From workers’ mine to greedy bosses’ trough
Audit report finds Arnot Opco funds were mismanaged
In February 2020, Minister of Mineral Resources Gwede Mantashe hailed a deal that saw mine workers and the community take ownership of a coal mine in Mpumalanga – the first transaction of its kind in the country.
Two years later, the dream of worker ownership is in peril following a damning report on how the mine has been run.
A preliminary report by Sizwe Ntsalubagobodo (SNG) Grant Thornton shows that no sooner had Arnot Opco (Arnot) risen from the ashes did the feeding frenzy take root at the company with procurement processes flouted.
The Arnot mine, owned by Exxaro, was the surrounding community’s main source of income for four decades and its closure in 2015 dealt a big blow to the community. However, eight former Exxaro employees decided to revive the mine. They formed a company, Innovators Resources (IR), and pooled their retrenchment packages and pension payouts as seed capital for the mine.
To assist its former employees, Exxaro donated all its mining and office equipment at Arnot to IR. The employees then partnered with Wescoal Holdings.
This saw Arnot take form, with Wescoal holding a 50% share and IR a 25% share in it. The 1,029 retrenched Exxaro employees got a 25% share in Arnot. Former Exxaro project engineer Bontle Aphane became Arnot’s CEO.
The report, dated January 10 2022 and seen by Sunday World, shows a company in disarray, with senior managers implicated in the mismanagement of company funds.
Arnot makes most of its money from supplying coal to Eskom’s Arnot-power station. According to evidence presented to SNG Grant Thornton, the firm received R797-million from Eskom between March 2020 to November 2021. It is these funds that the company asked auditors to probe. The auditing firm was asked to determine several issues including HR payroll matters; contracts concluded betweenarnot and Boipelo Mining Contractors (BMC), Amandla and Ingwenya Mineral Processing; rehabilitation work; and contracts of external consultants, material contracts above R1-million and Covid-19 expenditure.
Findings on HR and payroll
SNG Grant Thornton’s findings are scathing on Aphane. Among other things, she was found to have hired her personal assistant without a fair process. She also received shift allowances against company policy.
Aphane, COO Mathias Sithole and HR GM Eddie Pienaar were paid a combined R339 768 (R176 000 to Aphane, R152 768 to Sithole and R11 000 to Pienaar) between September 2020 to October 2021 in shift allowances. “Arnot should consider recovering shift allowances paid to Ms Aphane, Mr Sithole and Mr Pienaar as these employees were not entitled to receive the payments.”
The investigation also found that a Mr Thole was in June 2020 offered a position of executive assistant coordinator with a salary of R86 132.50 a month. However, his salary was hiked to R154 438 a year later without the approval of the CEO or board. “We were not provided with evi- dence of how HR department performed grading for the position of executive assistant co-ordinator, which led to the increase of Mr Thole’s salary, nor were we provided with methodologies that were employed for such grading,” the report found.
Findings on BMC, Amandla and Ingwenya contracts
The investigators found there was no evidence of approvals by the board for the contracts for Amandla and Ingwenya, which was in contravention of the delegation of authority that requires contracts greater than R20-million to be approved by the COO, CEO and the board.
“The contracts for Amandla and Ingwenya were not signed, and the service providers commenced work/services without a valid contracts.”
SNG Grant Thornton found that the BMC contract was approved by the relevant structures but the company commenced work without a signed contract in place.
Findings on rehabilitation work
The probe found that several companies were paid amounts that exceeded those on their invoices. One supplier was paid R2.4-million more than what was agreed. The investigation also found that Arnot gave work to seven companies it did not have contracts with. The audit firm could also not find evidence that invoices to the tune of R3.8-million were for services provided. The company was found to owe service providers more than R130-million.
Findings on contracts of external consultants
Investigators found more than R40-million was spent on consultants and Covid-19 with little or no financial controls in place.
One of Arnot directors, Mxolisi Hoboyi, has since taken the company and Westcoal CEO Thiva Tshithavhane to court declare the appointment of SNG Grant Thornton and its terms of reference unlawful as he claims the appointment should have been sanctioned by the board.
Pienaar and Aphane had not responded to requests for comment at the time of going to press. However, Aphane has since been suspended.
Hoboyi said he does not recognise Aphane’s “unilateral” suspension. “I view this as nothing but an attempt hostile takeover of the mine from workers by Wescoal, which is using its powerful position as financier of the deal. I am challenging the business review process in court as it does not meet corporate governance rules,” he said. “I refuse on behalf of former Exxaro employees to be bullied by Wescoal.”
Sithole also declined to comment on the matter saying: “I know about investigations conducted, but I have not seen the report. My remuneration is a matter of my employer and myself and not for everyone.”