Competition Commission and SIU investigate police's disinfectant supplier Red Roses Africa

6 Oct 2021

On 20 September Daily Maverick published an exposé of hugely wasteful and possibly corrupt expenditure by the SAPS on PPE between April and July 2020. We pointed in particular to one company, Red Roses Africa, that had benefited from a R515m contract to provide disinfectant at what appear to be grossly exaggerated prices.

Read: La Vie en Rose: A single Mpumalanga company robbed SAPS...

It is surprising that, despite the seriousness of the allegations, to date there has been no direct response to the claims made in the article from the minister of police, commissioner of police, National Treasury or indeed any level of government.

Instead, in an answer to an EFF parliamentary question, the minister and commissioner of police stated categorically on 22 September that “no irregular expenditure was determined… with regards to the R1.6-billion on the procurement of PPE [personal protective equipment]” from March to August 2020.

It seems that the minister and commissioner hope that the issue will be a storm in a teacup that, if ignored or denied, will pass.

But the public is legally entitled to better answers to the many contradictions and disputes of fact that are emerging around the SA Police Service (SAPS) PPE binge.

Early in 2021 Brigadier Vish Naidoo of the SAPS claimed, in a recorded interview, that the Special Investigating Unit (SIU), the Auditor-General (AG) and the Fusion Centre had investigated the contracts, “and all of them have come back and stating that there was no wrongdoing found on the part of the procurement processes of the supply chain environment of the SAPS”.

Case closed?

Unfortunately for Naidoo, responses received from the SIU and AG suggest not.

In a written statement received on Wednesday Africa Boso, spokesperson at the Auditor-General of South Africa (AGSA), told us that “the South African Police Service (SAPS) did not form part of the audit scope for the special reports” conducted by the AGSA on Covid-19 procurement and that “no investigation was done by AGSA into the matter you are referring to [Red Roses], as the main purpose of an audit is not to conduct investigations”.

He added that, “The AGSA has adopted a phased-in approach based on specific criteria for the implementation of its enhanced powers (Public Audit Act material irregularities). As part of this approach, the SAPS was only phased in for the 2021-22 financial year.”

This means that in the crucial year in question the SAPS escaped close scrutiny from the AGSA over its PPE procurement.

Boso concluded by saying that, “The department of police (SAPS) would be best suited to respond on matters relating to internal audit reports and AGSA audit findings and recommendations arising from our annual regularity audit work, which are included in the management report and their status.”

But the SAPS won’t talk. It says we must talk to the people who in turn say we must talk to the SAPS.

Then, when it comes to the SIU, Maverick Citizen has been informed that, following our original article where we reported that the SIU had not investigated the SAPS’ PPE procurement and Red Roses Africa (RRA), the SIU’s Mpumalanga office “has registered the matter and is seeking further information”.

For its part, on September 27, RRA sent us a short statement that did not respond directly to any of the questions raised about the company and its suitability to win a R515-million contract for PPE.

Its sole director, Blessing Qwabe, has on five occasions failed to respond to reasonable questions sent directly to him. The latest questions we asked were simple: a request for the “specs of the disinfectant/detergent that you supplied to SAPS, its manufacturer, as well as NRCS registration number for the product.”

Red Roses Statement 270921

RRA claims in its statement (now also posted on its website) that the contract was “fully compliant with the emergency procurement process approved by the National Treasury per Instruction Note 8 dated 19 March 2020 (‘Instruction note #8’)” and that “its pricing was within the National Treasury Transversal prices as per Instruction Note #8”.

However, a close study of Instruction Note #8 of 2019/20 (which can be found here) reveals this not to be the case:

RRA is not on the list of transversal suppliers of disinfectants;

The prices the National Treasury records that RRA was paid for 25 litres of disinfectant (R5,405) are R1,955 higher than the Treasury’s recommended prices of between R125 and R3,450; it is also not one of the four listed suppliers of detergent.

Although Note 8 says departments “may approach any other supplier” if the goods they require are not listed they must:

“Ensure the items are to the specifications as determined by the National Department of Health”; and

“The prices are equal or lower than the prices in annexure A”.

On 28 April 2020 the director-general in the National Treasury, Dondo Mogajane, issued Instruction Note 5 of 2020/21 (which came to govern procurement until its abuse led to it being withdrawn in August by Instruction Note 11). According to this note, the “maximum price” for 25 litres of disinfectant was R4,665 (still R740 lower than RRA’s prices.)

Although a price deviation on this maximum price of up to 10% may have been allowed, it “had to be approved by the accounting officer... based on a justifiable reason”. The note adds that the department is also expected to inform the Treasury of the “saving achieved when compared to the prices listed on Annexure A” and provide “motivation for deviating from the items listed in Annexure A (if applicable)”.

At this point neither RRA nor the SAPS have answered our questions in this regard.

Unfortunately, according to its own internal auditor, the SAPS has not been forthcoming with the relevant documentation. In a presentation to Parliament in December 2020 titled Internal Audit Q1-Q3 Consolidated Critical Audit Findings 2020/2021 Financial Year, damning findings on the Supply Chain Management of the SAPS’ PPE procurement are addressed between slides 8 and 10.

There it is stated that:

“It will be difficult or impossible to verify the validity and accuracy of payments made if the procurement file and relevant supporting documentation is not made available for audit purposes.”

So it is not, at this point, possible to establish exactly what happened.

Based on the above, the internal audit concludes:

“There is still a challenge in terms of taking corrective action on reported audit findings and there is a need to implement consequence management.”

Precisely.

Corrective action? Re-enter the Competition Commission

RRA’s statement also repeats claims that its pricing was reviewed by the Competition Commission (CC). It states that:

“On 05 May 2020, SAPS referred RRA’s and other supply contract pricing to the CC for investigation; the CC received RRA’s full co-operation between May 2020 to July 2020 when CC ’s in-depth and exhaustive investigation was conducted. RRA finally confirms that CC has not made any adverse findings against RRA following the CC investigation.”

To verify this, detailed questions were sent to Siyabulela Makunga, head of communications at the Competition Commission.

Meanwhile, Maverick Citizen had been told by two sources (who contacted us independently of each other) that the CC investigation had led to the prosecution by the CC for excessive pricing by Blue Collar Occupational Health – a company that charged much lower prices for disinfectant than RRA. Both sources said that at the time some of those close to the process questioned this. However, they were warned that it would be “dangerous” to pursue this issue any further.

On Wednesday, however, Makunga contradicted both RRA and Naidoo’s claims. In a written response to questions posed by Maverick Citizen he says that “in the complaint [submitted to the CC about price gouging by PPE suppliers], Red Roses was cited as Mainstreet 699 (Pty) Ltd. Later into the investigation the CC found that Mainstreet changed its name to Red Roses.”

Makunga went on to write that RRA “is being investigated for price gouging. The investigation against two firms [Armscor and Zambayise] was closed due to low markups. Investigations against two firms, Red Roses and Basadzi Pele, are ongoing.”

Given that the Competition Tribunal heard the excessive pricing case against Blue Collar a year ago and judgment is still pending, it is not clear what the reason for the lengthy delay in the investigation with RRA is. We have asked the CC to explain.

RRA told us that it would “would welcome and fully cooperate again with any further investigation by any government institution so empowered”. We trust that is what is now happening with the SIU and CC.

This is an ongoing investigation. DM/MC

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