PRESENTATION TO SCOPA ON PRASA INVESTIGATIONS AND PROPOSED NEW PROCLAMATION.
SIU conducted investigations at PRASA in line with Proclamation R51 of 2019, proposing motivations for a new Proclamation, focusing on lifestyle audits and consequence management through civil litigation, disciplinary actions, and more.
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PRESENTATION TO SCOPA ON PRASA INVESTIGATIONS AND PROPOSED NEW PROCLAMATION ADV. ANDY MOTHIBI 16 MAY 2023
TABLE OF CONTENTS SIU investigations at PRASA The SIU s Legislative Mandate Proclamation R51 of 2019 progress update Motivation for a new Proclamation Lifestyle Audits
The SIUs Legislative Mandate Empowering Legislation Special Investigating Units and Special Tribunals Act, 1996 (Act no. 74 of 1996) ( SIU act ). Vision Mission The State s preferred and trusted forensic investigation and litigation agency. 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. Out of SIU Mandate SIU Powers Major Functions Arrest or prosecute offenders Investigate corruption, malpractice and maladministration Able to subpoena, search and seize evidence, and interrogate witnesses under oath (once a proclamation has been issued) Implement disciplinary actions Works closely with other relevant agencies where its powers fall short Institute civil proceedings Institute civil litigation to recover state funds lost or to prevent future losses 3
SIU METHODOLOGY Forensic Data Analytics Forensic Accounting Forensic Investigation Civil litigation Legal's Cyber Forensics SIU KEY SKILLS 4
SIU OUTCOMES CONSEQUENCE MANAGEMENT CIVIL LITIGATION Institute civil proceedings where there are potential recoveries of assets. Apply for preservation orders at an early stage of investigation where there evidence. DISCIPLINARY ACTION REFERRALS TO ESKOM PROSECUTION REFERRALS TO THE NPA REFERRAL TO OTHER REGULATORY AUTHORITIES SUCH AS: SARS CIDB is prima facie SYSTEMIC RECOMMENDATIONS 5
Background PROCLAMATION R51 of 2019 PROGRESS UPDATE
Background In May 2019, the SIU and PRASA entered into a Secondment Agreement which ended on 30 August 2019. The scope included: Collect and analyse investigation reports prepared by Werksmans Attorneys and forensic investigation firms commissioned by National Treasury in compliance to the Public Protector s Report issued in August 2015; Collect and analyse management reports of irregular and/or fruitless and wasteful expenditure identified by the Auditor- General in the Annual Financial Statements for the financial years 2015/16, 2016/17 and 2017/18; Provide an opinion on whether the allegations/findings contained in the reports mentioned above have any merit to pursue a Proclamation; Submit a report to the Board of Control of PRASA detailing the findings of the review; Advise the Board of Control of PRASA on those matters that may require further investigation by the SIU in terms of a proclamation issued by the President in terms of Section 2 of the SIU Act. 7
Background Members were provided with a compact disc containing 288 investigation reports for review, of which 227 were complete but with no annexures. There were 37 investigation reports (Section 34 Referrals) that were referred by PRASA to the DPCI for further investigation. There were 23 investigation reports outstanding. This was due to non-availability of investigation reports either from Werksmans Attorneys or National Treasury. The GCEO wrote letters to National Treasury and Werkmans Attorneys to obtain the reports, with no luck. Werksmans Attorneys reported that 32 contracts referred to them were of the value below R10m and were investigated by PRASA s Internal Audit. We received only 17 of these reports. 8
Background Members analysed all the 227 reports received. The reviewed investigation reports were categorised as follows: We have noted a duplication of some of the reports that would appear on both confinements and competitive bidding categories. On 26 June 2019, we submitted a motivation for Proclamation to the Presidency. The Motivation was based on the 20 investigation reports that were reviewed by 31 May 2019. The Proclamation was gazetted on 30 August 2019 with seven focus areas covering at least 102 contracts of the 227 investigation reports reviewed. 9
SIUs Mandate and Focus Areas Proclamation R51 of 2019 mandates the SIU to investigate the procurement of or contracting for 1. security services; 2. general overhaul and upgrade services; 3. works or services in respect of systems overhauling, repair of rails and infrastructure, or maintenance through the implementation of the Supplier Development Programme; 4. an advanced early detection cable theft solution in the Bonteheuwel-Phillipi Corridor in the Western Cape; 5. travel management services; 6. supply of mobile transporters; and 7. forensic services. We have identified 27 matters for investigation covering all the seven focus areas with the of R7.3 billion. 10
Focus Area 1 : Procurement of Security Services Status Investigation is complete Findings Irregular confinement of the 7 service providers to the value of R1,5bn Intense contract value of R98.6m Criminal evidence have been referred to the NPA against six former Accounting Officers for the contravention of various sections of the PFMA. Outcomes 2 Disciplinary referrals for Senior officials were submitted to PRASA. Disciplinary referrals against 3 other PRASA and 1 SAPS official/s who used to be employed at PRASA was submitted to PRASA. Two service providers were referred to SARS for tax irregularities. An Acknowledgement of Debt to the value of R122k was signed by one service provider for R122 000 for invoice overpayment. 11
Focus Area 2: General Overhaul and Maintenance Services Status Investigation on 8 entities is complete Findings CTE, Opiconsivia: No overpayment and no corrupt relations were confirmed as alleged. DCD Contract value of R86 812 350,63 Chanlou Contract value of R95 882 491,15 Armcoil Contract value of R R66 234 640.52 Bhayi Khetya Contract value of R3 946 124,47 All the above mentions service providers were appointed based on an irregular confinement memoranda. No contracts were signed with the service providers. Outcomes Criminal evidence have been referred to the NPA against six former Accounting Officers for the contravention of various sections of the PFMA. 12
Focus Area 2: General Overhaul and Maintenance Services Findings Isiphikeleni Senyoni: Payments made prior to the contract period. Irregular condonation for payment of R32m made above the contract amount of R90m. Siyaya DB: R131m contract value. R71m on Variation Orders. Quantification of payments concluded and a variance of R64m between the contract amount, variation orders and payments made by PRASA to service provider. Outcomes Isiphikeleni Senyoni: Disciplinary referral against a senior official have been submitted to PRASA. 13
Focus Area 3 : Supplier Development Program 6 service providers Status Investigation is complete Findings Active Power: The service provider was appointed irregularly Nandisa Milisa: The service provider was appointed irregularly and was found to have committed fraud amounting to 4m. Outcomes Nandisa Milisa: 4 NPA referral against the service provider, Director and two former employees. 5 PRASA disciplinary referrals were submitted and 4 of those affected officials (Mr Theoane, Mr Khumalo, Mr Mukwata and Mr Nyathi) have been dismissed . Conogon: Criminal evidence have been referred to the NPA against three former Accounting Officers and one former Company Secretary for the contravention of various sections of the PFMA. 14
Focus Area 3: Supplier Development Program Findings Bakara: Irregular condonation of R11m for payment made above the contract amount and in contravention of Treasury Note 3 2016/2017 provisions. David Sekgobela: Irregular appointment under confinement to a value of R101 495 651.66 Outcomes Bakara: Disciplinary referral against a senior official has been submitted to PRASA David Sekgobela: Criminal evidence have been referred to the NPA against three former Accounting Officers and one former Company Secretary for the contravention of various sections of the PFMA. 15
Focus Area 3 : Supplier Development Program Status Findings Wave Armature: Irregular appointment under confinement to a value of R57 221 358.44. Outcomes Wave Armature: Criminal evidence have been referred to the NPA against six former Accounting Officers for the contravention of various sections of the PFMA. 16
Focus Area 4: Early detection of cable theft solution Status Investigation is complete. Findings Take Note Trading Service provider was appointed via an irregular confinement process and was paid R9m via irregular variation orders. Outcomes Disciplinary Referral against 3 PRASA senior officials for irregular approval on variation orders that were over and above the permissible contract percentage were submitted to PRASA Criminal evidence have been referred to the NPA against six former Accounting Officers for the contravention of various sections of the PFMA. 17
Focus Area 5 : Travel Management Services Status Investigation is complete Findings Gemini Moon Irregularity found on contract terms changed after the award was made. Outcomes Criminal evidence have been referred to the NPA against one GCEO for the contravention of various sections of the PFMA. 18
Focus Area 6 : Supply of mobile transporters Status Investigation is complete Semele Trading Procurement of the service provider was approved without sufficient budget which amounted to unauthorized expenditure amounting to R18m. 1 DC referred to PRASA for Business Unit Manager was submitted to PRASA. Findings Outcomes SARS referral. 19
Focus Area 7: Procurement of Forensic Services Status Investigation is complete. Valucorp: Company was appointed through an irregular variation order amounting to R24m. Findings Werkmans Attorneys: The firm was appointed though an irregular process and was paid fees to the value of R170m for forensic investigation services. Valucorp: Evidence pointing to Contravention of various sections of the PFMA was referred to the NPA Outcomes Werkmans Attorneys: The SIU is considering the appropriate action against two former Board members. 20
2020 Secondment Agreement On 11 September 2020, the SIU and PRASA entered into a Secondment Agreement to investigate: a) Material irregularities identified by the office of the Auditor General; b) Anonymous allegations made by whistle blowers; and c) Irregularities identified by Werksmans Attorneys. In total there were 17 Focus areas identified for investigation under the Secondment Agreement. And one matter that was reported by a whistleblower to PRASA. All these investigations were completed and the SIU is currently supporting PRASA in disciplinary proceedings. 21
Status No. Matter under Investigation Progress to Date Report Submitted on: 31 August 2021 1. Unfair, non-transparent and not cost-effective process followed in the Investigation completed. appointment of Ziyenzeka Weed Control & General Services Assisting PRASA with Disciplinary Proceedings 15 September 2021 2. Unfair disqualification of bidder after scoring the highest points resulting Investigation completed. in an incorrect award to Khumbula Consulting. Assisting PRASA with Disciplinary Proceedings 31 August 2021 3. No procurement process followed in the appointment of Aburec Fencing Investigation completed. CC Assisting PRASA with Disciplinary Proceedings 30 June 2021 4. Unfair, non-transparent and not cost-effective process followed in the Investigation completed. appointment of Swifambo Rail Leasing Assisting PRASA with Disciplinary Proceedings 31 August 2021 5. Unfair, non-transparent and not cost-effective process followed in the Investigation completed. appointment of Thales Maziya Consortium Assisting PRASA with Disciplinary Proceedings 22
Status No. Matter under Investigation Progress to Date Report Submitted on: 15 September 2021 6. Unfair, non-transparent and not cost-effective process followed in the appointment Investigation completed. of general overhaul and upgrade contractors multiple suppliers. Assisting PRASA with Disciplinary Proceedings 15 September 2021 7. Unfair, non-transparent, non-competitive and not cost-effective process followed in Investigation completed. the appointment of grass and vegetation cutting service providers. Assisting PRASA with Disciplinary Proceedings 31 August 2021 8. Unfair, non-transparent, non-competitive and not cost-effective process followed in Investigation completed. the appointment of service providers for the transportation of train crew drivers. Assisting PRASA with Disciplinary Proceedings 13 September 2021 9. Unfair, non-transparent, non-competitive and not cost-effective process followed in Investigation completed. the appointment of Sele & Musa trading and tours for the supply of wooden Assisting PRASA with Disciplinary Proceedings sleepers. 17 September 2021 10. Not cost-effective process followed in the appointment of service providers for the Investigation completed. cleaning of stations as well as horticulture. Assisting PRASA with Disciplinary Proceedings 23
Status No. Matter under Investigation Progress to Date Report Submitted 15 July 2021 11. Unfair, non-equitable, non-transparent, non-competitive and not cost-effective Investigation completed. process followed in the evergreen contract with Golden Arrow Bus Services for Assisting PRASA with Disciplinary Proceedings the provision of services in the Western Cape. 17 September 2021 12. Unfair, non-transparent, non-competitive and not cost-effective process followed Investigation completed. Assisting PRASA with Disciplinary Proceedings in the appointment of Siemens Ltd on the basis of an emergency deviation. 31 August 2021 13. Unfair, non-transparent, non-competitive and not cost-effective process followed Investigation completed. Assisting PRASA with Disciplinary Proceedings in the appointment of ERB Technologies on the basis of an emergency deviation. 15 September 2021 14. Unfair, non-transparent, non-competitive and not cost-effective process followed Investigation completed. in the appointment of Gakennoshi Power Projects on the basis of an Assisting PRASA with Disciplinary Proceedings emergency deviation. 24
Status No. Matter under Investigation Progress to Date Report Submitted on: 15 September 2021 15. Unfair, non-transparent, non-competitive and not cost-effective process followed in the Investigation completed. Assisting PRASA with Disciplinary Proceedings appointment of Active Power Projects (PTY) Ltd on the basis of an emergency deviation. 15 September 2021 16. Unfair, non-transparent, non-competitive and not cost-effective process followed in the Investigation completed. appointment of UDS PTY (Ltd) on the basis of a Treasury Regulation 16A.6.6 deviation. Assisting PRASA with Disciplinary Proceedings 15 September 2021 17. Unfair, non-transparent, non-competitive and not cost-effective process followed in the Investigation completed. appointment of Combined Private Investigations on the basis of a Treasury Regulation Assisting PRASA with Disciplinary Proceedings 16A.6.6 deviation 17 March 2021 18. Investigation completed. Alleged procurement irregularities relating to PRASA CRES Isipingo project; related payments and variation orders Assisting PRASA with Disciplinary Proceedings 25
Outcomes 44 Disciplinary referral for Senior Managers at various business units were made under the secondment investigation, 33 employees were still under the employment of PRASA at the time the reports were submitted. Disciplinary proceedings are ongoing. 26
Key Challenges & Limitations No. Key Challenges Remedial Action 1. Non-availability of documents. Officials Attempted to obtain documents from the service providers with no success. responsible are no longer employed at Obtained affidavit from the relevant section with the view to recommend disciplinary action. PRASA. 2. Prescription period Despite PRASA becoming aware of the irregular confinement during 2016/2017, it failed to proceed with any civil action there was. Accordingly PRASA s claim has prescribed in terms of the Prescription Act, Sec 11. 3. Covid 19 Restrictions and challenges Resources capacitated and investigations is completed. Presidential report to be submitted by 30 November 2022. 27
Summary of Outcomes Outcomes Outputs R64m Rand value of potential cash and/or assets to be recovered R122 000 Rand value of actual cash and/or assets recovered 0 (due to prescription and time delay) Rand value of contract(s) and/or administrative decision(s)/action(s) set aside or deemed invalid Rand value of potential loss prevented currently 5 and 9 more pending right of reply time lapse 3 Number of referrals made for disciplinary action against officials and/or executives Number of referrals made for administrative action currently 4 and 7 more to be signed off 27 The number of referrals made to the Relevant Prosecuting Authority The number of investigations closed under a published proclamation Rand value of matters in respect of which evidence was referred for the institution or defence/opposition of civil proceedings 0 0 Number of reports submitted to the Presidency
Background MOTIVATION FOR A NEW PROCLAMATION
MOTIVATION FOR A NEW PROCLAMATION The matters referred to herein emanate from Volumes 2 and 4 of Parts V and VI of the Report of the Judicial Commission of Inquiry ( theCommission ) into State Capture, Corruption and Fraud in the Public Sector including Organs of State ( theReport ). According to the Mail and Guardian : State capture may be defined as The efforts of a small number of people aiming to benefit from the illicit provision of private gains to public officials in order to profit from the workings of a government ; and It was evidenced in South Africa in the actions of members of the Gupta family of Saxonwold, Johannesburg ( theGuptas ). It was documented widely in the news that this family amassed a fortune through businesses that have, at various times, intersected with the state for example, the decimation of state-owned companies, through a series of deals aimed principally to directly and indirectly benefit the Gupta family and their associates. 30
MOTIVATION FOR A NEW PROCLAMATION The SIU is part of a multi-disciplinary technical steering committee which has been constituted by the President of the Republic of South Africa to oversee the development of an Implementation Plan dealing with the findings and recommendations of the Report. The High Court of South Africa, Gauteng Division, Pretoria, ordered the President to table such Plan. The proposed investigation forms part of the Plan tabled by the President on 23 October 2022. It is stated as follows in paragraph 4.6.8 of the Plan: A proclamation will be issued to broaden the scope and set timeframes for an expanded SIU investigation into PRASA based on the evidence before the State Capture Commission . 31
MOTIVATION FOR A NEW PROCLAMATION Whether any of the individuals/companies/close corporations to be investigated were investigated under a previous proclamation or are under investigation in terms of a current proclamation The individuals and/or entities to be investigated are the subject of a current SIU investigation viz. Proclamation No. R.51 of 2019. However, the allegations that are referred to in this motivation fall outside the scope of the aforementioned Proclamation, hence this motivation. In the circumstances, the SIU has considered it prudent to seek a new (separate) proclamation that deals exclusively with the allegations mentioned herein so that the investigation in terms of Proclamation No. R.51 of 2019 may be finalised and reported upon to the President. 32
FOCUS AREA OF THE NEW PROCLAMATION TO BE ISSUED FOCUS AREA 1: IRREGULAR SALARY INCREASE OF one of the former CEO of Prasa FOCUS AREA 2: SA FENCE AND GATE FOCUS AREA 3: PROCUREMENT OF LOCOMOTIVES FROM SWIFAMBO RAIL LEASING (PTY) LIMITED FOCUS AREA 4: SIYANGENA TECHNOLOGIES (PTY) LIMITED ( SIYANGENA ) SIYAYA GROUP OF COMPANIES FOCUS AREA 5: PROCUREMENT OF ROYAL SECURITY AND RELATED COMPANIES 33
FOCUS AREA 6: SERIOUS MALADMINISTRATION Investigate serious maladministration in connection with the affairs of PRASA relating to. Investigate governance issues that led to the collapse of PRASA. Investigate causes of system failures, role played by the Boards and other persons in the collapse of PRASA. Investigate and make recommendations on systems and process improvement to turn around PRASA. Examine why PRASA was allowed to slide into almost total ruin Identify who should be responsible for that; and Who could have benefitted from those that unacceptable state of affairs. 34
FOCUS AREA 7: IRREGULAR AND IMPROPER CONDUCT BY OFFICIALS OR EMPLOYEES OF PRASA Investigate any irregular, unlawful or improper conduct by officials or employees of PRASA or any other person or entity, in relation to the allegations as set out in the proposed focus areas with the view to: Refer evidence of malfeasance and irregular activities to PRASA for disciplinary processes; Refer evidence of criminal activities to the National Prosecuting Authority for prosecution; and Institute and conduct civil proceedings in the Special Tribunal to recover any loss suffered by PRASA 35
Background LIFESTYLE AUDITS
ENGAGEMENT PROCESS PRASA through its Board has engaged the SIU to assist in conducting Lifestyle Audits. These will be conducted under a Secondment Agreement signed between the two parties. The SIU will second five members to conduct the lifestyle audit. On 4 May 2023, SIU presented it methodology to the PRASA executive management and agreed to sign the Secondment Agreement on 15 May 2023. The Audit will start on 1 June 2023 with Phase 1 focusing of Group Executives and will continue for 8 months
AGREED SCOPE OF WORK Conduct the lifestyle audit on +- 300 personnel which will include: Group Executive Committee members; Executive Committee members in the various business units (PRASA Rail, PRASA Tech, PRASA Cres & Autopax); Regional Executives; Senior Management in Corporate Office departments (Human Capital Management, ICT, Supply Chain Management, Finance); and All employees in SCM department from regions, business units and corporate office. Where the lifestyle audit identify that an employee s expenditures constantly exceed his/her income, and it cannot be explained, those findings must be referred for investigations by the relevant division; In respect of those matters that may require further investigation by the SIU in terms of a proclamation issued by the President in terms of section 2 of the SIU Act, such matters must be referred to the SIU for further processing; and Submit a report to the Board of Control of PRASA detailing the findings of the audit.
AGREED SCOPE OF WORK Review Integrity form for red flags and compare to CV Referee checks: 2x social & 1x work Open sources e.g. Google Verify qualifications and memberships (MIE) Credit check (Transunion/Experian/XDS): Business membership/directorship Property ownership Judgments & defaults
AGREED SCOPE OF WORK Financial analysis: Directorship/ownership of businesses registered at the Companies and Intellectual Property Commission; Registration of identified businesses on the Central Supplier Database; Payments made to identified businesses linked with personnel's via PRASA payment system; Ownership of motor vehicles via eNATIS; Ownership of properties via Windeed; Identity number, passport number, marriage details, spouses, and children s details via the Department Home Affairs; Salary details via Pay System;
AGREED SCOPE OF WORK Latest Annual Financial Disclosures; and Applications for grants via the South African Social Security Agency. Compare information supplied by employees against the information extracted and received; Review all accounts and perform income vs expenditure analysis; Vehicle ownership and was vehicle paid in cash or shorter period (eNatis); Property ownership purchase amount vs bond amount and is bond still active; was the property bought in cash or shorter period Verify ALL red flags and questions through email, affidavit and/or LVA. Criminal Record Check
AGREED SCOPE OF WORK Layered Voice Analysis (lie detector test) Follow-up investigations Report (risk-rating & recommendation) Quality control Issue certificate of compliance (feedback)
CONSEQUENCE MANAGEMENT How do we report Red flags SIU hotline / business development team FIC for red flags on financial reports SAPS/Hawks or other relevant Law Enforcement Agencies Referral to Internal Investigations or further investigation through the existing proclamation Referral for internal disciplinary
THANK YOU Follow Us Hotline: 0800 037 774 Website: https://www.siu.org.za E-mail: info@siu.org.za @RSASIU 44
