of the investigations by September 2021. 

The Director-General, Adv Mokoena, said that it was important that when the Department responded to the Committee, they gave accurate information. The Department appreciated the role that the Committee was assigned to play as public representatives. On the capacity of the Department, especially when it came to the failure to supply the June and July statistics, this had exposed some of the officials in the Department. There had to be leadership. The Department could not come to the Committee to sugar-coat issues; they needed to be frank and honest in terms of the challenges that they faced and how they were going to deal with those challenges. The previous night he had been in constant discussion with the relevant colleagues, and they had had a meeting earlier that morning to discuss the very same matter. It was said that they did not want people to make excuses about money. Money was not the problem. The problem was a lack of creativity from some of the officials that were assigned to perform certain responsibilities. NECSA could not come to the Committee and try to defend things that could have easily been done. NECSA was making a commitment that heads had to roll, because people needed to take full responsibility. It was embarrassing that these issues were now being raised by Members. He thought that he should over-emphasise this point so that people could begin to understand that NECSA had a duty and responsibility to perform its responsibilities diligently and without any failure.

In respect of people who just resigned or whose contracts expired before consequence management, there were ways and means of dealing with this in terms of the law or policy of the organisation. For example, such persons could be blacklisted.  The Department would make sure that people did not just leave without having been subjected to any punishment. The Department made a commitment in that they would attend to all of the issues that had been brought to their attention. The Department was aware of these issues and had started working on them, but just needed to be frank and honest when they appeared before the Committee on how they were going to deal with the issues.

Further discussion

The Chairperson congratulated the Director-General on the manner in which he had made the presentation. At times it assisted when there was one person making the presentation on behalf of the Department and its entities. This was well appreciated because it did not consume too much time and showed that there was a department. At some point he had listened to the former president of South Africa, Mr Thabo Mbeki, raising a concern about how government functioned and saying that the problem with government was that there was not a federation of departments but a confederation of departments doing their own thing. He said that he had been worried about running the risk of there being a confederation of units within a department.

He was worried about the risk of chasing cases already prepared for failure. When looking at the ratio of how many cases had been successful, it was almost a 20 percent success rate because settlements could not be seen as success rates.

With regard to the issue of the Solar Water Heater Programme, at some point a lady had said that she would put her head on a block that by a certain date all of the units would be on the roofs. What had happened to the head of that person? He sometimes got the sense that there was a collective decision on what projects would be undertaken but there was an individual approach to implementation. There should be agreement on the steps to be followed so that it could be known at what point there was a default in the process. The report seemed to be taking an angle that one individual had to face the consequences. He could assure everyone that this was not the case. He was worried about collective responsibility. Who was the director-general at that time? Who was the DDG responsible for the project? Who was the assigned project manager on the exercise? Who were the people responsible for ensuring that field work was done in order to create or ensure demand? Consequence management meant that lessons were learned. It was impossible to come to the conclusion that only one individual could be held accountable for the trail of activities, unless it was an accounting officer.

At the SFF, there were people who had made decisions there and who  might no longer be there. Who were the people that were in office at that time?

What did the Committee do about actions that were taken and which did not necessarily fall within its ambit? For example, if a project was undertaken and at some point failed and this did not involve only one department, what did the Committee do here?

He was not convinced that enough had been done with regard to the sale of the strategic fuel stock. The Committee appreciated the fact that the sale had been challenged and that there was some reprieve and relief. There was a general belief that anything that was handled by the State now inherently had hallmarks of corrupt activity. The Committee had to bring back the integrity of governance and provide confidence to people that the resources and revenue to which they contributed would be used correctly. There could not be such large amounts of money just disappearing.

 ON the matter of legal privilege, his understanding was that no matter could not be in front of a committee to assist the committee in the performance of its duties, unless a court of lwa ruled otherwise.  The Committee did not have anything in front of it saying that the matter remained a matter of law and therefore remained sub judice and could not be tackled by any other arm of the State. This was a matter that would have to be taken into consideration.

Ten billion litres of diesel had been sold to a Zimbabwean company that was not lawfully supposed to have received it as it was an unregistered company. What was the estimated cost of the loss. At what point was action taken against those who had sold it to the unregistered company?

With regard to NECSA, he recalled that a person was suspended or dismissed and was supposed to be reinstated. In the period when that person was supposed to be reinstated, the contract had expired and there was then a dispute on how to settle the matter.

A matter that required the Director-General’s attention was that they had to look at what the most creative and innovative ways were to deal with the financial challenges being faced. Money should not be wasted. Where money had gone where it was not supposed to go, this money should be recouped. If work could be done in the manner in which it was supposed to be done, a lot of resources could be saved. 

Ms Malinga asked how the NERSA CEO knew he was underpaid. The salary of any person was confidential. The person who had responded on behalf of NTP had said that the person who fraudulently or unlawfully awarded the tender was still in their employ. Was this even legal? If a tender was deemed to be unlawfully awarded, should the person who was implicated not step aside so that they did not hinder investigations? AEMFC had said the project to supply machinery was stopped within four months and that only 40 percent of the work was done. What happened to the 60 percent? Did the entity cancel the project? Was AEMFC no longer in need of the project?

Department’s responses

The Deputy Minister said on behalf of the Department that all the concerns that the Committee was raising were being noted. One of the concerns was that the Department could not provide a substantive response on the investigations, how they were done, and what the full findings were. Another concern was that the Department did not seem to be serious about implementing consequence management. Other concerns related to how much the investigations cost the Department; placing people in other positions if they had done wrong instead of dismissing them; and the information technology systems.

In terms of delays in finalising cases within the Department, some were more policy-related and others involved more operational issues. There were cases that were referred to the CCMA when the employee or particular person affected was not satisfied with the outcome of the internal disciplinary processes. In terms of labour rights, an employee had the right to then refer the matter to the CCMA. When a particular employee was not happy with the hearing, that person had the right to challenge the award in the Labour Court. These were some of the issues that hindered the process of fast-tracking the Department’s cases. The Department was committed to looking at their labour relations component to see if they had the capacity to fast-track all of the outstanding cases.

The Department was in the process of reviewing its organisational structure.  It was committed to developing an action plan to deal with fruitless and wasteful expenditure. The plan would provide all of the details of who was involved in the irregular or fruitless and wasteful expenditure, what the reasons for it were, and what actions had been taken. The Department would also provide the Committee with progress reports from time to time. In trying to improve on the Department’s accountability, it was going to review its policies and internal controls from time to time to see. 

Mr Zahir Ismail, Acting Chief Audit Officer, NECSA, said that NECSA would look into the historical matters and report back to the Committee. The investigation into the NTP whistleblowing matter was still ongoing. NECSA could not suspend people in whistleblowing matters until they had been properly investigated and closed.

Mr Godfrey Moagi, CEO, SFF, responded to questions about the sale of diesel in Zimbabwe.  He said the SFF did not have a trading licence in Zimbabwe. Line Petroleum was a company which bought diesel from the SFF because the SFF could not sell it in Zimbabwe without a licence. The most recent calculation of the losses was R120 million, inclusive of interest. The SFF had won a court case against Line Petroleum. They had then appointed a tracer to see if the entity had assets in South Africa that the SFF could sell to recover the money. Unfortunately, it appeared that the entity did not have assets in South Africa. The attorneys were exploring whether they could use a Zimbabwean court to recover the money.

On the issue of strategic stock sale, the comments were noted. The priority was to deal with a civil case to make sure that the SFF protected its strategic stock. In November of the previous year, the judge had decided in SFF’s favour in terms of the illegal nature of the contract. However the SFF then faced hedging losses which they had appealed. The update was that all the parties had filed their papers with the Appeal Court and were waiting on the date for the case. The criminal and disciplinary cases were ongoing. 

The Chairperson thanked the Department and its entities for the presentation. The Committee would deal with the issues the following day. 

The meeting was adjourned.

 

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