The Special Investigation Unit (SIU) is investigating former Denel officials for their role in an irregular contract with information security company Telspace Systems.
Briefing the Standing Committee on Public Accounts (SCOPA) on 3 March, SIU lead investigator Zodwa Xesibe said the contract with Telspace Systems and Denel did not follow any formal procurement/competitive bidding process.
The company was hired to test the vulnerability of IT systems within Denel to outside hacking (red team penetration testing). The SIU found the process to appoint Telspace was irregular as there was no tender advert, and no tender procurement process followed. “It was a gentleman’s agreement,” Xesibe said. “There was a middleman who acted as a nodal point between Denel and Telspace. As a result of an engagement letter that was entered into, Denel made a 70% advance payment of R4.6 million.”
After providing Denel with some of its security threat findings, Telspace demanded the 30% outstanding payment and when Denel demanded all Telspace findings without further payment, Telspace launched a civil claim against Denel for R1.9 million. Xesibe said Telspace was willing to settle and walk away from the civil claim. “We advised Denel to settle because they don’t have money to pay legal fees to fight the case.”
Xesibe said the SIU has evidence against the former group CEO on PFMA (Public Finance Management Act) contravention and is looking at gathering more evidence. All employees implicated in the investigation have left Denel but the SIU is pursuing criminal and civil recoveries.