The Ernest & Young forensic report confirmed substantial evidence of irregular contracts awarded to Smit Amandla Marine (SAM) or different guises thereof since 1995 until 31 March 2012.
The acting Director-General (DG) of the Department of Agriculture, Forestry and Fisheries (DAFF), Sipho Ntombela, has received the forensic report on the investigation, commissioned to probe procurement processes and systems in the Fisheries Branch of DAFF, today.
The report reveals amongst others that the agreement concluded in 2005 and subsequent extensions, between SAM and the department failed to comply with the tender board regulations, with departmental procurement policies, National Treasury Regulations, income tax regulations and also the Public Finance Management Act. As an example, there was a contract extension entered into worth millions of rands by mere letter without any proof of any tender process followed or supporting documentation.
For instance, the contracts signed, particularly those signed in 2000, 2005 and 2010 were irregular and were deliberately drafted to have maximum benefit for SAM amounting to approximately R1.6 – R2 billion. The State had no protection in any of these contracts and the available evidence suggests complicity and corruption between government officials and SAM.
Smit International is a Dutch multinational with South African subsidiaries. The current SAM, South African subsidiaries are Smit Amandla Marine, which was formerly called Smit Marine and Pentow Marine. In all of these guises these Smit companies had the contract for the maintenance and repair of the government fleet lease from 2000 – 2012. Further investigation revealed that they may even have had the contract since 1995 until 2000. This is being verified by further forensic analysis.
These extensions also exceeded the required number of years for open tenders and were without any specified contract price. This gave rise to substantial expenditure running into millions of rands which is and was highly irregular in terms of the Public Finance Management Act (PFMA).
In some instances, contracts were entered into as extensions running into millions of rands even though the service had little to do with the prior terms of contract. This should have necessitated an entirely new tender process. It also emerged that the terms of payment were amended. Previously SAM was paid in arrears for services rendered, but subsequently, they were paid in advance for services not yet rendered. This confirms the high level of complicity with officials in the Fisheries Branch.
The evidence indicates that the state was defrauded to the extent of approximately R1.6 billion which includes invoices of duplicate payments, invoices without tax or VAT. Invoices worth up to R600 million have recently been uncovered hidden away from the investigators and could indicate more extensive defrauding of the state. Furthermore, payments were made to SAM as recently as after the termination of the contract after March 2012.
There is also substainal evidence that multiple government departments were asked to make payment, for example, where a contract is entered into with one government department, invoices and payment are made by other government departments in violation of the of the PFMA. In some instances the state was levied with amounts worth tens of millions at a time of which there is no evidence of SAM having provided any service to the state. There are instances where monies owing by SAM to the state have been deliberately withheld with the assistance of complicit state officials in the Fisheries Branch.
All of the above evidence has necessitated that the forensic audit investigation be expanded to include the period to 2000 for further evaluation of documentation. That would include servers and computers and the engagement of senior officials involved in all of these contracts.
This is substantial evidence of the unlawful defrauding of the state. Evidence against SAM and officials in Department of Environmental Affairs (DEA) and DAFF is overwhelming, indicating wide spread complicity, corruption, deliberate entering of contracts unfavourable to the state. In addition, there is total disregard for Treasury Regulations and procurement processes and attempt to hide this information from investigations in the last few months.
There has been a concerted effort by the parties associated with SAM to prevent DAFF and the forensic investigators from finding this evidence. Ernst & Young discovered documentation was moved to warehouses in Paarden Eiland. Together with the law enforcement agents, they were able to prevent the destruction of valuable data and contracts from government systems and computers.
The SAM contract was entered into by the previous Department of Environmental Affairs and Tourism and was given to Pentow Marine and Smit Marine. Despite this, there appears to be no evidence of a valid agreement between the then Department and Smit Marine. The DAFF only took over the contract from 2011 from the DEA and all prior agreements were concluded by the former department.
Available evidence also indicates that National Treasury and PFMA regulations were flouted in the awarding of the irregular extension of the contract.
Mr Ntombela will present the content of the report to Minister Tina Joemat-Pettersson tomorrow morning and will then brief the media at 10h00 at Imbizo Media Centre, Parliamentary Precinct.