A storm is brewing inside state owned entity (SOE) Broadband Infraco but this time the office of the president, the public protector and the auditor general have all been dragged into the turmoil.
In February Moneyweb exposed how Broadband Infraco’s procurement division was in a state of total dysfunction. According to a Deloitte audit report, of its 19 findings 11 were found to have a potential “catastrophic impact” and should be resolved immediately.
In a follow up article Moneyweb revealed that three of the parastatal’s 11 board members holding shares in companies which were awarded contracts by the same institution in which they serve.
The three comprised of non-executives Tumi Magasa, Cornelis Groesbeek and Chairman Andrew Mthembu. Subsequent to the article Moneyweb understands that the shares held by Mthembu in Nokia Siemens have since been sold.
In addition the Minister of Public Enterprises Malusi Gigaba told Moneyweb that he had requested a copy of the audit report where an assessment would be made and “appropriate action … taken if warranted”.
A few weeks later Magasa and the former CEO Dave Smith resigned, apparently due to “personal reasons”.
Unlike Magasa, Smith was given the option to stay on until March 15 where he was subsequently replaced by an interim CEO, Dr Andrew Shaw who according to the Ministry was seconded to the entity to ensure “that Broadband Infraco complies with the remedial actions proposed in its recent internal audit report, and supervising and overseeing disciplinary actions against all mentioned in the report”.
Shaw “will supervise the forensic investigation into the affairs of the company, … and undertake commercial and legal due diligence on all major financial contracts conducted during the past two years, and to inform the shareholder [Public Enterprises] and the board accordingly”, read the statement.
The acting CEO responded by taking disciplinary action against employees implicated by the audit findings which led to five final written warnings, three dismissals and a resignation by an employee, who is due to face disciplinary action.
Shaw’s presence has been met with some resistance. According to an anonymous letter (read the letter here) purportedly from a “worried Broadband Infraco employee”, addressed to amongst others the Presidency, Auditor General, Public Protector and Gigaba, employees have allegedly witnessed a deterioration in the operations of the company since January 2011.
“It all started when we all woke up to an article in the paper in which the board and executives were found to have abused their offices for personal gain, since that day, we have seen our fellow employees being victimised, others disappearing, suspended, disciplined and eventually the [former] CEO addressing us in a general staff meeting in which he tired to defend the indefensible…”.
The anonymous letter accuses Shaw of being worse than his predecessor, “Mr Shaw has openly victimised our colleagues … the only person Mr Shaw seems to be listening to is the acting chief procurement manager his friend from Transnet/DPE: Mrs S Chetty. The two together are hell bound to victimise employees and companies alike…”.
The anonymous letter further alleges that more procurement irregularities are taking place under Shaw than under his predecessor.
The strongly worded letter which is littered with allegations and innuendo points to amongst others a company called Eventec which accuses its representative Jack Nel, who provides consulting services of “irregularly doing business with Infraco without a tax clearance certificate”.
The letter further alleges that since the beginning of Shaw’s tenure no single tender has been awarded “without forcing his friends in”. According to the letter, all the contracts under Shaw’s tenure have allegedly been awarded “without any tendering procedure”.
Broadband Infraco has dismissed the allegations saying that the majority of the contents were “factually incorrect and … seemed to be the work of a disgruntled employee/employees”.
Following the letter the company told Moneyweb that “staff have been engaged and made aware of all internal and external developments as well as code of ethics that governs the organisation”.
Broadband Infraco’s spokesperson Thamie Mthembu told Moneyweb that all the consultants who were currently contracted to the company had been appointed within the parastatal’s procurement policies and procedures.
On the allegation that Broadband Infraco contrary to the Public Finance Management Act (PFMA) was conducting business with a company without a valid tax clearance certificate, Mthembu said that as a state owned entity it follows strict processes to ensure that it only deals with companies that are tax complaint and contrary to the allegations he confirmed that “at the time of awarding tenders, all suppliers had valid tax clearance certificates”.
The letter ends by asking for the chairman and the acting CEO to “do the right thing and resign”, a request none of the mentioned parties intend to follow.
Moneyweb has also learnt that Shaw has been threatened seemingly by people working within the organisation. According to Broadband Infraco, “a threatening e-mail was sent to the interim CEO indicating that he should be cautious of the actions that are being taken at the company in the process of implementing changes”.
When asked if Gigaba was made aware of the threats, Moneyweb was told that the parastatals chairman had brought it to Gigaba’s attention and that “all stakeholders were monitoring the situation closely”.
Minister Gigaba’s spokesperson Mayihlome Tshwete however, has denied that the minister knew about the threats against Shaw, but he is aware of the anonymous letter.
Asked if Gigaba would support an investigation by the Auditor General into Broadband Infraco, as requested by the anonymous letter, he said: “The Auditor General is an independent organ of state.
As such, it is the Auditor General’s prerogative to decide which matters to investigate. In the instance where the Auditor General chooses to investigate Broadband Infraco, it is the minister’s wish and fiduciary responsibility to support such investigation into the affairs of not just Broadband Infraco, but the affairs of all state owned enterprises within the department’s portfolio.”
On whether he would investigate the veracity of the allegations set out in the “anonymous letter” Minister Gigaba said he was “awaiting the final audit report” and would act accordingly following the findings.
Moneyweb understands that Broadband Infraco has engaged KPMG as external auditors to conduct a statutory audit on the financial statements and its report will likely be tabled at the Annual General Meeting (AGM) which is scheduled to take place on August 27.
At this point it’s unclear if the presidency, the public protector or other law enforcement will look into the affairs of Broadband Infraco but if any of the allegations contained in the anonymous letter are true perhaps the saviour [Shaw] brought in by the minister was not the right choice, and an appropriate permanent CEO needs to be found as soon as possible preferably someone with a history in rolling out broadband infrastructure.
If however, this is the work of disgruntled employees who have been implicated in the audit report and are afraid of being disciplined, Shaw and his team should take severe action and continue with the clean up process.
Either way stability is required both at managerial level and amongst staff who it is rumoured are leaving the institution in droves hopefully the upcoming AGM will be the catalyst to such stability, we wait with bated breath.