Home affairs minister Aaron Motsoaledi has welcomed a constitutional court judgment dismissing an application challenging the cancellation of a R1.5-billion electronic document management system contract.
The minister has now instructed the department of home affairs to pursue legal costs against technology companies New Dawn and Valor IT, which date back to 2010 when the initial claim was filed. He said he also plans to write to national treasury to request that the two companies be blacklisted from doing business with the state.
“This is not vindictiveness but is a warning to individuals and companies who believe that they can receive millions in public funds via spurious litigation,” said Motsoaledi.
The department of home affairs said the matter started when it wanted to digitise its records.
“In terms of the law, the State IT Agency (Sita) had to issue a tender looking for a service provider on behalf of the department,” it said. The tender had initially been awarded to three companies: New Dawn, Valor IT and Ideco.
“But before any contract could be signed or service-level agreement could be finalised, national treasury warned that there was no money for such a huge tender. As a consequence, home affairs could not go ahead with this contract,” said the department.
It said that Ideco understood the position of government and “let matters rest there”. However, said home affairs, “New Dawn and Valor IT somehow decided they were entitled to state money in this regard and litigated against the department for R602-million and R28-million respectively”.
The constitutional court last week dismissed the application after it found that the application “lacks reasonable prospects of success. Consequently, it has decided that the leave to appeal must be refused with costs.”
“Because of litigation by these two companies, the department’s audited contingent liability shot up to R2.1-billion in the 2019/2020 financial year,” home affairs said. This, it said, was automatically flagged by the auditor-general as a risk.
The department said if it had not successfully defended the litigation and the money had become payable, the budget of the department would have been severely impacted. However, the department said in this case it “vigorously defended the matter and contended that there was no contract signed”.
The minister said: “It baffles the mind that the two companies could pursue the state for this huge amount of money, going right up to the constitutional court, despite knowing that they had never provided any service to the department.
“We are aware that it is the constitutional right of individuals and companies to utilise the various courts of the country in pursuit of justice. However, we believe it is sheer opportunism, bordering on theft and corruption, for anybody to demand state money when they didn’t provide any services. We strongly discourage this kind of behaviour.”