[CORRECTED] #StateCaptureInquiry Today's @StateCaptureCom proceedings begin. Legal team head Advocate Paul Pretorius SC stands before Chair Deputy Chief Justice Raymond Zondo. Pretorius raises a report by the @PublicProtector, and court papers on a Free State *asbestos* project.
#StateCaptureInquiry "That investigation report has been signed by the investigators and will be referred to in the end," says Pretorius. It contains documents and witness transcripts ands statements. He names the witness: Jacobus Roets as an expert on asbestos.
"It's a risk to life, it's highly dangerous, causes a number of health conditions," says Pretorius of asbestos. "Hundreds of millions of rands have been spent on the project but the asbestos is still there." He says people are still exposed, and Roets will provide more input.
[CONTEXT] #StateCaptureInquiry For some background on the asbestos project in the Free State which forms the subject of evidence scheduled for this week, see the following @dailymaverick story by @PLMyburgh.
dailymaverick.co.za/article/2020-0…
dailymaverick.co.za/article/2020-0…
Pretorius begins in Gauteng. "We know that a panel of eight contractors was appointed to do an asbestos audit in Gauteng," says Pretorius, and Blackhead Consulting charged R650 per unit's assessment. "That whole procurement was declared [...] irregular by the Auditor General."
#StateCaptureInquiry "A procurement process was entered into [...] which allowed Blackhead [...] and allowed the Free State Department of Human Settlements to participate in the contract in Gauteng. That process was entirely flawed for a number of reasons," says Pretorius.
[SUMMARISED] Pretorius: Mr Sodi's evidence shows profits for the Gauteng project were massive. He was paid for his assessment of asbestos prevalence in Gauteng and he was paid "in the region of R250-million and his profit, on his own version, was in the region of R100-million.
#StateCaptureInquiry "The Gauteng contracts don't appear to have involved competitive bidding whatsoever [...] contracts in the Free State didn't involve any competitive bidding whatsoever and that casts a shadow over the Free State procurement processes," says Pretorius.
#StateCaptureInquiry "Treasury Regulation 16A 6.6 is the one relevant to the participation process," says Pretorius. He reads the regulation. Zondo asks about the Free State Department of Housing participating in a Gauteng contract "at a practical level" and how it works.
#StateCaptureInquiry "Different parties were involved. In Gauteng it was Blackhead Consulting PTY Ltd," says Pretorius. "In the Free State it was a different party. It was a joint venture between Blackhead Consulting and Diamond Hill Investment."
#StateCaptureInquiry Pretorius says, "Now, one may say that this is really a minor distinction. What is the difference between Blackhead and the joint venture?"
"Mr Mpambani, according to Mr Sodi, had no knowledge or experience or capacity to deal with asbestos eradication. He contributed nothing to the contract at all, save to unlock the opportunity in the Free State through his contact with officials in the Free State," says Pretorius.
#StateCaptureInquiry "For that he got 50% of the income," says Pretorius of Mpambani. He later says it is apparent from officials' correspondence both in Gauteng and the Free State: the panel arrangement (and not the contract) was transferred but one contract was accepted.
#StateCaptureInquiry Pretorius says there is a "huge problem" and "irregularity" in this transfer. "That correspondence will be dealt with in evidence, to show that [...] the Gauteng contract had expired," he continues.
#StateCaptureInquiry "At the time of the participation there was nothing in existence to participate in and new contractual arrangements had to be made on the Free State side," says Pretorius. He is introducing evidence on a fraudulent asbestos audit project in the Free State.
[NOTE] #StateCaptureInquiry Going forward, please note I will use 'JV' to indicate joint venture. I will use 'Blackhead' to refer to Blackhead Consulting PTY Ltd.
#StateCaptureInquiry Pretorius says, "The participation process allowed the contractual arrangements to be entered into in the Free State without any competitive bidding process."
#StateCaptureInquiry He says, "The fact that there was no competitive bidding process and that it wasn't transparent, just two of the requirements of the Constitution Section 217, means one could enter into a contract at an entirely inflated price."
Pretorius: It seems not unreasonable Chair to draw the conclusion at the end of the evidence that we will submit to you that the participation process was really quite a clumsy sham to cloak the Free State dept. contract with the [JV] with a veneer of legality, and successfully.
#StateCaptureInquiry Pretorius refers to a document provided by prior Free State MEC of Economic Development, Mxolisi Dukwana, which refers to Free State officials using initials. "That 'Cost of Business' schedule has been the subject matter of extensive investigation," he says.
#StateCaptureInquiry Pretorius says the appointment of the JV entitled Mr Mpambani and his entity in the JV to 50% of the income of the project to R255-million. "He had to unlock the opportunity with Free State officials [...] that was the value of his engagement," he says.
[NOW] #StateCaptureInquiry Zondo says, "If one looks at what that party got, one is likely to say it can be lower or much lower than what it would normally be entitled to [...] the whole price must be highly inflated in order to ensure there is this 50% for this other party."
Zondo speaks of inflating the price so the company with skill and expertise to conduct an audit on asbestos would receive its usual fee. Pretorius says this is correct, the corollary being a govt. official assessing the contract would surely analyse value for taxpayer money.
#StateCaptureInquiry "The persons [in Free State government] examining the project were, arguably, the persons who had been unlocked," says Pretorius.
#StateCaptureInquiry Pretorius says funding came via the national department in another province, this was done *after* the approach not before. "No competitive bidding process was entered in," he says. It was an unsolicited bid to conduct an audit of asbestos in the Free State.
#StateCaptureInquiry "It was entirely secretive so there was no ability to test the market," says Pretorius. He says no due diligence was conducted on the JV and if one had been conducted it would have emerged Diamond Hill had not expertise to conduct the asbestos audit.
#StateCaptureInquiry "To even be considered, certain prerequisites are laid down by Treasury," says Pretorius of an unsolicited bid process. He describes these requirements. "It must, Chair, present a new and COST EFFECTIVE method of service delivery," he says with emphasis.
#StateCaptureInquiry Zondo says of the JV contract indicating it would cover budget for the audit, "I wondered to what extent, I mean the impression I got [...] it was like the department wasn't going to have to pay anything and, of course, that sounds strange."
#StateCaptureInquiry "What happened then, Chair [...] a process was then carried out where the absence of a budgetary provision was cured by the rectification of the budgetary provisions to allow payment of R255-million," says Pretorius.
"It was at all times contemplated that the [JV] would receive income for the project, and it said so in the SLA [...] where the funds come from, its your problem and that problem on the probabilities can only have been finding the money from official sources," says Pretorius.
#StateCaptureInquiry "A gross misrepresentation was made to him [Mr Zulu] in the business plan," says Pretorius. He describes two phases to the asbestos audit in the Free State: (i.) the assessment phase, and (ii.) the eradication phase.
The first phase involves inspection and assessment of houses to determine how many have asbestos to be removed in the Free State (this is the R255-million project). The second entails a certified asbestos remover would then remove it and dispose of it in a safe manner.
#StateCaptureInquiry The number of Free State houses identified as having asbestos was approximately 36,000. Pretorius said earlier today the asbestos has still not been removed from them, so there is an ongoing negative health consequence for the relevant Free State community.
#StateCaptureInquiry "So, what Mr Zulu was told: at the rate of R850 per unit not only would the assessment take place but the removal and disposal would take place, a gross misrepresentation," says Pretorius. "It was complete misrepresentation," he soon adds.
#StateCaptureInquiry Pretorius then deals with clauses in the service level agreement (or, SLA) for this work in the Free State, the SLA includes clauses he describes as sparse and confusing.
#StateCaptureInquiry "Every claim for payment had to be accompanied by a report and had to be accompanied by a detailed verification for why the amounts were particularly charged. It doesn't seem that was done at all," says Pretorius.
#StateCaptureInquiry "One is not simply buying pen and paper for a stationery department within a government department. One is dealing here with life, the livelihood and the health of inhabitants of dangerous material in houses, life threatening material in houses," he says.
#StateCaptureInquiry Pretorius says an expert witness will testify on asbestos being present beyond roofs (or is it
written rooves) which were the focus of the Free State audit.
written rooves) which were the focus of the Free State audit.
#StateCaptureInquiry Pretorius raises a prepayment of R51-million, which is in the region of what the full project should have cost. "Up front before any work is done all of the costs are seen, by way of prepayment," he says.
Pretorius next raises the JV appointing a sub-contractor to execute the work, and being paid some R50-million (whereas the JV's figure was R255-million). "You have a person in the department who allows this to happen without properly interrogating a competitive bid," he says.
[NOTE] #StateCaptureInquiry The tea adjournment is currently underway and I am catching up on some of the last remarks before it was announced.
#StatecaptureInquiry Pretorius has broken down the astonishing figures involved in this project, which he says has not at all benefitted Free State inhabitants in some 35,000 households who are exposed to asbestos (and this a health hazard).
[PROCEEDINGS RESUME] #StateCaptureInquiry Zondo recalls what Pretorius detailed before the break. The JV subcontracted to Mastertrade, which subcontracted the work to another company, which Pretorius says "did most if not all of the work" involved.
#StateCaptureInquiry Pretorius says, "The details of these subcontracting arrangements and the prices attached to these are a matter of intense dispute between all involved."
[SUMMARISED] Pretorius: The JV is suing the dept. for R30-million unpaid. Blackhead is suing the estate of the deceased partner in the JV. One subcontractor is suing the main contractor. So, there is a flurry of litigation between all these parties, each alleging something else.
#StateCaptureInquiry "The effect of all of this must be that the entity that did all the work, if it could do the work for the price that it charged, it must mean that a reasonable price for the work can't be much higher than, more or less, what the entity charged," says Zondo.
#StateCaptureInquiry Pretorius says, "The final subcontractor in the line bid to do the work at R21-million and on its version made a substantial profit on that score, and has not been paid."
Zondo raises a relevant question, in terms of Free State government officials, is "on what basis did they believe that the price that they agreed to pay was reasonable when there were as a matter of fact entities that could do the job for FAR lower in terms of the price?"
#StateCaptureInquiry Zondo speaks of recovering monies. "The matter was investigated by the Public Protector, the current Public Protector and is, in fact, being investigated by law enforcement agencies at the moment," says Pretorius.
#StateCaptureInquiry Pretorius describes the trickle down and decreasing figures which are the subject of a "squabble in a defined space" which pale in comparison with the R255-million fee overall. "The point is clear, in relation to the overall costs to the fiscus," he says.
Pretorius describes the method for identifying Free State houses with asbestos: at a desktop computer aerial maps are used to identify roofs (rooves) likely to have asbestos, individuals in the community are trained to take photos of the houses, the detail's collated in a report.
"Remember the SLA, Chair, talked about roofs of houses, not water pipes or pressure boards or anything like that," says Pretorius. He predicts an expert witness will explain the removal of asbestos has to be done properly, because it involves a life-threatening substance.
When removing asbestos, says Pretorius, you're removing a life threatening substance. An expert witness is set to testify on why careful removal is vital. Pretorius says, "You're exposing fibres, the fibres are carried in the air, people breath them and they, quite frankly, die."
#StateCaptureInquiry "There are all sorts of question marks when one digs into the detail," says Pretorius when referring to the figures cited by the subcontractors relating to some of the work involved in the asbestos audit.
"There is no question [doubt] of a gross overcharging contract between the [JV] and the department," says Pretorius. He mentions invoices, "It seems that the payment of invoices and the recordal of work done to justify the payment is wholly inadequate [...] simply improper."
#StateCaptureInquiry Pretorius describes the @PublicProtector Advocate Busisiwe Mkhwebane's report on the Free State asbestos audit, and her findings. "The Public Protector found that the participation element [...] was improper," begins Pretorius.
#StateCaptureInquiry Mkhwebane found the SLA was in contravention of the department's own supply chain management policy. Pretorius says the Auditor General of the Free State declared the procurement as irregular, in a report released in July 2015.
Zondo and Pretorius discuss the document containing initials and some company names (such as Mastertrade) which reflects figures. Upcoming witness, Sodi, from the JV claims Mpambani prepared the document in Soni's office on Soni's computer, and he doesn't know what it means.
[MINUTES EARLIER] #StateCaptureInquiry Pretorius says, "The evidence of Mr Dukwana was clear that, according to his evidence, the amounts reflected on the 'Cost of Business' schedule were paid as gratification in relation to the Free State asbestos contract."
#StateCaptureInquiry Pretorius says, "As was correctly pointed out by you at the time, Chair [...] that was insufficient evidence to actually implicate [a] particular person and thereafter, the investigators were tasked to do their work, which they did."
#StateCaptureInquiry "What we do know is that Mr Zulu was at least involved, if not instrumental, firstly in the participation contract and secondly in the budgetary process of unlocking funds," says Pretorius.
#StateCaptureInquiry Nthimotse Mokhesi, also known as Tim, is the Accounting Officer and Head of Department of Human Settlements in the Free State. "We know that he was involved [...] in the signing of the SLA, payments and the like. He's the Accounting Officer," says Pretorius.
#StateCaptureInquiry Pretorius details several initials in the 'Cost of Business' schedule which Dukwana claims record gratification payments. His bare claim was insufficient for Zondo. Earlier today Pretorius reported inquiry investigators set to work regarding this record.
#StateCaptureInquiry Among initials and other names recorded in the schedule Pretorius has pointed out this morning: TZ, TM, AM, OM, MEC, MZ, Steve, JT and Diedericks. He then raises two payments by Blackhead to a motor dealer in Pietermaritzburg.
#StateCaptureInquiry "In one transaction the money was used to buy a Maserati for a Mr Ntuli. Quite where that set of transactions has its origins and why it should be so has not finally been established by the investigators," says Pretorius.
#StateCaptureInquiry Sodi paid the motor dealer R600,000 at the time of the project, says Pretorius. "It is, again, reflected on the recipient side as reflecting the initials TZ," says Pretorius. "And Mr Zulu uses it as a deposit for a vehicle [...] a Range Rover."
Pretorius says it's common cause "Sodi pays R600,000 to a motor dealer. It's used as a deposit for a Range Rover bought by Mr Zulu. The explanation for that, which you will hear evidence about [...] is that Mr Zulu has an involvement [...] owns a lounge called TZ Lounge".
#StateCaptureInquiry "On one version or on one explanation R600,000 reflected the amount of the tab run up by Mr Sodi at the lounge on Mr Zulu's version [...] it was monies owed by Mr Sodi for goods and services related to the business of the lounge in Pietermaritzburg," he says.
#StateCaptureInquiry Pretorius says, "On the face of it R600,000 is quite a large bill to run up at an entertainment venue." He's said evidence on this will feature in due course. Next, he describes the purchase of a property in which, according to investigators, Mokhesi lives.
"So, an amount of R650,000 is paid via a trust to attorneys which is used to buy a property in which, according to the investigators, it is apparant Mr Mokhesi lives but the explanation of Mr Mokhesi is: no, this was a joint business venture," say Pretorius.
#StateCaptureInquiury "He and Mr Sodi became friends and they decided to invest in a property and there's an agreement which shows how the income from rentals is to be divided and what's to happen to the property," says Pretorius of Mokhesi's explanation regarding the property.
[SUMMARISED AND NOT VERBATIM] Pretorius: A person involved in the grant of a tender of R255-million, the Accounting Officer, should not be in business with the recipient because it allows for all sorts of benefits like this to be granted and, certainly, this is a benefit.
#StateCaptureInquiry Pretorius says, "And there are others too, Chair, that involve the payment of fees from this money at the request of the Premier of the time, Mr Magashule."
"Legislation is [...] quite clear that whether you receive a benefit or a gratification yourself or on behalf of others (students studying) it falls foul of the legislation and no doubt the law enforcement agencies will pay close attention to that in due course," says Pretorius.
[NOTE] #StateCaptureInquiry Kindly note my tweets are out of sync with real time proceedings as I take care to accurately transcribe speech.
#StateCaptureInquiry "The whole story goes full circle, Chair, and it is illustrative not because it is unique or unprecedented but it shows a pattern," says Pretorius.
[EARLIER] "It shows a pattern of the ability to identify a moneymaking opportunity using funds of the fiscus to that purpose, an abuse of procurement processes, engagement with officials to facilitate the abuse of the procurement processes," says Pretorius.
"The production of work [...] simply not warranted even by the lesser amounts that were charged, the pocketing of huge amounts of the fiscus meant, Chair, for the livelihood of poorer members of the community but end up buying Maseratis," says Pretorius.
#StateCaptureInquiry "It's a very sorry tale to say the least but the full circle is there from the manipulation of procurement right through to the production of benefits and in between an entirely cost ineffective and quite frankly criminal project," says Pretorius.
#StateCaptureInquiry Proceedings are currently adjourned for the lunch break. In a few tweets to follow, I will reflect select remarks from last 20 minutes of @StateCaptureCom proceedings before this pause.
[EARLIER] #StateCaptureInquiry Two witnesses were scheduled for today. Lawyers for one of them, John Matlakala, have corresponded with @StateCaptureCom. Pretorius says Matlakala was not subpoenaed to appear and Matlalaka "claims he has reason not to appear this week".
#StateCaptureInquiry The witness set down for the remainder of today's proceedings, who began his evidence minutes before the lunch adjournment, is Jacobus Roets.
[EARLIER] #StateCaptureInquiry Pretorius says, "Not only are we here dealing with the duty to deal fairly, transparently, and cost effectively with state funds in procurement processes and in the execution of contracts under the auspices of provincial or national government..."
#StateCaptureInquiry "We are also dealing with another issue here, Chair [...] the state, through the state the executive, has a constitutional duty to provide adequate housing and to safeguard the lives of inhabitants of the various communities in the country," he continues.
#StateCaptureInquiry Pretorius says, "We know that, just from the small survey that we've done in this investigation of hundreds of millions of rand being spent [...] but the roofs are still there and the roofs with all their dangers are still there."
[EARLIER] #StateCaptureInquiry Roets reports he is an occupational hygienist. He cites some accreditation. Pretorius indicates Roets has been asked to give an opinion of an asbestos audit in the Free State conducted in 2014-2015. Roets cites his qualifications and experience.
#StateCaptureInquiry Roets will resume his evidence this afternoon, following the lunch adjournment. You can follow the proceedings live on YouTube and, or monitor the @StateCaptureCom account. Also keep an eye out for ongoing reporting from journalists.
