SIU investigating 7 000 NPOs over lottery fraud

With a team of dedicated investigators, South Africa’s Special Investigating Unit (SIU) – the country’s version of the American FBI (Federal Bureau of Investigation) – may appear smaller in stature, but its track record in a colossal fight against corruption, speaks volumes.

Having won 98% of cases in courts of law, the SIU performance in the 2021/22 financial year has continued to show an impressive record, which has included a:

• Staggering R5.9 billion value of potential cash and assets to be recovered;
• R5.5 billion of contracts, administrative decisions or actions that were set aside or deemed invalid;
• Value of cash and assets recovered standing at R436 million;
• Total of R6.2 billion of potential losses prevented;
• A total of R3.3 billion of matters in respect of which evidence was referred for the institution, defence or opposition of civil proceedings.

Government corruption

The unit’s commitment to uproot corruption has seen high profile figures being implicated in several cases worth R13 billion, currently being handled by the Special Tribunal.

Matters valued at R66 billion were before the high court, with 13 former government officials’ pensions frozen, pending finalisation of civil action instituted by the SIU.

Established in terms of Special Investigating Units and Special Tribunals Act 74 of 1996 by Proclamation No. R118 of 2001, the SIU is a public entity conducting investigations through a presidential proclamation, with President Cyril Ramaphosa receiving the final report upon the completion of an investigation.

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With a mandate to arrest or prosecute offenders and implement disciplinary action, the SIU works closely with other relevant agencies, where its powers fall short – ensuring enforcement of consequence management.

The SIU’s major functions are to investigate corruption, malpractice and maladministration – instituting civil proceedings, referrals to relevant prosecuting authorities to ensure disciplinary action is enforced.

According to SIU chief executive advocate Andy Mothibi, vulnerable sectors prone to incidents of fraud and corruption, have included health, local government, the not-for-profit organisation (NPO) sector, state-owned entities, education, infrastructure and construction.

NLC fraud and corruption

On the National Lotteries Commission (NLC), which has seen internationally acclaimed actress Terry Pheto being probed for fraud, Mothibi said the SIU was investigating:

• Any alleged serious maladministration in connection with the affairs of the NLC.
• Improper or unlawful conduct by employees or officials of the NLC.
• Unlawful appropriation or expenditure of public money or property.
• Unlawful, irregular or unapproved acquisitive act, transaction, measure or practice having a bearing upon State property.
• Intentional or negligent loss of public money or damage to public property.
• Unlawful or improper conduct by any person, which has caused or may cause serious harm to the interests of the public.

“The NLC investigations has three phases, with one, valued at R279 710 409, completed.

“Phase two, of the investigation is valued at R246 659.31 and three at   R905 901.910.04,” said Mothibi.

In terms of preservation orders on the NLC probe, 16 properties, five cars, two restaurants, two guest houses were seized, with one pension benefit frozen – all valued at R70 million.

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The SIU, he said, was investigating 7 000 NPOs.

Explained Mothibi: “In terms of the modus operandi used to siphon money from the NLC, this was done through various NPOs and not-for-profit companies (NPCs).

“We found that there has been misuse of proactive funding provision in the NLC Act – inadequate project management, lack of monitoring and evaluation.

“There was collusion between NLC officials, NPOs and NPCs – also between some board members and NPOs and NPCs.

“We found abuse of NPOs and NPCs – as well as their hijacking.

“Widespread ineffective auditing, maladministration in the approval of grants, was also uncovered.”

ALSO READ: SIU will ask Ramaphosa to extend lottery probe

Fort Hare University

Reflecting on Fort Hare University, where the bodyguard of vice-chancellor, Professor Sakhele Buhlungu, Mboneli Vesele, was earlier this year shot dead, Mothibi said the SIU was investigating alleged:

• Procurement or contracting for goods, works or services by, or on behalf of, the university and payments made in respect of cleaning and gardening services during the period 1 November 2012 to 31 July 2019.
• Leasing of student accommodation since 1 July 2013.
• Appointment of a service provider for the maintenance and repair of air conditioning systems in terms of bid reference UHF-SCM04/2018 – and the collusion between officials of the University and suppliers or service providers in which such officials held direct or indirect interests.
• Maladministration in the affairs of the university’s Faculty of Public Administration in relation to the awarding of honours degrees.
• Management of funds and sourcing of public servants for study into various faculty programmes by an individual for personal gain.

RAF

On the Road Accident Fund (RAF), the SIU was investigating:

• Duplicate claim payments made to attorneys.
• Claimants and sheriffs and change of mandates.
• Payments made to service providers in terms of RAF Act or contracts.
• Invoices submitted to RAF.
• Fruitless and wasteful expenditure.
• Procurement and tender irregularities.
• Fraudulent claims.

Said Mothibi: “The SIU has signed acknowledgments of debt with law firms and attorneys to the value of approximately R 68 million, which constitute unlawful acts of appropriation.

“To date, the SIU has managed to recover R18 million through the acknowledgements of debt process, following the signing of Proclamation R44 of 2021 by President Ramaphosa – authorising the SIU to investigate serious allegations of corruption and maladministration in the affairs of the RAF.

ALSO READ: SIU recovers R18 million linked to RAF investigation

“The firms received duplicate payments from the Road Accident Fund as compensation to persons injured, because of motor vehicle accidents on South African roads.

“Instead of returning the duplicate payments to RAF, legal practitioners opted to either keep the money in their trust accounts or use it to their personal benefit.”

NSFAS controls failed

On the National Student Financial Aid Scheme (NSFAS), Mothibi said

students whose parents’ household income was above R350 000 were funded.

“In terms of NFSAS funding rules, they were not supposed to have received funding.

“Students did not submit their parents’ details when they applied for funding, so that means test could be properly conducted.

“The SIU is currently engaging the affected students and parents to obtain addition information.

“NSFAS failed to design and implement controls to ensure that the is an annual reconciliation between the funds disbursed to institutions and the allocation to students.

“The control weakness led to overpayments and underpayments of funds to different institutions for the period 2017 to date,” he said.

Added Mothibi: “The SIU has recovered approximately R33.4 million from Northlink College in the Western Cape.

“Two more recoveries were made in March 2023 from colleges in the Western Cape and Mpumalanga provinces. 

“The SIU communication team will make an announcement in the coming weeks.”