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Corporate Governance

Action SA President and Former Jo’burg Mayor Herman Mashaba Found Wanting In The Public Protector’s Report

Brian Kazungu

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Brian Kazungu, 21/12/2020

Following a complaint by an anonymous entity to its offices, according to Report No. 21 of 2020/21 – (Anonymous v City of Johannesburg), there were some irregularities in the City of Johannesburg which after its own investigations, the Public Protector confirmed that many of the issues raised were substantive and warranting remedial action.

The report which was issued today highlighted that the complaint centered on irregular staff appointments, irregular salary increases, financial mismanagement and conflict of interest in the City of Johannesburg’s affairs.

It also touched on allegations of irregular staff appointments involving the appointments of the Executive Director of Housing, Group Head of Legal, Group Forensic Investigation Services Executive Head, Chief of Johannesburg Metro Police and the current City Manager.

Among some of the other irregularities which were also investigated by the Public protector according to the same report was the alleged ‘abuse of office’ by Action South Africa President, Herman Mashaba during his tenure as the Mayor for Johannesburg Metropolitan City.

The former Mayor was sucked in for allegations of complicit on the irregular salary increase for the Former Chief of Staff Mr. Michael Beaumont as well as for tenders involving a company belonging to his wife and a conflict of interest on the affairs of Setheo, a company contracted to the City of Johannesburg

His administration was also found wanting for incompetently failing to utilize a R736 million service delivery grant which had to be recalled back to the National Treasury

Part of the findings reads as follows: The former Executive Mayor of the City: Mr Herman Mashaba unlawfully and irregularly entered the procurement space and solicited free services from Lephatsi Financial Services and whether such amounted to a conflict of interests.

The former Executive Mayor of the City: Mr Herman Mashaba allegedly interfered or influenced the City to use funding allocation of youth drug rehabilitation and support programme to fund Field Band Foundation (FBF) which is a Non-Governmental Organisation (NGO).

Here-Under Is The Full Report by The Public Protector:

REPORT ON COJ DELIVERED BY PUBLIC PROTECTOR ADV. BUSISIWE MKHWEBANE AND ADV. KHOLEKA GCALEKA DURING A MEDIA BRIEFING HELD IN PRETORIA ON MONDAY, DECEMBER 21, 2020

Anonymous v City of Johannesburg (Report No. 21 of 2020/21)

The PP investigated an anonymous complaint, which covers four distinct themes”

  •  namely irregular staff appointments,
  •  irregular salary increases,
  • financial mismanagement and
  • Conflict of interest.

Allegations of irregular staff appointments involved the appointments of the Executive Director of Housing, Group Head of Legal, Group Forensic Investigation Services Executive Head, Chief of Johannesburg Metro Police and the current City Manager.

Salary increases – Former Chief of Staff Mr Michael Beaumont’s salary was irregularly increased allegedly with the full knowledge and consent of the former Executive Mayor.

Financial mismanagement,

  • On financial mismanagement, the complainant alleged that the City returned nearly R736 million to National Treasury in funds that were allocated as conditional grants for the year ended in 30 June 2017. National Treasury allegedly served the City with a letter of demand in October 2017 to recover this money which was not spent by the City.
  • It was alleged that the City, due to poor performance failed to spend the conditional grants in 2016/17. The money was allegedly meant for provision of basic services to the residents including water and sanitation, roads, housing, electricity and waste amongst others. This was, to the complainant, an indication of non-compliance, mismanagement and poor oversight by the Democratic Alliance-led administration.
  • In addition, the City allegedly appointed KPMG to conduct investigations in various departments including the Revenue Unit in 2016. In 2017 the services of KPMG were allegedly retained to perform analysis of the customer accounts in the City’s database and develop strategies to improve the City’s revenue collection.
  • These were allegedly different assignments which would require different expertise. Whilst the first appointment was made via a panel of forensic service providers, which KPMG belong to, the second allegedly did not fall under the expertise for which the panel was appointed.
  • KPMG was allegedly appointed without advertising the tender as required by the Municipal Finance Management Act (MFMA) and Supply Chain Management regulations. The basis of this appointment was allegedly through unsolicited bid procedures.
  • In terms of conflict of interest, the City allegedly awarded a multimillion tender for forensic investigations to Grant Thornton Capital. A company called Lephatsi Financial Services, which is allegedly owned by the former Executive Mayor’s wife, allegedly owns a 35% stake of Grant Thornton Capital. The former Executive Mayor is alleged to have unlawfully and irregularly solicited free services from Lephatsi Financial Services.
  • The former Executive Mayor is also alleged to have had a breakdown with Setheo Engineering Company (Setheo) appointed by the City due to personal vendetta against them since Setheo is in the same business as CONCO which is a company allegedly associated with the Mayor.
  • On 23 November 2018, the PPS office further received another complaint straight from the directors of Setheo alleging administrative irregularities in the termination of the NEC 3 contract, failure to respond to communication, bad publicity, abuse of power by the former Executive Mayor and maladministration around sub-contractors by City Power and/or the City.
  • Following the lodging of a separate complaint by directors of Setheo, this issue was then separated from this investigation and it is being investigated by the PPs office on its own as a stand-alone matter.
  • It was further alleged that the former Executive Mayor interfered in the funding allocation by the City of a youth drug rehabilitation and support programme to fund a Non-Governmental Organisation known as Field Band Foundation (FBF) which he claims as a personal project.

After analysing the complaint, the following 11 issues were identified for investigation:

  1. Whether the City improperly or irregularly appointed Mr Moses Metileni to the position of Executive Director: Housing, without following due processes.
  2. Whether the City improperly or irregularly appointed Mr Mafoane Mogashoa to the position of Group Head: Legal and Contracts without following due processes.
  3. Whether the City improperly or irregularly appointed Dr Ndivhoniswani Lukhwareni to the position of City Manager without following due processes.
  4. Whether the establishment of Group Forensic Investigation Services (GFIS) and the subsequent appointment of General Shadrack Sibiya as its Executive Head by the City were improper and irregular.
  5. Whether the City improperly or irregularly appointed Mr David Tembe to the position of Chief of Johannesburg Metro Police (JMPD) without following due processes.
  6. Whether the City irregularly increased the Chief of Staff: Mr Michael Beaumont’s salary and further allocated him the vehicle and Very Important Person (VIP) protection services without conducting security risk assessment.
  7. Whether the City returned nearly R736 million to National Treasury that was allocated as conditional grants for the year ended in June 2017, which money was meant for the provision of basic services to the residents of the City including water and sanitation, roads, housing, electricity and waste amongst others and if so, whether this was an indication of non-compliance, mismanagement and poor oversight by the City.
  8. Whether the City improperly or irregularly appointed KPMG to conduct investigations in various departments within the City for clearly different assignments which would require different expertise, without advertising the tender as required by the Municipal Finance Management Act (MFMA) and Supply Chain Management (SCM) regulations.
  9. Whether the former Executive Mayor of the City: Mr Herman Mashaba unlawfully and irregularly entered the procurement space and solicited free services from Lephatsi Financial Services and whether such amounted to a conflict of interests.
  10. Whether the former  Executive Mayor of the City: Mr Herman Mashaba allegedly interfered or influenced the City to use funding allocation of youth drug rehabilitation and support programme to fund Field Band Foundation (FBF) which is a Non-Governmental Organisation (NGO).
  11. Whether the Complainant, the City or any other party suffered improper prejudice in the circumstances.

Following a rigorous investigation, the PP have make the following findings:

  1. The City improperly or irregularly appointed Mr Moses Metileni to the position of Executive Director: Housing, without following due processes.
  2. The City improperly or irregularly appointed Mr David Tembe to the position of Chief of Johannesburg Metro Police (JMPD) without following due processes.
  3. The City improperly or irregularly appointed KPMG to conduct investigations in various departments within the City for clearly different assignments which would require different expertise, without advertising the tender as required by the Municipal Finance Management Act (MFMA) and Supply Chain Management (SCM) regulations.
  4. The former Executive Mayor of the City: Mr Herman Mashaba unlawfully and irregularly entered the procurement space and solicited free services from Lephatsi Financial Services and whether such amounted to a conflict of interests.
  5. The former Executive Mayor of the City: Mr Herman Mashaba allegedly interfered or influenced the City to use funding allocation of youth drug rehabilitation and support programme to fund Field Band Foundation (FBF) which is a Non-Governmental Organisation (NGO).
  6. The rest of the allegations are not substantiated.
  7. In the light of the allegation that are substantiated, the Complainant, the City or any other party suffered improper prejudice in the circumstances.

The appropriate remedial action that I am taking in pursuit of section 182(1)(c) of the Constitution is the following:

The City Manager must take appropriate steps to ensure that:

  1. Within sixty working days from the date of this report, disclose all irregular expenditure incurred in connection with irregular appointments of Mr Metileni, Mr Tembe and irregular extension of a contract of KPMG to the Council and Treasury.
  2. Directs the Chief Financial Officer (CFO) of CoJ to amend the closing balance of the current financial statements to accordingly include the irregular expenditure in the previous financial statements.
  3. Within sixty working days of the issue of this report; all CoJ’s officials who are involved in the SCM and Recruitment processes, including all the senior management, attend a workshop on the SCM, Recruitment and Selection procedures and processes.
  4. Within thirty working days from the date of this report, present this report to the current Executive Mayor of the City, for disciplinary action to be taken against all current City employees who are responsible for the flouting of Recruitment processes, SCM processes or any other form of maladministration or improper conduct highlighted in this report.

The Speaker of City Council must:

  1. Within sixty working days from the date of this report, ensures that the Council develops a policy regulating the exercise of discretionary power delegated to the Executive Mayor in relation to Grants for Funding or Donations to institutions or organisations which promotes public health, social welfare, art, culture and education within the jurisdiction of the City as contemplated in Section 79(16)(a) of the Transvaal Local Government Ordinance 17 of 1939.
  2. Within sixty working days of the issue of this report; all City councillors attend a workshop on Management of Conflict of Interests and on Policies related to mandatory Disclosure of Conflict of Interests.
  3. Within thirty working days from the date of this report, present this report to the MEC for Cooperative Governance and Traditional Affairs in the Gauteng province for a decision to address all irregular expenditure incurred as a result of maladministration and improper conduct highlighted in this report.
  4. The CEO of Road Traffic Management Corporation must take appropriate steps to ensure that within sixty working days from the date of this report, engage in the necessary process to nullify the Metropolitan/ Traffic Police Diploma issued to Mr Tembe by JMPD on 30 June 2007 and further disclose or communicate the outcome of the nullification process to the HoD for Gauteng Department of Roads and Transport.

Brian Kazungu is an Author, Poet, Journalist, and Technology Enthusiast whose writing covers issues to do with Business, Travelling, Motivation and Inspiration, Religion, Politics, and Communication among others. https://www.amazon.com/author/briankazungu https://muckrack.com/brian-kazungu http://www.modernghana.com/author/BrianKazungu kazungu.brian@gmail.com @BKazungu-Twitter He has written and published several books covering various aspects of human life including leadership, entrepreneurship, politics, personal development as well as poetry and travel. These books are found on Amazon https://www.amazon.com/author/briankazungu

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Corporate Governance

Critical Analysis of Ethics and Corporate Governance Issues on the Rule of Law and Property Rights in Zimbabwe: Gwaradzimba’s SMM Management and Mutumwa Mawere’s Mount Pleasant House Case Study

Brian Kazungu

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Image Credit: SlideShare

Brian Kazungu, 06/04/2021

Recently, iniAfrica News wrote an article titled SMM’s Administrator, Afaras Gwaradzimba Struggles to Provide Answers on Mawere’s Mount Pleasant House after 17 Years of Being in Charge.

In this article, it was highlightedthatAfaras Gwaradzimba, as the State appointed Administrator for Zimbabwe’s Shabani Mashava Mines which was placed under Reconstruction in 2004 was finding it difficult to explain what was happening in relation to Mutumwa Mawere’s house.

The issue which needed clarity were on why and how SMM collected rentals for a property that did not belong to it and what did it do with the money which it collected without the consent of the legal owner of the property.

In the WhatsApp chats between Mutumwa Mawere and Afaras Gwaradzimba which this paper saw, the Administrator acknowledged the mishap, promised to look into it and referred further correspondence to the company’s lawyers, Dube, Manikai and Hwacha (DMH) Attorneys.

However, in a related article published by Zimlive under the title, Mawere shops SMM administrator to ZACC over ‘illegal’ leasing of his house, Gwaradzimba is quoted as having said the following:

“I spoke to Mawere and told him I don’t know anything concerning his Mt Pleasant property, and that I would consult SMM management over the matter. I’m the administrator of SMM and not Mawere’s private property. Mawere should know more about his own property than I do,” – Gwaradzimba.

In regard to this whole debacle, here-under is a critical analysis of ethics and corporate governance issues on the rule of law and property rights in Zimbabwe using Gwaradzimba’s SMM Management and Mutumwa Mawere’s Mount Pleasant House as a Case Study.

This conversational critical analysis is adapted from a no-holds-barred WhatsApp chat between Mutumwa Mawere himself and Pharaoh Chimunoko who shared his general and business insights based on the available facts on the ground.

Pharaoh Chimunoko [12:58 PM, 4/4/2021]: Hello Sir. I been going through the threads and I appear to want to ask questions akin to what Mduduzi asked though in a different manner.         

It’s common knowledge that Gwaradzimba was extra-judicially appointed to administer the affairs of SMM and not the affairs of Mutumwa Mawere. My question is how did he get access to the personal house of Mutumwa Mawere?

Could the house, by any chance, have appeared in the books of SMM? Has it been occupied by any SMM employees during your tenure?

Pharaoh Chimunoko [1:17 PM, 4/4/2021]: I just learnt that the house was bought while you were in the USA which implies that it was not bought by proceeds from SMM and probably way back before the acquisition of SMM.

In that case the powers of the administrator to think about following the money does not hold. I don’t know how far true it is that the rentals were being channeled to the company and a trust was to be created where the rentals less admin fees would be deposited.

I don’t get it when one bulges into my safe take all the money go on to bank it deducting administration fees when I never contracted them to do such kind of work. The thought is missing me.

There appear to be less thought Vis a Vis the issue of property rights and corporate limitations.

The idea of forming a company is meant to separate the owners’ and the company’s affairs. When an administrator, who claims professionalism is championing poor corporate governance which he was employed to implement then we can say we are going nowhere.

mdmawere1 [1:18 PM, 4/4/2021]: It was always managed by myself but given that I was living outside the country, I requested Ms. Mwamuka, to assist me in collecting rentals outside the sphere of her employment.

At the time, the control and direction of SMM was under my control. The effect of the reconstruction act was to divest and deprive me of any legal nexus with SMM, the company.

Pharaoh Chimunoko [3:23 PM, 4/4/2021]: SMM has been providing security and paying rates for a house, in return collecting rentals but the administrator who is employed to oversee that there are no leakages of income to unauthorized individuals doesn’t know. I am not amused.

The nature of a reconstruction administration entails accounting for all assets and minimize liabilities. If you can assume unknown liabilities and unknown income and manage unrelated assets my mind rushes to think of incompetence.

Though without facts, the possibility of the company income going unchecked is very high and my question is; how is he faring as an administrator? Is he the right person for the job?

Since his installation, just like a Traditional Chief, how many creditors has he settled. Has the State recovered its debt? Is the company in a better position than before him? Have his fees ever been made public or he is just employed to kill off the company?

In the substance, the house issue might just be a tip of the iceberg. There’s likely to be too much mismanagement and fraudulent misrepresentation of facts at the company. Something needs to be done.

mdmawere1 [3:24 PM, 4/4/2021]: Do you agree that absent consent by the right holders, what can only follow is theft?

[3:39 PM, 4/4/2021] Pharaoh Chimunoko: Admitted. But depends on how the theft is perpetrated. It might not be an outright theft if there was a reasonable belief the house might be part of the property of the company. In that case the criminal element of the intent to deprive the owner of his house might be lacking. However the act constitute a delictual deprivation of right to property

[3:39 PM, 4/4/2021] mdmawere1: In relation to residential property, who is liable for rates and taxes?

[3:41 PM, 4/4/2021] Pharaoh Chimunoko: Obviously the owner or any person assigned by same

[3:42 PM, 4/4/2021] mdmawere1: Do you agree that for one to pay rates in relation to a residential property, one would have to do so as an agent of a known property owner?

[3:44 PM, 4/4/2021] Pharaoh Chimunoko: Unless the lease agreement stipulates otherwise, the tenant is responsible for paying rent. Where there’s any repairs to be done, he may do them but claim the cost from the landlord.

[3:47 PM, 4/4/2021] Pharaoh Chimunoko: In this case you mentioned that you assigned Ms. Mwamuka to manage the house. What needs to be verified is how she was bundled out of control of the house.

[3:48 PM, 4/4/2021] mdmawere1: Is it plausible that rates could be paid without the payer knowing of the property owner in question?

[3:55 PM, 4/4/2021] Pharaoh Chimunoko: The question of competence and suitability for the purpose comes into play. Spending 17 years managing something you don’t know. Even a mistake belief could have been verified and rectified.

mdmawere1 [3:56 PM, 4/4/2021]: I am asking whether it is possible for anyone to pay rates on a property without knowing the property owner?

Pharaoh Chimunoko [4:00 PM, 4/4/2021]: Absolutely Not

mdmawere1 [4:01 PM, 4/4/2021]: So what is your take on the veracity of the statement below by Gwaradzimba?

*****Afternoon once more. I have established that the house has always been leased out. SMM are paying the rates and receiving the rentals. However, SMM does not have the title deeds, neither do they know as to who the house is regis…*****

Pharaoh Chimunoko [4:09 PM, 4/4/2021]: I noticed it when I was reading the threads and two issues came to my mind. Either it is deliberate lie or there’s a literal rent-seeking behavior i.e. looking for avenues of getting income regardless of where it is coming from

mdmawere1 [4:09 PM, 4/4/2021]: What is Gwaradzimba saying above?

Pharaoh Chimunoko [4:13 PM, 4/4/2021]: The statement is portraying his ignorance of what is transpiring

mdmawere1 [4:20 PM, 4/4/2021]: Is he is not stating as true and fact that he established that SMM was paying rates in respect of the house?

Pharaoh Chimunoko [5:34 PM, 4/4/2021]: It’s true but his purported lack of knowledge leaves a lot to be desired.

mdmawere1 [5:37 PM, 4/4/2021]: He says he has knowledge that rent was paid. This precludes no knowledge of the owner. Do you agree?

Pharaoh Chimunoko [5:48 PM, 4/4/2021]: That’s agreeable.

mdmawere1 [5:50 PM, 4/4/2021]: If you agree, do you notice the immediate conflict in the version that admits to payment of rates and lack of knowledge regarding the owner. Do you agree that the two versions are mutually exclusive?

Pharaoh Chimunoko [6:57 PM, 4/4/2021]: The versions are conflicting. It’s like he is saying somebody had been in relaxed mood thinking that things are moving as expected then suddenly confronted with undeniable facts. The confidence dashes away and confusion reigns in

mdmawere1 [7:10 PM, 4/4/2021]: Which version should be accepted?

Pharaoh Chimunoko [7:16 PM, 4/4/2021]: It’s clear he is pretending not to know to save face while at the same time exposing himself as an incompetent administrator

mdmawere1 [7:17 PM, 4/4/2021]: Can a thief be called incompetent?

Pharaoh Chimunoko [7:19 PM, 4/4/2021]: For the purpose of his job as an administrator, Yes, But for his self-aggrandizement No

mdmawere1 [7:40 PM, 4/4/2021]: Do you agree that the rule of law permits no self-help?

Pharaoh Chimunoko [7:43 PM, 4/4/2021]: Yes I do

 mdmawere1 [4/5, 8:39 AM]: Based on this, what can you say as a conclusion? Do you trust Gwaradzimba as an honest actor? Would you hire him to any position involving public trust?

Pharaoh Chimunoko [4/5, 8:55 AM]: In respect of this he is exhibiting signs of a dishonest person. At one point he portrays himself as a professional practitioner and then he pretend to deny knowledge of what he has been doing for 17 years. He offers to verify (a good move for a professional though) what he clearly knows. His demeanor in the whole cast is dishonorable to say the least.

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