SABC irregular, fruitless and wasteful expenditure: hearing; with Deputy Minister

Meeting report

The Communications Deputy Minister, Ms Pinky Kekana offered apologies on behalf of the Minister.

The Chairperson addressed the Deputy Minister and said there had been a number of interactions with the South African Broadcasting Corporation (SABC) as part of the efforts to help the SABC "to get its footing right”. At that time and even now, one of the key issues was around irregular expenditure and in addition, there were issues with cash flow, instability at management level and interaction with staff. The Committee had been happy and encouraged by the interactions with the interim board. There was a company called SekelaXabiso that had many contracts focused on assisting the SABC to deal with irregular expenditure. At the time of the last meeting the Special Investigating Unit (SIU) came into the picture. Some of those talking points are still very much part of the agenda today. There was a very real possibility of some SABC employees losing their jobs and the Committee’s decision to call on the SABC was to touch base and to get a sense of what happened to the momentum.

Special Investigating Unit (SIU) on the investigations at SABC

Adv Jan Mothibi, Head, SIU, said the proclamation was signed and gazetted on 1 September 2017. Allegations on the security contract came to light and it necessitated extending the proclamation and it was then gazetted on 6 July 2018.

The last interaction with the SABC board was on 31 October 2018. He gave an overview of the Phase 1 project process and indicated that an interim report had been submitted to the President on 21 September 2018. This presentation summarised the outcomes of the 18 matters that the SIU investigated in Phase 1 and will provide an update on the status of all the Phase 2 matters as covered by the proclamation.

The SIU found evidence that indicated that there were irregularities in the awarding of the following contracts:

-Vision View Productions CC;

-SekelaXabiso CA Incorporated;

-Lorna Vision (Pty) Ltd;

-Lezaf Consulting;

-Gekkonomix (Pty) Ltd (trading as Infonomix);

-Asanta Sana (Pty) Ltd,

-Foxton Communicating (Pty) Ltd; and

-Mott MacDonald (Pty) Ltd.

Evidence obtained also indicated that there were irregularities in the awarding of the success fee to Mr Hlaudi Motsoeneng, as well as various appointments and salary increases awarded by Mr Motsoeneng.

SIU also confirmed the Public Protector’s findings that the following appointments of SABC staff/and or salary increases were irregular: Ms Sully Motsweni, Ms Thobekile Khumalo and Ms Guga Duda.

As a result of the investigation conducted by the SIU, court ready evidence was gathered and compiled, along with draft charges. This consisted of civil litigation that was instituted in five matters, with an additional three submitted to senior counsel who are drafting the court papers; the provision of evidence to the SABC to assist in defending one civil matter; four criminal referrals; and 23 disciplinary referrals.

The investigation has produced evidence to initiate the civil litigation instituted in the name of the SIU and the  SABC in five High Court matters to the value of just over R166 million and has referred 3 matters to counsel who are preparing court papers. The SIU also provided evidence to defend the Asanta Sana claim for R350 000 on 19 March 2018.

Slides 8 and 9 detailed the civil litigation referrals to date and it highlighted the value of litigation, the case number (where papers have been issued), and the referral date. On disciplinary referrals to date, Adv Mothibi said the investigation produced evidence to support 23 disciplinary referrals handed over against five SABC executives and eight SABC officials. Of the five executives no longer with the SABC, 1 was found guilty of disciplinary charges and dismissed; 1 was  found guilty of disciplinary charges; a final written warning was issued and the person then resigned then resigned; 2 resigned in the face of SIU disciplinary action; and 1 contract expired and was not renewed. Two SABC officials was found guilty of disciplinary charges and dismissed. Slides 12-15 detailed these matters, i.e. the names of the executives and officials, their positions, the related contracts and the updated status on the cases.

Adv Mothibi provided details on the civil litigation instituted by SIU. The Lorna Vision contract has been set aside by the High Court. On 11 May 2018 the SIU submitted evidence to the SABC’s attorneys (Werksmans) in support of a civil claim against Lorna Vision and Aguma to recover the R62.7 million. The SABC has issued summons against both parties and the SIU has filed an application to join the proceedings. Lorna Vision has filed a second exception. The Heads of Argument are being filed and the SIU was awaiting the allocation of a date for hearing the intervention application.

On 24 April 2018 the SIU and SABC filed a Notice of Motion to have the Vision View contract set aside. Vision View filed its answering affidavit on 29 May 2018. To date the SABC has paid Vision View R34.4 million of the total contract amount of over R52 million. Heads of argument were filed and the matter was heard on 5 November 2018 and postponed to 9 November 2018 for judgement.

The SABC and SIU jointly referred the matter to court for reviewing and setting aside the latest contract which was entered into with SekelaXabiso on 23 December 2016 to the value of around R9.8 million. The Notice of Motion was issued on 22 December 2017 against SekelaXabiso in the High Court and the parties are currently exchanging pleadings. In addition, an application was filed to join the SIU into these proceedings. The SIU application was heard on 5 June 2018 and the application was successful. All affidavits have been filed and Heads of Argument due next. Once filed, a hearing date will be allocated.

Ms Gina Howes, Programme Manager, SIU, clarified that all contracts with SekelaXabiso was valued at over R31 million and a decision was made to focus on the most recent contract where full payment has not been made yet and there were prospects of recovery. In addition, it was reported to the SABC that all the expenditure to the value of just over R31 million of the contracts entered to with SekelaXabiso were irregular and needed to be reported to the Auditor-General and National Treasury. This resulted in three disciplinary cases and two individuals, Simon Molaudzi and Audrey Raphela are no longer with the SABC as a result of that disciplinary action.

The SIU and SABC jointly issued summons on 5 February 2018 against Mr Hlaudi Motsoeneng. The civil case consisted of two claims: the recovery of R11.5 million in terms of the success fee that was paid and secondly for the recovery of R10.2 million for the irregular appointments and salary increments, suspensions and unlawful terminations of employment. The civil litigation process was underway and Mr Motsoeneng entered an appearance to defend and raised an Exception to the Particulars of Claims.

On the criminal referral, evidence obtained indicated that fraud was committed in relation to 11 fraudulent travel claims that Ms Sully Motsweni (former Group Executive: Sport) and her relatives benefitted from to the value of R45 000. The evidence obtained was referred to the National Prosecuting Authority (NPA) on 5 April 2018. The SIU, working with the SAPS Commercial Crime Unit, registered a criminal case at the Brixton Police Station on 15 May 2018 and on 30 May 2018 Ms Motsweni appeared in the Commercial Crime Court in Johannesburg on 11 counts of fraud. She was released on R5 000 bail; she appeared again on 20 June 2018 and the court case was postponed to 26 July 2018 for further particulars. The criminal trial has been set down for 22 November 2018.

Slides 21 and 22 dealt with the MultiChoice contract and he proceeded to outline the Phase 2 investigations where the aim was to submit the final report to the President on 30 April 2019 (see details attached).

Discussion

Ms V Mente (EFF) asked if the Committee could get another status update by January 2019, because Parliament will be closing soon and it would be good to finalise this before Members’ term ended. She referred to slide 12 and asked if any of the money had been recovered from those who have resigned in the face of disciplinary action.

Adv Mothibi replied that the SIU would be willing to give an update at any time. Resigning in the face of disciplinary action was a phenomenon faced across government. An official would sometimes resign and ‘pop up in another department or municipality’.  The SIU was engaging the Department of Public Service and Administration (DPSA) to address this – even if those officials can be “blacklisted” so to speak. When officials resigned, the employer/employee relationship ended and no labour relations actions can be taken against them. Where there was a link for recovering funds, these individuals can be civilly pursued.

The Chairperson referred to Mr Kubendhran Padayachee (former Acting Group Executive: Technology) and asked if this was such a case.

Adv Mothibi referred to slide 9 and said the matter referred to as ‘confidential’ to the value of R52 million involved Mr Padayachee.

Mr T Brauteseth (DA) asked what the endgame was in terms of the civil matters, i.e. was the SIU talking to the Asset Forfeiture Unit (AFU). He referred to the two officials that received final written warnings and he asked what the natures of the offences were.

Adv Mothibi said he would have to check what the offences were and get back to the Committee.

Mr Brauteseth said this was strange, because this was reported by the SIU to the SABC. He asked if the Vision View matter was heard on 5 November.

Adv Mothibi confirmed that it had and the matter was then postponed to 9 November.

Mr Brauteseth asked if criminal charges can be brought against Mr Motsoeneng.

Adv Mothibi said the SIU has not detected criminal activities as yet – only irregularities, i.e. not following policy, abusing his position, etc. It could be, as the investigation unfolded, that there might be evidence that showed contravention of the Combating of Corrupt Activities Act.

Mr Brauteseth asked who Mr Motsoeneng’s direct superior was.

Adv Mothibi said he imagined that he reported to the CEO.

Mr Brauteseth said the Combating of Corrupt Activities Act specified that persons must report irregular activity when they become aware of it. He asked if there was a criminal element to whoever surrounded Motsoeneng, because it cannot be right that someone can get R21 million out of a taxpayer funded organisation and everybody walked away. Somebody should have reported this and he asked if that angle has been looked at.

Adv Mothibi said the SIU was looking at whoever authorised it, i.e. if it was the board, contravening the Companies Act came into play or any contraventions around the Combating of Corrupt Activities Act are looked at.

Mr Brauteseth said there was a whole network of people around Motsoeneng and the Act specified widely that persons must report irregular activity when they become aware of it. He said he was concerned that the SIU was not picking up on this and the board should look into the enabling environment that allowed a man to take R21 million from taxpayers.

Mr M Booi (ANC) congratulated the SIU on the report.

Mr D Ross (DA) said at the last meeting there was a huge concern on the presidential proclamation and he acknowledged the progress made. He referred to the ‘interim report’ submitted to the President and asked what the difference between the interim and final report was and whether the President would advise on the legal action to be taken.

Adv Mothibi said that part of SIU’s strategy was to turnaround investigations as quickly as possible without prejudicing or compromising those investigations. If the investigation went beyond 12 months, by the 12th month and interim report was issued to continuously show outcomes to State institutions and to the President who signed the proclamation. The report was ‘interim’ simply because the investigation was still ongoing, but the matters addressed in the interim report are final. SIU do not seek guidance from the President on how to proceed on matters.

Mr Ross agreed with Mr Brauteseth and said there was also political responsibility, e.g. who the Minister at the time was, as well as the senior officials. What happened at the SABC was just looting by the elite and the investigation should be expanded to the elite, i.e. who authorised the looting of the institution and what the role of the internal audit function were. On the SABC security contract, he said it has been rumoured that the SABC who was severely constraint in terms of finances will now have problems, because the contract has been awarded to the second highest bidder in terms of points instead of the highest bidder. He said this surely exacerbated the fiscal risk to the institution and he asked for an opinion.

Adv Mothibi referred to slide 27 that explained the progress on the security contract and said the matter was already in court. The litigating company was of the view that it should have been awarded the contract. SIU investigations have revealed that there irregularities in the process and SIU would join the litigation with the intention of having the contract set aside, because of the irregularities in the supply chain process.

Mr E Kekana (ANC) also referred to recovery of funds and asked on Ms Bessie Tugwana (former Acting Chief Operating Officer) and the update that her contract has expired.

Adv Mothibi referred to slide 9 and said the ‘confidential’ matter valued at R52 million included Mr Padayachee and Ms Tugwana.

Ms Khunou asked who was paying for the litigation.

Adv Mothibi said if they instituted the litigation the State institution would carry the costs, but at the end of the process, the court can make an appropriate order on costs.

Ms Khunou said SABC was in this position because of the court costs. She asked how government would recover its money.

Adv Mothibi said the SIU engaged with the NPA and if there was an opportunity to freeze assets at an early stage it will be done. The court can also order costs to other parties.

Ms Khunou said the Anti-Corruption Task Team (ACTT) was clear on what they are supposed to be achieving and she did not see the SIU working with the ACTT. There were 23 disciplinary cases, but only eight officials and she asked for clarity.

Adv Mothibi said the SIU worked closely with the ACTT and the law required that matters must be referred to the NPA. He clarified that it was 23 counts of misconduct – not individuals.

Ms Khunou said there have been allegations that two officials (Ayanda Mkhize and Simon Molaudzi) have been dismissed without following proper disciplinary processes. She asked what SIU can do to stop implicated employees to move from one department to another.

Adv Mothibi explained that employer/employee relationship was governed by the Labour Relations Act and once an employee resigned, that relationship was terminated and disciplinary action cannot be taken. If loss to the State caused by an individual was proven, that individual can be civilly pursued. 

Ms Yolande Van Biljon, CFO, SABC, said Ayanda Mkhize was dismissed, because there was reason to believe active actions on her part  to delay the process and because she was drawing a salary every month, a decision was taken to dismiss to stop the outflow of money. Simon Molaudzi’s disciplinary hearing concluded and he was given an opportunity to submit documents to the chairperson of the committee and he did not respond within the timeframe. The recommendation was dismissal in the absence of anything else he presented and the evidence before the committee.

Engagement with the SABC

Mr Kekana asked if the SABC will be talking to the momentum and consistency at the institution.

The Chairperson said he would prefer that if at the end it has not been addressed, the SABC can talk to it.

Ms Mente said the SIU provided a thorough and detailed report. She asked who dealt with parliamentary relations and the Auditor-General findings at the SABC.

Mr Bongumusa Makhathini, Chairperson of the SABC board, said engagement or reporting to Parliament was driven by the board.

Ms Mente asked if the board received the letter dated 26 October 2018 from SCOPA that detailed how information should be given to the Committee and what was required from the SABC.

Mr Makhathini replied that the letter has been received and the information has been provided. There was then a follow up letter from the Committee that requested further details that was then provided.

Ms Mente asked what was requested in the follow up letter.

Mr Makhathini said the Committee requested the dates of the incidents, details on who was involved, the amounts and the officials involved. It also wanted the board to expand on the actions taken, the list of cases that have been investigated and a further explanation on deviations.

Ms Mente said it was not what the Committee received – no officials, no consequence management details, and no current status as SIU reported.

Mr Makhathini requested the CFO to address the matter.

The Chairperson said no, the question was why the information had not been sent for this engagement. 

Ms Van Biljon said the information as per the bullet points was not all available. The SABC had the names of the suppliers/service providers and the amounts and the institution was in the process of ascertaining who the individuals are involved in the cases. There was a small team that has been looking at these items on a line-by-line basis since SABC started looking into this a few months ago. The cover memo spoke in broad terms, because the process has started, but for a few that has been listed in forensic investigations and investigated by the SIU; the SABC did not yet have all the individuals and the subsequent corrective measures in place.

Ms Mente asked if SABC just started the process and if there was an action plan in place.

Ms Van Biljon confirmed that yes there was an action plan and a dedicated team in place to address these matters.

The Chairperson questioned how, in the absence of the requested information, the Committee can have a meaningful engagement.

Ms Van Biljon said that was why the document that accompanied the 2017/18 details listed the themes that informed the full balance of irregular and wasteful expenditure with the hope that each of these items will receive attention based on what they are. There are steps detailed that will be taken to deal with those line items to be able to come back with an update.

The Chairperson referred to the Deputy Minister and said there were no generalisations and the Committee dealt with specifics, e.g. who signed off on a tender. If the SABC did not know who the person was, this discussion was a waste of time. The letter was very specific and he said there must have been a meeting and a decision on what would be presented to SCOPA.

The Deputy Minister and said the letter received was addressed to the Minister and dated 1 November 2018.

The Chairperson said it was the wrong letter and it should be dated 2 November 2018. Not having the information requested created a problem and said there was an assumption that the Deputy Minister had seen the relevant letter.

The Deputy Minister said they developed questions based on that first broad letter to the SABC and did not know the SABC received questions directly from SCOPA. The SABC did not share these guided questions with the Department. She apologised and said she took responsibility on behalf of the Department and the SABC.

The Chairperson said there are two documents on fruitless and wasteful expenditure (referring to the response received from the SABC). The fruitless expenditure actually captured the responsible and only from number 104 the ‘responsible person’ was called Limpopo Finance and not an individual until 143. From 144 to 201 there was a name of a person and from 202 to 224 it was KZN Finance; 305 to 321 showed only amounts; 322 to 326 showed a name; 327 to 329 showed only SABC Ltd. After that there are no names and no information on what happened to the individuals. 

Ms Mente referred to the action plan and said the board has been in office for more than a year now and at the last engagement irregular expenditure already amounted to billions. R25.4 million were since disclosed and the current irregular expenditure was R571 million. Even if investigations are still ongoing, she wanted to know who the people responsible for the R25.4 million were and what happened to those people. It seemed that for the past 12 months no one has paid attention to the Auditor-General’s findings. SABC will soon find itself in the chaos of before and before any sort of bailout can be discussed, there needed to be a “strong hand handling the financials”.

Ms Van Biljon said the R25.4 million referred to a specific procurement contract and the investigation has not yet concluded. The SABC was still in the process of identifying the responsible persons.

Msmente asked for confirmation that in all 18 areas identified by the Auditor-general, nothing has been concluded and the SABC did not know who was responsible for any of the R571 million.

Ms Van Biljon replied only seven of the items has been concluded in the year to date and was going through the various approval processes (on page 6 of documents provided to the Committee). The rest of the R571 million was made up of over 7 000 line items and each of them needed to be investigated. 

Ms Mente said these items have been approved for condonation which meant satisfaction with the reasons why the law was not followed. The SABC’s approval might not be SCOPA’s approval and she asked for the details.

Ms Van Biljon said those details can be compiled and submitted.

Ms Mente said the response when the SABC came back must be as detailed as the SIU report.

The Deputy Minister said she wanted to be clear on SCOPA’s expectations. She acknowledge the detailed letter sent, but wanted to know if the irregular expenditure should be looked at cumulatively (R4.9 billion) and then categorised or only at the R571 that spoke to this financial year.

Mr Booi asked why the accounting officer was not taking responsibility since the correspondence was between the Committee and the accounting officer.

The Chairperson said the SABC has not done what it was supposed to do. SCOPA’s concern was irregular expenditure and SABC’s compliance with the law. Once irregular expenditure was identified it must be confirmed and investigated; thereafter it was either condoned or people are held to account for not following processes. R4.9 billion has not been accounted for and the Committee wanted every cent accounted for. When the Committee went to the SABC, almost all contracts for SekelaXabiso were for investigation and final determination of the quantum of irregular expenditure. SekelaXabiso was supposed to have given SABC the final report by the end of May. This was last year and there had been an assumption that this report on the schedule of irregular expenditure was processed, not taking into account the R571 million committed in the last 12 months. SCOPA’s expectations were not unreasonable. Members of this Committee read and wanted details – not generalities. The expectation was that the SABC would continue with the work and the momentum. The internal forensic unit of the SABC was given certain aspects of the irregular expenditure to investigate, specifically cases referred to the SIU. He asked what happened with the unit in relation to the irregular expenditure. The Committee had a sense that the board at that time, as part of assisting to ‘stem the bleeding’ was actually doing monthly reconciliations of all transactions. Did that stop?

Mr Kekana said the Committee also expected there to be a handover report. Members knew exactly the issues being dealt with, but now it felt like a first meeting.  The Committee needed answers on the handover and the continuity.

Mr Makhathini said SekelaXabiso was helping with irregular expenditure, but it turned out that the way SekelaXabiso was commissioned to do work for the SABC was irregular and that came under the SIU’s investigation. The work was stopped and the team did the work in-house and that affected the momentum. On the handover between the interim board and the permanent board, he said four members of the interim board are now permanent board members and there have been no loss of experience. The board has stabilised the SABC’s senior leadership. He acknowledged that there has not been much progress on finalising the investigations into the responsible persons, but the work of the SIU addressed some of the issues.

Ms Chiloane suggested a postponement of the meeting to give the SABC time to prepare and come back with a proper report.

Mr Booi said Members are lawmakers and the expectations of SCOPA are within the law. A commitment was made to help the SABC and now it seemed the SABC was not assisting. The Committee took its work very seriously and that was why this meeting was taking pace late at night.

Mr Ross said the Committee also addressed the institution’s going concern status at the June meeting. The SABC’s depletion of cash reserves have regressed immensely over the last year and has recorded a net loss of about R500 million and 40% (R3.1 billion) of expenditure went to the salary bill. These were alarming economic indicators and were spoken about a year ago. The SABC lacked progress and continuity although a bit of light in the tunnel was the fact that the Deputy Minister’ came from the finance department. He supported the proposal for a postponement and said perhaps there should be a focus on the R571 million in irregular expenditure for now. SCOPA can make some proposals to prevent job losses and to restore functionality to the financial obligations of the SABC.

Mr Kekana supported the postponement and said the letter was clear and it should be followed. As part of the guidance, the SABC should maybe meet with the interim board. The Deputy Minister was not a functionary, but rather an executive authority. The chairperson of the board   is the accounting officer in terms of the Public Finance Management Act (PFMA).

The Chairperson said the meeting will be next week Tuesday. There should be movement on the irregular expenditure from an accountability point of view. Preparation must also include consideration of the Annual Report and the Auditor-General report. Irregular expenditure happened in the context of the existing weaknesses and it would be a waste of time if the enabling environment was not addressed. He asked that if only seven matters were concluded, what the internal audit unit was doing and what their level of capacity was. The qualified audit finding on irregular expenditure should have prompted a singular focus on this matter.

Mr Makhathini said the SABC will come back, but ask for another date, because of a previous engagement on Tuesday.

The meeting was postponed to Wednesday, 14 November 2018.

Ms Mente asked for the documents to be forwarded by Monday.

The Chairperson also asked that the information be submitted in a spreadsheet format.

The meeting was adjourned.