Wally Mbhele reports on allegations that an advertising agency misled parastatals about its black empowerment
The Office of the Public Protector has launched an investigation into the awarding of more than R200-million in advertising contracts to a company that is alleged to have misled parastatals with false information about its black economic empowerment.
Documents handed to the Office of the Public Protector allege that the South African Post Office, Telkom and Metrorail awarded tenders to The Agency, despite “fraudulent submissions regarding its shareholding and black economic empowerment shareholding structure”.
Three top advertising agencies have complained to Public Protector Selby Baqwa that they lost tenders for advertising work for parastatals “because of a lack of transparency in the awarding of the contract, corrupting of various key decision makers at parastatals, as well as alle-gations that The Agency is the official parastatal advertising agency appointed by government higher-ups”.
The complaint has been brought by Herdbuoys McCann-Erickson, Skotaville Communications Group and Azaguys Advertising and Marketing. It is likely to spark a credibility battle among the heavyweights of the South African advertising industry.
Some of the accounts handled by The Agency include the South African Broadcasting Corporation, the South African National Parks Board, Eskom, the South African National Defence Force, the South African Bureau of Standards and the Department of Labour.
The Agency’s representative, Hendrick Ferreira, said he was not in a position to comment on the matter but said that the company had launched an investigation into the allegations and “was given a clean bill of health”. He refused to divulge further details.
In the complaint to the public protector, the executive chair of Herdbuoys McCann- Erickson, Peter Vundla, said he obtained information about The Agency’s false black equity structure from Telkom’s chair, Dikgang Moseneke, who had instituted an audit into its shareholding.
“Once I had been advised (unofficially) about the awarding of the post office business to The Agency, I requested a meeting with the post office chair, Max Maisela. I subsequently met with Mr Maisela on April 1 this year and expressed my concerns about the lack of transparency and apparent non-existence of any meaningful black equity in The Agency,” Vundla wrote.
Vundla has alleged to the public protector that he advised Maisela that Telkom had withdrawn its account from The Agency because of false information it supplied.
A check had been done at the Registrar of Companies which showed that The Agency did not have a single black director.
“Some months later I was advised by advocate Moseneke that The Agency had supplied false information on their equity structure in their tender submission. This discovery was made after an audit carried out by Telkom. According to Moseneke, this has led to a decision to withdraw the business from The Agency,” Vundla alleges.
Vundla said that in a subsequent conversation, Moseneke advised him that The Agency had “cured their equity structure with regard to black economic empowerment”. Vundla told the public protector that he “had it on hearsay that the business was returned to The Agency after a penalty was imposed on it”.
In a letter written to Moseneke in October last year, Vundla wrote: “On purely a matter of principle, I intend to expose what appears to be unacceptable behaviour on the part of certain individuals.
“My resolve to do this is unshakeable and I am sure you understand why I have to do this. I do believe that The Agency knowingly supplied fraudulent information in their first submission to Telkom. I also believe the re-awarding of the business after the cure to be improper.”
Moseneke wrote back to Vundla, saying Telkom developed a procurement process that sought to ensure that tenders are awarded in a fair and transparent manner.
A letter written by the chair of Skotaville Communications, Mothobi Mutloatse, to the South African Post Office management also queried the awarding of a tender to The Agency. “We believe that the issue of the black shareholding of any agency being awarded any contract is crucial, and must not only be transparent but most importantly be seen to be fair and open,” he wrote.
“This implies that this information will be available for scrutiny – in particular when a decision is held to be questionable in terms of empowerment. To award a contract to a company on the basis of its black shareholding is not only laudable but also necessary in advancing the economic aspirations of people previously discriminated against racially and politically, and so any awardee must genuinely be black-owned, managed, and controlled to avoid being labelled as tokens.”
In response, post office senior general manager, Reverend VC Mehana, said its criteria took into consideration ability to do the job, price and black economic empowerment.
“Given the information at our disposal about this pitch, we are satisfied that The Agency met all the requirements of the post office in relation to the above criteria … For now, your dissatisfaction unfortunately cannot be addressed beyond all the responses you have received … This matter is now regarded as closed and there shall be no correspondence with you on the same,” said Mehana.
Sipho Luthuli, of Azaguys, was not satisfied with this response. “We were shocked by the contents of the letter because as far as we are concerned The Agency is not black-empowered … As pointed out to you, it is our perception that something drastically went wrong in the awarding of this tender. All that we are asking for is some explanation which we are not going to get from the post office,” Luthuli wrote.
Vundla told the public protector: “There are unproven allegations that Reverend Mehana single-handedly appointed The Agency and coerced his management committee to sign a memorandum to rubber-stamp his choice.”
Vundla said he had been advised by a “reliable source” within Metrorail that the parastatal’s marketing unit sought to terminate the services of The Agency for non-performance.
“However, the chief executive officer of Metrorail, Sandile Jakavu, cautioned against firing The Agency as it was the official parastatal advertising agency appointed by government higher-ups.
“I contacted Mr Saki Macozoma [Transnet’s managing director] who referred me to his deputy, Mafika Mkhwanazi, and both strongly denied the assertion by Jakavu. I request that the source of this statement be investigated, especially against the background of my discussion with advocate Mojanku Gumbi that various individuals have obtained government business on the pretence of an endorsement or largesse from the Office of the President.”