It has long been rumoured that the EFF was given patronage over lucrative City of Johannesburg tenders as a quid pro quo for working with Herman Mashaba’s DA-led administration.
Now, an amaBhungane investigation shows that before controversially winning a mega-deal from the city, a fleet firm made payments to a company whose account was used for the benefit of Julius Malema and his party.
Is this evidence of kickbacks to the EFF – or rather, as the fleet firm maintains, unrelated payment for services rendered?
The contract for the City of Johannesburg’s “vanilla” vehicle fleet is big, financially. It is also vital for the city to run smoothly, requiring the supply and maintenance of some 2 700 sedans, bakkies and trucks. Bungle the contract and the city risks grinding to a halt.
But with the previous five-year contract coming up for renewal last year, it appears the vultures started circling, concerned less with service delivery than with the carrion of public-private greed.
A long, messy tender process had the incumbent, Avis, in the lead. But the tender stalled, eventually to be cancelled in June this year. This gave a relative bit player in the fleet scene the gap. Without a competitive tender, Afrirent was appointed to the mammoth task at a fee to match: R1.26-billion.
Financial records show that as the rain was about to fall for Afrirent, it transferred R500 000 in two tranches to a company fronted by Julius Malema’s cousin but used it as a “slush fund” for the EFF and Malema.
A Daily Maverick article last week gave details of large amounts flowing from its account to the EFF and a Sandown, Johannesburg house where Malema lived.
Sources in the city and the DA-led coalition charge that Mayor Herman Mashaba’s tough talk belies a willingness to sacrifice clean governance on the altar of political expediency, and that to maintain power he has allowed the EFF to control departments and tenders.
“The EFF has the DA by the balls,” said one.
The city administration denied impropriety, saying in a statement that allegations of politicians and senior officials unduly influencing the procurement are “mischievous and entirely unsubstantiated. The city wishes to state it categorically … that in terms of the city’s supply chain management policy, no politician participates in the supply chain processes.”
Two rounds of questions later, the city said that “all allegations surrounding the fleet contract are a subject of investigation by Group Forensic Investigation Services … and cannot be entertained further pending the outcomes of the investigation”.
In response to detailed questions, the EFF denied influencing the fleet tender. “We don’t know what you’re talking about,” spokesperson Mbuyiseni Ndlozi wrote, adding that it was “absolute nonsense” that the party had been handed control of departments.
About the Afrirent payments, he wrote: “None of your questions have anything to do with the EFF and its leadership. The individuals and companies you mention can speak for themselves.”
Malema’s cousin Matsobane John Phaleng, sole director of Mahuna Investments, the company to which Afrirent made the payments, claimed it was for services rendered.
“We want to put it on record that we never received any bribe … and we are not involved in the fleet contract with the [city]. We provided services to Afrirent from May until August 2018.”
He did not respond to further queries regarding the nature of the services.
Afrirent, however, stated via its lawyer that it had contracted Mahuna “to provide training and logistics for the delivery and implementation” of a contract it, Afrirent, had won from the department of rural development and land reform to supply tractors and farming equipment in Limpopo.
Afrirent provided evidence of its contracts with the department and Mahuna, saying “payments made by Afrirent to Mahuna were strictly in terms of this contract”.
Afrirent also said it “was unaware that the CEO of Mahuna was related to Mr Julius Malema and denies in the strongest terms that any monies paid by it to Mahuna … were a kickback to the EFF and/or Mr Malema”.
On the face of it, Afrirent’s explanation is good. But this is a tale of coincidences, some so large as to challenge the credulity of its version. You be the judge.
City officials started preparing a tender for the non-specialised, “vanilla” vehicle fleet well before Avis’s five-year contract was to expire at the end of September last year.
The successful service provider would own and service the vehicles, lease them to the city and offer support services such as call centres.
A project plan was put forward in March last year, according to which the bid would be advertised in May, evaluated, and a bidder recommended in July. But there were severe delays and the tender ended up being advertised in September only.
By the time applications closed in November last year, 16 bids had been received. An evaluation team then filtered down the bidders, disqualifying those that did not meet criteria.
Tender records show that five bidders ultimately went through the final scoring process. Avis was ranked top, followed closely by Fleet Africa.
- Click on the evidence docket to access the information we used for our investigation.
Of the five, Afrirent scored the lowest by a wide margin. It got 70.3 and 47.2 for functionality and price respectively, while Avis and Fleet Africa got in the 90s for both.
Avis was the preferred choice of the evaluation committee. But in April this year, a probity report commissioned by the city – standard procedure for all big tenders – put a screeching halt to a new deal with Avis.
SM Xulu, the small firm of consultants brought in to do the report, recommended that the tender be re-advertised, flagging concerns:
First, a list of pre-qualifying sub-contractors had only been provided a week before the bid closing date. Second, problems with the pricing matrix for manual and automatic vehicles had resulted in some bidders providing prices for automatic vehicles that other bidders said did not exist.
And third, a city treasury analysis had raised questions about Avis’s financial health – its ratios for inter alia profit margin, solvency and debt were supposedly below standard, exposing the city to the risk of non-performance.
Responding to amaBhungane questions, Avis said that Barloworld, its JSE-listed parent company, “has a solid credit rating, so we are not sure why the City is concerned about our ability to fulfil tendered obligations. This is all news to Avis. We are the largest fleet company in southern Africa and have been around for more than 30 years.”
Persons familiar with the fleet contract pointed out that Avis successfully ran the fleet for several years and continued to do so via contract extensions for another year when the tender got bogged down.
They also claimed that the identified problems could have been surmounted. Among other things, Avis could have posted a performance bond to guarantee delivery, which is what it did when the city awarded it a separate fleet contract for specialised vehicles – ambulances, water trucks and the like – earlier this year.
An early indication of Afrirent getting close to the EFF – although the company denies it was witting – appears from the bid it submitted for the vanilla fleet tender last November.
Afrirent had three consortium partners, bid records show. One of them was Mbewu Life, an insurance company owned by one Musa Shibambu.
Three individuals who were part of the consortium told amaBhungane that Shibambu told them he was a cousin of EFF deputy president Floyd Shivambu. They said that they, the other consortium partners, had introduced Shibambu to Afrirent.
When contacted by amaBhungane, Musa Shibambu was evasive and would not comment on whether he was part of the consortium. He insisted instead that he did not work for or own shares in Afrirent, and said that his company did not contract with government but offered insurance services to companies that did.
Musa Shibambu did not deny that he was Floyd Shivambu’s cousin or relative, saying that “I have my business and Floyd has his” and that they did not do business together. He directed amaBhungane to the latter for further comment.
Floyd Shivambu, through the EFF, would also not deny the relation and directed the question back to Musa Shibambu.
Afrirent said via its lawyers that it had been approached by the three companies to team up for the bid “because of its [Afrirent’s] experience… Afrirent did not know Musa and was introduced to him by the directors of [one of the partners] as an insurance provider…
“It is not unusual for Afrirent to participate in joint ventures or consortiums from time to time and it is not its policy to question potential partners on their connection to any political leader or party.”
When Afrirent was finally awarded the vanilla fleet contract, it was without the consortium partners. Afrirent said that it did not pay the partners any compensation or fee as the tender for which they had jointly bid was cancelled.
EFF ‘eyes’ the tender
A number of city sources, each who spoke on condition of anonymity, claimed knowledge of the EFF being interested in the outcome of the fleet tender.
The most direct account came from a former city executive, who told amaBhungane that EFF local representatives got him to meet at a Sandton hotel late last year with an EFF MP, Marshall Dlamini. This was around the time that Afrirent and its consortium partners submitted their bid.
Dlamini is also the EFF’s commissar, or shadow minister, for economic development.
“He said to me there’s this tender coming – we want a company that works with us to get it,” the executive said. He claimed he cut Dlamini short, telling him that the tender belonged to another department and he could not influence it.
We put the executive’s version to Dlamini, who texted in response: “I’ve nothing to do with what is happening in local municipalities particularly as it relates to tenders or any of the official[s] in the municipalities. I, therefore, deny all the allegations levelled against me by your good self, I’ve never discussed Afrirent or [the City of Johannesburg] with any senior leader or any official of my party or the municipality.”
Another city official, a deputy director, told us that Johannesburg City Manager Ndivhoniswani Lukhwareni had recently told him that “the whole thing came from the reds [the EFF]” and that its preferred contractor – ie Afrirent – was ultimately appointed.
We put it to Lukhwareni that he had said there was political pressure to appoint Afrirent. He texted in reply: “Unbelievable and false.”
Enter market man
Group Corporate and Shared Services is the city directorate responsible for fleet contracts. The city’s website says the directorate is “the nuts and bolts of the City’s administration. As such it needs to be solid, dependable and reliable.”
In March this year, a man named Sanjay Dubru stepped into the position of acting head at the directorate. The city had seconded him from Joburg Market, where he had been at the centre of corruption allegations and served a lengthy suspension before being reinstated.
A former senior directorate official told amaBhungane he came under intense pressure to manipulate fleet procurement before being booted out. He blamed Dubru.
AmaBhungane has no evidence that Dubru was acting on the EFF’s behalf; however, if he manipulated the tender that went to Afrirent, it would be one way in which political influence could have flowed. The official asked not to be named because he is still involved in the fleet industry, where the city is a potential customer.
The official claimed that soon after arriving, Dubru started approaching him directly about fleet procurement, going around the official’s superior, Shaun Ramroop, who was group head of fleet compliance management.
Ramroop was suspended in May, allegedly after falling out with Dubru, and resigned before a disciplinary hearing was convened. The same fate later befell the official now making the allegations against Dubru. He also resigned.
The official alleged that with Ramroop out of the way, Dubru and others tried to scupper the specialised fleet contract, for which Avis had already been selected but not yet contracted. This contract is separate from the vanilla fleet contract which finally went to Afrirent.
“Dubru said to me very clearly in passing, though never in a meeting, to pull the [award]. He said, take it away from them. I asked what do you mean? How? It’s gone through. He then said, find something to pull [it] away.”
He alleged that in a meeting, another director said to him: “You need to have big balls; if you have big balls you’ll pull this thing.”
“If Dubru came maybe two months earlier,” claimed the official, “I’m confident that that letter of award [to Avis for the specialised fleet] would not have happened.”
The tender for the vanilla fleet – which went to Afrirent after being cancelled in June with Avis in the lead – lagged behind the specialised fleet tender. Having arrived in March, Dubru would have been in a better position to intervene before Avis got that contract too, the official claimed.
The city’s spokesperson denied the official’s allegations, saying Dubru “did not participate or play any role in the cancellation and awarding of [the vanilla fleet] contract”.
He said any allegation that the official and Ramroop were targeted for disciplinary action because they were obstacles to manipulating the fleet contracts was “unfounded” as both “chose on their own free will to resign from the city before [their] disciplinary hearings even began”.
Regarding Dubru’s secondment to head the shared services directorate despite his history at the market, he said: “The matter regarding Sanjay Dubru was resolved between the Joburg Market and himself, which cleared him of all allegations.”
At the end of May this year, the political temperature in the city spiked as the DA-led coalition struggled to pass the city budget. The EFF would not support it, with a senior EFF official being quoted as “vehemently, unreservedly, unapologetically and ferociously” rejecting planned utility tariff hikes.
A Business Day article at the time read: “The decision by the metro’s kingmakers, the EFF, to abstain from voting on the tariffs led to the collapse of Mashaba’s revenue plan and created a huge funding gap in the coming financial year.”
Further afield, in Nelson Mandela Bay, the EFF had also been flexing its muscles against its de facto coalition partner, attempting to unseat DA mayor Athol Trollip in a no-confidence vote. Trollip finally fell in August.
Johannesburg was running out of time to pass a budget before the end of June, failing which the ANC provincial government might put it under administration. But a deal was reached and the budget passed, with EFF support, on June 12.
Headlines like “Passing of Joburg budget a ‘signal’ that ‘EFF holds the reins’” made it clear who the winner in this game of brinkmanship was.
But a closer look at the numbers shows that despite its “ferocious” rhetoric, the EFF won limited budgetary concessions: The proposed electricity hike was decreased from 7.37% to 7.17% and water from 14.2% to 13.2%.
Three sources who were in the orbit of the city’s politics at the time speculated that the fleet deal was behind the budget agreement.
One, from the DA-led coalition, tipped off amaBhungane as far back as July, surmising that the fleet contract was being used as a political bargaining chip, and that the budget had passed because the EFF would be allowed to get its hands on the tender.
Coincidence or not, six days later, on 18 June, the vanilla fleet tender was cancelled. Recall that Avis was the preferred bidder after scoring the highest, but that a probity report had recommended that the tender be re-advertised.
Asked if the fleet deal had anything to do with the budget deal, the EFF’s Ndlozi said: “None whatsoever.”
A city spokesperson denied the EFF had been handed the fleet deal in return for working with Mashaba’s administration, saying: “This is an unfounded allegation without basis. At no point was any political figure involved within the [procurement] process.”
Payments and a no-tender award
It is not clear what, if anything, the shared services directorate did in the weeks to follow regarding the probity report recommendation to rerun the tender.
But on 25 July, five weeks after the tender cancellation, Afrirent paid R300 000 to a company called Mahuna Investments, transaction records show. Mahuna’s sole director is Phaleng, Malema’s cousin.
The next day, 26 July, Afrirent appears to have met city officials to discuss the possibility of Afrirent being appointed to provide the city with its vanilla fleet via an alternative to a fresh tender: using Municipal Supply Chain Management Regulation 32.
Regulation 32, maligned for its abuse to bypass tenders, allows a municipality to “piggyback” on an existing contract between a service provider and another organ of state.
The meeting is evidenced by a letter Afrirent addressed that same day to the city manager, Lukhwareni, expressing “our gratitude” for the meeting and for “the opportunity to quote the City of Johannesburg on the provision of fleet leasing services”.
It also stated: “We consent to the CoJ [City of Johannesburg] utilising our contract with Mogale City for the provision of the required services to the CoJ”.
A month later, on 28 August, Afrirent made a second payment to Mahuna, this time for R200 000.
On 10 October, the city notified Afrirent of its selection to provide the vanilla fleet. It said the city’s executive bid adjudication committee had recommended and the city manager approved the company’s appointment – using Regulation 32.
The contract was to be for a period of 30 months at a maximum cost of R1 255 446 698.
The appointment caused major upset within the fleet industry. Industry insiders said that while there is an argument for not awarding the contract to Avis and giving a new player the opportunity, there were options other than Afrirent.
Recall that during the bid evaluation process Afrirent had scored lowest among those that passed the threshold.
Regulation 32 comes with conditions, including that there must be “demonstrable discounts or benefits for the municipality”. Did the City of Johannesburg get that? Seemingly not, other than getting out of the fix of a bungled tender.
The price, for one, appears to have escalated dramatically. Avis had bid to supply the fleet at R1.42-billion over the originally specified five years, or R23.7-million per month. Compare this to Afrirent’s R1.26-billion over two-and-a-half years, or R41.8-million per month.
There are some caveats, such as the city claiming in response to our questions that “additional fleet requirements … are incorporated in [the Afrirent] transaction”.
But If indeed Afrirent will be supplying more or fancier vehicles, it is unlikely to account for an increase of such magnitude.
Rather, the city had two further explanations: that “the cost of the contract rises when its duration is shortened because a service provider has to recoup their capital outlay”; and that “any outcome of a cancelled tender be it functionality or pricing is null and void, and therefore cannot be utilised to determine a suitable service provider”.
Both may be true, but neither suggests that the city’s decision to contract via Regulation 32 resulted in value for money, or was rational.
But back to the big question: Were Afrirent’s payments to Mahuna kickbacks to a party calling the shots in Johannesburg because it “has the DA by the balls”, or were they, as Afrirent maintains, unrelated and for services rendered?
Three sets of issues appear relevant in evaluating Afrirent’s version.
1. ‘Slush fund’
The first is the nature of Mahuna, the company whose sole director is Phaleng, Malema’s cousin.
The Daily Maverick reported on Mahuna’s bank statements last week, which showed income and expenditure inconsistent with an ordinary business.
Almost all income consisted of large round figures, similar to the R300 000 and R200 000 from Afrirent. The biggest receipts, about R4.8-million in total, were between June 2017 and February from Sgameka Projects, the company of Floyd Shivambu’s brother Brian. That in turn, the Daily Maverick said, came from Vele Investments, using money looted from its collapsed VBS Mutual Bank.
Expenditure was also consistent with a “slush fund” for the EFF and Malema. Apart from “directors fees” to Phaleng, there were no salaries paid. There were, however, regular and significant payments for a variety of EFF purposes.
This included R430 000 which the Daily Maverick identified as designated for a Sandown property where Malema lived. After Malema had rented it for years, the EFF’s took ownership of it in June last year.
As far as amaBhungane could ascertain, the bank statements also showed no payments from Mahuna’s account consistent with the logistics and training that Afrirent said Mahuna performed for it.
In reply to our questions, Phaleng wrote: “We are a business company and not involved with any political party. My cousin is a leader of the EFF and has nothing to do with my company… It is an insult to an emerging black business to be accused of receiving kickbacks on behalf of a political party or its leadership.”
Afrirent replied: “It is unreasonable to expect Afrirent to have knowledge of Mahuna’s bank statements… Afrirent denies that the services were not performed, as implied, and reiterates its position that Mahuna is a service provider to it.
“Like any business, if a service is provided and contractual obligations are met, Afrirent also pays without investigating how the service provider procured the services rendered.”
2. Proof of services rendered?
The second issue is the information that Phaleng and Afrirent would not give. Phaleng, after initially stating that the payments were for services rendered, did not respond to further queries.
Afrirent, however, gave some level of detail in correspondence with amaBhungane. The long and short of its version is that it won a contract from the national department of rural development and land reform on 17 October last year to supply tractors and farming implements across Limpopo.
The following month, November, Afrirent engaged Mahuna, a company based in Limpopo, to help transport the equipment to farms and help Afrirent’s trainers train the beneficiary farmers and farm workers “in several villages in the province as a result of the language barrier”.
Afrirent provided the 17 October letter of award of the rural development department to Afrirent, as well as the cover and signature pages of a supplier agreement dated 2 December between Afrirent and Mahuna.
AmaBhungane has independently verified Afrirent’s contract with the rural development department. But is Afrirent’s agreement with Mahuna what it is purported to be?
One problem is that it is not actually signed by Afrirent’s signatory, chief executive Senzo Tsabedze. Asked about this, Afrirent’s lawyer said: “Senzo signed by completing his name and designation as CEO of Afrirent. I think it would be inaccurate to say that the agreement is not signed.”
But more substantively, because Afrirent provided only the cover and signature pages, we cannot see whether the services it maintains Mahuna provided, matched those specified in the contract.
When asking for the contract we made it clear that we did not mind “truly commercially sensitive information being redacted”, but Afrirent would not show the contract’s substantive parts at all on the basis that its “commercial information must be preserved and cannot be disseminated”.
We also asked for “any form of evidence that would attest to” Mahuna actually having done the work. Afrirent provided none, although it is understood to argue that the rural nature of the contract in Limpopo does not lend itself to record keeping.
Without better evidence, it is impossible to say whether Mahuna provided real services to Afrirent, or whether the contract it presented was a sham to cover payments for another purpose.
3. All coincidence?
Which leads us to consider the context, which includes large coincidences:
- Afrirent happened to select Mahuna, which happened to be a “slush fund” for Malema and the EFF, to provide it with services.
We could find no evidence of Mahuna being in the business of logistics and training. Afrirent did not reply substantively to our request to “explain how Afrirent and Mahuna were first introduced to each other and how it came to be that Afrirent selected Mahuna as service provider”.
It said: “Most of the beneficiaries are rural communities and the elderly. Afrirent chose a local company owned by a local person who understands the culture and the language of the communities. Consequently, that is how Mahuna was appointed.
Afrirent also denied having known that Phaleng was Malema’s cousin. A simple google on his name would have turned up a 2012 amaBhungane story querying the link.
- Afrirent submitted its bid in the city’s vanilla fleet tender during November last year. This happened to be the same month, on Afrirent’s version, that it engaged Mahuna. It is also around this time that EFF commissar Dlamini allegedly told a city executive that “there’s this tender coming – we want a company that works with us to get it”.
Given the allegations of meddling in the tender process and the unsatisfactory and very expensive outcome of Afrirent being appointed tender-free via Regulation 32, one could ask whether Mahuna’s true service was to get the EFF on board regarding the tender.
The EFF denied all allegations bluntly. Afrirent stated: “It is a stretch to allege that there is a relationship between Afrirent and the EFF because of its business dealings with Mahuna and other companies.”
In Afrirent’s favour, the timing of its agreement with Mahuna could also have been informed by the fact that it was awarded the rural development contract that October.
- Afrirent submitted its bid to the city in November last year with consortium members including Shibambu, the apparent cousin of the EFF’s Floyd Shivambu. Mahuna happened to have connectivity to the latter too – R4.8-million in VBS money came to it via the company of Floyd’s brother, Brian.
Afrirent stated that it “did not know Musa [Shibambu] and was introduced to him by the directors of [another of its partners] as an insurance provider”.
- Afrirent made its first payment, of R300 000, to Mahuna on 25 July this year. This happened to be the day before city officials and Afrirent got the ball rolling for the latter to be appointed under Regulation 32, as evidenced by Afrirent’s letter to the city manager. The second payment, of R200 000 on 28 August, came as the city went through its processes to approve Afrirent’s appointment.
Afrirent stated that the payments were informed by three invoices Mahuna issued to it “on 1 May 2018, 1 June 2018 and 1 August 2018 in the total sum of R500k… The work in Limpopo was awarded on 17 October 2017 on an ‘as and when basis’ for a period of 36 months. The first request came from the [rural development department] in April 2018 once the Department’s budget had been allocated in March 2018.”
Although there is no exact correlation between the invoices and the payments – three of the one and two of the other, with a large gap between the first invoice and first payment – the explanation is roughly consistent with the timing.
But Afrirent did not provide the invoices despite our request for “evidence”, which does not help resolve whether they were for services in rural Limpopo.
And even if they were so in form, the big question remains: Were the invoices and payments for such services that were actually delivered, or kickbacks for the fleet tender?