Tender Frauds in South Africa: How to avoid, detect, protect yourself

Tender Frauds in South Africa: How to avoid, detect, protect yourself

Tender frauds in South Africa are starting to become a major problem for small businesses and entrepreneurs. This is a hot-topic that needs some light to shine on it.

I sat with *Trevor (not his real name) for a face to face interview last week. Trevor runs a Safety Boots manufacturing and supply company in Boksburg, South Africa. Trevor received an email in his inbox with an offer to tender for safety boots. He was excited to receive this tender. As he is registered with the Central Supplier Database (CSD), it was not unusual to receive this type of email.

Trevor admits in hind-sight that he should have interrogated the tender document or email more. He quickly forwarded the email to his Business Development Manager to pursue.

The sad conclusion

To cut a long story short, the company was awarded the tender in an unusually short period of time. They were asked to deliver the goods to the department, given the address. After delivery of the goods, payment never arrived. They called and the numbers which used to work before was suddenly disconnected.

After much investigation and research, they discovered they had been defrauded. The department in question never released such a tender and had no records of their award. They had lost close to a million rands in product, much more in man-hours preparing the material and working on the project. They had lost valuable time and missed opportunities that would have yielded profitable results. As a small company, they had to borrow money to meet their supply needs and was now in debt, unable to repay that loan.

As a result, with a heavy heart Trevor admitted that his company went bankrupt, five employees lost their jobs and he has been wounded deeply psychologically.

It will take me a very long time to try again, I felt so violated by these criminals. They did not only steal my money, they stole my sense of trust in people

Trevor admitted.

This unfortunately is a story that echoes the experiences of a growing number of small businesses.

We have compiled this report – on tender frauds in South Africa to help you with the following:

  • Identify a potentially fraudulent tender opportunity
  • Verify tender documents for authenticity
  • Verify tender awards

Tender Supply Fraud

This is the most common type of fraud, and what Trevor fell for. Here is how this type of fraud works:

  1. You get an email requesting you to supply certain goods or equipment
  2. The email and tender documents come in the official government letter head, logo and format
  3. They will request you to supply a quote and supporting company documents, qualifications, references
  4. There is likely a legitimate tender of the same type, tender number and title. If you searched for the tender at the official government website, you might even find that exact tender reference
  5. The only difference is the contact information, delivery and fine-print in the tender document
  6. Tender will be awarded to you and you will be requested to supply these goods or products
  7. The products will be collected or you will supply them to the address provided
  8. As soon as you supply these goods or products, you will not be contacted again. The details you used to contact the ‘government department’ will no longer work. You will not be paid for the products you supplied.

 

Tender Supplier Fraud

The second type of fraud is similar to the first one, except they get money from you instead of goods or products. This is how this fraud works:

  1. You get an email requesting you to supply certain goods or equipment
  2. The email and tender documents come in the official government letter head, logo and format
  3. They will request you to supply a quote and supporting company documents, qualifications, references
  4. There is likely a legitimate tender of the same type, tender number and title. If you searched for the tender at the official government website, you might even find that exact tender reference
  5. The only difference is the contact information, delivery and fine-print in the tender document
  6. Tender will be awarded to you and you will be requested to supply these goods or products
  7. The goods requested will be so specific that only one company is able to supply them – this second company will be in on the fraud
  8. The second company will take your money and disappear
  9. You will not be paid for your products and will not be able to recover monies paid to the second company

Additional dangers

Worms, viruses and hackers

This is even more dangerous in the long run and damaging enough to make you more cautious when sending out personal information. Job-seekers have been falling prey to this type of fraud for years.

tender fraud hacker stealing information
tender fraud hacker stealing information

Stealing of personal information

Some of these criminals are also digital fraudsters and hackers. They will embed worms and viruses in the documents they send you. As a normal person, you will not even notice any difference. This worm or malicious code will be installed in your computer and send them other important login data, files saved on your computer, passwords etc regularly when you are online.

If you fall to this type of fraud once, you are more likely to get hacked in other areas of your life too. This is because hackers are known to share information between themselves on the dark web, they have contact lists with addresses and passwords, emails etc. So if you get compromised once, your information may be added to the hacker database for other hackers to take their chances with you in the future.

Security and privacy

You will be sending actual company documents, certified copies of your ID, references, tax documents etc to fraudsters. Even if they do not steal your money, they could commit identity fraud with all this information, open bank accounts, take out loans in your name, your company name etc.

How to avoid these frauds

  1. Always search for tenders on the official government tender websites:  https://etenders.treasury.gov.za/
  2. In addition to this, confirm these tenders also exist on the department page for the government department that issued the tender.

You can read this blog we released on how to search for tenders online – there are additional reputable websites to search for tenders.

This might save you from a majority of the frauds, but not all. They key feature these fraudsters rely on – is sending you legitimate renders. In addition to confirming the tender is legitimate, you must confirm the contact information on the tender document with other sources:

  • The government department website
  • Call or visit the government department
  • Attend the tender briefing and meet the officials, other tendering companies

If it looks too good to be true, it probably is. The common thread with these frauds, is how quickly they process the documents and how “easy” it seems to win the tender. Most government departments take months to conclude tenders, some will even ask you for an extension on your quote before the tender is awarded. If you can rely on one truth about government procurement – they are not known for their efficiency. If it is too quick, too efficient, seamless process – you must question it further.

Confirm tender award

All government departments are required to publish publicly details involving:

(1) Companies that submitted bids for the tender

(2) The company the tender was awarded to

Check out the e-tenders awarded tenders page here.  In addition, check the individual department website – they also have to publish the awarded tenders. Confirm your company name is the awarded company.

Purchase Order

All government departments will issue a purchase order before they can request you to supply any goods or services. The purchase order is the official order document that says “I am requesting these products, and I will pay you this amount for it”.

A tender award letter is not a purchase order, a phone-call or word of mouth is not a purchase order, an email is not a purchase order.

Needless to say – you need to verify received purchase orders with the department in question again.

 

basically, verify … verify … verify

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