23 December 2021

Home Affairs Minister Dr Aaron Motsoaledi is ecstatic at the powerful decision delivered by the Constitutional Court yesterday which dismissed with costs an application by New Dawn Technologies and Valor IT over a contract for an Electronic Document Management System.

The Constitutional Court dismissed the application because it found that the application “lacks reasonable prospects of success. Consequently, it has decided that the leave to appeal must be refused with costs”.

The matter started when the Department of Home Affairs wanted to digitise its records. In terms of the law, SITA had to issue a tender looking for a service provider on behalf of the department.

The tender was worth R1.5 billion and it was awarded to three companies; New Dawn, Valor IT and Ideco. But before any contract could be signed, or service level agreement could be finalised, the National Treasury warned that there was no money for such a huge tender.

As a consequence, the Home Affairs Department could not go ahead with this contract.

Ideco understood the position of government and let matters rest there. However, 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.

Because of litigation by these two companies, the Department's audited contingent liability shot up to R2.1 billion in the 2019/20 financial year. 

Contingent liability in Home Affairs is the amount that companies and individuals claim by way of litigation either for contracts, as is the case in this one, or for Immigration or Civic matters.

As long as a public institution has contingent liability on its books, the Auditor-General will flag it each year as a risk because if the Department cannot successfully defend the litigation and the money became payable, the budget of the Department would be severely impacted.

However in this case, the Department vigorously defended the matter and contended that there was no contract signed. But New Dawn claimed that they had bought equipment which, despite persistent request for evidence by the Department, they could not produce.

They took the matter to the Gauteng North High Court and lost. They then went to the Supreme Court of Appeal and lost before finally proceeding to the Constitutional Court where they lost again in a judgment issued yesterday, 22 December 2021.

"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," said Minister Motsoaledi. 

Consequently, the Minister has instructed the Department to pursue its legal costs against New Dawn and Valor IT, which date back to 2010 when the initial claim was filed.

The Minister intends to write a letter to the National Treasury to request that these two companies be blacklisted from doing business with the State. 

"This is not vindictiveness but it's a warning to individuals and companies who believe that they can receive millions in public funds via spurious litigation," said Minister Motsoaledi.


Media enquiries:

Siya Qoza – 082 898 1657 (spokesperson for the Minister of Home Affairs)

David Hlabane – 071 342 4284 (media manager for the Department of Home Affairs)