13 April 2024 | 09:53 PM

Gauteng Health bosses accused of bid-rigging in tender for kickbacks scheme

Key Takeaways

  • A whistle-blower has accused the acting head of Gauteng Health of receiving a share of millions in bribes to award contracts to companies belonging to Landus Armstrong.
  • What is striking about the allegations is they were made in an affidavit to the Hawks in which the insider implicates himself in preparing and negotiating these kickbacks.
  • The whistleblower’s allegations not only implicate Malotana and his two colleagues Edgar Motha and Sheriff Lecholo, but also other members in the executive.

A former service provider at Gauteng Health has gone on record and implicated the acting head of department Arnold Malotana and two other senior officials in a tender-rigging scheme in which they allegedly scored millions of rands in kickbacks.

Malotana, together with the department’s Edgar Motha and Sheriff Lecholo are accused of manipulating supply chain processes in order to ensure that medical devices company BAS Medxpress (BAS Med) secured two tenders in 2016 and 2017.

In exchange, the insider who has turned whistle-blower, told authorities that the three officials were paid millions in bribes.

BAS Med is owned by Landus Armstrong, a Roodepoort businessman with a portfolio of businesses under the Bhekani Abantu Services Group (BAS Group) that provide security, cleaning, medical supply and vehicle services.

All those implicated have denied wrongdoing.

AmaBhungane has obtained a copy of the insider’s explosive affidavit filed with the Directorate for Priority Crime Investigations (the Hawks), which includes email communication, contracts, invoices and bank statements as evidence of the corruption allegations. 

The documents show that the trio occupied senior positions in the department when the alleged events occurred which gave them access to sensitive information about upcoming contracts and tenders.

Malotana was the chief director of Gauteng Health’s Special Projects Directorate and the CEO of the ambulance services division Gauteng EMS.

Motha is the special directorate’s deputy director for laundries and waste while Lecholo is a contract management assistant director in supply chain.

The insider, whose identity is known to amaBhungane, worked closely with Armstrong at the time and alleges that the bribes were split between two tenders.

The first tender was a R31-million contract to supply plastic food containers to the department’s Masakhane Laundry and Cook-Freeze Factory which produces food for six hospitals and 17 healthcare centres in Gauteng.

Masakhane reports to the Special Projects Directorate.

Malotana, Motha and Lecholo allegedly received “in excess of R8-million” for their supposed assistance.

This was allegedly followed by a R3-million kickback payment when BAS Med was selected to form part of a panel of service providers that would supply hospitals in Gauteng with orthopaedic equipment and implants for surgery.

AmaBhungane has seen bank statements which show that close to R2-million of this amount was wired from BAS Med’s bank account to two companies which were alleged to have links to the officials. 

AmaBhungane was able to identify a link between the officials and only one of the two companies, via the company director, although he denied facilitating any payments to them.

Apart from the above payment there appears to be no visible money trail between the trio and BAS Med’s Armstrong. The whistleblower claimed this was because the bulk of the kickbacks were paid in cash.

What is most remarkable about his allegations is that the insider implicates himself in the scheme admitting to being “present on some occasions when cash payments for these government purchase orders were prepared or paid to the officials.”

Right of Reply

AmaBhungane sent detailed questions to the officials and Armstrong.

Responding through his lawyers, Armstrong denied the allegations but declined to answer any questions because of the ongoing investigation by the Hawks and the SIU.

His lawyers said, “Our clients are currently and have since approximately

September/October 2022 given their co-operation with the investigations and will do so in the future.”

“Our clients deny the allegations as contained in your letter under reply and reserve the right to answer thereto in the correct forum and at the appropriate time.”

Malotana gave a similar response, saying he could not respond due to ongoing investigations that he has “fully cooperated” with and was awaiting its “outcome with anticipation.”

“I remain committed to set record straight on most of the issues raised in the inquiry at the appropriate time,” he ended.

Motha also declined to respond while Lecholo told us, “I would have loved to respond to the questions but however I won’t be able to because the matter is still under investigation.”

The Hawks confirmed to amaBhungane that investigations were ongoing; however no one has been charged.

Masakhane

In 2016, BAS Med was awarded a three-year tender to manufacture and supply plastic containers to package frozen food made by Gauteng Health’s Masakhane Cook Freeze factory.

Masakhane supplies over 115 000 meals to patients at six hospitals and 17 community health centres on a monthly basis.

The three-year contract was effective from 1 April 2016 to 31 March 2019 in which period it was estimated that Masakhane would need at least 1.5 million three-divisional trays, 200 000 lids, and 150 000 small desert tubs every year for the next three years. 

Before the tender was awarded “multiple meetings” took place between Armstrong, Malotana, Motha and Lecholo, said the whistleblower.

“I was present at these meetings, where it was discussed and agreed that these Gauteng Department of Health officials would receive a cash payment upon my signature of the contract,” said the insider.

“The amount agreed upon was R6 million in total as the contract was estimated to be valued at approximately R31 million.”

This was close to 20% of the tender’s total value.

The tender award information published on the Gauteng provincial government’s open tender portal shows that 16 companies responded to the tender advert.

Bidders were scored on technical compliance with the tender specifications as well as price and BEE-status using the 90/10 preference point system outlined in the Preferential Procurement Policy Framework Act.

There is very little public information about the technical and price evaluation scores that each bidder received but the award form shows that BAS Med was the only company to receive 10 points for BEE while the rest of the bidders’ points were under five.

What is clear is BAS Med’s submission was not the most affordable option in terms of price, which accounted for 90% of the points in the second stage of the evaluation.

At R31-million, the company’s three-year bid was the third highest of the 16 bids that were received by Gauteng Health.

A “saint” with inside information

The insider alleged that BAS Med’s advantage was not due to its technical expertise but was rather based on the company having “contact[s]” that would “assist with the approval” of its application.

For instance, the plastic container tender was advertised in the government gazette on 10 April but emails show that BAS Med was given a two-week head start to prepare its submission after receiving the tender specifications from Motha on 23 March.

The whistle-blower provided the Hawks with a thread of emails which reveal that Motha sent the specifications to Armstrong using his Gauteng Health email address.

In the email thread, the official simply tells Armstrong to “note” the attachment of the specifications that are concealed under a liquor store flyer cover page.

Motha refused to respond to written questions sent by amaBhungane, noting in an email that he “reserved his rights”.

However, in a brief conversation with one of amaBhungane’s reporters over the phone, Motha would not confirm if he sent Armstrong the specifications and tried to suggest that someone else, with access to his email, may have sent the document.

He also denied receiving any kickbacks.

“If you saw me, you would not see R6-million. I am a saint,” said Motha.

He was emphatic that as a “mere deputy director” he had no “influence” over tender processes.

“My point of understanding is [that] when you work in the contract management unit or when you advertise the tender you’re the one who will sit there and adjudicate” said Motha.  “I am not even the [chief financial officer] who can direct the contract.”

“I’ve never sat on this [tender] and I put it record,” Motha said. 

Hand-holding

Documents sourced by amaBhungane show that Motha’s colleague and associate, Sheriff Lecholo, an assistant director in the contract management unit in supply chain, was part of the tender process.

Bidders were required to submit samples of their products for testing by Masakhane as part of the technical evaluation.

That’s because the products needed by Masakhane were highly specialised and not run-of-the-mill containers that could be sourced easily.

For instance, the three-divisional container was supposed to withstand temperatures of between – 30°C and 150°C without breaking or affecting food quality.

BAS Med, a medical devices company, had no experience in food packaging manufacturing but, the insider claimed, they were “given samples of the plastic containers by Mr Sheriff Lecholo” which were then submitted for the bid.

Lecholo is also accused of allowing the company to amend its submissions, including its pricing after BAS Med had submitted its tender on 30 April, which was also the closing date for all submissions.

“I received a phone call from [Armstrong] on the evening of Sunday 3 May 2015 regarding [the] tender… which we had submitted on 30 April 2015. He advised that we needed to decrease the pricing and was irate because our company tax clearance certificate was apparently not included with the tender submission.” 

The insider said Armstrong informed him that these documents had to be submitted by “the following Monday morning prior to the adjudication committee meeting”.

“I emailed the pricing and tax clearance certificate to Mr Landus Armstrong, and then handed the original documents to Mr Sheriff Lecholo at the Oriental Plaza in Fordsburg on Monday 4 May 2015,” he said.

Emails show that BAS Med was submitted its financials more than three months after the closing date.

Although the tender advert made provision for companies to submit alternative documents if they had not yet traded or were briefly in operation, an examination of BAS Med’s submissions by amaBhungane shows that it did not submit those either.

Instead, the financials for “the four months ended June 15” were sent to Lecholo’s work email inbox on 12 August 2015.

Lecholo then forwarded the financials to the Gauteng Health official who appeared as a contact on the Masakhane tender advert.

The tender document stipulated that these were supposed to be originals “not faxed copies” so it’s not clear how BAS Med’s email submission was accepted.

The tender also warned that failure to submit the financials “may result in disqualification” but it appears this was not applied to BAS Med.

Instant red flags

Email communication shows that Masakhane started complaining about BAS Med’s services almost immediately after the company had signed its contract.

A review of internal emails between Masakhane’s management, department officials and BAS Med shows that the company could barely deliver on the container quantities needed to prepare food for patients.

At some point, the company tried discretely to buy the containers from Plastform, one of the companies who lost the bid for the same tender.

“You promised us deliveries of containers since 1 April 2016. On Friday 22 April you deliver 5 000 containers with lids. And further promises were made to deliver on Monday 25 April 2016,” reads an email sent to BAS Med and other departmental officials by Masakhane’s David Van Zyl.

“I received a call from another company that you bought the 5 000 containers from them. So you were lying to us from the start,” said Van Zyl. (Emphasis not added)

In another email, Van Zyl said Masakhane, which produces an average of  5 500 meals on a working day, “came to a standstill” on 26 April when, after four weeks, BAS Med only managed to deliver 5 000 containers.

BAS Med was only able to fulfil its orders because it approached one of the losing bidders, Plastform, with a request to buy 50 000 units from them.  

This is corroborated by a BAS Med bank statement which shows a payment of over R231 000 was made to Plastform’s parent company on 29 April.

The correspondence does not explain why BAS Med could not procure the containers from the supplier it named as a subcontractor in its bid application documents.

But, again, as the whistle-blower explained to the Hawks, the company “had no clue about food packaging” because it specialised in medical devices.

Emails show that Gauteng Health’s supply chain director for contract management Rose Phashe and her assistant Lecholo were, at all relevant times, made aware of the challenges and were seemingly unperturbed.

It appears that even though the company failed to meet its contractual obligations from the start there were no consequences from the department.

Instead, BAS Med went on to concretise its contract with the department on 17 May by concluding a service level agreement.

The insider said that in the first week of May, “at around 7h00 in the morning”, Armstrong paid a visit to Phashe’s office where he apologised for the stock crisis created by BAS Med.

Armstrong was allegedly “met by Edgar Motha to deliver R100 000  in cash as token of gratitude for assistance in resolving the complaints from Masakhane.”

“The cash was handed to Mr Motha who indicated that he would hand it over to Ms Phashe,” he added.

Phashe, who retired from the department in 2021, categorically denied any allegations of receiving money from BAS Med or giving the company any special treatment. 

I don’t even know anything about R100 000 and if Motha went around getting that money in my name, I don’t know,” Phashe said. 

Overall, Phashe said she did not recall the specifics of the tender but said the end user being Motha, was responsible for the management of the contract and could better explain how BAS Med was engaged by the department. 

Friends in high places

In the midst of this, BAS Med submitted a bid for another tender at Gauteng Health to be part of a panel of service providers who would supply orthopaedic implants for spine and shoulder surgeries at various public hospitals in the province.

The company submitted its bid in February 2016 and was awarded the tender in April 2017.

This time, the “comrades” wanted “R3-million in cash in advance and then a percentage of the invoice value of each surgical procedure we completed during the tender period”, claimed the whistle-blower.

But exactly what the officials were going to be paid for this time is not as clear because, based on what the insider wrote in his affidavit, BAS Med did not lean on the trio for assistance.

The insider told the Hawks that Armstrong had advised him to not apply for the tender because “there was no ‘contact’ at the Department of Health to assist with the approval.”

“I applied for this tender because we had been servicing hospitals with our spine implants and instruments, and I had introduced our range of products to the various heads of orthopaedic departments at Charlotte Maxeke Johannesburg Academic Hospital, Chris Hani Baragwanath Academic Hospital and George Mukhari Academic Hospital,” he wrote.

Three weeks before the tender was awarded, he said Armstrong informed him that the Gauteng Health officials wanted to meet to talk about the orthopaedics tender.

“I was displeased with this request since I believed our technical specifications, pricing and administrative compliance were sound, and that we had been awarded this tender purely based on merit,” the insider stated.

The insider’s account and publicly available information shows that the tender was advertised twice in 2016.

The first tender was published on 5 February and it closed on 19 February. However, after the tender validity was extended twice, the tender was cancelled. The second tender was advertised on 16 September and closed in October.

While the insider is adamant that there was no “departmental involvement” that led to BAS Med being selected to be on the panel, he does admit to receiving an internal departmental document with specifications ahead of the first tender being advertised.

As early as 20 January, BAS Med was in possession of a “submission to advertise” document that was sent to the members of the department’s bid adjudication for approval.

The internal document included the specifications of the tender and the minutes of the previous meetings held by the bid specification committee.

It’s not clear if Malotana, the acting head of department, who was the chief director of special projects and CEO of Emergency Services at the time, was a member of the adjudication committee; but emails shows that he was one of the recipients of the email addressed to committee members on 19 January.

At around 3.00 am the next day, the insider’s documents show, Malotana forwarded this email to Motha who then sent it to Armstrong.

Mamotlaletsi

A meeting was held with Malotana, Motha and Lecholo at a restaurant in Fordsburg where the officials allegedly asked for the R3-million upfront payment.

“Despite my contestation and outright disagreement with this arrangement,” said the insider, the officials were each paid close to a million each through electronic transfers.

A bank statement shows that on 26 April 2017, two payments of over R900 000 were made from BAS Med’s account to two recipients that were alleged to have links to the officials.

The balance from the R3-million was paid from one of Armstrong’s other companies, possibly Bhekani Abantu Security Services, said the insider.

One of the BAS Med payment references is “Mamotlaletsi” which amaBhungane traced to a company by the same name whose sole director, Moses Ndlovu, appears to be linked to the three officials, judging by Facebook photographs accessed by amaBhungane.

Ndlovu closed his Facebook page shortly after we questioned him about these relationships.

When amaBhungane visited Mamotlaletsi’s business address in Eldorado Park, which is also Ndlovu’s home, we took note of a black Range Rover vehicle with the same registration as one that was pictured in a photo Malotana uploaded on Facebook in 2014.

The image shows Malotana’s two children posing at the back of the car at what looks like a soccer game.

In 2022, Ndlovu uploaded a picture of the same vehicle on a trip to Mabalstaad in the North West.

Ndlovu also had about ten pictures of Malotana, Lecholo and Motha on his Facebook page in various combinations.

Ndlovu and Malotana post same vehicle on their Facebook accounts

When Motha’s white Mercedes Benz was hijacked in 2022, Ndlovu put out a call for assistance to locate the vehicle on his Facebook page. When the vehicle was later recovered, Ndlovu thanked his Facebook followers for their help.

Contacted by amaBhungane, Ndlovu confirmed that he was questioned by the Hawks early last year. 

He told amaBhungane, “This thing scares me; I don’t know further where it will end and I have to safeguard myself and leave it at the questions that the police asked me.”  

He explained that he knew Armstrong because Armstrong had bought equipment from him related to security.

Ndlovu sends Facebook SOS to locate Motha’s stolen vehicle

He however denied facilitating any payments or bribes to the Gauteng Health officials. 

Responding to the allegation that he is friends with the officials, Ndlovu also denied this and claimed to not know anything about photos of him with these officials on his Facebook page. 

“I know them generally, I’ll say generally.”

Frame 1 and 2: Ndlovu (right) at Lecholo’s (left) Monakaladi Pub. Source: Facebook
Frame 3: Ndlovu (left) and Lecholo (right) playing DJ at a party. Source: Facebook

Toxic tenders

The Gauteng Department of Health and its facilities have been the site of a number of corruption scandals in the past few years which were underlined by the murder of whistle-blower Babita Deokaran in August 2021.

Deokaran was the chief director for financial accounting at the provincial department and just weeks before her death she had called for a forensic investigation into procurement at Tembisa Hospital after discovering R850 million worth of questionable payments.

The details of the suspicious contracts and the companies who possibly unduly benefitted from them were exposed in a detailed an investigative series published by News24 called SILENCED.

After her death the Special Investigating Unit (SIU) disclosed that Deokaran was a key witness in the unit’s corruption investigation into personal protective equipment (PPE) tender fraud at the department during the Covid-19 national state of disaster in 2020.

A number of senior officials were suspended or dismissed after being implicated in the PPE corruption scandal including former Gauteng Health MEC Bandile Masuku, head of department Professor Mkhululi Lukhele and chief finance officer (CFO) Kabelo Lehloenya.

The whistle-blower’s allegations against Malotana, Motha, Lecholo and Armstrong are not related to the Tembisa or PPE scandals, however, they may provide crucial insight into high-level interests which have made corruption and the maladministration of public healthcare funds routine at Gauteng Health.

Under R500 000

Much like the corruption that took place at Tembisa Hospital, the whistle-blower claimed that the alleged kickback arrangement between Armstrong and this trio was not limited to tenders but included smaller contracts, valued at under R500 000, that were secured through requests for quotations (RFQ).  

Only purchases above R500 000 require an open tender process which is more competitive, transparent and rigorous than RFQs.

“Payments were made to these government officials of either 10% of the invoice value or the prices of goods or services supplied were inflated to accommodate their portion of the pay-out,” the insider alleged.

“I was not present when payments from the other businesses in the group were discussed or agreed upon, but I was made aware by Mr Landus Armstrong that this was standard across the group of companies.”

Underscoring the suspicions of impropriety regarding some of the BAS Group of companies and certain contracts at the department, amaBhungane has seen a letter which shows that some of these contracts are now part of a potential probe by the Special Investigations Unit (SIU).

This is separate to the Hawks investigation and specifically focuses on suspected procurement irregularities related to contracts awarded by the Special Projects Directorate at Masakhane.

On 23 February 2023 the SIU wrote a letter to the former head of department Dr Nomonde Nolutshungu requesting information about all the companies that were awarded infrastructure and maintenance projects at Masakhane between 2017 and 2022.

Nolutshungu left the department at the end of March and was replaced by Malotana who has been acting in the position since.

A copy of the SIU letter, obtained by amaBhungane, has a list of projects and contractors that the SIU received complaints about which led to the request.

The list includes BAS Med’s plastic containers tender and purchase orders awarded to Bhekani Abantu Security Services.

Another interesting overlap in the SIU’s complaint list and the allegations made to the Hawks is the inclusion of purchase order requests made to Ndlovu’s Mamotlaletsi and another company, Mellisto Trading. AmaBhungane has found that Mellisto’s director is Ndlovu’s 23-year-old son who does not share his surname.

The SIU says in its letter that it received allegations from complainants that both companies (among others) were alleged to have charged exorbitant prices and benefitted from irregular evaluations.

On the work that his company and his son’s company were doing at Masakhane, Ndlovu would not comment except to say “those are two independent companies”.

In the letter  the SIU states that officials at Masakhane allegedly reported these irregularities to the relevant senior officials who did not “attend to the matters and/or protect implicated officials.

Meanwhile, those who reported the matters are said to have been victimised or subjected to occupational detriment. 

In response to questions, the SIU said it had received the relevant documents from the department and they are still being assessed.

“Only after analysing the documents we would determine if a proclamation is warranted,” said SIU spokesperson Kaizer Kganyago.

INVESTIGATOR:

Tebogo Tshwane

Tebogo joined amaBhungane in September 2020 after leaving Moneyweb where she worked as a financial reporter. Tebogo is a Journalism and Media Studies graduate from the University of Witwatersrand where she specialised in radio, which led her to the Eyewitness News newsroom as an intern in 2017.

Your identity is safe with us. Email or Call us

KNOW MORE INFORMATION ABOUT THIS STORY OR ANOTHER?

Related Stories