Background and context

In March 2020, under emergency COVID-19 procurement regulations, the GDOH awarded a R38.7 million PPE contract to Ledla Structural Development. This contract was meant to secure essential protective gear for frontline healthcare workers but instead:

• Violated procurement laws by bypassing competitive bidding procedures.
• Was awarded to an unregistered supplier (Ledla), violating Central Supplier Database (CSD) requirements.
• Resulted in inflated prices, excessive payments, and deliberate financial mismanagement.

The SIU took legal action to:

• Review and cancel the contract.
• Preserve the R38.7 million paid to Ledla, which had been swiftly redistributed.
• Prevent the release of pension and retirement benefits of Mantsu Kabelo Lehloenya, the former CFO of GDOH, who authorised the irregular payments.

Key players

1. Special Investigating Unit (SIU) and the Gauteng Department of Health (GDOH)

The SIU, operating under the Special Investigating Units and Special Tribunals Act (Act 74 of 1996), played a critical role in exposing the misuse of emergency procurement processes.

Its findings revealed that:

• Ledla was unlawfully awarded the contract, despite being unregistered on the CSD.
• The pricing of PPE was deliberately inflated, with biohazard bags priced at R7.00 each, compared to a market value of R0.75.
• Senior officials within the GDOH facilitated the contract, even though Royal Bhaca had previously been disqualified.

2. Special Tribunal

The Special Tribunal’s ruling established that:

• The PPE contract was unconstitutional and had to be cancelled.
• The funds were unlawfully obtained and must be forfeited to the state.
• Additional forensic investigations were necessary to determine the involvement of secondary recipients.

3. Ledla Structural Development and associated entities

Ledla was not a legitimate PPE supplier, yet it received and laundered R38.7 million within days. The Tribunal found that:

• Ledla functioned as a front for Royal Bhaca, which had been forced to withdraw.
• Company directors colluded with government officials to secure the unlawful contract.
• The money was intentionally laundered through a network of external bank accounts.

4. Mantsu Kabelo Lehloenya (Former CFO of GDOH)

A key figure in the case, Lehloenya was found to have played a critical role in facilitating the unlawful contract. The Tribunal ruled that:

• She approved the Ledla contract despite knowing it violated procurement laws.
• Documentary evidence, including emails, linked her to the fraudulent transactions.
• The SIU successfully secured an interdict preventing her from accessing her pension and retirement benefits, pending further legal action.

Key findings of the Special Tribunal

1. Violations of Constitutional and procurement laws

• The contract violated Section 217 of the Constitution, which mandates that public procurement be fair, transparent, competitive, and cost-effective.
• Ledla was not registered on the Central Supplier Database (CSD), a basic legal requirement for state contracts.

2. Price inflation and financial mismanagement

• PPE prices were deliberately inflated—biohazard bags were charged at R7.00 per unit instead of the market rate of R0.75.
• Payments were approved without proper financial oversight, resulting in excessive spending and waste of public funds.

3. Rapid fund laundering

• Ledla received R38.7 million on 3 August 2020, and immediately redistributed it across multiple bank accounts.
• Several recipient accounts had no clear business relationship with Ledla, indicating a coordinated money-laundering scheme.
• Mr. Sangoni, an external figure, directed the fund disbursements without holding any official position in Ledla, further raising concerns of fraud.

4. Forfeiture of unlawful proceeds

• The Tribunal ordered the forfeiture of all funds held by Ledla and its affiliates.
• Some entities successfully proved legitimate transactions, and their preservation orders were lifted (e.g., BLSM Services, Sasol, Boxlee).
• Other recipients, such as Atturo Tyers and Mediwaste, were subjected to forensic audits to verify the legitimacy of their payments.

Legal and financial consequences

A. Tribunal’s ruling and financial liability

The Special Tribunal ordered that:

• R38.7 million in unlawfully obtained payments must be forfeited.
• Ledla’s directors and associated entities must be held financially liable.
• Forensic investigations will determine further legal actions against recipients of the laundered funds.

B. Broader implications for public procurement and governance

This ruling establishes a powerful precedent that:

• Emergency procurement must remain transparent and accountable.
• Corrupt officials and fraudulent companies will face financial and legal repercussions.
• The misuse of crisis funding will not be tolerated.

Timeline of events

Date	Event
March 2020	GDOH awards a R38.7 million PPE contract to Ledla Structural Development.
3 August 2020	Ledla receives payment and rapidly distributes funds to multiple accounts.
August 2020	SIU initiates legal proceedings to freeze unlawfully obtained funds.
2021	The Special Tribunal declares the contract unlawful and orders asset forfeiture.

Final takeaways and lessons for public sector reforms

• Judicial enforcement is key in deterring procurement fraud.
• Stronger oversight mechanisms are needed to monitor emergency contracts.
• Government agencies must prevent suppliers from using proxies to bypass procurement rules.
• The SIU and Special Tribunal play a crucial role in protecting public funds from fraud.

Conclusion

The SIU v Ledla Structural Development case is a landmark in South Africa’s anti-corruption efforts, reinforcing accountability in emergency procurement.

By ordering asset forfeiture, freezing pension funds, and uncovering laundering networks, the Tribunal has reinforced the principle that corruption in state procurement will not be tolerated.

This ruling serves as a warning to government officials and private entities that fraudulent procurement practices will result in severe financial and legal consequences.