Open letter to President Mbeki re Minister's directives cost Enterprises Department R7, 1m in unauthorised expenditure by Bantu Holomisa as UDM President (23/03/2000)

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President T Mbeki
Office of the President
Union Buildings

Dear Sir


The above-mentioned expenditure and the article that appeared in the Star Business Report on 2 March 2000 have reference.

The article referred to above state that, “with the compliance audit it was found that during the 1998/99 financial year unauthorised expenditure of R7, 151 695 (7,1m) was incurred for consultancy services regarding the restructuring of state-owned entities”.

We are disturbed to note that when this mater was brought to the attention of the public by the said paper, no one comes forward and accept accountability.  Surely, the Minister and her accounting officer (Director General or Acting one) owe the public an explanation.  The spokesperson of the then Minister of Public Enterprises, Miss Stella Sigcau responded by saying, “it would be inappropriate for Sigcau to comment on the issue (and) referred all questions to the former accounting officer of public enterprise, Nomonde Mapetla, who was the deputy director general under Sigcau”.

On the contrary, my investigations indicate that in fact Minister Sigcau is the person to take responsibility and accountability.  This is premised on the fact that she issued written directives authorising payments without Treasury or Tender Board authorities to self appointed consultants.

This evidence is contained in her memorandum reference M1/8/4 dated 03 June 1998, in which she said, “This is to affirm that this agreement with the Consortium was purely on a verbal basis between, myself and the consortium and that an amount of R4906 00, 04 had been agreed upon, as the final payment to the Consortium for their services.

Notwithstanding the foregoing, the agreement with the Consortium is legal and binding and in terms of ST37 the Department of Public Enterprises has to pay.  I therefore, authorise you to pay the amount of R490600, 04 to JQMMG legal Consortium with immediate effect via the budgetary provision for sectorial advisors”.

In another Memorandum to her Accounting Officer, reference 11/2/1/1 dated 07 September 1998, she wrote, “…I authorise you to pay an amount of R1 678,288.04 (R1, 6m) to HSBC for work performed..."

These directives which are not underpinned by any written contracts are not only a manifestation of a clear disregard of tender procedures and treasury instructions but also have contributed to a R7, 1m unauthorised expenditure.

However it is disconcerting to note that the Auditor General’s report does not seem to reflect on these directives – Strange!  On the other hand, if one looks at the integrity of the individual legal consortium, the reputable experience of HSBC, one wonders why did they allow themselves to be involved in irregular payments as they were fully aware that there were neither written contracts nor were due tender processes followed.  The matter is exacerbated by the fact that they are the very people who were suppose to advise the department on sound and principled transformation processes.

In my investigations, I could not get any evidence indicating involvement of her departmental senior personnel including the departmental accounting officer, with the consultants prior to directives for payments.

It is inconceivable that such an experienced Cabinet Minister could be a party to a process of mal-administration, which culminates in disregarding standard procedures.  We were of the view that practise of conducting business via directives had gone by with the Matanzima or Transkei National Independence Party era.  Note that in the then Matanzima Government, commissions of enquiry into corruption revealed that cabinet members, who issued directives were either directly or indirectly beneficiaries of their own directives.

I cannot reconcile with the fact that an amount of R7, 1m was distributed between two consultants with disdain to existing procedures.  This looting spree and plundering of the Country’s meagre resources cannot be tolerated in particular by a government that purports to be batting on a wicket of anti-corruption. 

The breakdown and payment dates of the R7, 1m is as follows:


18 Jun 1998

JQMMG Legal Consortium



17 Sept 1998

HSBC Simpson Mckie



17 Sept 1998

HSBC Investment Bank



19 Sept 1998

HSBC Investment Bank



29 Jan 1999

HSBC Simpson Mckie



30 March 1999

HSBC Simpson Mckie



R 7,151,695.44

In the light of the above I urge you to start a process which would culminate into a judicial commission of enquiry.  To this end, I suggest the following process:

(a)               Establish a Preliminary Investigation (PI) chaired by a retired judge or a senior magistrate to determine the existence of corruption or otherwise.  If there is a prima–facie evidence of corruption or wrongfulness, they would give you advice on the need to establish a Judicial Commission of enquiry.

(b)        The police and reputable forensic auditors should be appointed to assist in these investigations;

(c)         In justifying the directive for paying R1 678288,04 to HSBC, Minister Sigcau claims that the Inter Ministerial Cabinet Committee (IMCC) approved the extension of HSBC’s contract from 15 October 1997.  Obviously, the Minister does not administer contracts.  Therefore, the investigations should establish whether departmental officials had motivated to the Minister in writing that the said contract is extended.

(d)        Furthermore, to investigate whether there was any written memorandum from the said Department to the IMCC requesting for the extension of the contract as well as the written approval by the IMCC and whether such approval was in line with treasury and tender processes.  Determine whether there was any waiver by the Tender Board or a post-facto approval by the Department of Finance.

(e)        To investigate the role played by your economic advisor from your office i.e. did he have any powers extended to him to be involved in the process of restructuring and if so what powers were designated to him and by whom?


In my investigations, I also established that an empowerment consortium was sold 30% stake of Viamex Fleet Solutions in December 1998 for R12 Million.  Both the offices of Public Enterprise and Receiver of Revenue have not received the proceeds on the sale and an agreement of sale could not be submitted for audit purposes.  The documentation on this transaction could not be found in the Department because the sale was handled by a certain advisor who is answerable to the Minister only, such is the state of these Ministerial advisors who seem to have executive powers.  In fact, I noticed that Aventura and Connex sales were not processed by the Department but by the advisors who, were accountable to Minister Sigcau at the time.  The names of Ms Audrey Mokhobo and Mr Kennedy Memani appear as her advisors who handled these transactions.  These sales should also be investigated by the proposed Preliminary Investigations.

Noting the consequences of directives in the Matanzima era it is incumbent upon investigators to establish whether officials of the said Departments or their relatives benefited from the restructuring process, either in the form of nepotism, cash or kind.  To this end it would be worthwhile to investigate the generosity extended by companies involved in the restructuring of state owned assets, for example, in the form of all expenses paid holidays, bursaries, etc, etc.  The R7, 1m could just be a tip of the iceberg.

If this kind of practise signifies a trend in how government departments handle business transactions, such a kind of “Crony Capitalism” would not contribute in attracting much-needed investors.  The bypassing of duly appointed, senior officials by their Ministers are a source of concern.  What a contradiction!  It is well known by now, that the best civil servants have been bribed (severance packages) to quit the government services in a crazy bid to pave way for the ANC unemployed loyalists and pals of the Ministers.  The consequence of this ill-conceived move is the visible lack of delivery and baffling levels of incompetence.  Consequently, the national, and provincial governments spend billions on acquiring the services of consultants to perform duties which are supposed to be the domain of the civil service.  This is the extremist form of corruption – that is, the deliberate appointment of pals to key, well – paying jobs in the government without any track record in administration and the necessary skills and experience – hence the Ministers and advisors are on a looting spree of our resources.

The question many are asking is:  What is the difference between ANC government and NP and its homeland governments who were dubbed by the ANC as bunch of corrupt governments?  Remember the old German saying, “the troughs have changed, however the pigs have remained the same”.

The attached-signed directives addressed to the accounting officer by Minister Sigcau will assist your good offices.

Yours Sincerely

Bantu Holomisa, MP
President of the United Democratic Movement

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Last Reviewed: 26 August 2006