WHEN Public Protector Thuli Madonsela leaves office at the end of next month, she’s likely to have regrets of a professional nature in respect of a number of incomplete investigations. One of these will probably be her failure to have finalised the recommendations in her December 2013 report, Docked Vessels.
This report was the outcome of her investigation into the November 2011 award of a new five-year, R800 million tender MLRF 088 – popularly known as the “Sekunjalo contract” – to manage and operate South Africa’s seven-vessel fisheries research and patrol fleet for the Department of Agriculture, Forestry & Fisheries (DAFF), then headed by Tina Joemat-Pettersson who is the current energy minister.
Madonsela’s tough recommendations in Docked Vessels included that Joemat-Pettersson be disciplined by President Zuma for her “reckless dealing with state money and services, resulting in fruitless and wasteful expenditure, loss of confidence in the fisheries industry in South Africa, alleged decimation of fisheries resources in South Africa and delayed quota allocations due to lack of appropriate research”.
Finalisation of the report has been out of Madonsela’s control partly because the angry minister, complaining that the report contained “numerous flaws and inaccuracies”, decided to take it on review in the North Gauteng High Court.
But finalisation has also been delayed by the inexplicable failure, over more than two-and-a-half years, of the Competition Commission to respond to Madonsela’s referral of an issue that was one of eight key focus areas of the Docked Vessels investigation: an allegation of collusive tendering.
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Joemat-Pettersson’s review application had been set down for hearing on 2 November last year (2015) after all pleadings had been exchanged, but she filed a notice of removal from the court roll on 28 September because neither party’s counsel would be available for the November date.
Both parties were presumably also eager to wait for the outcome of the Constitutional Court applications brought by the EFF and the DA, before proceeding further. These related to the power of the Public Protector to “take appropriate remedial action” and whether Madonsela’s finding in her report Secure in Comfort – that President Zuma was required to personally pay back a reasonable portion of the money spent on installing non-security upgrades at his private residence at Nkandla – was binding.
ConCourt’s unanimous judgment, handed down on 31 March, was that the power of the Public Protector to take appropriate remedial action does have legal effect and is binding.
Joemat-Pettersson’s review application has now been set down for argument on 9-10 November in the North Gauteng High Court – just over a week after Madonsela’s statutory seven-year term comes to an end.
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The second aspect of the delay – Madonsela’s unanswered request to the Competition Commission to investigate alleged collusive tendering during the bidding for tender MLRF 088 and “to advise DAFF for future purposes” – has its roots in the tender call that was first published in November 2010.
There were eight bidders for the tender, two of which were disqualified for not complying with bid requirements in respect of tax clearance certificates.
Of the remaining six, four were closely related to a single parent company, Sekunjalo Investments Limited. It was this that gave rise to concerns about possible collusive bidding. These four bidders were:
- Sekunjalo Ltd;
- Sekunjalo Marine Services in consortium with Nkiruka Investments and KND, and referred to as SMSC (Sekunjalo Consortium);
- Premier Fishing SA (Pty) Ltd; and
- Premier Fishing SA (Pty) Ltd Consortium (in association with KDN).
Premier Fishing was wholly owned by Sekunjalo Investment Ltd, except for a 16% shareholding by the Premier Fishing Share Trust, and the companies shared common directors.
Supporting documentation provided for KND Naval Design reflected two different entities: Nautic Africa (Pty) Ltd and Odvest 110 (Pty) Ltd trading as KND Projects.
Nkiruka Investments was claimed as a broad-based black women’s grouping, but was a shelf company at the time of the bid submission. Its sole registered director, Ms CF Hendricks, was also a director of Sekunjalo Investment Ltd and of Premier Fishing SA (Pty) Ltd.
The other two tenders were from Smit Amandla Marine (Pty) Ltd that had previously held the contract since 2000, and Meihuizen Freight in association with Denmarine CC ('Meihuizen Denmarine').
On 24 November 2011, DAFF publicly announced that the tender had been awarded to the Sekunjalo Consortium (SMSC).
However, three weeks earlier, on 4 November 2011, Smit Amandla had already written to DAFF, questioning the award to the Sekunjalo Consortium – it is not clear from Docked Vessels how Smit Amandla became aware that the tender was being awarded to the consortium – and alleging inter alia that there had been collusive tendering because of the connectedness of the parties.
Smit Amandla also stated that even though the different bidders had not been entitled to be present during one another's bid presentations, it was apparent from the presentation process that a core team of presenters had remained throughout all four of the presentations for the four entities.
“To Smit Amandla, this created a reasonable suspicion that there may have been consultation, communication and arrangement amongst the four entities listed above since they all tendered for the same contract and they all sat in on one another's presentations – this is forbidden by the Certificate of Independent Bid Determination (SBD9) which all the parties had to sign,” Docked Vessels states.
Smit Amandla further contended that this was also in contravention of the Constitution – in that the tender process was not fair, equitable, transparent, competitive and cost effective – and of the PFMA and National Treasury Regulations, and might also have constituted a prohibitive practice in terms of the Competition Act.
It suggested that DAFF should investigate the tender award in light of its complaint, or face a legal challenge.
On 17 November 2011, DAFF’s legal adviser wrote a memorandum regarding the complaint by Smit Amandla. He concluded that the issues raised by it posed “significant and/or major risks” for DAFF as the possible collusive tendering as alleged was in direct contravention of Section 4(1)(b)(iii) of the Competition Act of 1998. He recommended that a Senior Counsel's opinion be obtained.
A Senior Counsel was briefed but before this happened, Smit Amandla had already launched an urgent application in the Western Cape High Court on 6 December 2011 to have tender MLRF 088 reviewed and set aside.
On 2 February 2012, the Senior Counsel advised the State Attorney, acting for DAFF, inter alia that:
- In respect of collusive tendering, the inter-relationships between the four related parties had been openly declared to DAFF’s Bid Evaluation Committee, so there could be no suggestion that the parties had secretly conspired with one another;
- There was no indication of bid rigging or collusive bidding;
- However, information contained in the Sekunjalo Consortium’s submission raised the question as whether the four related parties had complied with the conditions of SBD9 (Certificate of Independent Bid Determination).
The Senior Counsel’s opinion stated: “... there are prima facie indications that the entities in the SG (Sekunjalo Group), in submitting bids in the manner which they did, and the level of what can be described as an "intermingling" of resources in order to deliver in relation to the Tender, could not have signed SBD9. This aspect at least called for careful scrutiny by the BEC (Bid Evaluation Committee) and BAC (Bid Adjudication Committee), failing which the considerations of the bids were inadequate. There is no indication that such scrutiny took place."
The Senior Counsel advised that there were a number of grounds on which the tender award could be successfully challenged, including that it was not likely to withstand a challenge on the basis of rationality, and was also vulnerable to attack based on the Promotion of Administrative Justice Act (PAJA).
He concluded that significant shortcomings in the Sekunjalo Consortium bid had been clearly identified in a due diligence report by auditing firm SizweNtsalubaGobodo in January 2012 and which would probably result in the award of the tender being set aside.
On February 23 2012, the Sekunjalo Consortium withdrew its participation in the tender and the chief executive of Sekunjalo Investments Ltd, Khalid Abdulla, wrote to DAFF confirming that it would not oppose Smit Amandla’s High Court review application.
DAFF then revoked the award of the tender and Smit Amandla withdrew its court application.
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When Madonsela agreed to investigate separate complaints about the awarding of tender MLRF 088 from Smit Amandla and from DA MP and then deputy shadow fisheries minister Pieter Van Dalen, she identified eight issues to be considered and investigated, one of which was the issue of alleged collusive tendering: “Did the submission of four tenders on the same bid by the entities (Premier Fishing, Premier Fishing Consortium, Sekunjalo Limited and SMSC) which fall under the Sekunjalo Group constitute collusive tendering? If so, did DAFF’s entertainment of these bids constitute improper conduct and maladministration?”
As part of the inquiry, her investigation team met lawyers Edward Nathan Sonnenbergs (ENS) representing the Sekunjalo Consortium, and a statement from Abdulla followed in which he dealt inter alia with the alleged collusive tendering between the four Sekunjalo bids. His arguments included:
* The bids as submitted by the Sekunjalo Group did not constitute collusive tendering, because collusive tendering occurred in a clandestine manner when two or more parties that were in a competitive relationship agreed, instead of submitting independent bids, to tender in such a manner that competition between them for that tender was eliminated;
* Section 4(1) of the Competition Act did not apply to constituent firms within a single economic entity, such as a company, its wholly owned subsidiary, or any combination of them – “as is the case in the present instance”;
* Unlike the covert nature of tender collusion, the relationships and common ownership structures pertaining to the four Sekunjalo bids had never been disguised or concealed in any way; and
* The intention behind the provisions of section 4(1) was “to prohibit anti-competitive practices and not to curb healthy practices which foster the development of competitive offerings through the provision to the consumer of various options or solutions available to it as had been done in the present instance”.
Madonsela issued a Provisional Report on 7 October 2013 and distributed copies to the complainants and other relevant parties for a response. Although this Provisional Report was confidential, it is clear from her subsequent Final Report that, at the provisional stage, she had not accepted Sekunjalo Consortium’s arguments relating to collusive bidding and had made an initial adverse finding in this regard. Her Final Report states:
“According to (lawyers for the Sekunjalo Consortium) ENS, the factual basis and the legal premise on which the adverse finding (in the Provisional Report) of collusive tendering was based is wrong because the relationships and common ownership structures pertaining to the four bids were never disguised or concealed in any way, as they were pertinently disclosed unlike in the covert nature of tender collusion... In their view, the actions of the parties in the above-mentioned scenario do not resemble the conduct contemplated in section 4(1)(b)(iii) of the Competition Act which was specifically intended to outlaw agreements between competitors not to compete.”
Madonsela omitted the adverse finding about collusive tendering from her Final Report, but she did not replace it with a finding exonerating the Sekunjalo Consortium. Instead, she declined to make any finding and requested the Competition Commission to investigate and report back:
“Neither DAFF nor SMSC (Sekunjalo Consortium) have disputed the fact that four companies from the Sekunjalo stable submitted bids in respect of the same tender invitation. I would be speculating if I found that these four companies discussed and possibly colluded on pricing...
“The Competition Commissioner is requested in terms of section 6(4)(c) to investigate the alleged collusive conduct and advise DAFF for future purposes.”
She also flagged the issue of the signing of Certificate of Independent Bid Determination (SBD9) by the four Sekunjalo bidders: “The provisions of SBD9 exclude communication between partners in a joint venture or consortium as collusive bidding.
“Senior Counsel stated that ‘...there are prima facie indications that the entities in the SG (Sekunjalo Group), in submitting bids in the manner which they did, and the level of what can be described as an "intermingling" of resources in order to deliver in relation to the Tender, could not have signed SBD9. This aspect at least called for careful scrutiny by the BEC and BAC, failing which the considerations of the bids were inadequate. There is no indication that such scrutiny took place.’
“At the least it is clear that the four related entities made false statements when they signed SBD9. This issue could have been identified by the BEC (Bid Evaluation Committee) and BAC (Bid Adjudication Committee), had they scrutinised the documents carefully and diligently.”
Madonsela’s Final Report was publicly released at a media conference on the afternoon of 5 December 2013 – just hours before former president Nelson Mandela died.
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The Competition Commission is a statutory body constituted in terms of the Competition Act, No 89 of 1998, and is “empowered to investigate, control and evaluate restrictive business practices, abuse of dominant positions and mergers in order to achieve equity and efficiency in the South African economy”.
The Commission’s core functions include:
• to investigate and prosecute restrictive horizontal and vertical practices; and
• to develop and communicate advocacy positions on specific competition issues.
The Commission appears to have been somewhat economical with the truth in its responses to repeated media requests for information about the status of the investigation requested by the Public Protector.
On 11 February last year (2015), the Commission sent this response to questions by this writer:
“The Commission is currently investigating the matter. The Commission is not in a position to indicate how long the investigation will take before it is completed.”
In March (2015), this position was “still the same”, the Commission confirmed.
On 1 December (2015), Commission spokesman Itumeleng Lesofe had this to say in response to follow-up questions from this writer:
“The case is currently under investigation. The Commission cannot provide an exact date for the conclusion of the investigation, safe to say that the investigation is at an advanced stage.” (My emphasis)
On 11 April this year, a follow-up request was made and the Commission responded:
“We have checked with the investigating team, and can confirm that the Sekunjalo case is still under investigation. The Commission will announce the outcome once the investigation has been concluded. The Commission is not able to estimate when the case will be resolved.”
Asked why the investigation was taking so long, the spokesman replied:
“The length of an investigation depends entirely on the issues being investigated. The Commission is not able to divulge intrinsic issues of the investigation at this stage, safe to mention that the investigative process is at an advance (sic) stage. The Commission takes due care to consider all facts and information before it takes decisions.”
And on 24 August, yet another query drew this answer from the Commission:
“We haven’t completed our investigation. We can only respond to you once the investigation is completed.”
When asked whether the Public Protector Madonsela had tackled the Commission about its tardiness, spokesman Oupa Segalwe said the Competition Commission had informally told the Public Protector that there was “a legal impediment that hindered the implementation of remedial action”. “We will be getting in touch with them to get feedback formally on the matter,” he said. But such formal interaction would only occur once the review application had been heard.
The fisheries patrol and research ships that were the subject of the Docked Vessels report have been back at sea for many months already, but Madonsela’s recommendations and any possible consequences stemming from them remain firmly moored to a legal quay – at least until the middle of November.
* Khalid Abdulla was travelling overseas and was not available to respond to a request for comment. Thabo Mothibi, spokesman for minister Joemat-Pettersson, did not reply.
Journalist John Yeld retired at the end of 2014 from the Cape Argus newspaper where he specialised in environmental and science issues. He still writes on a freelance basis.
Disclosure: Yeld was involved in an unresolved dispute with Sekunjalo.
