DA to ask Minister why fraud and corruption prosecutions in local government have been so few and far between

Law enforcement agencies seem reluctant to investigate and prosecute cases of criminal conduct by municipal officials and persons doing business with municipalities.

According to a report presented by the Department of Cooperative Governance and Traditional Affairs (Cogta) earlier this week, the total cost of local government fraud and corruption cases currently under investigation amount to more than R1.4 billion.

Yet, the Special Investigative Unit (SIU), revealed that only 32 corruption investigations have concluded since 2002, and of these, there were only 13 convictions and R55 million has been recovered.

Municipal capture crooks seem to be getting away.

The Democratic Alliance (DA) will put questions to the Minister of Justice Ronald Lamola to determine exactly why section 173 prosecutions have been so few and far between.

Adv Shamila Batohi conceded to the Cogta Portfolio Committee that it was possible for criminal cases to “disappear” – a practice that she resolved to bring to an end.

Cases of tender fraud and criminal financial misconduct in the country’s metros are disappearing from the radar of law enforcement agencies, including the National Prosecuting Authority (NPA), Special Investigations Unit (SIU), and the Hawks.

We raised two of these cases in Tuesday’s committee meeting:

  • In the first case, the DA wants the NPA to explain why the prosecution of two directors of a company called Setheo Engineering was provisionally withdrawn in October 2018, and nothing has happened since.

The case arose from a R126 million tender awarded by the City of Johannesburg to Sotheo Engineering in 2015. Substations were to be built in Eldorado Park and Hopefield to stabilise the supply of electricity to these communities.

Two Joburg officials, who were subsequently suspended, arranged for Setheo Engineering to receive forward payments to the value of R66 million. But by 2017 the then DA-led City government discovered that only R2 million of the work had actually been done. Setheo Engineering was also found to have submitted a fraudulent bank guarantee for the performance of its obligations.

  • In the second case, the DA wants to know why the SIU and the Hawks have not taken up the smart meter scam in the City of Tshwane. In 2012 the City appointed PEU Capital Partners to advise it on revenue-raising measures, and then promptly appointed the same consultants to implement its own advice without a further tender process – a clear violation of supply chain management regulations.

There is no evidence that a financial feasibility study was ever done on the smart meter project. By the time the municipal realised the deal was going to bankrupt the City, about 13000 meters had already been installed, and billions of rand in commission had been paid to PEU. The Auditor General found every cent of this money to have been irregular.

National Treasury had warned Tshwane against the smart meter deal. But the former mayor, Kgosientso Ramakgopa, failed to disclose this fact to Tshwane councillors when the ANC-majority voted to approve the PEU contract. Today Ramakgopa is an adviser to President Cyril Ramaphosa.

Before the enactment of section 173 of the Municipal Finance Management Act, it was far more difficult to secure convictions of municipal officials suspected of criminal conduct, because of the heavy burden of proving fraud and corruption.

But since about 2004 this provision has criminalised financial misconduct by municipal officials, including their deliberate or grossly negligent failure to implement supply chain management policies or prevent irregular expenditure. Why, then, have we seen so few MFMA section 173 convictions?

The DA will write to the NPA and the SIU to track the progress of the Setheo and PEU cases.