Oliphant in the room - minister covered up for adviser using Nedlac funds to fuel shopping sprees

Labour Minister Mildred Oliphant has kept secret a forensic audit report that found her adviser, Herbert Mkhize, had ripped off the government-funded Nedlac labour council by more than R1-million.

Besides racking up huge bills on travel and car hire, the report said, Mkhize used his Nedlac credit card to buy household goods at Makro such as nappies, power tools, boxer shorts, toilet paper, pillowcases, dog food and even a High School Musical DVD.

Despite the damning findings, Oliphant continues to employ Mkhize at taxpayers' expense.

At the time of the unauthorised expenditure, Mkhize was earning more than R800000 a year as executive director of Nedlac (the National Economic Development and Labour Council), which acts as a negotiating forum between the government, labour and big business.

The report, which has now been handed to the Hawks, paints a picture of decadence, greed and corruption by Mkhize and the man who was supposed to check spending at Nedlac as chief financial officer, Umesh Dulabh.

Both, who have since left Nedlac, refused to co-operate with auditors probing their expenditure.

The findings, by chartered accountants AFCA & Partners, have been kept hidden from the public until now because everyone who had sight of the report had to sign a confidentiality agreement. It was finally obtained this week by DA MP Ian Ollis under the Promotion of Access to Information Act.

The report recommends that police charges and civil claims be instituted against the two men. It found that:

• Mkhize must repay R35000 spent as an "allowance" during an unauthorised visit to the US;
• Mkhize must repay R62200 "borrowed" illegally from Nedlac;
• Mkhize must pay income tax on a total of R146000 identified as interest-free loans to him from Nedlac;
• Mkhize must repay R133000 incurred irregularly on air travel; and
• Mkhize must repay R309000 illegally paid to him for wrongly accrued leave.

The audit report, which raises serious misgivings about claims by Mkhize following the loss of computer equipment because of a "burglary", also finds that:

He spent R168000 on his Diners Club card, including R21000 at Makro on household goods. He also used the Diners Club card to pay for travel by his wife, to the tune of R9000;

Items purchased at Makro include car accessories, power tools, soccer balls, nappies, toilet paper, rice, pillow cases, dog food, cat food, boxer shorts, female hygiene products, a desk and chair, car cleaning material and the Disney DVD. The audit report says this could not possibly have been for anything but personal use; and

Mkhize bought an Azzaro suit for R2800 and a shirt for R650 on the Diners Club card.

The report says that, after resigning from Nedlac, Mkhize spent R12200 on car tyres and R1899 on items from the Ferrari Shop. He also spent R431000 to rent luxury cars to travel mostly around Johannesburg. He spent R269000 to rent cars outside office hours, on weekends, and used company funds to pay R19000 in traffic fines and damages.

The report is damning of Dulabh's performance as CFO. It finds that he "appears to have been primarily responsible for the failure to adhere to the required policies and procedures" and "withheld financial information from the audit and finance committees". The report finds that Dulabh:

Flew business class to the value of R19000;

Used a Nedlac car and petrol card for private travel;

Withdrew R36000 in cash from his unauthorised Nedlac Diners Club card and spent R399000 at Makro. Of this, R61000 was spent on a "huge array" of personal items. These included soft drinks, an air compressor, a weed killer, Disprin, Panado, milk, toilet paper, dinner plates, coffee, tea, batteries, a dinner set, sweets, an urn, a hand trolley, a DStv decoder, a DVD player, an external computer hard drive, alcoholic drinks, dog food, washing powder, a lot of Red Bull, a peeler, a vacuum cleaner, cups, saucers and a CD,Learn Zulu.

The report says Mkhize and Dulabh jointly charged R186 000 to unauthorised petrol cards.

Answers

Sithembile Tshwete, the Department of Labour's spokesman, agreed to answer questions on behalf of both Oliphant and Mkhize.

In response to nine written questions, Tshwete confirmed that Mkhize was still employed as a special adviser to Oliphant as he has been since 2011 and did not want to divulge his salary.

Because Oliphant (above) became aware of the findings against Mkhize only in 2012, Tshwete said, a question on whether the appointment was prudent was "not applicable".

Tshwete said Oliphant had no input in deciding that the contents of the forensic audit report should remain confidential. Therefore, a question on whether she thought confidentiality was justified was "not applicable".

Asked whether Mkhize had paid back any of the money, Tshwete said that some assumptions, allegations and findings were disputed, and therefore not necessarily valid.

Nedlac could not be reached for comment on Friday, but in a covering letter to the forensic audit report given to Ollis, acting executive director of Nedlac Mahandra Naidoo says the matters contained in the forensic audit report have been reported to the police, in terms of the Prevention and Combating of Corrupt Activities Act.

Naidoo writes that "the systemic financial, managerial and organisational problems" are being addressed and Nedlac "has now put in place a range of finance and procurement policies that were previously lacking".

He says members of Nedlac's constituencies had questioned the validity of some of the allegations, assumptions and findings in the forensic report including whether Mkhize's overseas trips were unauthorised.

"It appears that the investigators were hampered by a lack of documentation at the time, which resulted in assumptions being made," Naidoo writes. He says the findings of the reports should not be treated as "necessarily true or valid".

All attempts to reach Dulabh failed.

Taxpayer's Expense

Ollis said Mkhize and Dulabh enriched themselves at the taxpayer's expense.

"Reading the list of items purchased on the Nedlac Diners Club cards is amusing until you realise that poor taxpayers funded trips for the executive director's wife, nappies for children, car tyres and services for private vehicles, lubricant, groceries and the like.

"It is unacceptable that an individual engaged in systematic self-enrichment and shopping trips at taxpayers' expense is still being protected by the minister," he said.

It is clear from the report that Mkhize and Dulabh defied the forensic investigators' best efforts to speak to them on the findings.

They tried to secure interviews with Mkhize on October 10 and 12 2012, finally settling for October 29 - only to have Mkhize inform them that Oliphant needed him in Cape Town on that day.

After numerous attempts to contact Dulabh, they received a call from him in which he indicated that he only returned the call because he thought it was for a job interview. After promising to reply, he had not replied to the forensic investigators.

Oliphant was contacted by the forensic investigators in 2012 but referred the matter to senior officials. When probed on the matter by the DA in parliament in December last year, she refused to say who her special adviser was.

joubertj@sundaytimes.co.za