Embarrassed Sasol axes shady BEE partner

04 August 2013 - 13:04 By Stephan Hofstatter and Mzilikazi Wa Afrika
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A file photo of a Sasol Gas plant.
A file photo of a Sasol Gas plant.
Image: Sunday Times

Petrochemical giant Sasol has pulled the plug on a shady empowerment deal with union boss Simon Mofokeng and wife Maureen after Business Times exposed how they used fake documents to clinch contracts worth over R300-million.

But this still leaves questions unanswered, including how Sasol could have done business with Mofokeng's company for 13 years before uncovering the deception.

Sasol confirmed this week it would report a case of fraud to the police, which means the Mofokengs are likely to face charges along with their financial director, Vusani Moyo.

Simon Mofokeng is the general secretary of Cosatu-affiliated Ceppwawu (Chemical, Energy, Paper, Printing, Wood and Allied Workers Union) - a serious conflict of interest, as Ceppwawu has a major presence at several of South Africa's top listed companies, including Sasol.

Sasol, which is listed on the JSE and the New York stock exchange, said on Wednesday it had cancelled its coal-handling contract with Khotso Batho "with immediate effect" for issuing "fraudulent letters of good standing to Sasol".

"Sasol is not immune to corruption, but in instances such as this, where acts of fraud are identified, we will act swiftly and decisively," said Sasol CEO David Constable.

The scandal has also sparked a major overhaul of Sasol's procurement processes to make it harder for contractors to get away with fraud. It also launched an internal probe into the role of Sasol staffers, including the likelihood that they had failed to act against Khotso Batho despite being given evidence of wrongdoing.

"Any member of staff found to have knowingly facilitated a corrupt or noncompliant relationship with this service provider will face disciplinary action," said Constable.

Well-placed sources told Business Times previously that Mofokeng had enjoyed a close relationship with Sasol top brass, including former Sasol Mining MD Hermann Wenhold, who is now group safety manager.

Sasol declined to confirm whether Wenhold or other senior executives were under investigation.

The company said its mining operations had not been affected by cancelling the contract as other arrangements had been made.

"All coal-handling services remain on schedule and in accordance with Sasol Mining's specifications," said spokesman Jacqui O'Sullivan.

Sasol's decision effectively shuts down Khotso Batho as it has no other contracts. It also means its 72 workers at the Sasol Secunda plant will lose their jobs, although they could be absorbed by Sasol.

O'Sullivan said: "These nonmanagement employees will be the unfortunate victims of Khotso Batho's fraudulent actions.

"These employees would be welcome to apply for any of our current vacancies within the Sasol Mining or the general Sasol environment, depending on their skills and expertise," she said.

Business Times has learned that Khotso Batho has failed to pay the workers their outstanding salaries or severance pay, and refuses to issue their UIF forms, which means they won't be able to claim unemployment payments from the state.

Despite this, the company is trying to resurrect itself by transferring its plant equipment to another Mofokeng entity called Kiaranet.

Internal correspondence shows Moyo is trying to register Kiaranet with SARS and the compensation fund to be able to tout for new business from Mpumalanga mining services companies Diesel Power, Sentula and Andru.

A three-month investigation by Business Times previously exposed how Mofokeng used his influence as a union boss to extort special treatment for his company from Sasol, which renewed its contract twice even though it failed to comply with its procurement rules.

These included needing a tax clearance certificate and letters of good standing from the labour department proving Khotso Batho was up to date with payments to the government's compensation fund.

Mofokeng earned a salary of R130000 a month as a Khotso Batho executive while employed as a full-time Ceppwawu office bearer, even though the union does not ordinarily allow its salaried top brass to hold paid outside employment.

Business Times established that Khotso Batho owes the SA Revenue Service at least R22-million in unpaid taxes, has failed to produce audited financial statements in the last three years, and is up to a year behind in submitting its VAT, PAYE and UIF returns.

It has been in arrears with the compensation fund since 2001.

Moyo referred all queries to the Mofokengs, who did not respond to e-mails and messages left over several days.

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