Minister takes action on allegedly corrupt R800m hospital oxygen plant tender

Public Works’s Macpherson launches investigation into governance at the Independent Development Trust, implementing agent for the tender.

Minister of Public Works and Infrastructure Dean Macpherson has launched an investigation into governance issues at the Independent Development Trust (IDT) after failing to receive requested documentation from the trust’s board about an allegedly irregular and corrupt R800 million hospital oxygen plant tender.

Macpherson’s decision was prompted by the Department of Health (DoH) giving notice that it intends to remove the IDT as its implementing agent for the controversial Pressure Swing Absorption (PSA) Oxygen Plant tender because of allegations of corruption.

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Read: President to SIU: Catch those crooks!

Macpherson informed IDT board chair Advocate Kwazi Mshengu on 19 November that the tender for the rollout of this project should be suspended with immediate effect to restore the integrity of the process.

It is unclear if the IDT has done so.

Mshengu said on Monday the IDT board directed management to accept the DoH’s intention to withdraw the contract from the IDT.

Investigation

He also said IDT management maintains that procurement processes were followed with this tender – but that the IDT board has decided to commission a full-scale independent review of the trust’s internal processes to ensure that any gaps that may exist within the procurement processes are adequately addressed.

However, Macpherson said on Tuesday it is patently clear that an organisation cannot and should not be allowed to investigate itself.

Macpherson said the Department of Public Works and Infrastructure (DPWI) minister, as the executive authority to which the IDT is accountable, will therefore launch a full independent investigation into the IDT and its corporate governance challenges “to prevent any possible abuses and corruption going forward.”

Read: SIU takes aim at ballooning dodgy medical litigation that is costing the government billions

“Furthermore, due to the inquorate nature of the trust, it is not empowered to take such a decision,” he said.

“This is why I will be appointing an independent firm to investigate the alleged corporate governance failures that have led to this breakdown in trust.”

Where are the documents?

Macpherson’s action in launching the investigation also appears to reflect his annoyance at the failure, despite several attempts over the past weeks, to obtain documentation from the IDT board regarding the tender.

The tender involved awarding contracts valued at more than R800 million to three companies to install oxygen plants in hospitals despite two of the companies lacking South African Health Products Regulatory Authority (Sahpra) registration and one potentially submitting fraudulent documentation.

Read:
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Macpherson wrote to Mshengu on 5 November to formally request additional documentation and clarity on specific aspects of the PSA oxygen plants project, particularly regarding procurement and project implementation processes.

He specifically requested that he be provided with a number of documents by 5pm on 8 November, including:

• Signed contracts with Bulkeng and the Maziya/On-Site Gas Joint Venture;
• Full bid submissions and bid documents for both Bulkeng and the Maziya/On-Site Gas JV;
• The joint venture agreement between Maziya and On-Site Gas;
• Confirmation letters on the working relationship provided by Bulkeng;
• Minutes of all Bid Evaluation Committee and Bid Adjudication Committee meetings concerning the oxygen plants contract;
• The Infrastructure Programme Implementation Plan from the DoH to the IDT for the project; and
• All correspondence from DoH Director-General Sandile Buthelezi to the IDT CEO regarding the PSA oxygen plants rollout.

Macpherson also requested a prompt and comprehensive response to a number of questions to clarify outstanding issues related to the project.

These include:

• A detailed account explaining how the project scope or projected cost increased from about R256 million to R836 million; and
• Why the Sahpra requirement was not included in the IDT’s request for quotations (RFQ), given its inclusion in the DoH’s instructions for this bid.

Red flags

In the letter to Mshengu on 19 November informing him that the rollout of this tender should be suspended, Macpherson highlighted the reasons for this decision, including investigative articles published by the Daily Maverick that raised a number of red flags in the tender process, most of which had not been countered by the IDT to him.

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He said the DPWI was also not provided with full bid documents, despite requesting them to conduct an independent assessment as to whether the two service providers, Bulkeng (Pty) Ltd and Maziya On-Site Gas Systems JV, complied with all other requirements of the bid specifications.

Read: Flawed tender processes could be costing SA R400bn a year [Aug 2018]

One of the mandatory requirements stipulated that the bidder possess a letter confirming readiness and capacity from the original equipment manufacturer (OEM) detailing delivery times and quantities.

However, Macpherson said that if the partnership with the OEM was confirmed on the dates stipulated (25 July 2024 and 10 October 2024) and the appointment processes were completed on 12 June 2024 as claimed by the IDT, the implication is that Bulkeng (Pty) Ltd at the point of finalising the appointments of mechanical contractors for the rollout of the PSA oxygen plants at the identified 45 sites/health facilities “did not meet one of the mandatory requirements and thus should not have been considered for appointment”.

More issues

Other concerning issues mentioned by Macpherson include:

• Bulkeng appears to be a ghost company with no confirmed business address nor online presence, with the company having a list of 23 addresses, which were edited from time to time. The last entry is on 5 October 2023, which is listed as 9 Bosbok Street, Volkrust [Volksrust], Mpumalanga;
• Reports that Nathi Ndlovu, the sole director of Bulkeng, is deceased, which means the company would not be in a position to operate or deliver on the project;
• Bulkeng does not have a registered Sahpra certificate and seemingly used another company’s certificate in its bid application;
• It appears the Sahpra certificate of a local subsidiary, Atlas Copco, was used in the bid without the permission of Atlas Copco; and
• Bulkeng (Pty) Ltd had a collaborative agreement with an OEM accredited by Sahpra. However, analysis of the dates provided on the documents by IDT concludes that the partnership was entered into “post the bid closure and award of the contract to Bulkeng (Pty) Ltd for both appointment to the panel and RFQs”.

‘Era of corruption coming to an end’

Macpherson on Tuesday expressed his gratitude for the collaboration and support he had received from Minister of Health Dr Aaron Motsoaledi.

“The way in which Minister Motsoaledi and I worked together in the best interests of South Africans on this matter is truly commendable to ensure access to life-saving oxygen, and to shed light and accountability on this tender when the facts became known to us.

Listen/read: ‘Corruption ultimately makes the poor pay’ – Andy Mothibi [SIU head]

“We simply cannot allow close to a billion rand in public funds to be potentially lost through alleged corrupt activities, particularly when it involves essential healthcare equipment intended to save lives.

“We are working urgently to ensure accountability and to hold any wrongdoers responsible,” he said.

“As I stated when I took office on 3 July, the era of corruption and abuse within the Department of Public Works & Infrastructure is coming to an end.”

Allegations ‘cannot go untested’

Mshengu said on Monday the board has noted with serious concern the allegations of corruption that have surfaced in the recent past about this tender and stressed that the allegations about the tender process cannot go untested because they bring the image of the IDT into disrepute.

“For the IDT to continue growing its business portfolio, it must demonstrate the capacity to deliver quality projects on time and within budget.

“The internal processes leading to the awarding of tenders and project management should be beyond reproach.

“Therefore, anything that smells of malfeasance should be nipped in the bud and those found to be responsible … shall face consequence management,” he said.

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