DCEC PROBES P6BN ORPHAN FUND LOOTING SCANDAL

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  • A questionable P40M transaction
  • Similar company Net1 Technologies involved in South Africa multi billion social grants scandal

TEFO PHEAGE

In January, the Directorate on Corruption and Economic Crime (DCEC) stormed the Department of Social Protection seeking to sniff out answers on questionable transactions into the disputed P6 billion contract for social grants to orphans, destitute and home based care beneficiaries, The Botswana Gazette reveals.
Skeletons are beginning to tumble out in the orphans, destitute and community home based care beneficiaries P6 billion fund following a probe into the connections between the department of social protection services and Smartswitch Botswana-a company that has survived solely on its management of the tender since its formation in 2006.
Recently a furore erupted over the suspicious cancellation of a tender to service 75 thousand orphans, destitute and community home based care beneficiaries after the tender was won by ‘an undesired’ local company.
The matter is currently before the court with the winning tender bidder Prinson Group, among others, claiming that “the cancellation of the tender was meant to extend the contract for SmartSwitch Botswana which has been monopolising the tender since 2008.” There are also calls by some stakeholders that the contract extension is resultantly illegal or invalid.
The Botswana Gazette’s investigations reveal that SmartSwitch is a subsidiary of Net1 UEPS Technologies-the South African company which became notorious for the R10 billion social welfare grant tender corruption scandal. Smartswitch Operations Manager- Vivian Dakpo confirmed to this publication that “Net 1 UEPS Technologies has 70% shareholding in SmartSwitch Botswana.”
This is not the first time a Net1 subsidiary and a social protection department are facing accusations of suspicious and illegal contract extensions. In 2016, Net1 which had the contract to distribute the South African social grants payments electronically for four years was found by the Constitutional Court to have been operating under an invalid contract. The South African Concourt ruled that Net1’s contract was invalid in December 2014 and that the SA’s Social Security Agency (SASSA) was expected to start a new tender process. Due to subsequent legal challenges, the ConCourt ordered that the contract be extended until the end of 31 March 2018 to avert a social grants catastrophe.
The ConCourt said its decision was prompted by Minister Bathabile Dlamini and SASSA’s failure to find a suitable distributor to take over payments when the contract reached its expiration date. With the extension, the court gave the Social Development Department and SASSA time to sever ties with Net 1 and find an alternative grant payment system. The Constitutional Court’s Justice Johan Froneman criticised Sassa for its “irregular” conduct regarding the Net1 deal.
Allegations of corruption swirled around the deal as investigations in the US were also launched against Net1, which is listed on the Johannesburg Stock Exchange (JSE) and New York’s Nasdaq. Net1 was investigated by the US Department of Justice (DOJ) Criminal Division and the SEC, regarding possible acts of corruption in South Africa.
The Botswana Chapter…
In Botswana, it is still not clear how the matter will unravel. In several letters to concerned government agencies, the Department of Social Services warned that the court case could deepen the crisis. In a letter to the Competition Authority and PPADB, the Ministry warned that “Orphans, destitute and community home based care beneficiaries would be adversely affected if it is to be dragged to the courts.”
A source at the Ministry says they feared for the repercussions of an extension to the contract, the adverse impact of a controversy on a fund for the less privileged and the possible far-reaching effect of court orders. Sources with the administration of the fund warn of a grand plan devised by senior government officials and some ministers to derive personal and political benefit from the lucrative fund. Botswana introduced the payment system after government changed its approach of giving food rations at central places of distribution that were deemed to deny the beneficiaries of their much-needed dignity, but little did public officials know that more serious problems were in the offing.
DCEC, DIS probe officials, connections
The Gazette can reveal that the Directorate on Corruption and Economic Crime (DCEC) recently stormed the Department of Social Protection for answers. Confronted with the Gazette’s revelations, the Department and Ministry said they could not comment on the matter as it was now before the courts. This refusal to comment came after an initial undertaking to avail a response to the questions raised to this publication.
The Department was asked to confirm (or deny) that they were recently questioned by the DCEC and to give an account of over P40 Million that was recently diverted from Smartswitch back to the department.
The unaccounted for P40 Million was allegedly paid into the Department account at the height of the tender scandal. Efforts to ascertain the origins and motives behind the payment of the P40 million proved futile. Commenting on the tender cancellation, as derived from the court papers, the Ministry says the tender was cancelled due to failed negotiations.
Some of the same questions were also sent to Smartswitch but of the five questions sent to Smartswitch, only 2 were responded to while the rest were ignored in an email response.They ignored a questions seeking to know the length of the contract extension and also declined to disclose the date on which their contract with the department of social services elapsed. They also declined to shed some light on the P40 Million transacted to the department of Social services.
Sources reveal that the DISS is aware of the dispute and the allegations surrounding the tender but were unable to state whether the spy agency is investigating it or not. Contacted to shed some light on the allegations raised in the court proceedings, the Director for the Directorate of Intelligence and Security Services (DISS) Director General Isaac Kgosi was of no help as he refused to answer questions asked.
The two organisations, DCEC and DISS have faced sustained accusations of being good at hunting small fish. “Where there is a corruption scandal, leaders are nearby,” a source warned in the Ministry of Local government.
In the South African saga where about 17 million citizens receive various forms of social grants costing the government more than R150 billion annually, former Net1 CEO, Serge Belamant, whose company earned R1.1-billion profit in five years disbursing social grants in South Africa, blamed the Sassa scandal on “political infighting”.
Net1, in May 2017, agreed to pay its founder Serge Belamant US$8m and about a 14% premium on his shares after he agreed to step down as CEO amid a storm of controversy concerning the South African contract.
Amid government failure to appoint a new social grants supplier following the scandal, Net1 had to supply the South African Constitutional Court with information regarding its revenue and profits of its unit cash paymaster services (CPS). But the Alternative Information and Development Centre (AIDC) has alleged that Net1 appears to have underestimated the pretax profits of CPS by between R214.2m and R614.4m.

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