PRESENTATION TO THE PORTFOLIO COMMITTEE ON HUMAN SETTLEMENTS BY - PowerPoint Presentation

1. PRESENTATION TO THE PORTFOLIO COMMITTEE ON HUMAN SETTLEMENTS BYADV. ANDY MOTHIBI05 JULY 2023

2. TABLE OF CONTENTSSIU investigations at Human SettlementsThe SIU’s Legislative MandateThe SIU MethodologySIU outcomes consequence managementLimpopo: Housing Development AgencyEastern Cape: Housing Development AgencyMpumalanga : Human Settlement DepartmentFree State: Human Settlement DepartmentGauteng: Human Settlement Department

3. The SIU’s Legislative MandateEmpowering Legislation Special Investigating Units and Special Tribunals Act, 1996 (Act no. 74 of 1996) (“SIU act”). Major FunctionsInvestigate corruption, malpractice and maladministrationInstitute civil proceedingsSIU PowersAble to subpoena, search and seize evidence, and interrogate witnesses under oath (once a proclamation has been issued) Institute civil litigation to recover state funds lost or to prevent future losses Out of SIU Mandate Arrest or prosecute offenders Implement disciplinary actionsWorks closely with other relevant agencies where its powers fall shortVision“The State’s preferred and trusted forensic investigation and litigation agency.“Mission“We are the State’s preferred provider of forensic investigating and litigating services working together with other agencies in the fight to eradicate corruption, malpractice and maladministration from society.”3

4. SIU METHODOLOGYSIU KEY SKILLS4

5. SIU OUTCOMESCONSEQUENCE MANAGEMENTSYSTEMIC RECOMMENDATIONS5

6. BackgroundPROCLAMATION R23 of 2020Limpopo: Housing Development Agency

7. 7The SIU received a request from the Premier, Mr CS Mathabatha on the 9th of July 2020, to investigate certain allegations with regard to procurement during the national state of disaster at Co-operative Governance, Human Settlements & Traditional Affairs (“COGHSTA”). In this allegation, COGHSTA appointed an implementing agent, the Housing Development Agency (“HDA”) for the establishment of transitional residential areas.The Limpopo Provincial Department of Co-operative Governance, Human Settlements & Traditional Affairs (“COGHSTA”) identified a number of densely populated informal settlements in Limpopo Province which made it difficult to practise social distancing. COGHSTA prioritised two informal settlements, Talana Hostel and Burgersfort Ext. 10, which required urgent attention in the form of a partial relocation. On 08 May 2020, COGHSTA appointed HDA as an implementing agent.Background

8. 8 HDA appointed a service provider, Aventino Group CC, to construct 192 TRA’s. The contract value was R 12 372 672.00 and an extension of scope was approved for an additional amount of R 3 019 531.03. The total contract value is: R 15 392 203.03 The process of appointing a contractor for HDA/RSA/2020/001 started in March 2020 and Aventino Group CC was appointed on 18 May 2020. The contract relates to the “Construction as per design, 192 Temporary Residential Accommodation’s (“TRA’s”), 30 square meter, at Greater Tzaneen (Talana Hostel), and Fetakgomo Tubatse (Burgersfort ext. 10).”Background

9. 9Status of the InvestigationCovid-19 De-densification ProjectStatusInvestigation is in support phaseFindingsSIU did site inspections on 10 September 2020 and found at Talana Hostel that all 40 structures were build. On the Burgersfort Ext.10 site, no structures were complete, there was only half build structures.A total payment of R 2 577 640.00 was made to Aventino from 1 April 2020 up to 15 October 2020. No any further payments were made to Aventino.Aventino committed fraud by misrepresenting the facts about its professional team to be used in the tender. Five professional team members denied having any knowledge or involvement with Aventino.OutcomesCivil recovery: This matter is at Tribunal. The SIU and Aventino have reached a settlement agreement in August 2022, SIU attorney is still awaiting an outcome from the Honorable Justice Naidoo to issue the court order. Disciplinary referral: On 23 March 2020, the SIU made three (3) disciplinary referrals to the HDA against Bid Adjudication Committee and Bid Evaluation Committee members. Enquiry has been made with the HDA for the status update on the matter and the SIU is still awaiting for the feedback.

10. 10Status of the InvestigationCovid-19 De-densification ProjectStatusInvestigation is in support phaseOutcomesNPA: The case number is Polokwane CAS: 384/12/2020, the charge is Fraud. The arrests were made by the Hawks on 17 December 2020 and the case went to court. On 24 June 2022 the matter was set down for trial, however the magistrate struck the case of the roll because the copies of the case docket were not provided to the defense. New Investigating Officer (IO) was appointed on the matter, according to the new IO, the matter is with the Control Prosecutor for the Specialised Commercial Crimes Court, Polokwane and she is waiting for the warrant of arrest to be issued.Blacklisting: The SIU also recommended Aventino and its Director to be placed on the database of restricted suppliers. Follow-up will be made with HAD for progress update.

11. BackgroundPROCLAMATION R23 of 2020Housing Development AgencyEastern Cape

12. 12Background In an effort to mitigate the spread of the Covid-19 pandemic, a decision was taken to construct emergency housing units in identified areas to assist with the de-densification of densely populated informal settlements across all provinces of the Republic.On 22 May 2020, a contract was signed with NJR Projects (Pty) Ltd (Reg: 2012/123584/07), which subsequently changed its name to G5 Group (Pty) Ltd (registration number remained the same) (“G5”), to construct 1 174 top structures (i.e. a 30m² basic house) in the Duncan Village area at a total cost of R87 001 794.10 (incl. VAT).In July 2020, a 118% extension of scope of works of G5’s contract was approved by the HDA Bid Adjudication Committee.The extension resulted in an additional cost of R86 106 471.45 (incl. VAT). This brought G5’s total contract value to R173 108 265.55.

13. 13Status of the InvestigationCovid-19 De-densification ProjectStatusInvestigation is in support phaseFindingsTo date the target of occupying 1 174 TRAs in de-densifying Duncan Village in mitigating the spread of the Covid-19 pandemic, as initially planned for some 2 years ago, has not been met. Approximately only half of the TRA’s have been built.Furthermore, the specifications changed dramatically to include building of roads and installation of electricity, water services, sewage and storm water drains for each unit. Initially, each unit did not have its own electrical, water service and sewage and that there was only communal services that served the entire community. The SIU’s investigation has revealed that there is evidence that points towards HDA contravening section 217 (1) of the Constitution and paragraph 3.6 of National Treasury Instruction No. 5 of 2020/2021 dated 28 April 2020 in that HDA extended and/ or varied the specifications and for the construction of TRU’s beyond the threshold of 30% or R30 million.OutcomesCivil recovery: Appointed counsel is in the process of drafting papers for the Special Tribunal for the recovery R86m.Disciplinary referral: Of the six officials identified, four have since left the employ of the HDA. The disciplinary referrals are to be delivered to the HDA against the remaining two officials on or before the 7th of July 2023.Criminal Referral: No criminal referral could be made against the former CEO in terms of PMFA.

14. BackgroundPROCLAMATION R23 of 2020EC Department of Human Settlement

15. 15After receiving allegations as to the irregular appointment of four service providers to erect 1800 temporary shelters in overcrowded and dense informal settlements in an effort to mitigate the spread of the COVID 19 pandemic. The SIU initiated an investigation under the mandate of Proclamation R.23 OF 2020. It was established that approval was obtained from the Head of the Department (“HoD”) to deviate from the prescribed procurement process and appoint four service providers from a process that had been concluded in the Department. During the initial investigation, the SIU further established that prior to the COVID 19 pandemic, the ECDHS had appointed the same four service providers to supply and erect temporary shelters for families affected by a natural disaster. The SIU was made aware that the process followed in the procurement of the four service providers was rigged with irregularities and necessitated the SIU to investigate same.Background

16. 16Status of the InvestigationProcurement of 4 service providers to erect temporary shelter for victims effected by a natural disaster StatusInvestigation is ongoingFindings (interim)Several bid submissions contained fraudulent documentation and had the ECDHS known such at the time of the bid assessment, contracts to the various service providers would not have occurred.Further aspects of maladministration are being investigated with the view of gathering evidence to support possible civil litigation, disciplinary action against the ECDHS officials implicated and systemic recommendationsOutcomesCriminal referral: Two referrals were sent to the National Prosecuting Authority against one service provider and its Director. The SIU is busy with additional criminal referrals against other service providers.Civil recovery: No referral is made, as yet. The investigation is ongoing and it is to be finalized on the 31st of July 2023. Disciplinary referral: No referral is made, as yet. The investigation is ongoing and it is to be finalized on the 31st of July 2023.

17. Key Challenges & LimitationsNo.Key ChallengesRemedial Action1.Non-availability of documents. Documentation was initially indicated as missing. Through a concerted effort, SCM files were eventually located. Documentation continues to be received in piece meal. The use of Section 5 of the SIU Act had facilitated this process.17

18. 18ObservationsThere has been an abuse of ‘emergency procurement’ in the procurement process relating to the National Disaster. There has been a lot of deviations in the procurement processes and mostly to circumvent prescribed processes.There has been an overlap between disaster management and Covid related procurement.Institutions generally do not follow their own procurement policiesGeneral poor record management.Delay in handing over of the requested documents and records.

19. BackgroundPROCLAMATION R23 of 2020Mpumalanga Department of Human Settlement

20. 20MDHS embarked on a project aimed at installing or refurbishing boreholes as well the provision and installation of water storage tanks at 247 schools in the Mpumalanga province. A further 129 communities were identified for the provision and installation of water storage tanks. The project also included the supply and installation of 11 large steel water reservoirs. DHS appointed 3 service providers, one per district, to implement the projects on a turnkey basis. A service provider was appointed separately for the provision and installation of the reservoirs. The project was overseen by the Project Management Unit (PMU) of the MDHSThe total budget allocated for the projects was R182 707 185.13Background

21. 21Status of the InvestigationProcurement of services for the provision of water related infrastructureStatusInvestigation is ongoingFindings (interim)Large steel tanks which came at a cost of R 5 million each have been installed by the service provider by they are not operational. It bares mentioning that when the verification was conducted it was noted that there were other steel tanks previously provided to the area which were also not operational, these were vandalised. The amount paid (R 5 mil) could also be grossly inflated.A tank collapsed and killed a learner in one of the schools, the contractor is under investigation by SAPS and has been replaced by the Department.In some cases sites were identified by the Municipality but no work has been done.In some cases boreholes were erected but they are not functioning.OutcomesNo referrals made yet, awaiting report from Quantity Surveyor. The Quantity Surveyor requested information from the Department to finalise the report which is due by the end of July 2023. The referrals will be made on or before the end of August 2023.

22. BackgroundPROCLAMATION R23 of 2020Free State Department of Human Settlements

23. 23BackgroundIn an effort to mitigate the spread of the Covid-19 pandemic, various measures were taken by departments. One such measure taken by the Free State Department of Human Settlements was the identification and acquisition of land for the provisioning of temporary relocation areas and structures to allow for, amongst other, the de-densification of households and individuals.A tender was advertised by the Free State Department of Human Settlements on 27 March 2020, inviting contractors to submit tenders for the construction of 7 381 temporary shelters for Covid-19 in the Free State.The bid was awarded to Rich Soil Resources (Pty) Ltd on 8 April 2020. Their bidding price was R151 307 539.57.Rich Soil Resources (Pty) Ltd proceeded to erect 537 structures at the Maluti-A-Phofung Municipality and received payment in the amount of R12 611 380.89 before the contract was ended.

24. 24Status of the InvestigationProcurement of Rich Soil Resources (Pty) Ltd to erect temporary sheltersStatusThe investigation is in the supporting phase, supporting ongoing remedial action such as the referral to the NPA, the disciplinary referral and the ongoing civil action in the Special TribunalFindingsThe Head of the Free State Department of Human Settlements (HoD) failed to approve the deviation for the bid process and his decision to seek approval from Treasury for the deviation of the procurement process is unlawful.The Department proceeded with the bid process without the mandatory approval from the HoD.The Department selected entities to submit bids which did not comply with the requirements.The decision to award the tender to Rich Soil Resources (Pty) Ltd was unlawful and should be set aside.The agreement between Rich Soil Resources (Pty) Ltd and the Department is void.

25. 25Status of the InvestigationProcurement of Rich Soil Resources (Pty) Ltd to erect temporary sheltersOutcomesCriminal referralA referral was made on 11 December 2021 to the NPA. The referral was against the Accounting Officer at the time for failing to comply with section 38(1) of the PFMA, which made him guilty of an offence terms of section 86 of the PFMA. A criminal case was registered, which is investigated by the Directorate Priority Crime Investigations under Park Road CAS 572/03/2021. Civil recoveryThe SIU filed an application in the Special Tribunal on 21 February 2022 to review the decisions made by the Department and the awarding of the contract, and also to claim back the money paid to the service provider. This matter is on the unopposed roll and we expect judgement in due course.Disciplinary referralsA referral was made on 2 February 2021 to the Premier. This referral was against the Accounting Officer at the time for failing to comply with section 38(1) of the PFMA, which made him guilty of financial misconduct in terms of section 81 of the PFMA. Also for failing to comply with Regulations 11 and 14 of Chapter 2 of the Public Service Regulations. The person’s contract expired before disciplinary action was taken.

26. BackgroundPROCLAMATION R39 of 2019Free State Department of Human Settlements

27. 27BackgroundA complaint was received from a whistle blower who made various allegations regarding the appointment of a service provider to undertake a technical assessment of old township houses roofed with asbestos. The SIU applied for a proclamation to investigate the allegations.The SIU was mandated, through the issuance of Proclamation R.39 pf 2019 to conduct an investigation into the affairs of the Free State Department of Human Settlements (Department) in respect of, inter alia:The procurement of, or contracting for, services pertaining to the identification and removal of asbestos from houses in the Free State by or on behalf of the Department and payments made in respect thereof in a manner that was not fair, equitable, transparent, competitive or cost effective and contrary to applicable legislation;Any related unauthorised, irregular or fruitless and wasteful expenditure incurred as a result thereof; andAny unlawful or improper conduct by the employees or officials of the Department, the applicable service providers, or any other person or entity in relation to the allegations set out above.

28. 28BackgroundOn 28 May 2014 a proposal was submitted to the Department by two entities, namely Blackhead Consulting and Diamond Hill Trading 71. A Joint Venture namely Diamond Hill Trading 71 – Blackhead JV was appointed by the Department. This was followed by the signing of a Service Level Agreement and the issuing of an Instruction to Perform Work dated 2 December 2014.The value of the contract was R255 000 000.00 and a total of R230 000 000.00 was paid to the JV by the Department.

29. 29Status of the InvestigationProcurement of Diamond Hill Trading 71 – Blackhead Joint Venture for the identification and removal of asbestos from houses in the Free StateStatusThe investigation is in the supporting phase, supporting ongoing remedial action such as the referral to the NPA, the disciplinary referrals and the ongoing civil action in the High CourtFindingsThe main findings were as follow:The procurement process in respect of the appointment of the service provider did not comply with section 217(1) of the Constitution and the subsequent Service Level Agreement was voidDue to the fact that the procurement process was irregular, the expenditure of R230 000 000.00 that was incurred, constituted irregular expenditureThe amount of R208 608 510.70 that the Department overpaid (R230 000 000.00 minus R21 391 489.30 (the amount for which the services could have been rendered), constitutes fruitless and wasteful expenditure

30. 30Status of the InvestigationProcurement of Diamond Hill Trading 71 – Blackhead Joint Venture for the identification and removal of asbestos from houses in the Free StateOutcomesCriminal referralA referral was made on 10 February 2020 to the NPA. The referral was against the Accounting Officer at the time, Blackhead Consulting (Pty) Ltd and the Joint Venture for the commission of offences in terms of the Prevention and Combating of Corrupt Activities Act, Act No. 12 of 2004 (PACOCA Act). The referral was investigated by the Directorate Priority Crime Investigations and the NPA prosecuted a number of officials, private individuals and entities. The criminal case is ongoing in the High Court. In addition, the Asset Forfeiture Unit obtained a Restraining Order to the value of R300 000 000.00 against some of the accused. Civil recoveryThe SIU has joined the Department in defending a claim in the High Court by Blackhead Consulting (Pty) Ltd for the outstanding payment of a R25 000 000.00.In addition, the SIU has also joined the Department in counter civil action against the service provider in the High Court. This civil action is aimed at reviewing and setting aside the Service Level Agreement entered into between the Department and the Joint Venture and to claim back losses suffered by the Department. This civil action is ongoing.

31. 31Status of the InvestigationProcurement of Diamond Hill Trading 71 – Blackhead Joint Venture for the identification and removal of asbestos from houses in the Free StateOutcomesDisciplinary referralsThree disciplinary referrals were made on 15 June 2021 against 3 senior officials at the Department for the contravention of section 45 of the PFMA. These referrals are being attended to by the Department.A referral was made on 6 August 2021 to the Premier. This referral was against the Accounting Officer at the time for the contravention of sections 38(1)(a)(iii) and 38(1)(c)(ii) of the PFMA. Also for the contravention of section 3(a)(ii) and/or (iii) and/or (iv) read with sections 1, 2, 20, 24, 25 and 26 of the PACOCA Act. The person’s contract ended before disciplinary action was taken. RecommendationsThe SIU made a number of recommendations to the Department in order to prevent reoccurrence.

32. Key Challenges & LimitationsNo.Key ChallengesRemedial Action1.Non-availability of documents. Documentation was initially indicated as missing. Through a concerted effort, SCM files were eventually located. Documentation continues to be received in piece meal. The use of Section 5 of the SIU Act had facilitated this process.32

33. BackgroundProc R22 of 2016 Lepelle Northern Water & Gauteng Department of Human Settlements

34. Background The Schedule provides for the investigation of the following matters:1. The appointment of the LTE Consulting (Pty) Limited (“LTE”) by the Department to render services to the Department in respect of Tender No: G05020078/1 – Tender for Sweetwaters (Kanana Park Extension 6) Reticulation Networks: The Construction of Sweetwaters Reticulation Network for Water and Sewer – and payments made to LTE in a manner that was: (a) not fair, equitable, transparent, competitive or cost – effective; or (b) contrary to applicable- (i) legislation (ii) manuals, guidelines, practice notes or instructions issued by the National Treasury; or (iii) manuals, policies, procedures, prescripts, instructions or practices of or applicable to the Department; and any related unauthorised, irregular or fruitless and wasteful expenditure incurred by the Department.34Proc R22 of 2016 Lepelle Northern Water & Gauteng Department of Human Settlements

35. 35Status of the InvestigationProc R22 of 2016 Lepelle Northern Water & Gauteng Department of Human SettlementsOutcomesDisciplinary referrals3 Disciplinary referrals supporting charges of misconduct in respect of 3 GDHS officials was made on 13 November 2017. We have not obtained update from the department.NPA referralsReferral to NPA and AFU was made in respect of 7 GDHS officials/entities for corruption on 3 April 2018. Referral to regulatory bodiesReferred evidence to SARS on 6 March 2018 relating to a false tax clearance certificate of the appointed contractor and the corruption relating to the above 7 officials/entities.Referred evidence to Construction and Industry Development Board on 10 November 2017.

36. 36Status of the InvestigationProc R22 of 2016 Lepelle Northern Water & Gauteng Department of Human SettlementsOutcomesCivil RecoveryInstituted civil litigation on 29 March 2018 to set aside the contract to the value of R108 300 000. The case number is 22781/18 and has been issued out of the Gauteng High Court. The respondents are opposing the matter. The respondents have not filed their opposing papers within the prescribed time limits and the SIU briefed counsel to draft notice to compel the respondents to file and serve its opposing papers. The SIU applied for a hearing date on 23 June 2022 and the respondents did not respond. The investigation has been concluded and the Presidential Report was signed off and submitted on 20 September 2018 to the Office of the President.

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