South Africa has certainly faced its share of high-profile scandals, some of which we have covered in other blogs, which can be found here. Below we profile some of the bigger cases in the country, and with some still playing out in front of various commissions and inquiries, there is no doubt, there is still more to come.
Bain & Co.
The Backstory
Looking to win work from the public sector in South Africa Bain & Co – one of the world’s leading management consulting companies – had its managing director in sub Saharan Africa Vittorio Massone meet with Tom Moyane months before his “surprise” appointment as Commissioner at SARS in September 2014. Massone and his team spent several days — tens of billable hours — for a man without an official government position and ostensibly no political power.
The Outcome
Bain & Co. worked on three projects for SARS, to the tune of almost R204 million – including one project that had cost R151 million and another that cost R50 million –after being awarded the tender. The bidding process was later questioned, with a number of irregularities to be found.
The SARS tender opened on December 12, 2014 and closed on December 18, 2014. PwC, one of the bidders, pulled out of the process as the time frames were “unrealistic”, according to National Treasury procurement official Solly Tshitangano, who appeared at the Commission of Inquiry testified that only “clever” bidders would be able to respond to a tender that was only open for six days.
National Treasury procurement official Solly Tshitangano, who appeared at the Commission of Inquiry testified that only “clever” bidders would be able to respond to a tender that was only open for six days.
Senior SARS officials told the Commission they felt Bain & Co entered into these interviews with a preconceived idea of what needed to be done, that the interviews were inadequate and without depth, while being conducted by junior staffers that had no knowledge about SARS or taxation. These officials would testify that Bain & Co’s operating model made “no business sense”, but that it was clear to them certain senior officials were targeted by Moyane and his henchmen.
The Result
A massive R50 billion revenue collection shortfall for 2017-18 — a factor that impacts every South African, but especially the poor, in ways that have a direct material impact on their lives.
The Nugent Commission reported: “We think what occurred can fairly be described as a premeditated offensive against SARS, strategised by the local office of Bain & Company Inc, located in Boston, for Mr Moyane to seise SARS, each in pursuit of their own interests that were symbiotic, but not altogether the same. Mr Moyane’s interest was to take control of SARS. Bain’s interest was to make money.”
South African Airways
The Backstory
BnP Capital won a bid by South African Airways to raise capital to consolidate the struggling State-Owned airline’s debt. BnP would work for a fee of R260 million. It was later discovered that the Financial Services Board had suspended the company’s licence to operate as a financial services provider, a fact that will have rendered any contract with it illegal.
The Outcome
Following media reports detailing the dodgy deal, there was a public outcry, the deal was cancelled, executives Musa Zwane and PhumezaNhantsi were suspended for their roles in the deal, and an independent disciplinary hearing led by Nazeer Cassim SC.
The pair would be found guilty of gross financial misconduct, negligence and dishonesty.
“The quantum leap in BnP’s appointment as transaction adviser for a fee of R2.6 million to a staggering R250 million a month or so later, this was a jump of almost 10 000% a truly eye watering increase and without compliance to any credible procurement process is bizarre in the circumstance and has the hallmarks of corrupt activity,” said Cassim in a scathing report.
“Both of them knew the money was not payable. There is no legal basis to make this payment to BnP. This is a clear sham and the two knowingly participated in a scheme to procure payment for BnP when the company was not entitled to it.”
“Both of them knew the money was not payable. There is no legal basis to make this payment to BnP. This is a clear sham and the two knowingly participated in a scheme to procure payment for BnP when the company was not entitled to it.”
The Result
Before the Zondo commission, BnP Capital director Daniel Mahlangu stated he did not know his company flouted tender regulations and was working with former SAA chairperson Dudu Myeni’s adviser when it won the tender.
An application was successfully bought before the courts seeking to find former SAA chairperson, Dudu Myeni a delinquent director and the judgement’s findings were referred to the National Prosecuting Authority for consideration during May 2020.
A North Gauteng High Court Judge declared her a delinquent director and referred the findings to the National Prosecuting Authority (NPA) for a decision on a criminal prosecution. Myeni delivered a stinging rebuke and questioned the findings.
Vodacom and the free State govt
The Backstory
A Daily Maverick report claimed that South Africa’s largest mobile phone network operator, Vodacom, “gifted lucrative partnership deals to companies linked to politician Ace Magashule” in relation to voice and data contracts Vodacom scored from provincial government departments in the Free State. One of the deals has subsequently been reported to the Zondo Commission of Inquiry.
The Outcome
The media reported that Vodacom signed the first of two dubious partnership agreements with Free State businesses in 2014 after Magashule met with Vodacom CEO Shameel Joosub in Cape Town to discuss the cell phone giant’s commitment to “BEE procurement and local empowerment”.
Later that year, in a letter to Magashule, Joosub vowed that Vodacom would divert nearly R600-million to emerging companies in the Free State and the Northern Cape. Vodacom later partnered with Marangrang IT, a company with strong links to Magashule and the ANC, while Vodacom won the Free State’s voice and data tender.
A similar partnership with Supana Technologies, another entity linked to Magashule, came about in 2017 after Vodacom had won the government’s massive transversal contract for cell phone services. The National Treasury’s RT15-2016 transversal contract all but guaranteed that Vodacom would clinch contracts from national and provincial government departments and stood to bring in estimated revenues of around R5-billion.
The Result
Thanks to their association with Vodacom, Marangrang IT and Supana Technologies are said to have earned at least R20-million in commissions and other revenues as a direct result of the contracts Vodacom secured from the Free State provincial government. Some of Vodacom’s other BEE partners in the province claimed the cell phone firm side-lined them to make way for Marangrang IT and Supana Technologies.
When one of these partners queried Vodacom’s actions, Vodacom employees allegedly told him that they were under “political pressure” from Magashule. Vodacom’s dealings with Supana Technologies triggered an internal investigation that eventually saw the cell phone giant report details on some of its dealings in the province to the Zondo Commission.
The cell phone giant has been tight-lipped about the report’s findings.
Vodacom, “gifted lucrative partnership deals to companies linked to politician Ace Magashule” in relation to voice and data contracts Vodacom scored from provincial government departments in the Free State.
Prasa and Swifamba locomotives
The Backstory
Novice BEE Swifambo Locomotive was awarded the tender to provide a fleet of new locomotives to PRASA. The State Owned Enterprise would pay R2.6 billion for the locomotives, but once delivered, it was discovered they were too tall for the South African rail network and therefore useless.
The Outcome
The Prasa board led by Popo Molefe, went to court in 2015 to have the tender set aside, pitting Molefe against former CEO Lucky Montana. It was argued by PRASA, that despite paying R2.6 billion, the full complement of locomotives was not delivered – 13 of 70 were received – and those that were delivered, were “gathering dust”.
Judge Ellem Jacob found that Swifambo was nothing more than a willing and criminal front for the international rail company VosslohEspaña, recently bought by Stadler Rail. The judge found there was sufficient evidence that proved Swifambo was merely a “token participant that received monetary compensation in exchange for the use of its B-BBEE rating. Vossloh could not bid on its own. Instead it concluded an agreement with Swifambo in which its B-BBEE points were exchanged for money”.
The Result
According to a report in the Daily Maverick, almost R500-million from the failed contract disappeared into a web of private accounts, trusts and companies controlled by or linked to the main role-players in one of South Africa’s largest tender scandals to date.
After review, the South Gauteng High Court set aside the contract for the supply of locomotives. The Constitutional Court later dismissed the application brought by Swifambo for leave to appeal an earlier Supreme Court of Appeal (SCA) decision not to reinstate the contract. Swifambo Rail Leasing is facing liquidation.
The list goes on
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