Anti-corruption update Report on progress made by National Audit Task Team August 2010

1. Terms of reference 2. Areas under investigation 3. Ongoing SIU investigations 1. Subsidy fraud in provinces 2. Subsidy fraud in municipalities 4. National Audit Task Team investigations 1. Probes into housing syndicates 2. Probes into dodgy contractors Overview

 April 2007: SIU appointed to investigate fraud and maladministration in respect of low-income housing schemes (President Mbeki issues Proclamation R7 of 2007)  November 2009: National Audit Task Team appointed by Minister, headed by SIU, with mandate broadened to include fraud, corruption, maladministration and shoddy construction across housing delivery process  July 2010: President Zuma renews initial 2007 SIU Proclamation on human settlements (now R35 of 2010), enabling National Audit Task Team to continue its work post April 2007 Background

 National Audit Task Team identifying and uncovering blockages and impediments to delivery  These include:  Shoddy construction  Continuous contracting of same bad contractors.  Inordinate delays  People in housing queues for years  People selling government houses  Illegal occupation of government houses  Nepotism  Abuse of the waiting list system Audit Task Team terms of reference

 Two dimensions to Task Team’s work:  Punitive process ▪ Arrest ▪ Charge ▪ Convict ▪ Jail ▪ Recover government money  Corrective process ▪ Improve systems ▪ Develop new controls and measures. Terms of reference

Ongoing SIU investigations 1. Subsidy fraud in provinces 2. Subsidy fraud in municipalities

 AG ordered investigation into government officials suspected of subsidy fraud. Of these:  930 government officials arrested  761 government officials found guilty and convcted  R21.7m recovered through acknowledgement of debt  SIU found an additional government officials suspected of subsidy fraud. Of these:  634 government officials arrested  385 government officials found guilty and convicted  R15.4m recovered through acknowledgement of debt Subsidy fraud in provinces

 AG ordered investigation into municipal officials suspected of subsidy fraud. Of these:  346 municipal officials arrested  151 officials found guilty  76 cases still pending  R7m recovered through acknowledgement of debt Subsidy fraud in municipalities

 Since its investigations began in 2007, SIU has:  Recovered R44m from provincial and municipal officials, which goes back into the human settlements grants for service delivery.  R11m has already been paid back into state coffers  Arrested government officials who were unlawful beneficiaries of housing subsidies  Successfully prosecuted of these  Prepared disciplinary files against another officials Summary of subsidy fraud probe

National Audit Task Team investigations 1. Probe into housing syndicates 2. Probe into dodgy contractors 3. Complaints about NHBRC

 Increasing concern at activities of housing syndicates  Several investigations now underway into syndicates selling and renting state-owned houses  These are primarily operating in Gauteng, North- West and KwaZulu Natal  Three arrests have already been made in KZN and suspects are currently in court. More arrests are expected in other provinces in the next 6 weeks 1. Probe into housing syndicates

 housing projects have been assessed  SIU visited all nine provinces to get understanding of processes and provide high-level overview of all projects  Top ten ‘dodgy’ contracts in each province were identified  Further investigation narrowed these down to 20, with a total value of R2bn  Investigators hard at work investigating blockages in the contract value chain 2. Probe into dodgy contractors

 A conveyancing attorney in KZN has been charged with 142 counts of fraud and theft  2 criminal cases have been registered with SAPS for fraud in respect of a contractor and engineer who defrauded the department of more than R10m  The process of restriction in respect of more than 40 contractors is in an advanced stage  Defaulting contractors will be placed on Restriction Database once process is complete Progress to date

 Identify blockage points in contract value chain to:  Ensure specific performance by contractors  Set aside contracts and recover payments to date  Address improper conduct emanating from such non-delivery  Potential legal outcomes may include:  Claiming damages from parties in default  Facilitate criminal action including colluding parties  Recommending disciplinary action against implicated government officials  Ensure removal of contractors from department’s database Potential outcomes of Task Team

 Complaints have been raised about the National Home Builders’ Registration Council  Complaints have come from the public, from Parliament and from political parties  These complaints have been forwarded to the SIU for investigation, and a report is expected 3. Complaints about NHBRC

Conclusion

 The crackdown continues  We are putting increased resources into investigating all those who abuse the system – government officials, public representatives or contractors  DHS in process of closing systemic gaps identified by SIU to prevent future abuse of low-income housing subsidy scheme  Excellent progress has been made in cracking down on corrupt officials who have abused housing subsidies The crackdown continues

 The focus now is threefold:  Housing syndicates  Dodgy contractors  Fraudulent subsidies  In doing so, the mandate of the National Audit Task Team, and the SIU in particular, is clear: investigate, arrest and charge those who are guilty of wrongdoing -- without fear or favour No fear or favour