Informed people live longer
13 December 2017 13:04 (South Africa)
South Africa

The Principal Agent Network (PAN) Dossier, Part 3: Fast cars, family ties and fiscal dumping

  • Marianne Thamm
    marianne-thamm.jpg
    Marianne Thamm
  • South Africa
Photo: South Africa’s State Security Minister Siyabonga Cwele sits in court before his wife Sheryl Cwele appears in the Pietermaritzburg High Court, February 5, 2010. Sheryl Cwele was applying for bail after being arrested on charges of dealing drugs, the country’s National Prosecuting Authority said. REUTERS/Stringer

The former manager of the Covert Support Unit (CSU), under which resided a clandestine, parallel and unaccountable intelligence structure, the Principal Agent Network, went on a two-month spending spree in 2008, blowing R150-million on cars and surveillance offices. Former CSU manager Prince Makhwathana told former Inspector-General for Intelligence, Faith Radebe, that the Joint Standing Committee on Intelligence and the former Minister of State Security, Siyabonga Cwele, had suggested that the NIA (later the SSA) max out the budget. Radebe didn’t buy the story. This is how it all went down. By MARIANNE THAMM.

Note: We have opted not to reveal the identities of some SSA members named in the Office of the Inspector-General of Intelligence report. We have named only those who have surfaced in court.

What is interesting in light of the damning revelations in two investigations by the Office of the Inspector-General of Intelligence (OIGI) into the National Intelligence Agency’s (NIA’s) PAN network, is that former CSU Manager Prince Makhwathana, who had lingered at home for five years on suspension while collecting a cool R6-million, appears to have found his way back into the shadowy world of intelligence.

Former IG, Advocate Faith Radebe, compiled two reports (one in 2013 and a supplementary in 2014) into PAN after a request by former Minister of State Security, Siyabonga Cwele. Radebe, for her reports, referenced several other internal SSA investigations into the alleged misappropriation of around R1-billion in public funds in three years by the CSU and PAN.

Makhwathana emerges as a key suspect in several areas probed by Radebe yet in 2016 then Minister of State Security, David Mahlobo, lifted Makhwathana’s suspension from the SSA. This after Makhwathana had challenged his suspension in court.

Back in 2013 Radebe found that it was Makhwathana who had directed the CSU's splurging of R150-million between February and March 2008.

This is how it went down.

Makhwathana told Rabebe that he had met Cwele in Port Shepstone in December 2009, an encounter that had been facilitated by then NIA Director-General, Gibson Njenje.

According to him it was made clear by the minister that he was there to reveal wrongdoings by both Mr (Manana) Manzini and Mr Fraser [who established PAN] failing which he could be jailed. He informed the minister that he had received no unlawful instructions. He now believes that due to his utterances he was suspended and is being treated the way he is,” wrote Radebe.

Makhwathana had advised the OIGI team that he had been “very surprised” by the minister's approach at this meeting as a few months prior to this, around 11 September 2009, he and Arthur Fraser, then DDG of NIA, had made a presentation to Cwele about the PAN programme.

Fraser, who was appointed DG of State Security in 2016, was the former Head of National Intelligence in the Western Cape. He later worked as the DDG for Home Affairs in the National Immigration Branch before his appointment as DDG of NIA “in charge of offensive and counterintelligence operations”.

The minister, Makhwathana told Radebe, had “seemed very impressed with the programme”.

The reason for the “rapid and unplanned expenditure” that took place between February and March 2008, Makhwathana informed Radebe, was that following a JSCI briefing in February in Cape Town, Cwele had “expressed his dissatisfaction that the intelligence services were unable to spend their budgets within the financial year”.

The CSU head told the IG that NIA had been “instructed” to spend their annual budget by the end of the financial year. That meant the NIA had about a month to offload the surplus.

It was Mr Makhwathana's view that had the JSCI not given this instruction there could not have been such massive and unplanned expenditure in the PAN programme.”

According to Makhwathana the instruction to spend the NIA budget had resulted in a decision by senior managers responsible for finances to “find a way of spending the money”.

On 7 February, 2008, former DDG Corporate Services, Ms (Margaret) Modipa, and former CFO, Mr (Mkuseli) Apleni, advised that there was an amount of R50-million that was available to be spent in order to avoid a roll-over of funds. During February and March 2008 this was used to purchase vehicles and for the rental of properties. In the process of spending the available money/budget the spending increased from R50-million to R80-million and eventually ended at about R150-million. These expenditures, according to Mr Makhwathana, were done with the full knowledge of the then CFO Mr Apleni,” said Radebe in her report.

According to Makhwathana, the CSU funds were also used to fund covert projects in provinces such as KZN and Northern Cape. In the main, the funds were used for acquisition of surveillance offices.

Funds were also used to acquire command vehicles that were bought in the United Kingdom and stationed in the Western Cape offices.”

Although these command vehicles had been bought covertly, “a mistake was made when they were collected at the Cape Town harbour in that the vehicles were collected overtly under the name of NIA people who collected these vehicles … used their own contacts/persons who worked at the harbour. The concern was that the existence of the vehicles will be known and linked to the NIA which rendered them unusable.”

In her findings with regard to this “rapid and unplanned expenditure”, Rabebe found Makhwathana’s justification “to be strange and unacceptable given the fact that as an oversight committee, the JSCI was justified in expecting the NIA to spend all the money budgeted for within that financial year. Budget allocation for the NIA is approved by Parliament after annual plans and funding are presented to the JSCI. It was therefor incumbent on the NIA to provide the JSCI with reasons for not spending the budget as planned as opposed to engaging in a process of fiscal dumping.”

A quick and easy solution

But what do do with all these brand new cars.

Eureka! Let’s store them in a warehouse.

Enter Fraser.

Fraser told the Radebe that he had “recruited” a certain Mr VW and had introduced him to Makhwathana. Fraser said he had wanted Mr VW to “offer the services of warehousing for the purposes of storing the vehicles owned and bought for the PAN programme”.

While he was in the process of “engaging” the services of the warehouse owner, the man, out of the blue, had offered to employ Fraser’s son. Fraser’s son was later employed as the floor manager of the warehouse where the vehicles were kept.

Mr Fraser further admitted to the OIGI team that his brother, Mr Barry Fraser, worked for the same Care Ware-Housing. It has been revealed that the said Mr Barry Fraser was the director of the said company. Fraser denied knowledge about his brother, Mr Barry Fraser, being a director of the said company. He said as far as he knows, a certain Mr VW was the owner and director of Care Ware-Housing,” wrote Radebe in her report.

The cost of warehousing the cars amounted to R150,000 a month. In the end a total of R24-million was blown on storing the PAN vehicles.

The OIGI uncovered further nepotism with the employment of Makwathana’s wife as a PAN agent. This came about, he told Radebe, after he had mentioned to Fraser that her daily commute from Kempton Park to Soshanguve for work purposes was a major schlep.

The conversation had popped up between Makhwathana and Fraser during a trip from Durban to Pretoria.

Mr Makhwathana indicated that Mr Fraser then indicated that he would employ her in the PAN programme. Mr Fraser in his interview confirmed this. He said he then arranged that his spouse should meet Mr Fraser for an interview. The process of employment is in complete disparity with the provisions of the Intelligence Services Regulation Chapter V in that none of the recruitment and selection procedures were followed,” remarked Radebe in her report.

Covert members and structure of CSU

PAN members were recruited from the public, the intelligence community or NIA members who had been asked to resign. They were appointed on a contract basis as “co-workers”. However, the regulatory framework did not recognise co-workers, only sources, agents and members.

It is curious that these members were not appointed as ‘90’ members as provided for in the OD:09 (Operational Directive 09 Authorisation and Conduct of Cover). In this regard their employment status was severely compromised/prejudiced.”

OD:09 required such members to be vetted every two years or “as deemed necessary by the DDG”. None of the PANS had been vetted, Radebe found.

Radebe said it was vital to understand the intended role of the CSU.

In terms of OD:09 the DDG Operational Services is responsible to effect the establishment of a Cover Support Unit within the Operational Co-ordination Unit to assist the DDG Operational Services in the centralised management of national and provincial cover operations” and “to provide assistance, support and advice regarding the management of human resources, financial, logistic and legal matters pertaining to cover, as well as all communications and the efficient monitoring, oversight and control of the utilisation of cover”.

The CSU acted as a nodal point for all communication between cover structures and other structures of the agency.

Fraser had told Radebe the CSU had performed the function of support alongside an auditor who reported to Margaret Modipa, DDG head of corporate services, and Manzini, the DG. This was in order to ensure compliance, Fraser said.

Fraser told Radebe that his intention in establishing the CSU was to set up “shield capacity that was able to administer and provide support operations without being part of operations”.

She found 64 PAN members had been appointed on contract, post establishment of the network which had resulted in personnel expenses being paid through the operational budget. Fraser had told Radebe that the PANS would be “co-workers” with members of NIA and that their conditions of employment would be consistent to that of members of the NIA.

On this very issue, it would appear that the PANS conducted themselves as sources hence the application of OD:04. However, when this was put to Mr Fraser he indicated that OD:04 was not relevant as the PANS were co-workers and OD:04 would only come into play if the PANS themselves were running sources.”

She found that many of the PANS received higher salaries than counterparts in the NIA. After the dissolving of the programme it was found that the contracts had been signed on behalf of NIA by Makhwatana “which was in contravention of the MPD which required contract workers to be approved by the DG or by a delegated authority.”

Some of the contracts, she found, had also been signed after an SSA investigation had commenced and may have been backdated. The contracts also had no end date which seemed to imply that the PANS were intended to be permanent employees of the SSA.

This corroborates the version of Mr Fraser who advised the team that the intention of the PAN programme was to create a parallel system to develop a new philosophy within intelligence in its collection methods.”

Radebe said it was “noteworthy” to point out how the PANS were treated following the decision to shut down the programme. The PANS had two options, transfer to NIA or take a severance package. In the end 36 PANS were appointed as members of NIA, five were reemployed as “90” members (a covert code), 10 opted for severance packages and the remaining 13 had been dealt with “in processes that were somewhat unfavourable.”

In her findings Rabebe said the PAN members had been employed without compliance to employment prescripts.

In this regard discrepancies in employment contracts, benefits, remuneration and vehicle schemes require further investigation. It needs to be noted that in some instances the CSU manager approved or concluded contracts while others’ contracts were incomplete.

She found that the manner in which the SSA had handled some of the PANS “is unlawful”, including the unilateral suspension of a salary in breach of contract.

This amounts to unfair labour practice which not only is unconstitutional but contravenes provisions of the Intelligence Services Act 65 of 2002 which provides Mr B with grounds for a civil claim.”

Radebe found that almost all of the PAN members had been irregularly appointed and that “there followed a large-scale recruitment of personnel which includes a significant number of family members and associates of some members in senior management in the NIA.”

She recommended that Makhwatana be charged for contravention of the relevant regulations and directives “in that he wholly and exclusively involved himself in the recruitment, selection and the ultimate employment of his spouse, thus compromising the fundamental principles of fairness, transparency and professionalism”.

Flying high

Radebe confronted Makhwathana with regard to findings made in an earlier SSA report that he had forged Fraser’s signature in order for him to fly business class.

The submission was shown to Mr Makhwathana and he denied knowledge of the said submission and stated he could not understand where that document originated from. He advised the team that he is aware of is a request he had made to Mr Fraser to fly business class which was approved. His motivation therein was based on the fact that it was risky to fly economy class because at times he will be having in his possession highly sensitive documents and/or large amounts of money.”

His request had been approved, Makhwathana told the IG, and he had flown business class on about four occasions, accompanying Fraser.

In his view, had the approval not existed, Mr Fraser would have queried him as to why he was flying business class. One must take note that when Mr Fraser was questioned about this submission, he corroborated the version of Mr Makhwathana and went on further to say he would expect Mr Makhwathana to fly business class because of the documents/cash he was required to carry.” DM

Photo: South Africa’s State Security Minister Siyabonga Cwele sits in court before his wife Sheryl Cwele appears in the Pietermaritzburg High Court, February 5, 2010. Sheryl Cwele was applying for bail after being arrested on charges of dealing drugs, the country’s National Prosecuting Authority said. REUTERS/Stringer

  • Marianne Thamm
    marianne-thamm.jpg
    Marianne Thamm
  • South Africa

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