Scopa submission re: Allegations of maladministration, mismanagement, and corruption at the Development Bank of Southern Africa
Oral submission to the Standing Committee on Public Accounts by Mr Bantu Holomisa, MP regarding Allegations of maladministration, mismanagement, and corruption at the Development Bank of Southern Africa
18 November 2020, from 09:00 to 11:00
I wish to express the United Democratic Movement’s (UDM) sincere thanks to the chairperson and the members of the Standing Committee on Public Accounts’ (Scopa) for this opportunity to address it.
1.1. We all agree on the strategic importance of the Development Bank of Southern Africa (DBSA) and yet, considering my recent experience, it seems as if it has been left to its own devices and it may not be as well-run as we hope.
1.2. With at least one other state funding agency, the Public Investment Corporation (PIC), it was a case of; where there was smoke there was fire. I have relied on Scopa for assistance so that it can look at the warning signs that have been brought to my attention, so that it in turn can apply its collective mind and decide whether that warrants an inquiry and what kind of term of reference should such an enquiry be armed with.
1.3. I want to clarify that I had been, on separate occasions during 2020, approached by different sources with information regarding alleged wrongdoings at the DBSA, which I had compiled and shared in main with Scopa in the letter of 23 October 2020.
1.4. I would like to start off this session by sharing new information that has come to light since my letter to you, but the latter part of this presentation contains the initial submission for the sake of completeness and for the record.
1.5. In addition, the committee should please take note that some information had also, in the meantime, been exposed in the public domain by The Sunday Times on 8 November 2020 (Annexure A) and I took the liberty of contacting two of the former board members mentioned in the article.
2. Strange ministerial correspondence and the announcement of the appointment of the new DBSA board
2.1. I table two letters that were purportedly sent by Finance Minister Mboweni to now former board member, Ms Bulelwa Ndamase, which show certain peculiarities which caused some unease in my mind.
2.2. The first is a fairly curt and unreferenced letter, dated 30 September 2020 (date typed), informing Ms Ndamase of the expiry of her term of service as a non-executive director. She was given no reasons for not extending her period of service after her having served only one term.
2.3. By extension of this topic, it is also important to note that the DBSA used the “effluxion of time”-excuse to get rid of Ms Ndamase and two of her colleagues, but it chose to keep five other members to “retain valuable knowledge, skills and experience and maintain continuity within the Board”. (Annexure D)
It would be interesting to know what logic exactly set these two groups apart. For all the rationalisation and defending the DBSA has done, it is interesting that it is at least two of the “independent two” who did not “toe the Godongwana line”, who saw themselves unceremoniously shown the door.
2.4. The second letter, now with the traditional detailed reference, dated 11 November 2020 (date written in pen) is addressed to Ms Ndamase using the DBSA’s postal address. Why would the minister do use the DBSA postal address if he clearly is aware that she is no longer associated with the DBSA since 30 September 2020?
The content of the letter clearly is the minister’s considered response to correspondence that Ms Ndamase had written to the minister informing him of the Cranbrook matter and her subsequent experiences. The entire tone of the letter suggests that the minister regards Ms Ndamase as a member of the board and very much still part of the DBSA establishment.
2.5. Comparing these two letters, something very unusual is going on. I find it extremely irregular that a ministerial letter, and this is not just a run-of-the-mill administrative letter, has absolutely no reference number.
I also understand that the DBSA forwarded these letters directly to the affected board members i.e. it did not come from the ministry’s registry, which adds another piece to this puzzle.
Could it be that someone forged this letter? Does someone at the DBSA have the electronic signature of this minister and what havoc are they wreaking?
2.6. Another bit of strangeness, the new DBSA board was seemingly announced on 5 October 2020, and the information is available on the DBSA website . However, ordinarily any such board appointments go in tandem with some media fanfare, but one would be hard-pressed to find a media article to that effect in the popular media. A simple Google search will leave you to wonder if the media outlets even were aware that the DBSA had a new board.
2.7. One does not have to be a conspiracy theorist to read between these lines and arrive at very unsettling questions about exactly what process was followed with the selection process and appointment of the new DBSA board, and who exactly the role-players were.
3. Mr Enoch Godongwana may have too many skeletons in his cupboard of the wrong kind
3.1. Just as we can agree on the strategic importance of the DBSA, we must agree that it is imperative that the chairperson of the board of such a government financial entity has an unblemished record.
3.2. Aside from the fact that Mr Godongwana is of course a well-known politically exposed person (PEP), the governmental due diligence reports that have been conducted on him, which I have seen, paints a picture of a man with less than sterling credentials.
3.3. These due diligence reports, for example, state that:
3.3.1. Around 2003/4 Mr Godongwana had been implicated (as the then MEC for economic development of the Eastern Cape), together with Mr Mcebisi Jonas (then CEO of the Eastern Cape Development Corporation), Mr Stone Sizani, as well as the then premier, Rev Arnold Stofile, in serious fraudulent misconduct involving millions of Rands. The Eastern Cape High Court, Grahamstown had later set aside the report of the Commission of Inquiry into the Finances of the Eastern Cape and declared it a nullity and of no force and effect.
3.3.2. In June 2011, Mr Godongwana was accused of being linked to Canyon Springs Investments 12 which allegedly disappeared with R100 million in workers’ pensions belonging to the Clothing and Textile Workers’ Union. The money allegedly went missing after a trust company he had chaired from 2007-2009 apparently lent money to Canyon Springs which it subsequently “lost”. Mr Godongwana and his wife had a 50% interest in Canyon Springs, and although they were allegedly served summonses and offered to repay R1,5 million, nothing happened, and the company was seemingly liquidated.
3.3.3. Another questionable deal includes alleged payments made by the Recycling and Economic Development Initiative of SA (REDISA) to Mr Godongwana and his wife, and another prominent ruling party leader. REDISA (now apparently currently in liquidation) allegedly made monthly payments of R100 000 to Isivuno Consulting from February 2015 to February 2017 which reportedly has Enoch and Thandiwe Godongwana registered as its directors. Recommendations were allegedly made for the Hawks to investigate, but apparently no clear decision has been forthcoming regarding this investigation.
3.4. It is alleged that the Minister was fully aware of these allegations and still appointed Mr Godongwana as the DBSA’s board chairperson and given this information.
3.5. I reiterate my assertion that by virtue of his PEP-status, he should in the first instance never have been asked to head a government financial intuition and I find it rather disconcerting that the minister went ahead with the appointment having this information at his disposal.
4.2. I would like to make the following observations:
4.3. Firstly, the response is anonymous or without owner. Who exactly is defending the DBSA here and then the honour of the chairperson of the board? The chairperson and/or the board, the CEO, the entire executive, the company secretary? Who?
4.3.1. Secondly, that the DBSA was selective in terms of which allegations it chose to respond to, which I do not quite understand. Why not respond to all of it, in the same blow-by-blow fashion it chose to answer some of the allegations and arguments?
4.3.2. Thirdly, the DBSA was at great pains to refuse to give me information on the Poseidon Water Project and even refused my Public Access to Information Act application based on what I believe to be technicalities they chose to hide behind. Yet they chose to reveal information about the Cranbrook deal without any worry. It is also most convenient that the DBSA commissioned an “independent investigation” into the Poseidon deal even before the President attended to the matter as addressed to him in my letters of 17 June 2020 and 20 July 2020.
4.3.3. Fourthly, the DBSA’s “version of the story”, as contained on this webpage, differs from the information my sources have provided and even from the facts as contained in the bank’s own documentation – which I have in my possession – and what is under dispute. Only a proper investigation and comparison of these versions would establish the facts. The DBSA merely posting a piece of text on the internet cannot be the litmus test of truth.
4.3.4. Lastly, the DBSA is denying for the sake of denying. They specifically state about Mr Godongwana that it “followed an enhanced due diligence” and I know that, because I have seen this due diligence as I have said. The point being, following an enhanced due diligence does not mean that the due diligence must be ignored.
4.4. Now that we know who the role-players are, as revealed in the Sunday Times, Scopa could call them to account for themselves.
5. Case Study 1: Poseidon Water Project – PEPs’ access to public funds
5.1. For the sake of completeness, I here below repeat the information I had previously shared in my letter to Scopa on 23 October 2020, with a few additional bits of information that I thought would enhance understanding.
5.2. Earlier this year the DBSA funded a company called Poseidon, which allegedly had links to Harith General Partners, a company that had not been painted in a favourable light by the Mpati Commission.
5.3. In fact, the Mpati Commission said that: “Harith’s conduct was driven by financial reward to its employees and management, and not by returns to the GEPF. In essence, the PIC initiative, created in keeping with government vision and PIC funding was ‘privatised’ such that those PIC employees and office bearers originally appointed to establish the various Funds and companies reaped rich rewards.”
5.4. Poseidon was allegedly funded to the tune of R50 million to conduct feasibility studies, for some kind of water project/s in South Africa and other Southern African countries. At that time, another R300 million was apparently still to be disbursed for the implementation of Poseidon’s project.
5.5. It is important to know that Poseidon’s shareholding is allegedly as follows and the importance will become apparent, once the role-players in these parent companies are revealed. The first is a screenshot of a DBSA document and the second is just our rendition to make the information clearer.
5.6. The information about Poseidon (see below screenshot of a DBSA document) pertains to the PEPs in Poseidon’s group structure and it reads like a veritable Who’s Who of directors of public owned entities: