Co-operate with the FBI tender probe - DA

Co-operate with FBI tender probe - DA
Dec 06 2012
Sapa

Johannesburg - The DA on Wednesday called on Social Development Minister Bathabile Dlamini to work with the FBI in its probe into the department's awarding of a social grant tender.

"I will... request that she and her department give their full co-operation to the FBI in their inquiry into the R10bn tender for the administration of social grants awarded to Cash Paymaster Systems (CPS)," the party's Mike Waters said in a statement.

CPS is a subsidiary of US company Net1 UEPS.
Net1, through CPS, manages and distributes social grants in South Africa. It was awarded the tender by the SA Social Security Agency (Sassa) in January this year.
The Federal Bureau of Investigation is looking into whether Net1 violated United States federal criminal laws by engaging in a scheme to bribe local officials in connection with the tender.

The social grants tender had been marred by controversy, said Waters.

"In April this year, reports revealed that human settlements director general Thabane Zulu, who is a member of the Sassa tender adjudication committee, received a R1.4m deposit into his personal account a few weeks before deliberations on the bid commenced."

Another committee member received a R600 000 payment towards his bond soon after the contract was awarded to CPS.

"Furthermore the involvement of President Jacob Zuma's lawyer Michael Hulley raised questions when he was brought in by Sassa as a ‘strategic adviser' for the bid."

Key tender requirements were changed nine days before applications for the tender closed.

In August this year, Judge Elias Matojane in the High Court in Pretoria declared the tender illegal and invalid, but it was not set aside.

Absa subsidiary AllPay challenged the awarding of the tender in court, alleging widespread corruption and irregularities.

"I have already written to the Public Protector (Thuli Madonsela) to investigate the awarding of the tender. I will now request that she shares her findings with the US department of justice and the FBI."

Department spokesperson Lumka Oliphant said they had not had any communication from the FBI regarding the investigation.

Labels : Fraud Corruption Tenders DA FBI Public Protector Thuli Madonsela Sassa

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Tokyo Sexwale's prints all over R10-billion tender

23 Mar 2012 00:00 - Staff Reporter


The BEE consortium that is part of the winning bidder for a massive social grant tender has many links to Mvelaphanda, Tokyo Sexwale's company.


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Human Settlements Minister Tokyo Sexwale’s fingerprints are all over the R10-billion tender for the countrywide payment of social grants—in both the adjudication and the BEE consortium belatedly cut into the winning bidder.

But Sexwale’s company, Mvelaphanda Holdings, flatly denies that he has any actual interest in the BEE consortium.

The South African Social Security Agency (Sassa) announced on January 17 that it had awarded the social grants tender to Cash Paymaster Services (CPS). The award was formalised in a contract two weeks later—but only after CPS’s parent company, Net1 UEPS Technologies, had announced an agreement to transfer 20% of its shares to a “broad-based” BEE consortium.

The consortium, it announced, was led by “well-known black empowerment investment company” Mosomo Investment Holdings.

Attempts to ascertain the full ownership of Mosomo Investment have been rebuffed and checks to corroborate the participation of entities allegedly comprising the broad-based element have turned up nothing (see “Investigation hits a wall of evasion and obfuscation” below).

However, Mosomo Investment is known to be headed by Brian Mosehla, a finance whizz kid formerly with Mvela, and to involve Lindikhaya Sipoyo, a former parliamentary spokesperson who represents Mvela interests in various companies.

Mosehla and Mosomo Investment have an existing relationship with Mvela, not least through a massive Coal of Africa BEE deal (see “We’re not involved in this deal” below).

If Mvela were to have a financial interest in Mosomo Investment, there would be a direct conflict of interest, because:

• Sexwale’s human settlements director-general, Thabane Zulu, was a member of the Sassa adjudication committee that decided the tender in CPS’s favour. Zulu is reportedly close to Sexwale, with whom he was imprisoned on Robben Island; and

• Michael Hulley, President Jacob Zuma’s lawyer, was brought in by Sassa as “strategic adviser” for the bid. Hulley is close to Mvela Holdings’ chief executive Mark Willcox and appears to be in a business relationship with Mvela. The Mail & Guardian reported in 2010 that Hulley and the president’s nephew, Khulubuse Zuma, used Mvela addresses when signing for oil rights in the Democratic Republic of Congo.
Willcox flatly denies that Sexwale or Mvela Holdings have any financial interest, direct or indirect, in Mosomo Investment—though he admits to various Mvela associations with Mosehla, Sipoyo and Hulley.

The question could be asked whether this entwinement of political and business interests is not too close for comfort—particularly in a year when patronage networks may be used to swing support behind factions in the ANC succession battle.

Suspended police crime intelligence boss Richard Mdluli’s “ground coverage intelligence report”, composed in 2010, claimed that politicians were building ‘war chests”, allegedly fed by tender corruption, to fund political campaigns.

It also claimed that Social Development Minister Bathabile Dlamini, responsible for Sassa, was part of a political “Mvela Group” aiming to install Sexwale as president.

A source with access to Dlamini denied she was close to Sexwale, but confirmed a close relationship with Sport and Recreation Minister Fikile Mbalula, another alleged member of the group.

Mdluli’s report must be taken with a large pinch of salt, but the ANC openly acknowledges the problem of tender funding for political campaigns.

Hotly contested
The Sassa tender has been hotly contested, both before the award and in court challenges by losing bidders AllPay and Empilweni Payout Services, in part because the stakes are so high.

CPS and Net1 head Serge Belamant denies the BEE deal is tied to the tender award. But the timing of the deal’s conclusion on January 25—midway between the tender award and its contractual formalisation—is suggestive.

In terms of the deal, the Mosomo Investments-led consortium has a one-year option to acquire up to 19.9% of US-listed Net1’s shares, at $8.96 a share. The discount to Net1’s $10.33 share price on the date of the deal translates into a hypothetical profit then of almost R100-million. And should Net1’s fortunes improve because of the grants tender, so will the BEE consortium’s fortunes.

Sexwale did not answer questions sent to his ministry and department more than a week before publication. His director general, Zulu, said that the Sassa chief executive had invited him to participate in the adjudication, and this was “normal government procedure”.

Hulley said in response to questions: “I have no intention of responding to any of your stories on this or any other matter as I consider your reportage to lack journalistic ethics.”

Sipoyo said: “Mvelaphanda has got nothing to do with Mosomo [Investments].”

Shortly before going to press, both Sassa and Mvela Holdings submitted written responses focusing on Mvela’s interest in Absa, the parent company of losing bidder Allpay.

The “Absa” defence
Too late for the M&G‘s print edition deadline, both Sassa and Mvela gave responses focusing on the fact that Mvela also owns an indirect stake in AllPay, through the Batho Bonke empowerment stake in AllPay parent compay Absa.

Lumka Oliphant, replying for Sassa and Social Development Minister Bathabile Dlamini, said:

“It is a well-known fact that the Minister of Human Settlements, Mr Tokyo Sexwale, is a shareholder at Absa. It is now public knowledge as well that AllPay/Absa, the losing bidders in the Sassa tender, are part of Absa and are taking Sassa to court.

“In your previous story you mentioned that Mr [Michael] Hulley was close to the president and in this enquiry you are implying that he is also close to Mr Sexwale.

“Your inference suggests that Mr Sexwale and/or the Minister of Social Development, Bathabile Dlamini, through the CEO of Sassa, lined up his DG and Mr Hulley (all allegedly close to Mr Sexwale) to make sure, by implication, that one of his subsidiaries loses the tender to pay social grants.

“It is important to clarify that the CEO of Sassa invited the DG of human settlements to be part of the bid adjudication committee in terms of the powers vested in her by the South African Social Security Act, No 9 of 2004 and the Public Finance Management Act, No 1 of 1999. It is normal government procedure for accounting officers to be invited to sit in such committees.”

Total rejection
And Mvelaphanda Group CEO Mikki Xayiya said:

“We totally reject any suggestion or insinuation that Mvelaphanda—a key shareholder in Absa via Batho Bonke, the broad based BEE consortium with a 5% shareholding in the bank—would conspire or act in a way that undermines Absa’s business portfolio and thereby undermines itself. It insults the integrity and acumen of all concerned.

“It does not require a mathematical genius to figure out where the biggest value for Mvela lies between our Absa shareholding and an as yet indeterminate pension payment contract.

“Former Mvelaphanda employees are within their constitutional rights to pursue individual business opportunities as they see fit—even if these compete with Mvela. Besides, we are fully supportive of Absa’s legal challenge of the Net1 award. The shareholders of Mvela are not directly nor indirectly involved in the Net1 Consortium.”

Their argument - essentially that Sexwale’s bread would be better buttered on the AllPay than CPS side - appears to rest on shaky mathematical ground.

Mvela Holdings, the private company in which Sexwale has an interest, owns perhaps 20% of Mvela Group, the listed company which owns some 45% in Batho Bonke, which owns less than 4% of Absa.

This translates to a Mvela Holdings interest of roughly 0.35% of Absa, worth in the region of R400-million.

Not a pittance
While this investment is not a pittance, the Sassa tender award will have minimal impact on it. Absa’s share price has risen marginally since January in spite of the tender setback—after all, Allpay generates but a small part of its revenue.

CPS’s value, however, is tied directly to the business it gets from Sassa—the payment of social grants in South Africa is its core business. Thus, the Nasdaq share price of its parent, Net 1, shot from under $7 before the Sassa tender announcement on January 17, to over $11 a week later.

It slumped back to below $11 immediately after AllPay challenged it in court, and fell further to sub-$10 levels as the tender award became mired in controversy.

The effect on Net 1’s new BEE partner was similarly dramatic. Its option for a 20% shareholding was in the money by over $12-million (R92-million) on the day it was announced, rising to more than $19-million (R146-million) before Allpay’s court challenge. —Additional research by James Wood.

“We’re not involved in this deal”
It looks, smells, and tastes like Tokyo Sexwale. No, insists his right-hand man Mark Willcox: “We’re not involved in this deal in any fashion, any form, any way, zero, not financially, not politically.”

The lead partner in the BEE deal concluded by Net1, Mosomo Investment, has Brian Mosehla as sole registered director. According to Net 1 he is also the “principal shareholder”.

The only other clue as to Mosomo Investment’s identity is an email from Mosehla saying that Lindikhaya Sipoyo is his co-director.

Willcox, Mvelaphanda Holdings chief executive, confirmed present or past relationships with Sipoyo and Mosehla.

Sipoyo is Parliament’s former communications head. He is now essentially a deployee who looks after Mvela investments in other companies.

He is the executive chair of Total Client Services, which offers traffic fining solutions to local authorities, and director of Moneyweb Holdings and air services company Medair Charter. Mvela Holdings has a significant interest in all three.

Key official
Mosehla, a chartered accountant, was a key official in the Mvela group, where his roles included head of corporate finance. Mosehla said he left Mvela in March 2008.

Nevertheless, Mosehla, alongside Sipoyo, became a director of Cape wine farming business D’Aria Vineyards in February 2008 and the related D’Aria Winery in March 2010. Their assumption of directorships in 2008 coincided with the acquisition of a Sexwale stake.
• In 2010 Mosehla acquired small but significant shareholdings in Mvelaserve, Mvelaphanda Group and the Mvela-invested company headed by Sipoyo, Total Client Services—all JSE-listed.

• Mosehla headed Mandumo Investment Holdings, the heart of a consortium that aborted a multibillion-rand BEE transaction with ArcelorMittal in 2010 when it was elbowed out by the Guptas and the president’s son Duduzane Zuma. The Mandumo consortium included ANC chair Baleka Mbete and Mvela Holdings—and the Sunday Times quoted Mosehla as speaking on behalf of both.
The most significant relationship tying Mosehla and Mosomo Investment to Mvela Holdings is the BEE arrangements of Coal of Africa Limited (CoAL).

In early 2008, some 11% of CoAL’s shares were bought by African Global Capital, an international investment fund co-owned by Mvela Holdings, for $55-million.

During that year CoAL issued more shares and share options to African Global and an associate company to raise their combined shareholding to a potential 26%, to comply with BEE rules.

But despite the Mvela share, African Global and the associate company were not BEE-compliant—meaning that a compliant superstructure had to be imposed.

Firefly
Enter Firefly Investments 163, a shelf company controlled by Mosehla and Mvela associate Patrick Ntshalintshali.

In 2010, the share options were transferred from African Global’s associate company to Firefly, and African Global ceded its voting rights—but not its shares—to Firefly.

This made Mosehla the custodian of Mvela Holdings’ interest in CoAL—a situation similar to that of Sipoyo, who represents Mvela interests in various companies.

Mosomo Investment—the same company now in the Net1 BEE deal—co-owns Firefly.

Investigation hits a wall of evasion
The Mail & Guardian‘s efforts to establish who owns Net1’s new BEE partner and the structure of its “broad-based” BEE consortium have hit steadfast evasion and obfuscation.

And attempts to verify the details that Net 1 has publicised have yielded little more than thin air.

In January, after Cash Paymaster Services (CPS) won the R10-billion Sassa contract, Net1—CPS’s parent company—announced the conclusion of a new broad-based BEE consortium to be led by Mosomo Investment, with 30% set aside for 19 community groups.

The M&G traced six of these, none of which knew of the deal.

The secretary of the Abigail Women’s Movement, Pearl Motolwana, said: “I’ve read [the statement] with utter shock — and I would like to categorically state on behalf of the board that we have no knowledge of any such transaction.”

Another group Net1 named was the “Amy Bill Foundation” (sic), but Kevin Chaplin, Amy Biehl Foundation managing director, was similarly in the dark.

Join us
Asked for precise details, Mosehla invited the M&G to join him when he visited communities in the Eastern and Western Cape to “finalise the structures”. Dates would be provided in due course, he said.

On Mosomo’s shareholding, Mosehla said: “I founded Mosomo Investment Holdings through my family trust structure. The current directors are Lindikhaya Sipoyo and myself.”

The M&G asked repeatedly for clarification of the company’s shareholding. Eventually Mosehla referred queries to Net1 chief executive Serge Belamant who urged the newspaper to join Mosehla in visiting the communities: “I can’t think of any better way for you to get the information you seek and suggest that you take him up on his offer before you jump to any conclusions.”

A formal request for the share register—under the provisions of the Companies Act, which allows public access—remains unanswered.

* Got a tip-off for us about this story? Email amabhungane@mg.co.za


The M&G Centre for Investigative Journalism, a non-profit initiative to develop investigative journalism in the public interest, produced this story. All views are ours. See www.amabhungane.co.za for all our stories, activities and sources of funding.