Tech giant EOH paid Johannesburg Mayor Geoff Makhubo’s company Molelwane Consulting R570,000 on 30 May 2016, a significant boost to the company’s R268 bank balance.
Makhubo, who was then serving as Joburg finance MMC, took R405,000 of the EOH payment for personal and family expenses. In its books, EOH said the R570,000 was for “ED for City of Joburg”, or enterprise development.
Two days after EOH paid Makhubo’s company, a City of Johannesburg evaluation adjudication committee awarded EOH a R404-million contract to install SAP software. That was just one of a number of questionable payments Makhubo received that appear linked to EOH.
“We will submit that these were ultimately corrupt payments,” evidence leader Matthew Chaskalson SC put to the mayor at the State Capture Inquiry on Monday.
Makhubo maintained the R570,000 payment was legitimate and related to prior work the companies had done together. He claimed that the millions EOH contributed to the ANC’s 2016 election campaign related to standard political fundraising and could not have influenced city tender decisions.
The mayor, testifying in the old Johannesburg council chambers in Braamfontein, said the R570,000 EOH payment related to work Molelwane had performed years earlier with EOH subsidiary, TSS. He could not explain why EOH accounted for the transaction as an enterprise development fee.
Chaskalson asked, “So, R405,000 of what they pay, and characterised as an enterprise development payment on a City of Johannesburg contract, is R405,000 that goes to you and your family. And when I said to you earlier, the most obvious reason for them to characterise it as an enterprise development [expense] is that they thought they were buying your influence. Don’t you think that this reinforces that?”
Makhubo maintained that the payment was related to legitimate business agreements. He called on the commission to question EOH staff to explain their version.
“Your version and your thesis is one thing, but the reality and the proof is here,” said the mayor. “I can tell you that my version is correct.”
Makhubo said he had no influence over city contracts and the municipality had checks and balances in place through its adjudication committees to prevent corruption.
The inquiry has heard testimony from Steven Powell, head of ENSafrica forensic department, which was hired by EOH to investigate corruption claims, that there was no evidence of work done by Molelwane in exchange for the R570,000.
While testifying at the inquiry in November 2020, Makhubo essentially admitted he had lied to the media about resigning from Molelwane when he was elected to the city council in 2011.
In fact, his company continued to receive payments from a deal with Regiments, which has been implicated in multiple State Capture allegations, for work with the city. Regiments paid Makhubo’s company R18.8-million between 2011 and 2016.
Molelwane also received payments from EOH while Makhubo was finance MMC.
“I struggle to understand why you made these statements, which are so clearly false, about your relationship with Molelwane after 2011, and the only conclusion that I can reach is that you knew it was improper to benefit from Molelwane, and your primary income came from parties who were buying their influence from the City of Joburg where you were an office bearer,” said Chaskalson.
Makhubo disagreed and said he had explained he was trying to ensure he got value from his company while aiming to disinvest.
In early 2016, Makhubo, who was the ANC Greater Johannesburg regional treasurer at the time, asked EOH for a R20-million contribution to the party’s local government election campaign. EOH paid almost R16-million towards the ANC’s election campaign through another company, Mfundi Mobile.
Mfundi is run by Makhubo’s tax adviser, Reno Barry. Makhubo’s former business associate and close friend, former EOH business development executive Patrick Makhubedu, appeared to hold sway over Mfundi and directed it to make payments directly to service providers for the ANC campaign.
Mfundi billed EOH for the almost R16-million in payments as cost-of-sales expenses for EOH’s contract to install the SAP software in the City of Johannesburg.
“What the accounting suggests strongly is that they regarded these payments as quid pro quo for the SAP support services contract,” said Chaskalson.
Makhubo was again dismissive, saying he did not know why Mfundi would invoice political donations as an expense for a city contract. Since hearing such evidence in November 2020, Makhubo never asked Mfundi’s leaders about their invoice descriptions.
If EOH and Mfundi were trying to buy Makhubo’s influence, they failed, the mayor said. He said he told ANC donors, “You know that I don’t trade in tenders. I don’t trade in proposals. I’ve never done an award. I don’t do that.”
The mayor was also questioned about a R109-million contract the city awarded to EOH in 2014. That year, Makhubo’s friend and EOH employee Makhubedu paid Molelwane hundreds of thousands of rands, through various entities, and paid millions to fund the ANC at Makhubo’s request.
Makhubo said he and Makhubedu were former business partners and their companies had joint offices in 2014. He claimed Makhubedu would transfer funds when Molelwane had liquidity issues.
In late August 2014, Makhubedu sent Makhubo an EOH business proposal to upgrade the city’s IT infrastructure. Days later, Makhubedu sent an invoice for a R106-million EOH proposal. On 15 September, Makhubedu sent Makhubo a draft letter of award from the city giving EOH the contract to install SAP software, backdated to May 2014.
Makhubo said he often received proposals and emails and ignored his close friend’s emails as they had nothing to do with him. Despite apparently sharing finances and regularly golfing together, the mayor said he never asked his friend why he was sending him updated plans for EOH’s proposed deal with the city.
Chaskalson asked, “Mr Makhubedu had made a series of donations to the ANC in the previous couple of weeks and he had now saved your company, Molewane, from its cash flow difficulties and it was in that context that he thought he might ask your assistance in relation to a pending EOH networking proposal. What’s your comment on that?”
Makhubo responded, “No, Patrick would never do that. We were business partners for a long time. We’ve helped each other for a long time. He would never solicit a tender from me like this or any other way.”
Chaskalson said, “I am going to submit that the most plausible reason why there wouldn’t have been any response to these emails in 2014, and there wouldn’t have been any attempt to engage Mr Makhubedu about these emails now in 2021 and last year in 2020, is that you knew exactly what Mr Makhubedu was asking of you and you were willing to provide what he asked of you.”
“I deny that and I think that it’s a very, very wrong proposition,” said Makhubo.
Makhubo is leading the ANC’s campaign in Johannesburg ahead of the October 2021 local government elections.
Former Eskom executive Matshela Koko was scheduled to testify after Makhubo on Monday evening.
Former minister Malusi Gigaba’s estranged wife Norma Mngoma is scheduled to return to testify on 20 May. Former Transnet CFO Garry Pita is due to testify the same day and Gigaba is due to testify on 21 May. DM
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