SIU Presentation to Portfolio Committee: Justice and Constitutional Development 12 October 2011

1. SIU Presentation toPortfolio Committee: Justice and Constitutional Development 12 October 2011 SIU presentation to PC on Justice and Constitutional Development

2. Summary Introduction to SIU, mandate and legal scope Strategy Overview Building capacity Participation with other government initiatives Overview of performance Operational summary Challenges in dealing with corruption Budget growth and project income Funding issues Financial information, audit and MTEF Conclusion Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government’s ability to provide basic services, feeding inequality and injustice, and discouraging foreign investment and aid Kofi Anan – previous Secretary-General of the United Nations SIU presentation to PC on Justice and Constitutional Development

3. SIU mandate and legal scope • Started out: Heath Commission of Enquiry, 1995 • Established: in terms of the Special Investigating Unit (SIU) Act 74 of 1996 • still function much like commission of enquiry • current SIU established by Proclamation R118of 2001 • Investigations mandated: by a Proclamation from President • Powers: (similar to commission of enquiry) • subpoena, search and seizure, interrogate witnesses under oath • innovation: power to use institute civil litigation to recover monies lost • not power of arrest, prosecution – can assist and facilitate • not power to take disciplinary action – recommend and assist • separate from law enforcement agencies but work closely together • Major functions: • investigate corruption and maladministration (ie not just crime) • institute civil legal action to correct any wrongdoing

4. About the SIU • Facilitate and assist withconcrete legal outcomes to investigations – ie: • criminal (prosecutions) working with the Police (SAPS) and the National Prosecuting Authority (NPA) • civil litigation to recover losses • disciplinary action • Capacity: massive expansion and development of multi-disciplinary forensic capability consisting of: • forensic investigators, lawyers and accountants • cyber forensic and data analysis experts and • project management capacity • Mixed funding model: • baseline funding from National Treasury allocation - not sufficient • additional funding secured through partnerships with state institutions • goal is to build capacity in state and reduce reliance on the private sector SIU presentation to PC on Justice and Constitutional Development

5. About the SIU cont... • Cooperation: developed close working relationships with: • law enforcement: SAPS (especially the Hawks), NPA • Treasury bodies: Accountant-General, SARS, Financial Intelligence Centre • oversight bodies: Auditor-General, Public Service and Administration (DPSA) • Legislatures: Public Accounts Committees – national, provincial, municipal • chapter 9 institutions: esp Public Protector • individual departments, provinces and other state institutions • Focus areas: • large scale fraud and corruption where multiple small cases • social grants, housing subsidies, driving licences • increasing focus on procurement related fraud and corruption • assist with improving systems and processes to prevent corruption • use of data to indentify potential irregularities pro-actively SIU presentation to PC on Justice and Constitutional Development

6. SIU strategy framework Vision: • Working together to rid society of corruption Mission: • We are a state body that fights corruption through quality investigations and litigation Values: • integrity, cooperation, professionalism, drive and effectiveness Strategic goal: • To contribute to the reduction of corruption and the perceptions of corruption • The SIU aims to make this contribution as part of the broader anti-corruption strategy of government SIU presentation to PC on Justice and Constitutional Development

7. Links to government outcomes Outcome 3: All people in South Africa are and feel safe • Output 3: Corruption eradicated, including bribery, by officials within the JCPS as one of the major contributors of ongoing criminal activity as well as lack of trust and confidence in the system by the community • Compile a baseline report with detailed data for the 2009/10 financial year • Output 5: Investor perception trust and willingness to invest in South Africa is improved and by taking corruption related action in a defined number of highly visible cases • Successfully convict 100 people who have assets of more than R5 million obtained through illicit means Outcome 12: Efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship • Output 4 – Corruption tackled effectively. • An improvement in the TI corruption index from position 55 of 180 to 40 of 180. SIU presentation to PC on Justice and Constitutional Development

8. Strategic objectives Externally focused • To increase impact of the SIU’s forensic services in the public sector • To achieve optimum institutional form • To ensure excellent cooperation with our law enforcement partners and stakeholders Impact • Strengthen our strategic partnerships • Increase the scope of operations for the SIU • Contribute directly to • Outcome 3: South Africans are and feel safe • Outcome 12: Efficient, effective and development oriented state SIU presentation to PC on Justice and Constitutional Development

9. Strategic objectives Internally focused • To secure appropriate capacity and funding • To align and improve systems and processes • To invest in appropriate technology capacity • To build an engaged, diverse and competent SIU • To develop effective, accountable and engaging leadership Impact • Enables the SIU to achieve its external objectives SIU presentation to PC on Justice and Constitutional Development

10. Strategic Overview – 3 years 2009/10 • Environment uncertain with recession and large dependence on partner funding • Concluded most of an intensive organisational assessment and design process to better capacitate the SIU • Adopted a 3 to 5 year approach to strategic planning • Key focus on positioning the SIU as the forensic service provider to the state • and increasing projects and funding 2010/11 • SIU became part of new government initiatives on corruption • ACTT, MAWG, DPSA • significant increase in impact, workload and funding • focus of investigations shift to procurement • Aligned strategic plan to the Results Based Management and Outcomes Management approach of government and developed a Logic Model linked to Outcome 3 (Outputs 3 & 5) and Outcome 12 (Output 4) SIU presentation to PC on Justice and Constitutional Development

11. Building capacity through partnerships • The major focus of the SIU has been to build more capacity in the state to deal with corruption investigations: • has grown from about 67 to 600 staff in 9 years • trainee investigator program has addressed EE challenges in the forensic field • The new operating model is designed for scalability – will allow for rapid increase investigator numbers in response to the increased demand • To bolster capacity have sourced additional investigators from the private sector • intended as short term intervention and skills transfer initiative • allow time to recruit and develop staff • cater for some of the uncertainty from our funding model • Big recruitment drive and development initiatives to provide long term capacity that is sustainable and helps to bolster government’s overall capacity to ensure effective investigations SIU presentation to PC on Justice and Constitutional Development

12. Capacity summary • Establishment is 668 funded posts • expect to grow to 706 in next 3 years • about 40% is dependent on project funding which make permanent employment risky • have tried to mitigate by using consultants, contract and temporary staff • recruitment drive is on going • 441 full-time ops staff • 25 working full-time with ACTT • and 11 with Wasps • Permanent posts filled decreased due to uncertainty about project funding • 594 in 2007/08 to 522 in 2010/11 • Challenges due to cumbersome process of salary approval on which implementing the new organisational structure depends SIU presentation to PC on Justice and Constitutional Development

13. Capacity summary • To address capacity issues and demands for new investigations • SIU has negotiated an innovative agreement with the private sector to in-source forensic investigators • at a discount of about 50% of AG rates • thanks to cooperation from private sector • Currently using about 135 forensic investigators from over 20 forensic firms SIU presentation to PC on Justice and Constitutional Development

14. Promoting EE • Promoting employment equity has been a challenge in the forensic industry traditionally dominated by white males from SAPS commercial branch • Difficult to compete with private sector salaries • SIU started own trainee programme –nearly 300 new investigators over 6 years • Also a leadership development programme • Agreed on a new plan with EE committee setting ambitious targets • Still a challenge at senior management level, but it is a focus of current recruitment and SIU has made good progress so far • Exco: currently 3 white male, 2 African male • 1 African male soon as Portfolio Manager • headhunting 1 African female for Stakeholder Head • Senior management in Operations and Business Support: • 6 African, 2 Coloured, 7 White SIU presentation to PC on Justice and Constitutional Development

15. Participation in other initiatives ACTT (Anti Corruption Task Team) in the Justice cluster • Task team set to fast-track high priority corruption investigations and prosecutions, and to co-ordinate efforts with other bodies. • Consists of the Hawks, SIU, and NPA (including prosecutors and the AFU) - supported by SARS, the FIC and the Accountant-General in Treasury • SIU has committed considerable resources to this process MAWG (Multi Agency Working Group on procurement) in the Finance cluster • Deals with irregularities in the gov’t procurement system, focusing on closing systems gaps as well as detecting and investigating irregularities • Comprising the AG, SARS, FIC, DPSA and SIU – supported by Hawks and NPA • SIU has played a significant part in the development of strategy and implementation Wasps (Special Anti-Corruption Unit in DPSA) in the Governance cluster • Focus on the investigation and prosecution of disciplinary cases against senior public servants involved in corruption ensuring effective action is taken. • It will work closely with departments • The SIU has committed to provide investigative and legal support SIU presentation to PC on Justice and Constitutional Development

16. SIU performance overview SIU presentation to PC on Justice and Constitutional Development

17. Analysis of performance • A significant change in focus in service delivery: • from multiple small cases • to fewer complex, long term investigations into procurement. • Essentially it will mean the SIU deals with fewer but more important cases • This coincides with the new focus of government on procurement irregularities • Social grants: shift from removals of grants to procurement issues • There is still one significant removal possible but probably not this year • Housing: shift from illegal subsidies to housing contracts • Transport: agreement on driving licences has not been renewed SIU presentation to PC on Justice and Constitutional Development

18. Analysis of performance cont. • Impact on performance as measured currently • Financial indicators will decrease in short term as it will take longer to deliver • Number indicators: will also decrease but not as significantly • 2 new indicators to try to measure impact • contributing to completed investigations for JCPS output 5 • value of contracts where irregularities found • Looking at internal indicators • value of contracts where potential irregularities identified • value of contracts under investigation • value of contracts where irregularities found • value of potential remedial action, eg cancellation of contracts SIU presentation to PC on Justice and Constitutional Development

19. New Proclamations 2010/11 • Tshwane Metropolitan Municipality: Gauteng Province • Ekurhuleni Metropolitan Municipality: Gauteng Province • George Local Municipality: Western Cape Province • National Heritage Council (Department of Arts and Culture) • Stellenbosch Local Municipality: Western Cape Province • Amendment to Stellenbosch Proclamation • Oudtshoorn Local Municipality: Western Cape Province • Department of Rural Development and Land Reform Department of Health: Gauteng Province South African Social Security Agency Extension to Housing Proclamation R.7 of 25 April 2007 Department of Arts and Culture Department of Education: Eastern Cape Province Department of Public Works South African Police Service Department of Public Works: KwaZulu-Natal Province South African Broadcasting Corporation Ikhala Further Education and Training College: Eastern Cape SIU presentation to PC on Justice and Constitutional Development

20. Operations summary • 2 more since last FY: • Midvaal Local Municipality (20 May 2011) • Former Department of Roads and Transport Eastern Cape (20 May 2011) • Numerous additional requests for investigations and motivations for proclamations in process • 60 current investigations • 22 active proclamations • Investigation growth areas include: • Procurement • Public works • Rural development and land reform • Parastatals • Local government • Education and Health SIU presentation to PC on Justice and Constitutional Development

21. Operations summary Procurement contracts under investigation: • 588 to the value of R9.1 billion Conflict of interest matters under investigation: • 360 to the value of R3.4 billion Procurement investigations were irregularities were found: • 43 to the value of R1.4 billion (April to June 2011) Conflict of interest matters where irregularities were found: • 45 to the value of R99 million (April to June 2011) SIU presentation to PC on Justice and Constitutional Development

22. Operations SAPS • Assistance to Public Protector in SAPS HO and Durban leases only part of a far wider investigation requested by the ICD and current National Commissioner • A major concern was significant irregularities in the SAPS build programme with allegations of SCM irregularities in the building and/or renovation of 33 police stations exceeding R330 million: • lowest quotations not accepted • no quotations from the winning bidder • possible cover quoting and BEE fronting • possible conflicts of interest - SAPS officials appear to have interests in the suppliers awarded work for goods and services • actual payments exceeding budgeted costs • Agreed priorities are the following building and/or renovation projects : • Pienaar, Hazyview, Brighton Beach, and eSikhawini police stations SIU presentation to PC on Justice and Constitutional Development

23. Operations Department of Public Works (DPW) • Looking at entire DPW function - a core state entity with significant vulnerabilities • At least R35m paid to entities where DPW staff have undeclared business interests • Contract for construction of accommodation at border post: • value of contract is R374m • Investigating maladministration, financial misconduct and corruption on part of senior DPW officials and contractor • Looking to civil recovery of about R46m as well as other action • Pretoria lease agreement for residential accommodation: • at approx R217 000 pm without relevant approval • payments to date exceeds R7m • contractor has been positively linked to DPW official • Priority matters currently under investigation: leased accommodation, specific contracts, conflicts of interest and general SCM irregularities – total: R3.3 billion SIU presentation to PC on Justice and Constitutional Development

24. Operations Arts and Culture • Looking at misuse of funds ring-fenced for 2010 Soccer World Cup (SWC) • Investigation revealed: • R26m shifted from earmarked SWC budget – unauthorised expenditure • R16m not used for SWC-related projects - also unauthorised expenditure • Reviewed 39 Investment in Culture projects: • recommended R8.3 million savings SIU presentation to PC on Justice and Constitutional Development

25. Operations SABC • SABC approached SIU for assistance • AG investigation which identified: • 20 employees whose business interests • received payments totaling R 3.4m from 1 Oct 07 – 30 June 09 • 13 disciplinary cases recommended • SIU has identified another • 20 employees whose business interests received payments amounting to R 2.4 billion in period 1 Sep 07 – 31 Mar 10 • still under investigation • Working jointly with the Brixton Commercial Crime Unit on 8 criminal matters • 5 matters have been finalised and are to be submitted to the NPA for a decision by SAPS SIU presentation to PC on Justice and Constitutional Development

26. Operations Tshwane Metro • Identified 65 officials who have interests in companies doing business with the Metro and receiving payments as active vendors • Total payments made to these businesses between 2007 and 2010 is R185m • Total value of procurement under investigation in excess of R80m • Irregularities include: • Deviation approvals of over R400m • Collusion between officials and service providers • Deviations from tender specifications without authorisation • Payments to service providers for work not complete or services not rendered SIU presentation to PC on Justice and Constitutional Development

27. Operations Ekurhuleni Metro • Waste management • Reviewing 10 tenders involving 19 contractors • total value of contracts in excess of R500m • In 1 contract, payments of R37.8m made to service provider without delivery notes • No-one at Metro can confirm whether goods were delivered • ICT contracts • Contract to value of R32 million awarded to company • with which Exec Director IT had an undisclosed relationship • He has since resigned and is now employed full-time by the company • Director: Infrastructure admitted to signing off on invoices to value of R 12.4m for services that were not delivered SIU presentation to PC on Justice and Constitutional Development

28. Operations Rural Development and Land Reform • Proclamation, requested by the Minister, covers the following areas in the land reform programme : • Application for and award of grants and funds and the administration thereof in a manner that was contrary to legislation and guidelines, or fraudulent • Irregular expenditure; fruitless and wasteful expenditure; and/or expenditure not due, owing and/or payable to beneficiaries, consultants, and/or service providers • SIU’s biggest ever data uplifting project, involving over 50 million printed documents being identified, catalogued, scanned and analysed • Have already worked with Hawks and AFU to: • 3 officials and a KZN businessman, on fraud and corruption charges relating to the irregular awarding and administration of land reform grants totalling R50m • AFU has frozen several KZN farms and assets worth about R50m to date • Farms to the value of R36m already forfeited back to the state (this FY) SIU presentation to PC on Justice and Constitutional Development

29. Operations Department of Human Settlements • One of SIU’s longest running projects in cooperation with the National Department. • New focus is on construction contracts • A review of the Housing Subsidy System indicated at least 50% of all projects are problematic in some way. Contractors paid for building houses which may • Not exist at all • Be extensively incomplete • Be seriously defective • Not correspond to the numbers agreed to (paid for building more houses than was the case) • Currently focus on 20 projects for 2010/11 drawn from all provinces, identified in cooperation with Department • 7 additional projects identified for 2011/2012 • Total value of contracts under investigation is over R2 billion SIU presentation to PC on Justice and Constitutional Development

30. Operations Department of Social Development / SASSA • One of SIU’s most consistently productive investigation • Headline statistics from June 2005 – February 2011 • Beneficiary files collected 85 315 • Cases brought before court 17 729 • Court cases finalised 16 623 • Convictions obtained 15 281 • Total AoDs signed 40 146 • Total value of AoDs signed R244 million • Savings on cancelled grants R898 million • Will no longer continue in this form, as result of a request by and lack of funds from the Department and SASSA. SIU presentation to PC on Justice and Constitutional Development

31. Challenges in dealing better with corruption • PFMA and powers of Accounting Officers • control over investigation, disciplinary action, civil litigation, referral for criminal action, recommendations not implemented • Another is the need for better coordination of the many new initiatives • Response to the Glenister judgement • Ensure SA compliance with the UN Convention Against Corruption including the establishment of dedicated agency with sufficient safeguards around independence • Need to locate appropriate over-all accountability for a consolidated assault against corruption including prevention and enforcement efforts • Amendments to SIU Act – in Judicial Matters Amendment Act • Unable to use civil litigation effectively as envisaged in Act - deal with locus standi and other issues • Delays have restricted impact of SIU SIU presentation to PC on Justice and Constitutional Development

32. Budget growth and projects income • Huge overall growth in income from R21m in 2001/02 to R312m this year • Massive increase in funding from projects to 60% of total income, then decline • This year forecast to be about R240m (from R142 in 10/11) • SIU vulnerable when there is decline as during recession as many staff employed SIU presentation to PC on Justice and Constitutional Development

33. Funding Issues Background • In past 7 years, SIU budget supplemented with project income through cooperation agreements with other state institutions • For 2011/12, budgeted project income was R150 million • Such income has enabled the SIU to take on many more investigations Possible legal problem • Legal opinion received that SIU is not allowed to enter into such agreements • since SIU Act is silent on this issue • Legal advice is that for this FY, SIU can continue to receive payments for work • provided that a proclamation exists and an agreement is already in place • It can also renew such agreements that expire in current financial year • However, this is on condition of there being a process to regularise the situation • through an amendment to the SIU ACT to allow for such funding SIU presentation to PC on Justice and Constitutional Development

34. Funding Issues Impact • At present, SIU cannot to enter new cooperation agreements which involve funding • Was expecting to invoice an additional R90m this year Possible solutions to situation • Amendment to the SIU Act - a discussion has already taken place with the DOJ DG and amendments have been drafted for inclusion in Judicial Matters Amendment Bill • NT with support from DOJ has agreed to additional funding of R97m for this FY • to compensate for loss of revenue and to take on additional work • Additional funding for future years; SIU to request permanent increase in current budget to reduce reliance on funding from co-operation agreements • SIU throughout this process has received excellent support and commitment from the Minister of Finance, NT, Minister of Justice and the DG of DOJ SIU presentation to PC on Justice and Constitutional Development

35. Financial Information SIU presentation to PC on Justice and Constitutional Development

36. Audit and MTEF Audit outcomes • Have received clean (unqualified) audits at all times since formed in 2001 • SIU is particularly proud of the fact that its last 6 audits have been unqualified and without any emphases of matters Funding for the SIU • Grant received as transfer from the Department of Justice and Constitutional Development • Also revenue generated from charging institutions fees for some of its investigations MTEF requests • Have requested an additional R150m in funding over the next 3 years • To reduce reliance on projects funding • And to increase capacity to take on unfunded investigations • Some of the areas where SIU is most needed, at municipal level and some provinces • it is in fact doing very little work • This will create an additional 200 positions over the MTEF period • Initial indication from NT that they will support request but still to be processed SIU presentation to PC on Justice and Constitutional Development

37. Analysis Growth Trends • Total Revenue: up 10.6 % pa from R237m to R314m (07/08 to 10/11): • projected to increase by 5.6% pa to R384m by 14/15 before baseline increases • After proposed baseline increases, revenue should grow at 18.7% pa to R549m by 14/15 • Total Expenditure (excl Capex): • increased 23.2 % pa, from R199m to R337m (07/08 to 10/11) • projected to increase by 3.5% pa to R384m by 14/15 before baseline increases • After proposed baseline increases, expenditure should grow at 15.8% pa to R549m by 14/15 Savings • In past 2 years, aggressive savings: reducing accommodation & car rentals costs, limit telephone use and recovering all private call costs SIU presentation to PC on Justice and Constitutional Development

38. Conclusion • SIU has made considerably more impact in past 2 years • There is a massive increase in demand for assistance to address corruption from government and state institutions • Capacity to deal effectively with investigations remain a challenge • Partnerships with other government institutions through initiatives like ACTT, MAWG & Wasps have started to improve coordination SIU presentation to PC on Justice and Constitutional Development

39. Questions & Discussion SIU presentation to PC on Justice and Constitutional Development