The Mathenjwa story (Part Two): Broken trust at the Mvula Trust
In ‘Community Work Programme agent gave 300 contracts to brother’s company’, we reveal how a Community Work Programme agent handed R32m in government contracts to her brother’s company. We also told you she did something similar before. Here’s what happened.
Umgeni Water chairperson Gabsie Mathenjwa was previously called out on a deal that saw large amounts of Community Work Programme (CWP) cash channelled to a company she had recently come to own.
That deal, in 2012, has come back to haunt her via a R20-million civil claim.
Mathenjwa is contesting the claim, but the backstory of the dispute calls into question her version that she did not know there was a conflict-of-interest problem with the scheme she set up with her brother in 2018, which we exposed in Part One.
The 2012 affair reverberated inside the department of cooperative governance and traditional affairs (Cogta). It raised questions about why Cogta, the department in charge of the CWP, continued to do business with her.
Pitching to Cogta
Seven years ago, a Corruption Watch report and a Daily Maverick investigation accused Mathenjwa of improperly benefiting from a 2012 CWP contract which channelled government cash to a company, Ubuntu Sima, connected to her and her brother.
Mathenjwa was then a trustee of a prominent non-profit called Mvula Trust.
The CWP provides part-time work and training to 280,000 unemployed people across the country. The R4-billion-a-year programme is run by non-profits that Cogta appoints as its agents.
Back in 2011, Mathenjwa’s brother, Phiwisipho Mathenjwa, was the programme manager at a close corporation called Ubuntu Sima Trading.
He and Ubuntu Sima’s then-owner approached Mvula with an idea for Mvula to bid and be appointed a CWP agent.
Ubuntu could not bid itself because it was a for-profit company and only non-profits like Mvula were eligible.
Part of the pitch was that Ubuntu Sima had a cashless payment system that Mvula could use to make wage payments to CWP workers.
Ubuntu Sima would also write most of the proposal on Mvula’s behalf.
What Mvula failed to mention in its bid to Cogta was that it had agreed to subcontract the majority of the work to Ubuntu Sima.
The contract that went wrong
In late 2011, Cogta appointed Mvula as the lead CWP agent in Gauteng, Limpopo and Mpumalanga.
According to the Mvula sub-contract with Ubuntu Sima, concluded in January 2012, Ubuntu Sima would be responsible for managing the project; providing, managing and distributing wages to participants; managing subcontractors; and writing reports.
In other words, although Mvula would hold the contract and receive a 15% project management fee, Ubuntu Sima would receive 85% of the fee (equating to just under R30-million over three years), to do virtually all the work and control the finances.
Before the agreement with Ubuntu Sima had even been signed, Mvula transferred over R286-million of government funds into Ubuntu Sima’s bank account to pay for work programmes, according to court records.
Company records show that also in January 2012, the original owner resigned as a member of Ubuntu Sima and Gabsie Mathenjwa took over.
This made her the sole owner of Ubuntu Sima, a for-profit company now flush with cash thanks to its partnership with Mvula, where she sat on the board of trustees.
Her brother continued in his position as Ubuntu Sima’s programme manager.
But just a month later, the Mvula board was made aware of Mathenjwa’s involvement in Ubuntu Sima, following a memo sent to the audit and finance committee.
Mathenjwa’s version now
When asked about that old conflict of interest, Mathenjwa said the Mvula chief executive was aware of it from the start: “I was conflicted from day number one. I was brought in as someone to do business with Mvula. But the way we looked at it, it was not conflict, it was the way this organisation was supposed to be,” she told us during a recent interview.
She explained that skills and knowledge of the sector were scarce.
She said her job at Mvula – first as a consultant in 2006 and then as a board member from 2008 – was to find new projects for the non-profit.
Her solution was to suggest partnerships between Mvula and her own for-profit companies: First, Gabsie Business Solutions and later Ubuntu Sima.
“There was never a day in my life at Mvula that I was not conflicted. It was something they brought me to do. So, I cannot highlight opportunity as a conflict … It was the way Mvula operated.”
“Maybe the way the organisation thought of it then, is not how we do it now,” she added.
An early Mvula board charter dating back to 2006 made provision for trustees’ companies to work with the non-profit because of their “special knowledge, skills and experience”, provided “their personal interests at no time conflict with their fiduciary responsibilities”.
From Mvula’s records, it is clear that other board members also took advantage of this clause, but not to the same extent.
But it is also clear that, for some on the Mvula board, Mathenjwa’s involvement with Ubuntu Sima was both news and a conflict of interest that they thought went beyond acceptable bounds.
By March 2012, Mvula’s then chief executive had resigned and minutes from a special board meeting in April 2012, which amaBhungane has seen, indicate that Mvula trustees unanimously agreed that Mathenjwa should resign too.
Two legal opinions from separate law firms completed in May 2012 also suggested Mvula remove Mathenjwa as a trustee and cancel its contract with Ubuntu Sima.
According to one of the legal opinions seen by amaBhungane:
“Therefore, despite the fact that on the surface of its contract between Mvula Trust and Ubuntu Sima may appear lawful, it appears the purpose of the contract was unlawful and therefore renders the contract voidable at the instance of Mvula.”
Mvula chair Rejoice Mabudafhasi, then deputy water and environmental affairs minister, wrote to Mathenjwa asking her to resign in June 2012 on the grounds she had breached her fiduciary duties.
Mabudafhasi cited: “Your knowledge of the use of Mvula Trust as a front for Ubuntu Sima in obtaining the contract and failure to declare [a] conflict of interest in line with article 9.3 of the Mvula Trust Deed and Ubuntu Sima representing itself as Mvula trust to get the Community Work Programme contract”.
However, Mathenjwa wrote back that the “charges were never factually substantiated” and were “based on contorted and fabricated information”.
She was supported by Mvula then-new acting chief executive Silas Mbedzi who, in a memo to the board of trustees in June 2012, argued that asking her to resign “is too extreme”.
Mathenjwa defended herself at a subsequent board meeting in July, which saw three Mvula trustees resign – but not Mathenjwa.
Cogta had, however, heard of the issue and acted.
In September 2012, Cogta then deputy director-general Ricardo Hansby wrote to Mvula asking the non-profit to terminate the contract within seven working days.
He noted: “The close to wholesale outsourcing of Community Work Programme management by Mvula Trust to a third party and, in particular, a private company can be considered to undermine the norms and standards of the Community Work Programme which Mvula Trust contractually agreed to and could be in breach of the contract with the Department.”
By January 2013, Mvula found itself facing public scrutiny about its dealings with Ubuntu Sima.
The Mvula annual report for 2012/13 later disclosed the non-profit had done millions of rands of “related party” business with Mathenjwa under the banner of Ubuntu Sima – some R10-million in the 2012 financial year and nearly R9-million in the 2013 financial year.
According to reports at the time, Mvula admitted Mathenjwa had declared her company’s role verbally, but only after the tender was awarded.
Initially, Mvula acting chief executive Mbedzi backed her, saying the problem lay with vague disclosure rules. He also attempted to play the race card.
In written answers to questions in 2013, Mbedzi said: “Necessary declarations were made and the board ratified the matter …
“The Mvula Trust is aware that about 4 former trustees and 3 ex-employees (all White members for ease of reference) approached the following organisations, namely the Hawks, police, corrupt watch, Department of Water Affairs, Department of Cooperative Governance, The Presidency and other organisations with allegations of corruption [sic].
“We are also aware that they have been told that there is no case. However, we have not been officially contacted by the police.”
But at some point, Mbedzi’s attitude hardened towards Mathenjwa.
One former trustee told amaBhungane: “The police and the Hawks started asking questions and going into the offices. This unnerved people and they started to fight each other.”
First, Mvula stopped all payments to Ubuntu Sima. Then, in May 2013, Mathenjwa’s brother, Phiwisipho wrote to Mvula, copying his sister and Cogta officials, saying that Ubuntu Sima was suspending all services owing to a dispute over payment.
“There was no money for petrol. There was no money for anything. There was no way we could have worked as money was being withheld. It never got to us. It remained with Mvula,” explained Mathenjwa to amaBhungane recently.
Mbedzi told amaBhungane: “The Mvula Trust was schemed of its money by Ubuntu Sima after they failed to pay participants and participants staged a sit-in at the Mvula Trust, and we decided to pay them from our own funds hoping that Ubuntu Sima will reimburse us.”
Mbedzi appointed law firm Bowmans to prepare a claim against Ubuntu Sima, a decision which was adopted by the board in August 2013. On the same day, Mvula resolved to remove Mathenjwa as a member.
Mathenjwa resigned the same month due, she later claimed, to “work and travel commitments”.
Despite the fact that she hung on for more than a year after first being asked to resign, Mathenjwa now casts her resignation as being in the interests of good governance.
“We did the responsible thing: We went and did a declaration register which had never existed before, and we decided that everyone should start declaring,” she told amaBhungane.
“My resignation was also the promotion of good governance because at that time things had changed and I wanted the best for the organisation.”
A month after she resigned, Mvula filed a section 34 submission with the police. Section 34 of the Prevention and Combating of Corrupt Activities Act requires companies to report suspected corruption.
To date, nothing has come of the case, but the fallout from the Mvula contract has continued to dog Mathenjwa.
On 21 October 2013, Mbedzi delivered a report from Bowmans to the board.
It stated that “a notice of default” had been sent to Mathenjwa “outlining the failure of Ubuntu Sima to account … on how money was spent”, specifically the R286-million Mvula had transferred to Ubuntu Sima in late 2011.
Bowmans alleged that R56.1-million was not accounted for and Mvula lodged a claim for repayment of the amount.
Ubuntu Sima disputed the claim and the matter has still not been settled.
Mvula and Ubuntu Sima entered arbitration in September 2015 with Advocate Terry Motau – writer of the VBS bank heist report – as the presiding officer.
After several delays and attempts to reconcile financial records, Motau found in March 2017 that Ubuntu Sima should return CWP funds totalling R20.7-million to Mvula.
Motau also called for Ubuntu Sima to pay the legal costs of Mvula because Ubuntu Sima’s conduct was “less than satisfactory”.
Mathenjwa did not pay up and in November 2017, Mvula applied to make the arbitration award an order of the court. Later that month, Ubuntu Sima (now renamed Buka Strategic Projects) filed a new motion to have the arbitration award set aside. Mvula is opposing this new application.
Mathenjwa maintains that Mvula is “owed nothing” and claims in her court papers that the arbitration award was unfair.
Cogta seems as hapless as Mvula.
Asked why Mathenjwa was granted a new CWP contract when the department was aware of her role in the Mvula debacle, a spokesperson pointed out that Mvula did not receive a new contract.
When we pointed out that Mathenjwa simply bid under a new non-profit, Insika Foundation, he complained that there was no database to blacklist directors who might bid for contracts under the name of a new company.
As part 1 showed, Mathenjwa, using Insika, subcontracted 311 CWP contracts to a new company set up by her same brother, Phiwisipho.
Seemingly the conflicts-of-interest just go on. DM
Additional reporting by Susan Comrie and Sam Sole
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