May 22, 2023

Tembisa Hospital tender prices were upped by 2 000%

Investigations into the rampant corruption at Tembisa Hospital through fake and forged documentation have uncovered further intricate networks through which companies inked to extraction syndicates won lucrative contracts and grossly inflated their prices.

Nearly 900 pages of bid documents, quotations and purchase orders reveal how the hospital's procurement system was captured and pillaged, with Gauteng Department of Health boss Lerato Madyo and Tembisa Hospital CEO Ashley Mthunzi signing off on contracts with wildly inflated prices, and overlooking blatant discrepancies, including forged documents.

In one instance, found News24, the price of surgical drapes was inflated by almost 2 000%, and the cost of a 12.5 litre heavy duty bucket, normal price R189.75, ballooned to an eye-watering R9 800.

Last month, the two were charged with misconduct during internal disciplinary action arising from 13 transactions they approved, among more than 1 000 dubious payments flagged by provincial financial manager Babita Deokaran before her murder. They face dismissal if found guilty.

The contracts were awarded to companies which form part of complex syndicates, first exposed by News24, that extracted more than R1bn from the hospital, according to a preliminary report filed by the Special Investigating Unit (SIU) in December last year.

A comparison of prices paid by Tembisa Hospital against a universal private sector benchmark found it was paying a premium for everything, from surgical implements to frozen chicken.

For 13 tenders, Tembisa Hospital paid R5.6m. Had it used competitive pricing from the private sector, it would have paid less than half of that. More jarring is that these benchmark prices are higher than those available to the hospital through transversal government contracts.

In May 2021, Mthunzi green-lighted the purchase of 100 surgical drapes for R475 000 from a company called Olimocraft, and in June the payment was approved by Madyo. This equates to R4 750 per drape that, if bought by a private hospital, would cost less than R240 each.

On the same day, Olimocraft also landed a contract for the supply of gauze eye sponges used in ophthalmic surgeries with a price tag of R9 100 per unit – a more than 200% mark-up in price, with the same product available for about R3 000.

And for sutures, a company called Preliboo landed a R485 200 purchase order, one of 27 individual deals worth R14m tracked by News24.

For the sutures, Preliboo gouged prices by 300%: Preliboo is a shell company, its registered address a vacant shop in Nigel, east of Johannesburg, where the landlord has no knowledge of the company or its owners.

The bigger picture

Olimocraft is controlled by Rudolph Mazibuko, the patriarch of a medical supply dynasty that landed contracts worth R250m in two years.

Mazibuko, his brother, son and now deceased wife, directed 17 companies which were in business with the facility.

In respect of the splurge on surgical drapes, eye sponges and sutures – as with all the deals – Mthunzi is charged with failing in his fiduciary duty by not rejecting the bid. The bid should have been disqualified, not only for the massive price inflation, but also because bidding documents were incomplete.

Madyo is accused of an oversight failure, and for failing to prevent fruitless and wasteful expenditure.

Mthunzi, as CEO and final signatory on the purchases, was not the only person to miss obvious discrepancies in the paperwork for each of the 13 purchases for which he has been charged.

All purchase order documents signed would have first passed the quotation adjudication committee – supposed to be a check and balance against fraud and irregular expenditure – comprising as many as five hospital staff.

They too either missed or ignored serious anomalies in the paperwork that should have seen bidders disqualified.

In their preliminary report, the SIU held that 11 hospital officials should be departmentally charged in connection with these 13 contracts.

One retired and four resigned before they could be charged. As of January, six officials were still in their posts, some in the procurement section.

The companies that scored the contracts for which Madyo and Mthunzi have been charged provide a glimpse of key actors and extraction syndicates that operated through Tembisa Hospital's supply chain management office.

Chief culprits among the front companies scoring contracts for which Madyo and Mthunzi have been charged include kingpin Stefan Govindraju, with an empire of more than 50 businesses which, despite using fake addresses and existing only on paper, scored R440m from the hospital.

At the time Preliboo won the contract to supply over-priced sutures, Govindraju's relative, Meshan Govender, was its sole director.

Of the 13 contracts, four were awarded to businesses Govindraju now controls. There were 17 discrepancies in the bid documents that should have seen them disqualified.

Mthunzi and Madyo also approved a payment for Magnolia Trading Enterprise, whose lone director is Tembisa tender don Hangwani Morgan Maumela, nephew to President Cyril Ramaphosa from a previous marriage.

Maumela and his cousin, Aluwani, through 12 entities they control, have been paid R380m by the Gauteng Department of Health as suppliers of various state hospitals. More than 93% of their treasure came from Tembisa.

The first sitting of the disciplinary inquiry, chaired by advocate Phillip Mokoena SC, sat in February after Mthunzi and Madyo had been on paid suspension for six months.

The SIU said that Mthunzi should be disciplined, insisting that "in this case, the CEO failed in his duties as the accounting authority of Tembisa Hospital", the report reads.

The Hawks also executed search and seizure warrants on the pair, who had their cellphones and laptops confiscated, as part of a fraud and corruption investigation.

The inquiry into Madyo and Mthunzi's continued employment will sit again in August.

News24 article – SILENCED | The big score: Tembisa tender kings 'inflated' prices for embattled hospital by up to 2 000% (Restricted access)

See more from MedicalBrief archives:

R250m Tembisa Hospital syndicate still scoring tenders

Hawks raid ANC bigwig's home, offices in Tembisa Hospital tender probe

Crucial Tembisa Hospital corruption evidence stolen

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Tembisa Hospital News24 Special Investigating Unit Olimocraft Preliboo Magnolia Trading Enterprise News24 article – SILENCED | The big score: Tembisa tender kings 'inflated' prices for embattled hospital by up to 2 000% (Restricted access) See more from MedicalBrief archives: R250m Tembisa Hospital syndicate still scoring tenders Hawks raid ANC bigwig's home, offices in Tembisa Hospital tender probe Crucial Tembisa Hospital corruption evidence stolen Stay informed!