AMABHUNGANE

EFF-linked businessman who captured Tshwane fleet department had a man on the inside 

By Micah Reddy and Stefaans Brümmer for amaBhungane 26 February 2020

Beyond the highly lucrative fuel tender, Hendrick Kganyago’s companies have squeezed millions out of Tshwane through a number of other questionable contracts with Stanley’s fleet division, say the writers. (Illustrative image | sources: EFF logo / Unsplash/Mitch Harris / Fuel gauge (image: www.publicdomainpictures.net)

amaBhungane previously reported how a tenderpreneur who paid apparent kickbacks to EFF leaders won a rigged Tshwane fuel tender. It now appears that he also had help on the inside. 

Hendrick Kganyago, the man who paid millions into EFF-linked accounts when he won a lucrative City of Tshwane fuel tender, seems to have had help on the inside too – a close relative is a city employee charged with overseeing contracts from which he benefitted.

amaBhungane previously reported that Kganyago, the owner of Balimi Barui Trading (BBT), paid R15-million to three companies linked to EFF leader Julius Malema and the party’s new secretary-general, Marshall Dlamini, during and after a tender to supply the city with its fuel needs.

BBT was one of three companies awarded the three-year R500-million fuel contract though its prices were effectively the highest of 10 shortlisted bidders.

The EFF holds significant sway in the city, where it is regarded as a kingmaker by dint of its significant minority vote.

The party has “bannedamaBhungane and is not responding to our requests for comment. Kganyago and BBT have not responded either, despite numerous requests.

Kganyago has built a small but thriving empire off the back of local government contracts. He has been one of the City of Tshwane’s top suppliers by value for years and appears to have targetted the Tshwane corporate fleet division in particular.

Now, amaBhungane can reveal that Kganyago’s relative Stanley Kganyago is a senior official in the fleet division – and was, at least formally, responsible for the fuel tender. 

As for the exact nature of the two Kganyagos’ family relationship, all the evidence points to them being brothers. They have also shared business interests.

‘Responsible official’

A report of the city committee that evaluated bids for the fuel tender early last year identifies Stanley as the “official responsible from the department”.

The “department” is the city’s corporate and shared services department, which issued the tender and of which Stanley’s fleet division forms part.

amaBhungane’s initial story showed that BBT was able to “game” the tender evaluation by quoting very cheaply on some fuel types. This made BBT appear to be cheapest overall, while in fact, its basket of prices was the most expensive when weighted against the city’s actual consumption.

After awarding the contract to BBT and two other companies, the city set about overpaying them by millions each month due to an apparent contracting mistake. The city called this an “honest mistake”.

We asked the city about Stanley’s apparent conflict of interest as the “official responsible” in a tender his brother’s company won. 

The city responded via a spokesperson, who wrote:

“As much as the report indicated so, this is a procedural matter in the department as he is the Director for Contracts, however, a different official managed the tender from the department including at evaluation and we confirm that Mr Stanley Kganyago was not part of the evaluation of the tender or presentation of the said report [to the adjudication committee].” 

Regarding the first stage of the tender process – where criteria for tenders are specified – Stanley was in fact involved, amaBhungane can reveal. The city did not deny this, but seemed to suggest he could not influence things on his own. “Specifications are approved by a duly appointed and competent Bid Specifications Committee… These committees are comprised of multiple individuals, more than 15 in total.”

The city referred most questions, including what exactly the family relationship is between the two Kganyagos and whether Stanley had declared it to the city, to Stanley himself, by saying:

“This can only be responded to by Mr Stanley Kganyago who is currently hospitalised at the moment and cannot respond.”

When Stanley later replied to detailed questions emailed to him, it was to say that he could not respond in his personal capacity “due to my employment contract”. 

He added that:

“I have never in my entire life jeopardised any working relationship with my employers.”   

The city subsequently said it had taken a decision “not to comment any further” in light of a decision, taken after amaBhungane’s original article, to investigate the fuel tender. It said the investigation was still underway.

Specifying Stanley

A transcript of a meeting of the bid specifying committee, which laid out the terms of the tender, shows that Stanley was actively involved. 

When committee members discussed potential conflicts of interest, Stanley denied having any – despite Hendrick’s BBT being the incumbent supplier who would bid for this tender too.

Using his formal name, Stanley told the committee: “I’m Abram Kganyago. I declare I don’t have interest in the matters to be discussed in the meeting.”

The transcript reflects a number of committee members arguing for the tender to be divided among the three top bidders, which it ultimately was. The chairperson expressed concern that at the time only BBT supplied the city, arguing that the committee should instead focus on “empowerment” and “sharing of the cake”. 

One person who was less keen on “sharing the cake” was Stanley. He argued against dividing the tender three ways – evidently not wanting to see Hendrick’s lucrative patch of turf diminished too much.

The transcript also shows that Stanley was heavily engaged in discussions around the itemisation of fuel types – the very aspect of the bid specs that Hendrick exploited when gaming the tender.

Finally, the transcript makes it abundantly clear that Stanley’s portfolio with the fleet division involved him directly with the administration of BBT’s contract.

As the person in charge of contracts – and who, according to a city official asking not to be identified, oversaw payments to contractors – it cannot be excluded that Stanley had something to do with the “honest mistake”, that saw the city overpaying its fuel suppliers, including BBT, once the new tender was awarded. 

Keeping up with the Kganyagos

Writing our initial article, we had noticed the name Stanley Kganyago on tender documents. Only after publication, however, did we hear from the city official, claiming that it was fairly well known within the fleet division that he and Hendrick were brothers. 

The official claimed that at least three other officials had spoken about the link between the Kganyagos. 

Another person who is very familiar with both Hendrick and Stanley independently told amaBhungane that the two are brothers. 

There is no shortage of criss-crossing links to support a conclusion that the two are related and may have made common cause. 

Company registration records show that Stanley – whose full given name is Morwakgati Abram Kganyago – earlier shared company interests and a key address with Hendrick: 

  • Buzzabee Global Networks was registered in 2005 as a close corporation with three members, including Hendrick and Stanley, to an address in Ormonde, south Johannesburg. This was also given as Hendrick’s residential address. Buzzabee has since been deregistered.
  • Two years later, Stanley registered another close corporation, Phepho Setshabeng Trading, to the same Ormonde address – which he gave as his residential address. Phepho Setshabeng has since been deregistered.
  • BBT, Hendrick’s company that won the fuel tender, is registered to the same Ormonde address.
  • Mmaseroka Holdings, one of the companies from which Hendrick paid the EFF-linked companies, has had one director, Hendrick, since March 2017. Before that, Stanley was one of two directors.

Beyond the highly lucrative fuel tender, Hendrick’s companies have squeezed millions out of Tshwane through a number of other questionable contracts with Stanley’s fleet division. 

Rich pickings

In Tshwane, Hendrick’s companies were already in business with the city by the time of Stanley’s appointment as director of fleet performance, monitoring and compliance in early 2016. But with his relative in a key oversight position of a division that Hendrick was eyeing, the opportunities to game the system and extract more money from the city were arguably greatly expanded.  

A city recruitment record dated 17 February 2016 noted that an appointment panel of five officials “unanimously agreed that Mr MA Kganyago [Stanley] was the most suitable candidate for appointment in this position”.

According to his application, Stanley was an external candidate with a law degree, but no local government experience at the time and there is little evidence that he had much managerial experience either. 

Barely more than two years prior to his appointment at Tshwane on a yearly remuneration package of roughly R1-million, he was a mere trainee with the AFS Group, a fleet and fuel management company, according to his application.

However, AFS, now known as Gilbarco AFS, said in response to questions: “AFS has no record of him being employed by AFS or any relationship with AFS.”

Notably, two of three references on Stanley’s application were his relative, Hendrick, and a man named Sidwell Phutheho. The latter has listed his positions on LinkedIn as chief operating officer of BBT and an executive director of Bertobrite, another of Hendrick’s companies, directed by his wife.

According to recruitment records and the city official, Stanley’s position was newly-created before he applied for it.

Internal documents show that in 2014, the administration approved a restructuring of the fleet risk and compliance section, with the role that Stanley would get, director of performance, monitoring and compliance, at the top of the new organogram. The title “director of contracts”, which the city also calls him, appears to be shorthand.

The role would have ultimate oversight of about 36 staff in two sub-divisions – fleet help desk and compliance, and fleet risk and project reporting. 

Soon after the date Stanley was set to begin his new job, the first of a wave of lucrative contracts came the Kganyagos’ way. 

In April 2016, the city awarded an automotive glass fitting contract to Bertobrite, the company directed by Hendrick’s wife. Stanley is unlikely to have been involved in the tender process given the timing of his appointment, but his position would likely have given him responsibility for contracting Bertobrite and overseeing it.

In February 2017, Hendrick scooped another big contract, this time via his company Bulldozers Trading, to provide maintenance services to the city’s vehicles for 12 months up to a maximum value of R32.9-million.

The fee would include a management fee of R551.90 per month per vehicle for managed maintenance, which entails liaising with repair shops, handling payments and keeping a maintenance database, among other things.

There were glaring problems.

For starters, the contract agreement, signed by Hendrick on behalf of Bulldozers and a joint venture partner, made it clear that “the work to be provided by the service provider… will be supervised by the City’s Contact Person and/or Contract Manager”.

As contract manager, it listed none other than Stanley.

The service provider, Bulldozers and its joint venture partner, was to be represented according to the agreement by Phuteho, the executive of Hendrick’s companies who Stanley listed as a reference when he applied for the city position the year before.

So Stanley was to supervise his relative’s company, and his direct counterpart would be the very person who he said would vouch for him.

Then, there was the issue of Bulldozers’ joint venture partner, which the agreement identified as Transit Solutions. Hendrick signed the agreement on behalf of both parties, claiming to be “duly authorised”.

Transit Solutions, however, denied any knowledge of the contract. In response to questions, it said:

“We can again confirm that from Transit Solutions’ side, Transit Solutions never consented to be part of any Joint Venture with Bulldozer and we never gave any party permission to use the company’s name in the context referred to.”

Records show the city paying Bulldozers at least up until mid-2018, well beyond the contract duration, by which time the running total was R43-million. 

The city official claimed that the money was just “given away”, because the contract replicated the fleet division’s core functions.  

One industry insider told amaBhungane that the supplier of fleet vehicles also often managed maintenance. In Tshwane’s case, three fleet companies provide vehicles. 

A mayoral committee report of January 2018 states: “In 2016 the City awarded the CB54 [fleet] contract to three service providers… These service providers were appointed to primarily provide Full Maintenance Lease (FML) vehicles as well as Managed Maintenance (MM) services.”

The report contains this input from the city’s chief financial officer: “The ‘Managed Maintenance’ is not necessary. The City officials can perform the services that are provided by these service providers.”

Put differently, Bulldozers provided a service, at great expense, that it appears vehicle providers were also supposed to provide – and that according to officials, the fleet directorate itself could have provided.

Hendrick hit another jackpot when a fleet division contract for vehicle tracking, which Stanley would have been charged with overseeing, passed from fleet company Afrirent – a company with EFF links that amaBhungane has written extensively about in the past – to Bertobrite. 

amaBhungane has seen internal correspondence suggesting that Afrirent was underperforming on the contract, in terms of which it was supposed to monitor and track vehicle usage, fuel consumption, driver behaviour and vehicle movements. 

A report noted that Afrirent’s contract, awarded in July 2014 for three years, had been extended for six months up to the end of January 2018.

Sometime after that, the role was passed on to Bertobrite using regulation 32 – a process that bypasses a competitive bid by “piggybacking” on another government entity’s existing contract. amaBhungane has written previously about the widespread abuse of regulation 32.  

Again, there is nothing to suggest that the conflict of interest – with Stanley overseeing fleet division contracts with companies connected to his family – was recognised, let alone that steps were taken to manage it.  

The Municipal Systems Act, which governs the conduct of municipal officials provides: “A staff member of a municipality… may not take a decision on behalf of the municipality concerning a matter in which that staff member or that staff member’s spouse, partner or business associate, has a direct or indirect personal or private business interest.” 

The Act goes on to state that: “A staff member of a municipality who, or whose spouse, partner, business associate or close family member, acquired or stands to acquire any direct benefit from a contract concluded with the municipality, must disclose in writing full particulars of the benefit to the council.”

When amaBhungane asked the city if Stanley had disclosed his links to Hendrick, it was among the questions it referred to him. It did not address a question about the conflict of interests inherent in having two relatives on different sides of a contract. DM

* For clarity, we used first names when referring to the two Kganyagos. No disrespect is intended.

The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB  Supporter to help us do more. Sign up for our newsletter to get more.

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