Every supplier is meant to have a fair shot at winning a contract for government’s R4-billion-a-year Community Work Programme (CWP).
But an amaBhungane investigation shows that Ziphozethu “Gabsie” Mathenjwa, the woman tasked with awarding a portion of the contracts, gave more than 300 of them, valued at R32-million, to a newly registered non-profit set up by her brother; all without a competitive bidding process.
Mathenjwa – an experienced director who sits on the governance and ethics committees of Umgeni Water – claims she was not aware of any duty to declare a conflict of interest with regard to her brother.
She says the department of co-operative governance and traditional affairs (Cogta), which runs the CWP, knew about other aspects of the arrangement and raised no objection.
That is surprising because, as we discovered, she has done something similar before and Cogta objected vigorously – read our accompanying story, Broken Trust at the Mvula Trust.
The CWP is one of government’s signature job creation schemes, providing part-time work to 280 000 people across the country.
Yet the programme is not run by government, but by “implementing agents”, non-profit agencies that run sites and award contracts to procure things like tools, materials, protective clothing and training.
But because this is government money, the implementing agents are required to award contracts in a way that is “transparent, cost effective, fair [and] equitable … in line with section 217 of the constitution”, according to Cogta.
In April 2018, Mathenjwa’s Insika Foundation was one of 11 implementing agents appointed by Cogta. Although Insika is based in Johannesburg, it was put in charge of sites in the Western Cape and Kwazulu-Natal.
Last year, amaBhungane used the Promotion of Access to Information Act to access data from Cogta. We wanted to see who was benefitting from the thousands of contracts implementing agents were awarding for tools, training and the like.
Explore the CWP service provider database here.
We also wanted to establish if rumours were true that the CWP had become a feeding scheme for friends and family of those connected to Cogta and its implementing agents.
As we analysed the data, one name jumped out at us: Umnotho we Afrika.
With 311 contracts, Umnotho we Afrika far outstripped the next biggest CWP supplier countrywide, which received just 38 contracts. In addition to this, Umnotho’s contracts all came from the same implementing agent: Insika Foundation.
The R32-million Umnotho received accounted for almost 60% of the contracts Insika issued and included ten for protective clothing (R3.8-million), 37 for tools and materials (R7.9-million) and 264 for training (R20.7-million).
Remember, Insika was running the programme on government’s behalf and was supposed to preside over a “cost effective, fair [and] equitable” procurement process.
“We have to satisfy ourselves that your processes are fair,” George Seitisho, the then-acting deputy director general in charge of the CWP, had warned implementing agents in a secretly-recorded meeting in 2017, before the current tender for the appointment of implementing agents was awarded.
“You know that section 217 of the Constitution? You are not going to be like one consultant I knew who was a civil engineering consultant and all the contractors were his buddies. So, you will be watched like a hawk.”
Yet a simple company search would have shown Seitisho and Cogta that Insika and Umnotho are related companies. While the former is run by Mathenjwa, the latter is run by her older brother, Phiwisipho.
In fact, Phiwisipho Mathenjwa was previously a director of Insika. He resigned in September 2016 and in November 2017 registered Umnotho – just before Cogta issued its new tender.
For a short time Insika and Umnotho even shared an office in Midrand.
“I like hard-working people”
When we met Gabsie Mathenjwa last month she was defiant about Insika’s decision to award over 300 contracts to her brother’s company, describing it as her “competitive advantage”.
Here is how she explained it:
Cogta’s tender for implementing agents awarded extra points for bidders that agreed to partner with an “emerging” non-profit organisation and her brother had “all the qualifications and experience necessary” for Insika to deliver an impressive bid.
“It was going to be easy [for Insika] to form a partnership [with Umnotho] because one of its directors, Phiwisipho, had a history with Insika,” she told us, before rattling off a list of his qualifications.
Seemingly Cogta’s intention was to give a leg-up to small, local non-profits. But as a newly-registered non-profit based in Gauteng, could Umnotho really be considered “emerging”?
“They were both: they were brand new and emerging,” Mathenjwa insisted.
When we spoke to Mathenjwa a week later, she added: “I like hardworking people. My decision was not based on blood relations. I am a workaholic. And I want people who meet that criteria.”
Documents show that Insika told Cogta it planned to form a joint venture with Umnotho and to subcontract “30% of the contract” to Umnotho, with “decision-making authority” split “70 (Insika): 30 (Umnotho)” – in other words to share some of the management duties and fees Insika as implementing agent would be entitled to from Cogta.
But in fact Mathenjwa had devised a scheme to use the procurement budget from the CWP to pay her brother’s company instead.
The devil in the detail
The CWP in the Western Cape and Kwazulu-Natal has an annual budget of R905-million.
Roughly 70% of this goes to pay the programme’s workers, while another 30% is paid to several implement agents, including Insika, to cover their fees and so they can procure tools, materials, protective clothing and training.
These are the contracts Insika was supposed to award in a fair and equitable way.
But a one-page extract from Insika’s bid that Mathenjwa showed us, stated: “[T]he emerging partner is allocated a minimum of 30% of the contract value. As such a minimum of 30% is allocated in the procurement budget as a set aside … to Umnotho we Afrika Foundation with a view of deliberately facilitating transformation and development.”
Put simply, this means Insika planned to hand 30% of the procurement budget – contracts for tools, training and protective clothing – directly to her brother’s company, without any competitive bidding process.
“When we get a budget … automatically they have 30% of the work that is being done,” she confirmed.
Although Cogta’s tender document does not specify that implementing agents had to use a competitive bidding process, at very least the other criteria of section 217 of the Constitution – “transparent, cost effective, fair [and] equitable” – still had to apply.
Mathenjwa said that in the absence of a competitive bidding process, Insika used its own “market study” to determine what a fair price for Umnotho’s goods and services would be.
Phiwisipho Mathenjwa initially told us that Umnotho used a three-quote system when sourcing goods that it could not provide itself. But when we asked a series of follow up question, he refused to clarify.
“The follow up questions raised are now intrusive into our operational model (our competitive advantage) and as such could [be] quite detrimental to the long term survival of our organization,” he said via WhatsApp.
Gabsie Mathenjwa insisted the highly unusual arrangement with Umnotho (though not the family relationship) was disclosed to Cogta during the bidding process but that no eyebrows were raised. “Maybe we were too ambitious, but no one said anything.”
Capacitating within the family
Mathenjwa spent much of our hour-long meeting discussing how her brother’s company would be capacitated by the experience of working on the CWP.
“We told [Cogta], if you want to build [a non-profit] they have to participate in the core of CWP, in everything,” she said.
She also insisted that awarding contracts to her brother’s company made the programme more efficient because Umnotho would double as both trainer and implementing agent when on site.
Which is precisely the point: instead of splitting its own project management fee with Umnotho, Mathenjwa simply awarded supply and service contracts to her brother’s company with governments money.
Pushed on whether Cogta explicitly accepted this arrangement, Mathenjwa told us: “They accepted because we are here today.”
We requested additional information and documents from Mathenjwa in a bid to test that claim.
For example, we asked to see the agreement Insika signed with Cogta – or at least the clauses governing procurement – but she turned us down.
Instead she repeatedly pointed to what appear to be an outdated tender document.
Eventually we pointed out that the Cogta tender on which she actually bid required implementing agents to run a procurement process that was “transparent, cost effective, fair, equitable and an effective procurement and provisioning system that will ensure value for money while implementing CWP (In line with section 217 of the Constitution of the Republic of South Africa, 1996)”.
Section 217 also requires procurement to be competitive.
We put it directly to her that on our reading she was not entitled to procure goods and services on any other basis, and as such was not entitled to create a set-aside in the procurement budget for Umnotho.
We also put it to her that the fact that Insika recorded the payments to Umnotho as RFQs RFQs supported this interpretation. An RFQ, or request for quotation, is usually part of a competitive bidding process.
Instead of answering, she shut down the discussion.
“It is now over a month that you have been trying to publish negative information regarding my organization… It is now clear that you have decided to move away from the facts but have decided that your conclusions supersede what I have told you,” she said in an almost identical WhatsApp to one that we received minutes later from her brother.
Both Gabsie and Phiwisipho Mathenjwa warned us that they had read the Press Code and reserved their rights to sue us.
The conflict of interest
Both brother and sister said they were not “explicitly” asked in the bid application form to disclose their relationship, and so neither did.
Cogta spokesperson Mlungisi Mtshali confirmed that Cogta had not required implementing agents to disclose whether their service providers were related companies on its CWP contract – a flaw Cogta said it would address in the next cycle.
According to Phiwisipho Mathenjwa, it was public knowledge that he and Gabsie were related.
We queried this with the office of the auditor-general, the entity which audits the CWP and which recently flagged over R2-billion in irregular expenditure at Cogta, mostly stemming from the programme.
Spokesperson Africa Boso told amaBhungane that the auditor-general had no knowledge of the Mathenjwas’ relationship.
As a seasoned director with Umgeni Water and formerly Denel, it is hard to believe that Mathenjwa had no idea she was required to disclose that her brother’s company would benefit from the government contracts she would dish out.
But Mathenjwa’s claims of ignorance became even less believable when we discovered that she had been bust for a similar scheme several years before.
For that detail, read Broken trust at Mvula Trust.