Instructions from the ‘boss’: Gupta-linked public enterprises DG in ‘irregular’ R22m procurement

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  • Former public enterprises director-general Richard Seleke allegedly pushed a R22 million contract to an events management company.
  • A forensic investigation suggests Seleke manipulated the process to favour ZAM Projects – a company he allegedly knew from the Free State.
  • Seleke says investigators made no attempt to contact him. ZAM has issued summons against the department, claiming it is still owed R16.9 million.

Former public enterprises director-general Richard Seleke – whose appointment was linked to the state capture project – allegedly interfered in the tender to appoint a communication and events management company in 2016.

The four-year contract, which was capped at R22.4 million in the service agreement, went to ZAM Projects under highly suspicious circumstances.

Seleke was alleged to have worked with ZAM and its owner, Zola Key, when Seleke was head of the Free State Department of Economic Development, Tourism and Environmental Affairs.

The contract produced a failed TV programme and a conference that never happened, with the Auditor-General subsequently calling out fruitless and wasteful expenditure of more than R700 000 (and another possible R1 million) relating to ZAM.

In 2018, Seleke left the Department of Public Enterprises (DPE) after arch Gupta opponent Pravin Gordhan took over as minister.

The #GuptaLeaks had revealed that, before he was appointed, Seleke’s CV was forwarded to former president Jacob Zuma’s son Duduzane via the infamous “[email protected]” account.

The email address also known as “Business Man” was almost certainly controlled by Gupta lieutenant Salim Essa.

Seleke was appointed director-general in November 2015.

The Zondo commission has since heard claims that as early as 2011, Seleke was summoned to the Gupta compound and presented as a candidate to head the Free State Department of Economic Development, a post to which he was appointed in 2013.

Following Gordhan’s appointment in February 2018, allegations were raised suggesting that there may have been irregularities in the manner in which ZAM was engaged.

The DPE launched an investigation and appointed Abacus Financial Crime Advisory to investigate.

Leaked reports, marked “draft” or “confidential” and obtained by amaBhungane, set out in detail the Abacus findings of how Seleke allegedly interfered in the procurement process and placed undue pressure on officials to ensure that ZAM received the contract – even though their bid was initially described by one evaluator as a “poor”, “dishonest” and “unacceptable” “cut and paste job”.

The reports describe a “fundamentally flawed and irregular” process, whose roots could allegedly be traced to Seleke’s office, to appoint ZAM.

Investigators also found that ZAM’s contract was poorly managed by the department’s officials, resulting in irregular as well as fruitless and wasteful expenditure for work performed by ZAM.

Abacus conducted interviews with former and current officials who were involved in ZAM’s procurement and overseeing the company’s work. The process also included a review of documents related to the bid, financial documents such as invoices and quotations for work conducted and email exchanges.

Abacus’s investigation took place between February and August this year.

Abacus states that it was unable to reach Seleke for comment on two different cellphone numbers before submitting its draft reports.

AmaBhungane sent detailed questions to Seleke and Key.

Seleke said he had not heard of the investigation and denied that attempts were made to get hold of him. He also declined to respond to amaBhungane’s questions unless he was provided with the reports. AmaBhungane provided him with extracts relevant to the claims made in this article, but Seleke still did not respond.

Key referred questions to his lawyers, stating that ZAM and the DPE were currently engaged in litigation. His lawyers also asked to be provided with the reports before responding. AmaBhungane provided his lawyers with relevant extracts but they too failed to respond.

The set-up

Abacus reports DPE staff told its investigators that after Seleke arrived in December 2015, there were complaints “from the leadership of the department” about the standard of events arranged by the communications unit.

When a DPE official argued that the department’s communications team was adequate, he was told that the complaint had come from Seleke.

Abacus records: “We were informed that Seleke took a personal interest in the appointment of an external communications and events management service provider. [Redacted] informed us that the procurement process, that ultimately led to the appointment of ZAM, was initiated by Seleke shortly after he joined the DPE, and that decisions and instructions relating to work to be performed by ZAM emanated from the office of Seleke.”

Abacus says several DPE officials informed it that Seleke and Key, the owner of ZAM, had a pre-existing relationship.

“Although we were unable to identify a direct relationship between Seleke and ZAM, we determined that Seleke was employed within a Free State provincial department at the same time that ZAM rendered events management services in the Free State.”

While Abacus took the link between the men no further, amaBhungane did – see Seleke, Key and the powerboat festival.

Seleke, Key and the powerboat festival

Abacus’s investigators were not able to establish a direct relationship between ZAM Projects, its owner, Zola Key, and former public enterprises director-general Richard Seleke. But officials told them that the company had worked with Seleke in the Free State.

Before moving to public enterprises, Seleke was head of the provincial Department of Economic Development, Tourism and Environmental Affairs, a role he was appointed to in 2013.

According to ZAM’s website, the company provided event management services to the Free State government for its annual Phakisa powerboat festival that ran from 2011 to 2015.

The festival is hosted by an entity of the department, the Free State gambling, liquor and tourism authority, and Ngwathe Municipality in Parys.

Powerboat South Africa’s president, Christo De Jager, whose organisation worked with Key on the events, told amaBhungane that when Powerboat SA asked about some of Key’s budgeting or payments, Key would decline saying: “I can’t show you that because I have to take care of certain people”.

De Jager claimed “Richard’s” name “came up regularly”.

“He specifically said I need to take care of the [head of department] and I have a good relationship with him or whatever the case may be.”

Subsequent to the 2014 event, De Jager said Powerboat SA took the decision to stop working with Key, declaring him as a “persona non grata”. Because of this experience, the association made a resolution to not use external event managers for any of their events.

Neither Key nor Seleke responded to questions about de Jager’s claims.

 – Tebogo Tshwane

Instead it was Seleke’s interventions during the bid evaluation process that investigators concluded “strongly suggest conduct influenced by a conflicted relationship”.

In simple terms, the evaluation is done in two stages in line with the department’s procurement policy.

The first stage looks at the functionality scores of the bidders. Those who meet the minimum threshold progress to the second stage where price and empowerment standing are evaluated.

All the evaluation committee members are then required to sign off a document with all the consolidated scores and make a recommendation for the bid adjudication committee.

The adjudication committee will hold its own meeting to consider the recommendation of the evaluation committee against all supporting documents. At this stage, the committee will either forward a final recommendation to the director-general or, if the recommendation is declined, refer it back to the evaluation committee.

Round 1: ZAM is on the floor

For this specific contract the minimum functionality threshold was 70%; this meant that a bidder had to score at least 665 points out of a possible 950 to be considered for further evaluation.

In February 2016 the evaluation committee met to consider 29 bid proposals.

At the end of the first stage only two companies had met the functionality criteria and ZAM was not one of them.

In fact, ZAM scored only 281.67 points on functionality, the Abacus report states.

One of the committee members made the following comment on their scoresheet:

Poor proposal. Evidence in document of cut & paste job .. .no attention to detail. Documents not authentic. Dishonest. Require 3 months lead time in advance that the DPE doesn’t have. Unacceptable.”

C-Squared Group and Change Strategies with 806.67 and 751.67 respectively were the only ones to proceed to stage two of the evaluation where C-squared was recommended as the winning bidder after scoring 98 points on price and B-BBEE.

The bid evaluation process had been finalised. The next step would be to forward the recommendation memorandum to the bid adjudication committee.

But six days later, at the beginning of March, members of the evaluation committee received an invitation to convene a re-evaluation process.

Abacus states: “The first recommendation of the [evaluation committee], which did not include ZAM – which was formally documented and approved, was questionably not submitted to the [adjudication committee] for approval, but rather shared directly with Seleke.”

The report states that at least one panellist said he was told they had to reconvene because the “boss”, which he understood to be Seleke, wanted to appoint a panel of service providers to spread the risk of the contract.

Remember, the procurement policy allows for a re-evaluation only if the adjudication committee rejects that initial recommendation. “In this instance,” the report reads, “the adjudication committee] could not have rejected the [evaluation committee] recommendation as it has not received it.”

“This interference by Seleke was improper and irregular.”

The events of the re-evaluation meeting would be even more irregular.

Round 2: ShaZAM! One score more than doubles

Whereas in the February evaluation only two bidders met the minimum threshold, after the re-evaluation, ZAM’s points increased by a whopping 390 points, from 281.67 to 671.67.

The panellist who made strong unfavourable remarks during the first evaluation and gave ZAM a score of 270 in Round 1 ended up changing this to a final score of 720 during the re-evaluation.

“We were not able to find an acceptable and agreeable rationale for this significant increase,” the investigators noted.

In an interview with one of the committee members, investigators heard how he was placed under “undue pressure” to change his score for ZAM when he scored the company under the functionality threshold. A heated debate ensued where he was told that if he did not want to amend his score he “should go and tell the DG that [he] no longer wanted to be part of the process”.

The investigators point out that this was key to pushing ZAM’s score over the qualifying threshold.

Round 3: ZAM scores a knockout

Now the evaluation committee had three qualifying bidders which it recommended to the adjudication committee to be considered for a panel of service providers. The final decision on how many service providers would be appointed on the panel was left to Seleke as director-general in consultation with stakeholders.

But the adjudication committee was not informed or given documentation about the first evaluation process.

This means the adjudication committee was not aware of the initial evaluation and the different outcome.

Documents from the first evaluation were also initially not provided to investigators until they questioned a February 2016 date on one of the scoresheets that did not correlate with the ones they had from March.

The adjudication committee meeting was held via round robin on 15 March. Four panel members were in support of the evaluation committee’s recommendation while two others asked for clarity on why the department was outsourcing expertise it already had in-house.

These queries were not responded to and the bid adjudication committee did not in fact make a recommendation to Seleke.

But the supply chain management representative prepared a recommendation memorandum in which it said a panel of service providers should be appointed.

This document was submitted to Seleke for approval despite not being signed by the adjudication committee chairperson as required by the procurement policy.

On the same day, 15 March, Seleke made the decision to appoint “the highest scoring bidder” instead of a panel as recommended. ZAM had the highest score on cost and empowerment of the three, so once it was pushed over the functionality line, it came out on top.

The investigators noted, “[After] Seleke’s initial improper and questionable influence and interference which led to the [evaluation committee] reconvening … with the purpose of appointing a panel, he inexplicably only approved the appointment of one service provider, being ZAM.”

Fruitless and wasteful

Investigators uncovered other irregularities in the manner that ZAM’s services were engaged by the department.

Even though ZAM’s approval letter, dated 16 March, states that ZAM should not proceed with any work prior to a contract being finalised, documents reviewed by investigators show that this was disregarded.

ZAM’s contract was completed on 28 April, but documents show that the company had already started working under the letter of award. As a result, the department had to account for R1.35 million in irregular expenditure which was condoned by Seleke without a contract in place.

In its 2018/2019 report on the department, the Auditor-General’s office confirmed R713 000 in fruitless and wasteful expenditure after ZAM’s contract was extended to produce a failed TV series called Econonetics as part of Seleke’s strategy to profile the work of the department and its state-owned companies.

Meeting minutes show that Seleke tabled the idea at an executive committee meeting in June 2016 and ZAM made a presentation on it. Investigators believe Seleke abused the committee to push this idea through because the structure was asked to approve the idea despite having “no decision-making powers”.

But the 10-episode TV programme, which was meant to air on SABC, never took off.

ZAM provided the department with at least three broadcasting dates which were not met due to delays in finalising a formal contract agreement with the SABC. In emails to the department, Key put the blame on the “state of affairs” at the SABC, which at the time was contending with internal issues, including a labour dispute over the unfair dismissal of journalists.

Following delays stretching into 2018, including an aborted attempt to air the show on ANN7, the production was suspended.

In its recommendations, Abacus said the department should consider submitting the findings in its reports to the Special Investigation Unit (SIU) and the SIU tribunal to set aside ZAM’s contract and potentially recover losses.

The firm said this could possibly include remedial action against Seleke and other officials in the department.

VIEW THE COURT PAPERS


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an amaBhungane investigation

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