/ 20 January 2012

Godongwana resigns amid outrage

Godongwana Resigns Amid Outrage

Enoch Godongwana, deputy minister of economic development, quit his post this week in the face of growing outrage in government circles about his involvement in a company that allegedly defrauded clothing factory workers of R100-million of their pension fund money, the Mail & Guardian has been reliably informed.

Senior government officials said the situation had become untenable and there was “a lot of talk” about whether Godongwana, if he had not resigned, would have survived the next Cabinet reshuffle by President Jacob Zuma, which, rumour has it, will take place in March.

“The pension fund scandal was massive. Government, other stakeholders and the business community were outraged by what had happened and they wanted Godongwana to step down to let the law take its course,” said an official close to the events.

With the scandal tarnishing the reputation of the department of economic development, Godongwana is said to have asked Zuma in December if he could resign.

Yet the M&G has learned that the first time his departmental colleagues realised Godongwana would be quitting his post was last Sunday, when Zuma’s spokesperson, Mac Maharaj, announced that the deputy minister had resigned to “pursue personal interests”.

The M&G was informed that Godongwana would not immediately be replaced. The decision about his successor must be made by Zuma.

Allegations that he had clashed with his boss, Minister Ebrahim Patel, have been disputed by government officials, who said the two had a “really good working relationship”.

All eyes will be on Godongwana next Friday when he will testify in Cape Town again at the insolvency inquiry into Canyon Springs Investments 12, a company he co-owned and chaired before he took up his high-ranking post in 2009.

His glamorous wife, businesswoman Thandiwe, who has been a non-executive director of Canyon Springs since May 2009, has also been recalled to give evidence at the inquiry on the same day.

But Godongwana this week denied that there was any connection between his unexpected resignation and the scandal over the missing R100-million that, it appears, will largely be irrecoverable. Canyon Springs and the companies in which it invested are now mostly insolvent.

“There is no link,” Godongwana told the M&G. “Any questions can be answered only after the finding by the inquiry, not now.”

His wife could not be reached for comment.

Having cleared his desk on Monday Godongwana will now be able to give his full attention to defending himself in the case he has to answer:

  • Court papers lodged in the liquidation application for Canyon Springs reveal that Godongwana chaired the company between August 2008 and March 2009, when the first R19.8-million of the R100-million loan, which ultimately came from clothing workers’ provident-fund money, was paid into the company’s bank account.
  • Court records also indicate that about R25-million of the pension fund money loaned to Canyon Springs was sunk into a company Godongwana was creating, Pan African Service Benefits, which offered actuarial, administrative and consulting services. Godongwana and Thandiwe were initially registered as co-owners of Pan African, with a fellow director in Canyon Springs, Mohan Patel.
  • R1.2-million of the pension fund money was loaned to the Iboma Call Centre, another failed company the Godongwanas co-owned with Patel. A further R1-million was loaned to Iboma Properties, which Godongwana and his wife co-owned with loan facilitator Richard Kawie, who has since been arrested for his involvement in the pension fund scandal.
  • In his evidence at the inquiry last year Patel claimed that he had been encouraged to move money using an intermediary as a “conduit” to pay Godongwana. Both Godongwana and his wife are alleged by Patel to have received hidden payments, allegedly two or three amounts of R132 000 or R150 000, which were allegedly moved through Kawie’s businesses.
  • Bank records subpoenaed in October last year by the inquiry apparently indicated that Kawie had used borrowed pension fund money to fund a lavish lifestyle. The inquiry still has to investigate allegations that about R2-million in payments were made to Godongwana from Kawie’s companies, whereas unspecified amounts went to Thandiwe Godongwana.
  • Because Godongwana was expected to exercise his fiduciary duties in all the positions he held, he is likely to be questioned about whether he knew the source of the money that was loaned to the company by asset managers Trilinear Capital. Patel agreed at the inquiry that Godongwana would have known that the Canyon Springs money came from the Trilinear Empowerment Trust that held the provident funds, something Godongwana has denied.
  • Godongwana and his wife have a 50% stake in Canyon Springs, which is held in a family trust, a fact he confirmed in an interview with the M&G last year. Kawie and Patel held the other half through family trusts. Since revealing his stake, Democratic Alliance spokesman Kobus Marais has accused Godongwana of breaching the executive-ethics code by not disclosing his interests in Canyon Springs and has asked public protector Thuli Madonsela to investigate.
  • Canyon Springs’s bank records from January 2007 to March 2011 indicate that before workers’ pension money started flowing into the company, it had an overdraft of R58. The loan was advanced on the strength of a verbal agreement and the bank statements reflect payments to Godongwana of about R60 000 and about R420 000 to his wife.
  • The former general secretary of National Union of Metalworkers of South Africa, Silumko Nondwangu, who is Thandiwe Godongwana’s brother and replaced her husband in his post at the union, received five payments of R40 000 from Canyons Springs between June and September 2009 on a “short-term contract” to sell breathalysers for the company in Gauteng.

A chequered history of accusation, denial and survival
A former senior executive of the National Union of Mineworkers of South Africa, Enoch Godongwana has not given up his ANC posts and is still deputy chairperson on the economic transformation subcommittee of the party’s national executive committee, which is tasked with job creation and other pressing issues facing the country.

Godongwana has earned considerable respect among his colleagues in the ANC for driving economic transformation. One of his former academic colleagues described him as a “brilliant” economist and other politicians regard him as a key player on policy.

But this is not Godongwana’s first brush with controversy over his family’s business transactions. In 2004, he was embroiled in another scandal when he was fired as MEC of finance by Nosimo Balindlela, then premier of the Eastern Cape, following an inquiry she had ordered into corruption and maladministration in the province.

According to a report in the Daily Dispatch, Godongwana was accused of giving his wife, Thandiwe, and another relative R17-million in loans from the Eastern Cape Development Corporation, an accusation he strongly denied.

Although Godongwana was implicated in the findings of the inquiry, chaired by Judge Rajarithina Pillay, he and four other officials, including former sports minister Makhenkesi Stofile, brought a high court application to have the findings dismissed.

In May 2009, Judge Dylan Chetty ordered the Pillay Commission’s findings scrapped, because no proclamation had been issued to extend the commission’s life beyond September 2006 and none of the officials were given a chance to respond to the allegations.

Balindlela ultimately stood accused of using her official powers to prejudice political leaders who did not support her.

There is mounting speculation in government circles that President Jacob Zuma might welcome Godongwana’s resignation. The pension-fund scandal is a huge embarrassment for the government and nobody has forgotten the declassified documents leaked to the press last year at the time of the arrest for murder of Richard Mdluli, the former head of police crime intelligence.

Among them was a report claiming that Godongwana was one of a number of top ANC leaders planning to oust Zuma in the 2012 party elections, something which Godongwana and the others named in the report fiercely denied.