As President Cyril Ramaphosa faces a backlash over his new Cabinet and Parliament’s resolution on land expropriation, he and new Finance Minister Nhlanhla Nene now have a new crisis to deal with.
In the past three months Treasury was forced to block state-owned entities and government departments from blowing R15bn on irregular purchases.
The companies and departments have continued wanting to spend money Treasury cannot afford because of a R50bn shortfall in the budget.
The largest culprits, a City Press investigation found this week, are state companies SAA, Armscor and Eskom which now fall under new Public Enterprises Minister Pravin Gordhan. They account for more than 90% of all spend Treasury blocked for flouting tender and procurement laws.
Treasury documents City Press obtained indicate that in the past three months, Treasury has stopped:
- SAA from sourcing R13bn in loans to spend on consultants to provide “cultural change services”, “organisational design” and recruiting foreign airline turnaround specialists;
- Armscor from spending R330m on direct procurement to refit the navy frigate Isandlwana;
- The SABC from buying three outside broadcast trailers for R12m without a tender;
- The SA Post Office from spending R67m on manufacturing bank cards, without a tender;
- More than five requests from Eskom totalling about R500m – including R136m on a security tender extension, R127m for a technical supplier contract extension, R85m on a printing tender extension and R43m on a catering contract extension; and
- The environmental affairs department from directly procuring R120m on goods and services without going to tender.
Senior Treasury officials told City Press that all they could do was refuse, but it did not mean the state companies and departments abided by their decision.
“In some cases government departments go ahead and deviate [from the rules],” said one.
Former finance minister Malusi Gigaba warned of this in his budget speech two weeks ago, when he said “a large number of deviations from normal procurement processes have reduced the credibility of the supply chain management system”.
“Deviations can also result in anticompetitive practices that open the door to corruption and which limit transformation by preventing small businesses from doing business with the state. In future deviations will be allowed only in rare, well-justified cases,” he said, adding that Treasury would strengthen collaboration with “all law enforcement agencies” to “fight fraud, corruption and abuse” of supply chain management systems.
Two senior Treasury sources said officials at the Office of the Chief Procurement Officer declined numerous requests to “deviate” from tender laws and “extend” existing contracts, all of which amount to “irregular, unauthorised, fruitless and wasteful” expenditure.
They said some officials in state-owned enterprises (SOEs) and departments demand kickbacks from companies after securing Treasury permission to extend or award contracts without their having to tender first.
“Very few companies are able to resist this. Some of these tenders are massive and the kickbacks run into millions,” said one.
The other said: “When it comes to extensions, government departments and companies will wait until it is too late to advertise a tender. They will then go to Treasury and ask for the current contract to be extended.
“Often they will find fault in the procurement process, cancel it and advertise again. In the meantime they approach Treasury and request another extension. This means that the contract will be extended several times and, while the process unfolds, money bags and brown envelopes are exchanging hands.”
SA Shipyards CEO Prasheen Maharaj, for whose company Armscor applied for a R330m tender deviation, had no idea that a deviation was requested in his company’s favour. “We wish to confirm that SA Shipyards has never received any tender recently or ever from Armscor or any other state entity through a process of deviation,” he said.
Deloitte, for which Eskom asked Treasury for a R22m deviation to supply IT services, was also not aware of the request. “Deloitte is not aware that Eskom was about to award a tender to it,” said CEO Lwazi Bam.
MEANWHILE IN CABINET
Although Ramaphosa was forced to retain a number of controversial Cabinet ministers in Monday’s reshuffle, most ministers implicated in state capture – including Lynne Brown, Mosebenzi Zwane and Des van Rooyen – were removed.
He came under fire for retaining others implicated in wrongdoing in the interests of ANC unity, including Malusi Gigaba, Nomvula Mokonyane and Bathabile Dlamini. They might be headed for the exit.
Other changes include a “plan for arts and culture to be merged again with sports as it was previously”, said one insider. The department of small business was also likely to be dissolved and allocated a director-general in the trade and industry department, “which would mean that Minister Lindiwe Zulu is a candidate among those headed for a full-time post in Luthuli House”, said another.
City Press has learnt that more ministers will be axed in 2019 and deployed to Luthuli House in line with the ANC’s Nasrec national conference resolutions that include that fewer national executive committee (NEC) members serve as ministers.
City Press understands that most ministers who are members of the ANC’s powerful NEC could be sent to Luthuli House full time to manage the party’s operations.
The Nasrec conference also resolved that the post of head of the ANC political school should be full time, which would affect current Arts and Culture Minister Nathi Mthethwa.
ANC head of presidency Zizi Kodwa said Monday’s Cabinet reshuffle was not about compromises but “continuity and change” designed “not to disrupt the entire operation of government”.
Kodwa said senior party leaders such as Bathabile Dlamini, who is also president of the ANC Women’s League, could not easily be dispensed with because “whatever mistakes they have made in one department, it does not disqualify them particularly as the president of the women’s league”.
A pending Auditor-General report is expected to nail new Communications Minister Nomvula Mokonyane for the dire financial state of her former department of water affairs and sanitation.
And, although Gigaba’s name was not mentioned in the former public protector’s State of Capture report, he is expected to be implicated as the judicial inquiry into state capture takes off.
One lobbyist said: “Cyril did not have to remove some of them because the processes that are unfolding will determine their fate.”
Ramaphosa’s aides say that although there is a positive public sentiment around the new president, the same was not true in his party and “the ANC can still split”.
“Remember the people who messed up were people close to [former president Jacob] Zuma and that is a fact. But you cannot remove them all because then it is a purge. So at least you deal with the Gupta ones as a start,” he said.
Another lobbyist said that while he drummed up the unity message, Ramaphosa was keenly aware of growing power contests, saying: “We are in a fierce fight and everyone has their man closely marked.”
Monday’s reshuffle announcement was delayed from 8.30pm to 10pm because of delayed meetings.
Ramaphosa first met ANC officials about the reshuffle at 8am – his “first and only meeting” with them on the subject, said insiders. Another meeting with alliance partners the SA Communist Party, union federation Cosatu and the SA National Civic Organisation was supposed to start at 5pm but started two hours late because one of the alliance leaders was on a flight and the meeting could not start without him.
A further delay was caused when Ramaphosa could not get hold of one of the ministers getting the boot, who was also on a flight.
STORM OVER LAND
Ramaphosa also has to deal with the storm resulting from Parliament’s passing of a motion to amend section 25 of the Constitution on property rights.
Ramaphosa said there was nothing to panic about and there would be “no smash-and-grab of land in our country”.
“That we will not allow. There is no need for anyone to panic and beat the drums of war,” he said this week, adding that the “issue would be solved without any problems”.
The ANC has also moved to allay fears over its effect on the economy and food security.
ANC spokesperson Pule Mabe said: “There should not be any upheaval or worry from the international community ... we have implemented major decisions without creating any kind of upheaval.” This followed the lobbying of some in the international community to “intervene” to avoid a repeat of the Zimbabwe land-grab crisis.
WHAT THEY SAID
SAA CEO Vuyani Jarana said he approached Treasury to request the deviations because the airline was in a dire financial situation.
“At the heart of it all were liquidity issues. We understood why Treasury said no, we just wanted to be pragmatic.
“When Treasury said no, we went the long route. But the board was anxious to get things done,” he said.
But a senior manager at Treasury said “Jarana’s requests had no substance”.
“In any case, we told him what his procurement department had been telling him all along, to allow procurement processes to be followed to the letter.”
Eskom spokesperson Khulu Phasiwe said it could not appoint Deloitte because Treasury blocked the appointment.
Environmental affairs department spokesperson Albi Modise said the request to Treasury to appoint a service provider directly was informed by the agency’s internal capacity and specialist staff.
Armscor and SABC were unavailable for comment.
In the past three months Treasury was forced to block state-owned entities and government departments from blowing R15bn on irregular purchases.
The companies and departments have continued wanting to spend money Treasury cannot afford because of a R50bn shortfall in the budget.
The largest culprits, a City Press investigation found this week, are state companies SAA, Armscor and Eskom which now fall under new Public Enterprises Minister Pravin Gordhan. They account for more than 90% of all spend Treasury blocked for flouting tender and procurement laws.
Treasury documents City Press obtained indicate that in the past three months, Treasury has stopped:
- SAA from sourcing R13bn in loans to spend on consultants to provide “cultural change services”, “organisational design” and recruiting foreign airline turnaround specialists;
- Armscor from spending R330m on direct procurement to refit the navy frigate Isandlwana;
- The SABC from buying three outside broadcast trailers for R12m without a tender;
- The SA Post Office from spending R67m on manufacturing bank cards, without a tender;
- More than five requests from Eskom totalling about R500m – including R136m on a security tender extension, R127m for a technical supplier contract extension, R85m on a printing tender extension and R43m on a catering contract extension; and
- The environmental affairs department from directly procuring R120m on goods and services without going to tender.
Senior Treasury officials told City Press that all they could do was refuse, but it did not mean the state companies and departments abided by their decision.
“In some cases government departments go ahead and deviate [from the rules],” said one.
Former finance minister Malusi Gigaba warned of this in his budget speech two weeks ago, when he said “a large number of deviations from normal procurement processes have reduced the credibility of the supply chain management system”.
“Deviations can also result in anticompetitive practices that open the door to corruption and which limit transformation by preventing small businesses from doing business with the state. In future deviations will be allowed only in rare, well-justified cases,” he said, adding that Treasury would strengthen collaboration with “all law enforcement agencies” to “fight fraud, corruption and abuse” of supply chain management systems.
Two senior Treasury sources said officials at the Office of the Chief Procurement Officer declined numerous requests to “deviate” from tender laws and “extend” existing contracts, all of which amount to “irregular, unauthorised, fruitless and wasteful” expenditure.
They said some officials in state-owned enterprises (SOEs) and departments demand kickbacks from companies after securing Treasury permission to extend or award contracts without their having to tender first.
“Very few companies are able to resist this. Some of these tenders are massive and the kickbacks run into millions,” said one.
The other said: “When it comes to extensions, government departments and companies will wait until it is too late to advertise a tender. They will then go to Treasury and ask for the current contract to be extended.
“Often they will find fault in the procurement process, cancel it and advertise again. In the meantime they approach Treasury and request another extension. This means that the contract will be extended several times and, while the process unfolds, money bags and brown envelopes are exchanging hands.”
SA Shipyards CEO Prasheen Maharaj, for whose company Armscor applied for a R330m tender deviation, had no idea that a deviation was requested in his company’s favour. “We wish to confirm that SA Shipyards has never received any tender recently or ever from Armscor or any other state entity through a process of deviation,” he said.
Deloitte, for which Eskom asked Treasury for a R22m deviation to supply IT services, was also not aware of the request. “Deloitte is not aware that Eskom was about to award a tender to it,” said CEO Lwazi Bam.
MEANWHILE IN CABINET
Although Ramaphosa was forced to retain a number of controversial Cabinet ministers in Monday’s reshuffle, most ministers implicated in state capture – including Lynne Brown, Mosebenzi Zwane and Des van Rooyen – were removed.
He came under fire for retaining others implicated in wrongdoing in the interests of ANC unity, including Malusi Gigaba, Nomvula Mokonyane and Bathabile Dlamini. They might be headed for the exit.
Other changes include a “plan for arts and culture to be merged again with sports as it was previously”, said one insider. The department of small business was also likely to be dissolved and allocated a director-general in the trade and industry department, “which would mean that Minister Lindiwe Zulu is a candidate among those headed for a full-time post in Luthuli House”, said another.
City Press has learnt that more ministers will be axed in 2019 and deployed to Luthuli House in line with the ANC’s Nasrec national conference resolutions that include that fewer national executive committee (NEC) members serve as ministers.
City Press understands that most ministers who are members of the ANC’s powerful NEC could be sent to Luthuli House full time to manage the party’s operations.
The Nasrec conference also resolved that the post of head of the ANC political school should be full time, which would affect current Arts and Culture Minister Nathi Mthethwa.
ANC head of presidency Zizi Kodwa said Monday’s Cabinet reshuffle was not about compromises but “continuity and change” designed “not to disrupt the entire operation of government”.
Kodwa said senior party leaders such as Bathabile Dlamini, who is also president of the ANC Women’s League, could not easily be dispensed with because “whatever mistakes they have made in one department, it does not disqualify them particularly as the president of the women’s league”.
A pending Auditor-General report is expected to nail new Communications Minister Nomvula Mokonyane for the dire financial state of her former department of water affairs and sanitation.
And, although Gigaba’s name was not mentioned in the former public protector’s State of Capture report, he is expected to be implicated as the judicial inquiry into state capture takes off.
One lobbyist said: “Cyril did not have to remove some of them because the processes that are unfolding will determine their fate.”
Ramaphosa’s aides say that although there is a positive public sentiment around the new president, the same was not true in his party and “the ANC can still split”.
“Remember the people who messed up were people close to [former president Jacob] Zuma and that is a fact. But you cannot remove them all because then it is a purge. So at least you deal with the Gupta ones as a start,” he said.
Another lobbyist said that while he drummed up the unity message, Ramaphosa was keenly aware of growing power contests, saying: “We are in a fierce fight and everyone has their man closely marked.”
Monday’s reshuffle announcement was delayed from 8.30pm to 10pm because of delayed meetings.
Ramaphosa first met ANC officials about the reshuffle at 8am – his “first and only meeting” with them on the subject, said insiders. Another meeting with alliance partners the SA Communist Party, union federation Cosatu and the SA National Civic Organisation was supposed to start at 5pm but started two hours late because one of the alliance leaders was on a flight and the meeting could not start without him.
A further delay was caused when Ramaphosa could not get hold of one of the ministers getting the boot, who was also on a flight.
STORM OVER LAND
Ramaphosa also has to deal with the storm resulting from Parliament’s passing of a motion to amend section 25 of the Constitution on property rights.
Ramaphosa said there was nothing to panic about and there would be “no smash-and-grab of land in our country”.
“That we will not allow. There is no need for anyone to panic and beat the drums of war,” he said this week, adding that the “issue would be solved without any problems”.
The ANC has also moved to allay fears over its effect on the economy and food security.
ANC spokesperson Pule Mabe said: “There should not be any upheaval or worry from the international community ... we have implemented major decisions without creating any kind of upheaval.” This followed the lobbying of some in the international community to “intervene” to avoid a repeat of the Zimbabwe land-grab crisis.
WHAT THEY SAID
SAA CEO Vuyani Jarana said he approached Treasury to request the deviations because the airline was in a dire financial situation.
“At the heart of it all were liquidity issues. We understood why Treasury said no, we just wanted to be pragmatic.
“When Treasury said no, we went the long route. But the board was anxious to get things done,” he said.
But a senior manager at Treasury said “Jarana’s requests had no substance”.
“In any case, we told him what his procurement department had been telling him all along, to allow procurement processes to be followed to the letter.”
Eskom spokesperson Khulu Phasiwe said it could not appoint Deloitte because Treasury blocked the appointment.
Environmental affairs department spokesperson Albi Modise said the request to Treasury to appoint a service provider directly was informed by the agency’s internal capacity and specialist staff.
Armscor and SABC were unavailable for comment.
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