Chapter 23: Mashaba comes to the party
On the morning of 27 September 2017, Herman Mashaba sent a mayoral committee report to his EFF allies, including Julius Malema and Floyd Shivambu, writing in a covering email: “As the Mayoral Committee has approved this document, it is a mere matter of process for the board of City Power to convene a meeting and finalise the appointment process. I have made my request known to the relevant individuals that this meeting must now happen at the earliest opportunity possible in respect of the City of Johannesburg’s policies and relevant legislation.”
The document in question was a resolution to appoint Lerato Setshedi, a longtime City Power employee who had headed metering services at the utility, for a five-year term beginning on 1 October 2017. That he was writing this to the national leaders of a rival party outside his coalition was strange enough. Even more eyebrow-raising was Mashaba’s placatory tone. According to Denis Hunt, a DA member, “it was clear that the mayor had gone with the EFF chaps who wanted Lerato”. Another email suggests there may have been a link between the decision to appoint Setshedi and a walkout by EFF members in the city council. In the email, a senior EFF leader asks Mashaba to contact Shivambu about the Setshedi matter and an earlier “conversation about EFF PR councillors walking out of your council sitting today”.
Mashaba appears to have backed Setshedi to get the EFF’s support in council. He needed Malema’s party on side to pass his institutional review – a vital element of his plans for the City, which included introducing broad structural changes and slimming down its bloated management. Pushing the institutional review through the council had already proved impossible, with the previous three sessions collapsing because the ANC walked out and EFF councillors were absent. Mashaba knew that his institutional review was stuck without the EFF’s support.
According to a source with direct knowledge of the haggling between Mashaba and the EFF, the latter was holding the mayor’s agenda hostage in the hope of extracting quid pro quos, such as influencing the appointment of key officials. And Mashaba’s conciliatory message to Malema, Shivambu and others regarding Setshedi’s appointment appears to have come just in time. In council the very next day, 28 September, the EFF flipped and voted with the DA-led coalition in support of the institutional review while the ANC’s members goaded them from the opposition benches. Mashaba’s important policy passed, for the time being, and the EFF would seemingly get its choice as the head of City Power.
Top City Power sources said Setshedi was viewed widely as an EFF appointee. With the new MD ensconced at the utility and EFF members on the entity’s board, the stage was set for what was to follow.
In mid-2020, the media began to report on allegations by an anonymous whistle-blower about tender rigging at City Power. At the heart of the controversy was a City Power employee called Percy Mphahlele, a general manager in charge of capital contracts at the utility. Mphahlele, the whistle-blower alleged, was manipulating tenders in favour of certain companies. Those contractors – three in total – would allegedly channel kickbacks to Mphahlele via third-party companies.
One of those third parties was Anego Africa Power, owned by Moloshi Seanego, a young businessman and business partner to Mphahlele’s 19-year-old son, Prince. Anego’s bank statements from March to May 2020 reflect more than R6-million in payments from City Power contractors, mostly payments in big round numbers. Some of the money – at least R300,000 – was then passed on to Prince’s company, Hlelele Power Projects. In the same period, large sums of cash – tens and even hundreds of thousands of rands at a time – were withdrawn from the Anego account. These included R200,000 withdrawn on the same day that one of the contractors paid in 10 times that amount. At least R2.4-million in the Anego account was channelled into property.
The three contractors had obtained multimillion-rand chunks of a City Power tender for capital expenditure (capex) and maintenance awarded in late 2018. The tender, worth R1.5-billion in total, was split among a pool of service providers and was supposed to run for three years. But it wasn’t long before an unsuccessful bidder, Infinite Blue Trading, cried foul and rushed to court, contending that there were “material irregularities” in the tender that led to it being unfairly excluded.
On 30 May 2019, Judge Roland Sutherland of the Gauteng High Court ruled the tender invalid and set it aside. He agreed that there were “clear irregularities” that gave rise to “a reasonable suspicion of deliberate manipulation of the process to improperly exclude the applicant, and perhaps others too”. He ordered a re-evaluation of the bidders while those who held the flawed tender continued to perform their work for up to 90 days. In addition, the matter had to be brought to the attention of the City Power chief executive officer and the mayor.
The judgment then led to a long and grinding court process that included the “unconscionable dragging of feet on the part of City Power”, as a later and far more damning judgment put it in September 2020. By then, the headache had been passed on to Judge AJ Snyckers. This was nearly two years after the tender had been awarded, by which time the case had taken on “disconcertingly grotesque proportions”, as Snyckers put it.
City Power had repeatedly failed to reissue the tender within the prescribed deadlines, rushing back to court each time to extend the deadline at the last minute. The terms of the unlawfully appointed contractors were also extended as they continued to profit from what City Power eventually conceded was “deliberate manipulation” of the bids.
City Power and its head, Lerato Setshedi, had also ignored the initial order to investigate the tender. In response to their attempt to explain their failure, Snyckers wrote: “It would be difficult to achieve a more minimalist rendition of an account, in the style of Ernest Hemingway, with fewer facts contained in seven sentences.”
Snyckers slammed City Power for conduct that “[bordered] on the contemptuous”, but reserved the fiercest criticism for Setshedi. His failure to investigate the alleged fraud was “either cavalier and brazen disregard” for the order to do so, “or trepidation at what a proper investigation and report might reveal”. Following Snyckers’s 2020 judgment, Setshedi – who was already on special leave as City Power reluctantly investigated him – faced a legal fight to stay out of jail for contempt of court.
Among the numerous companies that got a share of the rigged capex and maintenance tender was F&J Electrical, which was also implicated in Mphahlele’s scheme by the whistle-blower. City Power became a milch cow for F&J, owned by Freddie Raphahlelo. Just one month after bagging its share of the capex and maintenance tender in November 2018, Raphahlelo’s company won another tender of unspecified value, this time for a metering project.
But the big-ticket item came in March, when F&J was awarded a “turnkey” contract for electrification worth a hefty R229.5-million, much of which was subcontracted to other companies, including the three that paid the apparent kickbacks. An audit conducted years later found that payments by City Power to F&J amounting to nearly R12-million were irregular and should be “written off”, but in the meantime, F&J and the subcontractors were happily feasting at the City Power trough.
On 13 April 2019, less than a month after F&J had received its electrification tender, it paid the Malema-linked Santaclara R200,000. Then, just over a month after the company had won a separate tender for LED streetlights in May 2019, a further R400,000 popped into the Santaclara account. This time, however, the money came from Baberwa FC – a third-division soccer club based in Gauteng. What did an obscure soccer club have to do with City Power, its contractors and multimillion-rand electricity tenders?
Journalists at the Mail & Guardian linked Baberwa FC to Anego – the company that was reportedly at the heart of Mphahlele’s scheme, and which had received the alleged kickbacks from the three contractors. The link was a small payment of R10,000 that Anego made to a staff member of the soccer club. The club’s chairman, Joe Seanego, was a City Power employee related to Anego’s Moloshi Seanego.
At the time, Joe denied any knowledge of Anego Africa Power but did confirm that he had known Mphahlele senior and junior for a long time. According to the whistle-blower, Percy Mphahlele of City Power and F&J’s Raphahlelo were “silent partners” in Joe Seanego’s soccer club, and indeed, the club’s current and former directors include someone with the surname Mphahlele and a Raphahlelo.
City Power internal records show that while Joe was a City Power employee, he had even approved payments to F&J in relation to older contracts. Not long after his football club had paid Malema, however, Joe was “challenging his dismissal for gross negligence” in connection with other City Power contracts, the entity’s annual report for 2020/21 notes. By that time, City Power’s head, Setshedi, had also been removed. To some, it looked like an attempt to clean up the corruption festering within City Power.
But Malema had already seemingly raked in rents. An elaborate racket involving City Power officials colluding with favoured companies had squeezed money out of a vital City entity, with large sums channelled back to those officials along with a cut for Malema, their political protector. Vital to all of this was the unwitting assistance of a mayor who the EFF had not long before said they could never work with. DM