Five Companies Ordered to Pay Back Profits from Voided R1.6 Billion Correctional Services Contracts

In a landmark ruling that underscores the South African government's commitment to transparency and good governance, the Special Tribunal has mandated the return of profits earned from contracts amountarily valued at R1.6 billion, previously awarded by the Independent Development Trust (IDT) for projects under the auspices of the Department of Correctional Services. This significant legal victory highlights the relentless efforts of the Special Investigating Unit (SIU) to recover funds lost due to improper conduct.

The tribunal's decision, delivered on 29 July 2024, invalidated two contracts struck between the IDT and five contracting companies during 2011 and 2012. The implicated companies, including Secelec Consulting Engineers (Pty) Ltd, Bakone Consulting Engineers (Pty) Ltd, Bakone Secelec Consulting JV 2011, Manyeleti Consulting SA (Pty) Ltd, and SA Fence and Gate JV, were initially tasked as transactional advisors to oversee and implement vital security infrastructure for South Africa's correctional facilities.

However, thorough investigations conducted by the SIU revealed the fundamental failure of the IDT to heed statutory and constitutional guidelines that oversee public procurement processes. This disregard for procedure paved the way for the misallocation of funds and the consequent surge in the initial budget, cumulatively leading to an irregular expenditure in excess of R1.6 billion. The Tribunal unearthed that the Department of Correctional Services had prematurely skyrocketed its budget by 81%, a substantial increase from the permitted 20% deviation stipulated by National Treasury regulations, giving the impression of budgetary predetermination.

Further exacerbating the situation, the Office of the Auditor-General of South Africa corroborated the SIU's findings, denouncing the contracts as non-compliant with proper procurement protocols. This neglect rendered the contracts void and placed the financial onus on the IDT for irregular expenditure of the full contract amount.

The Special Tribunal's order is an unambiguous mandate for the companies to forfeit their overall profits. They are obliged to disclose all payments received under the now unauthorized contracts, substantiating expenses with pertinent documentation. The legally accountable profit must be remitted, post-deduction of legitimate expenses. Moreover, the corporate entities have been saddled with the legal costs incurred by the SIU in pursuit of the review application.

The SIU, acting under Proclamation R28 of 2017, lauded the outcome, recognizing it as a stride towards the enforcement of its investigatory findings and a measure of accountability to reclaim state-incurred losses. The tribunal's outcome is not only a testament to the SIU's civil litigation capabilities authorized by the Special Investigating Units and Special Tribunals Act 74 of 1996 but also highlights the potential of the National Prosecuting Authority (NPA) to instigate criminal proceedings based on evidence relayed by the SIU.

As the dust settles on this case, the verdict serves as a warning against complacency and misconduct in the management of public funds and strengthens the resolve against corruption and maladministration within the public sector.