The UK says it raised concerns around the “grave reputational damages” Bain and Company committed and that the ban was the result of Bain’s “despicable” role in South Africa’s biggest post-apartheid corruption scandal.

According to Jacob Rees-Mogg, UK Cabinet Minister responsible for Brexit Opportunities and Government Efficiency, “After reviewing Bain’s role in alleged state capture and corruption by the former government of South Africa, taking account of the evidence and conclusions of the South African Government Commission, the Minister for Government Efficiency considered Bain to be guilty of grave professional misconduct. We have consequently excluded them from competing for Cabinet Office contracts for a period of three years.

“This decision has been taken in light of Bain’s responsibility as a global brand for its South Africa division and the company’s failure to clarify the facts and circumstances of its involvement.”

Bain & Company, which took out adverts in the South African media to apologise for its actions, featured prominently in the State Capture Commission report because it committed a series of irregularities at the South African Revenue Services (SARS). The ban was implemented amid the repayment of the fees to SARS, where they are alleged to have wreaked financial havoc over the restructuring process.

Former British MP Lord Peter Hain has said that the fight to ostracise the giant consultancy group would now proceed to the United States who will be requested to implement similar sanctions. 

Big corporates often attempt to pay penalties and move on. Conversely, if the wrongdoing had not been detected the wrongfulness, knowingly, would continue without any reduction in intensity or strength.

For example, in South Africa it was not long ago that the Department of Water and Sanitation entered into a settlement agreement with System Application Products (SAP). In this case SAP would repay the department an amount of R413-million of the R1,036-billion contract value pursuant to the 2015 and 2016 software licence and support contacts. 

The parties apparently agreed to a settlement agreement upon realising that the proceedings would bring protracted litigation with little prospects, if any, of recovery. 

The Department, for its part, boldly sent a message that it would discipline its own officials who had been implicated.

But disciplining implicated officials is not sufficient. Stern action must be taken especially where intent is established. The legislation should also be tightened.

Settlement agreements, by their nature, result in less punitive measures. Once caught, the implicated person may likely raise a settlement agreement as a remedy, if successful, that’s the end of the litigation process.

This is why the courts in South Africa have a duty not to adopt a mechanical approach to granting an order by agreement between the parties. They must ensure that such orders are legally competent and proper and relate directly or indirectly to the issues between the parties.

This approach was confirmed in the Constitutional Court ruling on the matter between the Buffalo City Metropolitan Municipality v ASLA Construction (Pty) Ltd where the Court held [at paragraph 25] that:

“There are sound reasons why a Court should carefully scrutinise a settlement agreement before making it an order of Court. Once a settlement agreement is made an order of Court, it is interpreted in the same way as any judgment or order and affects parties’ rights in the same way.”

The Court further cautioned parties against courts being approached to make a settlement agreement an order of court without being in a position to pronounce on its legality [at paragraph 31].

A court can only make an order that is competent and proper and in accordance with the Constitution and the law.

Settlement agreements need careful scrutiny before being made an order of the court.

Approach of the Special Tribunal

The Special Tribunal followed the Constitutional Court’s approach in the case concerning a declaratory order brought before it by SIU against Aventino Group (Pty) Ltd. The SIU’s founding affidavit alleged that Aventino fraudulently made misrepresentations to the National Housing Development Agency and obtained a R15-million contract to build shacks in Talana, Limpopo. The SIU agreed to the settlement agreement proposed by Aventino.

The Special Tribunal directed the SIU to depose an affidavit setting out the factual and legal basis on which the terms of the agreement were reached and that the SIU had correctly applied its mind to those terms. The settlement agreement is still to come before the Special Tribunal to be made an order of court.

Role of public officials

One lesson from state capture is that it’s clear that consequence management needs to be strengthened and applied against erratic public servants, especially those involved in awarding these contracts.

Annually, the Public Service Commission and the Auditor General release reports of officials who do business with the State. But one wonders about the impact this has on these wayward officials as they can simply resign upon being caught out and the irregularity ends there.

Some avoid liability by registering companies using their families’ details as proxies to earn state contracts.

It is therefore encouraging to see the legal trend where the pensions are being frozen and, in the event that the outcome of an investigation confirms the irregularity, the money is declared forfeit to the State. More such actions are required for South Africa to be on the right trajectory in the fight against State corruption.

For example, on 8 August 2022, the Special Tribunal interdicted Transnet Retirement Fund from releasing R1,8-million in pension benefits to Zakhele Thabo Lebelo, former Transnet Group Executive responsible for Property Management. Lebelo, cited in his personal capacity and as a co-trustee of the Thabo Lebelo Family Trust, is alleged to have benefitted unlawfully and irregularly from the service providers to whom he awarded contracts for rental ventures. He resigned with immediate effect when confronted with the charges.

His colleague, Phathutshedzo Mashamba, who is the Regional Manager for the Carlton Management Centre, is on suspension pending the investigations by Transnet. The duo is understood to have been instrumental in awarding and administering several leases on behalf of Transnet.

The application for civil proceedings against Lebelo and Mashamba relates to the disgorgement of secret profits they earned from Superfecta Trading 209 CC (a supplier to Transnet Property) and BBDM Bros Advertising Agency (a tenant of Transnet).

Between 2016 and 2018, Superfecta allegedly earned R64-million in payments from Transnet as a result of its business with Transnet Property. BBDM was paid tenant installation allowances totalling more than R73-million between 2015 and 2016.

Through these secret payments, Lebelo and Mashamba allegedly purchased, in cash, exclusive apartments in Rosebank and Dainfern, Johannesburg.

Also cited in the papers are their spouses and members of the Thabo Lebelo Family Trust. The wives of Lebelo and Mashamba are alleged to have been conduits of these secret deals between their husbands and channelled the money through the Family Trust.

Still at Transnet, Herbert Msagala, former Group Executive for Capital Projects at Transnet,was ordered by the Court to pay back an amount of R26,4-million after being found guilty of accruing ill-gotten gains while employed there. Msagala was the project manager of the New Multi-Product Pipeline – the high-pressure transportation system for liquid petroleum products from Durban to Heidelberg in Gauteng.

The Court found that Msagala had acquired secret kickbacks and gratification in the form of cash and different bank accounts, some belonging to his children. He had also purchased five properties – two houses in Gauteng, two houses and a farm in the Free State – most through cash payments:.

At Eskom, former Senior Manager for Coal Operations, Petrus Shaka Mazibuko, was ordered by the Special Tribunal to repay an amount of R11,5-million. Mazibuko is alleged to have overseen the awarding of contracts to a company with links to his brother. Payments to his brother found their way back to him.

After being found liable for the financial irregularities, including failure to declare his business interests and potential conflict of interest, Mazibuko approached the Supreme Court of Appeal. He awaits his prospects.

Should South Africa, at some point, adopt the approach followed by the UK in Bain of banning corrupt companies from doing business, corruption will not thrive. The individuals in positions of influence will stop using their influence to entrench corruption.

The rampant looting endured during the Covid-19 pandemic is an illustration of the lack of ethical means among some of those charged with the responsibilities to oversee the state coffers.

It is therefore pleasing to note that Justice and Correctional Services Minister, Ronald Lamola, has commenced with the process of driving legislative amendments on the SIU and the Special Tribunal Act 74 of 1996. The draft amendment should be ready for presentation to Cabinet in September.

The Executive should endeavour to ensure that the provisions of the Public Finance Management Act are known by all the Departments and State Owned Enterprises. This will curb the disease of officials stealing from the same departments where they are employed. DM/MC