Corruption hits SA’s governance ranking

Increasing perceptions of corruption have knocked South Africa from the top slot in the UBS Governance Rank, which measures corporate governance perceptions in 44 global emerging markets, it was recently reported in Business Report.


The UBS research cautions that a continuation of this trend could threaten South Africa’s safe haven status.


Analysts noted yesterday that the safe haven status of South Africa, as well as its generally favourable corporate governance rating, helped to support the local equity market last year when other emerging markets came under pressure.


The slide to second place behind South Korea occurred despite the fact that local companies are perceived to have the best corporate governance practices among the 44 countries in the UBS’s emerging markets study. The UBS Governance Rank combines the corporate governance ratings of the 44 countries, which is undertaken by Governance Metrics International, with the results of the World Bank’s “Doing Business” survey and Transparency International’s corruption perceptions index.


Although South Africa scored well in the corporate governance ratings and continued to rank about midway in the Doing Business survey, it scored very badly in the perception of corruption index. Last year, the country suffered the biggest increase in the perception of corruption among global emerging markets. UBS noted that the change in perception in South Africa was worse than the change in Egypt.


The UBS governance index tells a similar story to the World Economic Forum’s Global Competitiveness Report, which was issued earlier this year. That report revealed that South Africa ranked very highly when it came to private sector institutions, but struggled on measurements of corruption and the performance of government institutions.


The report, which also deals with perceptions and covers 142 countries, ranked South Africa as second in the efficacy of corporate boards category. In the issue of protection of minority shareholders’ interests, South Africa ranked third out of 142 countries.


David Couldridge of Element Investment Managers noted that South Africa ranked first in the world for the regulation of security exchanges.


“Unfortunately we are a country of great contrasts and do not score well in a variety of other leadership indicators,” he said. “Investment is required to support South Africa’s plans to grow our economy and create vital jobs … leadership should recognise the excellence that is currently in place and take action to ensure we retain our strong governance ranking.” (Business Report)


Deputy president talks on Chancellor House deal

Deputy president Kgalema Motlanthe has said that it’s not ideal for Chancellor House, the investment wing of the ruling ANC, to be doing business with government or any of the state-owned enterprises, it was reported in Sowetan on 1 March.


Responding to a question in the National Assembly, Motlanthe said: “Chancellor House is a company, and it engages in economic activity in South Africa and outside of South Africa … ideally, it should not do business with government at all.”


The question was asked by Independent Democrats MP Lance Greyling, who had quizzed the deputy president about the role of Hitachi Power Africa in delaying the completion of the building of Eskom’s new generation power station of Medupi.


Chancellor House has 25% stake in Hitachi Power Africa, which has won a multibillion-rand tender to produce boilers to be fitted at the Medupi Power Station, but has since admitted that it would not be able to deliver on time, causing a year’s delay in the construction of the much-need energy plant.


Greyling cautioned that the “massive conflict of interest” was threatening the security of electricity supply, which could have dire economic consequences.


He also wanted Motlanthe to assure parliament that Chancellor House would not be benefitting from government’s multi-billion rand infrastructure and nuclear-build programmes.


Motlanthe pointed out that Chancellor House bought a stake in Hitachi long before it won the Medupi boiler tender.


“They did not put their money in Hitachi Africa to produce boilers for Eskom.


“Hitachi Africa got the contract later … those are the facts,” said Motlanthe.


“Where there’s clear evidence of manipulation, we will be the first ones to say let’s deal with this … and we say Chancellor House should not do business in a way which gives it an advantage because it is an investment wing of the ANC, that should not happen, that’s our position,” the deputy president said. (Sowetan)


Gauteng Speaker’s business-politics crossover

Many of the companies of which the Speaker of the Gauteng legislature, Lindiwe Maseko, is a director have received government tenders within the past seven years, while others have been mired in controversy, it was reported in The Star on 29 February.


On 28 February, The Star looked into a gala dinner hosted at the Coca-Cola Dome for the opening of the legislature. The official caterers for The Dome are Delmont Caldow Caterers. One of their directors is Maseko’s daughter, Edna Maseko.


Edna said she does not believe the hosting of the dinner at The Dome was a conflict of interest because “we do not have any influence on which venues or suppliers they (the legislature) use”.


“This is done through their own processes, which I cannot answer on as I am not employed by the legislature,” Edna said.


In her declaration of interests last year, Maseko listed eight companies of which she is a director but, according to the Company and Intellectual Property Commission, she is an active director of 17 companies.


These are: Autumn Star Trading 898, Boerassic Park, Dyambu Holdings, Imvelopark, Katlego Investments, Mogwele Trading 194, Mphe Integrated Solutions and Trading, Mphe Investment Holdings, Palesa Ya Sechaba Properties, Rishile African Gold, Rishile African Mineral Resources, Rishile African Mineral Resources (KwaZulu-Natal), Sensormatic Mphe Technologies, Tissella Investment Holdings, Webindaba, Westside Trading 570 and Xiluva Xa Rixhaka Properties.


Autumn Star Trading 898, Mogwele Trading 194 and Westside Trading 570 are listed on Government Gazette websites as having received tenders.


Dyambu Holdings is a female-led investment group that owns a share in numerous companies including I&J, Ten Alliance, Vela Phumelela Investments, Moribo and Comparex.


Media reports in 2006 said Dyambu received profits from the Gautrain. It was one of 18 companies representing the Strategic Partners Group.


In 2011, the Mail & Guardian linked Westside Trading 570 to leasing scandal developer Roux Shabangu and “irregular” Land Bank loans.


“To the best of my knowledge, I have always declared all my financial interest as required by the code of conduct of the Gauteng Provincial Legislature, and there has never been an issue of conflict of interest,” Maseko said. (The Star)


Joburg metro official investigated for ‘corrupt spending’

A member of the Joburg mayoral committee (MMC) is under investigation for, among other things, having a personal make-over and ordering Valentine’s Day and birthday gifts for herself at the expense of City Parks, it was reported in The Star recently.


Matshidiso Mfikoe, now MMC for health in the City of Joburg, was previously responsible for corporate services and environment and, as such, was the political head of City Parks.


A formal complaint and a full report detailing the complaints against her has been lodged with the council speaker’s office by DA councillor John Mendelsohn.


He has refused to comment on the matter, saying it is under investigation.


However, the Gauteng DA has released a copy of the complaints.


Among the complaints are that employees at senior management level were made to buy gifts for her from the time she celebrated her son’s birthday in 2009.


Management was told that she gets angry if she does not receive gifts.


She allegedly received a Valentine’s Day gift paid for out of the budget of the City Parks’ marketing department.


It is also claimed that she had a make-over at the department’s expense in time for a greening concert held by City Parks.


She allegedly demanded 100 free tickets to the concert for her family and friends, even though staff pointed out that the function was for charity.


In September 2010 Mfikoe had a birthday party at the Botanical Gardens and was given gifts allegedly bought and paid for by City Parks’ marketing department.


In May last year, at her farewell function, invited staff were ordered to take her a gift. This was made compulsory.


Other allegations are that her brother and other relatives have been hired by the department but are not qualified.


The report states there is concern and panic among staff members about these irregularities, which are “causing them to stress because they have to implement them against their will in the form of an instruction”.


Janet Sempel, leader of the Gauteng DA, said this type of suspected corrupt spending for personal gratification must be rooted out.


“Corruption of any kind deprives the province and country of money which could be better spent elsewhere,” she said.


The council said it had noted the allegations against Mfikoe.


Spokesperson Gabu Tugwana said: “A formal complaint was lodged with the speaker’s office by John Mendelsohn of the DA.


“The matter is receiving urgent attention in line with the provisions of the code of conduct for councillors as stipulated in the Municipal Systems Act.


“The complainant has been informed accordingly in this regard.”


The council said it took a serious view and approach to wrongdoing by any official or politician.


It has a toll-free anti-fraud hotline – 0800 002 587 and SMS lines 32792, 32694, where people can report suspected wrongdoing.


Complainants’ identity is always protected. There is also a department – the Joburg Risk and Audit Services – specifically assigned to assess, mitigate and act against any risks to the council.  (The Star)


Ex eThekwini city manager will be reported to police

Former eThekwini municipal manager Michael Sutcliffe will be reported to the police and the council will take steps to recover from him R1.1-million that the city lost, it was reported in The Mercury on 1 March.


Other high-ranking city officials implicated in the damning report compiled by forensic auditors Manase and Associates will be charged with misconduct and could be suspended pending the outcome of investigations.


The council’s recommendations come after a summary of the report was released in February, following a lengthy probe into allegations of fraud, corruption and maladministration at eThekwini, instituted by Co-operative Governance MEC Nomusa Dube.


City manager Sibusiso Sithole said Sutcliffe would be reported to the police for failing to report fraud and corruption in the municipality to law enforcement agencies and for not taking “reasonable” steps to prevent irregular expenditure.


Mayor James Nxumalo said if Sutcliffe had been aware of certain fraudulent and corrupt activities which resulted in irregular expenditure, he should have reported the matter to the mayor, the auditor-general and the co-operative governance MEC.


The full 700-page report has not been released and the names of the companies and individuals implicated in the fraud have not been disclosed.


Nxumalo would not say when the full report would be released, but said officials implicated would be given copies first so they could respond to the allegations.


“It must not be seen that we do not want to release the report, but it must be clear that nobody has been found guilty. We want to respect the rights of the individuals implicated in the report before we release it,” he said.


The report also recommended that disciplinary action be taken against: geographic information and policy unit head Jacquie Subban, for irregularly awarding two contracts and for negligence which resulted in a service provider being paid R2.6-million twice; city treasurer Krish Kumar, for failing to take reasonable steps to prevent irregular expenditure; deputy city manager of infrastructure Derek Naidoo, for failure to comply with supply chain management policies and failure to exercise due care and diligence in dealing with matters before the bid adjudication committee.


KwaZulu-Natal Premier Zweli Mkhize would also be asked to set up a commission of inquiry into allegations identified in the report.


The Manase investigators also found that former mayor Obed Mlaba had irregularly and unlawfully influenced the awarding of a multibillion-rand landfill tender, but Nxumalo said this matter would be referred to Speaker Logie Naidoo.


The report also found that 30 trainee metro police constables had bought their driving licences after heeding the advice of metro police college instructors, who had directed them to illegal driving schools. Also, 14 metro officers were taxi owners, in contravention of metro police policies and national legislation. (The Mercury)