R127m PPE corruption hearing bogged down in legal skirmishes

The Special Investigating Unit (SIU) is gunning for the company implicated in the alleged irregular awarding of a personal protective equipment (PPE) contract to the tune of R127,136,000 in 2020. The SIU wants the Special Tribunal to review and set aside the contract.

In addition, the SIU is seeking relief for the recovery of all financial losses suffered by the Gauteng Health Department flowing from the PPE contract. The financial losses outlined in the SIU’s affidavit consist of:

• R22,136,000 — the full purchase considered paid for all the PPE procured by the department and not used by it;


• R6,840,000 — the difference between the purchase consideration paid in respect of all PPE procured and delivered and the maximum price determined by the National Treasury; and


• R3,815,000 — the profit realised by Beadica under the PPE contract.

In papers, the SIU contends that regulations were flouted in the awarding of the PPE contract.

But the hearing at the Special Tribunal was stalled when the Iyasa Group brought an application for a stay of proceedings pending the outcome of a Constitutional Court hearing on the Ledla Structural Development matter.

The reason for this application is that the PPE contracts of both Iyasa and Ledla were awarded by Kabelo Lehloenya, the former chief financial officer in the Gauteng Department of Health. Lehloenya resigned as CFO on 28 May 2020.

The SIU also contends that both the Ledla and Beadica contracts were irregularly awarded and that it also found evidence of vastly inflated prices.

This last-ditch attempt by Ledla Structural Development to try to overturn a Special Tribunal ruling was filed in May. The matter was heard in June in the Constitutional Court, and Ledla contends that the tribunal was wrong to order the forfeiture of about R38.7-million held in various banks.

Iyasa, in its heads of argument, contends that the Constitutional Court judgment in the Ledla matter is important to them as it will give clarity regarding the jurisdiction of the Special Tribunal to make declarations on the constitutional invalidity of contracts.

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‘Deliberate effort to thwart recovery’

The SIU, on the other hand, brought an application to oppose the stay of application on the grounds that it was deliberately brought in late to put a spoke in the wheels of civil recovery efforts.

The SIU’s case against Iyasa is set out in the founding affidavit of Vhyladhum Reddy, a forensic investigator at the SIU.

“At the time of issuing the commitment letter and on 24 April 2020, the Department was not authorised to procure PPE as all procurement had been centralised with the result that the Department was obliged to have referred the procurement need to the National Treasury Procurement Team for procurement by Imperial Health Sciences as the central procurement agent for both the public and the private sector,” his affidavit reads.

Reddy further states that:

• On or around 20 April 2020 the department, through its chief financial officer, Lehloenya, telephonically requested a quotation from Beadica (now Iyasa) for the supply of PPE to the department;


• There is no evidence that the department invited any other potential service providers to provide quotations in this regard;


• On 24 April 2020 and before Beadica could submit a quotation as requested by the CFO, the department prematurely issued a commitment letter under the hand of the CFO in favour of Beadica for the supply of PPE to the value of R127,136,000;


• The commitment letter states: “This letter serves to confirm that your quotation for the services listed has been accepted subject to the terms contained therein”; and


• The PPE contract was single-handedly procured and awarded by the CFO. No procurement process as set out was compiled prior to its award and the contract was not awarded based on the recommendation of the bid evaluation committee.

Reddy states that the quotation referred to was not yet in existence on 24 April 2020 and only came to hand four days later, on 28 April 2020, after its purported acceptance.

Reddy also points out that Lehloenya was not duly authorised and properly delegated to commit the department to expenditure in the order of R127,136,000.

His probe further established that the PPE for which Beadica quoted the department was overpriced.

“The evidence demonstrated that Beadica quoted and sold the PPE at a price exceeding the maximum price prescribed by the National Treasury, sold PPE contrary to the purported agreement and Beadica made profit from the unlawful contract,” Reddy said.

The stay of application was postponed to 29 August to be reserved for the hearing of the main application. DM