SABC man accused of milking Post Office

South African Broadcasting Corporation (SABC) legal services head Mafika Sihlali stands accused of milking the South African Post Office of millions of rands in fees that were not earned.

Sihlali’s former legal practice charged more than R6-million to restructure the parastatal — an exercise that came to naught, according to a draft forensic report obtained by the Mail & Guardian.

The report says the expenditure appeared ‘fruitless and wasteful”, violating the Public Finance Management Act. It states:

• Sihlali was paid two retainer packages a year apart for the same job, one worth R4,6-million and the other R2-million.

• The payment arrangement appeared ‘highly irregular”.

• Most invoices, requisitions and purchase orders relating to the R4,6-million package were missing.

Sihlali has been a controversial figure since his appointment last August as head of legal and business advisory services at the SABC.

Only six weeks into the job, he led an unsuccessful attempt to interdict M&G Online from publishing the SABC ‘blacklisting” report. He also drove last week’s abandoned attempt to stop the M&G screening the documentary Unauthorised: Thabo Mbeki at its Critical Thinking Forum.

Sihlali’s pre-existing business relationship with his fellow lawyer and boss, SABC CEO Dali Mpofu, has also raised eyebrows.

The draft forensic report details how Sihlali’s former private practice, Sihlali Molefe Incorporated, charged the Post Office more than R12-million between 2003 and 2005 while apparently delivering little value.

Topping the list were nine ‘retainer” payments in 2003 totalling R4,6-million to assist in corporate restructuring. A year later Sihlali’s firm received another six ‘retainer” payments totalling more than R2-million, again to do the same job. The Post Office was never restructured as intended.

Campaign cut short

The draft report was prepared for the Post Office last year as part of a controversial clean-up campaign under the leadership of then CEO Khutso Mampeule. It appears to have gathered dust since Mampeule was dismissed in the wake of a vehement counter-campaign by his predecessor and first target, Maanda Manyatshe.

The Post Office fired Mampeule after an investigation commissioned by Communications Minister Ivy Matsepe-Casaburri found, among other things, that he should have informed the Post Office board about a decision to lay criminal charges against Manyatshe.

Mampeule has said he will challenge his dismissal in court.

Mampeule’s charges against Manyatshe related to allegations of impropriety in a R100-million contract for the revamping of Post Office branches, first revealed by the M&G. Manyatshe, who was ousted as CEO of MTN South Africa in the ensuing scandal, last week filed an unprecedented R270-million damages claim against the Post Office.

The draft report in possession of the M&G points a finger at Manyatshe, who approved both retainer agreements with Sihlali Molefe Incorporated. It says: ‘While a number of additional documents are required in order to complete the picture, it would seem apparent at this stage that [Sihlali Molefe] has been paid some R6,69-million in respect of [the Post Office] restructuring process which has not yet occurred.

‘The amount was paid by way of a series of 15 retainer payments as provided for in two different retainer agreements, approximately one year apart, each of which appears to cover essentially the same services. This appears to have taken place with the knowledge and support of a number of senior [Post Office] executives, including the former CEO, Mr Manyatshe.”

The expenditure, the report says, was ‘on the face of it — irregular, fruitless and wasteful” — a breach of the Public Finance Management Act.

First agreement

Sihlali’s formal history with the Post Office appears to have started in January 2003, when Manyatshe signed a nine-month ‘retainer” agreement with Sihlali Molefe. The agreed fee was R450 000 a month — R4,6-million over the period, including VAT.

Under the agreement, Sihlali Molefe was to have advised on and prepared the necessary documentation to restructure the Post Office into a holding company, with operating divisions transferred to a number of subsidiary companies to be formed.

The report charges that the retainer arrangement appeared ‘highly irregular” considering the scope of the work. ‘Normally one would have expected that for the work done … a straight hourly rate would have been charged.”

In February 2003 — the month after the agreement was clinched — the Post Office board approved the restructuring, resolving that it ‘must be pursued vigorously”.

While the report lists some correspondence between Post Office officials and Sihlali Molefe regarding documentation prepared towards this end, it also says: ‘We were unable to find any evidence of any work undertaken by [Sihlali Molefe] pursuant to the first agreement.”

Invoices, requisitions and purchase orders relating to the R4,6-million were also largely ‘missing from the boxes — in which they are recorded as having been placed”.

The M&G has found three companies registered during July 2003 with names suggesting they were intended Post Office subsidiaries, but which appear to be dormant. The main divisions of the Post Office remain just that — divisions.

Second agreement

In September 2004 Manyatshe and Sihlali Molefe entered a second ‘retainer” agreement, this time for a period of six months at a monthly fee of R300 000. The total for the period, VAT included, was R2,05-million.

In January 2005 Sihlali Molefe sent the Post Office a number of documents relevant to the restructuring, including draft board resolutions and a memorandum of incorporation.

These, the report notes, were ‘standard form documents which can be obtained from a book such as Butterworths Forms and Precedents”.

In March that year the Post Office instructed Sihlali Molefe to ‘focus exclusively on the corporatisation of Postbank and discontinue work on the other parts of the original assignment.”

The report alleges: ‘The services for which [Sihlali Molefe] was engaged remained substantially outstanding.”

Postbank remains a division, and not a subsidiary, of the Post Office.

The report recorded further large disbursements to Sihlali Molefe, including 10 amounts of R399 000 each for due diligence reports during the period May 2003 to January 2004 — almost R4-million in total.

The report says a view could not be expressed on the due diligence studies in the absence of further documentation, but ‘the fees charged seem prima facie to be exceptionally high”. Again, supporting documents appeared to have ‘gone missing”.

How they responded

Lawyer Barry Aaron said on behalf of Mafika Sihlali: ‘The allegations are sweeping and unsubstantiated. Although this particular report, which my client has not seen, is incomplete, the allegations themselves have been tested in a three-month-long disciplinary procedure conducted by the Post Office against its senior legal adviser. The arbitrator, appointed by the Post Office, found the senior legal adviser not guilty of these charges.

‘The allegations are denied by my client, who feels that they are part of the sustained attack against him by those within the SABC opposed to what he is trying to accomplish.”

Bart Henderson said on Maanda Manyatshe’s behalf: ‘As you are — aware summons was issued in the High Court of Pretoria on Friday 20 July 2007 against [the post office] for damages suffered by Maanda Manyatshe.

‘We can only conclude that the leaking of an incomplete, unsubstantiated report to your paper was done to subvert this process in an act of malice of forethought and intent.

‘Suffice it to say the matter you address was raised by Khutso Mampeule and investigated under his authority and no action was taken in this regard and no charges were successful, to our knowledge.

‘We can only conclude that this information has been leaked to further the agenda of the post office and Mampeule. We find it incredulous [sic] that after almost a year of heightened media attention this matter should only be raised now —

‘Your constant reliance on the scope and purpose of Mr Mampeule’s agenda in the matter of Maanda Manyatshe is treading a fine line between journalism and persecution.”