Award of lucrative tender for collecting outstanding student debt being probed by authorities
- A South African debt collecting company has struck a deal with a Lesotho competitor over a government tender to collect debt.
- The South African company, Cabana Zenowethu, hopes to corner the market for the collection of debt from Lesotho students who default on loan repayments.
- Its rival, Lesotho-based Super Solutions, has been promised R13-million to withdraw from the battle which has been raging in court.
- Lesotho's anti-corruption authorities suspect corruption and are investigating.
- The tender contract is stalled during the investigation.
A South African debt collector has reached a dubious deal with a Lesotho competitor for a lucrative government tender to collect debt from students who default on loans. The Lesotho company was promised R13-million to withdraw a court application challenging the award of the tender to its rival.
Lesotho's anti-corruption authorities are investigating this arrangement and suspect bribery and corruption. Lesotho's Minister of Finance has been instructed not to approve the contract until the investigation is finalised.
The amount the contract is worth was not disclosed in the tender documents. But according to a source close to the tender processes, it is worth about R1-million a month (20% commission on debt collected, estimated at about R5-million a month).
The two companies, Cabana Zenowethu and Super Solutions, were selected from 16 applicants as preferred bidders by the Ministry of Development Planning in September 2021. Cabana Zenowethu was formed when Lesotho-based Cabana Solutions banded together with Zenowethu Debt Management, a South African-based company that specialises in financial and debt consolidation advice. Zenowethu's director, Aaron Nzotho, was appointed chief executive of the new joint venture.
Super Solutions's participation in the tender was controversial from the start, because its managing director, Lebelo Raliapeng, was also an official in the Ministry of Development Planning during the bidding process. MNN Centre for Investigative Journalism first exposed his involvement in the debt collection tender bid in April 2022. At the time, Raliapeng told MNN that he was no longer part of Super Solutions, having relinquished his shares earlier that year. (He also told MNN never to talk to him again.)
But the Procurement Policy Advisory Division (PPAD) in the Ministry of Finance has confirmed that these changes were only made on paper while Raliapeng continued to act on behalf of Super Solutions.
The two companies were invited to submit full proposals for the National Manpower Development Secretariat's debt collection tender. But one month later, the Ministry issued a new call for tenders, saying that it would reopen the bidding due to a lack of competitiveness. Super Solutions objected and took the Ministry to court. The court ruled in Super Solutions' favour, saying that the Ministry could not re-issue the tender and that the invitation to tender had to be issued to the two preferred bidders, Super Solutions and Cabana Zenowethu.
This was done in early 2022, and in May, the tender was awarded to Cabana Zenowethu. Super Solutions complained to PPAD, questioning the integrity of the evaluation process. The PPAD decided that Raliapeng was "conflicted between the ministry of development planning mandate with the core business of Super Solutions.".
Super Solutions turned to the procurement tribunal for help. Tribunal chair Polello Sephora Makhera ruled in favour of Super Solutions deciding that the PPAD had "misdirected itself" and that its recommendation was therefore null and void. The matter was returned to the PPAD, with instructions to deal with the Super Solutions complaint in its entirety.
In December 2022 the PPAD ruled that the process of awarding the tender to Cabana Zenowethu had been flawed and that the award would create a monopoly. The PPAD also ruled that Super Solutions should not be allowed to participate in a new tender because of its unfair advantage, and instructed the Ministry to "go for a public retendering process with clear and unambiguous evaluation criteria".
Now it was Cabana Zenowethu's turn to appeal against the PPAD decision. Cabana Zenowethu turned to the Public Procurement Tribunal, which ruled in Cabana Zenowethu's favour, instructing the ministry to proceed with the contract. And in January 2023, Ministry of Development Planning Procurement Manager Motena Mofosi wrote to Cabana Zenowethu, inviting the company to sign the contract.
Before the contract could be signed, however, Super Solutions filed an urgent application, seeking an order reviewing and setting aside the decision directing the Ministry to conclude the tender contract with Cabana Zenowethu.
On 24 January, 2023, procurement manager Mofosi called Cabana Zenowethu, informing the company that it would not be possible to sign the tender contract on 25 January 2023.
On 8 February 2023, Cabana Zenowethu's advocate Sello Tšabeha wrote to the Ministry, demanding answers and pointing out that there was no court order suspending the contract. The Ministry's advocate Mafefooane Moshoeshoe replied that the Ministry could not go ahead with the contract "until the court of law has pronounced itself in the matter challenging the tender award."
Hatching a tender plan
It is at this point in the dramatic and protracted standoff between these two companies that Raliapeng for Super Solutions and Aaron Nzotho for Cabana Zenowethu got together in Gauteng, with Nzotho covering Raliapeng's costs to attend the meeting, including flights, according to a source in the company.
Asked about this meeting, Nzotho did not deny hosting the Super Solutions director or picking up his travel costs. But he said the company would not discuss "internal company matters" while the case was in court.
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Following the Gauteng meeting, Super Solutions director Retšelisitsoe Mpinane and Cabana Zenowethu's chief executive officer signed a deed of settlement. Super Solutions withdrew its application to set aside the award of the tender to Cabana Zenowethu; the settlement was filed before the Lesotho High Court and made a court order.
In terms of the settlement, Cabana Zenowethu agreed to pay Super Solutions R13-million, part of it in tranches, and part of it as a monthly retainer.
But the whole issue is now in the hands of the Directorate on Corruption and Economic Offences, which is probing possible corruption. On 22 March 2023, director-general Knorx Molelle notified the Minister of Finance that the directorate was investigating the circumstances under which the debt collection tender was awarded "with specific allegations of fraud, corruption, and bribery.".
Molelle "strongly recommended" that the Minister not proceed with the signing of the contract and execution until the investigation has been completed.
This story was produced by MNN Centre for Investigative Journalism and syndicated by the IJ Hub on behalf of its member centre network in Southern Africa. It is co-published with GroundUp.
