Report uncovers Ntsika mismanagement

An independent forensic probe into Ntsika, the government’s small business promotion agency, has uncovered a sorry tale of financial mismanagement, discrimination against staff, inefficiency and sheer management incompetence.

Ntsika, funded largely from the public purse, has been dogged by a series of scandals.

Now a report by Gobodo Forensic and Investigative Accounting shows that the public entity has not corrected issues of corporate governance.

The Gobodo report, parts of which were leaked to the Mail & Guardian this week, paints a gloomy picture of widespread misconduct, poor management controls, failure to adhere to statutory obligations and tax violations, raising concerns about the agency’s ability to effectively discharge its statutory mandate.

The report exposes the Ntsika management for making policy changes without proper board approval. This, the report says, indicates that the Ntsika management ”can change policies as and when they want”.

The report has not been released publicly and Ntsika chairperson Mashudu Ramano this week said he had not seen it — two months after it was finalised.

”I have not seen the final report. The report I saw was a preliminary one and was still to be discussed between the Ntsika management and the auditors,” he said.

The report, dated March 2002, incorporates Ntsika’s management response and is a final version.

In the report, Gobodo, which is Ntsika’s internal auditor, says all its findings were discussed with Ntsika management and ”there were no disagreements of fact, except where indicated in the detailed findings”.

Ntsika was established by an Act of Parliament in 1995 to promote small business — the key thrust of the government’s strategy to reduce South Africa’s high rate of unemployment. It falls under the Department of Trade and Industry.

The agency started life with a chief executive who resigned in 1996 after fraud allegations by her previous employer, the Swazi government. The subsequent chief executive, Kate Moloto, quit in December 2000 following allegations of mismanagement.

The new chief executive, Lefa Mallane, formerly Ntsika’s operations manager, was promoted to his current position despite some board members questioning his suitability. He was acting chief executive before he was appointed full-time in March this year.

Senior Ntsika sources this week charged that Mallane’s reign has failed to bring stability to the organisation and has brought the agency ”to a chaotic state”.

But Mallane disagrees: ”The Trade and Industry Minister, Alec Irwin, was not stupid to appoint me to be chief executive. The minister has closed the chapter and has appointed me. We work on integrity here and take issues of corporate governance very seriously. We have a policy system that we adhere to.”

Mallane insists that his management has not breached corporate governance procedures.

”It is not true that we changed policies without board approval,” he says.

Mallane also says he has a report by the auditor general on Ntsika’s management affairs and it does not raise the issues contained in the Gobodo report.

”The auditor general looks at all reports by auditors, including Gobodo,” he said.

”Gobodo is part of Ntsika’s audit committee and so is the auditor general. Any report by internal auditors is submitted to the audit committee,” Mallane said.

However, the M&G understands that the audit committee Mallane refers to was constituted only in May, a month after the Gobodo report was concluded. The Gobodo report findings include:

• Failure to adhere to statutory and tax regulations: ”We discovered that provident payments to staff were made without a tax directive from [the South African Revenue Service],” the report reads. ”It was found that the travel allowance exceeded the permitted 45% of total cost to company. In the case of one individual whose total package is approximately R18 000 per month, a travel allowance of R8 600 is included”.

  In some instances, the report adds, employees were not taxed on their bonus. No reasonable explanation could be provided.

• Changes to policies and procedures without board approval: ”It was noted that changes were made in the existing policies and procedures without board approval. Changes in the study grant policy discriminated against some employees,” the report said.

• Employment offers above approved salary scales: ”When reviewing the controls in place for the recruitment and selection process, it was noted that an offer was made to a candidate that exceeded the approved salary scale for that position. The position in question was subsequently adjusted by management to justify the offer. The role matrix policies and procedures were compromised. This indicates that management can change policies as and when they require.”

• Restructuring of salaries without board approval: ”Staff received salaries that exceeded the approved salary scales and were not approved by the board,” the report reads.

• Contractors’ benefits were found to be identical to those of permanent staff members.