The police are investigating the disappearance of R80-million that allegedly went missing after it was paid to the investment arm of the Police and Prisons Civil Rights Union for shares it held in the Protea Hotels group.
The payment was allegedly not recorded in the books of the Popcru Group of Companies (PGC). The disappearance of the money forms part of a police investigation into alleged corruption in the PGC.
The police confirmed the probe, while Protea Hotels said the National Prosecuting Authority had approached it for information about the case. In an affidavit handed to police, which the Mail & Guardian has seen, former PGC board member Meshack Mpemva said the search for the missing millions had pitted board members against one another and those who asked questions subsequently lost their union positions.
Another former board member, KwaZulu-Natal correctional services commissioner Mnikelwa Nxele, broke his silence this week to say that he suspected corruption in Popcru’s dealings over the shares. A founder member of Popcru, Nxele was on the team that formed the PGC, which bought its first stake in Protea Hotels in 2001. In 2008, the M&G has established, the PGC was paid R80-million for its 13% stake when Protea Hotels was bought by the Australia-based Stella Group.
The union had earlier received payment of R117,9-million for its shares. According to Nxele, who said that he had sat in on all meetings in which the sale was discussed, he became aware that Popcru had been underpaid.
“It came to my attention that we had not been paid enough,” he said. “A dispute was declared and Protea Hotels agreed to pay us a further R80-million.” But the payment was allegedly not recorded in the PGC’s accounts, prompting questions by several board members, including Nxele.
“The whole Protea shares deal coincided with what I saw as an escalation of the salaries of some top leaders of Popcru. I queried the salaries, which, in some cases, were as much as R200 000 a month, and became very unpopular,” Nxele said. “I decided I could no longer be part of this situation and left.”
2009 Sale
In 2009 the Stella Group sold the hotel group back to a South African consortium comprising Protea Hotels management, its BEE partners — which included Popcru Investment Holdings — and Investec Private Equity. Mpemva said in his affidavit that Popcru treasurer Themba Matsane was instructed to buy back shares of R40-million on the PGC’s behalf. Mpemva said that the number of shares bought by Matsane was never disclosed.
The legal firm representing the PGC, Eversheds, refused to answer the M&G‘s questions about the Protea Hotels shares. “It is not our client’s intention to respond to allegations, the veracity of which have not been tested,” said lawyer Gary Pritchard. Pritchard said the PGC had a properly constituted board of directors, held annual general meetings and produced reports and accounted to its members through the proper channels. “Accordingly, our client is no longer prepared to become engaged in a debate based largely on unsubstantiated allegations.”
Mpemva said in his affidavit that a current board member, who he names, confirmed that the R80-million was paid to PGC but later disappeared. “[He] asked me why the second payment from the Protea Hotels buyout was not showing in the books of PGC,” the affidavit states.
“He told me that Mr Matsane once phoned him and told him that the Protea money was paid and asked what must he do with it and he advised him to deposit it in the bank account of PGC.” Arthur Gillis, chief executive of the Protea Hospitality Group, said in a statement that the company was “aware of an investigation by the public prosecutor’s office” and that it had been contacted for assistance with the probe.
“Protea Hospitality Group, while not the subject of any investigation, will make available all information requested,” Gillis said. He would not comment further, saying the matter was sub judice. Mpemva also said in his affidavit that he had requested the shareholders’ agreement and the agreement on the share sale from the PGC’s financial director, who he also names.
He stated that he made several follow-up inquiries about the shares, but was “sent from pillar to post”. “I told him [the financial director] that I need these documents because there are allegations that we used PGC money to buy ourselves shares in Protea and he is the company secretary for PGC— he has the responsibility to keep all company documents and make them available when a need arises,” Mpemva stated.
He alleged that the financial director eventually told him that the documents were kept in a safe at the home of Popcru treasurer and PGC chairperson Matsane. Nxele claimed that a march organised this week by Popcru’s leaders to protest against a new shift system in prisons was a move to divert attention away from allegations of fraud and corruption in the union.
Uprising
“Popcru leaders have called for the correctional services leadership in KwaZulu-Natal to be removed; it is a deliberate strategy to draw focus away from the uprising against them in the union,” he said. Some Popcru members, who have set up a national task team to investigate alleged fraud and corruption, have distanced themselves from the planned march.
“We want to state categorically that the members of Popcru are against the intended march against our comrade who was deployed in the department of correctional services,” they said in a memo sent to the M&G this week. “Comrade Mnikelwa Nxele has got more information about the alleged corruption in the national office of Popcru and that is why he is being targeted in this cowardly fashion.”
Popcru members contacted the M&G this week to ask what Cosatu was doing to deal with the escalating crisis in the union because they had seen no evidence of promised moves by the federation to mediate in the dispute. Cosatu general secretary Zwelinzima Vavi said last week that the federation would be mediating.
Asked about the progress of the mediation, Vavi said members could not know about the discussions happening at leadership level. “I know they are using the media to try to get us to do something, but we are already [doing it],” said Vavi.
Popcru pulls out stops on probe
Popcru members have nominated five members from each province to form a national task team to investigate alleged corruption and mismanagement of union funds by the union’s leadership.
A spokesperson for the task team, Siza Ka Doncabe Maphumulo, a South African Police Service captain in Durban, said there was deep concern that not enough progress had been made in the police investigation, in spite of a charge of corruption having been laid at the Pretoria Central police station.
“We are dismayed by the fact that the case was registered in November 2010. Four months later, the docket is still at the station and is assigned to an ordinary investigator,” he said.
“This is not in line with President [Jacob] Zuma’s policy on corruption. “Millions of rand belonging to ordinary members has been used inappropriately — including to buy cement from China for R18,5-million before the Fifa World Cup — and cannot be traced.” The task team has called on the Hawks to take over the investigation or assign it to an “appropriate office”.