Background and context
In the matter of Special Investigating Unit (SIU) v Hawulethu (Pty) Ltd and Another, the Special Tribunal was asked to review and set aside the decisions of the MEC for the KwaZulu-Natal Department of Education (“the Department”) to contract and conclude an agreement with Hawulethu (Pty) Ltd (“Hawulethu”) in June 2020, and to extend the said agreement for the procurement and provision of chemical mobile toilets, and to declare the contract unlawful, irregular, invalid and unconstitutional. The SIU further asked the Tribunal to direct Hawulethu to repay the contractual amount of R2 538 000.00, alternatively, all profits derived from the contract.
On 5 June 2020, the Head of the Department of Education in KwaZulu-Natal sent a memorandum to the district directors to procure and provide chemical mobile toilets for district schools for one month, with a cap of R3 000.00 per item. All Supply Chain Management (“SCM”) processes and procedures had to be complied with.
The need for the provision of these toilets arose as an emergency measure to ensure that learners at the affected schools had access to adequate toilet facilities following the lifting of the national lockdown in response to the Covid-19 pandemic and the subsequent return of learners to schools in the week commencing 8 June 2020.
On 10 June 2020, when acquisitions and authority for purchases were compiled and signed, the invitation to bid (SM001) was sent to Hawulethu. The bid was submitted, and Hawulethu was appointed to supply and deliver 72 units to 11 different schools. The goods were indeed delivered, but the date of delivery was disputed.
The SIU contended that the officials or employees of the Department contravened section 217 of the Constitution, various sections of the Public Finance Management Act (“the PFMA”), as well as Regulation 16A6.4 of the Treasury Regulations. It is alleged that certain officials or employees of the Department were instrumental in the procurement of 72 chemical toilets and in processing the award to Hawulethu for the supply and servicing of those toilets. In particular, the SIU contended that Hawulethu received various phone calls before 10 June 2020 from the Department, which pointed to collusion and unfair competitive practices. It further alleged that Hawulethu claimed fruitless and wasteful expenditure by claiming for unrendered servicing of the toilets during school holidays.
Hawulethu contended that, due to the urgency of the request, a formal tendering process was not followed prior to the contract being entered into by the Department and itself. According to Hawulethu, it was approached directly by a representative of the Department on 5 June 2020 in order to quote for the supply and servicing of mobile toilets, and it duly furnished the Department with such a quote on 5 June 2020.
Judgment of the Special Tribunal
Judge Fortuin delivered a comprehensive judgment delineating two key issues:
- Whether the SIU’s late application could be condoned, and
- Whether the conclusion of the procurement contract was unlawful and invalid.
Judge Fortuin began by addressing the question of condonation. She noted that the application was brought well outside the reasonable time period applicable in reviews, and that various factors had to be considered in determining whether condonation should be granted. The Tribunal had a discretion to overlook the delay, based on an analysis of whether the SIU showed good cause and whether it was in the interests of justice to do so.
On the facts, the SIU had taken three years to bring the application after receiving the investigation file. During that period, Judge Fortuin noted that various state institutions were under-resourced, and she accepted the SIU’s submission that the delay was caused largely by factors beyond its control, such as inefficiencies in the State Attorney’s office, tender processes to appoint a panel of attorneys, and other unsuccessful processes. Judge Fortuin therefore held that it was in the interests of justice to condone the late filing of the application and proceeded to deal with the merits of the review.
On the merits, Judge Fortuin set out the relevant provisions of the Constitution, the PFMA and the Treasury Regulations. Section 217 of the Constitution provides that when an organ of state contracts for goods or services, it must do so in accordance with a system that is fair, equitable, transparent, competitive and cost-effective, and in accordance with a procurement policy, the framework for which is dealt with by the PFMA. Section 38 of the PFMA sets out certain responsibilities of accounting officers and other officials in institutions. Regulation 16A6.4 provides that, in exceptional circumstances, an organ of state may procure goods or services in a manner that deviates from the normal procurement process.
Pursuant to the powers accorded to it by the PFMA, National Treasury Instruction Note 5, dated 19 March 2020, specified the various emergency procurement methods available during the state of disaster. It provided emergency procurement provisions for accounting officers to procure required goods or services by other means, such as price quotations or negotiations, in accordance with Treasury Regulation 16A6.4. Toilets were not included in the list of PPE that would have warranted a deviation from the normal procurement process.
Judge Fortuin took into account the fact that Hawulethu delivered the toilets before the submission of the bid documents and the subsequent appointment, and that SCM processes and procedures were not complied with. Hawulethu further admitted, without proper explanation, to receiving phone calls before 10 June 2020 from the Department, which, in Judge Fortuin’s view, created the only plausible inference of collusion and unfair competitive practices in contravention of section 217 of the Constitution. As the procurement contract deviated from legislated requirements without a valid reason, the contract was unlawful and invalid.
Moreover, Hawulethu claimed R3 000.00 per month per unit, while the goods were purchased at R1 000.00 and R1 500.00 per unit per month. As a result, Hawulethu was unjustifiably enriched, having overcharged the Department and profited from an unlawful contract.
It was thus evident that the officials of the Department did not comply with SCM processes when the bid was awarded and the contract extended. As a result, the contract was irregular. The amount of R2 538 000.00 was accordingly an irregular expense incurred by the Department.
Judge Fortuin therefore granted the application, declared the decision of the Department and the subsequent contracts unlawful, invalid and of no force and effect, reviewed and set them aside, and granted consequential relief in the form of forfeiture of all profits derived from the contract.
Timeline of Events
| Date | Event |
|---|---|
| 5 June 2020 | Memorandum sent to district directors to procure toilets for schools |
| 10 June 2020 | Invitation to bid sent to Hawulethu |
| 7 July 2021 | SIU receives investigation file |
| 11 October 2021 | Permission requested to instruct State Attorney to brief counsel |
| 17 November 2021 | Matter approved for briefing of counsel |
| 1 June 2024 | Application launched |
| 6 November 2025 | Hearing and judgment |
Conclusion
This judgment signifies a firm restatement that following proper procurement procedures is not a choice, but a constitutional obligation. It showcases the importance of the Special Tribunal in holding both private companies and public officials accountable for irregular expenditure and corruption, through the decisive action taken by the Tribunal to reclaim public money by ordering profit forfeiture.