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Corruption Watch continues to make a valuable contribution to the fight against corruption, with its most recent success related to the Constitutional Court case involving Allpay Consolidated Investment Holdings (Allpay) and others v The South African Social Security Agency (SASSA) and others.
The organisation appeared as a friend of the court in September, in a case where losing bidder Allpay disputed the awarding of a R10-billion tender by SASSA to a private company, Cash Paymaster Services (CPS) for the distribution of social grants.
About 15-million people in South Africa depend on social grants, and for many this is their main income. SASSA manages the distribution of these grants on a national level, where before this was done by provincial authorities. To streamline the process it decided to initiate a tender process to select an entity that would administer the social grants system for five years across the country, and it selected CPS.
On Friday Judge Johan Froneman handed down a unanimous judgment, which found that the decision to award the tender to CPS was constitutionally invalid. In doing so, he overturned the decision of the Supreme Court of Appeal, which had turned down an earlier appeal by Allpay. The matter began in the High Court where the tender was declared invalid, but because of the potential upheaval and delay in issuing the grants, the Court declined to set the award aside.
Allpay appealed to the Supreme Court, which dismissed Allpay’s appeal and upheld another appeal by CPS against the High Court’s declaration of invalidity. Allpay then went to the Constitutional Court to have the Supreme Court’s rulings set aside.
In its 15-minute court appearance, said Corruption Watch’s executive director David Lewis, the organisation “played a major role in the enunciation of a clear legal standard in determining how irregularities in tender awards should be understood”.
Procedural non-compliance could underlie a larger wrongdoing
In its judgment the Constitutional Court referenced Corruption Watch’s contribution concerning irregularities in public procurement being red flags for corruption. The Court held that “deviations from fair process may themselves all too often be symptoms of corruption or malfeasance in the process. In other words, an unfair process may betoken a deliberately skewed process”.
“This is a critical finding,” said Lewis, “because, as our experience confirms, there are seldom witnesses to corruption, no-one who actually sees the brown envelope exchange hands, mostly what one hears about are deviations from fair process. Corruption Watch believes – and argued in court – that when a clear cut and relatively simple procedural requirement has not been met, we have to ask ‘why?’ and our suspicion, one that has been borne out by our experience, is that an investigation will reveal that someone conspired to undermine the fair process because it served the interest of one or other of the bidders.”
Once the court has accepted this it must become the standard against which contraventions of tender procedures are judged, he said.
“What we are now calling for is for the Hawks to probe the irregularities that occurred.”
Tender processes are there for a reason
In the judgment Froneman held that compliance with the requirements of a tender process is crucial, and that insistence on compliance serves three purposes – “(a) it ensures fairness to participants in the bid process; (b) it enhances the likelihood of efficiency and optimality in the outcome; and (c) it serves as a guardian against a process skewed by corrupt influences”.
The Court found that SASSA had failed to investigate and confirm CPS’s black economic empowerment credentials before it made the award. It also found that the second bidders’ notice, issued during the tender process, was vague and uncertain and gave rise to procedural unfairness.
But, despite the fact that the Court declared the award of the tender to CPS invalid, it remains in place for the time being. The Court has ordered the parties to return to court on 11 February 2014 to present evidence as to a “just and equitable” remedy.
SASSA and CPS were ordered to pay Allpay’s costs, including that of three counsel, in the High Court, the Supreme Court and the Constitutional Court.
