SIU guns for ‘inflated’ profits of Gauteng Covid school cleaning firms

Companies linked to fishing, arts, entertainment, vehicle repairs, real estate, construction, mining and quarrying allegedly scored some R431m worth of Covid-19 school decontamination and sanitisation contracts from the Gauteng department of education.

These were just some of the claims that emerged in a special tribunal hearing on Wednesday.

The Special Investigating Unit (SIU) had approached the tribunal to have the contracts, awarded to 173 companies in 2020 for Covid-19 decontamination, declared unlawful, set aside and profits made by the companies forfeited to the state.

The contracts, according to the SIU, were allegedly awarded via WhatsApp message and phone calls, with companies paid between R250,000 and R270,000 to clean primary schools, R250,000 and R290,000 for the cleaning of secondary schools, and R250,000 and R300,000 for decontaminating district offices.

The SIU alleges the 173 companies were not on Gauteng education department’s service providers’ database listed as providing cleaning and sanitation services.

In May the tribunal granted the SIU an interim order to freeze funds in business and personal banking accounts belonging to the directors of the companies, as well as the accounts of several trusts, some of which belong to the service providers’ directors.

The SIU’s lawyer, adv Matthew Chaskalson, arguing before judge Lebogang Modiba on Wednesday, said the constitution did not allow for anyone to benefit from an unlawful contract.

Chaskalson said the appointments were “manifestly unlawful and unconstitutional”, as they contravened the emergency deviation order granted by Treasury, with the majority of service providers not accredited or registered on the department’s central supplier database to supply cleaning and decontamination services.

While some of the service providers were registered on the database, they were “registered as suppliers in industries including mining and quarrying, retail trade, vehicle repairs, construction, transportation and storage, arts, entertainment and recreation, agriculture, forestry and fishing, and real estate”.

He said evidence the SIU gathered into payments to the implicated service providers, compared to payments to service providers appointed through procurement processes for similar services, shows “these service providers were grossly overpaid”.

“This comparison shows that the fees paid were 11 to 27 times higher,” he said.

Adv Harold Epstein, who represented the Mpofana group of companies, including the Insimu Medical Group, said the matter emanated from the department and not from his clients.

“Contract approvals were granted by the head of the department, with the prices set by the department,” he said.

He criticised the SIU’s price verification investigation.

“The problem with the verification process is the SIU cannot provide affidavits from those who did the verification. They claim that they went to two suppliers to get them to provide costs on decontaminating schools, but they do not provide the credentials of these suppliers,” he said.

Disputing that his clients were not registered on the department’s database or correctly accredited, he said many of the companies were registered for “human health”.

“We need an explanation [from the department] as to what human health includes and whether this includes decontamination.”

He described the SIU’s investigation as sloppy.

“Given how much money is being dealt with, one would expect the SIU to have done a more in depth investigation than just saying that the pricing is incorrect.”

Adv John Peter, who represented the directors and trustees of 12 service providers and two trusts, said SA was in a national emergency and that it was impossible to obtain competitive bids at the time.

He questioned why the SIU was chasing specific service providers, “when none of the service providers were registered on the database”.

“The SIU argues that there was a feeding frenzy, but the money that was paid out is not necessarily lost. The state is not out of pocket because services were rendered. The state should only be concerned when it is out of pocket.”

He questioned why the state should be allowed to take away innocent companies’ profits.

“Why should the state profit when the innocent individuals are not in the wrong? We are innocent and it’s the state officials who are guilty.

“Yes, technically the contract is invalid, but no harm has been done. If the state received fair value for what it paid on a contract that was performed, there should be no interferences unless malfeasance is identified. “

Modiba questioned whether, given the fact that the procurement was irregular in regards to the constitution, the tribunal should not lean towards protecting state resources in the public interest, rather than allowing service providers to benefit from profits.

“Yes, the state should not be ripped off but it should not be receiving things at a supplier s cost,” Peter replied.

Judgment was reserved.