/ 22 September 2006

M&G ungagged: MTN boss faces charges

Maanda Manyatshe, boss of cellphone giant MTN South Africa, has been accused of pushing through a deal worth R100‑million -- and potentially more than R2‑billion -- without a tender process while he was CEO of the Post Office. Manyatshe’s successor at the para­statal, Khutso Mampeule, has laid a criminal complaint against Manyatshe and two other former Post Office executives.

Maanda Manyatshe, boss of cellphone giant MTN South Africa, has been accused of pushing through a deal worth R100‑million — and potentially more than R2‑billion — without a tender process while he was CEO of the Post Office.

Manyatshe’s successor at the para­statal, Khutso Mampeule, has laid a criminal complaint against Manyatshe and two other former Post Office executives and the company that got the deal, Vision Design House.

The contract — to refurbish Post Office branches countrywide — was initiated in 2003 under Manyatshe’s leadership. It was finally cancelled by Mampeule in October last year, amid allegations that Post Office tender regulations had been flouted, board decisions ignored and costs to the Post Office massively and fraudulently inflated by Vision Design.

After Mampeule terminated the contract, Vision Design sued the Post Office in the Pretoria High Court for about R5‑million it claimed was still owed. The matter has since been referred to private arbitration. The arbitrator will also weigh a counter claim by the Post Office for millions in allegedly fraudulent “secret profits” made by Vision Design.

The CEO of Vision Design is Mandla Msimang. A former consultant to Vision Design claims that Msimang tried to mobilise political pressure to have the matter resolved in Vision Design’s favour.

Mampeule’s allegations are contained in a 55-page affidavit filed in the high court in response to Vision Design’s civil claim, and in a similar affidavit he made to the police commercial branch in Pretoria asking that Vision Design, Manyatshe and the two former executives be investigated.

Copies of both affidavits, made in February, are in the Mail & Guardian’s possession. Mampeule, who took over at the Post Office in June last year, said in the affidavit to the police that his board had “instructed” him to lay the criminal complaint. In neither affidavit does he accuse Man­yatshe of personally benefiting from Vision Design’s alleged fraud.

The police service last week confirmed that its commercial branch was investigating charges of fraud and corruption related to “the refurbishment of post offices”, but would not name suspects. The Post Office has also confirmed that it laid the criminal complaint.

Vision Design was paid nearly R100-million to refurbish the retail space at 68 Post Office and Post Bank branches around the country between 2003 and the contract termination last year — about R1,47‑million a branch.

Based on this figure, and had the refurbishment been rolled out to 1 500 branches as planned, the cost to the Post Office would have been more than R2-billion.

Mampeule’s affidavits allege that the appointment and payment of Vision Design were irregular and that the company had fraudulently inflated its bills to the Post Office.

He puts the “secret profits” as “at least” R8‑million, but said the figure may be much higher as Post Office investigators have been able to obtain supporting documentation relating to the refurbishment of a limited number of branches only.

The allegedly undue profits were in addition to a 12,5% commission that Vision Design charged as project manager.

The two other ex-Post Office executives implicated in Mampeule’s affidavits are Francis Matabane, former head of transformation, and Geoffrey Mabote, the former retail head.

Mabote, at the centre of the deal with Vision Design, was fired earlier this year after a disciplinary hearing into his conduct. Matabane resigned in December last year after charges were brought against him.

After leaving the Post Office, Matabane joined the country’s first new Regional Electricity Distributor, set up in Cape Town, negotiating himself a controversial R1,2‑million annual package as chief financial officer.

Matabane and Mabote have both claimed in their defence that the contract had been properly awarded by the Post Office board and that their own actions had been consistent with this.

Central to Mampeule’s allegations is the way Vision Design was chosen as project manager for the retail upgrade, dubbed the New Image project.

As required by Post Office regulations, the project was put out to formal tender in 2003, receiving 19 bids. An extraordinary series of events followed:

  • The tender process was cancelled. According to Mampeule’s high court affidavit: “When the tender process was nearing completion … the process was suddenly aborted, and shortly afterwards the extraordinary step was taken of appointing Vision Design, which had not participated in the initial process, to commence with certain New Image pilot sites.”

  • After the tender process was aborted, Mabote and Manyatshe put forward Vision Design to refurbish branches on an ad hoc basis, a deviation from tender procedures intended only for “exceptional circumstances”. From September 2003 to May 2004 about R12‑million was paid to Vision Design for projects approved by Manyatshe on an ad hoc basis.

  • Vision Design shifted its claimed BEE profile from 30% black-owned to 50% and, finally, to the required 51%. It was allowed to do this despite Post Office policy that punishes “fronting” or misrepresentation of BEE credentials.

This ad hoc process was eventually parlayed into a board-approved appointment of Vision Design as project managers for the entire upgrade project.

According to Mampeule, Mabote and Manyatshe drove the appointment. “It was readily apparent that [they] were very concerned to have Vision Design appointed for the New Image project, even if it meant misrepresenting the facts and flouting the prescribed procedures.”

Mampeule alleges that in March 2004 Manyatshe presented the board chair with a draft board resolution authorising him (Manyatshe) to roll out the retail upgrade programme using Vision Design as “project manager” without a tender process. This was rejected.

Then, on May 27 2004, Mabote prepared a document entitled Request for Approval Vision Design for the board’s consideration. This asked the board to ratify the roll-out of the retail upgrade at an average cost of R1,2‑million per outlet and to “ratify the decision taken at the last strategic workshop, that is the appointment of Vision Design House as project managers.”

Mampeule alleges Mabote misrepresented the position — although the board had informally accepted the refurbishment plan at the workshop, Vision Design had not been mentioned as the potential contractor.

The board approved the appointment, but set important conditions to protect Post Office interests: that projects should be properly motivated on a case-by-case basis to assess value for money, and that each needed to be signed off by the CEO (Manyatshe) and the chief financial officer.

In June 2004 a contract to manage the relationship was signed by Manyatshe for the Post Office and Msimang for Vision Design.

But Mampeule alleges that the board’s conditions and the contract provisions were not met. No motivations, or business cases, for individual projects were approved.

Instead of Manyatshe and the chief financial officer signing off, as they should have, the roll-out proceeded with Mabote approving quotes for individual projects on “the scantiest information”. He had no authority to do so.

Mampeule alleges Vision Design did not disclose the true prices charged by its subcontractors. Instead it represented, in invoices, that the Post Office was liable to pay prices that included a secret profit in addition to the agreed 12,5% project management fee.

A schedule of alleged cases of over-invoicing, appended to Mampeule’s high court affidavit, includes examples such as: Isipingo — contractor charged R216 749, Vision Design charged R704 576; Phillipi — contractor R555 346, Vision Design R789 814; Manyanani — contractor R414 256, Vision Design R649 553. In each case Vision Design still added its 12,5% fee to the higher figure.

As early as July 2004, according to Mampeule’s affidavits, the Post Office received complaints about the high cost and poor quality of the work done by Vision Design.

Inspections by the Post Office property division, which had been excluded from the contract, found the work to be generally substandard and completed at a cost of R10 000 a square metre, 285% higher than for earlier work handled by the property division itself.

By November 2004, when Manyatshe left the Post Office to join MTN, the Vision Design issue was already under investigation.

Vision Design’s Msimang refused detailed comment for this article.

The M&G is aware of allegations that political pressure has been brought to bear on the Post Office and others not to pursue the investigations.

Self-appointed corruption buster Bart Henderson, consultant to Vision Design during its earlier dispute with the Post Office, made a similar allegation in an open letter released last weekend.

In the letter, Henderson said he thought the Post Office had leaked details of the dispute and that this was “because [Msimang] decided he couldn’t wait for the outcome of the arbitration matter and foolishly began lobbying among his powerful ANC comrades to put pressure on [the Post Office] to settle out of court.

From the Post Office’s perspective, once the matter is out in the open then the weight of political pressure becomes more tenable.”

Henderson’s letter, released while the M&G was barred by a court order from publishing this article, argued that Manyatshe had been unfairly dragged into the fight between the Post Office and Vision Design.

What the players said

Maanda Manyatshe: Ex-Post Office CEO

Shortly before the M&G’s deadline this week, Manyatshe issued a media statement in which a detailed response to the allegations against him was offered for the first time. Manyatshe insisted he had done no wrong. Manyatshe’s full statement

Francis Matabane: Former Post Office executive

Matabane said the contract had been duly and correctly awarded by the board and he had merely signed off on payments. He said the Vision Design House contract was one of a number of “major interventions” to turn around the fortunes of the Post Office. The effectiveness of this strategy was apparent in the dramatically changed financial results.

Mandla Msimang: Vision Design House CEO

Msimang expressed surprise and shock at the allegations. He said he regarded the matter as sub judice and did not want to respond pending the finalisation of the legal processes.

Geoff Mabote: Former Post Office executive

Mabote said: “I don’t believe I did anything wrong. I delivered on the mandate that was approved by the board. I believe there is a police investigation, so I wouldn’t want to compromise myself [by going into details], but I am open to scrutiny.”

He said the Post Office has sophisticated checks and balances and he had operated according to an approved process. I managed process as per a detailed contract that was in place. I did my job to make sure there was delivery and performance. I have nothing to hide.”


An MTN spokesperson said that, as this was a private matter, the company could not comment.

Post Office

Spokesperson Twiggs Xiphu said: “Since prima facie evidence came to the fore that a number of people benefited from serious irregularities pertaining to certain suspect/onerous contracts, certain contracts were cancelled during 2005. The cancellation of these contracts as well as the company’s publicly declared objective to uproot fraud and corruption, have resulted in a number of executives either being dismissed or leaving the Company.

“Since the conduct of some of these former executives constitutes a breach of their fiduciary duties and an act of financial misconduct [which is a criminal offence in terms of the PFMA], the Company handed the matter to the South African Police Service in February 2006.”