Signed appointment letters and related documents reveal that the National Department of Health’s (NDoH) top official and his counterpart at the Independent Development Trust (IDT) played key roles in an allegedly unlawful project to install oxygen plants at state hospitals.

The NDoH has since written to the IDT to withdraw from the project, according to a statement issued by the IDT’s board of trustees. The board has directed the IDT’s management to accept the NDoH’s instruction. According to the statement, the IDT’s management maintained that “procurement processes were followed”.

The project, bankrolled by the Global Fund, one of the world’s largest health financiers, was initially set to cost R216-million, but the figure later ballooned to R836-million. The main contractor, Bulkeng, failed to adhere to several of the project’s original requisites yet somehow managed to secure a R428-million portion of the roll-out.

In this latest instalment in Daily Maverick and amaBhungane’s joint investigation we unpack seemingly irregular tender processes associated with the project. The IDT, a government infrastructure implementing agency, appointed Bulkeng to install pressure swing adsorption (PSA) oxygen plants at 45 government hospitals.

A joint venture (JV) between Maziya General Trading and On Site Gas Systems International clinched a R152-million contract to install plants at a further ten hospitals.

Our investigation shows that the IDT seemingly expanded the project’s scope after it took over as the NDoH’s implementing agent. By altering the quantities and the sizes of the required plants at many of the hospitals, the IDT paved the way for far costlier contracts.

An implementation plan for the project, adopted by the NDoH and the IDT in August 2022, set the budget at R216-million. This boils down to an average spend of roughly R3.61-million per hospital. The following year, however, the IDT altered the bill of quantities and the contractors were eventually appointed at an average cost of R10.5-million per site. The IDT and the NDoH have been at pains to explain how the project’s budget ballooned by nearly 300%.

We’ve established that Dr. Sandile Buthelezi, the health department’s beleaguered director-general, and the IDT’s CEO, Tebogo Malaka, played key roles in getting the contentious contracts over the finish line, despite concerns about the cost overruns.

Buthelezi reportedly already faces an investigation for allegedly soliciting a R500 000 bribe from an unrelated contractor in another IDT project. He was also suspended in 2021 over his role in the Digital Vibes scandal but later returned to work after an internal disciplinary hearing cleared him of wrongdoing.

Dr. Sandile Buthelezi, the National Department of Health’s director-general. (Photo: sourced)

We can also reveal that the IDT, ostensibly with Buthelezi’s consent, ran afoul of the 2022 implementation plan by omitting or circumventing key requirements, including those related to the bidders’ South African Health Products Regulatory Authority (SAPHRA) registration status and their gradings from the Construction Industry Development Board (CIDB).

We will also detail how the IDT apparently allowed Bulkeng to slip key documents into its bid bundle more than a year after the tender had closed.

Finally, we will highlight some of the statements the IDT and the NDoH made in relation to the project, illustrating how the IDT in particular has apparently been disseminating patently false or misleading claims.

We sent the IDT and the NDoH detailed queries regarding each matter unpacked in this piece. Both organisations vowed to respond but failed to do so before our deadline.

Instead, the IDT’s board of trustees on Monday afternoon issued its statement. The board said it “noted with serious concern” the allegations regarding the project.

“…anything that smells of malfeasance should be nipped in the bud and those found to be responsible of such, shall face consequences management”, the board’s chairperson, Adv. Kwazi Mshengu, was quoted as saying.

Vital bid requirement dropped

Documents in our possession, including Bulkeng’s company records and the IDT’s request for quotations (RFQ), point to a flawed procurement process, one that allegedly saw Bulkeng appointed at an inflated cost despite the fact that it wasn’t qualified for the project.

The procurement process, a two-pronged affair, was concluded in 2023.

First, the IDT advertised a tender to appoint contractors to a panel of would-be suppliers. More than sixty entities submitted bids, and in June last year the IDT appointed eight companies to the panel.

Next, in July 2023, the IDT issued RFQs to the panel members and eventually picked Bulkeng and the Maziya/On Site Gas JV for the roll-out.

Much of the controversy around Bulkeng’s appointment stems from its SAHPRA certification – or rather lack thereof.

In our previous reports, we detailed that Bulkeng had never been registered with SAHPRA, and that it had submitted another entity’s certificate to the IDT.

The IDT has since repeatedly claimed that a SAHPRA certificate was never a mandatory requirement for bidders, but we can now illustrate why this statement is disingenuous.

An infrastructure programme implementation plan, or IPIP, signed in August 2022 by various NDoH and IDT officials, forms the basis for the oxygen plants project.

The IPIP document very clearly states that SAHPRA certification needed to be factored into the IDT’s procurement process.

When the IDT issued its tender and RFQs, the SAHPRA requirement was somehow omitted, which would have opened the door to unqualified companies like Bulkeng.

A PSA oxygen plant (Image: Sourced)

Construction Industry Development Board

The 2022 implementation plan also called on the IDT to manage the procurement process in line with the CIDB’s requirements.

Unlike the SAHPRA specification, the CIDB requirement did make it into the IDT’s tender, although the threshold was quite low.

Companies with a mechanical engineering (ME) grading of five and higher were allowed to submit bids.

A grading of five limits companies to a project value of R10-million or less. Considering the project’s initial budget of R216-million, the grading requirement seems to have been far too generous.

Bulkeng has an ME grading of eight, so it easily cleared this minor hurdle. However, the company’s grading still only qualifies it to work on projects with a maximum value of R200-million.

It is therefore unclear how the IDT managed to appoint the company for a R428-million contract.

Bulkeng was appointed to install oxygen plants at the St. Andrews Hospital in Harding, KZN, at a cost of nearly400% the original budget. (Photo: sourced)

The IDT’s uneven application of the CIDB requirement raises another red flag.

According to a submission by the IDT’s Management Bid Adjudication Committee (MBAC) dated October 2023, at least one of Bulkeng’s rival bidders was disqualified from the bid because the contract value would have exceeded its CIDB limit. It is unclear why the IDT did not apply the same standard to Bulkeng.

Enter the DG and the CEO

In July 2023, Bulkeng, the Maziya/On Site Gas JV and three other companies submitted their quotations to the IDT. The bids were staggeringly high, with the lowest among the lot coming in at more than double the R216-million budget.

The Maziya/On Site Gas JV’s quote came to R862.6-million, while Bulkeng said it would do the job for an eye-watering R1.18-billion.

Word soon spread among NDoH and IDT officials that the project’s budget would be raised to accommodate the sky-high bids.

Naturally, the development sparked concern over the potential legal and auditing implications. The project already had a set budget. Any attempt to pour additional funds into the roll-out risked triggering an irregular expenditure finding.

The matter came to a head in early August 2023, at a meeting held by the project’s steering committee, a seven-person body that consisted of officials from the NDoH and the IDT, plus an external auditor.

The committee, in a formal resolution, decided that it would be best to restart the procurement process, citing the escalating budget and the SAHPRA requirement’s omission from the RFQ as the main reason for doing so. They also referenced the CIDB issue.

The committee sent a letter to the IDT’s CEO, Malaka, requesting that the process be restarted.

But Malaka never responded to the committee. Instead, it seems she chose to directly consult with Buthelezi, the health department’s DG. We know this because later that month, Buthelezi allegedly told the committee that he’d spoken to the IDT’s CEO. He allegedly told the committee’s members that he was happy for the IDT to continue with the bid process.

Tebogo Malaka, the IDT’s CEO. (Photo: sourced)

By all appearances, Malaka and Buthelezi had effectively brushed aside the committee’s concerns.

Their apparent disregard for the cost considerations is seemingly manifested in a “concurrence approval”, signed by both officials in October 2023. The document sought to raise the program’s budget to R987.4-million, a jaw-dropping R771-million more than the IPIP budget from the previous year.

According to our sources, this was a bridge too far for the Global Fund, which apparently instructed the IDT and the NDoH to formulate a more realistic figure.

A second “concurrence approval”, signed by Buthelezi in February 2024, introduced a budget of R580-million. Malaka’s signature also appears on this document, but it is not clear when she signed it.

The R580-million figure is exactly enough to cover the contracts awarded to the two winning bidders, but this was not the final project budget. The IDT and the NDoH have both confirmed that the budget had been set at R836-million. This means they had somehow released an additional R256-million. It is not clear when this figure was adopted by the two state bodies and whether it had been cleared by the Global Fund. It is also not clear which contractors, if any, were going to benefit from the additional spend, although the NDoH previously indicated that the R836-million budget included “professional fees, management fees and maintenance costs” for the oxygen plants.

The appointment of Bulkeng and the Maziya/On Site Gas JV, meanwhile, was finally concluded in June 2024. Malaka signed the letters of intent that reflect the “final allocation” of the two bidders’ respective sites.

After the fact 

The Bulkeng contract that Malaka and Buthelezi green-lighted seems dubious for yet another reason.

The RFQ called on bidders to submit letters of support from whichever Original Equipment Manufacturer (OEM) they’d chosen to work with. Where relevant, the bidders also had to furnish the IDT with signed JV agreements.

Our assessment of Bulkeng’s bid documents strongly points to a flawed and possibly unlawful bid process. All indications are that Bulkeng failed to comply with key mandatory requirements and that the IDT nevertheless allowed the company to clinch the lion’s share of the project’s roll-out.

As far as we could establish, Bulkeng’s original bid submission did not include a letter from its chosen OEM, nor one from Brutes Air Solutions, the company we previously identified as Bulkeng’s partner in the bid.

What we did discover, however, is a letter from Brutes Air’s CEO, Christo Bruwer, addressed to the IDT. According to the heading, the letter serves as “Official Confirmation of Collaborative Partnership with Bulkeng for PSA Oxygen Plants”. But the letter is dated 25 July 2024, so we have strong reason to suspect that the IDT entertained this crucial document a full year after the RFQ had closed.

Christo Bruwer, CEO of Brutes Air Solutions. (Photo: sourced)

Bruwer claimed there had been “a few versions” of the letter, including one that had been submitted in time for the 2023 RFQ. We asked him for a copy of the earlier version, but he said he couldn’t share it with us without the IDT and Bulkeng’s consent. Bruwer wouldn’t say why it had been necessary for him to draft a 2024 version.

Bulkeng’s letter from its OEM, or lack thereof, should also raise eyebrows.

The company’s bid included a letter that explained its relationship with Brutes Air and its OEM, Atlas Copco, dated 17 July 2023.

However, Atlas Copco only submitted a letter to the IDT on 10 October 2024, more than a year after the RFQ had closed.

What’s more, the letter doesn’t do much for Bulkeng’s cause as a bidder. It merely states that Brutes Air is an “authorised partner” of Atlas Copco. Bulkeng therefore failed to submit a letter that affirmed its own agreement with an OEM.

Under normal circumstances, Bulkeng’s failure to adhere to these bid requirements should have disqualified the company from the process.

Soaring costs 

The IDT has made several dubious claims regarding the oxygen project’s ballooning costs.

Following our first reports on the issue, the organisation went as far as claiming that the original R216-million budget was for fifteen hospitals, not sixty.

The IDT’s spokesperson, Phasha Makgalane, claimed in a live interview with Newzroom Africa that the R216-million budget was compiled as far back as 2017.

Elsewhere, the IDT has claimed that the budget was formulated in 2019 and therefore had to be adjusted to account for inflation. It has also claimed that the lower figure excluded VAT and maintenance costs, claims the NDoH has also repeated.

None of this is true.

The August 2022 IPIP clearly shows that the R216-million figure was less than a year old when the RFQ went out. What’s more, the budget covered the roll-out of oxygen plants at sixty hospitals, including VAT, installation costs and maintenance.

We compared the IPIP to the bill of quantities the IDT later issued with the RFQ. This exercise explained why the costs had risen so dramatically.

The Tshepong Hospital in North West, for instance, required only one small (10Nm³/h or 15Nm³/h) PSA plant at a cost of roughly R2.84-million, according to the 2022 IPIP. However, the IDT altered the bill of quantities so that bidders were required to submit quotes for two large (40Nm³/h) plants. This meant the eventual costs would be far higher.

The IDT appointed the Maziya/On Site Gas JV to install the plants at this hospital, which the JV would have done at a cost of R24.4-million – a hefty 757% increase from the original IPIP budget.

Bulkeng, meanwhile, was appointed to install a large plant at the St. Andrews Hospital in KwaZulu-Natal. It would have done so at a cost of R13.9-million. The 2022 budget, meanwhile, called for a small plant at a cost of only R2.84-million. A large plant, according to the IPIP, should in any case only have incurred a cost of roughly R8.5-million – still far less than what Bulkeng would have gotten.

At the Jubilee District Hospital in Gauteng, where one large plant would have sufficed, Bulkeng was set to install two large plants at a cost of nearly R28-million, a far cry from the R8.5-million budget envisioned in the implementation plan.

We looked at all 45 sites assigned to Bulkeng. Nearly every hospital that required only a small plant, as per the 2022 IPIP, was upgraded to a medium or a large one. The sites awarded to the Maziya/On Site Gas JV were given the same treatment.

Maziya’s CEO, Chris Delport, strongly denied that his company was trying to fleece the IDT through excessive pricing.

Chris Delport, CEO of Maziya General Services. (Photo: sourced)

He emphasised that the bidders had no say in the drafting of the bill of quantities, and that Maziya and its JV partner merely submitted their quotes in accordance with the RFQ.

Delport said there were several factors that contributed to the quoted fees, including the cost of installing and maintaining the plants. He said his company had factored in a mark-up of no more than fifteen percent.

“Some of the sites are in rural, far-flung places, so it costs more to go out there and install the plants. And none of these machines are manufactured in South Africa, remember, so there are import costs to consider too,” explained Delport.

We showed the project’s figures to an industry expert who told us that the numbers for the IDT project were “pure madness”.

This person, who has been involved in several PSA installations across the continent, reckoned that the roll-out could be done at a total cost of around R350-million.

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It has been five years since Advocate Shamila Batohi was appointed National Director of Public Prosecutions (NDPP).

South Africans want to see the masterminds of state capture in orange overalls and the NDPP is central to achieving this, but Batohi is running out of time, as is the country.

Batohi says she’s “not hiding away as a national director from very critical and honest assessments of where we are in dealing with state capture”.

Critics, however, say the NDPP’s state capture failures represent a deeper crisis. Batohi’s former deputy, Hermione Cronje, could no longer stay silent on this matter.

Her concern is shared by amaBhungane, who believe that we have to fix state accountability systems if we are to get off the path towards a failed state.

With this in mind, we sat down with Cronje and others who watch and worry over the NPA; we sourced some candid footage from internal NPA meetings; and we confronted Batohi with some hard questions.

The NPA needs skills and resources, but does it also need new leadership? Join us as we take a deep dive into these urgent issues.

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Yesterday, the Supreme Court of Appeal (SCA) threw out Steinhoff’s appeal against a high court decision ordering the company to release the full report of a forensic investigation into the massive fraud that pitched Steinhoff into free-fall and eventual liquidation, costing investors more than R200-billion.

In a ringing judgment, the five justices excoriated Steinhoff’s attempts to claim litigation privilege and avoid the implications of the law governing mandatory disclosure in the public interest, at one point describing Steinhoff’s strategy as “untenable”.

In March 2019, PricewaterhouseCoopers (PwC) disclosed the full report – comprising 4000 pages and 3000 pages of annexes – to Steinhoff, but the company’s board took a decision to publicly release only a 14 page summary.

The Financial Mail and amaBhungane requested disclosure of the full report in terms of the Promotion of Access to Information Act (PAIA), but Steinhoff refused.

The company cited as reasons its claim that the document was legally privileged and that the public interest override in PAIA did not apply.

Section 70 of PAIA provides that disclosure is mandatory if the disclosure of the record would reveal evidence of:

a substantial contravention of, or failure to comply with, the law; or 

imminent and serious public safety or environmental risk; and

the public interest in the disclosure of the record clearly outweighs the harm contemplated in the provision in question.

The judges held firm that this was exactly such a case.

It is worth quoting Judge Schippers, who penned the judgment, in some detail.

He noted that the PwC summary itself disclosed that the wrongdoers inside Steinhoff had perpetrated irregular transactions and concealed them for nearly a decade, clearly indicating that they were committing fraud on a large scale.

Judge Schippers further noted that “in addition, this is a classic case where the public interest in the disclosure of the Report clearly outweighs any potential harm to Steinhoff. The harm it alleges comprises superficial assertions…[They] do not bear scrutiny… The public interest, more specifically, the right of South African society at large to know the facts about the Steinhoff scandal, goes beyond the narrow interests of Steinhoff, and is best served by exposing the nation’s biggest corporate scandal through complete transparency, to avoid a recurrence.”

He observed that the Steinhoff scandal “led to a massive and precipitous drop in its share price (98%) and affected a large majority of South Africans with some form of retirement savings invested in Steinhoff.”

Schippers said the evidence of company secretary Nicholas Lewis was evasive, noting that  “Lewis’  answer to all of this is cagey, and one of avoidance. He simply says: ‘I do not accept the applicants’ summary’, and contends that the media respondents assume that the causes and consequences of the accounting irregularities have already been determined. And this, after publication of the overview, which describes the irregular transactions that caused the profits and assets of the Steinhoff Group to be grossly inflated.”

“What all of this shows, is that Steinhoff used dishonest and illegal ways to maintain its businesses and deceived investors into believing that the company was more profitable than it actually was. Billions of Rands were wiped off the JSE and the pension funds of millions of ordinary South Africans suffered huge losses. Steinhoff was once regarded as one of the most successful companies in South Africa, with a strong commitment to corporate social responsibility. There is simply no basis to shield the Report from public scrutiny: Parliament has decreed that the public interest override must be applied in a case such as this. Accordingly, I conclude that the public interest override applies in relation to the Report.”

While the judge ruled that the public interest override cut across other justifications allowed by PAIA for companies to refuse disclosure – such as the various forms of privilege attached to communication between a lawyer and his client – he also rejected Steinhoff’s argument on this ground on its own terms.

Effectively, the judge found that Steinhoff had tried to retrofit a privilege claim based on the argument that the PwC report had been prepared for the purpose of litigation.

Judge Schippers held that this claim was not supported by the facts, which showed that PwC had been engaged to conduct a fact-finding investigation long before any litigation was contemplated.

Steinhoff itself has ceased to exist, but its legal rights are held by a successor company, Ibex RSA Holdco Limited, which is incorporated under the laws of England and Wales, with its registered office in London and its operating office at Steinhoff’s former premises in Stellenbosch.

Ibex RSA now has control of the Report and has unhindered access to certain books, documents and other data storage media of Steinhoff.

If the company does not appeal the ruling it has ten days to hand over the report.

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In April this year Xolile Sizani was brought in to save PetroSA, but after just six months as chief executive he was suspended by the board.

The struggling state-owned entity refused to discuss the allegations against their CEO, even when Members of Parliament – from the DA, EFF and ANC – demanded answers.

Now, amaBhungane has obtained access to the letter suspending Sizani, as well as his response. These documents suggest that PetroSA rustled up a flimsy case against its own CEO after he threatened to sink what appears to have been a politically tainted gas deal.

On 14 June, Sizani terminated an offshore gas deal that amaBhungane had exposed as problematic because it involved cutting in notorious political operator Lawrence Mulaudzi.

Sizani noted the failure to achieve certain conditions precedent of the contract signed with EquaTheza Oil and Gas – the joint venture between Mulaudzi’s Equator Holdings and Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.

By this point, however, Mulaudzi had quietly exited the company and been replaced by another political heavyweight, former National Director of Public Prosecutions Bulelani Ngcuka.

The suspicion that Sizani’s suspension is linked to his failure to support controversial contracts is strengthened by another leg of the complaint against him.

The 8 October suspension letter also cited Sizani’s removal of PetroSA’s former chief operating officer, who signed two other scandal-plagued gas deals: another with Mulaudzi’s Equator and one with Gazprombank, a division of the Russian oil giant Gazprom, which is subject to international sanctions.

“When you put the CEO on suspension … it sends a very strong message, and [raises] very serious concerns about the stability at the level of the leadership, more so that the CEO has been in office for only, what, [six] months?” the ANC’s Tshiamo Tshotetsi said during the Central Energy Fund’s 18 October appearance in Parliament.

“It is indeed concerning,” PetroSA board chair Unati Figlan agreed. “However, when there is an alleged act of misconduct that is raised to us as a board we have to act, we have to investigate.”

The leaked correspondence – provided to amaBhungane by a PetroSA insider – shows that PetroSA placed Sizani on a precautionary suspension based not on formal charges, but on three allegations that are yet to be investigated.

“I have reached the conclusion that the allegations against you are serious in nature and therefore, given your seniority, your continued presence in the workplace will have corrosive effects on the investigations,” Figlan wrote on 16 October.

Yet a closer look at the allegations – and Sizani’s response to them – suggests that other motives may be at play.

Allegation #1: The other Russian deal

When Sizani was appointed on 1 April 2024, PetroSA had just embarked on a series of multi-billion rand deals to develop South Africa’s offshore gas industry:

A R3.7-billion deal awarded to Russia’s Gazprombank to refurbish the gas-to-liquids refinery in Mossel Bay;

A multi-billion-rand deal awarded to EquaTheza Oil and Gas to develop and restart offshore oil and gas wells; and

A R22-billion deal awarded to Equator Holdings to finance the offshore gas wells project and to build gas infrastructure, both on and offshore.

The Gazprombank deal and the Equator deal have received the most scrutiny, the former because partnering with a sanctioned Russian entity placed PetroSA’s entire business at risk and the latter because Equator’s front man, Mulaudzi, is notorious for not paying his debts and for leveraging his political connections.

According to the leaked letters, however, it was Sizani’s decision to cancel the EquaTheza deal that potentially cost him his position.

This deal was for a project was to restart offshore oil and gas wells that PetroSA had abandoned, and to develop new wells that PetroSA had identified but never tapped.

Originally, the deal had been awarded to a company called Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.

After Theza was selected as a preferred bidder, however, Hendricks was allegedly strong-armed into giving 10% of the deal to Mulaudzi’s Equator Holdings. “They were foisted on us … They don’t add any value to us as Theza,” a source in the company told us last year.

Hence, when the contract was signed in October 2023, there was a new company name on the paperwork: EquaTheza Oil and Gas Exploration. 

The deal had been a long-time coming: in 2017, Russia’s state-owned exploration firm Rosgeo offered to spend $400-million (R7.3-billion) to explore and develop blocks 9 and 11a, which are owned by PetroSA and sit alongside Total’s former discovery in blocks 11b/12b. When the deal collapsed, some of Rosgeo’s technical experts formed Theza.

The partnership between Theza and Mulaudzi’s Equator Holdings would not last. By the end of January this year, Mulaudzi and his brother had resigned as directors and sold their 10% stake back to the company.

A month later, Theza had a new partner: Vuwa Capital Partners, owned by a group of prominent black businessmen. Among this group is former NPA boss Bulelani Ngcuka, who is also Vuwa’s chair.

In February, Vuwa “was made aware of an opportunity to invest in Equatheza; having conducted its due diligence, Vuwa took a decision to invest,” CEO Lungisa Dyosi told us over email.

“The shares acquired in EquaTheza were paid for in cash, to fund EquaTheza’s operations … and were not bought from any existing shareholder of EquaTheza. To amplify this point, by the time [Vuwa] acquired the EquaTheza shares, Mr Lawrence Mulaudzi was neither a shareholder nor a director at EquaTheza.”

On the surface, however, it was still a risky investment, because by the time Vuwa bought in, EquaTheza’s offshore deal was already in jeopardy.

In breach

In terms of the Profit-Sharing Agreement, signed in October last year, EquaTheza had 60 days to pay PetroSA $12-million (R217-million) as its contribution towards the upkeep of the”FA platform”. This floating structure connects offshore gas wells to pipes that bring the gas onshore and would be a critical piece of equipment for EquaTheza’s project.

When EquaTheza failed to pay over the amount, PetroSA declared a breach of the agreement. EquaTheza was also required to deliver a Technical Work Programme, which had likewise not materialised within the 60 days.

In letters provided by another insider, EquaTheza told PetroSA that it was not in breach because one, no FA Platform agreement had been signed and two, PetroSA had been late in delivering the technical data.

PetroSA remained unmoved. It granted EquaTheza a 30-day extension, then another, but stuck to its position that EquaTheza was in breach and was at risk of having the entire agreement cancelled.

In March, Hendricks, the EquaTheza CEO, wrote to PetroSA confirming that “the issue around the [conditions precedent] is a critical risk … this is extremely serious as it puts the whole deal at risk if we cannot resolve this.”

Two weeks later, the Central Energy Fund (CEF) – PetroSA’s parent company – told Parliament that “work presented to date by EquaTheza is not inspiring confidence that they can deliver … By end of March PetroSA will seek way forward regarding dealing with EquaTheza due to their failure to deliver satisfactory technical work programme and funding solution.”

Enter Xolile Sizani

This was the situation that Sizani walked into when he joined PetroSA on 1 April this year.

On 18 April, after EquaTheza’s second extension lapsed, Hendricks sent a letter to Sizani imploring the new CEO to “regularise our relationship under the [Agreement],” which included signing an addendum that would extend the deadlines and take EquaTheza out of breach.

Hendricks told him that PetroSA officials had initially agreed to this, but that”unfortunately, we were subsequently informed that the addendum would not be signed and were given no reasons for this change of viewpoint,” he wrote.

EquaTheza had by this point delivered an initial work programme, and had estimated that there were 284 million barrels of oil and 10 years’ worth of gas in PetroSA’s offshore wells. Using their “conservative recovery rate of 25%”, this put the potential deal value at $5-billion (R95-billion) – just for the oil.

However, turning EquaTheza’s estimate into a bankable figure would require a lot more work, and PetroSA was unconvinced.

When the second cut-off date rolled around in June 2024, Sizani presented the Board with a resolution to pull the plug on the deal.

“I obviously was aware through media reports, that PetroSA was criticised from various quarters regarding its performance,” he told PetroSA in a 15 October letter in response to the allegations against him.

“While there are other matters relating to this particular contract, the prominent problem about it was the failure on the part of EquaTheza to meet ‘Conditions Precedent’… the details were deliberated in a Board meeting held on 13th June … Significantly, the Board agreed that the profit-sharing agreement with EquaTheza was not beneficial to PetroSA. Instead, its continued existence was detrimental.”

The next day – 14 June – PetroSA sent a formal letter to EquaTheza terminating the deal. The reason given was EquaTheza’s failure to meet the deadlines for the conditions precedent.

Enter Bulelani Ngcuka

Although EquaTheza had known the deal was in jeopardy for months, they were furious with Sizani’s decision and went over his head.

On 25 June, Sizani was summoned to a meeting with CEF and EquaTheza – now represented not by Hendricks (the CEO) but by Ngcuka, the chair of Vuwa Capital, EquaTheza’s minority shareholder, as well as Dyosi, the CEO.

“The [Agreement] makes provision for a mediated process should any dispute arise,” Dyosi told us. “In line with this, and in the spirit of the [Agreement], representatives of EquaTheza, who happened to be members of [Vuwa] … approached the CEO of the CEF as the shareholder of PetroSA to mediate a discussion.”

Vuwa had bought a 5% stake in EquaTheza in February, when Mulaudzi had pulled out. It’s unclear how much they paid – Dyosi declined to say – but the PetroSA deal was seemingly EquaTheza’s only asset, meaning that their investment, which was risky to begin with, was about to be written down to zero.

At the meeting, however, Sizani told Ngcuka and Dyosi he would not change his decision to cancel the deal. “No promise was made to EquaTheza to alter, amend or modify the contract,” he later recounted.

Still not satisfied, EquaTheza’s lawyer wrote to Sizani the following day. Amongst other things, the four page letter argues that Sizani was not entitled to cancel their agreement, adding that PetroSA had “impermissibly approbated and reprobated”, “generally frustrated” and “deliberately prevented” the fulfilment of the conditions precedent.

“Should it become apparent that PetroSA intends to persist in its contrived termination of the [agreement], our instruction are … to institute review proceedings to set aside the unlawful decision taken by PetroSA,” the lawyer wrote.

The letter ended by demanding that PetroSA confirm, by 5 July, that it would back down and honour the contract: “Failing receipt of such unconditional undertakings, we are instructed to approach the High Court for an order in the appropriate terms against you, coupled to a claim for costs.”

“EquaTheza (and [Vuwa] as a shareholder) maintain that the cancelation is illegal and invalid. Our lawyer’s letters in your possession are clear on this,” Dyosi added.

Instead, on 3 July, Sizani sent back a one paragraph letter: “We take note of your assertion that the [Agreement] between PetroSA and Equatheza is still active. PetroSA hereby informs you that our position … remains unchanged, i.e. the [Agreement] is terminated.”

Empty threats

When Sizani was suspended three months later, the PetroSA board threw the EquaTheza deal back in his face: “You have withheld information from the Board in relation to the EquaTheza contract by failing to inform the Board of a dispute that was lodged,” Figlan wrote in her 8 October suspension letter.

Sizani denies this. “It is my humble view that this allegation is clearly a mistake or a misunderstanding because surely I was not aware … of what was in the mind of EquaTheza. The decision to terminate the contract was taken on June 13th and the dispute was declared on the 26th June 2024, clearly when that decision was taken on the 13th June no dispute existed at that stage, I deny that I withheld information from anyone including the … Board,” he wrote on 15 October.

It is also unclear why the PetroSA board took the dispute so seriously.

On 10 July, EquaTheza’s lawyer had told Sizani: “We are in the process of preparing … legal proceedings … which will be issued and served on you in due course”.

To date, however, EquaTheza has not made good on its threat to go to court.

Instead, it appears that EquaTheza – led by Ngcuka, the incoming chair of EquaTheza  – kept trying to pull strings behind the scenes, including writing to Figlan, the PetroSA board chair, a week later “requesting her intervention”.

As Dyosi put it: “having realized that … in taking the decision to cancel, the PetroSA Board had not been appraised of all the information … attempts to find a mediated solution to the impasse continued.”

Figlan eventually told EquaTheza in September that “the matter would be further investigated”.

“We are still awaiting the outcome of that investigation,” Dyosi told us. “EquaTheza believes that it has a strong case … and has no intention of abandoning it legal challenge against this erroneous decision, but is giving the mediation process a fair chance.”

Importantly, Sizani’s letter reveals that by October, PetroSA had obtained a draft legal opinion from law firm Fairbridges, a recommendation from the transaction advisors Mazars and a draft internal audit report, all of which appear to have concluded that “the EquaTheza contract should be cancelled for not meeting the condition precedents”.

A week later, the PetroSA board suspended him. And with Sizani gone, the EquaTheza deal appears to be back on the table.

“Equatheza is looking forward to continu[ing] with the project,” Hendricks told us last week. “The dispute between Mr. Sizani and PetroSA is a matter between PetroSA and Mr. Sizani. We are looking forward to a very constructive relationship with PetroSA as this project is very important for the country and contributing to the economy significantly.”

Allegation #2: The difficult COO

The EquaTheza deal, the Gazprombank deal and the Equator deal had all been signed by PetroSA’s acting chief operating officer Sesakho Magadla, who had been seconded to PetroSA by its parent company CEF.

Before Sizani was appointed, Magadla had stepped into the PetroSA CEO role for two months. However, handing back the reins did not go smoothly: “I found her to be a very difficult person to work with and, unfortunately, extremely insubordinate and condescending,” Sizani wrote in his 15 October letter to the board.

“I made several attempts to talk to her by way of trying to instil corrective measures to her conduct but I failed because she ignored me and did so disrespectfully with condescending gestures and comments.”

On 20 May, Sizani terminated Magadla’s secondment and sent her back to CEF – a routine decision that nevertheless prompted two urgent meetings with Minerals and Petroleum Minister Gwede Mantashe.

On 26 May, Sizani and the group CEO Ishmael Poolo met with Mantashe “to discuss the … termination of Ms. Magadla,” Sizani wrote. “The outcome of that meeting led to a proposal on the working model between [myself] and Ms. Magadla.”

We asked Mantashe why he felt it was appropriate to intervene in an HR issue: “When the CEO fights a COO, in an entity that reports to me, I’m an interested person I must intervene and try to stop the fight. That’s what I should do,” he told us last week.

“If a new CEO … has a fight … it reflects on the character of the CEO, and I have a responsibility to guide the CEO, [to say] ‘listen man, listen first, don’t walk in there and try to kick everybody on the backside.’ Sometimes CEOs listen, sometimes they don’t.”

On 31 May, they met again with the minister, this time with Magadla present. “[T]he minister reprimanded Ms. Magadla about her unprofessional behaviour,” Sizani wrote.

Sizani seemingly believed that this was the end of the matter: “the matter of removal of Ms. Magadla never arose again. I am, therefore, not aware of any legal backlash or negative consequences to PetroSA resulting from my decision to remove her until today hence this allegation comes as a surprise to me.”

The allegation, contained in Figlan’s 8 October suspension letter, is that by terminating Magadla’s secondment, Sizani has inadvertently restructured the organisation: “This termination has the effect of restructuring the organisational structure … something that you were not authorised to do.”

“Futhermore, such termination was not done in consultation with the … Board,” Figlan added.

Much like the EquaTheza allegation, Sizani argues this is nonsensical. “The COO position still exists even in the new proposed structure and Ms. Magadla was replaced with another Executive who is performing the same functions in the same office,” he told Figlan in response to the allegations.

Sizani conceded that while he did not consult the board before firing Magadla, he met with the board two days later and presented reasons for his decision, which he claims the board never questioned.

Enter Gwede Mantashe

PetroSA’s decision to suspend its CEO, which so alarmed Members of Parliament, does not seem to have provoked any response from the Minister.

“The suspension of the CEO is handled at board level. I’ll wait for the report. I’ve not received it. And I must not go and fetch it because the board must do its work,” Mantashe told us last week.

Yet Mantashe could not explain why he had rushed to intervene not once, but twice, when the COO’s secondment was ended, yet took a hands-off approach when the CEO was suspended.

“[W]hen Sizani was suspended I asked CEF ‘what is happening there?’ I did ask … I’m waiting for them to come back to me to say, these are the findings of the investigation. Then I will determine at that point, what is the course of action to be followed.”

Asked what he thought of Sizani’s response to the allegations, Mantashe said: “If you have seen them you are lucky, I’ve not seen them.”

Allegation #3: The turnaround plan

In a sense, the fallout between PetroSA and its CEO was inevitable. Sizani joined PetroSA with the mandate to rescue it, while its parent company, CEF, is in the process of lowering the coffin into the grave.

Although PetroSA had a turnover of R24.5-billion last year, the company is technically insolvent. The solution proposed to the crisis at PetroSA is to strip the company of its productive assets – the diesel trading business and its investment in Ghana – and move these into a new entity: the South African National Petroleum Company (SANPC).

This would leave the problematic “legacy” assets – like the shuttered gas-to-liquids refinery in Mossel Bay – for PetroSA to manage.

“Your appointment as PetroSA Group CEO came at a time wherein a number of CEF subsidiaries … were in the process of merging into a single national petroleum company (SANPC) as directed and approved by Cabinet and directed by the Minister of Mineral Resources and Energy [Gwede Mantashe],” Figlan wrote.

“It should be noted that in implementing Your Turn Around Strategy for the organisation … differs with the already existing and approved organisational structure by the Board,” Figlan added.

The PetroSA CEO, Figlan alleges, was trying to run two parallel and contradictory process under the Labour Relations Act: a section 189 retrenchment process while a section 197 transfer was already underway.

Sizani disputes this. “I deny that I have embarked on the alleged process. In fact no steps have been taken in pursuance of retrenchments at all,” he wrote. “I was requested … to put together a turnaround plan for PetroSA … One of the propositions we considered … was the ‘right sizing of PetroSA’ … to assist in turning around the misfortunes of PetroSA,” he wrote.

But since the right-sizing project was not approved by the board, no retrenchments were ever made, he argues, adding that “my employment is threatened for only making a proposal”.

Keeping Parliament in the dark

When Figlan and the other CEF executives appeared in Parliament in October, they refused to discuss the allegations against Sizani, telling MPs that “we cannot divulge on what is happening because this is a Labour Relations Act [issue], which requires us to be confidential about it. Even worse, the employee involved his lawyers so we cannot divulge such information.”

Mikateko Mahlaule, the chair of the Minerals and Petroleum Portfolio Committee, was unimpressed. “The chair of PetroSA says ‘it’s a labour relations matter, I don’t think we must divulge the information.’ If we want it, we’ll get it. There’s no such thing that you can’t divulge this information, not here in Parliament. Not here.”

So far, however, Parliament hasn’t pushed for answers.

When we approached Sizani about the reasons for his suspension, he referred us to his lawyer Tukela Ningiza, who declined to provide said reasons but told us: “We are aware that the matter is that of public interest and in this regard, we have (on our client’s instructions) consented that the allegations and information related thereto can be disclosed to the parliamentary committee”.

PetroSA did not want to provide us with the information either.

“PetroSA reserves the right not to make public the reasons for the suspension of Mr. Xolile Sizani as the Group Chief Executive Officer (GCEO) … The provision of a response indicating the reasons of the suspension of Mr. Sizani would result in PetroSA transgressing the basic obligations of employee and employer confidentiality,” Figlan told us in a letter last week.

“PetroSA as a State-Owned Company and responsible corporate citizen acknowledges the requirement of transparency and public interest. It is through this understanding, that we have been open with the process of the suspension of Mr. Sizani from the onset.”

“Furthermore, it is noteworthy that an investigation is currently underway, therefore, it is key to ensure that this process unfolds and subsequent to which further communication will be provided in this regard. This is to afford the process the integrity of processing without any form of interference or possible prejudice.”

We wrote back to Figlan telling her that our insiders had, in the interim, delivered. We asked if she wanted to offer any further comment on the allegations, specifically our conclusion that PetroSA had suspended its CEO on spurious grounds and with ulterior motives.

PetroSA said it would not offer any further comment.

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the post #TheLaundry: How Eswatini became a transit hub for Southern Africa’s money laundering networks appeared first on amaBhungane.

BY Warren Thompson (Finance Uncovered) and Micah Reddy

Leaked documents from the Eswatini Financial Intelligence Unit (EFIU) reveal how, in late 2018, the kingdom’s authorities began secretly investigating suspicious payments amounting to tens of millions of rands between entities linked to two politically connected businessmen.

The investigation raised red flags regarding the relationship between Keenin Schofield, son-in-law to King Mswati III, and a Dubai-based businessman, Alistair Mathias, who claimed to be a close friend of the king.

Mathias was accused in a 2023 Al Jazeera documentary of being one of the architects behind a vast scheme to smuggle gold out of Zimbabwe, allegedly with the complicity of the Mnangagwa regime.

The leaks reveal how millions of rands emanating from a Johannesburg, South Africa company named AMFS moved rapidly through entities controlled by Schofield and Mathias before ultimately being transferred to Dubai.

This raised suspicions within Eswatini’s authorities that the pair “might be using the country as a conduit for smuggling illegally obtained Gold out of Africa through Eswatini to the United Arab Emirates under the guise of a company,” and that this was being done to “conceal the true source and purpose of the funds received and transferred,” according to a letter the EFIU wrote to the country’s tax authority.

Back in 2018, Swazi jeweller Keenin Schofield appeared to be an up-and-coming businessman. His company, Schofield & Co. Custom Jewelers, was making a name for itself selling high-end custom watches and jewellery to a slew of wealthy celebrities. One of his more eye-catching Instagram posts shows Schofield delivering a diamond-encrusted pendant to World Cup winning midfielder Paul Pogba.

Less publicised, however, is Schofield’s run-in with the law. In 2009, aged 20, he was arrested for smuggling, pled guilty in a Zimbabwean court for illegal possession of diamonds and was fined US$400.

Also less visible are Schofield’s links to the Swazi royal family. There is very little public information on his marriage to Princess Temtsimba, one of the king’s daughters, but he confirmed the marriage to amaBhungane and said that he and the princess have two children.

Schofield says he met Mathias at some point during 2018.

Mathias was not widely known until last year, when Al Jazeera aired its undercover exposé on the so-called “Gold Mafia” operating in Southern Africa. In secretly recorded interviews with journalists posing as crooked businessmen, Mathias claimed to be one of the kingpins using gold to move and ‘cleanse’ cash on behalf of Zimbabwean clients.

In the interviews, Mathias hinted at a larger operation on the continent, telling Al Jazeera’s undercover reporters that he “moves” gold worth between $70 million and $80 million each month through Ghana and southern Africa to Dubai.

Mathias later denied to Al Jazeera that he had ever laundered money or traded illegal gold. 

Putting the “Special” in Special Economic Zone

Schofield says that he and Mathias teamed up to build a large gold refinery in Eswatini’s newly created Special Economic Zone (SEZ), which was intended to be a major hub for commodity refining and trading. The SEZ was described as the “brainchild” of King Mswati III.

“I had met all the relevant stakeholders in Eswatini to get the licensing done … but I just wasn’t able to get it over the line in terms of raising enough capital,” Schofield told us.

That’s where Mathias came in. He would put up the money and was “leading” the project.

Schofield was to act as the local partner, by building relationships in Eswatini and introducing Mathias to “relevant people.”  His own company, Schofield & Co., would be one of the “agents” that would buy finished gold products like gold coins from the new refinery and sell them on.

But far from being a landmark investment in Eswatini, the millions of rands that flowed through the companies of the two businessmen yielded nothing tangible. Instead, all it did was raise suspicions at the EFIU and Eswatini Central Bank.

The business relationship between the two developed quickly. According to Schofield & Co’s FNB bank statements, which we obtained through the leaks, Schofield travelled to Dubai in June 2018.

Cash flows

Upon returning later that month, Schofield’s business account received three large cash deposits amounting to R840 000 on the same day. All three deposits were made with the same reference: “Watches & Jewellery”.   A few days later, Schofield & Co made a single payment of R740 000 to Mathias Holdings in Dubai.

Large cash deposits are particularly suspicious in the eyes of financial intelligence units, because cash is untraceable. Judging by the identical references used, the deposits appeared to be related, , underscored by the fact that when added up, these deposits amounted to a nice round number – exactly R840 000.

In money laundering parlance, the term “smurfing” is used to describe the practice of breaking a single transaction up into smaller transactions to avoid detection by authorities. Schofield’s company account had never before received cash deposits. Yet in one day, it received R840 000 via three separate transactions.

It seems that Schofield’s bankers at FNB immediately became suspicious. On 2 July, FNB’s in-house financial crime analyst sent an email to the EFIU containing Schofield & Co.’s company documents, which included earlier bank statements for the company. The EFIU had been alerted.

A similar sequence occurred a week later, on 11 July. Six cash deposits amounting to R1.68-million were made on the same day, at the same branch, to Schofield & Co’s account. This time each deposit came with a different reference, including “Rolex Presidential”, “Diamondstraponrolex” and “Diamond Setting.”

The next day, Schofield & Co. sent R1.54 million – almost all the money it had just received – to Mathias Holdings in Dubai.

In a matter of weeks, Schofield & Co. had received millions of rands, dwarfing all the money that had arrived in their bank account in the preceding nine months.

As soon as the money left for Dubai, the pattern repeated. On 13 July, six cash deposits amounting to R1.52 million, all with the reference “Stock Purchase”, were made on the same day before a single payment for over R2.5 million was sent overseas to Mathias Holdings after a delay of two weeks.

Alistair Mathias did not respond to requests for comment.

Schofield said that he did not recall the deposits when we raised them during our interview. He did not respond to subsequent follow up questions regarding the matter either.

There was a subsequent lull in the account for a couple of months before even larger amounts of money swept through it in November and December.

At the same time as cash was rolling into Schofield’s company account, seemingly destined for Dubai, the pair established a company named the Mint of Eswatini in which they were equal shareholders. This company immediately obtained a license to operate in the SEZ, which provided tax incentives.  Schofield told us that he thought this would be the vehicle that would achieve his dream of developing a gold refinery in the country.

Enter AMFS

In November, instead of cash deposits, money began arriving in the account of Schofield & Co. via international transfers from an obscure company in Johannesburg named AMFS. 

On 2 November, a single payment of nearly R6 million arrived with the reference “amfs”. On the same day, just over R5.3 million was wired to Mathias Holdings in Dubai. South Africa to Eswatini, Eswatini to Dubai. The money was moving faster than a jet.

“It’s never proof of anything, but I always think it’s a red flag when you have a company that receives and dissipates money immediately,” says Paul Holden, who assisted the Zondo Commission on state capture as an investigator. “Most legitimate companies hold on to some of their assets for reserves, they pay office costs. … They have all these extraneous expenses that reflect on their account, and you can tell an operating business’s account pretty quickly.”

Between the end of November and the middle of December, AMFS sent another ten transfers amounting to over R67 million to Schofield & Co. But this time, instead of going straight to Dubai, the money was transferred to the FNB account of the Mint of Eswatini, which then sent three international payments to Mathias Holdings in Dubai.

Excerpts of Schofield & Co. FNB accounts (November – December 2018)

Despite the plans to build a refinery, which would entail significant costs in Eswatini, the millions arriving in the country were immediately sent to Dubai. Schofield claims that this was to pay for inventory like gold bars and coins.  The volumes represented an enormous increase in the turnover through the account of Schofield & Co, which earlier in the year – before Schofield had met Mathias – would receive hundreds of thousands of rands a month.

Excerpts of Schofield & Co. FNB accounts (November – December 2018)

Schofield says Mathias alone controlled Mint of Eswatini’s bank accounts, even though Schofield was a 50% shareholder and a director of the company.

Schofield said he thought the cash coming from AMFS was Mathias’ money, used to purchase gold inventory: “We were receiving it [the money] and the idea was that that was part of the investment,” he told us.

Excerpt of Mint of Eswatini FNB bank account (November – December 2018)

Schofield alleges that Mathias sent money to Schofield & Co., which then passed the money to Mint of Eswatini based on invoices Mathias generated for gold bars and coins.

Mint, in turn, sent the money to Mathias Holdings in Dubai, ostensibly for the purchase of gold products. This suggests that Mathias was paying himself through Schofield & Co and Mint of Eswatini, something that would appear to be highly inefficient.

Excerpts of Schofield & Co. FNB accounts (December 2018 – January 2019)

A Central Bank of Eswatini letter from September 2019 asked: “why doesn’t Schofield and Company Jewelers directly purchase the gold bars from Mathias Holding FZC?”.

Mint of Eswatini added no markup to the transactions, according to the letter; it was merely a conduit for the money and supposed gold bars and coins.

Its bank account was opened days before it started receiving payments from Schofield & Co and, in January 2019, after a brief flurry of activity when the money from Schofield & Co. began pouring in, this account went dormant. FNB would later freeze Mint of Eswatini’s accounts.

The insertion of Mint of Eswatini into the chain of transfers from South Africa to Dubai via Eswatini could have been, according to the analysis of the EFIU, part of a “layering” pattern.

According to a recognised definition of money laundering, “layering” refers to attempts to hide or obscure the source of illicit money (money generated from criminal activity) through a series of elaborate transactions across different countries and entities.

On 20 December 2018, the EFIU sent a “Suspicious Transaction Report” to the country’s Anti-Corruption Commission to encourage it to look into the matter and, if necessary, investigate further.

The report provided a summary of the payments made in November and December, raising suspicions over “the manner in which all these transactions are conducted, especially receipts of huge sums of money, which were immediately disposed-of to one of the Directors company in Dubai”.

The EFIU was of the opinion that Mint of Eswatini could be involved “in some sort of criminality bordering around corruption and money laundering.”

When we put all this to Schofield, pointing out that the transactions bore the signs of money laundering and that he may therefore have been party to a crime, he replied:

“Definitely, I mean I can’t sit here and deny things, that would be stupid of me,” he said.

He pointed out that he was young at the time (29) and that, with the benefit of experience, probably would have recognised what was going on.

“Now that we can sit down and discuss it and talk it through, we can highlight all the problems and all the things that I didn’t see. But at the time I wanted to open up a refinery. As I say, Alistair came across as a person who was well ahead of my understanding of how the business actually functions. And I was kinda going along his lead,” says Schofield.

In January 2019 the two parted ways, according to Schofield, and Mint of Eswatini’s refinery was never built.

We don’t know where the money went after being transferred to Mathias Holdings in Dubai.

Holden says the city is among the “jurisdictions around the world which make money laundering incredibly easy, which are basically not compliant with anti-money laundering provisions and where it’s almost impossible to see those authorities collaborating in tracking illicit financial flows”.

Despite his newfound fame due to the Gold Mafia exposé, Mathias was not interested in responding to our lengthy set of questions. However, the letters “AMFS” on Schofield & Co’s bank statements provided a clue about the origin of the funds going through Eswatini.

The Big League

AMFS Solutions was little known in 2018, but soon began to attract notoriety following accusations of money laundering. The business was under new ownership, having been bought by Johannesburg-based businessman Carlo Stickling, who had acquired it from AMFS’s previous owner, Kalandra Viljoen, in November 2017 (amaBhungane previously set out some of the allegations concerning AMFS here and here).

At almost the same time AMFS began transferring money to Schofield & Co., records show that two new directors were appointed – Mohamed Khan and the since-deceased Sohail Jiwani.

As amaBhungane has previously reported, these two have, over several years, allegedly aided a variety of illicit financial operations by facilitating the expatriation of funds. This occurred most famously through Sasfin Bank, where their company SALT Asset Management was a broker representing several large clients. This most notably included Zimbabwean mogul Simon Rudland and partner Ebrahim Adamjee’s Gold Leaf Tobacco Corporation.

Mohamed Khan was also introduced to the public in the Gold Mafia exposé, in which he was accused of being one of the major money launderers in South Africa.

Quite why Khan and his business associate were purported directors of AMFS for roughly two-and-a-half months before abruptly resigning at the start of February 2019 remains a mystery.

Khan did not respond to any of our emails.

When we messaged Stickling to engage, he told us that he could not help and then promptly blocked us.

Prior to when AMFS began sending money to Schofield in Eswatini, its accounts had already been temporarily frozen in connection with allegedly receiving money from the looting of Namibia’s SME Bank.

In a tale eerily similar to that of VBS, the scale of the alleged theft and fraud perpetrated by SME’s executives led to its collapse.

The liquidators alleged that a portion of the millions of dollars stolen from the bank was laundered through AMFS, which they bluntly labelled “a money laundering machine”. A report by the EFIU noted the bad publicity around AMFS at the time.

A closer look at AMFS’s bank statements shows two names popping up repeatedly in relation to payments into the account: Northern Spark and JR Technical.

Both have previously been identified by the South African Revenue Service (SARS)  as among the suppliers of gold in a massive alleged refund fraud perpetrated against SARS that ran to billions of rands. The SARS claims remain the subject of legal dispute.

It is unclear what to read into the appointment of Khan and Jiwani as directors of AMFS in this period. Bank statements continued to be directed to Stickling, who was reappointed as sole director shortly afterwards.

However, the fact that AMFS channelled money through Eswatini to Mathias in Dubai suggests that alleged money laundering networks in Southern Africa were more integrated than was initially thought.

Back to the present

Today, Eswatini’s SEZ lies largely dormant. The lots are filled with weeds and the wide roads are empty. The refinery was never built, and the only completed building on the vast property is a government office.

The paper trail in the leak does not shed light on where investigations by Eswatini authorities ended up. The last indication was in 2022, when the country’s Anti-Corruption Commission sent a progress report on investigations to the EFIU. Nearly four years after Mint of Eswatini was founded, Schofield and Mathias’s involvement in suspicious transactions was still listed as an “active investigation.” No further details were provided.

Schofield told us that Schofield & Co.’s company accounts with FNB were never frozen or closed, and that he never received a call from officials at the bank asking him about any of the transactions involving Mathias.

Mathias told Al Jazeera that he had never laundered money or traded in illegal gold. According to the staff at one upmarket hotel we spoke to, he still visits Eswatini often.

Neither Mathias nor his associate in Zimbabwe, Ewan MacMillan, have been prosecuted by Mnangagwa’s government following the airing of the Gold Mafia.

The Central Bank of Eswatini and EFIU did not respond to our specific questions. Instead, they said in a joint statement emailed to amaBhungane that “we cannot respond to questions on any information relating to confidential communications and operations other than to entities legally entitled to hold this information.”

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The Global Fund, one of the world’s largest health financiers, is sending its inspectors to South Africa in response to allegations of tender fraud linked to an R800-million contract it funded, exposed in a joint Daily Maverick and amaBhungane investigation. 

On Wednesday, Health Minister Aaron Motsoaledi made the announcement during his oral reply to questions posed in the National Assembly. He was answering a question by DA member Michéle Clarke. TimesLive and Newzroom Afrika first reported on the announcement.

Last month, Daily Maverick broke the news of “ghost company” Bulkeng being awarded the lion’s share of the contract to install oxygen plants at 55 hospitals across South Africa. A subsequent joint Daily Maverick and amaBhungane investigation found evidence of potential tender fraud in the documents Bulkeng submitted for the contract. 

“When this story broke, it disturbed all of us, including [President Cyril Ramaphosa], who wrote me a letter to present to him a report within 14 days,” Motsoaledi told the National Assembly. 

According to Motsoaledi, the project is funded by the Global Fund, a Geneva-based powerhouse coalition of governments and civil society organisations dedicated to fighting Aids, tuberculosis and malaria. It is “the world’s largest multilateral funder of global health grants in low- and middle-income countries”, according to its website.

“When the story broke, I was in Brazil and the Global Fund was there,” said Motsoaledi. 

“We met and they promised that they too would send their own inspectors to investigate this matter.”

The Global Fund donates R10-billion every three years to South Africa, added Motsoaledi. During Covid-19, it set its target on acquiring oxygen plants for South African hospitals when it heard that facilities had run out of oxygen. 

“That’s why they decided that part of the money must now be used to put oxygen plants in 55 hospitals so that, in future, the hospitals will no longer issue tenders for oxygen, and they will be self-sufficient,” said Motsoaledi. 

He explained that his department delegated procurement to the Independent Development Trust (IDT), a government infrastructure implementing agency reporting to the Department of Infrastructure Development under Minister Dean Macpherson.

“For this issue, because we are just a client department, it is [Macpherson] who is busy investigating this issue, but I talk to him every day about it, including today, to get to the bottom of this,” said Motsoaledi. 

“I can assure you that it is being investigated by Minister Macpherson, because IDT accounts to him. I am working with him, and the Global Fund is independently going to investigate this matter because this is their money. Then they will be able to bring out the findings.”

Daily Maverick revealed last month that the contract to install the highly technical pressure swing adsorption (PSA) oxygen-generating plants ballooned from R256-million to R836-million. 

Bulkeng managed to clinch the lion’s share of the contract — about R400-million — despite the company having no online presence, no certification from the South African Health Products Regulatory Authority (Sahpra) and a very elusive director, Nkosinathi Ndlovu. 

A subsequent joint investigation by amaBhungane and Daily Maverick found more damning evidence that Bulkeng had seemingly used a Sahpra certificate belonging to a third-party company without that company’s knowledge, and a witness signature used in its offer letter to the IDT may have been forged. 

Read more: Alleged tender fraud, shock ‘death’ of contractor cloud R836m hospital oxygen plants project

Bulkeng also seemingly used a business address in Sandton to tender for the contract when it no longer occupied those offices. 

Days after Daily Maverick and amaBhungane finally met with Ndlovu, he was purported, via X (formerly Twitter), to have died; however, attempts to verify this at police stations, mortuaries and via the police were unsuccessful.

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The post The #Laundry: Shadow Banks, part one – phantom gold appeared first on amaBhungane.

Recap: In Parts One and Two of this series we saw how illicit gold seemingly made its way through a system winding all the way from the Reserve Bank’s Krugerrand subsidiary through a coin-dealing pastor to exporting refineries, allegedly in service of a huge tax scam. The next stop is Dubai and, the evidence suggests, a vast money laundering network with one mission in particular: sending huge sums to an entity called Aulion Global Trading – this time seemingly involving entirely fictitious gold.

BY Dewald van Rensburg

When recently retired Chief Justice Raymond Zondo presided over the sprawling Commission of Inquiry into Allegations of State Capture, a brief and easily overlooked appearance was made by one Kalandra Viljoen, nominal owner and manager of Asset Movement Financial Services (AMFS).

This “cash-in-transit” company, which did a suspiciously large amount of business simply making electronic payments between third parties, had been the conduit for about R4-million leached out of airline SA Express via a company named Koreneka.

R4-million was a drop in the ocean of state capture and, as we saw in previous instalments, equally insignificant in the world of AMFS.

Zondo was, however, moved to add a recommendation to his final report that the South African Reserve Bank (SARB) should look into the company.

“The question that needs to be answered is whether AMFS was providing general money laundering facilities to those who wished to have their proceeds converted to cash without the necessary checks required from the formal banking system,” he stated.

If only he knew.

For a sense of scale, the bank statements we have for AMFS reflect flows of roughly R33-billion through the company between its creation in early 2015 and early 2019. Much of that was the revenue of a small set of gold refineries which, as we saw in previous instalments, was at times destined for questionable recipients.

In particular, we have seen evidence suggesting that at least R5-billion of this consisted of payments to Krugerrand dealer African Medallion Group, seemingly originating in large part from the micro-refinery The Gold Kid, which used AMFS to make these payments (as described in Part Two).

Some of AMFS’s colossal flows also seemingly involved small once-off deals like the Koreneka one above.

Its bank statements are littered with incidents: for instance, what looks like R6-million received from fugitive pastor Shepard Bushiri in December 2017, which seems to have been destined for cash delivery.

Scattered throughout the books, as well as across extensive documents from both inside and outside AMFS, we have found what appear to be other huge clandestine operations.

After Krugerrand buying, the single largest coherent “project” that can be discerned is the channelling, between 2016 and 2019, of billions of rands to Aulion Global Trading in Dubai, as well as a few related entities in Dubai and Hong Kong, using several successive avenues wherein AMFS played a key role.

We can now reveal, based on the information available to us, that this “operation” involved over R5-billion leaving South Africa for Dubai under false pretences over the four years, although this is very likely an underestimation due to the limitations of our data.

Alongside AMFS, this story involves a wider cast of characters, byzantine financial arrangements and, our information suggests, at least a billion rands’ worth of non-existent gold “traded” between South Africa and Dubai.

Birth of the “gold lion”

Aulion Global Trading was registered in October 2015 by the owners of The Gold Kid –Andries Greyvensteyn and sanctioned money mover Howard “Howie” Baker’s notorious gold refinery.

AMFS was also set up in 2015, again with the involvement of Greyvensteyn, who recruited the aforementioned Kalandra Viljoen from another cash-in-transit company named Rustic Stone Trading 10, which operated in the gold sector.

She was to be the sole shareholder in AMFS, which operated out of The Gold Kid’s premises in Nigel.

The Gold Kid immediately became AMFS’s main client, even though the latter would go on to service a wider array of similar gold operations. Many of these operations have been investigated by SARS for alleged tax fraud.

The three companies – The Gold Kid, Aulion and AMFS – are inextricably bound together through the involvement of Greyvensteyn and Howie Baker.

And, as we will show, Aulion came to be central to an even larger network.

Both amaBhungane and other media publications have reported on parts of the Aulion gold network and its alleged receipt of the proceeds of alleged illicit cigarette sales by the Gold Leaf Tobacco Corporation, which is controlled by Simon Rudland and partner Ebrahim Adamjee.

 Gold Leaf has denied wrongdoing and is fighting a 2022 preservation order obtained by SARS against the company and its directors.

New evidence, however, gives significant insight into the true scale of the Aulion endeavour, including what went on behind the scenes and who else was involved.

Among other things, we can show how many other entities locally and abroad channelled funds to Aulion. For this, at least one other “shadow bank” in the mould of AMFS was used.

First, however, we will explore what looks like a daring scheme to position Aulion at one end of a colossal circular money laundering system involving the apparent faking of gold trading.

Johannesburg to Dubai and back

AmaBhungane has obtained no less than 5 378 emailed instructions sent by Howie Baker to AMFS’ Kalandra Viljoen between September 2015 and 2017, including instructions to pay the controversial Krugerrand dealer we reported on in [Part Two] of this series.

Of specific interest here is a subset of 134 of these instructions, each of which direct AMFS’s Viljoen to make payments to a FNB account with the reference “Sasfin payment”.

In each of these cases, Veronica Schubach, then manager of The Gold Kid, was copied.

Coupled with evidence drawn from bank statements, this indicates that the money for “Sasfin payments”, at least on paper, came from Greyvensteyn’s refinery, The Gold Kid.

Let’s illustrate this by examining the transaction chain over the course of a single day. We begin with an email sent by Baker on 20 October 2016:

Tracing the ensuing bank statements clearly demonstrates how the “Sasfin payment” reached its actual intended beneficiary.

The trail starts with The Gold Kid, AMFS’s main client.

In The Gold Kid account, we see four outgoing payments for the day totalling just under R26-million. We then see these payments – recognizable due to matching reference numbers – arrive in AMFS’s account.

At AMFS, the requested amount of R17 450 673 is paid out to Sasfin, as directed in Baker’s email. Another payment of R9-million is also made; this does not concern us here but explains why a total of R26-million had originally been transferred.

Now we move to Sasfin itself, or rather its transaction account held at FNB – the account Baker gave in his email. At the time, Sasfin was not a transactional bank but instead held accounts at all the other major banks. Sasfin received clients’ money via these banks before paying it abroad.

At FNB we see the R17 450 673 payment from AMFS arriving and on the same day being paid forward to Sasfin’s account at Nedbank, mixed up with some other small amounts received on the day.

This payment just reflects Sasfin’s practice of settling outbound payments every day by pooling the amounts paid into different accounts in one place.

At Nedbank we again see this amount arriving and, later in the day, the exact amount requested by Baker gets paid offshore to Aulion with the reference “Gold Leaf Tobacco Corp” – Rudland and Adamjee’s cigarette company, suggesting either Gold Leaf was involved in the scheme or that the money was ultimately theirs.

In reply to amaBhungane’s questions, Gold Leaf’s lawyer Raees Saint denied this inference.

Saint argued that “at the core of your inquiry is the assumption that funds flowing through various entities must somehow be connected to our client by virtue of certain payment references. There exists no evidence to suggest that these transactions involve or are funded by our client and any assertion of this nature is nothing more than a flagrant lie. Reference codes in bank statements or proof of payments are not the criteria in determining the true origin, ownership or purpose of funds…”

Regardless, we can see examples of this transaction train repeated at least 134 times with various supplier references (including but not limited to Gold Leaf), with the total value adding up to R2.7-billion.

These transactions were justified by invoices for alleged imports generated by a broker named SALT Asset Management, which belonged to two associates of Baker and Greyvensteyn: Mohammed Khan and Soheil Jiwani.

Many of the invoices generated by SALT are obvious fakes; in some instances, banking details for Aulion are simply pasted onto legitimate invoices from other companies.

But this is not the end of the story.

Ghost gold

Sending money offshore under false pretences is one thing. These payments seemingly went much further, with at least a very significant portion of them entering a novel circular system which at first glance makes no sense at all.

Based on the evidence available, it appears that much of the money Baker ordered to be paid to Aulion via Sasfin was for gold that existed only on paper.

Let us return to the R17 450 673 payment we followed from The Gold Kid to Sasfin’s account at Nedbank, from where it was paid offshore.

In Aulion’s bank statements this amount arrives with the same reference used at Sasfin – Gold Leaf Tobacco Corporation.

Another large payment of just over R20-million arrived at the same time. We have also traced this payment back to Nedbank and a payment bearing Gold Leaf Tobacco Corporation as a reference, although we have no record of who owns the account that made this payment.

Here is where things get strange.

The Aulion account is quickly drained by outward payments, all marked “Gold Kid”, i.e., the very source of the money to begin with.

All these payments from Dubai back to South Africa are visible in one of the accounts held in South Africa by The Gold Kid.

And then the money is immediately paid onwards again.

We can trace these payments back to AMFS, where the money arrives just in time for another instruction from Baker to pay it to Sasfin in order to start the whole process over again.

And here is where the true nature of the scheme seems to lie: an entirely circular flow of money from The Gold Kid to Aulion and from Aulion back to The Gold Kid. The question is why engage in such a seemingly pointless exercise?

A major clue lies in the payment references Aulion used to pay money back to The Gold Kid. Each of these are given as “AL” followed by sequential numbers. In the excerpt from Aulion’s account above we saw payments marked AL67 through to AL69.

These are also used in the statements of The Gold Kid when it receives the money.

Scouring The Gold Kid’s statements reveals many more “AL” payments. commencing no later than January 2016, shortly after Aulion was created.

Looking at 2016 as a whole, we see at least R1.17-billion arrive in The Gold Kid’s account through these “AL” payments.

Fake gold for real VAT?

SARS has conducted a far-reaching audit of The Gold Kid’s business, as we reported in a previous instalment.

From the details of this audit, it seems that payments to Sasfin (and ultimately offshore to Aulion) were disguised as payments to South African suppliers of scrap gold. If our interpretation is correct, The Gold Kid was seemingly pretending to buy gold in addition to its real gold business.

This interpretation is supported by the fact that the VAT invoices The Gold Kid used when it allegedly paid its scrap gold suppliers in fact match payments made to Sasfin or other entities that do not appear to lead back to the ‘suppliers’.

For example, on the day the payments above were being chanelled to Aulion, The Gold Kid declared it was paying a supposed supplier called Bhekusifiso Scrap. This is reflected in so-called tax type reports it produced for SARS in which it show the supposed payments with the VAT supposedly paid.

Thus far we have seen no actual financial records of the claimed payments being made to The Gold Kid’s supposed scrap gold suppliers, although Greyvensteyn has vowed to produce this evidence at some point in an ongoing court battle with SARS, as we reported on in a previous instalment.

At the other end of the equation The Gold Kid’s documentation of sales perused by SARS showed it making sales to Aulion of about R1.1-billion – pretty much the same amount of money we saw going through the “rinse cycle” between South Africa and Dubai.

In other words, what we see is The Gold Kid allegedly sending money to Aulion under the guise of buying gold domestically.

This money then comes straight back to The Gold Kid while it declares, in the documentation perused by SARS, that it is exporting gold to Aulion.

The pattern suggests that not only the purchases of gold but also the sale of gold were, at least some of the time, fake. It seems that no gold ever really changed hands, certainly not in the quantities that would match the amounts of money involved.

The whole point, again, would be the claiming of VAT refunds for the fictitious exports (which are zero-rated for VAT), which would have been based on (again, allegedly fictitious) purchases of gold that would have come with VAT.

This is the basic system that was outlined in Part Two of this series. Essentially, this earlier iteration of the alleged scheme appears to operate by generating payments for gold that doesn’t exist.

This would have the same effect as the better-known version of the scheme which involves using tax-free gold like Krugerrands (also zero rated) disguised as “scrap” to generate bogus tax refunds, a practice which has cost the fiscus billions.

While the documents we have suggest that the system we described above was in full swing in 2016, it becomes harder to interpret the nature of payments made via Sasfin in 2017, not least because The Gold Kid switched banks from ABSA to Standard Bank and the “AL” references disappeared from its statements.

New systems, new partners

From 2017 through to 2019 the configuration of The Gold Kid, AMFS and Aulion started shifting, with Aulion, the Dubai company, obtaining mountains of funding through new channels and, as far as we can tell, spending a large amount of it on real gold.

Aulion did in fact buy gold while The Gold Kid did sell it. As we showed in a previous instalment, a lot of this was complicated by the introduction of Krugerrands into the system, but nonetheless, real gold sales took place.

The Gold Kid sold practically all its gold to Rappa Resources, one of few export-orientated refineries. Rappa denies any knowledge of whatever The Gold Kid may have been up to and no evidence we have suggests otherwise.

Aulion, in turn, made all its gold purchases from Rappa.

It was not the refinery’s major client, but its purchases were nonetheless significant.

Using the limited data at our disposal we have very roughly calculated the scale of Aulion’s purchases from Rappa.

While we estimate the figure to have almost reached the R1-billion mark in 2017, Rappa CEO Gary Bickerton told us that the real figure is “less than R1-billion”, albeit without volunteering how much less.

From our rough calculations, it can be seen that Aulion’s purchases from Rappa escalated massively in 2018 and 2019.

But how was Aulion – and by extension all this gold buying – being funded?

The payments being made to Aulion via Sasfin came to an abrupt end in July 2017 following an internal decision by the bank to terminate Gold Leaf as a customer.

Our documentation for this period contains gaps, but we can pick up the trail of “Project Aulion” again in early 2018 when major new characters began funnelling money to this Dubai company.

Beyond Sasfin

AmaBhungane previously revealed a massive laundering operation that emerged during 2018 and 2019 using the now-liquidated Habib Overseas Bank [link].

Early in 2018, an account was opened at Habib by a company named PKSA Finance. This company belonged to Mohammed Khan and partner Sohail Jiwani, the aforementioned associates of Baker who gained notoriety after Khan featured prominently in an Al Jazeera documentary on a regional “Gold Mafia” last year.

Over the course of 2018, PKSA received nearly R1.4-billion and paid most of it straight out again – almost entirely to Aulion.

At the same time, another entity associated with Khan, Ovenbird, opened an account at Habib. This account received R370-million in less than two months and again paid almost all of it out to Aulion.

In 2019 a new front named Actinic was created and, as we reported, opened several accounts at different banks, accounts from which it promptly began sending money to Aulion. From a SARS audit of one of Howie Baker’s companies we know that Actinic was also being funded by him.

Combined with the earlier operation through Sasfin, this brings payments to Aulion to the region of R4.5-billion over three years – this just from entities we know about.

As before, a lot of the money from these new entities came from AMFS and, by extension, The Gold Kid.

But a lot came from elsewhere.

One particularly notable source was another shadow bank in the mould of AMFS: cash-in-transit company RENS Kontant in Transito – the subject of a coming instalment. Also notable was another refinery named Metal Enhancors.

RENS leads us beyond gold to the door of alleged tobacco smugglers associated not only with Howie Baker but also the man widely considered to be the power behind the scenes –  cigarette mogul Simon Rudland.

Like AMFS, RENS was seemingly just the conduit.

The customer: Baypass

According to records we have obtained, including bank statements, payments coming from RENS were all done on behalf of a company named Baypass Logistics.

Baypass had also earlier, in 2017, channelled R324-million into AMFS. This money was, as far as we can establish, used for the purchase of Krugerrands at the behest of Howie Baker.

There is an immediate red flag hovering over this multi-million rand company: the sole director is an individual whose last known employment was at a bottle store and who is simultaneously the sole director of seven different “logistics” companies.

Our efforts to identify the true hand behind Baypass leads straight to the illicit tobacco sector, specifically the trade between Zimbabwe and South Africa.

In RENS’s internal client book, the contact person for Baypass is given as simply “JC”, with a Zimbabwean phone number that doesn’t work and an email address no one responds to.

We did however find a 2018 email between “JC” and a RENS employee:

Morning JC

Hope all is well. Can we URGENTLY get a response on this letter.

Kind Regards,

Attached to this email was a letter signed by RENS owner Christo Janse van Rensburg requesting that “JC” provide a formal letter on a Baypass letterhead listing the services RENS is supposed to render. This should include collecting cash and making electronic payments to Baypass clients, said Janse van Rensburg.

Crucially, however, the letter ends with a note:

“Just a friendly request can you please back date the letter to the 1st time we serviced Gold Leaf Tobacco Corporation on 1st July 2018.”

Readers will recall that Gold Leaf is the tobacco company owned by Rudland and partner Ebrahim Adamjee.

The evidence thus raises the possibility that Baypass, after already moving hundreds of millions for Rudland associate Baker, became Gold Leaf’s conduit for paying money to South African recipients via RENS.

Gold Leaf did not respond to questions about Baypass, but their lawyer’s comments about references to Gold Leaf by third parties not being evidence of his client’s involvement would apply here.

Baypass, however, also has another link to the tobacco sector.

The shelf company vendor who registered and then sold the Baypass registration provided us with an email address for the buyer – one identifiably belonging to a Roy Muleya.

This would appear to be the same Roy Muleya who made headlines in 2021 when SARS accused his company Verbena Freight and Logistics Management of owing an astonishing R19-billion in custom duties related to alleged tobacco smuggling from Zimbabwe.

It is possible that there are two individuals named “Roy Muleya” involved in large-scale illicit cross-border activities, but additional circumstantial evidence reinforces that the buyer of Baypass and the alleged tobacco smuggler are one and the same.

The SARS case against Muleya was heavily redacted in court, but mention was made of him using Verbena and seven other companies to, on paper, import tobacco. This happens to neatly fit the existence of the seven suspicious companies with the bottle store employee as their unlikely director.

The above suggests that Baypass was associated with Gold Leaf, which makes its larger list of apparent clients all the more interesting.

Watch out for our next instalment where we delve into this mysterious client of RENS, as well as the other damning clients hidden in its books.

The post The #Laundry: Shadow Banks, part one – phantom gold appeared first on Vuka News.

Major-General Gopaul ‘Gopz’ Govender, the recently appointed head of the Directorate for Priority Crimes Investigation (DPCI) in Limpopo, has been accused of attempting to close down the investigation of the murder of “Bazooka” Radebe, the late chair of the Amadiba Crisis Committee (ACC).

Before his promotion in December 2022, Govender had served as Eastern Cape Provincial Commander for the Serious Organised Crime unit of the Hawks. During this time he took over control of the Bazooka investigation from mid-2017 until about 15 February 2021, when Govender effectively abandoned the case by sending an inquest docket to Mbizana Magistrates Court.

Govender allegedly favoured an informal inquest – a procedure that would normally be appropriate when a death cannot be ascribed to an act or failure by any person, for instance if the deceased committed suicide.

Bazooka was killed when two men who said they were policemen came to his workshop and insisted he accompany them; when he resisted they shot him multiple times and fled in a hijacked car.

The car had been hijacked in Port Edward in KwaZulu Natal. Two South African tourists heard but did not see the murder (one was locked in the boot, one was on the floor in the back seat) and escaped unharmed when the car was later abandoned.

There has never been an arrest, though the ACC has always alleged Bazooka’s murder was most likely motivated by his opposition to mining at Xolobeni, where an Australian firm and its local backers want to dredge the pristine coastal dunes for heavy minerals.

The case was always fraught with political undertones, as amaBhungane’s report on the killing and its aftermath showed.

Now Govender’s efforts to close the case have been called into question, notably in light of the emergence of a so-called “information note” which appears to have been prepared to justify his decision to his then superior, Major-General Obed Ngwenya, head of the Hawks in the Eastern Cape.

The information note, which amaBhungane has seen, is attached to a detailed affidavit and complaint submitted by Dr Dick Forslund, an economist at the Alternative Information and Development Centre (AIDC), who is married to Nonhle Mbuthuma – one of the leaders of the ACC.

The affidavit recounts a litany of alleged missteps and misinformation associated with the investigation, culminating in the information note, which Forslund alleges provides grounds for Govender to be investigated for defeating the ends of justice.

The copy seen by amaBhungane is unsigned, but is addressed to Ngwenya on Govender’s letterhead. If genuine, it is an extraordinary document.

Despite receiving very detailed questions based on the information note and the affidavit, neither Govender nor Ngwenya were prepared to comment.

They both took the position that the matter was sub judice.

AmaBhungane has established that a complaint has been registered by the Independent Police Investigative Directorate under number CCN2023030199 after a criminal case had been opened in East London as CAS 560/02/2023.

It is not yet clear whether IPID believes Govender – or any other policeman – has a case to answer.

However, while the information note claims everything was done by the book in the Bazooka investigation, it has two distinct threads that arguably show bias and unprofessionalism on the part of Govender, then a brigadier.

Firstly, it magnifies claims about potential other motives for the murder of Bazooka while minimizing the importance of his role in the ACC and the mining dispute.

Secondly, it attempts in quite a crude fashion to undermine the credibility of Forslund and the integrity of the private investigation that he helped put together and raise funding for.

The information note

Badmouthing Bazooka

Some of the flavour of the approach taken in the information note is provided by excerpts dealing with Bazooka and the motive for his assassination, which give the impression of a deliberate smear.

The second paragraph states, “The deceased at that stage was a controversial person in the greater Bizana District… as he was heavily involved in the taxi industry and was the chairman for many years, when taxi violence was at the highest.”

It goes on, “He [Bazooka] was also linked to the Marakana Killing in Limpopo through the Marakana Sangoma that was shot and killed in the Bizana area of the deceased.”

In his affidavit attached to the complaint, Forslund clarifies that Govender is referring to the 24 March 2013 murder of Mr Alton Joja (aka “Ndzabe”, aka “The Sangoma from Marikana”).

Forslund notes, “Bazooka was allegedly called in by the police for questioning after the murder of Mr Joja, a reason being an argument in or about November 2012 concerning 10 taxis that Mr Joja had placed in traffic in Mbizana. In their argument, Mr Joja allegedly threatened Bazooka who then went to the police in Bizana to report it.”

Another man was later arrested and charged for the Joja murder, something Govender must have known.

Disparaging Forslund

In paragraph four, the information note extends the smear. It questions the credentials of the ACC and implies Forslund is a dirty old man.

It states, “It was also alleged that he [Bazooka] was the chairperson of’ the Anti-Mining Committee — Amadiba Crises Committee (ACC) that was propagandered by an old foreign white male by the name of Mr Dick Foslund. This white male was allegedly married to a young Xhosa female by the name of Nonthele.”

Later on, the note, which Govender has not disavowed, goes even further, saying, “What became evident during the investigation is that the White man Mr Dick was using the Xhosa lady and ACC as a springboard for sourcing international funding on behalf of this murder case. He started sourcing millions of rand from international donors on behalf of the ACC and using this murder investigation as a leverage to get money.”

In his affidavit Forslund sets out how disingenuous these claims are.

He notes: “As anyone… in Mbizana knows, Bazooka was the Chair of Amadiba Crisis Committee since its foundation in 2007. Brig Govender put this fact into question with the word ‘alleged’. Bazooka worked in that position at the time of his death, closely cooperating with Nonhle and Mzamo Dlamini in the ACC leadership. The three met frequently to discuss ACC matters. A meeting was scheduled at 7pm in Bazooka’s house on the day of the murder. It was cancelled because of Nonhle’s and my son being ill.”

Elsewhere Forslund remarks, “The ACC doesn’t need to be ‘propagandered’ by the old foreign white male. The ACC claims over 2000 members on the Amadiba coast. The ACC is widely known in Eastern Cape and the whole country, not least for successfully blocking the ‘Xolobeni Mining Project’ in Court.”

He adds, “Brig Govender knows that Nonhle and I are married, but writes ‘allegedly married’… he met Nonhle and myself on 24 May 2019… at the Port Edward police station for a 3-hour meeting [purported to be about Nonhle’s security]… Responding to one officer, Brig Govender told him I am Nonhle’s husband…”

Forslund explains that the private investigating agency, the iFirm, was engaged to assist with the investigation in August 2016 after a R500,000 grant from the Raith Foundation and that another investigator, Shane Moodley & Associates, also did work, both firms at reduced rates and some of the work pro bono.

Defaming the iFirm

The information note is particularly scathing about the iFirm.

It says, “[Forslund] subsequently employed two ex SAPS generals, General [Mzwandile] Petros and General [Thulani] Ntobela of i-Firm to get inside information from the criminal dockets in order use the information to request donor funding. He did succeed to a certain extent when the two ex-generals manipulated a former SAPS General Molo, who was the then Provincial Head of SAPS Detectives of the Eastern Cape, to corruptly make copies of the content of the criminal docket and give it to them.

“What is abundantly clear, is that the reports the iFirm, the private investigator, was submitting was because of their financial benefits that they were receiving payment upon

producing such reports to the white man, Mr Dick.”

In his affidavit, Forslund responds: “Brig Govender defames Generals Ntobela and Petros, who had no financial gains from the investigation other than from working at reduced rates. They for example attended to the case pro bono from August 2017 to January 2018.”

He explains that private monitoring of the investigation was justified from the start because of the attitude of the local detectives, including members of the Hawks.

Forslund recounts how Bazooka’s son Tarzan began to suspect a cover-up when the investigating DPCI officer, on 24 March 2016 at the Bizana morgue, had floated the opinion that it wasn’t necessary to search for ballistic evidence in the body of the deceased as the father in the family was dead anyhow.

These suspicions hardened when, Forslund alleges, DPCI in Bizana refused to bring in and interrogate prima facie suspects identified quite early on, and later when DPCI in Bizana blocked the lodging of two crucial subpoenas to telecoms service providers.

Forslund notes that it is common practice in the overstretched SAPS to accept assistance from private investigators, especially when they are experienced ex-cops.

He points out that private assistance in the Bazooka investigation was canvassed with senior police officers on a number of occasions, including with the KwaZulu Natal head of Organised Crime on 16 September 2021, with General David Molo before his retirement in June or July 2017, and in a meeting in November 2017 with the then Acting Head of the DPCI, Lt Gen Yolisa Matakata (today Mokgabudi).

Forslund reveals that at that meeting Matakata agreed the investigation should be moved to DPCI in Port Shepstone because it appeared blocked by politics in EC. He says that on 18 December 2017, General Petros telephoned as agreed the Acting Head of DPCI in EC, Major-General Zinhle Mnonopi, asking about the transfer.

According to General Ntobela her answer was: “What is it that is so important with this case? There are murders every day”.

The docket was not moved.

Govender gets involved

Even Govender initially appeared well disposed towards the private investigation.

On 6 July 2017, then Brigadier Govender met retired generals Ntobela and Petros of the The iFirm for a handover of their findings and to agree on the way forward.

Forslund recalls, “The Generals reported back to Nonhle, Mzamo and myself… They told us that Brig Govender had said there had been a cover-up. Brig Govender told the private investigators that a team had arrived from Pretoria after 22 March 2016 “to block the investigation”. (Govender later denied to Forslund at the meeting in Port Edward that he had suggested there was any cover up.)

The generals reported that Govender also agreed to combine the still separated hijacking and murder dockets: “Gen Ntobela recalls that Brig Govender called Captain Dindi of the DPCI office in Bizana about it during the meeting, telling him to combine the dockets into one, as they were about the same case.”

Ending the artificial separation between the hijacking case (with a KwaZulu Natal jurisdiction) and the murder case (with an Eastern Cape jurisdiction) was regarded as a key breakthrough. 

According to Forslund, Govender also agreed to interview the hijacking victims again as the private team had established that they had important extra information to give.

The generals believed they were all “on the same page” regarding the way forward.

That impression was wrong.

Forslund states, “A couple of weeks later retired General Ntobela reported that Brig Govender had stopped answering his calls and emails despite the agreement they would stay in contact.”

No progress, no cooperation – even with Crime Intelligence

When the second private investigating team under Moodley took over, they could not get any further either due to a lack of cooperation from the DPCI in EC, Forslund alleges.

Frustration grew to the point that in 2019 the Radebe family lawyer, Henk Smith, sought a meeting with the then newly appointed head of Crime Intelligence Lieutenant-General Peter Jacobs.

Jacobs and Smith knew each other from when Jacobs was imprisoned on Robben Island, and Smith as a young attorney had come to Jacobs’ assistance.

Jacobs was concerned enough to order a counter-intelligence team to probe whether there was any merit to the allegations that the Bazooka investigation had been sabotaged from inside the SAPS in EC.

Forslund claims, “The approached officers refused to cooperate… As a leader of the investigation, Brig Govender for his part repeatedly refused to show the Cl-team the docket.

“Indeed, on or about 25 September 2020, I talked with Warrant Officer ‘Stompie’ Sonnekus (Ret.) In 2016, he worked at the DPCI in Port Shepstone and engaged in the Bazooka investigation for a couple of weeks after the incident… I called Sonnekus about the Cl-team, as they might contact him. He then told me that he recently met with Brig Govender in court. He said that Brig Govender had told him not to speak with the Cl-team.”

Forslund says it became clear that by the end of 2020 the Cl investigation had reached an impasse: “We got the impression that the Counter Intelligence branch… doesn’t have the power to impose its requests on other branches of SAPS.”

In the information note (supposedly penned by Govender) the CI intervention is portrayed in quite a different light. It notes:

“My belief is that Crime Intelligence should be providing the investigation team with any Intelligence Information or remote evidence to enhance the investigation and not requesting evidence out of a criminal docket that is to be used in a court of law… during our investigation process it became apparent that Private Investigators (retired senior officers —Generals ) have approached many CI policemen to source information from this investigation for financial gain.”

Enter General Ngwenya

Around the beginning of 2021, the iFirm’s General Ntobela alerted the new head of the DPCI in the Eastern Cape, General Ngwenya, that the Radebe family and the ACC alleged that the Bazooka murder investigation had been blocked and that he shared their belief.

According to Forslund, General Ngwenya then requested the docket from Brigadier Govender.

Forslund states, “On or about 26 January, Gen Ngwenya sent officers to Brig Govender’s home to fetch the Bazooka investigation docket. Brig Govender had previously said he was in Covid isolation and for time being couldn’t deliver the docket to Gen Ngwenya.”

In the meantime, Smith [the family attorney] and Forslund were able to obtain a meeting with the NPA’s Advocate Margaretha Brits on Tuesday 9 February 2021.

Forslund adds, “As for the docket, Adv Brits told us that Gen Ngwenya finally had got it on 8 February, the day before we met her.”

Forslund says Brits told them a meeting about the matter had been arranged for a week later between herself, the regional Director of Public Prosecution Advocate Barry Madolo and General Ngwenya.

Smith later recorded his understanding of the meeting in a letter to the NPA, noting, ”Adv Brits proposed that a matter of this kind should be investigated and prosecuted by an ad hoc team consisting of a senior prosecutor and senior DPCI investigator from each of the two relevant provinces ie Eastern Cape and KZN, and the NPA national office.”

That did not happen.

Instead, according to Forslund, Govender intervened in two ways to try to torpedo further investigation.

He alleges that on the evening of the meeting (9 February) a raid was conducted on Tarzan Radebe (Bazooka’s son).

The police confiscated the handgun of his late father and Tarzan was charged for its illegal possession, though the case has gone nowhere.

Forslund claims that General Ngwenya told General Ntobela later in a phone conversation that the raid had been ordered by Brig Govender as a part of the Bazooka investigation, though Forslund sees it as part of an effort to disrupt the family’s efforts to get to the truth and receive justice.

Govender’s other action, Forslund contends, was to try to hurriedly close the Bazooka investigation by sending it for an informal inquest at the Mbizana Magistrates Court on about 15 February.

The information note states, “The DPP of Umtata jurisdiction, Mr Barry Madolo, was engaged and he requested that the docket be prepared for an informal inquest hearing. However due to our office being affected by the very high number of COVID positive cases and multiple closure of our offices have hampered the finalization of the inquest docket.”

The information note appears to set out Brig Govender’s motivation for this action, which Forslund believes was triggered by the meeting on 9 February at the NPA offices aimed at reigniting the investigation.

Forslund claims that the information note was prepared as an attempt to justify the lack of progress in the case and the decision to forward the docket for an informal inquest.

NPA’s odd role

Forslund adds, “I also contend that prosecutors in Eastern Cape have assisted in the attempt to continue the cover-up out of fear, negligence, sense of impunity, ‘esprit de corps’, political convictions or a combination of such factors, depending on the individual case.”

That allegation might sound like a stretch, but in answers to questions from amaBhungane the Eastern Cape NPA stated:

“Following representations made to the office of the DPP, senior prosecutors, including Control Prosecutor, Senior Public Prosecutor and the Chief Prosecutor, took charge, which resulted in the inquest held in 2021. The magistrate held that the death was brought about by an act or omission involving or amounting to an offence on the part of an unknown person.”

This account appears to ignore the fact that the key representation made to the NPA was a request for further investigation.

The NPA told amaBhungane, “The prosecution’s decision to take the informal inquest route was the best under the circumstances. it would not be possible to hold a formal inquest as there are no suspects.  There is nothing the NPA can do at this stage unless new leads, evidence or information, is handed to SAPS, under oath, and brought to the prosecution.  The purpose of the inquest is exactly that of getting any evidence that may exist, and or may have been overlooked.”

Yet that does not seem to be what happened.

The family and their lawyers were not even aware that their representations had been discounted and an informal inquest held, with no opportunity for them to give input.

On 26 March 2021, Smith went to Advocate Brits’s office in Mthatha for an agreed meeting.

According to Forslund’s account, he argued that referring the matter for an inquest was premature because the investigation was far from completed.

Adv Bits allegedly agreed to a virtual meeting on 1 April with herself and the prosecutors responsible for the inquest procedure, which the family thought was in abeyance.

On 31 March, however, she wrote to Smith that “The update meeting on 1 April 2021 at 10h00 need to be rescheduled — I will let you know of the new dates.”

But there were no further messages from Adv. Brits about new dates.

Forslund writes, “Little did we know that an informal inquest already had been done by then… Indeed, during the whole of 2021, Smith, Gen Ntobela and myself thought that the informal inquest was still pending.”

A second investigation

Unaware that the informal inquest had been finalised the legal team continued to lobby the new provincial DPCI commander (Ngwenya) to continue with the investigation.

Smith and Forslund met on 15 April with Ngwenya and two Generals from the DPCI Head Office in Pretoria. Ngwenya promised to get back to them with a decision.

In the meantime, Ngwenya would have received Govender’s information note (if indeed it was ever sent), which cast doubt on the bona fides of Forslund and the private investigators and maintained that everything that could be done on the case had been done under Govender’s watch.

If the information note did reach General Ngwenya, it failed in persuading him all avenues were exhausted.

At any rate, in about August 2021 he ordered a restart to the Bazooka investigation with a team led by a new investigating officer (I/O) seconded from DPCI in the Western Cape.

Forslund notes, “We met the I/O and one of the team members first time on 18 September 2021… During the meeting [he] also made sure to request all the cell phone data subpoenaed in 2016, which the service providers had kept archived. He had to do that because Brig Govender hadn’t handed over the original docket with all its material. This is the case until this day. The I/O has built his docket from the inquest docket that contained no technical documentation.”

It may be that Govender never handed over the investigation docket because Ngwenya never informed him of the new investigation. We don’t know because both generals declined to comment.

Forslund says the new I/O made progress in the investigation after interviewing selected individuals who had never before been heard. On 3 June 2022 he suggested to the NPA in Mthatha that charges should be brought against a suspect for conspiracy to commit murder.

“After consulting with Tarzan, Smith and myself met the new I/O on 21 November 2022 in East London. We were informed that an Advocate “Moloto” of NPA in Mthatha had called him two weeks earlier saying that the evidence wasn’t satisfactory to press charges. The new I/O said he hadn’t got a written decision or any advice from NPA.

“In January 2023, it however became dear that the new I/O probably had been ordered to abandon the investigation.”

Unfinished business

The unsigned information note on Govender’s letterhead states: “Between April 2016 and 1 January 2017 the task team was deployed to the Bizana area at great cost to the DPCI. A Iot of investigations, follow-ups and gathering of information and intelligence was done, but at that stage, nobody could be linked [to the murder] through ballistics, fingerprints or cell phone analysis.”

Forslund sets out why he believes this claim is ill-founded and misleading.

He states, “Such analytic linking by means of cell phone mast dump and call data was done by DPCI in Port Shepstone in September and October 2016 assisted by interviews of informers… done by the team of the iFirm. Five prima facie suspects were identified within six weeks from the start of the iFirm’s work on 3 September 2016. But the DPCI in Bizana was owning the case and refused to arrest the suspects or take them in for interviews.”

In addition, Forslund argues that certain crucial cellphone evidence was never subpoenaed at all, neither by Govender nor by the second investigation.

Forslund adds that Govender never interviewed the hijacking victims, the unsighted witnesses to the murder, from whom more might have been learned.

Indeed, despite Govender allegedly agreeing in 2017 that the hijacking and murder dockets be combined, it appears this was never done, or never done properly. The information note even argues that combining the dockets was impossible, despite this being an established practice in serial crimes.

The author purporting to be Govender says, “It is clear that both ex Generals of the private investigations have misled their client into believing that the two criminal dockets can be joined as one docket to please the client. The Port Edward hijacking scene of the vehicle and the Mzamba murder scene are two different places. The time of the crime occurred differently in different Provinces and Magisterial Jurisdictions and thus both crimes cannot be consolidated as one docket. Brigadier Govender indicated to them that the docket will run concurrent for court purposes.”

Forslund responds acidly:  “Today, Brig Govender no longer understands that if two assailants hijack a car 5km from a province border, drive 5km into another province with two hijacking victims captured in the car, murder a person and then flee back again over the border, using the car as the flight vehicle and keeping the hijacking victims in the car until fleeing by foot, they are committing a series of crimes in a row that must be investigated together. The perpetrators of the crimes are the same, the witnesses of the crimes are the same, the motive for the whole incident is one, the cell phone traffic and cell phone locations might be possible to follow tower by tower on both sides of the border, et cetera. To hide the obvious, Brig Govender provides no detail on the sequence of the events in this report to his superior Gen Ngwenya.”

If this is indeed what Govender wrote, then, Forslund argues, this somersault starkly demonstrates Govender’s male fides.

Whether IPID judges that all this amounts to defeating the ends of justice, time will tell. What is clear, however, is that it demands answers: a proper investigation and accounting.

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By Sam Sole

This follows the filing of an explosive final affidavit in a Durban high court challenge to the Business Rescue Practitioners (BRP’s) and the Vision consortium selected to buy up about R8.5-billion in crippling debt.

The “secured” claims are held by a “lender group” led by Standard Bank, which has the biggest exposure to the sugar producer.

The case is based on an application by a small, unsecured creditor, Powertrans, led by its sole owner, Durban businesswoman Mohini Naidoo.

Naidoo is asking the court to set aside the business rescue plan adopted at the meeting of creditors held on 11 January 2024.

That plan, backed by the lender group, would have seen the Vision consortium take control of Tongaat in circumstances that were already controversial but are now, Powertrans argues, unlawful and improper.

See our previous analysis: Who is behind the Tongaat Hulett bid battle? 

Among the disclosures surfaced by the case, the most striking are:

The Vision consortium, putatively fronted by local tycoon Robert Gumede’s Guma Agri, will actually be dominated by Zimbabwean businessman Rutenhuro Moyo’s Mauritius-based Remoggo Investments. Remoggo will hold around 56% of the restructured Tongaat business. This raises questions about where most of the cash is coming from, with the most likely source being the controversial Zimbabwean Sovereign Wealth fund, renamed the Mutapa Investment Fund, which falls under President Emmerson Mnangagwa’s son Kudakwashe (34) since his appointment as deputy finance minister.

The Vision consortium, which has missed multiple deadlines to make payment to acquire the lender group’s R8.5-billion in claims, had still, as of 26 July, not paid the purchase price contemplated in the Acquisition Agreement (more than six months after the adoption of the Vision rescue plan) and had only paid an undisclosed “substantial cash deposit”.

The BRP’s have allowed Vision and the lender group to shift the terms of the rescue plan so that Vision will no longer acquire all the debt, leaving the lender group with a residual claim against Tongaat of at least R3.6-billion that is likely to be settled via the sale of major assets and the break-up of the current Tongaat Group.

Naidoo, who launched this court application in April, said in her replying affidavit that confirmation of these facts was to be found in a recent BRP circular to shareholders, dated 10 July 2024.

“Therein, the BRPs conceded that the Vision Parties have not acquired all of the Lender Group’s claims and that they will not do so before the business rescue process is concluded; and announced that the Lender Group would retain a R3.6 billion claim against [Tongaat Hulett] post business rescue… The BRPs have not informed creditors of these facts.”

Naidoo argues that these changes are material and irregular, and that the BRPs had a duty to tell creditors that the plan they authorised would not fly but that a new plan was now on the table.

“Once the Plan was incapable of implementation according to its terms. that should have been disclosed to creditors and all affected persons. Instead, it is apparent that the New Acquisition Terms, as now disclosed in the Circular, were secretly agreed between the Lender Group and the Vision Parties, and that the BRPs intend to implement them as if they are authorised by the Adopted Plan – which they are not. On the contrary, the Retention [of a R3.6-billion claim] is severely detrimental to [Tongaat Hulett] and directly contrary to the central tenets of the Adopted Plan.

The problem with the new plan, Naidoo argues, is that it leaves Tongaat Hulett still facing the R3.6-billion claim. And with no surplus cash to settle the claim, the sugar producer will have no choice but to start selling off assets.

“The unavoidable inference is therefore that [Tongaat Hulett’s] assets will be at risk of being sold in order to discharge the Lender Group’s remaining R3.6 billion secured claim.

“It is common knowledge in the industry that [Tongaat Hulett’s] Mozambican business can be sold for approximately USD 200 million, which equates to about R3.6 billion. The amount of the deposit that the Vision Parties in fact paid is unclear. The BRPs and the Vision Parties have declined to provide any proof thereof. However, the proceeds of [Tongaat Hulett’s] Mozambican assets would probably be utilised to settle the Lender Group.”

Naidoo maintains that the BRPs and the lender group have in effect allowed Vision to pay for a significant part of the purchase price out of the sale assets of Tongaat itself, an indulgence not extended to other bidders.

She argues that “this is unlawful infer alia because it has not been authorised by creditors in terms of the Adopted Plan, and it is to the material and undisclosed detriment of [Tongaat Hulett’s] financial position post business rescue.”

She also points out that due to the delays, Tongaat is now exposed to significant additional interest payments and has not secured the extension of business rescue financing extended by the Industrial Development Corporation.

Finally, Naidoo claims that the Vision Parties and the lender group have been allowed to pursue their private interests by agreeing secret new acquisition terms and concludes that “for all of the above these reasons, Powertrans persists in its complaints that the BRPs have abdicated their peremptory statutory oversight obligations and accommodated a private transaction between the Vision Parties and the Lender Group, instead of a transparent, regulated business rescue process under their supervision.”

Both the BRPs and Vision have denied there is anything improper or impermissible in the process they have followed.

They have also accused Naidoo of being a puppet of Mozambican bidder RGS, which pulled out of the race shortly before the creditor vote in January this year.

Naidoo doesn’t care. She notes, “I have stated all along that there are many other affected persons who are aggrieved and share Powertrans’ complaints. The fact that other similarly aggrieved and interested persons are assisting Powertrans does not affect Powertrans’ right to bring this application.

“Powertrans is not pursuing this litigation for reward or any ulterior, undisclosed purpose. Powertrans simply seeks a determination of the lawfulness of the Adopted Plan by a Court.

“The BRPs, Vision Parties and the Lender Group will have to be transparent regarding the nature and terms of the relevant transactions. Only then may it be determined objectively whether the Plan is lawful and whether the BRPs have discharged their duties under the Companies Act.”

Meanwhile it is understood that some Tongaat shareholders have also sought legal advice ahead of the general meeting called by the BRP’s for Thursday, 8 August.

The shareholder meeting has been called to vote on an authorisation to issue additional shares, which would allow for the conversion of the portion of the debt purportedly acquired by Vision into an overwhelming 97% controlling stake.

This would leave current shareholders with substantially devalued existing shares, but the BRP’s have warned that the alternative is receiving nothing at all should the company be liquidated.

The Powertrans case – which has not yet been set down – has given existing shareholders some new leverage and it appears that the battle of Tongaat is far from over.

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Intercape attacks: the ‘murderous’ taxi boss at the center of the long distance bus extortion saga, first appeared on Amabhungane

AmaBhungane can reveal that notorious Eastern Cape taxi boss Bonke Makalala – currently facing a string of charges in the Western Cape, including murder, attempted murder and impersonating a police officer – played a key role in attempts by taxi formations to force long distance bus operators to stop competing with minibus taxis.

This throws a new light on claims made under oath by SAPS provincial commanders and the Directorate for Priority Crime Investigation (the Hawks) that they could find no evidence that repeated attacks on Intercape buses was part of an organised crime campaign to intimidate Intercape and other bus operators.

This despite Intercape previously putting up evidence showing that it was Makalala who formally presented the taxi bosses’ demands at a meeting with bus operators in March 2022, pushing them to raise their prices and deliver other concessions in order to ‘normalise’ the situation and bring the violence and intimidation to an end.

AmaBhungane has previously reported on how the Eastern Cape high court skewered police over their failure to investigate attacks on Intercape buses as organised crime.

The court ordered the police to conduct a proper investigation, overseen by the court and the National Prosecuting Authority’s investigating directorate (ID).

Instead of latching onto the evidence provided by Intercape – including on Makalala’s role – both SAPS and the NPA have opted to appeal the ruling. (Watch our video on the case here.)

Perhaps it was not clear to the police and NPA just who Makalala was. That excuse is no longer tenable, if it ever was.   

In the last months, Makalala has been in and out of three Western Cape magistrate’s courts (Wynberg, Blue Downs and Simon’s Town) on separate charges of impersonating a police officer, murder, two attempted murders and possession of an unlicensed firearm and ammunition.

Makalala, who hails from Tsolo in the Eastern Cape, was arrested in Pretoria in December last year on alleged crimes dating back to 2018 and 2019 and is currently in custody pending the outcome of a bail application amid allegations he attempted to bribe prison officials while in custody in Malmesbury. 

Makalala faces one count of the murder of a man in Nyanga on 13 December 2019 and the attempted murder of a woman and a child. He also faces charges of illegally possessing a firearm and ammunition that date back to 2018, as well as similar charges flowing from the recovery of a pistol and ammunition during his arrest in Pretoria.

He has proclaimed his innocence on all counts.

But he also features prominently in the series of cases brought by Intercape to try to stop the attacks on buses and the harassment of their staff and passengers.

According to the court papers, on 28 March 2022 Intercape CEO Johann Ferreira, alongside other long distance bus operators, attended a meeting in East London with representatives of various taxi associations from the Cape Amalgamated Taxi Association (CATA), the Cape Organisation for the Democratic Taxi Association (CODETA), UNCEDO and the Gauteng Taxi Association.

Ferreira states under oath that “at this meeting, the representatives of the long-distance bus operators were brazenly informed by the taxi representatives that the only way to resolve the issues between the parties (i.e. to stop the violence) was for the long-distance bus operators to agree to certain terms and conditions… [the] meeting was led by a man named Bonke Makalaia, who is affiliated with CATA.”

Ferreira alleges Makalala wrote instructions on a whiteboard detailing how the bus companies should inflate their prices.

The terms Makalala wanted long distance bus operators to adhere to included increasing their ticket price to R1000.00, limiting the number of buses per day, and indicating that bus operators may no longer stop in a number of towns in the Eastern Cape, specifically iDutywa. Butterworth, Ngcobo, Tsomo, Cofimvaba, Gcuwa and Nqamakwe.

Ferreira refused to agree to the terms set out by the taxi associations.

In his affidavit he said a photograph of Makalala presenting the demands and other photographs taken during this meeting were provided to both the SAPS and the DPCI, as was a recording of the meeting.

Ferreira said that in April 2022 he agreed to meet with one of those present at the East London meeting – a certain “Hamilton”, who was representing the Gauteng Taxi Association

Makalala also joined this meeting at Menlyn Main, Pretoria, where Ferreira alleges he was told that if Intercape paid an undisclosed sum of money, the restrictions placed on them by taxi associations would be lifted. Later, at another meeting where Makalala was not present, a figure of R5-million was mentioned, claims Ferreira.

Intercape refused to buckle, but owing to the violence was forced to stop operating in the towns designated “no-go zones” by the taxi bosses.

Ferreira told the court that “the criminals who are behind these attacks are profiting from their reign of terror… first, by demanding extortion payments from long-distance bus companies against the threat of ongoing violent attacks; and second, by preventing long-distance bus companies from operating in certain areas and thereby eliminating any competition for taxi associations within the long-distance transport industry.”

According to Ferreira, in Makalala’s case the scheme went even further.

He points out that in the second half of 2022, Makalala seized the opportunity presented by the “no-go zones” to start his own long-distance bus company servicing these areas: Makalala Trans.

Makalala brought in his own buses to operate in hotspot areas where Intercape had halted operations.

Ferreira notes that “this appears to represent the next step in the stratagem of those behind the acts of violence; to fill the void created by their campaign of violence with their own services.”

According to the Makalala Trans web page, Makalala currently owns 17 taxis and 4 buses, and has 42 employees. The buses operate mainly between Cape Town and Mthatha, with the company office in Queenstown in the Eastern Cape.

Ferreira claims that “Makalala Trans is operating at least some of its buses without valid operating licences. Two Makalala Trans buses were impounded on 30 July 2022 and 2 December 2022. These impoundments, however, were immediately followed with what appear to be retaliatory attacks on Intercape…

“These attacks also make it clear that Makalala Trans strategy of violence will not only be implemented to establish itself in the market, but will be used to squash any opposition and remove any competition,” Ferreira said.

Ferreira notes taxi operators set up a WhatsApp chat group that included representatives of the bus companies to monitor compliance with their demands.

They also circulated details of a bank account into which the long-distance bus operators were required to make “donations” towards the travel costs of the taxi representatives. “I suspect that this is the same account that would be used by taxi representatives to receive any payment of extortion money from bus operators,” Ferreira observed.

He argues that while it was hard to link the taxi bosses directly to the multiple incidents of violence on the ground, viewed in the broader context of demands from the taxi associations the attacks constituted elements of a “pattern of racketeering activity” under the Prevention of Organised Crime Act (POCA).

Makalala’s conduct in particular, Ferreira alleges, appears to fit the description of an offence under POCA in that he appeared to have received benefits “derived, directly or indirectly, from a pattern of racketeering activity”.

This was either directly through the protection money paid via “donations” by bus operators or indirectly through the proceeds generated by his own bus business, “which he obtained by using violence to push other operators (including Intercape) out of certain areas in order to create a monopoly for his services”.

Although Intercape is still struggling to get SAPS provincial commissioners to investigate the bus attacks as organised crime, there does appear to be increased national focus on Makalala as a significant figure in a wider criminal ecosystem.

Police said his arrest in Pretoria on 9 December 2023 came as the result of a joint operation between the Western Cape provincial detectives, Pretoria National Intervention Unit, Eastern Cape and Head Office Crime Intelligence.

In a speech on 16 February this year unveiling the latest quarterly crime statistics, police minister Bheki Cele also appeared to link Makalala indirectly to extortion in the Western Cape.

In a section of his speech titled “Construction Mafia,” Cele stated that “the Western Cape province has also made significant progress in dismantling and taking down those behind the 30% construction mafia grouping where projects were delayed as a result of acts of criminality. Amongst the many arrested include the Kingpins which include Ralph Stanfield and his wife Nicole Johnson and three others.”

Under the same heading, Cele went on to refer to the arrest of Makalala “for taxi violence related activities”.

Cele did not indicate why he placed Makalala in this context, and amaBhungane has no independent information linking him to the so-called “construction mafia”.

Meanwhile, the trail of bodies emerging in Makalala’s wake has grown, even while he is behind bars.

The charge of impersonating a police officer stems from an investigation prompted by a video that emerged online showing Makalala driving a marked police van and using its built-in loudhailer.

Two Nyanga based police officers were arrested in December for allegedly allowing Makalala to make unauthorised use of a state vehicle. Both were released on bail.

One of the two was killed in a shooting on the evening of 25 February in the Masiphumelele informal settlement on the South Peninsula. Gunmen opened fire, killing two people, including the police constable, and seriously injuring two others.  The motive for the shooting remains unclear, but there has been one unconfirmed report that the policeman was due to testify against Makalala.

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Fight over state’s oil and gas assets reveals Mantashe’s growing conflict, first appeared on amaBhungane.

Susan Comrie

Two government ministers are in a tug of war over the future of the state’s oil and gas assets.

In September last year, public enterprises minister Pravin Gordhan gazetted the National State Enterprises Bill which, if passed in its current form, would remove the Central Energy Fund (CEF) and its valuable oil and gas assets from the control of the Department of Mineral Resources and Energy (DMRE).

CEF is the holding company for PetroSA, which owns the rights to offshore oil and gas fields, as well as iGas, which owns a significant stake in the Rompco pipeline that imports gas from Mozambique.

Gordhan’s proposal is to create a more independent holding company to manage state-owned entities – including Eskom, Transnet, Denel and CEF – that have been crippled by political interference and State Capture.

When we asked energy minister Gwede Mantashe about Gordhan’s proposal in October, he told us: “It’s a debate that one, leave it to be exhausted internally.”

Asked if there was an ideological battle coming over CEF’s future, he said: “Yes. A big one.”

A month later, Mantashe presented his own bill to Parliament: the South African National Petroleum Company Bill.

If passed, Mantashe’s bill will gut CEF and move its oil and gas assets into a new state-owned entity controlled by his own department: the South African National Petroleum Company (SANPC).

The rival bills – both presented by the ANC – are now making their way through Parliament.

A dirty diamond

The Central Energy Fund was established in 1977 with the mandate to “contribute to the security of the energy supply of South Africa”.

Aside from PetroSA and iGas, CEF also manages the Strategic Fuel Fund, which looks after the country’s strategic stockpile of crude oil and controls around R11-billion in assets.

On Wednesday, it presented its annual results to Parliament, declaring a R1.7-billion profit. The profit, however, is somewhat artificial as PetroSA reevaluated its rehabilitation liability, which put R2.7-billion back on its balance sheet. Without this, the group would have been R1-billion in the hole.

While CEF owns valuable assets, they have also been plagued by mismanagement and scandal: PetroSA’s Project Ikhewzi blew R14.5-billion drilling for oil offshore in the early 2010s. In 2015, the Strategic Fuel Fund sold off the country’s strategic fuel stocks for $5-billion without approval. In December, PetroSA announced it would enter into a R3.7-billion deal with Russia’s sanctioned Gazprombank.

Part of the motivation for the National State Enterprises Bill is to prevent a repeat of these kinds of scandals. Critically, the Bill would also remove SOE’s from the control of individual ministers and make the president the sole shareholder representative.

“This would separate the state’s ownership functions from its policy-making and regulatory functions, minimise the scope for political interference, introduce greater professionalism, and manage the state’s assets in a way that protects shareholder value,” Gordhan told Parliament in 2022.

This centralised shareholder model flows from the recommendations of the Presidential SOE Council, made up of government ministers and business leaders.

But it is unpopular as it flies in the face of the decision taken at the ANC’s December 2022 elective conference to “place SOE’s that operate in specific sectors of the economy under the relevant government departments”. Under this model, Eskom would be returned to the Department of Mineral Resources and Energy.

Public enterprises spokesperson Ellis Mnyandu downplayed the conflict between the bills: “The question of which SOEs will be transferred into the [state enterprises] holding company is a matter that is still to be decided upon.”

And even if Gordhan’s bill does pass, Mantashe’s would ensure that there is little left of CEF for the state enterprises holding company to inherit.

Gutting CEF

The merger of CEF’s subsidiaries has been on the cards for years. In May last year, Mantashe told Parliament that Cabinet had approved the merger of three CEF subsidiaries: iGas, PetroSA and SFF.

“[C]abinet approved the merger of iGas, PetroSA, and the Strategic Fuel Fund to form the South African National Petroleum Company (SANPC). … for the state to participate meaningfully in oil and gas developments,” he said.

“[T]he final draft of the SANPC Bill has been submitted to the state law advisor for constitutional certification… We implore Members to ensure its finalisation before the end of term of this administration.”

In practical terms, what this means is that “[e]very person who is in the service of iGas, PetroSA and SFF on the date this Act takes effect must be transferred to the services of the [SANPC]” and “[a]ll assets and rights issued … or held by iGas, PetroSA and SFF … be consolidated and transferred to the [SANPC].”

On Wednesday, CEF said it expected the transfer to happen by August 2024, although the transfer of some of PetroSA’s troubled assets would take longer.

This would eventually leave CEF with just one commercial asset: the African Exploration Mining and Finance Corporation (AEMFC) which owns Vlakfontein, a coal mine in Mpumalanga that supplies Kendal power station.

Asked how CEF felt about potentially being gutted by its own shareholder, spokesperson Jacky Mashapu said: “CEF as an implementing agent of the shareholder, it’s not better placed to make pronouncement on any policy related matters. In this instance, we believe that both DMRE and DPE are better placed to answer all these questions.”

Eskom 2.0

When the South African National Petroleum Company Bill was gazetted in November it widely interpreted as Mantashe’s attempt to build an “Eskom 2.0” under his own control.

Although the SANPC’s mandate is largely focused on petroleum – infrastructure, supply, storage, distribution, aggregation, marketing and trading – it has also been tasked with “providing for renewable energy” and “the acquisition, generation, manufacture, marketing or distribution of any form of energy”.

Initially, the SANPC’s main business will be supplying diesel to Eskom: in the 2022/23 financial year, PetroSA generated R24.5-billion in revenue, largely by selling diesel to Eskom to burn in its Open Cycle Gas Turbines.

In the past, PetroSA would have refined its own product, but now it merely buys diesel and sells it to Eskom and other SOEs at an “aggressive margin”.

“The current corporate plan is premised on aggressive returns from the purchase and resale of purchased products [i.e. petrol and diesel],” CEF’s 2022 annual report noted. “PetroSA continues to explore and attract new business for the supply of finished products, particularly with state-owned entities, which will further improve the downstream business and related margins.”

Eskom would like to do this in-house, but Mantashe has refused to grant it a diesel wholesale licence.

This has created a situation where one SOE (PetroSA) is allowed to cannabilise another (Eskom), and has placed Mantashe in the conflicted position of trying to reduce loadshedding with one hand while allowing PetroSA to profit off it with the other.

Transparency would help to keep this conflict in check, but instead this R24.5-billion a year industry operates in complete secrecy.

No tenders, just contracts

PetroSA stopped issuing competitive tenders for diesel in February 2022. A new tender was issued in September 2023, but seemingly never awarded. Instead, over the past two years, PetroSA has operated outside the law.

The Public Finance Management Act allows departments and SOEs to award contracts without a tender but requires that they file an expansion or deviation notice after the fact with National Treasury.

Those notices are published every quarter by the Office of the Chief Procurement Officer and provide a fascinating insight into when, where and how government is skirting the rules.

Explore Treasury’s expansion and deviation reports.

PetroSA continued to file expansion and deviation notices with Treasury throughout 2022 and 2023 but failed to disclose the lucrative diesel contracts that account for 90 percent of its business.

“PetroSA has not been granted a departure from reporting deviations and expansion,” a Treasury spokesperson confirmed in January.

Following our questions, Treasury wrote to PetroSA looking for answers. In February, we were told: “The National Treasury is still awaiting a response from PetroSA.” By mid-March, Treasury still had no update.

On Wednesday, the Auditor-General disclosed that PetroSA lost R11.5-million when it sold diesel to a “fictitious company”.

AmaBhungane has submitted three Promotion of Access to Information Act (PAIA) requests to PetroSA asking it to disclose the names of its diesel suppliers. PetroSA told us it could not read our first two requests, then ignored our third, handwritten, request.

Mantashe, meanwhile, has openly said he will never disclose PetroSA’s diesel suppliers.

“[I]f you want to expose the business of PetroSA you’re basically killing it, you’re saying we must just kill it…” he told amaBhungane in October. “PetroSA is trading with fuel and that is a highly contested space in the market. Now, nobody in that market will publish their suppliers or their consumers, nobody. Now you want PetroSA to do that, and I’m saying it’s a formula to close it down.”

The pastor

To be fair, transparency has proved fatal to some PetroSA deals.

In September last year, PetroSA approached Sanlam Investments to act as transaction advisors to set up a $160-million (R3-billion) facility to bankroll PetroSA’s diesel purchases.

PetroSA has severe cashflow issues. The annual report notes that “[a] material uncertainty exists regarding the entity’s ability to honour obligations as they fall

due because of low cash reserves”.

Sanlam was not asked to put up cash for the new facility; instead the funding would come from a company called Idwala Energy, which would allow PetroSA to borrow up to R3-billion at a time, and repay the loan up to 45 days later.

We estimate that for this service Idwala would have earn between R60-million and R500-million over three years, as it would be guaranteed at least one vessel per month, according to a leaked term sheet.

But where Idwala’s funding would come from is less clear.

The company’s sole director, Harold Edwards, is an evangelical pastor who bought the company in 2019. In 2021, it secured a diesel wholesale licence from the DMRE, but to date, still shares an address with Edwards’ Perfecting Church International in Industria West outside Johannesburg.

At the time, PetroSA declined to comment on the deal, saying: “The information requested herewith is commercially sensitive, therefore, PetroSA will not be commenting…”

Although Sanlam stood to make R75-million in fees, it declined to participate in the transaction.

After amaBhungane sent questions, Idwala withdrew: “We are not continuing with the project, we’re not going to help PetroSA,” Edwards told us in November. “There’s too much controversy around the entire issue. We’ve signed an NDA with the parties involved. It was an above-board deal. I don’t want to involve my name in anything that’s seen as dodgy or shady or corrupt. For the sake of my integrity.”

Similarly, PetroSA’s R21.6-billion deal with EquaTheza, exposed by amaBhungane in January, appears to be on the rocks.

In December, PetroSA appointed Theza Oil & Gas and Equator Holdings to develop its offshore oil and gas fields. As part of the deal, the newly formed joint venture, EquaTheza, would be required to source up to R21.6-billion in funding.

Read: PetroSA taps notorious political operator for massive offshore gas deal

But on Wednesday, PetroSA’s presentation to Parliament indicated that EquaTheza was already in breach of the agreement: “Delayed deliverables on technical work programme by Equatheza. Work presented to date by Equatheza is not inspiring confidence that they can deliver.”

According to the presentation, EquaTheza was required to put up $12-million, but the payment date came and went “with no commitment on new date”.

“By end March PetroSA will seek way forward regarding dealing with Equatheza due to their failure to deliver satisfactory technical work programme and funding solution.”

Director Barend Hendricks disputed PetroSA’s dire description of the deal, and attributed the delay to PetroSA instead: “Equatheza Oil and Gas dispute the Breach. It is currently finalizing the Report as per the schedule and will submit on Monday.”

With other transactions, however, PetroSA has simply ignored the bad publicity and ploughed ahead.

In November, we reported that PetroSA was about to sign a R3.7-billion deal with Russia’s sanctioned Gazprombank to refurbish the gas-to-liquids refinery in Mossel Bay. Despite the uproar, PetroSA went ahead with the transaction.

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KEY TAKEAWAYS

• A 2023 report from the Future of Free Speech project provides a sobering look at the challenges facing freedom of expression around the world
• In South Africa, the proposed amendments to our intelligence legislation are just one example of a shrinking space for free speech
• Although South African courts have proven strong protectors of the right to freedom of expression, we need to take firmer action to ensure this right is not eroded

A new Bill working its way through the South African Parliament has the potential to dramatically alter the freedom of speech environment in the country. The General Intelligence Laws Amendment Bill (Gilab) threatens to introduce security vetting of individuals and institutions ‘of national security interest’ and creates a bulk surveillance regime with almost no safeguards. Its requirement of vetting for those that access national ‘key points’ – which includes the national broadcaster – is also a clear threat to the independence of the media.

This trend towards limiting the right to freedom of expression is, unfortunately, not a uniquely South African one. A recent report from the Future of Free Speech project analysing 22 of the world’s open democracies illustrates that, around the world, action taken to restrict free speech far outweighs action which seeks to protect it.

The report found that the stated need to protect national security, national cohesion and public safety was the most common justification for limiting expression. In Denmark, there were nine instances of this being used; in Sweden and Australia, three. Gilab is the most significant new South African legislation to add to this list.

However, Gilab is only one of many recently introduced laws in South Africa that will have the effect of limiting the constitutionally protected rights to freedom of expression and access to information.

What makes it difficult in democracies is that these laws are generally not explicit that the limitation of free speech is their purpose, and they are enacted for other, legitimate, objectives.

For example, the Protection of Personal Information Act has the laudable goal of protecting individuals’ privacy, but its implementation means that access to information is severely constrained. The Cybercrimes Act seeks to ensure online safety, but it may work to limit journalists’ access to leaked information. The preamble to the Prevention and Combatting of Hate Crimes and Hate Speech Bill explains that the law forms part of the country’s commitment to combatting racism and intolerance, but it criminalises speech based on a broad understanding of hate speech, placing what is likely an unconstitutional limit on the right to freedom of expression.

The key question is how to find the balance between the important goals of, for instance, national security and tolerance, and everyone’s right to freedom of expression.

The report does highlight actions undertaken to protect speech. Around the world, many of these have occurred through the courts.

This is an area where South Africa is one of the leading countries under analysis, with the report describing the Constitutional Court as a ‘sophisticated and influential supreme court on expression matters’.

The strength of the South Africa courts in protecting freedom of expression was demonstrated last year in three cases involving the media and SLAPP suits. SLAPP suits are ‘strategic lawsuits against public participation’. This is a term that has gained traction in the United States and Europe and refers to powerful individuals bringing cases – traditionally defamation lawsuits – against journalists or activists who are seeking to expose them.

The South African Constitutional Court accepted the existence of SLAPP suits in South African law in 2022, when it held that environmental activists could raise it as a defence as they faced numerous defamation cases brought by Australian mining companies.

What was interesting about the cases last year was that three different high court judges extended the concept of SLAPPs beyond just defamation cases.

In the case brought by journalist Karyn Maugham against former President Jacob Zuma’s private prosecution of her, the KwaZulu Natal High Court said that private prosecutions can be used as an insidious way of attempting to silence individuals. It stressed the particularly gendered nature of Maugham’s experience, highlighting the abuse she received from Zuma supporters online.

The Johannesburg High Court described the obtaining of a secret order to compel amaBhungane Centre for Investigative Journalism to ‘return’ documents the journalists had received through a source and to cease publishing stories based on those documents as ‘an egregious abuse of process’.

The same court dismissed the application by businessmen to prevent a specific media house from using the term ‘Alex Mafia’ in reference to them, explaining that the order was ‘an abusive attempt by two politically-connected businessmen to gag a target newsroom’.

Although the courts have prevented the full effects of the SLAPP cases being felt in these three cases, it is not enough. Merely having to defend such cases takes a financial and emotional toll on activists and journalists.

Civil society groups, led by the Centre for Applied Legal Studies, have put together a draft Model anti-SLAPP law for South Africa. As SLAPP suits often take the form of ‘David vs Goliath’ legal processes these laws can be a powerful tool to give effect to the right to freedom of expression of those with less financial muscle. The South African draft contributes to a wider trend of similar laws that exist in the US and Canada and have been proposed in the UK and the European Union.

Although the right to freedom of expression is often seen as a negative right – one the state simply has to not infringe upon – decisive action often needs to be taken in favour of freedom of speech. Adopting an anti-SLAPP law would send a strong message that a state values the right to freedom of expression and takes seriously its obligation to promote the enjoyment of that right.

The Future of Free Speech report covered the period 2015 to 2022 and demonstrated a clear upward trend in restricting speech across the countries surveyed. What is particularly concerning about 2022 is the large gap between actions which restrict and those which protect speech.

South Africa is one of at least 60 countries holding elections in 2024. The volatility surrounding elections threatens to increase the recession in freedom of speech identified in the report.

We have also seen an increasingly hostile global free speech environment in the context of the Israel-Gaza war.

This year may well be a watershed for South Africa and other democraciesin determining where the balance falls between speech restrictive and speech protective activity.

Jacob Mchangama is the founder and executive director of the Danish thinktank Justitia, where he directs the Future of Free Speech Project.

Caroline James is the advocacy coordinator at the amaBhungane Centre for Investigative Journalism.

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COMMENT: By Sam Sole | AmaBhungane Managing Partner December 21, 2023

KEY TAKEAWAYS

AmaBhungane managing partner Sam Sole was recently (and unexpectedly) given an award by his old school, SACS. This is his acceptance speech: a challenge to a new generation facing the toughest problems ever.

When I was asked to accept this award and come and give a speech, I must admit I was a bit conflicted.

I wasn’t too fond of school nor most of my fellow scholars. But I am looking back on an institution and a self of more than 40 years ago – and both, I have to trust, have changed for the better.

The fact I am here tonight is also testimony to the persistence of your English teacher, Mr Southgate – and the important role that a good English teacher played in my own trajectory.

Indeed, I owe my own nickname, “Sam”, which has stuck with me my whole life, to my English teacher at SACS, Ali Abrahams. 

He also facilitated my first baby-steps of moral and political exploration, when he allowed me to give a talk to class about Apartheid in, I think grade 9, which was the fateful year of 1976, the year of the Soweto youth uprising.

So why am I here and what can I say to you that might be of some use across the 44 years since I sat where you are?

Firstly, let me say to the misfits and outsiders out there: there is hope.

I was not cool at school, and I’m probably not cool now.  But I have to say that the world is wider and more accommodating than the narrow bounds of a boys’ school and that the tortoise of persistence and commitment will usually outrun the hare of natural aptitude.

I come from a place of privilege, like many of you.

But being privileged comes with responsibility.

Much of what I am going to say may strike you as bleak.

I would urge you to take heed of Socrates’ view that “the unexamined life is not worth living”.

More broadly, as I think someone else said, a life without art or politics is no life at all. In living a life of introspection and awareness there is also excitement and growth.

Challenge and purpose are the very bedrock of a meaningful life – and you are of a generation that is going to have certain responsibilities thrust upon you, whether you wish for it or not.

You are like a class graduating in the 1930s on the eve of a global war.

You should not close your eyes to that reality, even if the process of dealing with it and finding your way takes a few years, as was the case with me.

Most of you will be from upper middle-class families.

And many if not most of you will have grown up in a bubble, like I did.

And, unfortunately, because of the failures of my generation and those before, that bubble, which was always both fragile and morally questionable, is no longer sustainable.

Part of your responsibility when you leave here is to pursue your own loss of innocence.

I do not mean this in a cynical way.

What I mean is that – despite the effort schools may make to promote outreach – you will most likely have been cocooned from the realities of those much worse off than you, both locally and globally.

You will certainly have been cocooned from the realities of how power and money work, how they reproduce themselves and prevent us from exercising agency over our own future, and that of the planet we all live on.

For me attending SACS in the late 70s, the very obvious and looming moral challenge was Apartheid.

Part of my sense of distance from many of my contemporaries at SACS is that so few of them embraced the challenge of dealing with that reality – and with the responsibility of the privilege that history had afforded us.

There were some honourable exceptions, but very few opted for a path of what one might very broadly call public service or public engagement in a socio-political sense.

A depressing proportion have left this country behind and carved out careers cut off from the social fabric that shaped them.

I must emphasise that none of this is easy or straightforward, and not everyone at SACS has the privilege I enjoyed as an 18-year-old to try and fail and try again.

It was also easy as a white middle-class boy in the Southern Suburbs to be almost totally screened off from the realities of Apartheid because of the racial spacial divides – via the Group Areas Act – that existed then and remain entrenched to this day.

The problem could also seem overwhelming.

I was in boarding school until my matric year – and in Grade 12 I stayed in a house with my older siblings who were working or at university.

I think it was in that year that I got on my bicycle one morning and pedalled out along the highway to Langa. I wanted to attend the Commissioners Courts that I had read about that processed passbook offences and deported offenders back to the Transkei or Ciskei homelands.

When I arrived at the building I was immediately approached by desperate black men – adults seeking the help of an ignorant youth. I never got inside. I got on my bike again and pedalled home overwhelmed by the scale of the human need that confronted me.

It took me a while to find journalism as a means by which I could try to wrestle to a small degree with the injustices of the world.

As you may know, I matriculated in 1979. I wanted to study drama, but my parents were not keen.

Given that I had been part of a pilot project at government schools to study computing I decided to do a BSc in Computer Science at UCT, but I was neither very good nor very interested.

I changed to a BA and then dropped out, worked for a bit, and then hitch-hiked in Europe for a month to try to decide whether to leave the country and escape the call-up for military service in the Apartheid defence force, something every white male was legally obliged to do.

After some internal struggle I returned and entered the SADF in mid-1984 as a rifleman – a private – at 6 SA Infantry Battalion in Grahamstown. That was my real education in the brutal realities of Apartheid, power, armies and related matters.

I returned to South Africa to confront not only these ugly realities of my country, but also confront my doubts about my own courage, whether I had what it takes to do much, to do anything.

On that score I think I can impart another lesson.

There are many paths up the mountain.

I don’t see myself as a courageous person. I see myself mainly as stubborn. Somebody who can endure.

In the army I proved something to myself. That I could endure a lot. A lot of stress. A lot of discomfort.

That would stand me in good stead in the job I was to come to occupy and still do – investigative journalism. I often tell my staff: it’s a marathon not a sprint – and that’s true of the examined life as well.

I wrote my first piece of published work about the actions of the police and military in the townships during the 1985 state of emergency.

It was smuggled out via the End Conscription Campaign and published anonymously (I was still in the army) on the front page of the International Herald Tribune, which was an international English language paper sold in 160 countries.

I have never again reached that level of success! But since then the use of journalism as a means for trying to hold power to account and expose injustice, greed and incompetence has been a lodestar for my career and my life.

That’s not to say there have not been errors, failures and costs.

Doing investigative journalism is something of an obsession.

My own family has carried a lot of the cost, including dealing with the stresses of my long working hours, fairly routine vilification, such as has happened on a larger scale with our current investigation, and the occasional serious threat to my personal security.

You now face challenges on a scale and intensity that dwarf any that I faced.

Those challenges are local. They are global. They are inexorable and they are overwhelming.

Not only do we have a worsening global security situation, from Ukraine to Palestine to the South China Sea, we have a global shift to authoritarianism and a retreat from rationality and restraint, including in what remains the most important global superpower, the United States, where the anti-democratic ambitions of Trump and much of the Republican Party are on open display.

Historian Niall Ferguson has warned that we are at serious risk of rerunning the 1930s with a “cascade of conflict that has the potential to escalate into a Third World War”.

But that is not the most dangerous threat we face.

Climate change is already starting to bring global upheaval and discontinuity at a scale and pace that beyond anything that humans have had to face.

I want to quote climate futurist Alex Steffen.

He writes: “The planetary crisis is an all-consuming crisis — a crisis of everything; a polycrisis; the Jackpot — because it is a set of discontinuities, of new realities for which old experience is a poor guide.”

He warns: “We’re also flying into a tornado of extinctions, ecosystem collapses, souring oceans, grim toxic accumulations, resource depletions, famines, evolving epidemics, and novel new dangers we’re still learning about.”

He adds: “Many — perhaps most — of those reading this have never lived through any genuine societal upheaval. But we will: Geopolitical shifts, mass migrations, conflicts over land and resources, asset bubbles collapsing, and economic turmoil as impacts hit and risks escalate.”

We are already witnessing many of these things.

But embracing that reality is one of the hardest but most necessary things we have to do because, as Steffen notes, one of the most obvious failures in the climate debate is that we are acting like we’re still making choices that our inaction has already made for us.

We are still pretending we have time, whereas the hour is very late.

We need to invest urgently and consciously in making our environments and our communities less brittle and more rugged.

This is an enormously difficult task, as our social, political and economic systems are set up to maximise individualism, consumption and corporate power.

Social media has led to the atomisation of audiences, the creation of echo chambers of outrage, the spread of bullshit and lies, the demise of regard for expertise and nuance.

Never before have we had the tools for the surveillance and manipulation of whole populations that governments and corporations now wield mostly thoughtlessly and for blind short-term gain.

The very language of community, of concepts that formed part of mainstream Western politics in the post war years, has become unfashionable and instead we have an intellectual and political landscape dominated by neo-liberalism and the unquestioned logic of the market.

There are few institutions nowadays that – like religious institutions in the past – still have the authority to bring people together.

The climate movement, thinking global and acting local, may offer a way forward – as does the broad and essential concept of justice that underpins everything, from inequality to climate change.

So you are going to have to prepare yourselves for the unexpected, to be able to lean in to uncertainty and understand that – similar to the time of the pandemic – acting quickly is more important by far than acting perfectly.

It doesn’t matter where or how small you start. It matters that you start.

You are going to have to be able to critically analyse news, information and misinformation.

You are going to have to acquire skills that your parents outsourced.

How to grow things, how to fix things, how to build, how to heal, how to judge character and risk, how to communicate, how to negotiate, how to build a community of shared resources and mutual support.

Of course, your lives will not be only about crisis – and of course you can’t be expected to have many real answers at this time of your lives, but you can be expected to – and you must – begin asking the questions.

Thank you.

NB: You can also read amaBhungane’s end of year newsletter here.

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BY Tebogo Tshwane – December 19, 2023

KEY TAKEAWAYS

• Forensic investigators acting on behalf of the state-owned asset manager, the Public Investment Corporation (PIC), have recommended reporting the suspended Chief Operations Officer, Vuyani Hako, to the police.
• This follows a lifestyle audit triggered by a whistleblower report that uncovered “suspicious transactions” with transfers exceeding R4.5-million directed into Hako’s home loan accounts.
• Confidential audit committee documents obtained by amaBhungane reveal that at least five whistleblower reports accusing Hako of nepotism and corruption were circulated before he was suspended in June 2022.

Forensic investigators appointed by the state-owned asset manager, the Public Investment Corporation (PIC), have recommended reporting suspended chief operating officer Vuyani Hako to the police.

This comes after a lifestyle audit, triggered by a whistleblower report, uncovered “suspicious transactions”, with transfers exceeding R4.5-million directed into Hako’s home loan accounts.

Hako, who occupies the fourth most powerful position in the PIC, was placed under precautionary suspension in June 2022 after allegations of misconduct were made against him. He remains suspended 18 months later.

At the time of his suspension the PIC, which oversees close to R2.6 trillion in assets, primarily of government employee pension savings, provided no detail about the nature of the allegations, merely stating that it was in the “best interest of both the employee and the employer to ensure that an independent inquiry can proceed unencumbered.”

Now, confidential board audit committee documents obtained by amaBhungane reveal that before his suspension the PIC received at least five whistleblower reports in which Hako was accused of nepotism and corruption.

The documents show that in response to the whistleblower reports, the PIC instituted various investigations, including a lifestyle audit by Fundudzi Forensic Services which uncovered a series of “suspicious” payments and transfers into Hako’s bond accounts beginning the month after he was appointed COO – in December 2020 – and continuing until November 2021. 

These payments – which according to investigators came from Hako and an in-law – went directly into Hako’s bond accounts to settle loans for two of his properties in East London and Centurion.

A report of the audit committee’s in-camera meeting states that when investigators questioned him about these payments Hako “failed” to explain the source of the funds.

As a result of these suspicious and unexplained transactions, Fundudzi recommended that the PIC lodge a criminal case against Hako in terms of the Prevention and Combating of Corrupt Activities Act.

The Act makes it an offence not to report suspicion of corrupt activity to the police.

The audit committee resolved to recommend Fundudzi’s forensic report and recommendations to the full board for adoption, its meeting minutes show.

In response to amaBhungane’s questions, the PIC would not confirm whether a case had been opened against Hako, nor did they provide clarity on other allegations made against him, saying only that the COO was “under precautionary suspension while the allegations against him are being investigated and are yet to be concluded.”

“Mr Hako remains a PIC employee and is entitled to the same protection of his rights as any other employee, including entitlement to confidentiality for any matter or process between the employer and employee,” said the PIC in an email.

“The PIC must follow due process,” it added, emphasising that “it would go against applicable policies and labour legislation for the PIC to publicly disclose any detail or make public comments about any aspect of confidential labour proceedings that are still underway”.

“Legally, this would undermine the PIC’s own case and therefore the PIC is not in a position to respond in further detail.”

Hako also declined to respond to detailed questions.

Forensic evidence

A confidential report on the proceedings of a board audit committee meeting in November 2022 sets out a summary of the forensic auditor’s case against Hako.

It states that in 2021 Hako paid off his home loans with Rand Merchant Bank for two properties bought in 2015 and 2018 using money he could not adequately account for.

Fundudzi Forensic Services, the company the PIC appointed to conduct a lifestyle audit on Hako, reported that Hako made repayments of at least R1.9-million for the two properties over a few months.

Over a period of six months, an additional R2.7-million allegedly flowed from accounts belonging to a relative of Hako’s by marriage.

Fundudzi said Hako “failed” to provide the source of the R1.9-million transferred into his accounts; he claimed that the payments made by his relative were for “the rental of his property based in Mthatha”.

But investigators said there was “no agreement and/or lease agreement detailing rental arrangements”.

Suspicious transactions

“The PIC should register a criminal case against Mr Hako in order to determine the source of the total amount of R4,521,905.00 paid and/or transferred into his bond accounts,” Fundudzi recommended.

Fundudzi emphasised that the payments were deemed “suspicious transactions and require further investigations in terms of section 34 of the Prevention and Combating of Corrupt Activities Act (PRECCA).”

In simple terms, Section 34 of PRECCA places a duty on the relevant individuals to report suspected or actual acts of corruption, fraud or bribery involving transactions of R100 000 or more. 

Estate agents consulted by amaBhungane said that the typical rent for houses in Fort Gale, Mthatha, where Hako reportedly claimed he had received R2.7-million in rental income, ranged from R13,000 to R15,000 per month.

This is significantly lower than the over R440 000 per month that Hako received and raises further questions about the explanation he reportedly provided to forensic investigators.

Source of funds?

A separate document, flagged as a “Report of Tax Crime”, was leaked to amaBhungane alongside internal PIC documents, though its origin is not clear, nor is it certain that it formed part of any PIC investigation.

The document speculates on the source of Hako’s extra cash, alleging that “it is very likely that … all or some of the monies are traced from a company called Mazwe Financial Services”.

Mazwe was the recipient of a R180-million payment in 2021, part of a controversial R294-million loan facility approved by the PIC that also triggered a forensic investigation in the same year, but that report purported to find no irregularities in the approval process.

Hako, who was acting CEO, signed the resolution to approve Mazwe’s funding application, which had been struggling to gain momentum within the PIC since 2018.

Responding to questions sent by amaBhungane, Mazwe’s CEO Xolisa Bebula emphatically denied these allegations, characterising them as “false, malicious and unfounded”.

Hako would not be drawn into commenting on the transfers made to his bond accounts but stated that he had not had sight of the whistleblower and forensic reports referred to in our questions.

“I cannot therefore be expected to respond to the allegations contained in the

report/s which I have never seen or read,” said Hako.

“My attorneys have written several letters to both the PIC and its attorneys raising concerns about my prolonged suspension. In addition, my attorneys also referred the dispute of unfair labour practice relating to unfair suspension to the [Commission for Conciliation, Mediation and Arbitration],” he added.

Blowing the whistle

Hako, who was previously the executive head of properties, was appointed as the organisation’s operations chief in November 2020. Documents show that after he was appointed as the COO, he remained the head of properties in an acting capacity.

Before Hako’s appointment, the PIC had been operating without a COO since 2015, when the PIC underwent a restructuring process.

The position was officially removed in 2017 when the board, chaired by former deputy minister Mcebisi Jonas, amended a clause in the company’s memorandum of incorporation that outlined how the COO and chief investment officer (CIO) should be appointed.

When the Commission of Inquiry looking at allegations of impropriety in investment decisions at the PIC completed its work in 2019, one of its recommendations was that these two roles, with the addition of a chief risk officer, should be reinstated to strengthen governance in the organisation.

The commission, led by retired Supreme Court of Appeal Judge Lex Mpati, found that the removal of the COO and CIO roles had created a “centralised operating model with a significant concentration of decision-making responsibility, power and influence in the hands of the CEO and the CFO”.

But in April 2021, six months after Hako was appointed COO, the PIC received a whistleblower report through its internal reporting line that accused him of wide-ranging abuses of power.

The allegations focused on incidents that supposedly took place when Hako was acting CEO between March 2019 and July 2020, as well as during his time as the head of properties.

The authors of the whistleblower report accused Hako of manipulating the appointment of senior staff members to exert control over investment decisions, among other claims.

When the PIC’s internal audit team looked through the various allegations, it found that a number of them were either without merit or too vague to investigate.

However, a memo submitted to the board’s internal audit committee and signed by the PIC’s head of internal audit Lufuno Nemagovhaniu recommended that a lifestyle audit be conducted on Hako to determine whether “there are any suspicious activities”.

“The lifestyle audit will inform whether a forensic investigation is required on some transactions or not,” reads the memo dated October 2021.

The Wedge

The allegations from whistleblowers kept piling up and, according to a confidential report submitted to the board by the chairperson of the audit committee, forced the PIC to consider whether Hako should continue to act as the head of properties.

The confidential report, seen by amaBhungane, detailed the proceedings of audit committee meetings held between October 2021 and May 2022. It stated that in November and December 2021, the PIC’s internal audit team received more complaints of impropriety against Hako involving two transactions in properties.

One of the whistleblower reports was related to a project to refurbish the Wedge Shopping Centre in Morningside that supposedly led to the PIC’s biggest client, the Government Employee Pension Fund (GEPF), incurring fruitless and wasteful expenditure.

The renovation of the shopping centre seemingly happened without the requisite approvals.  Moreover, a whistleblower report claimed that Hako “told his team not to inform the GEPF about the matter. Staff were too scared to talk about the matter”. 

Isago

The other complaint was related to the PIC’s contentious decision to buy a 60% stake in an empty piece of land located on the N12 highway between Klerksdorp and Stilfontein (known as the Isago@N12 transaction) for an inflated price of R510-million. In its 2020/2021 annual report, the PIC’s client, the GEPF, said it had valued the land at just R178-million.

In a previous article, amabhungane shared details about a court dispute involving the landowners, Isago@N12 Development, and a retired military veteran who helped broker the deal with the PIC.

The case revealed a dubious commission arrangement, signed in 2015 between Isago and the veteran, providing for a 35% facilitation fee based on the money the PIC invested in the vacant land.

The veteran’s fees were supposedly for leveraging his “connections” to facilitate the land sale.

The deal was finalised in 2018 during Hako’s time as the head of properties.

The audit committee report recorded that a whistleblower report had included allegations that “Hako had struck a deal to pay a bribe of R100-million to a specific military Colonel.”

The audit committee resolved to appoint a forensic firm to look into the allegations regarding both the renovations at The Wedge and the Isago transactions, according to the documents.

The PIC would not answer questions about the progress or outcome of these two forensic investigations, nor reveal whether they had found any evidence of wrongdoing against Hako.

Suspension

The documents reveal that as early as February 2022, the audit committee had asked the CEO of the PIC, Abel Sithole, to remove Hako as the head of properties pending investigations into the allegations made against him.

Sithole’s response seems to have been discussed in May, and the report of the audit committee chairperson states that the “CEO noted the suggestion from the Committee and stated that Mr Vuyani Hako will continue acting as Executive Head: Properties as the person he was considering to act [in that capacity] was also subject to an investigation.”

Unimpressed with Sithole’s response, the committee requested that the matter be discussed with the board.

A few days later Hako was suspended.

Disciplinary action

Hako did not respond to our detailed questions, saying it would not be “prudent” to ventilate the allegations levelled against him through a “media inquiry or a so-called court of public opinion initiated by amaBhungane.”

“I prefer to deal with and answer to the allegations levelled against me in a disciplinary process provided by my employer, the PIC,” said Hako.

Hako said that he was unaware of multiple whistleblower reports received by the PIC, asserting that there “was only one so-called whistleblower report referred to when I was placed on precautionary suspension.” Hako did confirm that the PIC has commenced a disciplinary hearing against him, which is ongoing. However, he would not elaborate on the process or the charges brought against him.

The post Public Investment Corporation: suspended COO’s R4.5m ‘suspicious transactions’ appeared first on Vuka News.

By Sam Sole | AmaBhungane Managing Partner

KEY TAKEAWAYS

• Letters to business rescue practitioners (BRP’s) reveal Mozambican bidder’s furious allegations of being repeatedly sidelined.
• RGS Group Holdings claims the BRP’s repeatedly favoured rival bidder Vision Investments, despite RGS offering a better deal.
• Now there are doubts about Vision’s funding, while RGS claims its bid is fully funded.
• Both bids hang in the balance after a judge ruled that the BRP’s acted unlawfully in withholding sugar industry levies, but now RGS is asking the Durban high court to enforce the tabling of their bid.

This post Tongaat Hulett bidder in scathing attack on business rescue process appeared first on amaBhungane

Leaked letters have blown the lid off backroom battles that Tongaat Hulett rescue bidder RGS alleges show that the business rescue practitioners (BRP’s) have attempted to sideline them in favour of a rival bid led by IT mogul Robert Gumede.

The allegations amount to claims that the BRP’s acted contrary to the best interests of Tongaat Hulett Limited (THL) and its creditors by frustrating efforts by Mozambique based RGS to make an offer for the distressed company – an offer that appears better for all concerned than others the BRP’s have been pursuing.

And, in the latest drama surrounding the business rescue process, RGS has launched an urgent application to force the BRP’s to table their bid for a vote by creditors, arguing that Gumede’s consortium has failed to raise the necessary cash.

Tongaat Hulett was placed in business rescue in October 2022 after a new management team uncovered accounting failures and alleged fraud that led the company to a R12-billion reversal in valuation. Business rescue is an alternative to liquidation for companies in distress that might be saved by a combination of new investment and a compromise of debts owed to creditors. 

In papers published on the Tongaat Hulett website yesterday (Tuesday 12 December 2023) RGS seeks a court order compelling the BRP’s to proceed with a creditors meeting this Thursday, 14 December 2023, to vote on an amended RGS rescue plan.

The amendments are necessary to take account of last week’s Durban high court ruling that the BRP’s acted unlawfully in withholding payment by Tongaat Hulett of sugar industry levies of almost R2-billion due to the SA Sugar Association (SASA).

The creditors’ vote on two published rescue plans – that of RGS and a competing plan of Gumede’s Vision Investments consortium (previously named Terris) – was due to have taken place on Friday 8 December but the timetable was torpedoed by the court judgment on the levies.

For the full background, read Who is behind the Tongaat Hulett bid battle?

Initially, the BRP’s were insistent that the creditors vote must take place on Thursday the 14th.

Now the BRP’s want it postponed to January. RGS alleges that this is intended purely to give Gumede more time to raise money, whereas their bid is funded and ready to go.

In their court papers RGS also take aim at the Lender Group of banks which holds some R7.7-billion of Tongaat Hulett debt and was poised to do a deal to sell their claims to Gumede’s Vision consortium, allowing him to take control of the business rescue vote by taking their place as the dominant creditor.

RGS disclosed a copy of the agreement between the banks and Gumede’s Vision Investments 155 which would have seen the Vision consortium take over the claims at a discounted price of R3.51-billion.

But it also shows that the agreement would terminate if Vision failed to make payment by noon South Africantime on 6 December 2023.

Vision failed to make payment and amaBhungane understands that this was because the board investment committee of the Public Investment Corporation (PIC) resisted pressure to advance R2-billion, citing concerns about the reputational risk of preempting a fair rescue bid process.

In their application RGS claims they were informed by the Lender Group at a meeting on 7 December that the Vision Agreement had lapsed and no new agreement had been concluded.

Lawyers for the Vision consortium did not respond to questions about the PIC’s involvement and their efforts to find other funders, which were rumoured to have included an approach to Zimbabwe’s notorious Rudland family. Prior to the business rescue this family had launched a failed bid to take over Tongaat Hulett.

After deadline the lawyers for Vision sent this response: “It is well known that some of the Vision parties are Zimbabwean, and others have business interests in Zimbabwe, so they do travel to Zimbabwe often. A simple fact check would have revealed that Vision parties in 2021 had a THL board approved deal to purchase THL’s Zimbabwe and Botswana operations. This SA and Zimbabwean consortium deal was scuttled by the Rudlands’ backed THL rights offer at the last minute. We respect the Rudlands’ family as any other but there is no direct or indirect relationship with them on this deal or any other. However, it is important to note that neither any of Vision’s members have ever had the pleasure of meeting the Rudlands, their management or advisors. This allegation is a fabrication.”

They also noted, “We do not have a deal with the PIC, nor have we been promised therefore our plan is not depended on the PIC. We can confirm that Vision has an agreement with the Lender Group that is conditional on Vision’s plan being adopted by creditors. We are looking forward to the creditors meeting on 14 December. We are ready to present and support our plan.”

The PIC also failed to answer questions about its decision, merely saying, “The PIC is not collaborating with any party in this regard.  Any interpretation of the PIC’s position as a shareholder of Tongaat Hulett outside of the business rescue process would be speculative until a business rescue plan is presented and approved by the required majority of creditors, both in number and in value, at a duly constituted creditors meeting in terms of the requirements of the Companies Act. Currently, the meeting is scheduled for the 14th of December 2023.”

In their urgent application to compel the meeting to go ahead on the 14th, RGS argued that the BRP’s support of yet another adjournment until January was “bizarre” in circumstances where the RGS Plan was “fully funded and capable of adoption at the Meeting on 14 December 2023, and immediate implementation”.

RGS stated, “The BRP’s (and the Lender Group) should not be choosing sides between RGS and the Vision Parties… The Vision Parties have still not secured the necessary funding and it is inconceivable that the BRP’s should now be attempting to adjourn the Meeting to provide the Vision Parties with more time to secure the funds they need to acquire the Lender Claims.”

RGS said the BRP’s, “in promoting and favouring the Vision Plan,” were attempting to facilitate the Lender Group’s desire to escape their exposure to Tongaat Hulett.

“It is submitted that the BRP’s’ conduct has created a reasonable impression that they are conducting the THL Business Rescue solely for the benefit of the Vision Parties and / or the Lender Group,” RGS argues.

That claim is consistent with the history of previous interactions set out in the leaked letters between RGS and the BRP’s.

The letters suggest that:

• RGS delivered an expression of interest to the BRP’s in June but was ignored;

• RGS was forced to purchase another creditor’s claims in order to enforce its right to make alternative rescue proposals;

• Even at that stage RGS was forced to threaten legal action in order to get access to the Tongaat Hulett data room to conduct a due diligence exercise;

• In October, RGS made what it termed “a fully funded bid” that appears more beneficial than the Vision offer, yet it only saw the light of day after RGS threatened, in a blistering letter on 10 November 2023, to go to court to have the BRP’s removed.

The business rescue team appointed by Tongaat Hulett is led by Peter van den Steen, Trevor Murgatroyd and Gerhard Albertyn, all of Metis Strategic Advisors.

They did not respond to detailed questions but said through their spokesperson that business rescues were guided by regulated processes: “It is therefore not appropriate for us to provide detailed information on the current Strategic Equity Partner [bid] process outside of the formal communications channels.”

In an attached statement they said: “The BRP’s are tasked with providing for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all the relevant stakeholders… [The BRP’s] are confident that they presented fair and balanced business rescue plans under challenging circumstances.”

RGS’s key allegations are set out in detail in a letter dated 10 November 2023, addressed to the Joint Business Rescue Practitioners and signed by M Aquil Rajahussen, the chair of RGS Group holdings.

RGS summarised the position in these terms: “It is clear to us that the Joint BRP’s have failed to act in an independent manner and have actively favoured the Terris [Vision] Transaction… over a due and proper consideration of the RGS Business Rescue Plan.

“In particular, the Joint BRP’s have not afforded the body of creditors of Tongaat the opportunity to evaluate the RGS Business Rescue Plan against the Terris Business Rescue Plan. Instead, the Joint BRP’s have sought to facilitate the purchase of the of the Secured Lender Claims to the Terris Sugar Consortium by inter alia… delaying the date for the publication of a business rescue plan to afford the Terris Sugar Consortium the opportunity to negotiate the purchase of the Secured Lender Claims and seek approval for its financing. This in the face of a fully funded business rescue plan contained in the RGS Business Rescue Plan.”

RGS also raised doubts about whether the secured lender claims of the bank Lender Group were “in fact secured against the assets of any member of the Tongaat Group due to such security being potentially invalid and unenforceable”.

The letter concludes with a threat to seek the removal of the Joint BRP’s on grounds of failure to exercise proper care and a lack of independence.

RGS argues that this perception is supported by the fact that when Vision was not able to secure funding in terms of an agreement with the Lender Group of November 3, further delays were allowed to enable the conclusion of another agreement as of November 20.

It was this later agreement that allegedly lapsed on December 6.

The RGS plan was only published – alongside the Vision plan – on November 29.

The RGS urgent application is being opposed by Tongaat Hulett and the BRP’s.

These and the competing claims of Vision and other parties are due to be argued tomorrow in the Durban high court, including the BRP’s application for leave to appeal levy findings in favour of the Sugar Association.

The post Tongaat Hulett bidder in scathing attack on business rescue process appeared first on Vuka News.

This post Analysis: Who is behind the Tongaat Hulett bid battle? appeared first on amaBhungane

December 13, 2023

By Sam Sole | AmaBhungane Managing Partner

KEY TAKEAWAYS

• The Vision and RGS consortiums are battling it out to buy the bank debt that would give them control over Tongaat Hulett. Both have a somewhat controversial pedigree.
• Vision includes a financier who spent a chunk of his career in the service of three notorious Kazakh oligarchs known as “The Trio”; it also includes a company implicated in Pakistan’s so-called “sugar mafia” cartel scandal. Both deny any wrongdoing.
• RGS is part of the Mozambican Gulamo group, previously called out for its closeness to the ruling Frelimo party. It has in the past been linked to some unsavoury characters, although the company says these links are either erroneous or innocent.
• Meanwhile, other sugar industry heavyweights have weighed in following a damning judgment which found that the Business Rescue Practitioners had illegally withheld statutory payments worth nearly R2-billion.

Things have been sour for sugar giant Tongaat Hulett since 2019, when a new management team uncovered accounting failures and alleged fraud that led to a R12-billion reversal in the company’s valuation.

The criminal trial of key former directors is yet to get properly underway.

With a group of banks holding the company over a barrel of debt, there have been increasingly desperate efforts at keeping alive a business that supports thousands of jobs, especially in KwaZulu Natal.

What has emerged and is of particular concern is the opaque nature of the various deals cooked up between management, the lender banks, state funders such as the Industrial Development Corporation (IDC) and the Public Investment Corporation (PIC), as well as, latterly, the business rescue practitioners (BRP’s).

The failed Rudland gambit

First, there was the attempt in early 2022 by Tongaat Hulett management to hand control of the company to the controversial Rudland family of Zimbabwe. That attempt was abandoned following disclosures by amaBhungane and the Takeover Regulation Panel that linked tobacco mogul Simon Rudland to the deal.

Incredibly, banks and lawyers for the deal gave it a clean bill of health.

Rudland has since been singled out in the Al Jazeera “Gold Mafia” exposé as one of the alleged kingpins of a Zimbabwean money laundering and gold smuggling network, though he has denied this and threatened to sue Al Jazeera.

Following the collapse of the Rudland deal, Tongaat Hulett was placed in voluntary business rescue while the BRPs sought a buyer who could inject enough cash to keep the banks (who were still owed about R7-billion) at bay.

But the Rudland experience – and the fact that sugar is known in the region as a risk commodity for trade-based money laundering – suggests a need for close scrutiny of anyone seeking control of such a strategic company.  

Preferred Bidder

In July the BRP’s announced the preferred bidder: Kagera Sugar, a little-known Tanzanian producer run by multi-millionaire brothers Seif Ali Seif and Nassor Seif which had submitted a R3.56-billion bid.

There followed a furious lobbying and media campaign, by two other bidders in particular.

One was the Zimbabwean Sovereign Wealth fund, which falls under the ministry of finance where President Emmerson Mnangagwa’s son Kudakwashe (34) has been appointed deputy minister. The fund had attempted to make a bid for Tongaat’s Zimbabwe assets, but was rebuffed by the BRP’s, who did not want to break up the company whose Botswana, Mozambique and Zimbabwe sugar operations are not financially distressed.

Indeed, part of the parent company’s woes stem from its inability to access profits from Zimbabwe because of the country’s exchange control restrictions, and sugar industry insiders say vultures are still circling trying to pick up the Zimbabwean assets for next-to-nothing.

Blurry Vision

The other party aggrieved by the selection of Kagera was the Vision consortium (previously dubbed the Terris consortium), a rival bidder characterised by various somewhat opaque offshore constituents, although its lawyers say there is nothing unusual about this.

Vision’s front man in South Africa is IT mogul Robert Gumede, represented via Guma Agri and Food Security Ltd (Mauritius).

Alongside Guma in the consortium is Amre Youness’s Terris AgriPro, also registered in Mauritius, which is owned by the Terris Fund SPC registered in the Bahamas, of which, the lawyers disclose, Youness is the ultimate beneficial owner.

Youness, notably, was a longtime consultant to three central Asian oligarchs: Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov, also known as the Trio, and at the time served as chair of two of their South African investments, Shaftsinkers and Samancor Chrome, held through their investment company International Mineral Resources BV (IMR).

One of the Trio’s more significant brushes with notoriety came via the London listing of, and subsequent investigations into, their commodities group: Eurasian Natural Resources Corporation (ENRC).

Both the listing and the investigations eventually came to naught, but some flavour of the frisson surrounding ENRC and its founders is provided by a Financial Times investigation into the mysterious deaths of three South Africans.

Youness, through the consortium’s lawyer, insisted that IMR Management Services (IMSL) where he was for a time the chief executive, was a completely separate and distinct entity and acted only as a corporate advisor to International Mineral Resources BV in a consulting capacity.

“Mr. Youness had zero involvement with any of these allegations… Raking up and relying on outdated, unverified, and unproved allegations against the ENRC principal shareholders, in order to cast doubt on Mr. Youness’ character, is unfair and unprofessional.”

The technical partner in the consortium, Pakistan’s Almoiz Industries, was slammed by a Pakistan Sugar Inquiry Commission report in May 2020, which accused the company – among others in the nation’s so-called “sugar mafia” – of cheating both farmers and the tax authorities. The consortium’s lawyer alleges these allegations were politically motivated and says they came to nothing.

Undisclosed Zimbabwean interests are represented by Mauritian company Remoggo PCC, described as an investment holding firm with a portfolio of investments in Zimbabwe and the region. Rutenhuro Moyo is the Managing Partner at Remoggo and has served on the board of Tongaat Hulett’s Zimbabwe subsidiary Hippo Valley Estates since 1 August 2020.

Kagera blocked

Following the nod for Kagera, the Vision group wrote to the BRPs objecting to the decision and also to the IDC, which it accused of favouring Kagera with funding while refusing to consider Vision.

The IDC was persuaded to conduct an internal inquiry, which led to a senior executive resigning, allegedly for approving a funding commitment for Kagera without the necessary authority.

By October, Kagera appeared to be struggling to raise finance and a new name appeared: the Mozambican family owned RGS Group, which reportedly submitted a R6-billion bid, almost double that of the preferred buyer.    

That left the process somewhat in limbo, until a City Press article on 5 November trumpeted, “Robert Gumede’s consortium takes control of Tongaat Hulett”.

The story suggested that Vision had outsmarted everyone by doing a deal directly with the lender group of banks by buying Tongaat Hulett’s debt (at a discount) in order to assume a controlling position as the largest creditor.

This would effectively block everyone else because Vision/Terris would have the majority vote at the creditors meeting to approve the business rescue plan.

“Terris Sugar now holds over 80% of creditors’ votes and any bidding company only required 75% of the votes to succeed. It will still inject the R3.6 billion required for the company’s assets,” the paper proclaimed.

It seemed the deal was sewn up.

Not so fast

However, to clinch the deal Vision had to come up with the money.

We know from subsequent court papers that on 3 November the Lender Group notified the BRP’s that they had reached agreement with the Vision parties. This transaction was seemingly never consummated. A new agreement on 20 November 2023 apparently made provision for payment to be made by Vision to the banks by no later than Wednesday 6 December.

That was two days before the date announced by the BRP’s – Friday 8 December – on which creditors would have to vote for one of two rescue plans for Tongaat Hulett: that of Vision/Terris or the competing offer of Mozambique’s RGS, owned by the powerful Gulamo family.

As of Thursday morning on 7 December, the advocate appearing in the Durban high court on behalf of Vision was forced to tell Judge Rashid Vahed that no money had been paid to the banks.

He was eager to assure the court – and a courtroom full of opposing lawyers – that the money was “still available” and that Vision’s bid was still on the table. No payment had been made, he tried to suggest, because of what he termed the current “uncertainties”.

But what were these “uncertainties” and how did they end up in front of Judge Vahed?

To understand that we need to take a step back and examine how the South African sugar industry is regulated.

SASA and the Sugar Industry Agreement

Sugar production is important to the South African economy. Evidence before court was that the industry generates in excess of R18-billion annually and creates between 65 000 and 85 000 direct jobs, along with 350 000 indirect jobs.

As Judge Vahed noted, sugar is particularly significant for the rural areas where cane is grown and local economies are boosted by the proximity of sugar mills and the infrastructural support they bring.

Because sustaining the sugar industry is a matter of national importance, the South African Sugar Association (SASA) has been given statutory recognition and powers via the Sugar Act and the Sugar Industry Agreement.

Sugar is globally oversupplied and South Africa is vulnerable to dumping by international producers – the import of cheap sugar at prices that undercut the price at which the local industry can viably produce.

To counter this threat the government imposes anti-dumping duties on imported sugar in order to shield domestic producers.

In addition, the Sugar Industry Agreement creates a revenue-sharing regime through which local sugar production is regulated.

As the judge highlighted, “The revenue-sharing arrangement is based on the central and overarching principle that the growers, the millers, and the refiners should all benefit from an equitable division of the proceeds of the domestic market, and all be insulated against the risk of the export market.”

The overproducer

Tongaat Hulett is an overproducer against its regulated quota and must pay into the general fund for redistribution to other growers, millers and refiners.

The internal transfers that are managed by SASA can be large.

Around the time it was placed in business rescue, Tongaat Hulett received an assessment of levies from SASA amounting to more than R400-million.

It did not pay.

Following the institution of business rescue, the BRP’s took the view that they were entitled in law to suspend these payments, and so the bill owed by Tongaat Hulett has grown to almost R2-billion according to SASA (although this figure may be subject to dispute).

These debts have a knock-on effect in the industry. In court papers another large producer, Illovo Sugar, said that Tongaat Hulett’s non-payment had, as of 31 March 2023, caused lllovo to suffer a loss of R153-million.

Illovo told the court, “The threat of non-payment by THL [Tongaat Hulett Ltd] is even more immediate and serious for smaller millers and growers… [the] business rescue plans refer to the human and social catastrophe… if THL is placed into immediate liquidation… The elephant in the room is the greater human and social catastrophe that will be caused by THL if it again fails to pay its redistribution obligations which will drive the entire sector into ruin, beginning with small scale growers.”

Litigation

The industry was so concerned about Tongaat Hulett’s non-payment that in June this year another big player, RCL Foods, lodged an urgent interdict to stop the business rescue practitioners from convening a meeting of creditors to consider the rescue plan that was then on the table because it did not make provision for the outstanding levies to be recovered.

That interdict was withdrawn only because the BRP’s postponed the creditors meeting and promised to pursue a high court ruling on whether, as they claimed, the business rescue provisions of the Companies Act allowed them to suspend payments and treat SASA as just another unsecured creditor which might get paid a few cents to the rand when the business was finally sold or liquidated.

That issue ended up before Judge Vahed. On 29 November, by agreement with the parties, he handed down a one line ruling dismissing the BRP’s case with costs and giving notice that the full judgment would be handed down on Monday 4 December 2023.

The urgency to obtain clarity on whether Tongaat Hulett was entitled to withhold those levies was based on a deadline set by the creditors for the business rescue plans to be published by 29 November, in order to ensure that a vote on these plans could be held by Friday 8 December.

The ruling should have given the BRP’s pause, despite the absence of a full judgment.

Potentially it instantly punched an extra R2-billion hole in Tongaat Hulett’s balance sheet and called into question the business rescue process. 

Instead, the practitioners published two plans – the Vision plan and the RGS plan – in which they maintained that the court was wrong to dismiss their application and that they intended to appeal.

A damning judgment

When the full judgment was published on 4 December it eviscerated the BRP’s case.

It found Tongaat Hulett’s obligations to SASA were statutory (derived from law) not contractual, and therefore could not be suspended by business rescue. “To put it bluntly: if a company cannot comply with its statutory obligations, then it cannot be rescued and must seek liquidation.”

Judge Vahed found that, given that payments had been suspended in breach of the legal obligations, SASA must receive preference (priority) in the business rescue: “This is a consideration which the practitioners ought to take into account when determining whether the business is capable of rescue or whether a better return will result in liquidation.”

Given this ruling, RCL Foods and SASA launched urgent applications to stop the creditors’ planned Friday 8 December vote in favour of the Vision or RGS business plans.

In court papers they argued that both plans put forward by the BRP’s were unlawful in that they did not recognise and encompass the statutory obligations towards SASA.

At an urgent hearing in front of Judge Vahed on Thursday morning, counsel for the BRP’s agreed the vote would have to be postponed, but only until Thursday 14 December, because the Industrial Development Corporation, which has been funding the business rescue, was going to shut off the taps.

The interdict will now be argued on Wednesday 13 December and Vahed will have to give a snap judgment on whether the vote can go ahead the next day.

Meanwhile the swirl of questions around the players and process is only getting louder.

Questions for the BRP’s

The Mozambican bidder, RGS, has delivered an extraordinary series of allegations, in effect accusing the BRP’s of manipulating the rescue process (see main story here).

But RGS is not the only critical voice. 

In its urgent interdict to stop the vote, RCL Foods was scathing about the BRP’s decision to publish the two rescue plans despite Vahed’s judgment.

RCL stated, “Quite apart from demonstrating an alarming contempt for the order, this attitude demonstrates an unwarranted degree of arrogance on the part of the practitioners or those entities who may be driving the business rescue process, be they the lender group… or the competing bidders under the two plans.”

It noted that even before receiving the full judgment the BRP’s expressed the opinion they were still entitled to suspend the statutory obligations: ”Their belief or opinion is legally irrelevant, and their willingness to conduct themselves by privileging their opinion over an order of court Is wilful self-help, which our courts have repeatedly deprecated.”

By this RCL meant the BRP’s were endeavouring to go ahead and make an omelette that could not later be unscrambled.

In their provisional answer (both sides will file more complete papers ahead of argument on 13 December) BRP representative Gerhard Albertyn said they still believed the proposed rescue plans were lawful and viable.

“Their terms and/or implementation will not cause SASA or RCL irreparable harm…  On the contrary, preventing… the vote… will likely lead to THL’s liquidation — laying to waste all the work done and the money expended in the business rescue, and redounding to the permanent and unjustifiable prejudice of THL, its creditors, employees. shareholders and other affected persons, as well as the sugar industry and the public at large.”

Rather liquidate?

However, in an affidavit in support of RCL Foods Illovo Sugar took aim at the business rescue outcomes, pointing out that Tongaat Hulett’s liabilities have increased by over R3-billion in 6 months.

“THL’s state of insolvency is rapidly increasing,” Illovo alleged.

It noted that according to the first business rescue plan published by the BRP’s on 31 May
2023, Tongaat Hulett had assets to the value of R5.897 billion and liabilities in the amount of R9.882 billion as of 30 April 2023.

Now, according to the RGS and Vision plans published at the end of November, liabilities as of 31 October 2023 have increased to R13.059 billion, while there has been no increase in the value of the assets. 

Notably, this deterioration flowed from Tongaat Hulett’s debt to the IDC for loans made since the commencement of the business rescue. This had increased from R613 million to R2.118 billion.

The other major liability was indebtedness to SASA, which had grown to R1.6-billion according to figures contained in the rescue plans.

Illovo said there were still many regulatory, procedural and financing hurdles: “The business rescue proceedings therefore may continue for many months, or even years.”

Illovo alleged there was a real risk that Tongaat Hulett might be unable or unwilling to pay the outstanding industry levies, and that “the harm that this would cause to participants in the sugar industry will certainly be irrecoverable, and may, for many of the participants in the industry be irreparable.”

On the other hand, Illovo argued that if Tongaat Hulett were to be liquidated, its productive capacity would be taken over by a new miller who would immediately be required to honour any new redistribution payments: “That scenario would be infinitely preferable to the sugar industry as a whole than the “business rescue” process envisaged, in respect of which ongoing obligations heap up with no realistic prospect of being discharged, to the catastrophic prejudice of the industry as a whole and to the benefit only of THL’s secured lenders.”

In its replying affidavit the Sugar Association was unequivocal: the BRP’s decision to suspend payments to SASA was ruled unlawful by Judge Vahed, which in turn rendered the business plans unlawful. SASA must be paid, finished and klaar.

SASA also took aim at the banks, stating: “It appears that the proposed business plans are focused on the rights and interests of the Lender Group, not all creditors.

“First and foremost as consistently stated, a vote cannot take place on an unlawful plan. Second, it is not SASA or RCL that is pushing THL into liquidation it is the Lender Group that are doing this.

“That is because they insist on payment of their debts to the detriment of the entire sugar industry, not just THL. In effect this statement seeks to hold SASA hostage: SASA must forego its statutory rights in favour of the Lender Group’s contractual rights or be branded as the cause of THL’s liquidation. This is factually unsustainable and legally untenable.”

Some unresolved questions about Vision

While Amre Youness from Terris has distanced himself from any negative association with the Kazakh oligarchs, his own responsiveness to allegations of corporate manipulation has been called into question.

His name came up in a 2019 case lodged by the Association of Mining and Construction Union (AMCU), in which Youness was cited as the Third Respondent, with Samancor being the main target.

In that case, a former Samancor director turned whisleblower, Miodrag Kon, described various ways in which money was allegedly siphoned out of Samancor to the detriment of the company and minority shareholders, including via “marketing fees” paid into an offshore entity called Samchrome in which a former shareholder allegedly had a beneficial interest.

In his affidavit, Kon states that “in 2006, I started to be uncomfortable with what was going on at the company… I approached Ahmed Youness… [from IMR] questioning Samancor’s and their own disadvantageous relations with Samchrome Ltd Malta.”

Kon attested, “As a manager of shareholder relations, I travelled to London for a meeting with the Chair of the Board, Mr Youness… Mr Youness told me at the meeting that he already knew that [the former shareholder] had taken out “500 million dollars”… I saw no action taken by Mr Youness after this meeting.”

The payment of marketing fees was later transferred to another company, Samchrome FZE Dubai.

Kon stated, “It is my understanding that Samchrome FZE Dubai continues to provide marketing services to Samancor on the same or similar terms. I believe this is to the prejudice of Samancor’s minority shareholders as 9% is far too high a fee for the services actually rendered.”

The lawyer for the Vision/Terris consortium pointed out that the papers were never served on Youness and that he never had an opportunity to rebut the allegations because this lawsuit was withdrawn.

The suit was terminated in response to an agreement by Samancor in July 2021 to appoint audit firm BDO to conduct an investigation.  BDO found no wrongdoing, but its confidential report is still the subject of litigation by AMCU.

The consortium lawyer said that “Mr. Youness has no knowledge of the BDO report or of the status of the agreement with AMCU. Mr. Youness has no knowledge of Mr. Kon’s allegations, all of which took place long before Mr. Youness was involved. Mr. Youness had no involvement in the creation of the marketing agreement… However, it is worth noting that a margin of 9% is nothing more than a complete fantasy. The typical net profit margin of a trading business is closer to 1%, which was the case for Samchrome.”

She added: “Your determination to smear Mr. Youness is unprofessional and defamatory. Mr Youness is a respected international investor who is part of a consortium that is seeking to save a major South African corporation.”

And Almoiz, Vision’s technical partner

On the face of it, the Pakistani Sugar Commission report is pretty damning, but the lawyer for the Vision consortium told us that “nothing ever came out of the commission. It was widely criticized for being politically motivated, flawed and lacking credibility… No convictions (even against the targeted political group) were ever achieved, and not a single charge was formally leveled against any other party, let alone Almoiz.”

She said that the World Bank’s compliance arm has carried out its independent diligence on the Sugar Commission allegations and concluded that not only could it continue to collaborate with Almoiz, but that it would also proactively work to expand its relationship with the Group.

The report did, however, produce some action.

The Competition Commission of Pakistan (CCP) conducted raids at the Pakistan Sugar Mills Association (PSMA) and imposed penalties totalling Rs44 billion on the PSMA and its member sugar mills – including Almoiz – for their alleged involvement in cartelisation.

“Cartelisation in the sugar industry appears to be compulsive or pathological where players collude and engage in collusive practices as a means to an end,” the majority wrote in the infringement decision.

The finalisation of this case has been delayed by the failure to appoint a chair of Pakistan’s Competition Appellate Tribunal, but this has recently been remedied and the Tribunal has announced it will be hearing the case.

Finally, questions about the other bidder: Mozambique’s RGS

Perhaps most notoriously, the Gulamo family, which owns RGS, features in a 2010 Wikileaks dump of US embassy cables (specifically this one from 2004) which purported to link the Gulamo family to the drug trade.

RGS executive chair Aquil Rajahussen has convincingly argued that the US diplomat got it wrong, confusing the Gulamo family with alleged drug dealer Gulamo Rasul Moti.

Rajahussen told amaBhungane, “The individual in question is not Rasul Gulamo. His FIRST name is Gulamo, and to the best of my knowledge, his surname, is Rassul…  I want to clarify that I have no relationship with this individual… The first I learned about him was through WikiLeaks.  I have never met him… Given the prominence of our family, the media would not have failed to mention an association if one existed.”

“We have no involvement in contraband or anything deemed unlawful under the laws of Mozambique or Islam; Further, there have never been any credible allegations to the contrary.”

That is perhaps not quite 100% accurate.

In 2017, the Gulamo family – and in particular Aquil Rajahussen – were implicated in an alleged money laundering scheme on behalf of former Minister of Mines and Geology for the Republic of Guinea, Mahmoud Thiam.

Thiam was sentenced in the US to seven years in prison for laundering bribes paid to him by executives of China Sonangol International Ltd. and China International Fund, SA.

Thiam used some of the Chinese bribe money to buy a $3.75 million estate in Duchess County, New York. 

A Gulamo group company, Sociedade Saboiera De Nacala Lda, was allegedly used to launder the cash. The agent of Sociedade was Aquil Rajahussen, described as Thiam’s friend.

Two tribunals, the US court and the London court of international arbitration appeared to find that Rajahussen knew that Thiam was using Sociedade Saboiera De Nacala to conceal the transfer of funds. 

Rajahussen denies this.

He explained, “Mahmoud Thiam was indeed a long-time acquaintance from our youth, and we maintained a friendly relationship over the years. However, it is crucial to clarify that I was neither involved nor implicated in any of his schemes or engaged in any business dealings with China Sonangol International, China International Fund, SA, VALE S.A., or BSG RESOURCES LIMITED, as mentioned in your inquiry. I became aware of his illegal activities only at the time of his prosecution.”

Rajahussen said that Thiam had sought a loan to buy the property but that he had instead decided to personally purchase the property, allowing Thiam to lease it on the understanding that he had an option to buy when he had the necessary funds.

“During the subsequent legal proceedings against Thiam, our arrangement came under scrutiny. While I was not directly involved in the proceedings and unaware of the findings, the authorities attempted to attach the property, claiming it belonged to Thiam. I contested this order, asserting that the property was rightfully mine and presented all such evidence necessary to prove as such to the courts. I succeeded in winning the case in the State of New York.”

Rajahussen does not deny his closeness to the ruling Frelimo party in Mozambique.

“I, like Patrice Motsepe [and the ANC], am openly a member of the Frelimo Party. I believe that being a member of a political party is a legal and permissible act in both SA and Mozambique. 

Similar to Patrice Motsepe, I engage in lawful contributions to political campaigns. “Importantly, my company has no need for reliance on political favours. We do not conduct business with the government, nor do we participate in government tenders. We make absolutely no revenue from government revenues.”

The post Analysis: Who is behind the Tongaat Hulett bid battle? appeared first on Vuka News.

The post Commentary: Cleaner tenders? Not likely. appeared first on amaBhungane.

BY Caroline James

KEY TAKEAWAYS

• A weak Public Procurement Bill has been approved by Parliament’s Standing Committee on Finance
•  Despite warnings from the Zondo Commission, the bill fails to address the clear link between tendering systems and corruption
• Up to two-thirds of public submissions may have been ignored in the consideration of the bill.

Corruption is eating away at South Africa’s economy, our integrity and our sustainability. And our tender systems are facilitating much of this. According to the Special Investigating Unit’s Adv Andy Mothibe, up to 90 percent of the cases on their books are tender fraud and corruption.

We know it: just last month we published a story on a proposed R3.7-billion deal between PetroSA and Russia’s Gazprombank, based on seemingly irregular tender processes.

The president knows it: at the recent National Dialogue on Anti-Corruption President Cyril Ramaphosa said that we must ‘look at the integrity of the [tender] systems because that is where the money is found and that is where all these thieves, thugs, focus their attention on because that is the centre that dispenses the resources that they want to steal.’ 

Chief Justice Raymond Zondo knows it: at the National Dialogue he said that ‘closing the taps’ to tender corruption would make a significant impact on combatting corruption as a whole.

In fact, Zondo knows so much about the link between corruption and tenders he wrote a chapter on procurement (the tendering for goods and services) in his State Capture Commission Report. He wrote that one of the lessons we must learn is that ‘the public procurement sector cannot defend itself against those who control the levers of political and state power.’

But those who do control the levers of political and state power seem utterly unfazed by the urgent need to stem the flow of tender-related corruption.

Ramaphosa’s biggest test

The Public Procurement Bill is currently before Parliament. This week, the Standing Committee on Finance accepted a revised version of the bill and sent it to the National Assembly for consideration.

We have previously described it as the most consequential piece of legislation of President Cyril Ramaphosa’s administration. Yet the manner in which this bill has been handled by its drafters and Parliament is deeply concerning.

As appears to be the trend now, National Treasury, rather than the parliamentary committee, drove the law reform process. National Treasury produced the draft bill which was published for public comments, consolidated and considered those comments, and proposed changes to the bill for the committee to vote on.

However, National Treasury acknowledged in its most recent report to the committee that it had only considered 36 percent of written submissions. In other words, the entity responsible for reworking the bill to respond to the concerns raised by the public, simply chose not to read two out of every three public submissions.

National Treasury explained that the sheer volume of submissions meant they simply could not get to all of them.

The committee was at pains to state that it had met its obligations to facilitate public participation in the lawmaking process, referring to “robust stakeholder engagement” in their report.

But considering only a third of the submissions is not acceptable: comments, suggestions and proposals from academic experts, grassroots representatives, and those with direct experience of the tender systems are likely to have been ignored.

Even more concerning, National Treasury introduced a chapter on ‘preferential procurement”’ based on some of the submissions received. This chapter – dealing with the thorny issue of balancing the need to transform our economy while ensuring cost-effective public contracting – was never put out for public comment.

Preferential procurement refers to the constitutional requirement that public procurement be conducted through a system that is fair and equitable. In the past, this has led to adoption of a ranking system where tenders have been scored on the 90:10 or 80:20 rule, meaning a company’s BEE score counts for 10 to 20 percent of the points it receives. However, as we saw during the State Capture era preferential procurement rules were manipulated to divert billions from Transnet and Eskom. And the Constitution also requires that procurement be competitive and cost-effective. The bill fails to explain how these priorities are to all be achieved.

The new bill, if it becomes law, will leave it up to government departments and state-owned entities to set their own rules for what constitutes fair and equitable procurement, leaving the gate wide open for the same kind of abuses to continue.

Zondo has repeatedly stressed the need to prioritise value-for-money procurement. This is not only motivated by economic interests, but also because of how the evidence at the State Capture Commission illustrated that the lack of priority given to cost-effectiveness in awarding tenders results in corruption at government and state-owned entities.

That the committee could assent to a bill without having had public participation on such a weighty chapter is inconceivable.

Weakening protections

Unfortunately, it appears to be just one example of the committee and National Treasury’s failure to engage with the need to develop a tender system that can identify, prevent and ensure accountability for corruption.

When the bill was first published, we highlighted our concerns that the anti-corruption measures it would implement were too weak, and that its failure to consider an independent procurement accountability mechanism would open the system up to abuse.

During deliberations the bill, astonishingly, has become even weaker on integrity and anti-corruption.

The bill automatically excludes certain categories of persons from tendering for government contracts. This initially included leaders of political parties. We and others called for these categories to be expanded to include additional political party office bearers.

But the committee resolved to remove them from the bill altogether.

Zondo had recommended that whistleblowing be incentivised as a way to identify and prevent corruption. A number of the submissions also emphasised the need to incentivise and protect whistleblowing, particularly after the assassination of Babita Deokaran, the public servant who dared to blow the whistle on the Gauteng Department of Health.

However, National Treasury and the committee felt that it was not appropriate for there to be a separate whistleblowing provision for procurementonly and noted that the Department of Justice is undertaking a review of the country’s whistleblowing laws.

Other pieces of legislation – such as the National Environmental Management Act – have introduced sector-specific whistleblower protection clauses. And any updates to the broader whistleblower regime are likely to take years before adoption.

Another serious concern is the capacity of the Public Procurement Office (PPO) and its ability to effectively play all the roles it is allocated by the bill.

The PPO is supposed to regulate all procurement, and also conduct oversight and accountability for non-compliance. It is also required to identify possible criminal irregularities and refer those to law enforcement.

This means that the PPO is effectively a player and the referee in the tendering game, which has direct bearing on the ability of the PPO to effectively identify corruption and take action against those responsible.

There is a debate that must be had over the correct location of the PPO. Many procurement specialists – including Professor Geo Quinot and former Chief Procurement Officer Kenneth Brown – have argued for (at least) the regulatory powers of a procurement office to be located outside of National Treasury.

The problem is the committee accepted the bill without any deliberation on the PPO’s location, need for independence, and capacity to effectively combat corruption in procurement processes.

Laws are failing us

In his State Capture Commission report, Zondo eviscerated the efforts of those responsible for curbing procurement-related corruption:

‘It seems scarcely believable that the constant flow of legislation over the years had so little impact in curbing corruption and that the combined efforts of Parliament, National Treasury, the Auditor-General, the Provincial Treasuries and National and Provincial Governments could have been so ineffectual.

‘The efforts, albeit failed efforts, to address corruption show that there is no easy solution to the problem. Corruption has strengthened its hold and extended its hold on public procurement over a very long period of time. Clearly, a new approach is required; it cannot be the same mixture as before.’

As South Africans, we should be angry that, despite Zondo’s warning, those with the power to make legislative changes are treating this so lightly.

We should be angry that those we have entrusted to represent our interests have failed to take seriously the need to step the corruption flowing through procurement.

We should be angry that – despite everything we know about how tenders are used to facilitate illicit wealth accumulation – those who have the power to introduce restrictions on who can benefit from tenders have looked after their own interests rather than the country’s.

And we should be angry that Parliament and National Treasury pay the public so little respect that they’d rather rush through a law than take the time to consider the submissions made by members of the public desperate for a government that works.

But the bill is not yet law. The National Assembly and the National Council of Provinces have to vote on it. And then the President has to sign it into law.

The window of opportunity to create a tender system that does not serve as a cash cow to those with power and connections is closing rapidly.

But we still have a chance. We must do what we can to prevent this bill becoming law.

The post Commentary: Cleaner tenders? Not likely. appeared first on Vuka News.

The post Verdict: Karpowership’s owner slammed for discrimination against BEE partners appeared first on amaBhungane.

BY Susan Comrie

KEY TAKEAWAYS

• Former chief justice Sandile Ngcobo delivers damning arbitration ruling in fight over Karpowership’s BEE shareholding.
• Turkey’s Karadeniz has 21 days to return 49% shareholding to its BEE partners Powergroup SA.
• Ngcobo described clauses of the shareholders’ agreement as “biased”, “oppressive” and “so unreasonable as to offend the core foundational value of equality”.

Former chief justice Sandile Ngcobo has eviscerated Karpowership’s Turkish owner over its “biased” and “oppressive” shareholders’ agreement with its black empowerment partners.

Powergroup SA turned to arbitration when Turkey’s Karadeniz tried to evict it from the R218-billion deal to supply emergency power to Eskom for the next 20 years.

In February, Karadeniz told Powergroup that it needed to fund its portions of a $5-million (R93-million) the Turkish parent said was needed to get the Karpowership deal over the line. 

When Powergroup did not deliver the funds, Karadeniz exercised a call option in its shareholders’ agreement that allowed it to seize Powergroup’s 49% for the princely sum of R83.

Karadeniz, Karpowership’s Turkish parent company, owns 51% of the local joint venture through a subsidiary in Malta. Powergroup, which is owned by local businesspeople – Sechaba Moletsane, Ravin Rajoo, Sureshan Moodley and George Mokoena – held 49% until recently.

But Ngcobo’s confidential ruling, delivered last week Friday, found that key clauses of the shareholders’ agreement – which only applied to Powergroup and not Karadeniz – smacked of discrimination, and were inconsistent with Powergroup’s constitutional right to equality.

“The problem here is that the Call Option as well as the Trigger Events have as their only target, Powergroup,” Ngcobo wrote in his ruling, which amaBhungane has seen. “The impugned provisions are heavily biased in favour of Karadeniz. They were obviously tailored from Karadeniz’s point of view.”

He continued: “They were not merely designed to secure contribution to additional funding but were designed to ensure maximum protection for Karadeniz against any breach of the [shareholders’ agreement] … by Powergroup while at the same time subjecting Powergroup to the most stringent and oppressive terms … This is manifestly unfair and unreasonable.”

During the arbitration hearing, Karadeniz’ lawyers argued that the one-sided clauses were necessary to ensure Powergroup did not get a “free ride” in the deal.

Summarising Karadeniz’ argument, Ngcobo wrote: “Reduced to its essence the assumption is that because Powergroup is a BEE entity and has brought neither capital nor technical skills to the Company, it has no vested interest in the success of the project. 

“This is so notwithstanding access to both capital and technical skills that Powergroup stands to gain by participating in the project. This assumption seems to be based on the premise that because of its contribution to the project, Karadeniz has much to lose if the project does not succeed and therefore it will not do anything that might constitute a trigger event. For this reason, there is no need to put in place contractual mechanisms to ensure it does not fall foul of any provision of the [shareholders’ agreement].”

But Ngcobo rejected this argument: “No facts have been put forward to justify this assumption. There is utterly no basis for this assumption. If anything, it exposes the irrationality of the basis of the discrimination and its unreasonableness. The ineluctable conclusion is that the assumption is based on a predisposition about Powergroup as an entity. This is inimical to our foundational value of equality.”

Powergroup also asked Ngcobo to consider whether the arrangement constitutes “fronting”, which is a criminal offence and punishable by up to 10 years in jail.

However, while Ngcobo found that there is “a compelling argument” that the clause in question “violates the fronting provisions of the Empowerment Act”, he did not make a ruling on this, reasoning that it was enough to declare the clauses violated the “foundational value of equality” in the Constitution.

The ruling, which is binding, gives Karadeniz 21 days to return the 49% stake in Karpowership to the BEE shareholders.

The only upside for Karadeniz was that Ngcobo agreed that Powergroup had failed to respond to previous calls for funds, which in theory would allow Karadeniz to start the process to push Powergroup out of the deal again. 

Read: Karpowership’s failed interdict unearths State Capture on steroids” agreement

The post Verdict: Karpowership’s owner slammed for discrimination against BEE partners appeared first on Vuka News.

BY Dewald van Rensburg November 29, 2023

KEY TAKEAWAYS

• Mysterious buyers are allegedly lining up to save the “hopelessly insolvent” Habib Overseas Bank.
• Habib is the bank the Gupta family once tried and failed to acquire and has recently been implicated in corruption and money laundering.
• The South African Reserve Bank wants to press ahead with liquidating the bank which it says requires “at a minimum” R364-million to keep going.

Mysterious anonymous investors from Limpopo, Saudi Arabia and Dubai, as well as one of Botswana’s richest politicians, are allegedly all separately poised to spend hundreds of millions of rands to save and take control of the controversial Habib Overseas Bank.

Habib is the same bank the Gupta family, through proxies, sought to take control of in 2016 when the family was losing access to all the major local financial institutions.

It has also been the subject of an amaBhungane exposé revealing large-scale money laundering.

These new alleged bids are being endorsed by a group of account-holders claiming to represent almost a quarter of the deposits left in the crippled bank. In the process they have temporarily blocked the South African Reserve Bank’s (SARB) attempt to liquidate Habib and potentially hunt down misappropriated monies.

The diverse collection of interested parties includes Satar Dada, a Botswanan magnate and parliamentarian who serves as the ruling Botswana Democratic party’s treasurer.

Also in the running is Durban businessman Barlow Gonaseelan Govender, who claims to have the informal support of the Public Investment Corporation. The state-owned asset manager ignored a request for confirmation.

The key figure in the profusion of (potential) bids is Yunus Paruk, the marketing manager of Al Baraka Bank in South Africa.

In court papers the depositor group claims that Paruk became a go-between for the various interested parties.

One of them is allegedly an anonymous suitor from Dubai represented by “deal maker” Anwar Khan, who runs a “boutique advisory firm” called Adsum Capital Management in the United Arab Emirates.

Khan, incidentally, used to work for the Pakistani Habib Bank Limited, which is not affiliated to Habib in South Africa but was founded by members of the same extended family, which also has separate banking interests in the UK.

Paruk was also the point of contact for the Botswanan Dada. According to the court papers the two are partners in a property business.

A “prominent business family from Limpopo” is also interested, with an unnamed US investor in tow.

And there is also allegedly a “Saudi Arabia based consortium” interested in buying Habib.

The depositors have approached the court to force the provisional liquidator of Habib, Zeenath Kajee, to disclose detailed financial information so that all these potential buyers can conduct due diligence exercises before making actual offers.

This case is running in parallel to the group’s opposition to the Prudential Authority’s attempt to liquidate Habib. The PA is the division of SARB which regulates banks.

This new slate of potential buyers is not the first. The owners of Habib had in fact already entered into a sales agreement in November last year with a company called Shop2Shop which seems to have fallen by the wayside.

While depositors understandably want to recover their money, the profusion of mostly anonymous ‘white knights’ raises some red flags:

• First, Habib is in bad shape, requires immense amounts of money to resuscitate, and appears unsustainable – making it unclear why anyone would buy it other than to acquire a banking license;
• Second, the fact that Habib’s banking license has been abused in the past to facilitate money laundering; and
• Third, the blanket anonymity surrounding most of the alleged suitors.

Financial black hole

Habib was placed under curatorship in March this year and the Prudential Authority subsequently applied to court to liquidate it after the curator concluded that the bank is “hopelessly insolvent” and would require “at a minimum” R364-million just to meet regulatory requirements, much less actually operate.

And to operate, much more money would be needed to effectively overhaul the whole bank, which runs on inadequate systems and has an “unsustainable” business model, claims the central bank.

Furthermore, that is before Habib tries to overcome its descent into infamy due to its association with money laundering.

As amaBhungane previously reported, in the course of 2018 and 2019 nondescript front companies managed to expatriate more than R1-billion through Habib accounts using forged paperwork. The money arrived in rapid-fire deposits only to be sent abroad almost immediately. The role of compromised Habib employees was to rubber-stamp fake documents to legitimise offshore payments.

Meanwhile the Prudential Authority claims that even if there were a serious buyer, the due diligence and transfer process would take months and lead to the worsening of the bank’s finances, with no guarantee it would not be liquidated anyway.

Before the extent of its financial woes was fully known, the initial reasons the bank was shut down prominently included “compliance, governance and operational failures”.

In its liquidation application the SARB revealed that it had imposed “a limitation of its exchange control license” in 2021, seemingly in response to the bank’s role in illegally expatriating funds.

This led to a precipitous drop in Habib’s income that coincided with the general economic downturn brought about by Covid.

These factors seemingly precipitated a snowballing withdrawal of deposits.

According to SARB data deposits at Habib plummeted by almost 30% in the immediate aftermath of losing its full forex abilities. This trend continued up to the beginning of the curatorship, by which time the depositor base had halved from its 2018 high point of R1,3-billion. 

A hopeless case

Habib’s financial declarations to the SARB, while already dismal, do not even square with what the curators found.

According to official filings Habib was insolvent to the tune of R64-million. This is really closer to R114-million according to the curators, who have applied their own analysis of how sound the loan book is.

On top of that a bank is supposed to have minimum capital of R250-million. Added together this comes to the minimum R364-million Habib needs if it wants to even legally exist as a bank.

Three of Habib’s non-executive directors resigned together on the 24th of February, about a month before the bank was first put under curatorship. This was one day after the SARB wrote to Habib after the bank breached the minimum requirement for capital adequacy.

One of these directors was John Henry Burke, a former director of the JSE who came on board last year on the invitation of Habib’s CEO Henk Engelbrecht. Another was Douglas Lorimer, formally of Absa, and another was Deborah Mutemwa-Tumbo – a lawyer and colleague of Lorimer.

All three told us that they resigned when the shareholders of Habib, being the Habib family, allegedly reneged on a promise to keep providing capital to keep the bank afloat.

But it is worse than that.

The curators’ report attached to the SARB liquidation application paints a grim picture of a crumbling institution with barely functioning computer systems, patchy records and essentially no proper upper management.

Customers were not properly vetted and documents were not verified, while there are indications of corruption by at least 29 employees.

The scale of financial crime at Habib is potentially an order of magnitude larger than what occurred at the infamous VBS Mutual Bank, the only other bank failure in recent South African memory.

The SARB has suggested that it intends to pursue malfeasance by individuals at the bank and needs a rapid liquidation so that “necessary proceedings can be pursued to hold those accountable for [Habib’s] demise”.

“The longer it takes for the appointment of a liquidator and for steps to be taken, the more unlikely the recovery of monies and other assets from potential recipients will be.”

Which underscores the strangeness of the arrival of as many as five, mostly anonymous, prospective ‘saviours’.

It remains to be seen whether any of these suitors actually raise their heads above the parapets and whether Habib will be put out of its misery or miraculously revived.

The post A scramble for the broke and broken Habib bank appeared first on amaBhungane.

The post A scramble for the broke and broken Habib bank appeared first on Vuka News.

Photographs by Magnificent Mndebele

In the lush plantation fields of Skeerpoort, situated about half an hour’s drive from Brits in the North West province, lies the farming community of Khutso-Naketsi.

Sina Modise is one of its oldest members and her identity document shows her to be 115 years of age.

She was also meant to be one of the beneficiaries of a ’megafarm’ purchased by the North West Department of Agriculture, Land Reform and Rural Development (DALRRD) in 2019.

The land was bought as part of a land reform programme and is held under a communal property association (CPA).

Yet the ambitious project to transfer 70 percent of a massive working vegetable farm to community control, at a cost of nearly half a billion rands, is in shambles.

Its problems highlight not only the policy and practical challenges inherent in the CPA model, but also the seeming complicity of national and provincial departments responsible for land reform, whether through incapacity, neglect or worse.

As with many CPA’s before it, the Khutso-Naketsi CPA’s big problems started when, as a cumbersome legal entity in a rural and underdeveloped community, it was saddled with the need to take responsibility for multi-million rand businesses.  

In April this year the previous committee members, elected by beneficiaries like Modise to manage the farm and the CPA’s other properties on their behalf, were voted out.

Like many before them, the old committee is perceived as having chosen to fatten their own wallets with little regard for the impact on Modise and other beneficiaries.

Four of the committee members of the CPA who were ousted in the elections allegedly misspent or mismanaged about R24-million from the CPA and its subsidiaries.

In addition, an irregular agreement signed by one of these former members almost saw the association lose its chief land asset and income stream.

Sina Modise is 115 years old and one of the oldest Khutso-Naketsi beneficiaries.

“Those people have made me to suffer,” Modise told us while sitting on a couch in her home in Letlhabile township – almost an hour away from the land she once lived on. “I have nothing to display that I am a beneficiary. We have been waiting for a long time but there is no difference.”

That perception is still a matter of dispute, but what is indisputable is that it is entirely foreseeable that placing rural community leaders in roles of significant corporate and financial authority is going to produce challenges and temptations.

Given this, it seems extraordinary that the provincial and national department did not, as far as we can tell, put in place effective checks and balances to manage a land transfer as large and complex as this one.

The response from officials to amaBhungane’s attempts to elicit accountability have been met with a level of non-responsiveness or officiousness that together suggest an underlying indifference.

Khutso-Naketsi

The Khutso-Naketsi CPA is one of the country’s 1 720 associations collectively holding millions of hectares of land transferred to land reform beneficiaries in the democratic era.

Its woes offer a window into the widespread dysfunction of the CPA system, which is marred by infighting, untransparent management and a lack of post-acquisition government support.

The evidence in amaBhungane’s possession suggests that between 2018 and mid-2022, the CPA and its subsidiaries received at least R27-million in revenues. Yet only R2 985 115 reached the hands of about 325 beneficiaries via a once-off payment in December 2019 that amounted to R14 500 per household.

Bank statements and financial reports that amaBhungane obtained suggest that the four former committee members tapped into the CPA’s resources in problematic ways that went beyond their purview, a view bolstered by  allegations of their poor performance.

The four erstwhile members allegedly appointed themselves as directors of the CPA’s corporate subsidiaries, comprised of a farming joint venture created from restitution involving the previous landowner and two separate companies created in July 2020.

Their modest R3 500 committee stipends blossomed into self-determined salaries of up to R60 000 a month per person. As a result, the employment costs of the CPA steadily rose from R493 500 in 2018 to R2 423 733 in 2022.

The documents also reveal that R1,283-million was extracted via ATM withdrawals and cashed cheques, with little or no documentation to show where it went.

“We’ve asked them to break down the R24-million [internal spending]. Who did it benefit? There is no benefit to the community,” said Douglas Ncube, the new chairperson of the CPA.

The CPA’s two main corporate assets are Damsig Poultry – a preexisting asset – and Khutso-Naketsi Agri, which controls the more recently acquired mega farm in which the CPA holds 70%.

Damsig, which leases 19 chicken houses to large corporate clients, was overseen by former treasurer Thomas Selahla – a former Klipgat Police Station acting commander – and William Moroke, a former CPA committee member.

The separate 70-30 joint venture, Khutso-Naketsi Agri (KNA), was led by the CPA’s former chairperson Abdullah Lucky Milanzi and Ephraim Mphamo, another member of the CPA.

Now, the new committee is faced with wresting control from the old members, who remain listed directors of Damsig and KNA, as well as trying to find out what went on and putting the businesses back on track.

Redistribution of a ’megafarm’

The CPA was registered as a legal entity on 15 September 2008. This is when the DALRRD restored a first land parcel to the dispossessed Khutso-Naketsi community members.

In early 2019, the Department bought an additional ‘megafarm’ of 1 923 hectares at a cost of R462-million. This land was returned to the 325 household beneficiaries, for whom it should have been a momentous occasion of historical redress.

Any celebration was, it turned out, premature, as by 30 September of that same year the community had lost all control over the land.

The post-settlement success of the farm depended not just on the acquisition of the land and implements, but also on a capital injection agreed to by the Department, as well as the transfer of skills to manage such a labour-intensive and technically challenging project.

Setting up a joint venture

For the purposes of skills transfer, the Department recommended that the new landowners enter into a joint venture with the previous owner, Henning Petrus Nicolaas Pretorius.

70% of the joint venture would be held by the CPA and 30% by Pretorius, trading through his company HPN Bestuur Pty Ltd. This joint venture, KNA, was registered as a private company on 3 April 2019.

Pretorius was the obvious choice to provide mentorship at what had previously been his farm.

The joint venture was to last for five years, whereafter the community could terminate the arrangement and acquire the 30% of the shares held by HPN Bestuur or renew the management agreement.

KNA’s shareholders agreed that the company’s operational costs had to be split between the CPA and HPN Bestuur based on their respective shareholdings. The CPA’s R87,1-million of “post-settlement funding” was supposed to come from the North West DALRRD while HPN Bestuur had to provide R26,7 million.

The joint venture was effectively a transitional structure. In a judgment stemming from subsequent litigation in the North Gauteng high court, the joint venture’s purpose was framed as aiming “…to transfer a going concern to a new corporate governance structure without putting the on-going of the business at risk and to prevent job losses”.

There are theoretically two income streams for the CPA through the joint venture.

First, the contract makes provision for the CPA to earn a 2% rental fee on KNA’s monthly turnover. This was evidently duly paid. Then, it should receive 70% of whatever dividends the venture pays. The Khutso-Naketsi CPA has received nothing from this second income stream.

This is because the North West DALRRD failed to provide the total portion of the CPA’s funding on time.

This is where the trouble began.

The shortfall of funding saw Pretorius lend money to the joint venture in the interim, with the CPA’s 70% being given back to him in terms of a supposed share transfer agreement as security, pending payment by the Department.

This arrangement was highly problematic. Rather than the CPA’s 70% being encumbered in the event of, and to the extent of, any default, the entire 70% was transferred back to Pretorius as security. This deal was signed by the then-chair of the CPA, Milanzi.

The scene was set for the CPA to lose its prize asset, ironically to the very person the state had bought the land from in order to restore it to the dispossessed community.

As it turned out, this was exactly what allegedly happened, ultimately leading to an acrimonious court battle.

KNA workers are gathered at the meeting point for the morning prayer, which has been a tradition for the company culture.

The disastrous cost of delayed “post settlement funding”

Milanzi concluded the share transfer agreement on 19 September 2019, on behalf of the CPA.

“As soon as the post settlement support [from government] is available the 70% shares will be reallocated to Khutso-Naketsi CPA,” reads one of the conditions in the agreement that Milanzi signed.

It would take the North West DALRRD nearly two years to release a partial payment of R37 969 190, which was only paid on 1 April 2021, despite the R87,1-milion having been approved in June 2019.

This money was for additional implements worth R16 960 691, as well as crops on land worth 28 000 000, but for the latter the Department only paid what the crops were sold for on the market said Stephan Pretorius, the son of the farm owner, who now controls HPN Bestuur’s 30% stake in KNA along with his brother.

AmaBhungane understands that when Pretorius senior stepped in to fund KNA it was a contingency plan, based on the hopes that in a month or two government would have released the post-settlement funding. As a result, since KNA’s inception the company has had to borrow about R20-million from Pretorius and still owes him about R8-million.

“It was never meant to be R20-million. He was forced to continue supporting the company,” said Stephan.

On 25 May this year, the CPA argued in court that Pretorius’ agreement with Milanzi giving him 100% of the company as security was void.

Acting judge of the High Court Gauteng Division, Karin Strydom, agreed, ruling that the agreement signed with Milanzi was invalid because it was not approved by a majority of heads of households in the community.

She restored the CPA’s rights as “the holder of 70% of the authorised and issued share capital in the first Respondent [KNA].”

But what she could not restore was the money and goodwill already lost.

Why was the funding delayed?

It has been difficult to get information out of the DALRRD, but documents obtained by amaBhungane show that post-settlement funding in the full amount of R87,1-million was approved by the chief director of the regional land claims commissioner and the North West DALRRD’s Provincial shared services centre as early as June 2019.

There appear to have been bureaucratic delays, mainly because the province wanted the funds paid into an account controlled jointly by Khutso-Naketsi Agri (the joint venture) and “the identified accountant”, which apparently referred to a transaction advisor insisted on by the province.

This meant that a transaction advisor had to be appointed and that a deviation approval was required, which seems only to have happened in November 2019.

Stephan Pretorius gave us his recollection.

“What happened was, it was in a government meeting where… it was decided that they have not yet assigned a transitional advisor, and this is after the project had started and they assured us that once that person gets assigned the money will be released quickly. This is at the start of the company. My father said he will lend us to start everything and as soon as the transactional advisor gets appointed, [KNA will] pay back the money. When the transactional advisor came in, we already had a financial year and shown a loss.”

This was around February 2020. Then, Stephan alleges, the Department changed its tune and said that “it was too risky for them give the money out because they think we are going to lose the money, they need to reanalyse the business”.

He said the Department wanted them to change their management structure to bring in another person to oversee the project.

No comment

AmaBhungane reached out to a number of those involved at the Department, without success.

We also reached out to the transaction advisor, Balebetje Makua. Eventually this reporter sent an SMS to her, saying, “I would really love to have a chat with you regarding your role… I am about to run out of time.”

She responded, “Since you’re out of time and I have none at the moment. I am no longer on the project as you know. The project is in the full custody of the department… they are very open with the challenges of the project.”

That was not our experience.

Eventually we reached Richard Keothaile, the chief director of North West DALRRD’s Provincial Shared Services Centre, which renders corporate support services.

He was one of the first officials to sign approval for the R87,1-million whose delays and partial payment seemed to have been the original cause of the joint venture’s operational and legal problems.

You can listen to the full interview above, but in essence Keothaile said he would not discuss the issue with the media, only with the CPA committee.

We tried to explain, “We have come to you guys because we’ve spoken to those people and they have allegations against you guys.”

Keothaile said he was not aware of any allegations or differences between the Department and the beneficiaries. And if there were, the CPA should bring them up with the Department.

Keothaile: “I will respond to the CPA itself if they raise questions and not to you specifically.”

Reporter: “The very same CPA that is frustrated with you guys and it has come to the media that you guys are not doing your duties?”

Keothaile: “Then refer them to us. We can discuss with them… But what you are doing of trying to get information from government and say government must just speak everything openly to any people identifying themselves to be… representing the public. Unfortunately, I won’t fall into that trap… This is private matters for Khutso Naketsi.

Intervention

Indeed, seemingly in response to amaBhungane’s efforts, North West DALRRD officials held a meeting with the Khutso-Naketsi CPA committee members on 1 November 2023 in Mahikeng.

In a recording of the meeting obtained by amaBhungane, one official, Kenneth Matukana, the director of operational management, can be heard downplaying their contribution in the post-settlement agreement. In fact, Matukana denies the existence of the agreement.

“It was a gentlemen’s agreement,” said Matukana in the recording. “Let me not even call it a gentlemen’s agreement. We said, ‘Pretorius, since you are the owner with…experience, let us see in the five-year how can this relationship be enhanced. It is not something that is binding.”

The province’s own internal approvals give the lie to this claim. It is apparent that the approval of the R87,1-million was based on a detailed post-settlement plan. Now it seems the Department wants a new plan.

“I am not going to release money until there is a plan,” another official, Lengane Bogatsu, the chief director of land restitution support, told those at the meeting.

But what is not clear is who will provide this plan.

Leadership fallout

Based on documents and interviews obtained by amaBhungane, the Khutso-Naketsi CPA was beset by leadership problems. Milanzi, the former chair who signed away the CPA’s 70% share to Pretorius, is accused of being part of a “scheme” that siphoned money from the CPA.

Milanzi and Mphamo, who became KNA board directors representing the CPA in the joint venture with Pretorius, were selected to be part of the skills transfer programme. They were required to report to the KNA farm on a daily basis.

KNA would initially pay Milanzi and Mphamo R20 000 each a month.

However, according to Stephan, Milanzi informed them one day that the CPA had decided that he should earn R60 000, while Mphamo continued to earn R20 000.

Stephan said they initially refused the request but “Milanzi, through the CPA, forced us to increase his salary to R60 000 through the majority shareholder”.

Stephan said the duo failed to meet their contractual obligations. Stephan and his father opted to freeze the duo’s skills transfer money.

This allegedly led to Milanzi obtaining a monthly payment out of the account of the CPA that was presented as a “loan” to KNA. According to the figures that amaBhungane reconciled, the “loan” – which stretches from 29 June 2021 to 23 September 2022 – amounts to R932 700.

We sent detailed questions to Milanzi on 11 September 2023, asking him to explain the KNA loan as well as mysterious cash withdrawals from the CPA’s account that totalled R1,283-million.

He failed to respond to the questions but said that the matter was currently under investigation by the Hawks.

“All the money was correctly accounted for,” Selahla, the former treasurer, told us before his sudden death at the beginning of November. “We were sometimes forced to use the services of skilled labour which we didn’t have. Most of the labour is people from other countries with no identification which then necessitated us to use proforma [invoice] to record everything that does not appear on the bank statement.”

What is clear is that both men had access to the bank accounts of the CPA as designated signatories.  “The money used to pay stipends to the executive committee was agreed upon,” Selahla told us.

Damsig Poultry

Damsig, the CPA’s other corporate subsidiary, established in July 2020, is another headache for the incoming committee. Selahla, the late policeman and part-time treasurer, along with Moroke, also a former committee member, was fully responsible for its operations.

The CPA inherited 19 chicken houses with a capacity that varies from 20 000 to 40 000 birds. When Damsig started “it was impossible [to] start running the business as there was no start-up funding,” Selahla told us. “The total cash needed to start was about R3-million. We had no cash and tried for funding from the department but to no avail.”

Damsig’s directors turned to the shareholder, the CPA. “We went back to the beneficiary and reported the dilemma we are in; it was agreed to use some money which was needed urgently like the generator,” Selahla said.

The full extent of the money that went through Damsig is not clear due to the fact that Damsig used a separate bank account from the CPA. It appears that when the erstwhile members were ousted from the CPA’s committee, they failed to hand over the financial records of the company.

One of the companies Damsig leased chicken houses to, Avon Chicken Farming, paid rent of R350 000 per month directly into the CPA’s Standard Bank account. In total the amount paid to the CPA between 15 May 2018 and 3 April 2020 was R9,1-million.

The Damsig directors couldn’t do as they wished with this money as it went into the collective account.

Another renter, Daybreak Farms, paid into Damsig’s own account. We managed to trace the payment requests which suggests that Daybreak Farms paid a rent of R7 111 490.87 to Damsig’s between 21 July 2020 and 11 January 2021.

This R7,1-million, which never went to the CPA, remains unaccounted for. “When we stopped growing for Daybreak in March 2022 we had not broken even,” said Selahla.

William Moroke, one of the directors of Damsig Poultry, who was in charge of the entity along with the late Thomas Selahla. At least R7.1 million that Damsig received remains unaccounted for.

Moroke said that between 2020 and April 2022 Damsig’s bank accounts received on average R1,5-million every six to eight weeks. The total revenues that Damsig generated between 2020 and 2022 are estimated to be R17-million.

We were unable to establish a breakdown of the company’s expenses over the period.

Khutso-Naketsi Holdings

So far, what is clear is that all these newly acquired businesses failed to contribute what they should have to the community. Perhaps in a bid to manage the situation, the former committee members took a decision to set up a holding company in July 2020: Khutso-Naketsi Holdings (KNH).

KNH was purportedly intended to oversee the subsidiaries. However, KNH too ended up straining the finances of the CPA. The holding company’s employees were paid what the current committee members felt were exorbitant and unjustified amounts.

Thathi Samuel Tau was hired as the chief executive officer. Tau was apparently entitled to a remuneration of R1,26-million per annum, including benefits such as a 13th cheque, medical aid, housing and car allowance.

Tau’s employment is under dispute and a case is currently before the Commission for Conciliation, Mediation and Arbitration (CCMA).

The new Khutso-Naketsi CPA committee has questioned Tau’s status. In a submission to the CCMA they claimed that he “was involved in a scheme with erstwhile committee [members]… disguised as employment…To date it is unknown what the applicant was appointed to do and what his duties and responsibilities are”.

Tau told amaBhungane that his duties were to ensure that there was compliance among the subsidiaries and the CPA regarding annual returns and audits; to enable good governance; negotiate for business, network and get some stakeholders to grow the business; safeguard the property of the CPA from legal disputes that could potentially result in the CPA losing its land and lastly, control dividends so that beneficiaries would receive what was due to them.

Tau told amaBhungane that the re-audit by the accountancy and auditing firm, whose reports were not out at the time, would clear his name.

CPA’s have potential but…

Khutso-Naketsi is just one of the many CPA’s that have a potential to radically improve the livelihoods of beneficiaries. But this seemingly is not the case.

Khutso-Naketsi is another CPA whose land was purchased through the public purse for historical injustices.So far, it has failed to deliver its objectives due to the alleged misuse of monies and infighting. This has become a common story for CPA’s, largely due to DALRRD’s failure to administer and support them.

The CPA model was created in 1994 as the primary vehicle for land reform. As of 2022, there are 1 720 CPA’s across the country, comprising millions of hectares of land.

However, only 23% of these CPA’s are, according to DALRRD’s 2021-2022 annual report, compliant with the required standards.. Two-thirds of the country’s CPA’s are non-compliant and 1 in 10 will never be compliant.

“It is clear that many of them are dysfunctional,” said Professor Ruth Hall, the director of the Institute for Poverty, Land and Agrarian Studies (PLAAS) at the University of the Western Cape. “In abstract the CPA model is a very powerful model but only if it is for holding land and not to run a business. Secondly, if they are adequately set up.”

KNA farm workers on the field tendering vegetables.

No political will to support CPA’s

The power of CPA’s is that they obligate the state to provide the beneficiaries with additional support and in doing so break down the division of state and private land, noted Hall.

The DALRRD minister is meant to ensure that every CPA has its finances audited and that annual general meetings are held. One of the difficulties is that when CPA’s were established, said Hall, DALRRD massively underestimated the programme.

“What officials would say to me is that the problem with the CPA model is that you can never finish a project cycle. You are always called back, and officials want to go on to create new projects,” Hall said. “In fact, the very institution that is meant to be responsible for them, successive senior officials and ministers have said, ‘We do not support the CPA model.’”

But the Department denied this allegation, saying, “The Department continuously supports CPAs and there are targets in the Department Annual Performance Plan and the quarterly reports and Annual performance reports are provided. The Department is not aware of the allegations that the officials dislike CPAs.”

Nolundi Luwaya, a researcher at the Land and Accountability Research Centre (LARC) at the University of Cape Town echoes Hall’s sentiments: “The other part of the failure rests squarely in the present, in this ministry and those who have preceded it. They have failed to provide adequate support to CPAs.”

Luwaya added that once DALRRD has restored land to the community via the CPA model, there seems to be a perception that everything will automatically move smoothly. As a result, the department’s ability to provide ongoing support “has been problematic.”

This observation resonates with the Khutso-Naketsi CPA.

Its shortfalls are a double-edged sword for the beneficiaries for whom lands is bought, yet who never reap the benefits, as well as for the country, as these farms are purchased at market value yet the Department fails to provide support or administer CPA’s. Thus the beneficiaries are robbed of improved livelihoods. Khutso-Naketsi is just a drop in the ocean – a story of one of many CPA’s in the country whose millions of hectares of land are lying fallow and without support.

The committee called for a special meeting on 5 November 2023 to brief the community about the auditor’s report on the financial mismanagement by the previous committee members.

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