Confidential Special Investigating Unit (SIU) reports obtained by Sunday World name generals, senior officials, company directors, spouses and private firms in 41 Defence Department criminal referrals and 26 from the Water and Sanitation probe.
Based on the new details, the publication can now reconstruct how the combined R686-million flowed through stretched contracts, vague orders, duplicate invoices and coordinated quotations for technology that was under-delivered, unused or already available.
The Defence investigation, concluded in December 2023, covers R507.9m in irregular expenditure on Microsoft licences. The Water report of March 2024 led to a R178.4m settlement over SAP software contracts.
The distribution list shows copies going to President Cyril Ramaphosa and the SIU head. But almost three years later, nobody has been publicly charged.
Implicated firm, EOH, now iOCO, said this week that authorities received a watertight evidential package containing affidavits, recipients of illegal payments, amounts transferred and details of the sending and receiving bank accounts. EOH said its independent investigation confirmed wrongdoing by former employees and outsiders.
It removed implicated employees, reported the conduct and entered repayment settlements.
The company said it came clean at the Zondo commission.
“The real question you should be posing is why the criminal justice system is taking so long to prosecute the individuals responsible,” EOH said.
The National Prosecuting Authority says investigators are tracing the money before deciding whether to prosecute.
At Defence, the alleged scheme began with a Unified Communications contract awarded to EOH Mthombo in 2015. It did not provide for Microsoft licences. Major-General Happy Bhembe recommended adding R120m. Captain Avhashoni Bologo submitted the request, supported by Brigadier-General Thituwi Mulaudzi and Fikile Khumalo. The procurement board, chaired by Dr Mthobisi Zondi, approved it.
Bologo told EOH official Jehan Mackay the value had increased to R120.2m. “There was no documentation to justify the increase,” the SIU found.
The contract, signed by EOH, Microsoft and Defence official Sipho Sabuka, omitted licence quantities, types and costs. Bhembe certified delivery, releasing full payment.
Microsoft Ireland records showed between 4 500 and 4 927 licences were missing.
“Despite the shortage EOH received full payment,” the SIU states. Major-General Mokete Shashape confirmed that the licences were never implemented.
EOH received R130.1m, including payment for implementation and maintenance.
“EOH received the whole amount, which includes payment of services that were not yet rendered,” the report says.
The SIU alleges that EOH created “false/artificial teaming agreements and/or loan agreements” that produced fraudulent payments to enterprise development partners using Defence money.
Two Defence employees “and/or their wives” allegedly received gratification directly or indirectly from those partners.
At Water and Sanitation, EOH received R112.6m to install SAP systems at nine catchment management agencies when only two were operating.
The other seven were departmental units with SAP access. Officials nevertheless extended EOH’s contract through a deviation approved by former director-general Margaret-Ann Diedricks.
EOH knew only two agencies were operational but invoiced for all nine, the SIU found. Services for the others “were not and could not be provided”.
Official P Nel was referred for discipline for allegedly signing invoices declaring that all agencies existed operationally.
Water and Sanitation then paid EOH R126.35m for SAP licences it already possessed.
SAP shared its quotation and bill of materials with EOH, the SIU found. Both firms’ documents contained the same misspelling of “Affairs”.
EOH submitted one quotation matching SAP’s price exactly, followed 21 minutes later by another with a slightly different amount.
“This suggests that EOH colluded with SAP,” the report states. It alleges that SAP cover-quoted EOH to secure the award.
The licences were never downloaded because they were not required, but EOH received full payment.
SIU spokesperson Selby Makgotho said EOH had agreed to repay R191.883m, including interest, over 36 months.
It paid R65.79m upfront in November 2022 and began monthly R3.4m instalments in January 2023.
He said that on April 30, 2025, the Special Tribunal set aside Defence’s R257.5m SoftwareOne contract, declaring it “unconstitutional, unlawful, invalid, and without any legal force or effect”.
Makgotho said the process of restricting implicated suppliers was “ongoing”. Although the SIU wanted more prosecutions, its primary mandate was civil recovery. “Ultimately, our goal is to ensure that every cent stolen from the state is recovered so it can be used for its intended purposes,” he said.
Hawks spokesperson Colonel Katlego Mogale said yesterday that she was awaiting feedback from the Serious Commercial Crime Investigation unit.
Defence and Water and Sanitation did not answer questions.
Water spokesperson Lebogang Maseko said she was waiting for the director-general to approve its reply.
- Special Investigating Unit (SIU) reports reveal R686-million in irregular spending involving Defence and Water and Sanitation, with no public charges filed nearly three years later.
- The Defence investigation found R507.9 million spent irregularly on Microsoft licences, with EOH receiving full payment despite missing licenses and services not rendered.
- Water and Sanitation's probe uncovered R178.4 million paid to EOH for SAP software contracts for nine agencies, although only two were operational, and some licences were already possessed and unused.
- EOH admitted wrongdoing by former employees, removed implicated staff, repaid R191.883 million, and cooperated with investigations, but criminal prosecutions are delayed pending money tracing by the National Prosecuting Authority.
- The Special Tribunal declared Defence’s R257.5 million SoftwareOne contract unlawful on April 30, 2025, and steps are ongoing to restrict implicated suppliers, while civil recovery remains SIU’s primary focus.
