AG's Covid-19 report exposes government's general failures

Government procurement systems need to be more digital, robust, connected and transparent to reduce abuse

02/09/2020 16:00:24

AG's Covid-19 report exposes government's general failures 

  

The Organisation Undoing Tax Abuse (OUTA) says the Auditor-General’s recent report on the substantive abuse of Covid-19 relief shows how easy officials and contractors find it to override and abuse government systems, at significant cost to society.

“The AG and civil society warned the government that the easing of supply chain controls to address the Covid-19 crisis will expose the government to risks of misuse and abuse of public resources,” said Julius Kleynhans, OUTA’s Executive Manager for Public Governance. “Flawed systems, missing information, poor planning and project management, system abuse… it all sets up the perfect environment for corruption, maladministration and fraud. This has been an ongoing and growing problem with government expenditure for many years, and - exacerbated during the Zuma era - continues to deprive South Africans across all sectors, especially the poor, from receiving necessary services.”  

“The shameless have shown their colours by abusing the system in an environment where people’s lives are at stake, says Kleynhans, adding that “fast and stringent action” is needed to hold the perpetrators to account.

The AG’s report found many instances of the lack of validation, integration and sharing of data across government platforms, resulting in people – including government officials – receiving benefits and grants to which they were not entitled. 

“We welcome the AG’s exposure of weaknesses in the UIF and Social Security systems, which lack integration with other government databases, leading to significant losses due to duplicate or incorrect payments. Hopefully these findings will lead the Government to move faster into adopting the use and implementation of far more connected, transparent and robust systems and technology available in today’s digital world.”   

The pre-existing deficiencies in the supply chain processes were amplified by the introduction of the emergency procurement processes allowed for personal protective equipment. “More important is that we see those in charge of oversight where these wrongs have occured, held to account for what has happened under their watch,” says Kleynhans.

The AG reported that there are clear signs of overpricing, unfair processes, potential fraud and supply chain management legislation being sidestepped. In addition, delays in the delivery of personal protective equipment and quality concerns could have been avoided through better planning and management of suppliers.

Contrary to the National Treasury instructions for public sector institutions to purchase the specified PPE at specified prices or less, some items were priced at more than double and even five times the prescribed price. Similar instances were identified in the procurement of PPE in the education sector where the national and provincial departments are not procuring PPE at market-related prices. 

“A common theme of fronting and extra layers of middle-men or ‘facilitators’ are created to enrich a few people, thereby significantly pushing up the prices of goods at the expense of the entire country. These companies must be investigated and those involved must be taken to task as these transgressions are simply outrageous and not only diminish our prosperity, but cause unnecessary suffering and death”, said Kleynhans.

“It is shocking to see the extent of corruption at a time when the country should be working together amidst a health and economic crisis. We trust the President will act quickly on the findings, ensuring that those responsible for the looting are held accountable, if he is to regain the trust of the people. The abuse of Covid-19 relief funds should not be allowed to become another after-the-fact State Capture commission scenario, with the accused escaping accountability for years to come,” Kleynhans said.


Some highlights of the report include the following

  • There is a risk that the R350 social relief grant is being paid to people who are not in distress. The databases they have access to are not sufficient.

  • Payments to over 30 000 beneficiaries that required further investigation. These include payments to beneficiaries employed in government or that received other sources of income such as other social grants, government pension, UIF payments and benefits from other relief funds. 

  • The databases that Sassa used are also outdated and could have led to the rejection of applicants that should have received the grant. The audit of the validity of the rejections will be dealt with in the next report.

  • The Department of Small Business Development aims to implement 10 initiatives to the value of R1,8 billion to support small, micro and medium enterprises to remain in business during the pandemic. In total, R145 million had been disbursed up to 15 July and no concerns have been identified at this stage of the audit. A control weakness in the approval process was identified, which the department is attending to.

  • The Department of Agriculture, Land Reform and Rural Development implemented a relief scheme for financially distressed small-scale farmers in the form of vouchers for production input. By 22 July, 14 589 applications for vouchers had been approved with a value of R517 million and 13 662 had already been distributed.

  • A tourism relief fund of R200 million was made available by the Department of Tourism to support qualifying small, micro and medium enterprises in the tourism and hospitality sector. In total, 4 000 applications had been approved to each receive a R50 000 relief Payment. By 31 July, 3 994 applicants had been paid.

  • The Department of Sports, Arts and Culture established a R235 million relief fund to assist artists, athletes and technical personnel affected by cancellations of sport and art events and to fund digital solutions. By 3 July, only R39 million was paid out. 

  • The Industrial Development Corporation ringfenced R2,5 billion in funds to provide as loans to their clients and other businesses operating in sectors within its mandate. By 15 July, no loans in respect of debt relief had been approved yet as the businesses did not comply with the qualifying criteria.

  • Before the R350 social relief grant was activated, Sassa used part of its budget to purchase and distribute food parcels to people in need. By 11 May, when this initiative ended, 146 936 food parcels had been distributed. 
    COMMENT: It is, however, unclear if food parcels reached those with the greatest need.

  • The Department of Water Affairs and Sanitation and the Department of Education identified the need for emergency water supplies to communities where there is no or an unreliable water supply and to schools without water and sanitation facilities. The departments provided the funding and determined where emergency water is required. Rand Water was appointed as an implementing agent to procure water tanks and tankering services. The water supply initiative is behind schedule – the planned installation date for tanks across 3 401 informal settlements was the first week of May, but by 31 July, only 69% were reported to have been installed. The Department of Education only transferred the first funds to Rand Water by 26 May, which delayed the start of the emergency response. The delayed start and pressure due the reopening of schools resulted in corners being cut in the installation of water tanks and the design specifications for foundations and hydraulics not always being followed. 
    COMMENT: OUTA has said many times in the past that access to water is a basic human right. This state of affairs is unacceptable, and even more so during a pandemic.

  • R410 million pledged by the United States government for South Africa’s health response has not yet been received and of the 1 000 ventilators pledged, only 150 had been received by 6 July. The availability of ventilators in the market remains a problem – 1 144 ventilators were ordered for the health sector and by 31 July only 58 could be delivered.

  • In planning the health response, it was expected that a high number of people would require facilities for quarantine and self-isolation. In total, 6 123 quarantine sites were initially targeted but by 31 July, only 510 sites had been identified by the Department of Public Works and only 192 had been activated for use by the Department of Health. 

  • In total, R4,8 billion was made available for field hospitals. For this purpose, 66 projects were identified across the country – the money would be used either to upgrade current hospitals or build/use temporary structures to increase hospital beds. By 30 June, only 18 of these projects had been completed. 
    COMMENT: OUTA would like to see a thorough investigation to determine where funds went to.

  • A resettlement programme for informal settlements was initiated in response to the increased risk of contracting Covid-19 in overcrowded and dense settlements. The audit focuses on 31 571 temporary residential units planned for completion through 95 projects across the country. The progress with these projects has been slow. 

  • The Department of Public Works was tasked with urgently sourcing 25 000 additional workers to assist the Department of Health with screening, testing and educational campaigns – funding of R771 million was allocated for this purpose. By 30 June, only 8 229 workers had been recruited and R26 million spent on management and administrative expenses and PPE for participants. No payments had yet been made to workers as the start of the programme was delayed. 
    COMMENT: OUTA finds this unacceptable. We would like to see a thorough investigation.

  • At first R3,9 billion was provided through repurposing grants that municipalities already received for the 2019-20 financial year towards Covid-19 response, topped up by money from the municipal disaster relief fund. The fiscal relief package provided for a further R20 billion for municipal support in the form of an additional R9 billion in grants for Covid-19 response and a further R11 billion in equitable share payments.