A damning forensic investigation conducted by the department of employment and labour has recommended that Minister Thulas Nxesi institute disciplinary proceedings against the UIF commissioner, the department director-general (DG) and other officials for their role in signing a R5 billion lucrative deal between Thuka Capital Fund and the UIF.

The deal was meant to create thousands of long-term and sustainable jobs and market linkages, and broaden supply chains.

The scheme also aims to redirect workers who have been retrenched into other absorptive industries by analysing their skill levels, retraining, coaching, and creating sustainable businesses, cooperatives and small, medium and micro enterprises, while incubating and holding them in a value chain managed and controlled by the ecosystem.

NO DUE DILIGENCE

The investigation was instituted in December last year after Nxesi invoked a fact-finding exercise in the appointment of Thuja and conducted due diligence to establish whether Thuja had the necessary capacity to deliver on the project. 

The forensic investigation reveals how the department DG, Thobile Lamati, and UIF commissioner Teboho Maruping ignored legal opinions before signing the deal. The forensic report also states that no due diligence was conducted before the multibillion-rand deal was signed.

Last week, Nxesi dismissed Mthunzi Mdwaba, the owner of Thuja Capital Fund, as the chairperson of Productivity SA, an entity of the department.

This week Mdwaba sent Nxesi a letter from his lawyers informing him that his decision to dismiss him was unlawful.

City Press understands that Nxesi appointed law firm N Gawula Inc to conduct the forensic investigation in December last year and a final report was handed over to the minister at the beginning of September. 

Law firm director Neville Gawula confirmed to City Press that his firm of lawyers was appointed to conduct the forensic investigation and handed it to Nxesi.

The forensic report, which City Press has seen, shows that Lamati, Maruping and other officials were interviewed as part of the investigation.

The report reveals that Thuja refused to participate in the investigation and did not allow some of its directors to be interviewed.

City Press understands that Thuja, in a letter dated June 23 this year, communicated to N Gawula Inc that “we will not subject ourselves to any due diligence process post-agreement as we were and have been advised that all processes had been followed by the UIF prior to the signing of the agreement”.

The report states that Thuja Holdings was, according to Companies and Intellectual Property Commission records, only registered and the directors appointed on December 5 last year.

The report further states that Thuja’s listed directors did not have the requisite experience, expertise, capacity or track record to implement the Thuja Capital proposal.

The report states that the labour activation programme national adjudication committee (LNAC) and labour activation programme (LAP) officials had not performed a risk assessment and due diligence on Thuja Capital or Thuja prior to Lamati’s signing the UIF/Thuja agreement.

The report states: 

Furthermore, the Industrial Development Corporation (IDC) had not performed a risk assessment and/or due diligence on Thuja Capital or Thuja, as previously advised by the Auditor General of SA, prior to the DG’s signing the UIF/Thuja agreement

The report also reveals that Lamati and/or Maruping were untruthful during interviews with N Gawula Inc.

“[Through] engagements with the department and the UIF, it is indicative that an actual, perceived and/or potential conflict of interest may exist, involving Mdwaba, in that he is the chairperson of the Productivity SA Board, of which the DG (Lamati) is the accounting authority,” the report states.

The report adds that Mdwaba, as the chairperson of the Productivity SA Board, would have insight and knowledge of the Productivity SA strategies and the entities in distress.

It states: 

The LNAC observed that there is a possible conflict of interest because one of the initiators is the chairperson of the board of one of the entities, the department of employment and labour ... it was an important observation member lifted up for the attention of the delegated authority for consideration in the decision-making process

The report states: “No written declaration, nor any reference [was] made of such declaration in communications addressed by Thuja Capital or Thuja to the department and the UIF.”

IGNORED LEGAL OPINIONS

With regard to Maruping, the report made damning findings that he ignored or discarded internal legal opinions and comments provided by the LAP Unit, LNAC, the department and the UIF chief operating officer offices, the department and the UIF legal services, including external legal opinions.

The report states that Maruping relied on legal opinions or justifications provided by Mdwaba when Mdwaba and the UIF commissioner were unqualified to provide them.

It states that Maruping failed to reasonably take due care and caution in applying his mind to adequately address the comments and inputs provided by the department and the UIF legal services in the draft UIF/Thuja agreement to ensure that all potential risks to the UIF were addressed and considered, and, instead, relied on comments, justifications and input provided by Mdwaba or Thuja Capital.

The report states that Lamati also ignored or discarded internal legal opinions and comments provided by the LAP unit, LNAC, the department and the UIF chief operating officer offices, the department and the UIF legal services, including external legal opinions.

It states that Lamati also failed to reasonably take due care and caution in applying his mind to adequately address the comments and inputs provided by the department and the UIF legal services.

NXESI MUST ACT

The report recommended that Nxesi implement measures that LNAC members, LAP unit officials, the UIF commissioner and the DG, promptly, in writing, and during LNAC meetings, declare any perceived, actual or potential conflict of interest for each proposal or application received by the LAP, adjudicated by the LNAC, and approved by the UIF commissioner or the DG.

It further recommends that stringent adjudication processes, due diligence and risk assessment standards and checklists be developed before proposals are sent for approval.

PRESIDENT CONSIDERS THE CIRCUMSTANCES

City Press understands that Nxesi has submitted the report to President Cyril Ramaphosa and proposed that Lamati be placed on suspension.

Presidential spokesperson Vincent Magwenya confirmed to City Press that the report has been received and is being processed.

Magwenya said: 

I can’t comment on the action the president will take until such time as the report has been properly processed and the necessary action carefully considered. However, once the report has been properly processed, appropriate action will be effected

Nxesi’s spokesperson Sabelo Mali confirmed that a forensic investigation was conducted on the deal and was also referred to Ramaphosa.

Mdwaba told City Press that he hadn’t seen the forensic investigation report and had instructed his lawyers to request a copy.

“The minister has refused to give it to me in my capacity as the chairperson and CEO of Thuja or as the chair of Productivity SA,” he said.

Maruping said: “I am not in a position to comment because I do not have the forensic report.