Media statement by MEC Mahlakeng Mahlakeng on the current status and way forward, arising from the finalisation and release of the forensic investigation report by PricewaterhouseCoopers (PWC)
Good Morning
The purpose of the briefing today is to keep you posted with developments, following the conclusion of a forensic investigation by the auditing firm, PricewaterhouseCoopers (PWC).
The 196-page report is now a public document and I am aware that several media houses have obtained copies from the Register of the North Gauteng High Court in Pretoria.
We also hope to bring you up to speed, with the current status of the events and our way forward.
You may recall that:
On 14 December 2009, we confirmed the suspension of our Head of Department, Mr Nic van Staden and Chief Financial Officer, Mr Kweku Odame-Takyi.
The latest is:
Charges against them may be finalised before the end of this week.
The suspension of the two brought to three the number of senior officials implicated during the investigation and also by PWC in the final report. Chief Director for roads, Mr Eddie Thebe, was also placed on precautionary suspension in early September last year.
The latest is:
He has been charged with misconduct and mismanagement and is yet to answer to 11 charges, on a date still to be confirmed.
He appeared before the departmental Disciplinary Committee (DC) on 16 November 2009 but asked for a postponement in order to prepare. The presiding officer acceded to his request and granted a postponement. I am informed a new date will be finalised shortly.
We confirmed also in December that the department may have been hit by a multi-million-rand road scandal. The view expressed at the time was partly informed by the preliminary findings arising from the ongoing investigation by PWC.
Part of PWC's brief when they began their investigation on 13 September 2009 was:
To probe the patterns of expenditure and procurement procedures and the appointment also of consultants and contractors for road projects.
More than R1.5 billion, allocated to our road capital projects (Capex) for the next period of three years, often referred to as Medium Term Expenditure Framework (MTEF), has already been committed.
Within three months of the current financial year - 2009/10 - the roads directorate had already spent 100 percent of its allocated capital project budget.
Their budget allocation for the current financial year was R525 million.
Midway through the investigation, one of the road construction companies sued us for an amount of R64.3 million.
The company brought an urgent application at the Northern Gauteng High Court in Pretoria on 26 November 2009. An order was granted against Government to pay the company the stated amount within 48 hours.
We have made an application at the same court on Monday, 11 January 2009 for that order to be rescinded and set aside.
We can also confirm, that the final copy of the forensic report by PWC which I spoke about in my introduction, is one of the supporting documents in our application.
We could not make the report public in December 2009 as promised then but, by virtue of that final PWC report now being part of the court papers, it is a public document and we will make copies available to you.
In conclusion:
For us, the way forward in this whole episode is crystal clear.
Following a protracted meeting of a high powered delegation comprising of the management team of the department, PWC, Office of the Premier including an independent firm of legal practitioners held on Tuesday, 12 January 2010, it was resolved to;
1. Issue a directive to Kaulani Civils (Pty) Ltd and Moseme Construction to vacate site with immediate effect. Failure to comply with our directive may result in legal action against them. Kaulani were purportedly appointed to do work on the Lichtenburg-Koster road, while Moseme was doing same on the Phokeng to Sun City Road. The two companies, including a third called Roucomm Systems, have been identified in the PWC forensic report as having been improperly appointed to construct various roads projects in the province. The department has already made payments of more than R100.6 million to two of the above mentioned companies. The total value of the "contracts", awarded on 19 November 2008 under "Emergency Patchwork, Pothole Repairs And Maintenance Programme (Bojanala and Dr Ruth Segomotsi Mompati Districts)" for the three was more than R424.2 million.
2. Pursue civil action for the recovery of all monies paid to the three companies mentioned above.
3. Urgently conduct a due diligence on 54 contracts awarded without following proper procurements procedures.
4. Set up a meeting with the police corruption busting unit, the Hawks, with the view to: pursue criminal charges against individuals and entities; application for seizure to be done subject to advice arising from consultations with appropriate state agencies.
5. Once summons for damages have been issued against the alleged culprits, the department will approach the court to apply for an order that will enable the department to obtain essential evidence to the case from the premises of the alleged culprits.
Ladies and gentlemen:
On the face of it, one may say I have been vindicated, but on the contrary, I am extremely angry, betrayed, shocked and deeply saddened.
Betrayed and angered by the "apparent collusion within, and the conniving without," of people one would have expected to be the watch dogs of government, our democracy, our people and off course peoples monies.
Deeply saddened also, by those who in their quest tried desperately to put unbearable pressure on me to release the report, even before I could receive the first draft, paddled false information, alleging that I was implicated.
Now that the report is in the public domain, I am yet to be told and shown where in the report am I or was I implicated?
We are called to act decisively against corruption at all levels of government. We must be seen to deal ruthlessly and without fear, the rampant scourge of corruption and the pilfering of state coffers.
I will be failing in my duty if corruption is made to appear not punishable in my department.
I thank you for your time.
STATEMENT:
Two road contractors instructed to vacate sites, criminal proceedings, civil actions planned to recover monies paid, application for seizure, Hawks and Special Investigation unit (SIU) to be approached for action as the department begins to roll out strategy to recover million siphoned from the roads budget
The Department of Public Works, Roads and Transport today (Wednesday) instructed two road construction companies to vacate various sites with immediate effect because they are alleged to have been "improperly and illegally appointed" for the job.
The two companies are Kaulani Civils (Pty) Ltd and Moseme Construction "purportedly appointed" by the department to do certain work on the Lichtenburg to Koster and Phokeng to Sun City roads respectively.
PricewaterhouseCoopers (PWC) who conducted a forensic investigation in the roads directorate, implicated Kaulani Civils (Pty) Ltd, Moseme Construction and also Roucomm Systems as some of the companies improperly appointed to do construction work on provincial roads.
The 196 page report alleges that the "appointments" of the three were "irregular and illegal" because of failure to comply with tender procedures. Ironically, Kaulani Civils Pty (Ltd) sued the department in November last year for more than R64,3 million which they claimed was owed for work done on six road projects in the province. The directive to vacate the sites was communicated in writing also to Kaulani and Moseme early today.
Plans by the department are at an advanced stage to peruse civil action to recover monies paid to the above-mentioned road construction companies. Based on the PricewaterhouseCoopers findings, the department is of the view that the said payments were based on fraudulent appointments. The department has already made payments of more than R100,6 million to two of the above mentioned companies.
The total value of the "contracts", awarded to the three on 18 November 2008 under "Emergency Patchwork, Pothole Repairs and Maintenance programme (Bojanala and Dr Ruth Segomotsi Mompati Districts)" was more than R424,2 million. Criminal proceedings are also planned, a proposed meeting with the corruption-busting unit of the police, the Hawks, is in the pipeline. The department is also considering an application for seizure
"I will leave no stone unturned to recover whatever amount was fraudulently and falsely paid out to any of the contractors implicated or from anyone who may have colluded in "looting" tax payers' monies," Mahlakeng warned.
PricewaterhouseCoopers's findings put to rest speculation dating back to April 2009, when warning lights began to flash, indicating acute budget pressures in the roads directorate.
Chief Director for roads, Eddie Thebe was suspended and PricewaterhouseCoopers was roped in to probe, among others, patterns of expenditure and procurement procedures, with regards to the appointment of consultants and contractors for roads projects by the roads directorate.
Approximately R1,5 billion, allocated for road capital projects in the next period of three years' medium term expenditure framework (MTEF), was discovered to have been committed already. When the PricewaterhouseCoopers investigation began, the roads directorate had already spent 100 percent of its capital project budget within three months of the current financial year, 2009/10.
Nic Van Staden, Head of Department and Chief Financial Officer Kwekwu Odame-Takyi were put on precautionary suspension for their alleged role in the awarding of contracts in question. Charges against them are expected to be finalised before the end of the week.
"Corruption has become the real threat to the future of our democracy. We must therefore be seen and begin to make it difficult, especially for public servants, from colluding and conniving to loot state resources.
"We have to turn the tide on government officials and their cronies found guilty of pilfering, have them rooted out to face the full force of the law," said MEC Mahlakeng Mahlakeng.
Based on PricewaterhouseCoopers's findings and following thorough consultations by the department, it was resolved to start identifying "as a matter of urgency" contracts awarded without proper appointments.
In total, 54 such were identified for an urgent due diligence to be conducted in order to verify and ascertain whether procurement procedures were not flaunted in the awarding process.
The department confirmed that once summonses for damages against individuals and entities implicated in the PricewaterhouseCoopers report were issued, it would seek an order that would enable the department to give instructions to the appropriate agencies to enter premises of those identified to obtain evidence deemed essential for the case.
Reacting to developments, Mahlakeng said he felt vindicated but expressed sadness and shock at the "apparent collusion" by public officials to fleece tax payers of their monies and robbing ordinary people of basic services.
"We are called to act decisively against corruption at all levels of government. We must be seen to deal ruthlessly with the rampant scourge of corruption and the pilfering of state coffers," he said.
Mahlakeng said he would be "failing in his duty", if corruption was made to appear "not punishable" in his department.
Statement issued by the Department of Public Works, Roads and Transport, North West Provincial Government, January 20 2010
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