A multipronged investigation into an alleged tender-rigging scam involving nearly 400 tenders worth R50‑million could ripple outwards to implicate senior leaders of the KwaZulu-Natal ANC, including its provincial secretary, Sihle Zikalala.
The probe by the provincial treasury, the Hawks, the police’s asset forfeiture unit and the South African Revenue Service indicates the possible involvement of companies linked to Zikalala as well as Thulani Mashaba, who is the chairperson of the ANC’s Musa Dladla region on the north coast and the uThungulu district deputy mayor, and Bheki Ntuli, ANC provincial executive member and chairperson of the provincial legislature’s police committee.
Central to the allegations is Richards Bay executive Mthokozisi Nxumalo, who appeared in the Pietermaritzburg Regional Court on June 8.
He faces 459 counts of fraud and two counts of racketeering in connection with “cover quoting” on 398 contracts for the KwaZulu-Natal social development department to the value of R51.4‑million.
All the contracts were for facilities such as marquees, buses and toilets for “outreach programmes”, often for use in rural KwaZulu-Natal.
Cover quoting is the fraudulent attempt to undermine competitive tendering by a single entity that submits, or facilitates the submission of, all the required quotes and manipulates which bid is successful.
The Mail & Guardian has obtained copies of documents from the database of Nxumalo’s company, Andisa Unathi Investments, which were seized by the police.
They list 122 companies believed to have benefited from the cover quoting scheme, including Likhona Facility Management and Mathungasi Trading, in which Zikalala has or had an interest.
Also listed are Makhendleleni Trading, Isu Lempilo Trading and Inyameko Trading, which Mashaba either controls or in which he has a stake.
Ntuli has a stake in Inyameko Trading.
A forensic investigation ordered by the provincial treasury found that companies that won tenders as a result of cover quoting would typically retain between R20 000 and R30 000 of the payment as their cut and would then transfer the balance to Andisa Unathi Investments, which would do the work.
The contracts that were targeted fell below the R200 000 threshold, avoiding the need for a full tender process.
Company records reveal that a relationship had existed between Nxumalo and senior ANC provincial leaders before the alleged scam.
In 2004 Zikalala and Hlengiwe Nxumalo were partners in Mathungasi Trading, and Nxumalo formed Mtholiseni Trading with Ntuli in 2006.
Nxumalo, his wife Hlengiwe, his grandmother Thandeka Nxumalo, other relatives and a dismissed KwaZulu-Natal social department supply-chain management official, Bhekuzalo Khuzwayo, were arrested last year.
They are expected to appear again in court on August 24.
A forensic report, compiled by Durban-based Thabani Zulu and Company Forensic Accounting Services on behalf of the provincial treasury and seen by the M&G, covered tenders awarded by the province’s social development department between July 2008 and June 2010.
It said it “suspected that the department’s supply-chain management division had been defrauded by way of a large-scale cover quoting scheme” with the assistance of social development procurement officials.
The investigation concluded that Andisa Unathi Investments was involved in a “collusive bidding scheme” and the department had not received “fair value and independent quotations”.
Thabani Zulu’s chief operating officer, Eckhard Volker, said that in many circumstances the people who benefited from such schemes knew what was going on.
“We’ve dealt with matters like this in the past and the vast majority were convicted. It is dependent on whether the state and the complainant want to pursue the matter,” said Volker.
The firm’s report further revealed a pattern in which the same companies were bidding against each other and won tenders on a rotational basis.
This “strongly suggested” that the bidding process was being managed by Andisa Unathi Investments.
Hawks spokesperson McIntosh Polela said there would be more arrests.
“The sheer magnitude of this case and the amount of people involved means it requires time, but we intend to make more arrests as we continue to investigate.”
Zikalala said it would be “inappropriate” to comment because it could “prejudice the court process”.
Nxumalo admitted to the M&G that he had submitted quotes on behalf of 122 clients, some of them senior ANC members, but denied collusion, racketeering and fraud.
He claimed that he and his family were being “unfairly targeted by the SAPS” and that the “state has no case”.
KwaZulu-Natal social development spokesperson Vukani Mbhele said the “department is not at liberty to discuss the nature and extent of the alleged transgression”.
Treasury spokesperson Ntokozo Maphisa said, “where applicable”, it would attempt to recoup payments that were fraudulently obtained.
Mashaba and Ntuli were contacted for comment on Tuesday this week, but had not responded at the time of going to print.
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