Taxing times: SIU struggles to claw back state money from dodgy deals
The slow pace of litigation and uncooperative government departments are hampering its efforts
The Special Investigating Unit, tasked with identifying and recovering taxpayers’ money spent in unlawful state deals, is fighting in a number of courts to get back more than R7bn wasted on allegedly invalid government contracts.
The unit says that this year it prevented the government from losing R407m in transactions involving the Post Office and departments of public works and correctional services. Through legal action and other interventions, it has succeeded in having three state contracts, totalling R797m, declared invalid and set aside in the past financial year. This amount included a Post Office lease contract, valued at R493m, that was declared invalid, as well as an invalid correctional services contract valued at R301m. In this same period, it identified government deals totalling R2,7bn that are currently being decided in courts across the country, on the basis of evidence secured by the unit's investigators. One of the deals involves a correctional services department contract totaling R1,3bn.
The 26 cases, which were born out of SIU investigations dating from 2010 to 2017, largely concern efforts to have certain contracts declared invalid and to recover losses or seek repayment.
The cases largely involve Public Works, but also include matters involving the Rural Development and Land Reform, Communications, and Correctional Services. The Post Office, SABC and several local municipalities are parties in some of the cases.
Despite these successes, the SIU only recovered R34m in cash unlawfully spent by the state in 2017/18.
This is despite the SIU identifying R233m this year that it believed could be recovered by Public Works in relation to “overpayments that had been identified for parking bays, rental not due, lettable space not being provided and electricity and water”.
A question of power
It seems the SIU’s struggle to recover the money has to do not only with the slow pace of court litigation to declare certain state contracts illegal, but also difficulties in ensuring that the departments involved act on SIU recommendations regarding unlawful deals.
The SIU’s annual report, released this month, identifies “non-implementation of SIU remedial action” as the unit’s single-biggest strategic risk. It also appears that certain departments – Public Works and Correctional Services in particular – are almost constant subjects of adverse SIU investigations.
While the SIU can initiate court proceedings to cancel invalid contracts and recover the money spent on them, it can only make recommendations to the departments that it investigates about what action to take about allegedly illegal deals. It has no power to order them to do so. In this respect, it has less power than the Public Protector, who routinely refers certain cases to it for investigation.
It’s understood that certain departments have routinely failed to act on recommendations that they recover money allegedly illegally spent by government officials from those officials.
“There were a number of matters where potential recoveries were identified which we had hoped would be recovered during this financial year,” the SIU stated in its annual report, released on October 17.
It added that meetings had been held with the government departments concerned and they had promised to do “a reconciliation of all the matters referred to them”.
“We expect to see an increase in the number of recoveries in the 2018/19 financial year”.
This year the SIU handed over 15 of its finalised investigation reports, dating as far back as 2002, to the Presidency, which then referred them back to the departments or entities involved “with a request for updates on the implementation of recommendations made by the SIU”.
The only person who can attempt to force those departments to comply with the SIU’s recommendations is President Cyril Ramaphosa.
The SIU’s annual report also reveals that the unit has referred 148 cases of alleged state corruption and fraud to the National Prosecuting Authority for prosecution.
According to the SIU, these criminal matters involve alleged corruption, fraud, forgery, gross financial misconduct, and violations of the Prevention of Organised Crime Act.
The SIU has also referred 319 cases involving state employees, board members or directors of state institutions, “including state-owned enterprises”, municipal councillors and state vendors, contractors and suppliers, for “disciplinary, executive and/or administrative action”.
The matters include cases of alleged “improper and fraudulent conduct”, “fraud alternatively theft”, “gross dishonesty”, “gross negligence”, contraventions of the Public Finance and Municipal Finance Management acts, violations of the Constitution and “contravention of SARS Regulations”.