Molelwane Consulting is the textbook definition of a shell company – it had virtually no money in its account, and then it received a large payment without clear evidence of work done.
This was one of the pieces of evidence which was presented at the recent Judicial Commission of Inquiry into Allegations of State Capture involving EOH.
EOH has been dogged by corruption scandals for years which led to the appointment of Stephen Van Coller as CEO to “professionalise the company” in September 2018.
Upon his arrival, he initiated numerous interventions to address corruption at the company, which included broadening the scope of ENSafrica and ENS Forensics’ investigations.
The investigation uncovered evidence of governance failings and suspected wrongdoing at EOH, including unsubstantiated payments, tender irregularities, and unethical business dealings.
In his testimony at the Zondo Commission, Van Coller said the potential irregular payments at EOH currently stand at R865 million.
Some of these payments involved Molelwane Consulting, a company linked to City of Joburg mayor and ANC regional chairperson Geoff Makhubo.
During his testimony, Steven Powell, managing director of ENSafrica’s forensics department, shed light on Molelwane Consulting.
Molelwane Consulting was owned by Makhubo and his wife Florence Matlakhala Makhubo. He resigned as a director of Molelwane Consulting in 2019.
Another prominent company in the investigation is Mfundi Mobile Networks (Mfundi) which had a SAP Services support agreement with EOH Mthombo.
Although Mfundi received large payments from EOH, there was no clear evidence of the projects and deliverables of the service provider.
Mfundi Mobile Networks and EOH made large payments into the Molelwane Consulting bank account, which followed a similar trend.
- It had a balance of just R621.45 when a payment of R80,000.00 came in.
- It had a balance of only R597.45 when it received a payment of R100,000.00.
- It had a balance of R63.19 before it received a payment of R200,000.00
- It had a balance just R617.77 before it received a payment of R50,000.
In all these cases the account was virtually depleted before a big payment was made to Molelwane Consulting.
It is telling that Molelwane Consulting had basically no money in its account to perform duties for which it was employed by EOH.
With such a low balance it is also questionable whether it could show sound financial management and accounting to be trusted.
Powell confirmed Judge Raymond Zondo’s observation that there was a pattern where the account was topped up when it was very low.
Flags raised about Mfundi Mobile and Molelwane Consulting
Powell’s evidence further pointed to Mfundi Mobile being used as a front company which was used to extract money from the City of Johannesburg.
He said EOH paid Mfundi Mobile over R34 million for purported work on public sector projects where they could find no evidence that any work was done.
Once Mfundi Mobile received payments from EOH it would make large payments to Molelwane Consulting.
Molelwane Consulting, in turn, was contracted by TSS (now EOH Africa) to provide business development and advisory services.
Just like with Mfundi Mobile, Powell said they could sometimes not find evidence that work was done for these large payments.
The combination of a lack of evidence of work done and large payments being made into an account with a very low balance is a textbook definition of a shell company.
A shell company is an inactive company which is used as a vehicle for financial manoeuvres, like money laundering or channelling money to a specific source.
It allows fraudsters to conceal ulterior motives, conceal the origin and flow of monies, and hide the destination of ill-gotten gains.
In this case, Molelwane Consulting and Mfundi Mobile were allegedly used to receive money from EOH in return for lucrative tenders.
Powel said their evidence points to a textbook case of quid pro quo involving Molelwane Consulting and Mfundi Mobile.
“What we have seen is a pattern of regular solicitation of donations coupled with the awards of tenders.”
He provided an example of a City of Joburg tender, embedded below, which shows the payments to and from the two companies mentioned in this article.