Company scores ‘irregular’ R122m health department contract

The National Department of Health (NDoH) dodged legislation and regulations to grant a little-known company, Brainwave Projects SA, a R122-million contract. This was after Brainwave tried unsuccessfully to bill the department for earlier work done under its foreign technology partner via the Department of Communications and Digital Technology (DCDT).

The NDoH contract was for the provision of satellite-based internet connections to 800 health facilities across South Africa. In September last year, Brainwave was given the lion’s share of a three-year tender for the R153-million contract.

The department seemingly went to great lengths to avoid prescribed processes, which has resulted in a searing report from the Auditor-General (AG) and led a senior departmental official to approach the Hawks.

Brainwave touts itself as the official public sector partner of the Abu Dhabi company Yahsat, which was visited in May by “senior government ministers [and] heads of departments” led by Deputy President Paul Mashatile and including former minister of communications Mondli Gungubele.



The visit led to the signing of a memorandum of understanding (MOU) between Yahsat and the South African government.

According to internal documents from the NDoH, Brainwave was tax non-compliant at the time of its appointment. The AG’s report states that there was no business case for the contract in the first place and that some of the health facilities listed in the NDoH tender had already been serviced by the contract under the DCDT.



It appears that until last year the NDoH had obtained internet connectivity services for 388 health facilities in terms of an “informal agreement” between the DCDT and YahClick — a subsidiary of Yahsat.

According to the AG, this procurement was also not above board.

It was under this agreement with the DCDT that Brainwave attempted to instead invoice the NDoH for R34.9-million (seemingly on behalf of YahClick), although no formal contract existed at that stage between the NDoH and Brainwave.

A senior NDoH official, who spoke to amaBhungane on condition of anonymity for fear of reprisal, said they had reported the matter to the Hawks this year.

Hawks spokesperson Brigadier Thandi Mbambo said they were assessing the information and working with “relevant stakeholders so as to determine the angle of the investigation”.

Irregular procurement

According to the AG’s final management report, the department appointed Brainwave (as well as another company named ABT Telecoms) against National Treasury regulations, the State Information Technology Agency (Sita) Act and the Public Finance Management Act (PFMA).

According to National Treasury regulations, government departments are required to procure certain IT and telecommunication services through Sita. The NDoH, however, ignored this and followed its own tender process.

Everything the NDoH has spent and will spend on the subsequent contract will now potentially be declared irregular expenditure, said the AG.

The department said it had spent R85-million on the contract so far.

A curious timeline of events shows that the NDoH seemingly pushed through the deal with Brainwave in 2023, after the department, through its director-general, Dr Sandile Buthelezi, failed to acquire the National Treasury’s approval for payment of the impromptu R34.9-million invoice in 2022.

The NDoH had originally tasked Sita with procuring these services in October 2022, but when Sita recommended using its internal panel of service providers to fast-track the process, the department opted to procure the services itself.

This was against legislation and regulations, notes the AG report.

In response, the NDoH said it disagreed with the AG’s findings, claiming that using Sita was not mandatory in this case and that the agency had caused delays.

The AG report was scathing, arguing that the NDoH’s handling of the tender process and contract displayed a lack of planning, governance structure and contract management, as well as the “lack of a business case for the implementation of the direct internet access”.

This, said the AG report, was evident in the department’s requests to Sita, with one letter requesting services for 388 locations for 24 months, another letter requesting services for 241 locations for three years and the final tender advertisement asking for services for 800 locations for three years.

“We are unable to reconcile the request for 352 sites by the DG (Noted on the letter) to the 388 sites referred to above, including the 800 sites mentioned on the NDoH 10- 2023/24 tender,” says the AG report.

The increase in the number of sites represented a scope change and would mean a totally new tender.

“We cannot therefore use the tasking request as the same procurement process for the 800 sites. The 800 sites are a different procurement process from the tasking request to Sita,” states the AG report.

The report adds that “based on the increased number of sites in NDoH 10-2023/24, it appears that management realised that the tasking request to Sita did not cover all the sites in the health sector.

“Going back to Sita with a different number of sites would mean that the process should start from scratch, which management wanted to avoid. This may indicate that there was no proper planning/analysis of the department requirements before a request was initially sent to the Sita.”

In other words, the department’s complaint that Sita was delaying matters stemmed from the department itself shifting the goalposts.

“Based on the above, the finding will remain as a material non-compliance to section 7(3) of the Sita Act, National Treasury regulation 16A6.3(e) and paragraph 3.3 of Practice Note 5 of 2009/10. Amounts spent and still to be spent on the [contract] would potentially result in irregular expenditure being incurred,” notes the AG report.

The failed invoice

As mentioned, the scramble to appoint Brainwave seemingly followed the NDoH’s failure to obtain authority to pay an invoice for R34.9-million. The invoice came from Brainwave, despite the work having been done by YahClick under the DCDT.



Although amaBhungane sought clarity from the NDoH about the invoice, the department failed to provide any.

However, documents show that the department, through Buthelezi, tried to push the payment through a year before appointing Brainwave on its own contract. It is unclear whether that payment was eventually authorised.



In August 2022, senior NDoH officials wrote to Buthelezi asking him to sign off on a letter asking the National Treasury for permission to pay R34.9-million — the same amount for which Brainwave invoiced. The letter, however, only mentions YahClick.

While a letter to the National Treasury from Buthelezi was subsequently drafted, the National Treasury told amaBhungane it had no record of the communication.

The letter from Buthelezi asked the Treasury for permission to pay the invoice for services rendered from June 2020 to August 2022, and for an extension of the contract for one year.



According to the letter, the DCDT had continued with the project beyond its deadline and asked the service provider “not to switch off services due to non-payments" before Brainwave handed its invoice to the NDoH.

Connections

Apart from its relationship with Yahsat, Brainwave also seems to have indirect political ties with the African Transformation Movement (ATM), the ANC breakaway associated with former Free State premier Ace Magashule.

Brainwave is directed by Nkanyiso Kevin Khanyile (28) and Sanele Tumelo  Khanyile (25). Their father, Thamsanqa Khanyile, is the executive chairperson of the company.

Nkanyiso Kevin Khanyile. (Photo: Instagram)

Sanele Tumelo Khanyile. (Photo: Instagram)

Brainwave’s address on the Companies and Intellectual Property Commission (CIPC) is registered in the name of Thamsanqa Khanyile and his wife, Vuyisile Tebogo Khanyile.

Thamsanqa and Vuyisile Tebogo Khanyile. (Photo: Instagram)

Vuyisile Khanyile is a member of the ATM. Thamsanqa is a senior member of the Twelve Apostles Church in Christ, which is closely aligned with the party, according to media reports.

Brainwave is an official public sector partner of Yahsat, which is also known as Al Yah Satellite Communications Company and is an Abu Dhabi Securities Exchange listed company. Yahsat is, in turn, a subsidiary of Mubadala Investment Company — a state-owned global investment and asset management firm that is one of Abu Dhabi’s sovereign wealth funds.

The aforementioned delegation of government officials who visited Yahsat in Abu Dhabi in May had their visit facilitated by Brainwave “to discuss closer cooperation in the satellite communications sector”, according to a statement by the company.

Following the visit, Yahsat’s chief commercial officer, Sulaiman Al Ali, and DCDT Director-General Nonkqubela Jordan-Dyani signed a memorandum of understanding between Yahsat and the South African government later that month.

“The agreement focuses on a broad range of areas for collaboration including partnering on satellite and ICT-related services, satellite broadband connectivity, Internet of Things, geospatial applications, High-Altitude Pseudo Satellites (HAPS), and Earth Observation Satellites,” Yahsat said in a press statement at the time that has since been deleted.

“It also creates a framework for exploring the potential of building ground stations in South Africa to operate satellites, collaboration on manufacturing of devices and antennae, skills exchange and investment.”

Right of reply

NDoH spokesperson Foster Mohale told amaBhungane the department approached Sita after the contract with the DCDT expired and internet services were discontinued due to the project not being handed over to the department.

“The Department of Health approached Sita to continue with the provision of services to avoid disruptions or a gap; unfortunately the process took longer than anticipated. This resulted in health facilities experiencing downtime due to service providers terminating the internet services and that prompted the department to go out on its own tender,” said Mohale.

He added that while the NDoH had appointed Brainwave and ABT Telecoms, it “has no contract with the subcontractors of the two companies”. This means there is no formal agreement between Yahsat as a subcontractor and the NDoH.

“It is not correct to suggest that the department had a specific service provider in mind prior to the appointment and still undertook the normal procurement process,” said Mohale.

On the irregular expenditure, Mohale said that the department could not yet confirm that the full contract amount — which, he said, was R153,200,000 — would be determined as irregular expenditure.

While the AG said the department included locations in its tender that had already been serviced, Mohale said the new service provider upgraded this technology because it “was not compatible with the newly installed broadband solution/technology that was powered by the facilities’ electrical supply and did not run independently on the solar power.

“The department has viewing rights on the portal for monitoring uptime/downtime and performance of the solution as part of ongoing monitoring of the implementation of the contract,” added Mohale.

He noted that the 388 sites from the previous project did not represent the total number of public health facilities and that the department added more locations in its tender “to ensure that no facilities are left behind”.

“The department dismisses any unsubstantiated allegations which suggest that the contract was irregularly awarded, or the unethical behaviour of department officials involved. Anyone with evidence of maladministration is urged to approach the relevant independent anti-corruption agencies for investigation. The department remains open for scrutiny on this and any other matter,” said Mohale.

Mashatile’s spokesperson, Keith Khoza, did not respond to amaBhungane’s request for comment on how Mashatile was acquainted with Thamsanqa Khanyile, how he became aware of Yahsat and what due process went into the signing of the MOU. Instead, Khoza responded with this article.

Neither Brainwave, YahSat, the DCDT or ATM responded to amaBhungane’s requests for comment. DM