Special Tribunal hammers KZN education officials for corrupt contract

A R2.5-million contract for chemical toilets has been set aside. Archive photo of chemical toilets (not representative of the toilets supplied by Huluwethu): Liezl Human

• A company that was given a R2.5-million contract in 2020 to supply chemical toilets to schools in KwaZulu-Natal has been ordered to repay the profits.
• The provincial education department has been ordered to discipline 16 officials involved in the contract.
• No competitive procurement process was followed; bidding documents were only completed after the toilets were delivered, prices were marked up, and the company was paid for services it did not render.

A R2.5-million contract granted by the KwaZulu-Natal education department for the supply of chemical toilets at schools has been set aside by the Special Tribunal.

The contractor, Huluwethu (Pty) Ltd, is to repay its profits from the contract, and the province’s education MEC must discipline the 16 officials involved in the process.

Special Tribunal Judge Chantel Fortuin, after hearing an application by the Special Investigating Unit (SIU), found that department officials had colluded with Huluwethu to fix prices and no competitive bidding processes were followed.

The toilets were purchased by the department in June 2020 when schools reopened after the first Covid lockdown.

The head of the department sent a memorandum to district directors, instructing them to procure mobile toilets for their schools for one month, with a cap of R3,000 per toilet. All supply chain management processes had to be complied with.

The invitation to bid was sent to Huluwethu on 10 June 2020. The company was then appointed to supply and deliver 72 toilets to 11 different schools.

But the SIU said in its submissions that Huluwethu admitted “receiving calls” from department officials before 10 June. The company said it had been approached by an official from the department on 5 June and asked to quote for the toilets.

This “pointed to collusion, price fixing and unfair competitive pricing,” the SIU said.

Huluwethu, the SIU alleged, had charged more than a 100% mark-up and, additionally, had claimed for services and goods not supplied.

The company had also admitted that the necessary supply chain management documents were only completed retrospectively, after the toilets were delivered.

The SIU also alleged that Huluwethu had been paid for services it did not render. This included payment for servicing the toilets during the school holidays, and for rent and servicing during 1-11 June and 15-31 December 2020.

This, it said, was fruitless and wasteful expenditure.

The SIU submitted that the department had entirely failed to comply with the Constitution and other applicable law. And it had used the provisions of emergency regulations without first obtaining approval from the Head of Department, whose approval was only obtained ex post facto.

Huluwethu said that formal tendering processes were not followed because the toilets were urgently needed. The company denied that it was the only supplier that was invited to tender and that it had been involved in collusion or price fixing.

Judge Fortuin said the allegations were serious and involved the “stripping of the public purse”.

The only plausible inference from the fact that Huluwethu was in contact with officials before 10 June was that there was collusion, price-fixing and unfair competitive practice, Fortuin said.

“[Huluwethu] also made false declarations regarding compliance. It submitted inaccurate information regarding its operational capacity. It also did not declare a conflict of interest as its director is also a director of another company, which was also dealing with the department, as well as her position as a board member of a government institution,” the judge said.

“The evidence shows that the company claimed R3,000 a month per unit, while the (toilets) were purchased for R1,000 and R1,500 per unit a month. The latter amount included delivery, collection and service.”

Judge Fortuin found that department officials had not complied with supply chain management processes, and thus the contract was unlawful and the R2.5-million spent was an irregular expense.

“There were a number of intentional actions performed by the officials which point to a fraudulent scheme … an example is the fact that the department split payments to the company to ostensibly enable procurement under the financial threshold.”

She said Huluwethu’s director, Pat Lebenya, had failed to declare her interest in another company, which had contracted with the department in the preceding 12 months. Huluwethu had also had a contract with the department about five months earlier. These factors meant that Huluwethu should have been disqualified from the bid.

Lebenya had also “unlawfully and dishonestly” backdated the bid documents.

“Following proper procurement processes is not a choice. It is a constitutional obligation,” Fortuin said.

Fortuin noted that the Procurement Act, which is not yet in force, provided for the debarment of contractors found to have contravened the law.

“This Act will be a great tool in the arsenal of weapons in the fight against corruption. As it is not in force yet, it cannot be used yet … this is regrettable.”

Judge Fortuin declared the award of the contract to be unlawful, and she ordered forfeiture of all profits.

These would be determined following the filing of an audited statement of accounts.

She also ordered the department to discipline 16 named officials who were involved in the award of the contract.

In a press statement, the SIU described this as a “significant order” which actively enforced consequence management and “reinforced accountability where it matters most”.

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