Over R1 billion in irregular, fruitless and wasteful DoD expenditure under investigation


The Department of Defence (DoD) is investigating seven cases of unauthorised, fruitless, wasteful and irregular expenditure amounting to around R1.5 billion, Parliament’s Portfolio Committee on Defence and Military Veterans (PCDMV) heard.

In a presentation to the PCDMV on 17 March, the DoD gave an update on measures to combat corruption and fraud and provided an overview of the status of corruption and fraud in the department as well as irregular expenditure.

One case of irregular expenditure concerns a PriceWaterhouse Coopers contract for asset management worth R604 million. In June 2020 a forensic company was appointed to investigate. The investigation is ongoing with involvement from the DoD Inspector General (IG).

The IG is looking into a R239 million Through Life Cycle Management contract from the 2015-2019 timeframe.

Investigations into R447 million worth of asset management contracts from 2017 to 2019 are finalised, ratified by the principals and due processes are being followed, the DoD said.

Information and communications technology (ICT) contracts worth R216.7 million for ICT services and licenses for 2018/19 were flagged as bids were not evaluated according to criteria stipulated in bid documentation. The DoD said cases are registered with the Military Police. Additionally the Special Investigating Unit (SIU) and the Directorate for Priority Crime Investigation (DPCI), better known as the Hawks, are investigating.  The service provider conceded overcharging the DoD by R41 million and entered into an agreement with the SIU to pay back the R41 million with an acknowledgement of debt issued. The SIU is collecting the R41 million plus interest. An investigation is underway against those involved.

Progress was reported on an investigation into R105 million worth of non-compliant spending in 2018/19. The DoD reported “on 14 October the director of the company was arrested after a warrant of arrest was issued. The accused appeared in the Special Commercial Crime Court and was released on R80 000 bail. The case was postponed to 9 December 2020 for disclosure and again postponed to 12 April 2021.”

The DoD is also investigating an incorrect evaluation for spare parts and storage for ships in Cape Town between 2018 and 2020. Irregular spending in this case amounts to R59 million. The investigation is finalised and the case docket was referred to the Commercial Crime Court in Bellville for a decision. The prosecutor postponed to 15 April 2021.

The final case of irregular expenditure concerns under-utilisation of the Eco Park, Centurion, property over four years (between 2015 and 2019, amounting to R108 million). The DoD reported the investigation is finalised, ratified by the principals and due process are being followed.

For the 2019/20 financial year, irregular expenditure totalling R2.836 billion was recorded due to non-compliance with supply chain management processes and underfunding the compensation of employees (CoE) allocation.

Of the R2.836 billion in irregular expenditure incurred for 2019/20, R2.609 billion was for expenditure in excess of the CoE allocation. This was due to a reduction imposed by National Treasury on actual employees in service of the DoD, the department’s annual report said.

The difference of R230 million incurred is due to contracts awarded through unfair bidding processes from previous years which are still running and paid in the 2019/20 financial year.

Irregular expenditure, according to the DoD, amounted to R3.587 billion for the 2018/19 financial year (R2.895 billion of which was for expenditure above the CoE allocation). This was an increase on already increasing trends from previous years. For example, in 2017/18 irregular expenditure amounted to R631 million, substantially more than the R328.071 million reported in 2016/17.

Responding to the list of irregular, fruitless and wasteful expenditure, PCDMV chair Cyril Xaba said, via a statement, the audit committees and internal audit departments in both the DoD (headed by Minister Nosiviwe Mapisa-Nqakula) and the Department of Military Veterans (DMV), the responsibility of Deputy Minister Thabang Makwetla, should have more impact.

“This would enable identification of red flags and assist in prevention of fraud and corruption,” he said adding “poor risk management and internal control was the root cause” of the issues highlighted.

The PCDMV asked for details of the working relationship between the military police, the SA Police Service (SAPS) and the National Prosecuting Authority (NPA), headed by Shamila Batohi, as well as wanting more information on cases pending in both civil and military courts. This will assist in improving oversight.