Titled, “Unsettled Settlement,” the report stems from a a dispute between the Gauteng Department of Health and CKB Washroom Sales and Services CC (CKB), a small business that supplied hygiene equipment to several health clinics around the province.

When the Department cancelled some of the service agreements, CKB instituted court action, which culminated in an out-of-court settlement. The settlement extended the agreements to the end of July 2010 and the Department extended them to 30 September 2010.

CKB turned to the Public Protector in July 2011, complaining that the Department had failed to pay an amount of R2 960 112.60 which was allegedly owed for services that CKB continued to provide to the department’s clinics beyond 30 September 2010.

The company further alleged that the department wrote to Standard Bank in March 2011, confirming that it owed R1 448 790.06 to CKB in the context of a bridging finance application made by CKB and granted by the bank and that the Department subsequently repudiated CKB’s claim.

According to the report, the Department failed to ensure financial risk management and to prevent unauthorised and irregular expenditure in violation of section 38 of the Public Finance Management Act (PFMA) and to ensure efficient, economic and effective use of public resources in violation of section 195 of the Constitution.

The public protector also found that the Department failed to the manage the exit of CKB’s services from its clinics and to ensure a seamless transition to properly procured hygiene equipment and related services in its clinics thus prejudicing the Complainant from competing in an open tender process that should have taken place by 30 September 2010.

As part of the remedial action, the Public Protector directed the following:

The Head of Department must:

• In consultation with the Complainant, subject CKB’s invoices submitted in March 2012 (totalling to R 2 960 112.60) to an audit process and determine a reasonably payable amount for rental chargeable for the period starting on 1 October 2010 until the equipment was removed, taking into consideration the overpayment already made to the Complainant in the amount of R 295 180.20, and pay the Complainant accordingly within sixty (60) days after the issuing of this report.
• Take urgent action to ensure that finality is attained regarding the procurement of hygiene equipment and related services for affected clinics, giving serious consideration to purchasing things that should ideally not be rented and where rental is opted for, to rent from a manufacturer rather than a middle company.
• Expeditiously finalise disciplinary proceedings currently underway against Ms Mekgwe in terms of section 38(1)(h) of the PFMA, 1999.
• Ensure that all of its management and general staff, including those in health centres, are trained on the correct Supply Chain and Procurement Processes and Procedures in order to avoid the recurrence of a similar matter in the future.

The MEC must:

• Request the Auditor General to audit all payments made in respect of hygiene equipment and related services in hospitals and clinics;
• Decide whether or not disciplinary action should be taken against all the officials who are responsible for exposing the Department to unauthorised expenditure and other financial risks in violation of the PFMA; and
• Look into a possible systemic deficiency within the Department of Health regarding the payment of monies owed to service providers, particularly small business enterprises as non-payment contributes to their demise and loss of jobs.

Download the report: Unsettled Settlement