Sasol union scandal flares
Fake documents win contracts with petrochemical giant
UNION boss Simon Mofokeng and his wife Maureen’s coal-handling company, Khotso Batho, submitted fake official documents to clinch two shady BEE deals with petrochemical giant Sasol.
A Business Times investigation has established the company has not paid taxes or Compensation Fund dues in years — yet it twice managed to renew a deal worth up to R5million to supply coal to Sasol.
This scandal is likely to throw the spotlight on what appear to be holes in Sasol’s compliance rules— as well as how it handles its supplier relationships.
To make the conflict of interest more stark, Mofokeng is the general secretary of Ceppwawu (Chemical Energy Paper Printing Wood and Allied Workers Union), which represents a chunk of Sasol’s employees, yet the petrochemical giant still gave his company the lucrative tender.
Business Times is in possession of a fake letter of good standing from the Labour Department’s compensation fund submitted to Sasol in February.
Letters of good standing prove a company is up to date with payments to government’s compensation fund, which allows employees injured at work to claim money from the state.
But the letter, which Sasol accepted, is a crude cut-and-paste job in a format that was discontinued two years ago.
It contains a fake certificate number, coat of arms and stamp. Khotso Batho could therefore face criminal prosecution in terms of the Compensation for Occupation Injuries and Diseases Act, which carries a jail sentence of up to one year.
The Hawks are understood to be investigating the case, although this could not be confirmed.
Sasol’s role is likely to come under scrutiny too. A senior government official said that any company giving Khotso Batho a tender knowing it did not have a valid letter of good standing could also be held liable.
“This is fraud,” said the official, who did not want to be named.
“If a company knows that [Khotso Batho] doesn’t qualify, the liability now shifts to the company giving them a tender.”
This was confirmed by Compensation Fund spokeswoman Dikentsho Seabo. She said a company awarding a tender “will be liable” if it colluded with a supplier that submitted fraudulent letters of good standing.
“It could end up being criminal charges,” she said.
Seabo confirmed Khotso Batho was under investigation.
Sasol is listed on the JSE and New York Stock Exchange, and employs over 34 000 people in 38 countries.
Last year, Sasol had a turnover of R169.4-billion and an operating profit of R36.8-billion.
Last month, the Sunday Times revealed that Mofokeng and his wife raked in a salary of R320 000 a month from their coal-handling contract with Sasol.
Two independent sources who witnessed the deal said Mofokeng became a silent partner through a secret agreement when Khotso Batho signed its first contract with Sasol in 2000.
This week Mofokeng denied the existence of the agreement.
Sasol said it had “absolutely no information” about a secret deal involving Mofokeng, and could therefore not be expected “to dismiss a company simply based on who the now-CEO is married to”.
Official documents seen by Business Times show that apart from one month in 2010, Khotso Batho has been in arrears with compensation fund payments since 2001, and currently owes the fund R2.3-million.
Despite that, Sasol renewed Khotso Batho’s lucrative contract twice — once without issuing a tender in 2005, because it wanted to prevent disruption of “an existing operation, where equipment and site set-up has been achieved, with substantial skills development accomplished”, it said.
Then in 2011, Sasol awarded Khotso Batho the contract again, ahead of eight other bidders. It refused to provide any meaningful reasons for
Confidential commercial agreements are just that, confidential — Sasol
this decision when asked this week.
“Confidential commercial agreements are just that — confidential,” said spokeswoman Jacqui O’Sullivan. “You are choosing to ignore what is good business practice.”
Business Times also understands that Khotso Batho owes SARS at least R22-million in tax, interest and penalties for unpaid taxes. It is understood SARS could start foreclosing on its assets soon, although this could not be confirmed.
SARS spokesman Adrian Lackay said he could not comment on the case as he was bound to secrecy by the Income Tax Act.
Sasol’s own rules for suppliers state they must have an “original tax clearance certificate” and a “certified copy of a letter of good standing from [the] compensation commissioner”.
Several well-placed sources insist Sasol officials played a more prominent role than the company likes to admit in clinching Khotso Batho’s original BEE deal in 2000.
Khotso Batho was set up in 2000 by Hugo Neethling, a former employee of mining services company Fraser Alexander, which held the Sasol coal transport contract at the time.
Sasol confirmed that at the time, Khotso Batho’s BEE status was a key consideration in its appointment.
But Neethling said he was told that if he wanted the deal, his black partner had to be selected by Mofokeng.
“Sasol told me Simon Mofokeng will give you your partner [because] of his influence in the union,” said Neethling. “Sasol gave me this gentleman, Obakeng Malao, who told me he was coming in on behalf of Simon and Maureen [Mofokeng].”
Malao, who is the ANC spokesman in North West, was granted a 51% stake, and Neethling held the remaining 49%. But according to the secret agreement, Malao would only own 10%, with Mofokeng and another silent partner holding the remaining shares. Malao declined to comment. In 2002, Maureen Mofokeng, who is currently Khotso Batho’s CEO and sole director, bought Neethling’s stake for R600 000, ending up with 90% of the company.
Several sources close to the deal said the buyout was funded with a controversial loan from the Mpumalanga Economic Growth Agency (Mega). Her husband, Simon, sat on the board, as well as the tender committee that approved the loan. (See side bar).
Sasol has claimed suggestions that Mofokeng used his influence as a union boss to extort special treatment from the company to further his family business interests reflected “a lack of understanding” of labour negotiations “and are simply not true”.
The group said Ceppwawu was only one of five unions represented, and no single individual could exercise “undue pressure” over negotiations.
But sources at Sasol said otherwise. Those close to Khotso-Batho and the union, including Ceppwawu’s former president Jacob Mabena, said Mofokeng had used his influence to stop workers at Sasol’s Secunda plant going on a crucial strike agreed on by the Ceppwawu leadership in 2007.
Several well-placed sources have told Business Times that Mofokeng enjoyed a close relationship with the then Sasol Mining’s managing director, Hermann Wenhold, who is currently Sasol group safety manager.
“The orders from the MD [Wenhold] were that everything had to be done with the blessing of Simon,” said one.
Others referred to private meetings between Mofokeng and Sasol top brass, including Wenhold.
Asked for comment, Wenhold slammed the phone down.
O’Sullivan said later that Wenhold “categorically denied giving ‘express orders’ regarding instruction to Mr Mofokeng regarding Khotso Batho”.
But she did not dispute Wenhold’s close relationship with Mofokeng.
“Regular engagements, be it as part of a group or in one-on-one discussions, are necessary to develop strong relationships,” she said.
“Hermann Wenhold, during his tenure as MD of Sasol Mining, regularly met with union leaders from all the unions represented at Sasol Min- ing. This is entirely appropriate.”
However, she refused to answer questions related to Khotso Batho’s failure to produce valid tax clearance certificates and letters of good standing, as required by Sasol policy.
Instead, Sasol threatened to lodge a Press Council complaint that the two days it had been given to respond to the questions were insufficient.
“We will be able to respond to your additional questions in the course of next week — following our own internal investigation,” said O’Sullivan.
In response to detailed questions, Khotso Batho claimed it had complied with all Compensation Fund and tax laws, but declined to provide any proof, threatening to sue the newspaper if it printed any “SARS confidential information”.
It also declined to answer any questions about the Mega loan.
“It goes without saying that Khotso Batho and Mrs Mofokeng reserve their rights in relation to any false and defamatory statements published by you.”
Simon Mofokeng said through his lawyer, David Feinberg, that he “strongly rejected” allegations of an improper relationship with Wenhold.
“Our client maintains a professional relationship with all union stakeholders,” he said.
He reiterated that Mofokeng was being subjected to a campaign by his “political opponents to smear our client and his family’s good name”, and threatened legal action or a Press Council complaint if any information “which is untrue, unlawful and/or defamatory” is published.