A bitter R4-million defamation case is about to highlight some important questions about mega-contracts flowing through Gauteng’s economic development agencies.
In October 2008 Nomhle Canca — one of South Africa’s top black executives and granddaughter of ANC luminary Albert Luthuli — was suspended as chief executive of Blue IQ, the Gauteng government’s business incubator.
Allegations implicating her in fraud and mismanagement were leaked to the media, but were quietly dropped when Canca accepted a R2,6-million exit package.
Now a Mail & Guardian investigation has revealed Canca’s side of the story: that she was axed because she refused to play ball with a network of politicians and business people involved in major Gauteng government contracts.
GMSC and GSSC
Centrally, these involved the controversial Gauteng Motor Sport Company (GMSC) and the equally notorious Gauteng Shared Services Centre (GSSC) — both Gauteng government creations that answered to Paul Mashatile, then-provincial finance minister. Mashatile is now deputy arts and culture minister after a stint as Gauteng premier.
Canca has kept a low profile since her departure. But she is claiming more than R4-million in damages against Blue IQ’s chairperson, Noedine Isaacs-Mpulo, the Blue IQ board, and Sbu Xaba, former head of Gauteng’s economic development department, which also fell under Mashatile. Most of the claim flows from losing her expected appointment as Telkom chairperson because of alleged damage to her reputation caused by her suspension.
In court papers filed in the labour court and for her defamation action, Canca blames her problems on the fact that she had red-flagged contracts signed by the province and transferred to the GMSC, and conflicts of interest she raised concerning Isaacs-Mpulo.
Isaacs-Mpulo and Blue IQ are defending the defamation action. They allege Canca was suspended because of ‘financial irregularities, mismanagement [and] corporate governance failures”.
Mysterious contracts
The GMSC was set up in June 2008 as a subsidiary of Blue IQ, but Mashatile’s office drove the process. In May his head of department, Xaba, representing Gauteng, had already signed a series of contracts with local and foreign motorsport entities which Mashatile now proposed to transfer to GMSC and Blue IQ.
But Canca had serious concerns. The contracts committed Gauteng to ill-defined and uncapped spending to host the events and contravened a number of provisions of the Public Finance Management Act. They were signed without national treasury and Reserve Bank approval.
According to evidence disclosed by the Democratic Alliance’s Jack Bloom, Gauteng pledged more than R600-million to bring foreign motor-sport events — including Formula One and Superbike — to Gauteng. A three-year, R150-million contract with the A1 Grand Prix tour, in which Tokyo Sexwale has an interest, was part of the package.
Sexwale has long been considered close to Mashatile and his so-called ‘Alex mafia”, which initially backed Sexwale’s presidential bid ahead of the ANC’s December 2007 national conference.
One contract, with a mysterious entity called Nightsbridge Investments, handed all management of the events to Nightsbridge, though Gauteng would still pick up the tab — including a fat fee for Nightsbridge itself.
Conflict over motorsport
When Canca questioned the motorsport contracts, she hit resistance from Isaacs-Mpulo and Xaba, she alleges.
In her affidavit Canca states: ‘When I realised that the contracts were being negotiated … without approvals, Blue IQ engaged the services of a reputable firm of attorneys to furnish an opinion on the legal risk … once these contracts were taken over by the GMSC.”
She says attorneys Bowman Gilfillan produced a report finding that Mashatile, via Xaba, had committed serious governance breaches.
Lawyers who raised these with Xaba were told there were ‘confidential contracts and documents” that ‘removed all cause for concern” and that the legal opinion was wrong and should be withdrawn.
‘The request for sight of the confidential documents was refused. Naturally, the attorneys refused to amend their opinion without the benefit of seeing the documents referred to by Mr Xaba.”
When Canca tabled the Bowman report to Blue IQ’s audit committee on October 30 last year, ‘the members of the audit committee informed me that they were requested by the chairperson not to discuss the issue”, she notes.
Isaacs-Mpulo denies this.
The matter was referred to the main board meeting the next day, but was again deferred.
According to minutes of that meeting, Isaacs-Mpulo said she and other non-executive directors had ‘grave concerns” about certain agenda items, which she ruled ‘would not be discussed” — allegedly because of a crisis of confidence in Canca that was to be referred to the minister.
Among the items not discussed was the Bowman report and another matter raised by Canca — ‘outside interests”.
More conflict
‘It had come to my attention,” Canca said in her labour court affidavit, ‘that both Isaacs-Mpulo and [Younaid] Waja are directors of a company, Lefatshe Technologies, which is a service provider to the GSSC.”
Waja — a Blue IQ director — had declared his interest in Lefatshe. But, Canca alleges, Isaacs-Mpulo never did. She claims that Lefatshe would be bidding for work arising out of the transfer of a province-wide broadband project from Blue IQ in favour of the GSSC.
The so-called Blue Umbrella or G-Link project, worth more than R12-billion, had been spearheaded by Canca. She resisted its transfer from Blue IQ to the GSSC until Mashatile ordered her to implement it.
However, Canca claims Isaacs-Mpulo was ‘totally supportive of the transfer, which carried the potential for further service contracts being awarded to Lefatshe”.
Isaacs-Mpulo denies that any record of concerns about her outside interests was formally tabled — and she claims Canca knew of her move to Lefatshe.
She also notes that no tender process had been advertised for the G-Link project. ‘It is unclear how Ms Canca can know the intentions of Lefatshe.”
In any case, Isaacs-Mpulo argues, her business with GSSC does not conflict with her Blue IQ role.
There are also claims that Canca herself favoured certain companies.
The empire strikes back
Following the Blue IQ board meeting on October 31, events rapidly escalated.
On November 11 Isaacs-Mpulo wrote to head of department Xaba, listing complaints against Canca.
Later, Blue IQ also wrote to Bowman’s managing partner complaining that the law firm, appointed by Canca, was itself conflicted — and that the conduct of Bowman’s attorney at the meeting with Xaba ‘left much to be desired”.
On November 14 Mashatile’s successor, Mandla Nkomfe, suspended Canca.
On November 20 Canca launched an urgent bid to set aside her suspension. The Gauteng government settled with a substantial payout.
Protection racket?
Why were the Gauteng motorsport deals given such extraordinary protection? M&G investigations suggest a web of cosy relationships was being threatened by Canca’s awkward questions.
People pushing the motorsport deal — in particular via Nightsbridge — enjoyed the support of key decision-makers in the Gauteng government. Some of them, including Lefatshe representatives, had a parallel interest in the massive IT spending Gauteng was planning.
Nightsbridge
Behind Nightsbridge are businessmen Selwyn Nathan and David Hirschowitz.
Hirschowitz played the empowerment game via an early association with the Mineworkers Investment Company. Nathan is a former golf-pro turned sports marketer who hit the big time with Vodacom Sports and Entertainment, which later became part of Sail, the sports and brand management company.
He now sits on the 2010 local organising committee. He has good business and political connections, mostly golf-related, and is considered close to golf fanatic Mbhazima Shilowa.
Nathan defended the Nightsbridge contract, saying he was the go-to man for getting into the motorsport business. He had not seen the Bowman report, but its findings were irrelevant as ‘the final contracts are very different”.
‘They were renegotiated once the contracts were transferred to GMSC, as the latter would do much of the work, and that was why the contract prices were reduced.”
The telecoms lobby
But Nathan and Hirschowitz are also directors in ECI Telecom Africa, local representative of an Israeli-based multinational network-solutions company, which also had special access to Blue IQ. Nightsbridge is a shareholder in ECI.
Others with an interest include key Mashatile ally Nat Kekana, Business Connexion chief executive Benjamin Mophatlane, also a Blue IQ director until mid-August 2008, and Bridgman Sithole. All three are regarded as part of Mashatile’s ‘Alex mafia”.
It emerges that Canca was introduced to Hirschowitz just before a function to honour then-Gauteng premier Shilowa in February 2008.
Ahead of the festivities, she was pulled into a business meeting with Nathan, Shilowa, Mashatile, Hirschowitz and former Vodacom director Andrew Mthembu. Nathan had arranged the meeting directly with Shilowa. ECI — including Israeli specialists — was promoting its capabilities in relation to Blue IQ’s broadband project. It’s not clear why Mthembu attended the meeting, but he has expertise and interests in key ICT companies Gijima-AST, Siemens and Infraco, the state-owned broadband company.
In March 2008 Hirschowitz accompanied Canca and a team of officials on a trip to Israel to show off ECI’s facilities.
Mashatile told the M&G that he knew Nathan and Hirschowitz as ‘respected business people” but was ‘not aware of any meeting where someone tried to lobby Ms Canca on behalf of any private company”.
Shilowa confirmed that the meeting was ‘in relation to the need to meet various people with the capacity we were looking for to set up G-Link”.
He said Mthembu was there because of his involvement with Infraco: ‘At no stage was it ever said a deal has to be made with either of them.”
Nathan and Hirschowitz said there was no impropriety in a company demonstrating its capabilities to decision-makers, adding that no deal has yet been done.
Freebies with A1 …
But such lobbying does seem to have paid off for A1 Grand Prix — the so-called ‘world cup of motorsport”. In early April and May 2008, Sexwale hosted Gauteng decision-makers — including at one point Mashatile, Shilowa and Xaba — at racing events in Shanghai and London.
On April 14 Xaba wrote a letter to A1GP committing Gauteng to hosting the A1 at Kyalami for three years. On May 14 Xaba signed the first agreement with Nightsbridge and a short-term deal with A1, and the other motorsport contracts followed later that month.
By July Xaba was enjoying the hospitality of Kyalami, which hosted the annual Ferrari Automobile Club day, when he was given the honour of starting a race.
Said Chris Vick, spokesperson for Sexwale: ‘Gauteng government delegations did attend the UK and China events, as well as the South African leg in Durban, so that they could assess for themselves the tourism and investment potential. These visits received extensive publicity and it would be inappropriate to attach any sinister motive to them.”
This assessment clearly did not include scrutiny of A1GP’s financial situation.
The holding company reported a $240-million (R1,76-billion) loss for the initial 2005-06 season and by 2008-09 major sponsorship and advertising revenue had not materialised. Despite this, Mashatile paraded in style at the A1GP at Kyalami in February this year, arriving by helicopter and being escorted by a convoy of Safezone Security bodyguards. Safezone is a subsidiary of African Access Holdings, of which former Gauteng director general Mogopodi Mokoena became MD on March 1 2009 — after resigning from government in September 2008.
Safezone said it won the contract for the A1GP event and escorting Mashatile was a favour, because his transport was late.
Mokoena was also chairperson of the Gauteng Motor Sport Company, but he says he played no role in procurement processes for the Kyalami event. Coincidentally, Stephen Watson, the chief executive of GMSC, was general manager of A1GP until 2007.
Mashatile says the helicopter travel was part of his arrangements for the elections campaign and had nothing to do with the A1GP.
An expensive schmooze?
Under President Jacob Zuma’s administration, the new Gauteng government has cancelled the F1 plans and negotiated reduced fees for the other contracts.
Bloom estimates this has brought savings of R100-million – showing how padded the earlier deals were.
And A1GP’s management company, British-based A1 Grand Prix Operations, was placed in provisional liquidation in June 2009, raising doubts about the continued viability of the franchise.
Perhaps the real A1 money was made elsewhere.
In 2007 controversial co-founder Tony Teixeira told the Wall Street Journal his $200-million investment in A1GP was worth every penny and that he had almost broken even — thanks to A1GP’s VIP ‘Pangaea Club”.
He said: ‘The access to leaders in one room is huge to businessmen … [it has] nothing to do with motor-racing. They want to meet so-and-so from China and Indonesia.”
Or maybe Mr Mashatile from Gauteng? At the time of going to press, Xaba had failed to answer detailed questions.