On Thursday, the Gauteng government cancelled the R692m contract after it emerged that Ilima submitted a fraudulent tax document when it made the bid for the construction of the 300-bed hospital.
The decision was taken three weeks after the Gauteng public transport, roads and works department head, Sibusiso Buthelezi, defended his decision to award the tender to Ilima against the advice of his acquisition committee.
City Press confronted Buthelezi, asking him why Ilima had been awarded a tender without a valid tax certificate. He insisted that Ilima had submitted a valid tax certificate and forwarded City Press a copy.
But after further investigations, City Press established that the certificate was invalid. The department had already started its own investigation by the time we brought this issue to its attention. It cancelled the contract soon afterwards.
Ilima now also stands to lose a further R600m in building contracts it recently received from the North West and Mpumalanga provincial governments.
Ilima – established by Dr Tembalikayise Lupepe – submitted an invalid tax clearance certificate when it tendered to the three provinces.
City Press has learnt that Ilima has failed to submit tax returns for the last four years and now owes the South African Revenue Service (Sars) more than R8m.
Sars has also instructed the Gauteng department to forward all monies due to Ilima in order to repay outstanding taxes.
The department served Ilima with a termination letter of the contract for Jabulani Hospital citing that its taxes were not in order.
In June, the department re-awarded the contract to Ilima despite the company and its three joint venture partners having failed to complete the project in May as expected. It will now cost the department more than double the R334m budgeted for the project in 2006.
The department has now also ordered a forensic investigation into about R4bn in tenders awarded since 2005 to check whether officials verified the validity of documents submitted with all bids valued more than R50m.
Sars spokesperson Adrian Lackay said they were not at liberty to discuss individual tax issues with third parties but they would "investigate whether any regulations and procedures were flouted when Ilima Projects was issued the certificate".
Treasury regulations require that companies bidding for government tenders should have current and valid tax clearance certificates.
Lupepe on Friday admitted that Ilima was in arrears with its taxes when the tax clearance certificate was issued but denied that it was fraudulent. He only admitted that there was a problem after City Press had ascertained that the tax certificate was fraudulent and presented him with a copy. The company's registration number on the certificate is invalid, not corresponding with that of Ilima.
Lupepe confirmed that he received a letter of termination because the department felt that Ilima's taxes were not in order.
He indicated that he would take legal action against the department for failing to give him an opportunity to present his side of the story before the tender was cancelled.
City Press can also confirm that officials in the three provinces accepted Ilima's tax certificate without verifying its validity.
Buthelezi told City Press that that he would continue placing reliance on tax clearance certificates from Sars and would not form other mechanisms to probe their validity.
"Just because one company has submitted an illegitimate tax clearance, I have no right to assume that every contractor in this province has got fraudulent intentions. I'm not going to do that. I'm going to continue placing reliance on a document from Sars. I'm not going to institute alternative mechanisms," said Buthelezi.
He said that Ilima submitted what "looked like" valid tax clearance certificates when it tendered. "At face value we do have tax certificates that appear to be valid. However, upon further investigation we discovered that those are not valid," he said.
In June, Buthelezi overruled his department acquisition committee (DAC) and reappointed Ilima to complete the hospital, which it had failed to finish. He also overruled the DAC's recommendation to send the contract for re-tender.
At the time, he said the decision "was mine, and mine alone and I take full responsibility for it".
North West and Mpumalanga departments of public works have also launched separate investigations to verify the authenticity of the tax certificates Ilima submitted with its tenders.
Ilima also stands to lose a R456m contract to build a 200-bed hospital in Brits, North West. Department spokesperson Matshube Mfoloe this week confirmed that Ilima Projects submitted "what appears to be an original copy of a tax clearance certificate".
"Public Works North West has launched an immediate investigation to verify the authenticity of documents," Mfoloe said.
Ina Georgala from Mpumalanga's public works department said Ilima "met the requirements for the bid process" to be awarded a R135m contract to build an archive building.
She said the bid process was designed with "checks and balances to detect fraud and corruption".
"However, in line with our zero tolerance policy towards fraud and corruption, your allegations have been reported to the relevant authorities in the department for further investigation. The department will take the necessary steps only after the investigation is complete," she said. - Dumisane Lubisi and Jackie Mapiloko, City Press
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