A confidential dossier on the financial affairs of the ANC Youth League suggests prominent members massively enriched themselves through transactions under the banner of the league’s investment arm, the Lembede group.
The dossier, in possession of the Mail & Guardian, also reveals how deeply the league has sunk into debt.
Figures attached to a September report prepared by league treasurer Pule Mabe reflected a total of more than R14-million owed to creditors who supplied goods and services for functions, including the league’s national congress in April and its rerun in June.
A separate report prepared early this month by Lembede chief executive Lonwabo Sambudla shows how multimillion-rand deals involving Lembede companies often benefited prominent individuals within the league — which helps to explain, perhaps, the Porsche-and-patio lifestyle with which they have come to be associated.
The new board of Lembede, chaired by Mabe, tasked auditing firm Gobodo earlier this month with investigating Lembede’s financial affairs. The M&G has learned that the investigation might focus on some of these individuals.
Among those apparently implicated in the dossier is Malusi Kekana, who now heads the Umsobomvu Youth Fund established by government to promote youth entrepreneurship.
The Progressive Youth Investment Company (Pyico), a Lembede-associate company then headed by Kekana, was part of a BEE consortium that bought a 30% stake in Nedcor’s People’s Bank in 2001. But Nedcor bought the shares back from the BEE consortium in 2004/05 by assuming the debt incurred in the original transaction and paying R20-million over and above the amount.
There are large questions about the whereabouts of Pyico’s — in other words, the league’s — share of the
R20-million. Pyico held a 10th of the 30% stake, meaning it should have received R2-million. Chris Mamabolo, a former director of African Milestone — one of the companies which formed part of the BEE consortium — confirmed this week that Kekana represented Pyico and that the R20-million was shared by all the companies in the consortium.
‘We accepted the R20-million payout by Nedbank because the deal was under water. Nobody was going to make money out of it. They [Nedbank] offered us the R20-million as a consolation prize and this was shared between all the shareholders,†said Mamabolo.
But the report by Sambudla casts doubt on whether the league received its share, saying: ‘No records of this transaction exist and all endeavours by former Lembede chairperson Pumezo Mqingwana to meet with Kekana to follow up on what eventually transpired with the transaction were unsuccessful.â€
Contacted by the M&G, Kekana said he was not in a position to comment on the People’s Bank transaction but was willing to provide answers to both Gobodo and the new league leadership. Other league heavyweights who are fingered by implication include Lunga Ncwana, Songezo Mjongile and Andile Nkuhlu.
The three are shareholders of Itsuseng Investments, which holds a 50% stake in one of Lembede’s subsidiaries, Lembede Resources. The implication of their co-ownership is that whenever Lembede Resources did a transaction its shareholders also benefited in their personal capacities. Mjongile was Lembede group’s chief executive between 2000 and 2005.
Lembede Resources has clinched mineral rights worth hundreds of millions of rands. One of the newest, and perhaps the biggest deal, involves a 26% stake in the mineral rights of companies once in the stable of murdered mining magnate Brett Kebble: Randgold & Exploration, JCI and the Free State Development Corporation.
According to Sambudla’s report these rights have been valued at R195-million — but because Itsuseng owns half of Lembede Resources, the league’s share was only R97-million.
Lembede Resources obtained the mining rights in 2006 after Kebble’s death and in spite of still-unresolved issues about Itsuseng’s role in Kebble’s corporate frauds.
Randgold & Exploration this week pointed out that the mining rights were subsequently valued lower, leaving Lembede Resources with a R50-million stake — R25-million each for Lembede and Itsuseng. It also said the agreement with Lembede had been struck ‘before the cause of action against Lunga Ncwana [relating to Itsuseng and the Kebble frauds] was delineatedâ€.
Sambudla’s report says the rights were obtained after the Department of Minerals and Energy Affairs refused to convert JCI, Randgold & Exploration and the Free State Development Corporation’s rights to new-order rights as they did not have BEE partners at the time.
A Randgold & Exploration shareholder, who did not want to be named, told the M&G this week that the company felt compelled to give the rights to Lembede Resources as compensation after Nkuhlu intervened to stop the department scrapping Randgold & Exploration’s rights for lack of a BEE partner. Nkuhlu denied this.
Other lucrative deals made by Lembede Resources, which would have benefited Mjongile, Nkuhlu and Ncwana because of their co-ownership through Itsuseng, include:
Mahube Consortium: Lembede Resources held about 5% of Mahube, which acquired a majority stake in platinum miner Tameng Mining and Exploration. According to Sambudla’s report Lembede Resources’ stake was sold in 2006, with R3,8-million accruing to Lembede. A similar amount presumably accrued to Itsuseng.
Nghala Mining: Lembede Resources holds 10% of Nghala Mining, which, in turn, is a 26% shareholder in Imerys South Africa, an industrial minerals group. According to Sambudla’s report, Lembede Resources’ stake is valued at about R10-million, with an annual dividend of about R90 000. But because of Itsuseng’s co-ownership of Lembede Resources, only half accrues to Lembede.
This week Ncwana told the M&G he had resigned as a director of Itsuseng four years ago, but that he still held shares in the company. He refused to comment further, referring all questions to Nkuhlu.
Mjongile said he became involved in Itsuseng only after his contract as Lembede’s chief executive was terminated in 2006.
He said he held between 10% and 15% of Itsuseng. Mjongile said the new league leadership should not claim that Lembede never made financial contributions to the league — the former treasurer’s report reflected contributions from Lembede. ‘It is very dangerous for people to insinuate that only a few individuals benefited from Lembede. I don’t understand why people would drag my name into things that are irrelevant. If they are not clear, they must call us and we will explain to them,†said Mjongile.