Cape Town ­ MPs were shocked yesterday by a report on how top correctional services officials colluded with a major company in tender rigging and accepted millions in “inducements” that saw billions in contracts going to a single group of companies.

They also described Special Investigating Unit (SIU) chief Willie Hofmeyr’s report to a parliamentary committee as the most horrific they had heard.

Although Hofmeyr named no one, his report implies former correctional services minister Ngconde Balfour could be in deep trouble.

The unit reported that the department’s accounting officer and chief financial officer at the time let the company write tender specifications on at least four multimillion-rand contracts so only it would qualify for them.

The Department of Correctional Services’ annual reports show the accounting officer was then national commissioner Linda Mti, and the chief financial officer was Patrick Gillingham.

The Bosasa group, with Gavin Watson as CEO, has won contracts to supply state-of-the-art access control systems and prisoner-feeding schemes. Watson is a member of the politically connected Eastern Cape family.

Balfour’s role was not mentioned in Hofmeyr’s report. *1

When Mti’s successor, Vernie Petersen, began cracking down on corruption in the department, he suspended Gillingham pending the outcome of the SIU probe.

Balfour had Petersen transferred to the Department of Sport as director-general. His support for Bosasa was never explained.

Balfour and Petersen clashed over Gillingham heading the committee that would adjudicate the new prisoner-feeding scheme contract.

Hofmeyr, who declined to name the officials or the company as there had been heavy litigation and there was the risk of harming potential criminal and civil cases, warned that the government could be exposed to civil claims by companies that lost out in the tender process.

He said that there was clear evidence of tender rigging, with the supplier drafting tender specifications. No needs analysis, feasibility or financial planning was done when the tenders were compiled.

Soon before the 2005-06 financial year, a contract was signed a week after it was awarded. The first payment of R103m was made within three days, and it was classified as fiscal dumping.

Hofmeyr said that the investigation could not establish a “legal source” for about R2,1m of benefits enjoyed by the chief financial officer. This included cars for himself, his son and daughter, development of a house, Blue Bulls rugby season tickets and at least two payments of R48000 into his credit card.

The investigation was satisfied the payments came from the company. He said the reports were completed in August, and sent to the National Prosecuting Authority for a decision.

The prisoner-feeding contract, worth R250m a year for three years, was extended irregularly for a year, and the access-control system cost R254m. The Bosasa group had more than R1bn in contracts with correctional services.

Hofmeyr also said that because of the clear evidence of tender rigging there was scope for the recovery of some damages from the company.

African National Congress (ANC) committee chairman Vincent Smith said the findings were “horrific”. Another ANC MP said “they should be punished”.

Democratic Alliance MP James Selfe said “they are the most shocking I have heard in 15 years in Parliament”. Selfe later questioned how Bosasa, while under investigation, was awarded the prison feeding scheme contract for another three years.

With acknowledgements to Wyndham Hartley and Business Day.