SAMWU statement on the fraud and corruption at JRA
2 March 2023
SAMWU statement on the fraud and corruption at JRA
The South African Municipal Workers’ Union appreciates and welcomes all media houses to this media briefing. We have invited you here today to speak of the cancerous fraud and corruption which we have witnessed at the Johannesburg Roads Agency (JRA) one of the largest entities by budget.
As a union, we have over a period of time raised the alleged fraudulent and corrupt activities within the City. The JRA, as an entity that is fully owned by the City of Johannesburg is one that is riddled with fraud and corruption which has resulted in the entity not being able to maintain majority of the roads which are now in a state of disarray.
A number of transactions at JRA have come to our attention and as workers and residents of the City, we have an obligation to expose these fraudulent and corrupt activities. We cannot fold our arms in silence while the very institution which feeds us and our children is being milked to its last cent.
After this briefing, we will afford the City with an opportunity to investigate and take appropriate action on these dodgy dealings. We are demanding that the City’s Group Forensics Investigations to be tasked with this role, failure to that, we will then be approaching the Johannesburg Central Police station to lay criminal charges for the theft of money that could have been used to service residents of the City of Johannesburg. For the purposes of this briefing, we will be focusing on two financial years, 2018-19 and 2019-20.
Financial year 2018/19
During this financial year, a dodgy transaction raised red flags which resulted in JRA instituting an investigation into this transaction. In carrying out the investigation, HTB consulting was appointed 03 August 2020 to conduct an investigation of irregular, fruitless and wasteful expenditure for the period 2018/19. The appointment letter was signed by the Chief Financial Officer at JRA and the final report presented to the entity.
In pursuit of conducting their investigations, HTB did the following;
• Identified a number of transactions to be investigation.
• Review of all the relevant documentation relating the transactions under investigation.
• Perform background searches on the service providers appointed in the transactions under investigation.
• Investigative interview with key role players and obtain sworn affidavits.
• Assessment of the evidential information gathered during the review of documentation and from the interviews conducted
• Confirm or refute the alleged irregular expenditure and/or fruitless and wasteful expenditure
During the investigations, eight (8) Officials from the JRA were interviewed by HTB consultants. Most of the investigations were focused on appointment of service providers who were appointed through Regulation 32 of MFMA which provides for Procurement of goods and services under contracts secured by other organs of state. The regulation allows the Accounting Officer to procure goods or services for the municipality or municipal entity under a contract secured by another organ of state. Further to that MFMA Circular 80 dated 08 March 2016 and MFMA Circular 96 dated 24 July 2019 were also utilized for investigation purposes.
Having taken a deep dive on the irregular expenditure, the root cause was identified as failure by management to adhere to internal controls in securing a contract with service provider, for example the chain of procurement was not followed properly as the legal department was not involved in the review of contracts drafted for the service providers for them to advise accordingly. Management was also flagged for failing to keep abreast with the National Treasury pronouncement timeously, as they appear to be unaware of the circular 80 that was issued in March 2016.
In total, an amount of R418 702 718.96 was incurred by the entity in irregular expenditure incurred in respect of abovementioned transactions above.
Financial Year 2019/20
It is unfortunate that JRA did not learn from what transpired in 2018/19. SAMWU again flagged a number of dodgy transactions at JRA for the period July 2019 to June 2020. Lunika was appointed to conduct a review into specific transactions deemed to be irregular, fruitless and wasteful expenditure for the period 1 July 2019 to 30 June 2020 as pronounced in the Auditor-General’s (“AG”) regulatory audit.
The report was finalized and released on 27 September 2021. This is one of many investigations done on appointment of contractors within JRA. Most of the flagged contracts were found not be in accordance with regulation 32 Regulation and also not in compliance with circular 80, resulting in the entity loosing over R2 million.
The two investigation (HTB and Lunika) highlighted the following
• Non-compliance with SCM Regulation 32 may result in the entity incurring irregular expenditure for the transactions that were approved through this regulation.
• Non-compliance with SCM Regulation 32 may expose the JRA to activities related to fraud and corruption and/or financial misconduct.
• Unfavourable audit opinion may be obtained from the AGSA with respect to the procurement of goods and services under the premise of regulation 32.
The investigation made the following recommendation
• That JRA should institute disciplinary measures against the officials mentioned in report.
• Ensure compliance to the legislation and relevant SCM regulations applicable to its business operations
It is unfortunate that JRA did not learn from what transpired in 2018/19. SAMWU again flagged a number of dodgy transactions at JRA for the period July 2019 to June 2020. Lunika was appointed to conduct a review into specific transactions deemed to be irregular, fruitless and wasteful expenditure for the period 1 July 2019 to 30 June 2020 as pronounced in the Auditor-General’s (“AG”) regulatory audit. The report was finalized and released on 27 September 2021. This is one of many investigations done on appointment of contractors within JRAMost of the flagged contracts were found not be in accordance with regulation 32 Regulation and also not in compliance with circular 80. More than 2 million was lost through this transactions
Implementation of findings and recommendations
On 4 December 2020, the Chief Executive Officer of JRA wrote a letter to the MMC for Transport indicating that he noted recommendations by the internal audit investigation report that and that the Entity will institute disciplinary measures against the officials implicated by the report. We have been reliably informed that this matters were also referred to the City`s Disciplinary Board but to date nothing has been done.
SAMWU is also in possession of whistleblower document which properly state happenings at JRA including how certain people were appointed in various positions and how they were rewarded. We have since written to the Executive Mayor and City Manager demanding the following
• That disciplinary action be taken against all employees identified on HTB Consulting 418 million report.
• That all employees identified on Lunika report be subjected to a disciplinary process
• That Siyabonga Nodu be removed from the office of the MMC for Corporate and Shared Services noting that the office is strategically dealing with employee related matters.
• That there be further investigations on issues raised by the whistleblower.
Given the above, we will be affording the City an opportunity to investigate all these allegations. If they fail to do so, they will be complicit in the fraud and corruption within the JRA and as such, the union will be left with no option but to lay criminal charges in terms of Prevention of Organised Crime Act.
Lastly, as SAMWU, we take this opportunity to appreciate the positive developments in ensuring the return of the dismissed 130 workers by the previous administration. We however demand that in the same manner other workers were reinstated through court settlements, these employees should be immediately reinstated. These workers have suffered a lot, especially under the previous administration. We trust and hope that this new administration will speedily ensure the resolution of this matter.
Issued by SAMWU Gauteng
Mpho Tladinyane
Provincial Secretary
083 941 5888