More than R150m has been siphoned out of a company wholly owned by the Public Investment Corp (PIC) by a group of individuals and companies linked to the PIC’s company secretary.
Some of the money funnelled out of the company — Daybreak Farms — since March last year was spent on cars, a shopping trip to designer store Gucci and trips to a Stellenbosch wine farm and Cape Town, as well as rentals in the exclusive Johannesburg suburb of Dainfern.
A Sunday Times investigation has uncovered that, in early 2020, PIC company secretary Bongani Mathebula apparently broke the asset manager’s own rules to recommend an associate of hers — Lerato Nage — to the board of Daybreak Farms. The PIC, which invests money belonging to government pensioners, funded Daybreak Farms to the tune of R1.2bn.
Mathebula’s actions put into motion a series of events that saw Pule Malahlela — her former business partner — and companies owned by his associates make more than R150m through procurement from Daybreak in less than 18 months.
The PIC, which was alerted to this last year by Daybreak executives, appears to be looking the other way. The PIC has since January been in possession of a forensic report that exposed Mathebula’s activities and recommended action against her, but has done nothing.
The PIC looks after more than R2-trillion belonging to the Government Employees Pension Fund, the department of employment & labour’s Compensation Fund and the Unemployment Insurance Fund.
Through a stack of documents that include leaked company records, invoices and forensic reports, the Sunday Times has established that since March last year, Daybreak has paid more than R150m to Malahlela and his associates’ companies outside its procurement policies. Some payments followed fictitious or inflated invoices, double invoices and false invoices for work not done.
Daybreak paid R116m to Malahlela’s law firm Black-White; R7.8m to forensic company Schaefer-Schmidt for an investigation into those of its own executives who opposed the procurement and governance breaches; and R40m to communications and graphic design company Blueapple Tree. It does public relations for Daybreak. Blueapple Tree is linked to Daybreak company secretary Kgabo Mapotse. The two have a previous working relationship.
The documents, collected over months, appear to show that Mathebula, 46, did not declare her relationship with Daybreak board chair Nage, whom she nominated. Mathebula previously sat with Nage on the board of Johannesburg’s City Power.
The PIC initiated a forensic investigation into Daybreak after a whistleblower reported allegations about Mathebula’s conduct and her role in appointing the board. The report by JGL Forensic Services shows that, from her position at the PIC, Mathebula and her deputy, Mercia Monyane, allegedly flouted policies governing nomination processes to ensure Nage’s appointment.
The report says proper procedures were not followed and Nage’s CV was sourced directly from Mathebula. In addition, he was not properly vetted and public allegations of impropriety against him were missed.
The JGL report recommended both Mathebula and Monyela be disciplined, the former for flouting the rules and failing to declare her interest in Nage’s nomination.
This week Mathebula, who previously informed the PIC that she worked with Malahlela at his law firm MNA Attorneys during a period of suspension from the asset manager, said: “My engagement with Pule Malahlela had nothing to do with Daybreak. I knew Mr Malahlela long before Daybreak ... My engagement with Mr Malahlela between 2018 and 2019 was about me pursuing partnering with PJM Attorneys ... The relationship between Pule Malahlela and Mr Mapotse has nothing to do with me.”
Mathebula declined to comment on her alleged role in Nage’s appointment.
Nage did not respond to questions sent to him via Daybreak on Wednesday, nor did it respond to subsequent calls.
In its report, JGL said parts of both Mathebula and Monyela’s emails, which dealt with the nomination process, had been erased from Mimecast. Their laptops could not be imaged because they had been wiped clean and factory settings restored.
Once appointed in 2020, the Daybreak board allegedly rid the company of its executives, including then CEO Boas Seruwe, after they raised concerns with the PIC. The board allegedly introduced several service providers linked to Malahlela outside proper processes, to do work at apparently inflated prices.
One example is the sum Daybreak paid to Schaefer-Schmidt, which Companies and Intellectual Property Commission (CIPC) data shows began life as a hair salon in Mankweng, outside Polokwane. Schaefer-Schmidt was paid R7.8m in two months last year for a forensic investigation used as a basis to axe the executives. Leaked documents show that the company, owned by researcher Langutani Eugene Chauke, 30, had no forensic investigative track record before Daybreak hired it.
The Sunday Times established that a certified fraud examiner with 30 years’ experience, some of them in the police, worked just one month on the investigation before resigning. The investigator told authorities that Malahlela had hired him.
Another professional who edited the report told the Sunday Times that she billed Chauke R70,000, but alleged that Chauke passed on a bill to Daybreak of R440,000 for her work.
The Sunday Times established that, soon after being paid by Daybreak, Schaefer-Schmidt paid more than R320,000 to a car dealership in Centurion for deposits on a Mini Cooper and a BMW. Other expenses included luxury trips to The Bay Hotel in Cape Town and Khoroni Hotel Casino in Thohoyandou; shopping sprees at the Mall of Africa and Sandton City, where more than R15,000 was spent at Gucci; and more than R3,000 spent on manicures at a Tammy Taylor Nails salon.
Chauke refused to speak to the Sunday Times and referred questions to Daybreak.
My engagement with Pule Malahlela had nothing to do with Daybreak. I knew Mr Malahlela long before Daybreak
Malahlela was by far the biggest Daybreak beneficiary, earning more than R116m for providing legal services through one of his law firms, Malahlela and Co Attorneys, which now trades as Black-White. Work he billed for includes pursuing former Daybreak executives. Seruwe and axed executive Mathapelo More’s dismissals were overturned by the Commission for Conciliation, Mediation & Arbitration. Daybreak is now appealing the decision.
In the past three weeks, More and fellow executive Votelwa Majola had two fraud and money-laundering charges against them withdrawn in the Pretoria commercial crimes court. Besides the criminal cases, which Malahlela invoiced Daybreak to open, Daybreak applied for search-and-seizure orders against the executives, which have not yielded any results.
Malahlela’s company also billed Daybreak R336,000 for studying the state capture inquiry report. The Sunday Times has seen evidence that Black-White charged Daybreak for the forensic investigation Schaefer-Schmidt conducted. In addition, the law firm billed Daybreak R3m a month for collating and storing files related to the legal fight against the executives.
Malahlela did not respond to questions sent to him via an employee, Bazu Marasha, last week. Calls to Malahlela and a senior executive at his firm went unanswered.
Blueapple Tree, according to company records, earned R40m from Daybreak — R23m in the past five months. Some of the company’s invoices include R7m for a “brand strategy and website development” for Daybreak.
Blueapple Tree owner Cedric Mamabolo did not respond to questions about his company or Daybreak, on whose behalf his company is paid to communicate.
The Daybreak scandal highlights the seriousness of the PIC’s reform attempts after previous scandals exposed at the commission of inquiry chaired by retired judge Lex Mpati.
One of Mpati’s recommendations has yet to be implemented. It recommended an investigation be conducted into the conditions under which Mathebula, who was suspended and found guilty of sharing confidential PIC information with whistleblowers, was returned to the PIC after her disciplinary hearing recommended dismissal.
PIC insiders told the Sunday Times that she was returned to the PIC at the insistence of its then board chair Mondli Gungubele, now minister in the presidency.
On Friday Gungubele said he was not permitted to discuss decisions taken by the PIC board, “save to state that decisions of the board were well considered, preceded by a thorough debate and exchange of views from directors. Thereafter, the majority, if not the unanimous view of the board, would be adopted as the board resolution.”
The PIC said in respect of Mathebula and Daybreak: “The PIC is not concealing anything in relation to developments at Daybreak. The PIC cannot be expected to publicly disclose details of its internal processes and expects that its relationships with employees are treated as confidential.”
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