South African pandemic response open to fraud, auditor-general warns

4 Sep 20

South Africa’s auditor-general found a “high risk” of fraud and abuse in the country’s multi-billion rand Covid-19 stimulus package, with money having been improperly paid out and serious fears of corruption in procurement processes.

In his report, Kimi Makwetu described a “worrying picture” emerging from his investigation of personal protective equipment procurement.

According to the report, some public institutions paid up to five-times the price prescribed by the government for PPE, some suppliers did not have valid tax clearance certificates, competitive bidding processes were not followed correctly and conflicts of interest were identified, with one contract having been awarded to a supplier with no previous history of supplying PPE.

“We are concerned about the indicators of high risk of fraud and abuse we observed – not only in the areas that we were able to audit, but also where information for auditing was not forthcoming, which could be a deliberate tactic to frustrate our audit efforts,” said Makwetu.

The report gave the Social Relief of Distress Grant, through which unemployed people who are not otherwise supported by the state are given 350 rand (£15.81) per month for six months, as an example.

It said the application process included “very limited verification” to determine whether the applicant received other income, and the auditor-general’s analysis found 30,000 beneficiaries requiring further investigation.

Money was seemingly paid to people already receiving state grants, students receiving other payments, public servants, prisoners, dead people and children.

Elsewhere, “inadequate record keeping” made a 517m rand (£23.4m) agricultural relief scheme open to unfairness, a “compromised internal control environment” made a Covid-19 compensation scheme for those who contracted the virus at work open to fraud, and an initial food parcel programme led to some people receiving more food than they were entitled to while others received damaged parcels.

Frontline services and health spending was also concerning, Makwetu said.

A 410m rand (£18.5m) pledge from the US government for health services had not yet been received, and of the 1,000 ventilators promised only 150 had been sent by 6 July.

An initial target of 6,123 quarantine sites was missed, with just 510 having been identified by the end of July and just 192 approved for use by the Department of Health.

The audit identified “control weaknesses, overpayments, money spent on sites not yet approved by the Department of Health and state-owned properties upgraded for use as quarantine sites not being utilised”.

“As can be observed from all the initiatives started this far, there are significant risks that point to internal deficiencies as well as the exposure to external risk on the funds,” said Makwetu.

“To date, less than half of the appropriated funds have been spent. This suggests that a heightened level of oversight will be required as more programmes are rolled out.”

The auditor-general added that he hoped the report would serve as “a guide” for official agencies tasked by president Cyril Ramaphosa to investigate alleged abuse of Covid-19 funds.

After the report was published, employment minister Thulas Nxesi suspended the Unemployment Insurance Fund commissioner, and released a statement hinting at “further action against individuals and entities” once a series of legal cases had been concluded.

“I assure you that I will not rest until every payment is accounted for, and every wrongdoer held to account,” he said.

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