NEF’S money went to the boss’s brother
It says ‘sibling’ is not part of family definition
THE embattled National Empowerment Fund approved a R9.8-million loan to a company belonging to the brother of its CEO, Philisiwe Mthethwa.
On Friday the empowerment fund said it paid out only R243 000 of that loan but confirmed that not a cent had been repaid — three years down the line.
Mthethwa’s brother, Nkanyiso Buthelezi, is a director of Inala Shipping, which in 2010 was a start-up business requiring funding to transport cargo at sea using ships it was to lease from a third party.
The NEF maintains there is nothing wrong with this deal because its policies only prohibit funding to “immediate families” of trustees and board members.
“Under these policies, the term ‘immediate family’ is defined as a spouse and/or child or children of the trustee, and the term does not include a trustee’s siblings,” NEF spokesman Moemise Motsepe said in a statement.
However, the NEF’s latest annual report states: “The provision of NEF funding to members of the Board of Trustees or of Board Committees, or to their family members, is prohibited.”
Mthethwa, who married Police Minister Nathi Mthethwa in a French-themed wedding in Cape Town earlier this year, was not available to comment on the ethics of the deal due to family commitments.
But the transaction is bound to put the NEF’s funding systems back in the spotlight following a controversy over its decision to grant R34-million to Luminance, an ultra-luxury designer boutique co-owned by wealthy businesswoman Khanyi Dhlomo.
Following an investigation into the Luminance deal, Minister of Trade and Industry Rob Davies, whose department oversees the NEF, issued a directive to all its agencies stating that government funds may not be used to import finished goods or services.
Sidwell Medupe, the department’s spokesman, said the department had requested a report on the Inala Shipping deal. The report will be given to the minister.
Buthelezi, in an e-mail to the Sunday Times, said the loan went towards the payment of the office expenses right at the beginning of the company’s operations.
The CEO attended the meeting and by the time she left the meeting it was clear that she was in support of the loan
“The company had four fulltime employees until August 2011 when three of them resigned due to difficult trading conditions, which left the company with one employee, being myself,” he said.
Buthelezi said the loan was going to fund “our shipping activities”. He failed to respond to questions about whether the company ever operated, traded or still existed.
The NEF denied claims that there was an instruction to write off the Inala Shipping loan. It said that “repayments have not yet begun”.
Spokesman Motsepe said the NEF’s average write-offs amounted to 9% of the total amount of R3.6-billion disbursed since 2004.
He was adamant that NEF policy did not preclude Inala Shipping from qualifying for funding and provided minutes to show that Mthethwa had recused herself from a meeting at which “transactional approval” was granted.
Charl Kocks, from Ratings Afrika, a company specialising in gauging the soundness of governance, said: “I do not have any reservation in stating that the closest family that one has is one’s sister or brother.”
Three senior staff members previously associated with the NEF confirmed that all involved with the transaction knew from the onset that it involved Mthethwa’s brother.
They said although Mthethwa recused herself from the final decision, she participated in several meetings in which the proposal was discussed.
“She attended the meeting and by the time she left the meeting it was clear that she was in support of the loan,” said one of them.
Another independent source said Mthethwa had indicated that she fully supported the deal before walking out of a meeting where the final decision was made. This source said that, while the business proposal appeared viable, there were concerns about surety for the loan.
Another corporate governance analyst, Geoff Everingham, said it was puzzling that, by the NEF’s own rules, a family member could possibly exclude a brother.
“I think the answer to the loan application should simply have been, ‘Sorry, there’s a conflict here and we can’t help; please go somewhere else for the finance,’ ” Everingham said.