/ 1 August 2007

SABC report: What you couldn’t read

Two weeks ago, the Mail & Guardian newspaper was interdicted in the early hours of Friday July 20 by the head of the South African Broadcasting Corporation’s (SABC) legal services, Mafika Sihlali, from publishing a story on an explosive draft internal SABC audit report.

The report, which is in the possession of the M&G, alleges corruption, abuse of power and intimidation at the SABC.

Even though other newspapers, including the Sunday Times and Business Day, had since carried reports on the matter and named Sihlali, the M&G could not report on it as the interdict was still standing. A threatened interdict against the Sunday Times on July 22 never materialised.

On Wednesday, the interdict order against the M&G was dismissed with costs in the Pretoria High Court by Judge Ferdi Preller.

Among the factors that persuaded him to dismiss the order was the fact that the SABC audit report relates to how taxpayers’ money was invested, Preller said. As the public have a right to know, newspapers have a duty to disseminate news relating to allegations of corruption in public entities.

We can now publish the full original report below, as it was meant to appear in the M&G of July 20. Instead, copies of the newspaper on that day had most of the paragraphs blacked out.


Vicki Robinson and Lloyd Gedye

The head of the SABC’s legal services, Mafika Sihlali, has defrauded the public broadcaster of up to R2-million and is linked to CEO Dali Mpofu through nine dual company directorships, alleges an explosive internal audit report leaked to the Mail & Guardian.

Despite legal opinion which accompanies the audit report recommending that the SABC suspend and lay criminal charges against Sihlali, he is still at work. Said SABC spokesperson Kaizer Kganyago: ”He is working as we speak, and we do not discuss internal disciplinary issues with the media.”

Sihlali has been employed by the SABC for less than a year.

On February 14 this year, Mpofu ordered the SABC’s head of internal audit, Elsje Oosthuizen, to perform a preliminary investigation into allegations against Sihlali by the Broadcasting, Electronic, Media and Allied Workers’ Union.

A month later, the internal audit committee appointed Nexus Forensic Services to assist in the investigation after it had received an updated and anonymous ”tip-off report” containing similar allegations to those made by the union.

During the investigation, Oosthuizen’s house was mysteriously set alight.

The 249-page report was completed on July 3 this year and handed to the SABC board. The investigation found ”prima facie” evidence that Sihlali had defrauded the SABC of R1,8-million.

However, this figure may be much higher as the investigation team ”only investigated a fraction of the [questionable] invoices”, the report says.

During the investigation, the team found Sihlali had failed to declare 28 business interests to the SABC when it employed him in August last year. Mpofu shares directorships with him in nine of these companies, which are active in financial services, advisory services and mining.

In addition, SABC chairperson Eddie Funde and Pearl Luthuli, the head of SABC 3, share a directorship with him in Onetel, a publicly listed telecommunications company.

These apparent conflicts of interest exceeded the scope of the investigating team, which only listed the relevant companies, noting: ”This document tells some interesting stories.”

Mpofu did not put Sihlali on special leave during the investigation, despite a recommendation to this effect by the internal audit committee. The audit report says this resulted in Sihlali intimidating potential witnesses during the inquiry.

One SABC employee ”informed Group Internal Audit that on 8 March 2007, Mr Sihlali physically threatened her during an undisclosed meeting”, the report says. ”Various witnesses informed us that they are scared of the consequences of providing us with an affidavit against Mr Sihlali, particularly because he is still at the SABC.”

Spokesperson Kganyago would not comment on the shared business interests of Mpofu and Sihlali or on whether they constituted a conflict of interest.

Among other findings, the report says Sihlali inflated invoices, charged double VAT, claimed double payment for work, irregularly outsourced work to law firms that were his ”friends” (he stopped using the SABC’s law firm Deneys Reitz) and either double-charged for their work or claimed the payment for himself. It also says he misused a company vehicle and abused the SABC’s approval procedure for air travel.

Sihlali’s alleged fraud appears to have started about three weeks after he joined the SABC on August 1 last year. The investigating team found that his previous law firm, Sihlali Molefe Inc, submitted 25 invoices to the SABC on August 22, but manipulated most of them by deleting vital information so that the public broadcaster ultimately paid R371 503 more than was legally due.

”The highly inflated amounts appear not only to be, at the very least, arbitrary and exorbitant, but also without justification and warranting a criminal investigation,” the report noted. ”The deletion of the time spent and hourly rate was obviously aimed at diminishing control and supervision over the accounts and more importantly, the amounts charged.”

In three other instances, Sihlali’s previous law firm, Sihlali Molefe, is said to have double-invoiced the SABC, causing a total loss to the broadcaster of more than R92 000.

Another law firm also charged excessive fees and duplicated invoices, according to the report.

It says that after Sihlali’s appointment at the SABC, this law firm ”received a huge volume of work” amounting to R6,1-million, translating into an average of R767 000 a month.

The work was mainly performed by a young lawyer who was previously employed by Sihlali Molefe.

The report noted bills totalling R6-million between August 2006 and April 2007 from this law firm. ”Of this amount R2-million represent time billed for [the young lawyer]. During this period there were 173 working days. If [she] worked every day exclusively on SABC matters, this equates to 11,86 billable hours per day for 173 consecutive days.”

The investigators found Sihlali also seemed to have abused an SABC pool vehicle. According to the company policy on car allowances, top and senior managers are not allowed to use SABC pool vehicles unless their vehicles are undergoing repairs. The report says that on December 19 last year Sihlali collected a Mercedes Benz from the rental pool claiming his car had been involved in an accident. To date he had not returned it.

”It is difficult to understand how a vehicle can be under repair from 18 December 2006 to date,” said the report. ”If Mr Sihlali’s vehicle was in fact not in for repairs (the details of which can only be provided by him) the SABC would have suffered a loss of R129 073 based on a misrepresentation.”

The report says that Sihlali also outsourced legal work for the SABC that was supposed to be conducted by Sihlali Molefe to another law firm, Mabuza Attorneys. He is then alleged to have claimed the fee of about R100 000 from the SABC as though he had conducted the work himself.

Mabuza Attorneys confirmed to the investigators that it had received no payment for its work from Sihlali Molefe. According to the Law Society of the Northern Province, law firms can only subcontract work by agreement with the client, in this case the SABC.

Eric Mabuza of Mabuza Attorneys said: ”We dispute that there has been any impropriety between Mabuza Attorneys and Sihlali Molefe either when Sihlali was with Sihlali Molefe or with the SABC.”

The report recommends that criminal charges be laid against Sihlali, Sihlali Molefe Inc and two other law firms.

Kganyago declined to comment on whether charges had been laid against any of the named individuals or companies.

Spotlight on Sihlali’s backdated contract

Among the financial irregularities exposed by the SABC’s internal audit report is one that involves an amount legal services head Mafika Sihlali invoiced the SABC for seconding one of his employees to the public broadcaster, writes Lloyd Gedye.

The report accuses Sihlali of backdating a secondment agreement and of violating SABC policy by providing services to the SABC through his company, Sihlali Molefe Incorporated, despite the fact that he was in full-time employment at the SABC.

The report states: ”Mr Sihlali was the only director of Sihlali Molefe at this time. This amounts to a conflict of interest as Sihlali was the beneficiary of the payments made by the SABC, while he was employed as the Head of Legal [Services] to whom the services were rendered. In terms of Mr Sihlali’s contract of employment he is not allowed to have any other business interests.”

Despite numerous requests, Sihlali failed to declare his business interests to the SABC, the report says.

During February 2006 the SABC undertook to procure the assistance of law firms to assist with increased work flow in the legal and business advisory services.

Rirhandzu Mayiji of Sihlali Molefe and Itani Ravele of Jeftha Twala were selected and were appointed on secondment. Alan Jeftha of Jeftha Twala Attorneys agreed to oversee all the work conducted by Ravele before it was submitted.

Jeftha Twala Attorneys were paid R55 000 a month for the secondment of Ravele, while Sihlali Molefe was paid R90 000 per month for the secondment of Mayiji.

The internal audit report questions the amount paid to Sihlali Molefe when Jeftha Twala Attorneys had more experience of secondments to the SABC.

Mayiji informed the SABC internal audit team on June 7 2007 that she received a gross salary of R17 200 per month from Sihlali Molefe during her secondment to the SABC. This means that Sihlali Molefe made a profit of R72 800 per month.

Between April 20 2006 and October 30 2006, Sihlali Molefe submitted seven invoices to the SABC. These amounted to R864 660 and were all paid in full.

The last three of these invoices were submitted to the SABC after Mafika Sihlali was appointed as the SABC’s head of legal and business advisory services on August 1 2006.

The audit report says this amounts to a conflict of interest because Sihlali was the sole director of Sihlali Molefe at the time.

The internal audit report also states that on June 18 2007 the Northern Province Law Society advised the audit team that Sihlali Molefe was deregistered and therefore stopped trading on July 31 2006.

”As Sihlali Molefe has been deregistered at the Law Society on 31 July 2006, the business could not have rendered any services. The SABC paid R337 440 for services rendered by a deregistered law practice,” says the internal audit report.

It says that although the secondment agreement states that Sihlali, Mayiji and Christopher David signed it on March 15 2006, Mayiji told the audit team on June 7 2007 that she had only signed a secondment agreement after the initial three-month secondment period was complete, some time in late July.

”At face value it appears as if the agreement was only drafted on June 14 2006, the date on which the agreement expired and therefore the agreement could not have been signed on March 15 2006 by Mr Sihlali, Mr David and Ms Mayiji,” says the report.

Despite claims by Sihlali and David that the secondment agreement was extended for a further six months by means of an addendum to the initial contract, the audit team was not able to locate it. Mayiji informed the audit team that she had not, in fact, signed an addendum.