SITA forensic report on Rofin, Forensic Data Analysts and Fundudzi contracts

Meeting report

Introduction by Chairperson

The Chairperson said that although the National Commissioner of the South African Police Service (SAPS) was not available, three of his colleagues were present. The police and the Independent Police Investigative Directorate (IPID) had been invited because the issues were related to their work. The IPID Director was invited. The IPID presentation could not be considered, because it was too broad and general. The State Information Technology Agency (SITA) would be allowed to address the meeting, as it had finalised its own internal investigation. The police were also investigating, and when the investigation was concluded, SITA and IPID would be invited. As the matters were interrelated, they was not to be dealt with in silos. The Director General (DG) of the Department of Telecommunications and Postal Services had been met with on two occasions. SITA had committed itself to engage with SCOPA after a number of investigations to clean house. SCOPA had asked for a briefing when the report came out. There were two levels -- what had happened with regard to individual employees of SITA, and how to build systems to ensure that the same things did not happen again.

SITA briefing: forensic report on Rofin, Fundudzi and FDA contracts

Mr Setumo Mohapi, Chief Executive Officer (CEO): SITA, said the investigations into contracts involving Rofin, Fundudzi and Forensic Data Analysts (FDA) had led to 20 dismissals, 26 resignations, and four final written warnings. Six disciplinary hearings were in progress, there had been six mutual separations, and three charges had been drafted but not served. He had briefed the Minister the night before. Challenges identified included not testing the market for other maintenance suppliers; the scope of the original contracts had increased; there had been extensive collaboration between SITA staff and FDA, where there was undue influence; conflicts of interest; the transfer of SITA duties to other agencies; and contract extension. Undeclared companies also did business with the state on SITA premises.

Discussion

Mr T Brauteseth (DA) asked the CEO if there was definite proof that SITA was “captured.”

Mr Mohapi said that there was.

Mr Brauteseth remarked that there were many capturers in SA. Some were serious players. A thorough job had been done. He asked the CEO if SITA had suffered a loss of capacity, which made it unable to resist the advances of capturers.

Mr Mohapi agreed that this was the case.

Mr Brauteseth commented that action had been taken against 54 people following the investigation by Bowmans, the law firm which conducted the probe. He asked what would be done to rebuild capacity.

Mr Mohapi replied that the system and the people had stayed the same, as well as the process, the culture, the equipment and the market, so the benefits of technological change could not be realised. SITA had not had a retirement age before, but in future people would have to retire at 60. Capacity would be built from the bottom. Internship and recruitment would be increased, and programmes modernised.

Mr Brauteseth asked if the model followed by Trevor Manuel in the Treasury would be followed, where young recruits had been brought in to build a culture of excellence. Did Mr Mohapi have advice for departments on Information Technology (IT) matters?

Mr Mohapi replied that procurement had to be professionalised. The entire state operational environment had to be looked at, with a focus on the underlying demand.

Mr Brauteseth asked if SAPS was still being worked with.

Mr Mohapi replied in the affirmative.

Mr Brauteseth opined that SAPS had to be advised not to enter into another massive contract with Mr Keating of FDA for DNA testing kits. He had information that SAPS was about to enter into a massive contract. He asked about consequences. 54 people were liable for sanctions. When one looked at the SAPS lists on the blue page of the report, it was evident that many of the matters had been reported a year before. Wolfe and Siyabi had been reported a year before, Grimsell 10 months before, and Keating in May 2017. He asked if SITA had worked with SAPS, if an update could be provided, or whether SITA had just reported and discharged its responsibility.

Mr Mohapi replied that SITA had just reported.

Mr Brauteseth told him that his responsibility went beyond that. The country had good laws, but more responsibility had to be assumed for enforcing the laws. There had to be follow-ups with investigating officers, as they needed assistance. Updates on reports had to be received every few months. He asked if people who had been dismissed could be pursued financially, as well as those who had resigned. He asked what a mutual separation agreement was. How much was paid to people in the event of a settlement?

Mr Mohapi replied that there was no process to determine the recovery of money.

Mr Brauteseth said that R919 million had been spent. SITA had not thought of how to get the money back, except in the case of Keating. Rofin and FDA were also involved. He asked why the state could not seize people’s houses, cars and bank accounts, run them out of business and leave them penniless.

Mr Mohapi replied that there was not a lack of intention. The claims against Keating were intricately linked to claims against another person. The focus had been on claims against FDA companies, not on SITA’s own people, which ought to have been done.

Mr Brauteseth insisted that a culture had to be built, like the one prevalent five to ten years before, when people were arrested and their goods seized. Currently people who owed SARS R1 billion walked around with impunity.

Mr Mohapi explained mutual separation. It happened when a disciplinary process was not continued with. It would be acknowledged that a person had not been found guilty, and that the person would be paid what he was owed. The chairperson of the disciplinary process would tell the person that the process would continue for four or five months, and would cost so much. Even though the person might win, it would not be value for money to continue doing it. It was not done when there was a charge sheet for corruption or fraud, only for misconduct.

Ms N Khunou (ANC) remarked that she was disappointed that the SAPS National Commissioner was not there.

The Chairperson told her that the National Commissioner was committed elsewhere.

Ms Khunou continued that it was SITA’s job to consolidate and coordinate the state’s IT resources. It was in a similar position to the Department of Public Works (DPW), which undertook building projects on behalf of departments. SITA was also responsible for outsourcing. There had been problems the year before with Mr Keating. SCOPA was interested in consequences. A culture had to be inculcated of awareness that funds did not belong to government entities. People were reluctant to pay tax because money was being played with. She told the SAPS delegates that SAPS knew what the SITA services were. She asked what had made SAPS come up with the name of FDA.

The Chairperson told Ms Khunou that the police had also done their own investigation, and owed the Committee a report like the one presented by SITA.

Ms Khunou asked what the National Treasury (NT) and the Auditor-General (AG) prescribed in respect of cancelling of contracts, if a contract was obtained irregularly.

The Chairperson asked members of the Treasury present if fraudulent contracts could be cancelled.

A Treasury official replied that contracts could be cancelled if the supplier misrepresented information.

Ms Khunou said that a lot of money had been spent on litigation. She asked if Treasury regulations had been adhered to, and how much had been spent.

Mr Tendani Mphaphuli, Head: SITA Legal Services, replied that once an administrative decision had been made, a contract could not be cancelled at will. A court of law had to determine if the contract was unlawful. The contract with FDA had been cancelled, and FDA had taken SITA to court. SITA had defended the cancellation. If the right process resulted in a court order, money could be recouped.

The Chairperson asked how much had been spent on litigation.

Mr Mphaphuli replied that it was R3.5 million.

Ms Khunou congratulated SITA on people being sentenced for the unlawful renewal of contracts. She asked Mr Mohapi how many people were in the CEO’s office.

Mr Mohapi replied that there was no CEO office. He worked through the Executive Committee, with its divisions of Internal Audit, Supply Chain Management (SCM), Legal Services and others.

Ms Khunou remarked that when there were irregularities in contracts, the person responsible was the one who signed it off, as it was done without that person applying his/her mind to it. The person who signed had to take the blame. With the renewal of contracts, the CEO knew that people were not doing what they were supposed to do. She asked why people who brought contracts to him through the SCM process, were not charged. Why were they still there, if they could not advise him properly?

Mr Mohapi replied that accountability applied to everyone, and he was also subject to that. The board had authority over him. Consequence management also applied to irregularities at the executive level -- people that he relied on for advice. One person on whom he relied for advice was no longer there. In the SITA management structure, what was done in the disciplinary structure was submitted to the Audit Committee, so that Executive Committee members could not abuse their authority. There had to be vigilance about information in a risk environment. People could lie or forge documents. SCM was investigated, because management combined assurance. There was a duty of the Audit Committee to use risk reports and reports from internal auditors to identify weaknesses in controls.

Ms Khunou asked if management was advised on contracts.

Ms Mimi le Roux, Chief Risk Officer: SITA, replied that Internal Audit reported on extensions of contracts. All contracts above R10 million were subjected to internal auditing. The Bowmans investigation had had to see if internal auditing reporting had been done appropriately. It had concluded that conditions raised by Internal Audit had not been fully met in respect of the evaluation of price. There had been misrepresentation by management, and SITA personnel had been charged. There were internal controls, but approval had been granted on account of misrepresentation.

Ms Khonou asked about the extent of perpetual licensing.

Mr Mohapi replied that there was an amount of R252 million over a 13-year period. It was related to maintenance and licences. The licence amount was R92 million, which bought a perpetual right to use.

Ms Khunou asked how much had been recovered, and said Mr Mohapi’s assets would be seized if he kept on signing. She requested a list of FDA personnel working for SITA, as well as SITA personnel working for FDA. Were people who had resigned still working for government? When had the investigation commenced?

Mr Mohapi replied that the investigation had commenced in February 2016, and people had started leaving from June 2016. He was aware of one person who worked for a metro municipality, but was not sure where the person was currently working. Another had applied for a government position.

The Chairperson asked Mr Mohapi if he had told the truth about the applicants to prospective employers.

Mr Mohapi replied that he had done so with regard to the person employed by the metro.

The Chairperson remarked that a metro would enquire about the applicant from a previous employer. The new employer had to be told that the applicant was an employment risk.

Ms Khonou added that when one applied for a government job, it had to be declared if one had ever been dismissed. SITA would be phoned to check.

Ms T Chiloane (ANC) asked how many investigations had been concluded, and how many were still pending.

Mr Mohapi replied that the Bowmans investigations had all been concluded. Two investigations for Fundudzi were still pending. Only disciplinary hearings continued, which was normal internal work. There was auditing when things arose, which did happen.

Ms Chiloane asked about implementation of the Bowmans report recommendations, and timeframes.

Mr Mohapi replied with reference to declarations of interest, that in conflict of interest management, if one closed one loop, another opened up. There was active combined assurance between internal audit and risk management. There was robust oversight by the Audit Committee. There was a wakeup call to be vigilant.

Ms Chiloane remarked that people would find new ways “to milk the government cow.” IPID and SAPS had to close the gaps. Cases had to be concluded. She was glad that a person whose name had come up in SCOPA hearings had been arrested, and that it had been shown on TV. There had been a previous reference to threats.

Mr Mohapi replied that he had not received any.

Ms Chiloane asked about five companies, about which restriction letters had been sent to the NT. She asked if that meant the same as blacklisting. In one of the companies, the person was an employee of SITA.

Mr Mohapi agreed that the person was associated with SITA.

Ms Chiloane asked if she was gone.

Mr mohapi replied that she had been dismissed. She had resigned when charged, and had not shown up for the disciplinary hearing. Her name was on the SCM tab. She was the first person on the list.

Ms Chiloane asked how much the company had made out of the state, and whether there had been value for money.

Mr Mohapi replied that he did not have the amount with him.  The company sold computers. The market had been manipulated. She had chosen which companies to ask for quotations, with the intention that her company would win. There could be no value for money.

Ms Chiloane asked if there were attempts to recoup through pension funds.

Mr Mohapi replied that no claims had been pursued.

Mr Chiloane asked if there a report had been made to the Public Service Commission.

Mr Mohapi replied in the negative.

Ms Chiloane said that an example had to be set. She asked about “evergreen” contracts.

Mr Mohapi replied that it was rather a matter of constant requests for renewals.

Ms Khunou referred to a contract that had expanded by 168% since 2009. She asked how this had been addressed.

Mr Mohapi replied that the contract had first been awarded for a three-year period. A few months’ extension had been asked for the consideration of alternative methods, but there was no evidence that any work had been being done. The last one was a one-year contract, and a three-year extension was asked for, and he had refused. SITA had gone to the market to look for alternatives. A market feasibility study had been done. People had been suspended, and other ways had had to be found of doing the work. Six or seven alternatives had been found in the broader market. In the bidding request process, the one that could provide value for money would win. It ought to have happened a long time before.

Ms Khunou observed that the FDA contract had been terminated, and SITA had been taken to court.

Mr Mohapi replied that it was a one-year contract that had expired. The cancelled contract was supposed to go on until 2019.

Mr E Kekana (ANC) asked if SITA would have picked up on matters if SCOPA had not raised the alarm.

Mr Mohapi replied that SCOPA had indeed assisted SITA. SITA had appeared before the Committee in December, but investigations had commenced in May. Without that assistance, some matters would not have been addressed.

Mr Kekana asked if the Executive Committee members had all been vetted.

Mr Mohapi replied that submissions had been made to the vetting agency.

The Chairperson asked what the submissions entailed.

Ms Le Roux replied that vetting fieldwork was done by the Department, which had provided support for herself. All Executive Committee members had submitted documentation, and the fieldwork had been completed. Information was with the State Security Agency (SSA), who would issue clearances. SITA itself could not issue final clearances.

Mr Kekana noted that it had been stated that SITA had not disciplined employees for unlawful expansions or deviations. If it had led to irregular or fruitless and wasteful expenditure, there would be an enquiry.

The Chairperson pointed out that the first sentence was irrelevant. It was the second one that mattered.

Mr Mohapi replied that an expansion or deviation was lawful if the NT was applied to. Anything that could lead to irregular and fruitless and wasteful expenditure was enquired into.

Mr Kekana commented that feedback on progress with cases was needed. The courts could not be waited upon. In some cases, there had been only final written warnings for transgressions similar to some that had been acted against. He asked for the reasons for this.

Mr Mohapi replied that the chairperson of the disciplinary committee could pronounce on that.

Mr Kekana asked if, when SITA was taken through the findings by an external person, it was accepted without questioning.

Mr Mohapi replied that the decision of the chairperson was accepted as final, but employees could appeal to other structures of the organisation.

Mr Kekana asked if the chairperson of the disciplinary committee went through the findings with SITA, to establish the merits of each case.

Mr Mohapi replied that reports were processed. The industrial relations (IR) function was part of that process. SITA was privy to reasons. It could make enquiries.

The Chairperson commented that SCOPA could request the charge sheet.

Ms Khonou asked why the report had surfaced only recently, when the investigation had begun in 2016. People had already been dismissed in 2017. According to NT regulations, the CEO had to ask for extensions, as the chief financial officer (CFO) did not have the authority. She asked who was to be blamed.

The Chairperson remarked that there were different levels to the report of actions taken internally and beyond SITA.  SCOPA was happy with the steps taken against employees. With reference to the Bowmans report, it had to be asked what was relevant to IPID, and what was relevant to the Hawks. There had to be engagement with SAPS and IPID, to deal with the criminality. The police would be called upon to report on their part of the investigation. Wrongdoing had to be met with firm and swift action. It had to be the norm. SCOPA would support SITA. There had to be a hard approach and toughness, to rise to new levels of excellence. He asked the DG of the Department of Telecommunications and Postal Services (DTPS) to comment.

The Mr Robert Nkuna, DG, DTPS, said that the Department had overseen SITA since 2014 and the challenges were known. The Department supported the investigation. SITA had to be restructured, and Cabinet had to grant its approval. Procurement had to be taken out of SITA. It could still set standards for procurement, and play a role in transformation and innovation in the sector. SITA could be responsible for the storage of government information. Work was being done to finalise a business case for the new entity.

The Chairperson remarked that it was to be hoped that the work would not cease in May 2019. He asked IPID to comment.

Mr Robert McBride, IPID Executive Director, commented that the SAPS, the Hawks and IPID worked well together, despite sabotage. A case would be taken to court at the end of September. There was a joint team working in Namibia, as scheming and racketeering was being replicated there. IPID was currently at the litigation stage. SAPS members were not allowed to get involved in cases where SAPS had an interest.

Mr Brauteseth asked about the suspension of a general who had sat at SCOPA meetings while a Keating supplier was building a house for her.

Lt General Nobesuthu Masiye, SAPS acting Divisional Commissioner, replied that the officer involved, General Shezi, had indeed been suspended.

The Chairperson concluded that a list of cases had been opened with SAPS. It was not advisable to open a case and walk away. Investigating officers had to be met with on a monthly basis. It would not do to have endless investigations. He told the Mr Nkuna that the next stage would be to deal with cases that emanated from the report. SCOPA had to meet with the police, to determine which cases had to go to IPID, and which to the Hawks. SCOPA wanted the information before the end of September.

The Chairperson adjourned the meeting.