Vodacom storm in a BEE cup

A failed bid to become Vodacom’s multibillion-rand black economic empowerment partner underlies the “nepotism” storm that has erupted over the head of former Vodacom chief executive Alan Knott-Craig.

The Mail & Guardian has obtained court documents showing that a contentious KPMG forensic report—the source of the allegations against Knott-Craig and his family—has been resurrected by axed Vodacom manager Mandla Mdluli in his Johannesburg Labour Court challenge to his dismissal.

Mdluli, at the time a financial manager at the company, was part of the Tiger Consortium that lost out on Vodacom’s R7,5-billion empowerment deal in May 2008. The cellphone giant eventually chose Thebe Investments and the Royal Bafokeng as its empowerment partners.

Two insiders who saw the KPMG report told the M&G this week that no findings of corruption or wrongdoing had been made against Knott-Craig, but questions of “poor judgment” had been raised, on the grounds that he had involved his family in the business.

The M&G has in its possession a memorandum detailing allegations against Knott-Craig, sent by Mdluli to Vodacom’s shareholders—Reuben September at Telkom and Gavin Darby at Vodafone—on August 18 2008. This was six weeks before Knott-Craig stepped down as chief executive.

Based on Mdluli’s allegations and those of other whistleblowers in the company, the shareholders requested that KPMG conduct an investigation, which resulted in the report.

Mdluli was dismissed from Vodacom on June 27 2008, less than two months before he sent the memorandum to Vodacom’s shareholders.

Vodacom spokesperson Richard Boorman told the M&G this week that Mdluli was dismissed for “lying under oath and bringing the company into disrepute”.
It is not yet clear how the KPMG report is relevant to Mdluli’s case.

Mdluli, who said this week he was advised by his lawyers not to speak to the media, was one of the key members of the Tiger Consortium. He told the M&G his allegations against Knott-Craig had nothing to do with the BEE deal and denied being part of the consortium.

When the consortium was not selected as a BEE partner for the deal, it lodged an interdict application to prevent the deal from taking place.

Mdluli was key to this move, drafting the founding affidavit while still a senior manager at Vodacom.

In his Labour Court founding affidavit Mdluli alleges that he was dismissed for exercising his constitutional right to take legal action against Vodacom over the BEE deal dispute.

But Vodacom argues that the relationship between employer and employee had irretrievably broken down and alleges that Mdluli lied in the affidavit.

Knott-Craig, without naming Mdluli, has said that the allegations against him originated with disgruntled Vodacom employees.

But the two insiders who have seen the KPMG report said the level of involvement of Knott-Craig’s family in the business of Vodacom was a cause for concern, even if the former Vodacom chief executive had done nothing illegal.

One insider said the Knott-Craig family’s involvement was “problematic” and the KPMG report did not make “palatable reading”.

“Alan declared these things but people say that, even with a declaration, it is still poor judgment to have your family involved to this extent.

“Because your family is involved, it opens you up to mischief,” said the insider, obviously referring to Mdluli’s allegations. “There is no question in my mind that this is vindictive.”

Another insider who has seen the KPMG report told the M&G that the document “was not at all as serious as it’s now being made out to be”.

“There were some issues where they had questions about decisions taken that benefited his family, but nothing concrete was provided by the complainants. The report made it clear that Knott-Craig distanced himself from meetings where ­matters affecting his family were discussed. If there was something wrong with these issues, the whole Vodacom board should explain why they did not complain at the time.”

According to the second source, the complaints again Knott-Craig were “half-baked, loose pieces of information that were stitched together to present something that looked dodgy”.

KPMG allegedly recommended that Vodacom’s legal advisers read the report to decide whether further investigation or evidence was necessary. In late 2009 the board considered the report and decided to take no action against Knott-Craig.

However, Vodacom’s critics have argued that the KPMG report should be released to the public if it clears Knott-Craig.

But Boorman said the mobile giant did not have the report and it was up to Vodacom’s shareholders to release the report.

Telkom, now a former shareholder, referred queries back to ­Vodacom and Vodafone stated that it did not believe it was required to release the report: “This is a private document which contains sensitive information concerning a number of individuals and commercial agreements,” said Bobby Leach, Vodafone’s communications director.

“We do not believe it would be appropriate to publish it.

“The document was independently commissioned to identify whether there was any basis to the allegations which had been made and since no action against any individual was recommended, we see no requirement to release the report.”

Knott-Craig has denied any wrongdoing, saying: “I am fully satisfied that I have done no wrong and have acted properly at all times.

“I received a letter from the Vodacom Group chairman on December3 2008, which, inter alia, said and I quote: ‘The shareholders felt it necessary as a matter of good governance to engage in a publicly defendable independent process to investigate the allegations — and [after considering the report] the [Vodacom Group] board has decided to close the matter.’”

Boorman said that all 18 allegations against Vodacom employees were examined closely and two were deemed worthy of a more detailed review.

“Both of these were reviewed to the satisfaction of Vodacom’s shareholders and in neither case was it deemed necessary to take any action against individuals.”

Lloyd Gedye

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