Minister of Public Enterprises Jeff Radebe told Transnet to hand a privatisation tender to a company that was patently unsuited to the job — but in which the ruling African National Congress had an alleged financial stake.
Now, after a drawn-out court battle over the tender award, the transport parastatal has to pay R57-million in damages to a bidder it knew to be better qualified but which it dropped after Radebe’s intervention.
The saga shows the ANC perhaps as deeply implicated in funding sleaze — in this case as a result of an allegedly hidden shareholding — as the Democratic Alliance last year and the New National Party recently.
Evidence prepared for the court action suggests Radebe and his director general, Sivi Gounden, disregarded the merits of competing bids to end up favouring a company which was financially close to the ANC. Radebe did not respond to messages. Gounden on Thursday denied knowing of any financial relationship between the company and the party and said their intervention was based on price.
The saga started three years ago as rival companies put in their bids for Transnet Production House, the transport parastatal’s in-house printing division offered for sale as part of government’s “restructuring of state assets”.
It came to a head in Johannesburg High Court last month when Judge Suretta Snyders awarded damages of R57-million to Sechaba Photoscan, the company that in the end all parties agreed should have been awarded the tender in the first place.
In her judgement, delivered on January 17, Snyders quoted, with apparent approval, a witness who had testified that Production House entered a “period of disgrace” and “was run into the ground” after it was acquired in July 2000 by Skotaville Press, the company Radebe and Gounden had favoured. Evidence was that at the end of the first financial year under Skotaville Press, Production House had recorded an R8-million loss.
But it should have been a lucrative business for the successful tenderer. As a sweetener, Transnet had locked its subsidiaries, including South African Airways, Portnet and Spoornet into service agreements with Production House. For three to five years they had to offer the bulk of their printing work — from tickets to brochures and no-smoking signs — to the privatised company. Judge Snyders’s large damages award to Sechaba Photoscan was based on the argument that, with this captive market and if synergies with the new owners were properly exploited, Production House should have made an annual profit of about R20-million.
Sechaba Photoscan, a joint venture between black empowerment company Sechaba Holdings and established printer Photoscan, submitted an offer of R10-million for Production House in early February 2000. All seemed to be on track for the company when at mid-month Transnet formally said it was short-listed, and when on March 3 Transnet asked for a deposit of R1-million.
But around the same time, according to separate affidavits by Sechaba Photoscan joint managing directors Mandla Mthembu and William
Petersen, they were approached by one Miles Nzama, who offered to use his influence with the ANC and Transnet to ensure their bid succeeded — but for that they had to hand over 15% of their company, for free. Who exactly the recipient of the 15% would have been was not stated.
The Mail & Guardian has established that Nzama, who is listed as a director or member of more than 20 companies, has had a long association with the ANC treasury department. A switchboard operator at the ANC’s Luthuli House headquarters this week said Nzama had left the organisation, but transferred the call to the treasury, where an official said: “You’ve just missed him.”
Nzama later told the M&G: “I have no comment at all. You can write what you like.”
Petersen’s affidavit continues: “[Nzama’s] offer was not acceptable to us and we consequently rejected it … We also understood that Skotaville Press had neither the infrastructure nor the experience or expertise to handle a company the size and scope of which they had tendered for and we were confident that the decision from the [Transnet] evaluation committee would go in our favour.”
Indeed the court papers show that in spite of Nzama’s “offer” having been turned down, Transnet preferred Sechaba Photoscan. On April 4 2000 the parastatal submitted a short-list of three, including Sechaba Photoscan and Skotaville Press, to Radebe — with Sechaba Photoscan the recommended candidate.
But a month later Gounden wrote to Transnet: “We have reviewed your submission recommending Sechaba Photoscan as the preferred bidder for Production House. We are unable to approve the recommendation as we are of the view that limited consideration was given to the bidder who have [sic] made the highest offer … We recommend that urgent discussion be held with Skotaville Press to ascertain a speedy closure of the transaction.”
True, Skotaville Press had offered R11-million for Production House; R1-million more than Sechaba Photoscan. But that was not the only factor that Transnet’s evaluation committee, which included outside advisers HSBC, had taken into account; they had looked at factors including capacity to run the company and actual ability to pay. In the recommendation to Radebe, Transnet questioned whether Skotaville Press had secure financial backing.
What made Radebe and Gounden swing the tender to Skotaville Press anyway? Gounden this week maintained their rejection of Transnet’s preference was based on Skotaville Press’s higher bid. And he denied “instructing” Transnet, saying his and the minister’s was a “recommendation”. And he denied knowing about any suggestion that the ANC had a stake in the company.
Nevertheless, there are those who believe that Skotaville Press’s relationship with the ANC was what clinched it the deal. Evidence includes:
- Skotaville Press’s tender documentation boasted of the close relationship of its then chief executive, Mothobi Mutloatse, with the ANC. Among other things he was stated to be “writing the late Oliver Thambo’s autobiography [sic] and will be publishing a book on President Thabo Mbeki”.
- Robert Rammble, a small-time printer who was Mutloatse’s partner but fell out with and left Skotaville Press some time after they had won the tender, believes the ANC relationship is what pulled them through.
In an affidavit and a letter dated 2001, he said he had known they could not compete on merits “against the likes of a company such as Sechaba Photoscan”.
Rammble alleged that the same Nzama who had been rebuffed by Sechaba Photoscan had formed a relationship with Skotaville Press; that the ANC had provided nearly R1-million of financing to Skotaville Press to help it buy Production House; and that one Tlalefang Sekano had taken up a shareholding as a nominee for the ANC. This, Rammble claimed, had “ensured” that Skotaville Press won the tender.
Sekano is a past president of the Communication Workers’ Union, and is now listed as director or member of a staggering 50-plus companies, some of them overlapping with Nzama’s directorships.
Company registration documentation shows that he formally joined Skotaville Press as a director in May 2000, a month after Radebe and Gounden’s intervention. The company share register shows Sekano that year holding 20 shares, apparently one-fifth of the total equity.
Sekano deferred inquiries, but could not be reached again. ANC treasurer general Mendi Msimang commented: “A number of people always say they do certain things in order to support the ANC. There is no documentation to show that we are in fact holding these shares.”
Later, after checking his records, he assured the M&G the ANC had not acquired shares in or financed Skotaville Press. “I am saying there is [nothing] whatsoever.”
Asked whether it was possible that a trust, with the ANC as beneficiary, had played the same role as alleged, Msimang refused to comment: “I am saying you are talking about another entity. I represent the ANC.”
- In its court papers, Sechaba Photoscan re-asserted that Sekano had held shares on behalf of the ANC. This was not challenged in court after Transnet’s entire defence collapsed at the start of the trial last October.
This came about when Sechaba Photoscan subpoenaed the minister and his director general to testify. At that point Transnet on the one hand, and Radebe and Gounden on the other, realised they had different versions — Transnet had tried to exonerate itself by pointing to Radebe and Gounden’s intervention, while Radebe and Gounden felt their intervention had no force in law — they had merely “recommended” and Transnet was responsible for the final decision. The net result was that Transnet, with the ministry’s concurrence, decided not to challenge the merits of Sechaba Photoscan’s claim, and to fight only the amount of damages to be awarded.
After Judge Snyders’s R57-million award last month, Transnet served notice of appeal, but again it will contest the amount only, not the merits. The plea will be heard on February 28.
Testimony before the court was that after Skotaville Press took over Production House it could not cope, but was greatly indulged by Transnet — allegedly in contravention of the tender specifications and the sale agreement. Among claims are that:
- Skotaville Press failed to implement a promised staff share scheme.
- Employees remained on the Transnet payroll for months.
- Skotaville Press failed to pay Transnet rent on premises that remained in Transnet hands.
- Skotaville Press sold off company assets to make ends meet.In the end, government’s privatisation objectives can hardly be said to have been met.
Transnet got no value for money after it outsourced its printing function and instead it had to help prop up the new owners; jobs were lost as the company “was run into the ground”; and empowerment was of people improperly close to the ruling party.
Transnet, Radebe and Gounden have to explain