Shongwe fights over union windfall
Barloworld boss to make over R225m from deal
BARLOWORLD Logistics CEO Isaac Shongwe has laid charges against beleaguered union boss Simon Mofokeng for alleged perjury and defeating the ends of justice.
The charges relate to a dispute between Shongwe’s company Letsema and a management agreement it has with the Chemical Energy Paper Printing Wood and Allied Workers Union (Ceppwawu), which Mofokeng heads. Shongwe personally stands to make more than R225-million from the deal, which Mofokeng is trying to set aside.
Shongwe’s move comes as the union boss faces charges and a Hawks probe after his company, Khotso Batho, submitted fraudulent official documents to renew a coal supply contract with Sasol, worth up to R5-million a month, that the petrochemical giant cancelled last month.
The Department of Labour has threatened to shut down Ceppwawu because Mofokeng has failed to submit the union’s audited financial statements for two years, leading to accusations of mismanagement of funds. Should the union be shut down, this would create chaos at a number of JSE-listed giants whose staff are members of Ceppwawu, including Sappi, Mondi and Nampak.
Mofokeng claims that R33-million disbursed last September by the Ceppwawu trust, which manages the union’s investments, has been fully accounted for in the union’s secretariat report.
The report, however, simply lists the disbursements without any confirmation that they were all properly accounted for.
Several union sources have told Business Times that the treasurer and other officials have repeatedly requested these supporting documents, but have not been provided with any. Ceppwawu treasurer Thulasizwe Sibande declined to comment.
Now Shongwe has accused Mofokeng of lying under oath in an affidavit used in court in April 2013 that contradicts an earlier sworn statement Mofokeng made in 2009.
In that 2009 statement, Mofokeng gave the Letsema agreement a ringing endorsement. “I was satisfied that the management agreements in place between Letsema and CI [Ceppwawu Investments] ... were in order and that the transactions in regard to the investments were above board.”
But in his 2013 statement, Mofokeng now claims the 2009 statement was written “under great pressure and haste ... without reading it properly” and before he had “the full facts”.
Lawyer Ronnie Mendelow, who drafted Mofokeng’s 2009 statement, claims this is “patently and demonstrably untrue”. Mendelow says that four years ago Mofokeng said repeatedly he was “very pleased” and expressed “his extreme pleasure” and “complete satisfaction” with what he’d written.
The management agreement in dispute, first signed in April 2000, entitles Shongwe’s Letsema to a 27.5% share of Ceppwawu’s investment arm.
Thanks to some smart investment decisions, Ceppwawu’s investment arm now owns assets worth more than R2-billion — which entitles Shongwe to a massive windfall.
The portfolio has grown so large because the investment company bought Aspen shares for R158-million in 2002, but the pharmaceutical company’s stock has soared since then.
This means that Letsema, which is 53% owned by Shongwe and 43% by his partner Derek Thomas, stands to make a massive R550-million from the management agreement.
Mofokeng is spearheading a union drive to have the contract set aside, arguing that Shongwe is conflicted because he sits on the trust that owns and controls Ceppwawu’s investment arm, which he stands to benefit from.
Despite obtaining two legal opinions setting out grounds for a legal challenge based on this conflict of interest, Mofokeng has never gone to court to test it.
Shongwe counters that Letsema’s first management agreement of April 2000 predates the formation of the trust in November 2001, which he was asked to sit on, so he had no conflict of interest at the time.
He argues that Letsema is entitled to its R550-million for savvy investment decisions spanning 13 years. “I see nothing wrong with this. I brought these deals to the table. Without me the union would have nothing— now they have R1.5-billion.”
Mofokeng counters that “Shongwe and Letsema had little to do with the growth in Ceppwawu’s investment fund”.
“The majority of the R2-billion is as a result of the Aspen share price climbing in the past few years. Mr Shongwe and Letsema never put any money of their own into the investment to get it started. The money was borrowed from the CINPF [Chemical Industries National Provident Fund]. Given that neither Mr Shongwe, nor Letsema, were ever at risk for anything speaks to the absolute ridiculous nature of the Letsema agreement,” he said.
He previously accused Business Times of being used by Shongwe in a smear campaign to force him out of office.
“Mr Isaac Shongwe would (then) be free to participate in approximately one-third of the equity of Ceppwawu’s investment arm, and Ceppwawu and its members and their families would be at least R550-million poorer.”