A company which supplied personal protective equipment (PPE) to the Gauteng health department in 2020, has not established exceptional circumstances that rendered it just and equitable to retain the profit it stands to earn from the contract.
The Special Tribunal made this finding on Monday and ordered that Mlangeni Brothers’ Events CC be divested of the R4.6m profit it would have earned from the contract.
In April 2020, the department awarded Mlangeni Brothers a contract to supply 100,000 boxes, each comprising 100 powder-free examination gloves.
After widespread allegations of irregularities in the procurement of PPEs, president Cyril Ramaphosa authorised the Special Investigating Unit (SIU) to investigate maladministration and malfeasance in the awarding of these tenders. This contract was investigated by the SIU.
On the basis of its findings, the SIU instituted proceedings before the tribunal in March last year to review and set aside the contract.
When it quashed the contract in February, the Special Tribunal also directed Mlangeni Brothers to file an income and expenditure statement (IES) to determine the profit it acquired from the cancelled contract.
The SIU sought an order that it was just and equitable that Mlangeni Brothers was divested of profit it stood to acquire from the tender, and that it is only permitted to keep the reasonable expenses it incurred when it supplied PPE to the department.
Mlangeni Brothers, on the other hand, sought an order that the department pay it R15.5m, interest on this amount and the cost of the application. This is the amount it charged the department, inclusive of the profit it stood to earn from the contract and operating expenses.
In its IES, Mlangeni Brothers alleged it incurred operating expenses of R3.3m.
Mlangeni Brothers alleged it incurred R250,000 in legal fees in this application.
“But it does not itemise the legal costs. In any event, this expense stands to be disallowed as it was not incurred when performing in terms of the impugned contract,” the Special Tribunal president, judge Lebogang Modiba, said.
The IES also reflected a director’s salary of R500,000 and staff salaries of R390,000, which the tribunal disallowed in whole.
“At best, the alleged salary costs are indirect business costs Mlangeni Brothers would incur in the course of running its business. It is not its case that it retained a director and staff specifically for the impugned contract.”
The tribunal said only R4,100 stood to be allowed in respect of cost of sales. This is in respect of transportation and delivery costs of PPE items supplied by one of the three companies from which Mlangeni Brothers procured the items.
“All the operating expenses stand to be disallowed as Mlangeni Brothers failed to establish they constitute reasonable expenses when supplying PPE items to the department.
“I therefore find that Mlangeni Brothers incurred reasonable expenses in the amount of R10,859,455 to supply PPE items to the department.”
This is the amount the tribunal ordered the department to pay Mlangeni Brothers.
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