Public service investigators this week grilled the official in charge of the government body that regulates the electricity supply industry in South Africa over allegations of corruption, mismanagement and nepotism.
Xolani Mkhwanazi, CEO of the state’s National Electricity Regulator (NER), was crossed-examined on Monday by a five-member team of investigators appointed by the Department of Minerals and Energy.
The NER is a statutory body established to license all electricity suppliers and to regulate electricity prices. It reports to Minister of Minerals and Energy Phumzile Mlambo-Ngcuka.
Mlambo-Ngcuka’s Director General, Sandile Nogxina, ordered the probe into the NER after she received anonymous documents accusing Mkhwanazi of corruption. Mkhwanazi was one of the first black nuclear physicists in South Africa.
The documents alleges that Mkhwanazi used the parastatal’s Diners Club credit card to entertain members of his family, appointed his friends to senior positions, gave his friends irregular salary increases, used consultants to spy on employees, and spent tens of thousands of rands on furniture for his and the chairperson’s office.
It also alleges that he caused the NER to lose millions of rands on a building he bought for the agency in Pretoria, that he failed to follow the government’s procurement policies when acquiring the building, that he made irregular loans to NER employees and that he undertook a private trip to Brazil at the NER’s expense.
The document alleges Mkhwanazi “organises his own salary increase and annual incentive bonus, with the complicity of the chairman of the board”. Last year Mkhwanazi got a performance bonus of 23% of his total package, and an increase of 8,5% to compensate for inflation, which boosted his salary to R900 000.
Mkhwanazi this week denied any wrongdoings. He gave the Mail&Guardian a “confidential letter” he wrote on December 5 to NER chairman Collin Matjila in response to the allegations.
In his letter Mkhwanazi said he did not believe in responding to anonymous documents, but that he had chosen to do so in the interest of transparency and accountability.
He said he had received other anonymous letters accusing him of corruption. In the past the NER’s board had appointed forensic auditors to probe allegations of corruption against him and other senior managers — Snowy Khoza, the NER’s former general manager in charge of research and development; Wolsely Barnard, the executive manager regulation; and Kevin Morgan, the general counsel.
“The audit completely exonerated all of us,” Mkhwanazi wrote.
The anonymous allegations claim Mkhwanazi and the board had “whitewashed themselves” in the first probe and that Mlambo-Ngcuka had erred by allowing the “board to investigate themselves”, instead of taking “immediate decisive action”.
However, Mkhwanazi insists that individuals opposed to his restructuring plans have orchestrated the allegations against him.
He denies appointing friends to the NER and says the board had approved his salary increase, performance bonus and the R70 000 he spent on furniture.
He denied giving irregular loans, saying he only gave salary advances in accordance with the corporate governance handbook.
“I believe that the timing of the letter is clearly aimed at derailing the restructuring process currently under way at the NER. The board should not be intimidated by such tactics. I am convinced that the author of the letter is on a private vendetta and does not speak on behalf of all, or indeed any other staff.”
On the alleged misuse of the company credit card, Mkhwanazi said: “In 1999 the NER board approved that the CEO carries a corporate Diners Club card for entertainment and paying for accommodation and such expenses when travelling. The usage of this card is subject to normal NER corporate governance systems checks, including bi-monthly scrutiny by internal auditors and reporting to the finance committee chaired by a board member.”
Speaking to the M&G this week, Mkhwanazi denied that he had used the card for personal purposes. “I have used the credit card to entertain NER clients, buy presents for NER staff members and stakeholders.”
Information in the possession of the M&G, however, shows that Mkhwanazi may struggle to explain away some of the purchases.
A credit card statement for the past nine months shows that Mkhwanazi used the card to buy items from bookshops and florists. He also used it to buy goods at a retail shop, to dine at expensive restaurants and for stays at hotels. He used the card on overseas trips that had been sponsored by outside organisations.
Mkhwanazi spent between R400 and R3 000 on visits to his favourite restaurants. He spent between R200 and R1000 each month at a florist and used the card to pay for hotel accommodation in Pretoria, where he lives.
In response, he said he often used the card to pay hotel accommodation in Pretoria for NER guests.
Last March his credit card expenses cost the NER about R80 000, in May about R26 000. More than R120 000 was spent within nine months last year. Mkhwanazi spent between R8 000 and R80 000 every month on the credit card. Some of the expenses were incurred while on sponsored trips, such as a trip to Norway last September.
Though the trip was sponsored by the Norad donor, his credit card expenses amounted to more than R10 000 while abroad, including about R6 800 at the Huset Lofo restaurant.
Mkhwanazi said the amount he spent in Norway was recovered from Norad and that his credit-card expenses were budgeted in the NER’s business plan.
He denies that the building he bought in Pretoria will cause the NER a loss of R5-million and says it will be a good investment in the long run.
Mkhwanazi spent R7-million to buy the building and used a further R6-million to refurbish it. The building was valued at R4-million before refurbishment and at R8-million after the renovations.
Mkhwanazi said the valuator had placed a low value on rentals in the area, which had devalued the building. He said the building was worth “somewhere between the replacement cost, which has been estimated to be R35-million, and zero — depending on the purpose of the valuation”.