DTI already investigating SITA

The Department of Trade and Industry is investigating the State IT Agency (SITA) for alleged tender irregularities, and a report is expected in November.

SITA CEO Mavuso Msimang says he intends seeing the investigation through to its logical conclusion, preventing such discrepancies from happening again and moving ahead with the new SITA.

SITA's 2006 annual report cites irregular expenditure of over R130 million relating to five contracts, which include Gateway, CabEnet, its turnaround strategy and the firm's establishment of an ombudsman's office, all of which have been reported by the company for the past three years.

Msimang says these amounts were flagged as expenditure incurred without following proper procedures. SITA will investigate these amounts and attempt to recover any illegitimate expenditure if the costs are not ratified.

Auditor-general Shauket Fakie's statement in the company's annual report records the fact that management is taking steps to recover or clear these amounts.

The organisation, Msimang says, will have to "tighten up on its project management". The inherent danger in overspending is not the financial implication so much as the market's perception of SITA as corrupt, he adds.

The board could still ratify irregular expenditure of R50 million in the Gateway project. However, the company has taken steps to retrieve wasteful expenditure of R21.6 million.

Msimang says after his appointment as CEO in October 2003, he noticed the discrepancies and ordered an independent internal forensic audit at the beginning of 2004. Parties involved in the transaction, but outside of SITA, were sent letters requesting answers regarding the fruitless expenditure.

However, he says he did not have "much joy", and - as a result - consulted with senior counsel, which said the wastage should be recoverable. However, the legal opinion recommended a civil case be undertaken through the auspices of the DTI.

Minister of public service and administration Geraldine Fraser-Moleketi, as a representative of shareholders, approached the DTI, requesting it to investigate the matter. The department started its investigation in June, notes Msimang.

The DTI's investigation, in terms of overspending on the Gateway project, has wide terms of reference, which allows it to subpoena anyone in the scope of its examination.

This external investigation is expected to take some time, with Msimang speculating it may be a year or two before it is wrapped up. Meanwhile, he says, the internal investigation is ongoing.

One area that saw contractual abuse was when SITA established the office of the ombudsman in 2002. Initially set up to deal with the perception that the organisation was corrupt, it was meant to provide an anonymous outlet for whistleblowers.

However, Tedaka Business Consulting - the recipient of the contract - received payments months after the office was set up for the second phase of the ombudsman contract.

Msimang queried these payments and the matter is now in the Pretoria High Court where SITA is requesting R5 million back after alleged overpayments. The annual report records R6 million as irregular expenditure.

CabEnet - a secure communications system - did not see any irregular spending, he says. Msimang's statement contradicts a Sunday newspaper report that claims the company overspent by R43 million on this project. The annual report states this amount was unauthorised expenditure that may be ratified.

It is "not true", he says, explaining that SITA's original budget of R19 million was later scaled up to R67 million retrospectively, as a result of the scope of the work. Some R1.4 million spent on new PCs was absorbed by SITA and these machines were later reallocated.

Addressing the turnaround project, which saw overspending occurring during his tenure, he says three senior staff members received final written warnings after a disciplinary hearing, and one of these subsequently tendered his resignation.

The hearings were held because the organisation felt each of the three should have seen the overspending and taken action. The annual report records irregular expenditure of R15.4 million.

Msimang says he is unfamiliar with tenders or contracts awarded before his tenure, which could explain why none of these tenders could be found as awarded on SITA's Web site.

Msimang says SITA is repositioning as it moves forward. The company, which recently split into two focus areas, sees its future in strategic services. Projects already running under this banner include an integrated financial management system and a pilot project to aid municipal service delivery.

However, Msimang says the project that is most likely to define the future SITA is its work in public-private partnerships. He notes that companies participating in these ventures will not only be expected to procure items but also invest in long-term assets.

This will enable SITA to invest in the kind of technology that enables it to carry out its function, he adds. While the private sector will invest in future technology, government will retain the intellectual property.

SITA believes this future strategy will aid it in raising money, and attracting the kind of human capital to boost the country's technological skills.

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