PMTE CFO appointment at Public Works: hearing; with Minister and Deputy Minister present

Public Accounts (SCOPA)

23 October 2018
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Public Service Commission (PSC) had been requested by SCOPA to investigate the regularity of the employment of, and payments made to, Mr GB Mokgoro at the Department of Public Works (DPW). The terms of reference were to investigate the regularity of the employment of Mr Mokgoro from June 2016 to June 2018, and payments made in that regard to Honey Cloud Enterprises (Pty) Ltd. The Director General of the DPW had also requested an investigation into his appointment.

The PSC had previously investigated the secondment of Mr Mokgoro from the Industrial Development Trust (IDT) to the DPW from 2012 to 2015. The secondment had been found to be irregular since approval by the executive authority had been after the secondment, and Mr Mokgoro was not an employee of the IDT. His secondment from Honey Cloud Enterprises in 2015 had been irregular in terms of the Constitution and the Public Finances Management Act, as other companies were not given the opportunity to tender. It was also not in compliance with the Public Service Act, as Mr Mokgoro was not employed by Honey Cloud Enterprises, being the director of that company.

Approval for extensions of the secondment had been granted by former DPW Ministers Nhleko and Nxesi after the extension date, which was not in compliance with constitutional values and principles. The purchase of Honey Cloud Enterprises as a vehicle for the secondment of Mr Mokgoro circumvented the secondment regulatory framework. Compensating him at the scale of Chief Director / Deputy Director level was not in compliance with Constitutional values and principles. Payments to Honey Cloud Enterprises were also found to be irregular.

Certain documents requested from the DPW regarding the recruitment process followed in 2015, were still awaited by the PSC. The DPW had failed to provide the performance agreements requested for Mr Mokgoro, and the outcome of the assessment of his annual performance. SARS indicated that tax matters relating to Honey Cloud Enterprises and Mr Mokgoro were being investigated.

Members probed deeply to establish the motivation behind the appointment of Mr Mokgoro, and which office or individuals were behind his recruitment and secondment. It was felt that contracts signed by Mr Mokgoro also had to be investigated. Members wanted to know why documents related to the recruitment process had not been made available to the PSC. It was asserted that the political responsibility of the Ministers who had approved the secondment and extensions was considerable. There was some debate as to whether SCOPA should proceed with the investigation, or whether the PSC had to be allowed to finalise the report. The Chairperson concluded that the Minister’s response first had to be processed, to see if it would have a material impact. The Chairperson also said that it had to be determined whether the irregularities investigated were a general practice in the DPW, and possibly in the civil service as a whole.

Meeting report


Introduction by Chairperson

The Chairperson welcomed the Minister and Deputy Minister of Public Works, the Director General (DG) of the Department, and the Director General and leadership of the Public Service Commission (PSC). He was glad to see that Dr Bruno Luthuli, PSC Commissioner, was present.

The DG would have explained to him that there had been quite a meeting the previous week. He and Dr Luthuli had had a lengthy telephone conversation about matter on the agenda for the meeting, but as a democratic socialist he wanted to involve the Committee. There had been postponements, but the Committee had insisted that it had to be known what the PSC had found. SCOPA would not interfere with the time granted to Mr Mokgoro and the Minister to respond, but had to be informed about the findings of the PSC. The PSC could present its findings, and then Members would decide about the way forward. 

Employment of Mr Mokgoro: PSC’s provisional report

Dr Dovhani Mamphiswana, Director General: PSC, said the Commission had been requested by SCOPA to investigate the regularity of the employment of, and payments made to, Mr GB Mokgoro at the Department of Public Works (DPW). The terms of reference were to investigate the regularity of the employment of Mr Mokgoro from June 2016 to June 2018, and the payments made in that regard to Honey Cloud Enterprises (Pty) Ltd. The DG of the DPW had also requested an investigation into the appointment of Mr Boitumelo Cox Mokgoro.

The PSC had previously investigated the secondment of Mr Mokgoro from the Independent Development Trust (IDT) to the DPW from 2012 to 2015. The secondment was found to be irregular, since approval by the executive authority had been after the secondment, and Mr Mokgoro was not an employee of the IDT. The secondment of Mr Mokgoro from Honey Cloud Enterprises in 2015 had been irregular in terms of the Constitution and the Public Finance Management Act (PFMA), in that other companies were not given the opportunity to tender. It was also not in accordance with the Public Service Act, as Mr Mokgoro was not employed by Honey Cloud Enterprises, being the director of that company.

Approval for the extension of the secondment had been granted by the former DPW Ministers, Mr Nathi Nhleko and Mr Thulas Nxesi, after the extension date, which was not in compliance with Constitutional values and principles. The purchase of Honey Cloud Enterprises as a shelf company for the secondment of Mr Mokgoro circumvented the secondment regulatory framework.

Compensating Mr Mokgoro at the scale of Chief Director / Deputy Director level was not in compliance with Constitutional values and principles. Payments to Honey Cloud Enterprises were also found to be irregular. Certain documents requested from the DPW regarding the recruitment process followed in 2015, were still awaited by the PSC. The DPW had failed to provide performance agreements requested for Mr Mokgoro, and the outcome of the assessment of his annual performance. SARS indicated that tax matters relating to Honey Cloud Enterprises and Mr Mokgoro were being investigated.
 
Discussion

Mr M Booi (ANC) asked if the National Treasury (NT) had been drawn into the investigation. It was not reflected in the presentation.

The Chairperson asked if the NT was engaged.

Dr Bruno Luthuli, PSC Commissioner, replied that the NT had been engaged. On page 17 of the report, in paragraph 44, it was stated that the NT had been approached in response to a request from the Department, because there had been a departure from the normal procurement process related to Honey Cloud Enterprises. A Treasury official had stated in an interview that it was not allowed, in terms of Treasury regulations.

Mr C Ross (DA) commented that Mr Booi’s question was significant. It was not only the payments to Mr Mokgoro that was the problem, but also contracts secured by him. Huge amounts were involved. He recommended engagement with the Chief Procurement Officer (CPO), as there was an opportunity cost lost to the State. The CPO had to investigate contracts that exceeded a certain value. Conditions of employment had to be clarified. The first secondment had been a bogus secondment, as Mr Mokgoro was not employed by IDT. The secondment from Honey Cloud was also a bogus secondment, as Mr Mokgoro was not employed by Honey Cloud, but was the sole director. Mr Mokgoro could not have been the only person who benefited from payment. SCOPA had to engage with the CPO and the NT, to determine what the real purpose was behind the bogus secondments. Scopa had to dig deep to determine consequences.

Mr E Kekana (ANC) remarked that the PSC report was a provisional report. There was still information outstanding. He referred to page 11(1) of the report, where it was stated that information requested from the DPW had not yet been given. The DG had to respond about why the information had not been supplied. It was still a preliminary report, as the South African Revenue Service (SARS) was still investigating tax matters related to Honey Cloud Enterprises, and Mr Mokgoro was also being investigated. If the NT was present, it could pronounce on information it was supposed to get. SARS had to inform Scopa about timelines for its investigation. The DPW had to respond about documents not yet made available to the PSC.

Adv Sam Vukela, Director General: DPW, responded that documents ought to have been sent to the PSC.

Mr David Ntshila, DDG: Corporate Services, DPW, replied that Mr Mokgoro was not engaged with the Department in 2012/13. He had been part of the Ministerial team that had come for a diagnosis.

The Chairperson asked Mr Ntshila to speak to page 11, bullet 1. The question was why documents related to the recruitment process in 2015 had not been made available.

Mr Kekana asked why the requested information had not been sent to the PSC. The DG had to answer about why it had not been sent.

The Chairperson agreed that the DG had to say if the information was not available, or if it was being withheld.

Mr Booi questioned the attitude of the DPW. Not providing the documents undermined the mandate of another institution. The DPW was part of the process, yet had ignored the request, so the PSC could not finalise the investigation.

The Chairperson asked how the information was requested.

Dr Luthuli replied that a letter had been sent.

The Chairperson asked what had happened when the letter was received.

Mr Ntshila said that the only outstanding document was a copy of the advertisement for the position of Head of Finance, Property Management Trading Entity (PMTE), which he had made available during an interview with the PSC.

The Chairperson asked why the document was outstanding.

Mr Ntshila replied that the information requested for that period had been made available. He had made the only outstanding document available during an interview with the PSC. The DPW had email records that showed that the information had been handed to the PSC.

The Chairperson told Mr Ntshila that he should have started where he ended, as he had stated that he had handed the document to the PSC.

Mr Kekana asked if the DPW was in fact disputing the statement about outstanding information, made by the PSC. The request from the PSC and the DPW’s response to it, had to be made available to SCOPA. The DPW should have written to the PSC when the letter requesting the information was received, to state that the information was either irrelevant or not available.

Mr Ntshila responded that only the advertisement was not made available. All other documents for that period had been made available. During the interview, other information had been asked for, not necessarily related to that period. Some of the requested information had been sent in the previous week, and some the day before.

The Chairperson commented that Mr Ntshila was not being fair to the Committee. The PSC had concluded its report by 1 October. By 3 October, it could state that the information received was not complete. Mr Ntshila had first stated that there was only one document outstanding, which was handed over in an interview, and had then referred to other documents sent only the day before. Facts were not being presented in a simple and credible manner.

Mr T Brauteseth (DA) asked why Mr Mokgoro had been brought from the IDT, and what skills he possessed.

Adv Vukela replied that according to information, Mr Mokgoro could assist with the turnaround process.

Mr Brauteseth asked who had been DG at the time.

Adv Vukela replied that it was Mr Mziwonke Dlabantu.

Mr Brauteseth asked who the DG was in 2012.

Adv Vukela replied that he was not sure.

The Chairperson noted that according to documents received from the DPW, the acting DG at the time was Ms Fatyela-Lindie.

Mr Brauteseth asked when the DPW had become aware of the irregularity. He put the question to the Minister, the Deputy Minister and the DG

Adv Vukela replied that it was after a first meeting with SCOPA, when SCOPA had tasked him with investigating the matter of Mr Mokgoro.

Mr Brauteseth asked when that was.

Adv Vukela replied that it was in June.

Mr Brauteseth asked if Mr Vukela had gone to the police.

Adv Vukela replied that he did not.

Mr Brauteseth asked him if he knew what the Prevention and Combating of Criminal Activities Act prescribed.

Adv Vukela replied that he knew that one was supposed to report irregularity, fraud or corruption, but the matter was under investigation.

Mr Brauteseth asked how much money was paid to Mr Mokgoro between 2012 and currently.

Adv Vukela replied that it could be calculated.

Mr Brauteseth asked if anyone knew. It had to be R12 million to R15 million. The PSC was supposed to know, as it was the watchdog.

Dr Luthuli responded that it amounted to R6 million for the period under review.

Mr Brauteseth noted that it had only later been concluded that the first appointment was irregular. He asked what the starting salary was in 2012.

Dr Luthuli replied that it was R1.5 million.

Mr Brauteseth remarked that there was an irregular appointment, said to be motivated by a need for financial skills. The appointment did not help the turnaround, and yet R10 million had been paid out. There were no civil claims and no one had reported an irregularity.

Mr Kekana said that the Committee could deal with the matters raised by Mr Brauteseth only once the final report from the PSC had been received. There was still outstanding information from the DPW and SARS that had to be incorporated into the final PSC report.

Mr Brauteseth insisted that he was clearing the table. It had to be asked who was responsible. There was an individual, or individuals who had sponsored the appointment. That individual, or those individuals, saw what was happening and had ignored their duties. The full impact of the cost to the state had to be known. It was embarrassing to the government that someone could be seconded from his own company.

Mr M Hlengwa (IFP) opined that there could be substantive findings only once the final report had been received. He asked whose office was designated at the time of the first appointment.

Dr Mamphiswana replied that the Minister had approved the secondment.

Mr Hlengwa asked which official had handled it, unless it was solely handled by the Office of the Minister.

Ms Sellinah Nkosi, Commissioner: PSC, replied that it was first drafted by the Chief Director, and then went to the DDG: Corporate Services.

Mr Hlengwa asked who was responsible, at the first instance, for the secondment.

The Chairperson noted that from what he saw in letters from the Department, it was initiated by human resources (HR). He did not know if it was delegated from the DG’s office.

Mr Hlengwa insisted that the protocol trace had to be established, in terms of who did what. SCOPA had to receive that information. If it was not available, the DPW could provide it in writing. He asked when the DG had joined the Department.

Adv Vukela replied that he had been employed by the Department since 2004.

Mr Hlengwa remarked that he found it strange that Mr Vukela did not know who the DG was in 2012. He asked what Adv Vukela’s position had been in 2012.

Adv Vukela replied that he was not then in the Department, as he had been suspended from September 2011 to 2017.

Mr Hlengwa asked what position he had held when he was suspended.

Adv Vukela replied that he was acting DG.

Mr Hlengwa asked what position he had left behind when he became acting DG.

Adv Vukela replied that it was that of DDG: Corporate Services.

Mr Hlengwa asked if the DDG of Corporate Services was involved in the matters that were on the table.

Adv Vukela replied that the office of the DDG for Corporate Services managed recruitment, which was an HR function.

Mr Hlengwa asked who the acting DG  was, who filled his position.

Adv Vukela replied that it was Ms Hlatswayo.

Mr Hlengwa noted that Adv Vukela had made no comment on the provisional report. He asked if Adv Vukela was satisfied about the absence of documents.

Adv Vukela replied that he was satisfied that the documents not received would not change the situation.

Mr Hlengwa put it to him that he was the only one satisfied about the documents not submitted that were related to grave irregularities.

Adv Vukela responded that he would see to it that the documents were submitted. He would discuss it with his colleagues, and enquire about the reasons why they were not submitted.

Mr Hlengwa asked why Adv Vukela was convinced that the outstanding documents could not change the material findings.

Adv Vukela responded that he had wanted to understand the rationale of the secondment of Mr Mokgoro. He had obtained clarity about that. The outstanding documents could not change that.

Mr Kekana told Adv Vukela that SCOPA was not interested in his impressions about the provisional report. The Committee wanted to deal with the PSC, and it was essential for the PSC to obtain the documentsso that SCOPA could decide about the final report. It was Mr Vukela’s responsibility to get the documents to the PSC.

Mr Hlengwa asked about action to be taken against those who had failed to submit documents.

Adv Vukela replied that he would have a session with those responsible and would take the appropriate correctional steps.

Mr Hlengwa opined that Adv Vukela did not seem to care if the documents were submitted or not, as he had handed the matter over to the DDG.

Adv Vukela replied that he would have a session with the DDG to establish what had been raised in the meeting.

Mr Hlengwa told him that he was the accounting officer (AO), and that the matter had landed on his desk. If he only wanted to verify if documents were submitted or not, it showed that he did not care “two hoots” about the investigation.

Adv Vukela replied that he took the investigation very seriously.

Mr Hlengwa put it to him that the DPW submitted the documents only as malicious compliance.

Adv Vukela responded that there had to be a probe between himself and the DDG about the DDG’s response in the meeting. He would make sure that the PSC received all the documents.

Mr Hlengwa asked if, seeing that irregularities had occurred while he was on suspension, he would have wanted to defer to people who were there, before arriving at a firm conclusion. It had transpired in the previous week that there had been a lack of communication between the Minister and the DG. He asked who Adv Vukela had discussed the report with.

Adv Vukela replied that he had read the report and had made copies for his office, the DDG of Corporate Services, and the Chief Director (CD) of Legal Services.

Mr Hlengwa commented that he found it strange that it had not been discussed with the DDG of Corporate Services.

Adv Vukela responded that procedurally, the DDG of Corporate Services was the custodian for matters on the table, and after studying the documents he had to apply his mind, and then prepare a submission to the DG’s office.

Mr Hlengwa again reminded him that he was the AO. He received the report and had made a final determination without consulting with people who were at the coalface when he was suspended.

Adv Vukela replied that he had given his colleagues a chance to look at the report. He would submit his own comments.

Mr Hlengwa asked Mr Vukela why he did not consult with the Minister, after having arrived at a conclusion. The Minister had signed off on the secondment. If he himself had been in a situation where grave irregularities occurred during his absence, he would have wanted to understand what had happened. He asked how long Adv Vukela had known the DG of the PSC.

Adv Vukela responded that he had met the DG in January of the current year.

Mr Hlengwa suggested that it might transpire that he had known him before.

Ms T Chiloane (ANC) asked Adv Vukela who he reported to.

Adv Vukela replied that he reported to the Minister and the Deputy Minister.

Ms Chiloane asked the PSC if it had a role in appointing DGs.

Ms Nkosi replied that the PSC did not have a role.

Mr Booi commented that Adv Vukela saw himself as being innocent, while the Mokgoro situation was his responsibility, in terms of the PFMA. He was not cooperating with the PSC to facilitate the mandate of Parliament. He advised that the investigation be taken away from the PSC, and that Mr Mokgoro and the Minister be called to the Committee. The PSC had done what was expected of it. Granting time for Mr Mokgoro and the Minister to respond would cause the investigation to take longer. It had to become a Parliamentary report.

Mr Ross agreed with Mr Booi that time was of the essence. He also agreed with the DG that the PSC report was comprehensive. The role of the PSC was exhausted, as he saw it. SCOPA had to continue the investigation by roping in the Minister and Mr Mokgoro. There was a huge political responsibility. The question was why it had happened under the auspices of the Minister present on the day. It had to be clarified. The DG had taken note of what was happening and had asked for an investigation. The Committee was kicking the can down the road. The Minister and Mr Mokgoro had to be called in about the consequences of the irregular appointment. A person had been seconded by a company that did not even employ him. Political responsibility for what had happened in the Department had to be looked into. Contracts signed by Mr Mokgoro had to be investigated.

Mr Kekana noted that it was stated under (5) on page 11, that the DPW had failed to provide proof of the outcome of the assessment of Mr Mokgoro’s annual performance to the PSC. It was also indicated under (6) that tax matters related to Honey Cloud Enterprises and Mr Mokgoro were being investigated. Timelines had to be obtained from SARS. Outstanding documents were still needed to finalise the PSC investigation. A final report from the PSC was still awaited. The Minister and Mr Mokgoro had been given time to comment. They had to be allowed to comment so that all the facts could be dealt with in totality.

Mr Booi disagreed. It had to become a SCOPA report, which would take matters further with SARS and the NT. The investigation had to proceed under the lead of SCOPA. Outstanding matters could be referred to the Chairperson.

The Chairperson took note of the positions of Mr Booi and Mr Kekana, but thought it better for Mr Mokgoro and the Minister to respond to the PSC accusations, for it to finalise its investigation. Beyond that, it could become a SCOPA report that would deal with inputs from SARS and the NT.

Mr Booi opined that the two separate timelines granted to the Minister and Mr Mokgoro (21 and 15 days respectively), could cause a delay. The Minister and Mr Mokgoro had to respond according to timelines laid down by SCOPA, not those of the PSC.

Dr Luthuli responded that an input from the Minister had been received on the previous Friday, which had to be incorporated. Mr Mokgoro had not yet responded.

Mr Booi said that that the PSC should have mentioned from the beginning that a submission had been received from the Minister. The PSC was being undermined by the DG, who wanted to delay the investigation.

The Chairperson commented that the PSC had been too open-ended and tentative when it stated on page 11 (1) that documents were still awaited, and under (5) that the DPW had failed to provide proof of the outcome of the assessment of Mr Mokgoro’s annual performance. It did not make it clear whether there was no proof, or whether it was there and the DPW had had to dig around until it was found.

The question was whether the submission by the Minister could have a material impact on the outcome of the investigation. The responsibility of SCOPA was to determine who had to be held accountable for a fraudulent appointment. The CFO of the IDT had written letters of secondment. Mr Mokgoro claimed that he was advised by the Department to establish a company, which was part of the fraud. It had to be known who that person was. The Committee had to sit to decide what had to be clarified and what actions had to be taken.

Mr Booi advised that SCOPA Members should make submissions, and that a response be obtained from Mr Mokgoro.

The Chairperson concluded that the question remained whether the practice of using Honey Cloud Enterprises for the secondment of Mr Mokgoro was the only case in the Department. Mr Mokgoro had come in as additional to the personnel establishment. It had to be established whether the case of Mr Mokgoro was the sole diversion from established practice, or whether it had become general practice in the preceding five to seven years. It also had to be known if such irregular practices were restricted to the DPW. The civil service as a whole had to be looked at. He agreed with Mr Ross that during the period of his fraudulent appointment, Mr Mokgoro had also made decisions about tenders and contracts, which raised questions about the integrity of the work done. The qualifications of the national bid adjudication committee had to be determined. It had to be asked who they were, if they were still there, and how many wrong decisions had been made.

Mr Ross asked when the Ministerial response could be sent to SCOPA.

The Chairperson advised that the PSC would first process it to establish if it would have a material impact.

Mr Booi disagreed with granting that power of decision to the PSC. It would cause a delay.

Mr Hlengwa commented that there was clarity about what was expected from the PSC. The PSC had to do its work. He was not in favour of taking the documents before the PSC had had the opportunity to process it. It could prejudice the process.

The Chairperson told Mr Hlengwa that Mr Booi did not want the documents on that very afternoon. The Committee had to be satisfied about whether the report from the Minister would have a material impact. He asked the Minister if he wished to comment.

The Minister responded that he would reserve comment until the final report, pending consideration of what he had submitted to the PSC.

The Chairperson adjourned the meeting.

 

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