Public Protector provisionally finds 'serious irregularities' in R255m Free State asbestos audit

A Public Protector investigation into a contract awarded to the Diamond Hill-Blackhead Consulting joint venture by the Free State department of human settlements (FSHS) in 2014 has identified “serious irregularities” in the procurement process.

Scorpio has learned that Public Protector Busisiwe Mkhwebane is currently finalising her work on the matter and that Section 7(9) notices have been issued to parties implicated in her provisional findings.

Leona Kleynhans, a DA member in the Free State’s provincial legislature and the original complainant in the matter, has confirmed that she had been informed by the Public Protector’s office that it had made adverse findings after its probe. Kleynhans says the PP found “serious irregularities” in the contract.

Kleynhans and the DA first reported the matter to the Public Protector in 2015, after the party learned that the FSHS intended splurging R255-million for the audit of just 300,000 low-cost houses in the province to determine if they had asbestos roofs.

The FSHS awarded the contract to the Diamond Hill-Blackhead Consulting JV without a competitive bidding process. It instead relied on Treasury Regulation 16A 6.6, which allows government departments and entities to “transfer” contracts between one another. However, such transferrals need to comply with certain conditions, including having roughly the same value and offering the same kind of goods or services. 

Scorpio understands that the FSHS may have breached these conditions when it appointed Diamond Hill and Blackhead Consulting. Igo Mpambani, Diamond Hill’s late owner, was gunned down in his Bentley in Sandton in June 2017. Police found R1-million in cash in his car. Leaked emails and documents indicate that then premier Ace Magashule tapped into Mpambani’s asbestos audit riches.

PP spokesperson Oupa Segalwe confirmed that the investigation was in its final stages, but he said the findings referred to by Kleynhans were “merely findings (the Public Protector) intends making if no evidence supporting the implicated parties’ side of the story is provided to her as part of the parties’ response”.

Segalwe said he could not disclose the identities of the implicated parties.

“We never indicate as to whom the notices are being served to avoid prejudicing people unfairly as this is still very much part of the investigation. Only implicated parties are served,” said Segalwe. 

Kleynhans says the PP identified several red flags with regards to the contract, including that the FSHS made certain payments to the JV without having received invoices. 

This correlates with information unpacked in *Gangster State: Unravelling Ace Magashule’s Web of Capture.

The leaked emails and documents unpacked in the book indicate that the FSHS in December 2014 and January 2015 transferred R51-million to Diamond Hill-Blackhead Consulting in two tranches, before Mpambani had submitted any invoices to the department. 

When Mpambani finally emailed invoices to FSHS official John Matlakala in February 2015, he found himself in the Cayman Islands, according to flight ticket records and accommodation bookings. He happened to have been part of a delegation of Free State officials led by then premier Magashule who had flown to Havana in Cuba a few days before.

It is not clear why Mpambani had been in Magashule’s company during the Cuba trip.

Sven Laurencik, a lawyer for Edwin Sodi, Blackhead Consulting’s owner and Mpambani’s business partner in the asbestos audit, said he is not aware of any findings made by the PP.

Tim Mokhesi, the HOD for the Free State’s department of human settlements, said: “I have neither seen the report nor been contacted by the Public Protector.” DM

* Pieter-Louis Myburgh is author of Gangster State: Unravelling Ace Magashule’s Web of Capture