Gauteng minister of finance Paul Mashatile has declared — but now disowns — what amounts to a cool R50-million stake in a top IT company.
If Mashatile’s shareholding were confirmed, he would be saddled with a serious conflict of interests: The company, Business Connexion, has contracts with a government agency, the Gauteng Shared Service Centre (GSSC), which answers to Mashatile.
Even on Mashatile’s own version serious conflict-of-interest questions remain. He claimed this week he was offered the shares before his current ministerial term started in May 2004 and that he kept the option open until at least last year; but that he did not take it up. It was during this time that he famously ousted the then-GSSC head and removed the GSSC’s software services supplier, arguably clearing the way for new entrants such as Business Connexion.
The Gauteng legislature register of members’ interests shows that Mashatile declared a 15% shareholding in Gadlex Holdings in September 2004. In March this year he declared the 15% interest again, although he mistakenly called it “Gadlex Investments”.
Gadlex Holdings owns 97% of Gadlex, which is the 25% black economic empowerment partner in Business Connexion. The other 75% is held by the listed Business Connexion Group, which is in the process of being bought by Telkom. The Telkom offer has valued Business Connexion Group at more than R2,4-billion.
Allowing for assets that belong to the listed entity exclusively, the Telkom offer would value Gadlex Holdings’s stake in Business Connexion at about R550-million. If Mashatile has a 15% stake as he declared, it would be valued at about R82,5-million. Minus debt incurred by Gadlex in the course of its share acquisitions, Mashatile could be worth in the region of R50-million.
Gadlex Holdings’ four directors and known principals are IT entrepreneurs Benjamin and Isaac Mophatlane, former parliamentary communications portfolio committee chair Nkenke Kekana, and Bridgman Sithole, a former administration and finance coordinator in the African National Congress elections department.
Kekana this week described Mashatile as his “best friend”. Sithole is said also to be very close to Mashatile.
Apart from Gadlex, there are, on paper at least, more ties that bind the men together. Mashatile declared interests in two further companies, Mowana Investments (10%) and Dibata Bata Investments (25%).
Mowana, whose directors include the Mophatlane brothers, Kekana and Sithole, has investments in, among others, a financial advisory company, a construction company, a company that provides services to government utilities and a media monitoring company. Mowana has also been rumoured to be at the head of a group of BEE entities that are interested in an R8-billion to R10-billion stake in Vodacom.
But like Gadlex, Mashatile this week disowned the stake he had declared in Mowana, saying he had decided not to take up the share offer.
Mashatile does not disown his stake in Dibata Bata. He said it was intended as an investment vehicle in property and mining, for example, but that “as far as I am aware” it had made no investments yet. Kekana, who is listed as a director in Dibata Bata alongside Mashatile and Sithole, later said the company had performed “no activity whatsoever” yet.
Interestingly a fourth director of Dibata Bata is Mike Maile, Mashatile’s appointee as the new head of the GSSC. This means that Maile is a business partner of Sithole and Kekana, who are both directors and shareholders in the Business Connexion companies — which in turn have contracts with the GSSC. Mashatile this week said he did not think this constituted a conflict of interest, but that Maile was overseas and should respond on his return.
When Mashatile was appointed provincial minister of finance in May 2004, from his previous portfolio of housing, he opened one of the biggest cans of worms yet in relatively scandal-free Gauteng. Mashatile took issue with GSSC head Mike Roussos’s 50% stake in Capstone 518, a company that had received R52-million-worth of business from the GSSC as sole IT application software services provider.
Mashatile instituted two outside probes, both of which found Roussos’s interest constituted a serious conflict of involvement. Roussos defended himself, saying his interest had been declared and agreed by the provincial government as a means to compensate him. The matter put Mashatile’s predecessor, Jabu Moleketi, under whom the deal had been initiated and who had then just been elevated to national deputy minister of finance, under serious pressure.
Mashatile terminated Capstone’s contract with the GSSC, and effectively fired Roussos in August 2004.
During 2004, the GSSC put out at least two new IT tenders, which were awarded in June 2005 to Business Connexion, individually or as part of a consortium, according to the government tender bulletin. These contracts, still current, were for “supply of enterprise file servers and storage solutions” and “enterprise architecture and infrastructure planning solution”.
It could not immediately be established what these contracts are worth, or to what extent they overlap, if at all, with the Capstone contracts. But the GSSC spends very heavily on IT, which means it is fertile territory for companies such as Business Connexion.
Last week Mashatile presented the GSSC budget in the Gauteng Legislature. It was allocated R751-million, which includes items such as procurement services (R86-million), finance services (R59-million), technology support services (R333-million), and corporate services (R103-million), which are all heavily IT-dependent.
Whether Mashatile was correct in moving against Roussos and Capstone, and whether Mashatile was by then actually a shareholder in Business Connexion, questions remain whether his relationship with Gadlex/Business Connexion — which he does not deny — gave him an ulterior motive.
Mashatile first declared his interest in Gadlex Holdings in September 2005, the month after he had fired Roussos. When the Mail & Guardian first contacted him on Wednesday this week, he did not deny an interest in Gadlex, saying instead that he had been declaring it “for years”. He asked for written questions.
On Thursday, however, he answered in writing that he was “invited to participate in the company soon after it was established. I accepted the offer to participate and declared these interests accordingly in the register of members’ interest.
“In 2004, once I was appointed to my current portfolio, I decided not to continue to acquire my shares, as offered. I am, therefore, currently not a shareholder … in Gadlex. I have however kept the records as they are in my declaration of interests.”
In subsequent verbal comments, Mashatile described what appears to be, effectively, an arrangement where share options remained open to him even though he did not physically acquire the shares. He said he had considered joining Gadlex full time at the expiry of his term as housing minister in early 2004.
When he was, however, made MEC for finance, he said, he decided not to take up the shares, but neither did he unequivocally renounce the offer, so he declared them in the register of members’ interests. “From my side, it was in my interest not to have them [effectively share options] lapse.”
By last year, Mashatile’s “options” had still not lapsed. The Gadlex principals, he said, then told him that if he did not take up the shares, “we won’t keep them for long”.
Mashatile said he declared the shares — in his version, “options” — again this year, although he “should not have declared again”. In 2004 he declared them because “At the time the offer was still open. I declared so that as I continued talking to the guys, I did not want it not to be transparent.”
‘It’s not really moonlighting’
Gauteng provincial minister of health Brian Hlongwa has listed no fewer than 17 business interests in his declaration to the members’ register, reports Rapule Tabane.
Hlongwa joined the Gauteng government in March after the local elections. He came from the Johannesburg City Council where he was member of the mayoral committee responsible for municipal services.
Premier Mbhazima Shilowa roped him in to replace Gwen Ramokgopa, who was moved by the African National Congress to Tshwane as mayor.
Hlongwa’s declaration raises questions about how much time he can dedicate to his full-time government job.
Section 136 (2) of the Constitution specifies that members of the executive council of any province may not undertake any other paid work. It also says they should not act in any way that is inconsistent with their office or expose themselves to a conflict between their official responsibilities and private interests.
Reacting, Colm Allan, director of the Public Service Accountability Monitor at Rhodes University, said it was objectionable for ministers to have private company interests.
“In principle, politicians, particularly members of the executive, should not hold interests in any companies. They should be putting all of their time at the disposal of the state. They are there to serve the public, not their private interests.
“The problems South Africa faces are so serious that they require the undivided attention and absolute commitment of all our political leaders.”
But Hlongwa said most the companies he declared were shelf companies that were not actively trading.
“One is a family trust, another is a holding company for these interests, yet another a Section 21 company. Clearly I could not do any work as a politician if the companies were active.”
The Mail & Guardian pointed out to Hlongwa that he was a director of Southern Electricity Company (SEC), whose core work is to operate municipal electricity and service networks — despite his having been a senior Johannesburg municipal official until March this year.
SEC was active in other African countries such as Namibia and Nigeria, but not yet in South Africa.
The South African leg of the company was formed because future opportunities were likely to arise in the power industry.