The fallout from the controversial R5bn job creation project concluded between the Unemployment Insurance Fund (UIF) and Thuja Capital Fund could see Thuja’s owner, Mthunzi Mdwaba, who also chairs the department of employment & labour’s entity Productivity SA, out of a job.
Mdwaba stands accused of essentially taking money out of Productivity SA’s pockets, as his company’s agreement — to use a R5bn UIF grant to fund initiatives to save jobs and create new ones — was in direct competition with Productivity SA, which has the same mandate and also relies on UIF money to do its work.
Employment and labour minister Thulas Nxesi announced this week that he had ordered “consequence management” for senior officials in his department and its entities, and it appears Mdwaba could be in the firing line.
Late last year, the Sunday Times exposed the R5bn scheme that would have benefited Thuja, of which Mdwaba’s musician son is also a director. In January, Nxesi ordered the suspension of the R5bn transaction and an independent forensic investigation into it.
Mdwaba’s conduct in submitting a funding proposal allegedly in competition with the entity he oversees has left him in contravention of the Employment Services Act, the legislation that establishes and governs Productivity SA. The act says a board member may not remain if they acquire an interest in a business which may conflict or interfere with their functions as a board member.
Mdwaba did not respond to requests for comment yesterday. However, he previously denied any wrongdoing, saying: “We as a country have failed in creating jobs, and what we need is innovative, disruptive and creative models to change things and ensure impact.”
Nxesi’s office declined to comment beyond his announcement.
However, the Sunday Times has established that Nxesi informed his director-general, Thobile Lamati, this week that his fate was in the hands of President Cyril Ramaphosa, who appoints and dismisses directors-general. In a letter to Lamati, Nxesi said the forensic report had found irregularities in the department’s adjudication processes, for which Lamati was ultimately responsible.
The Sunday Times understands that Lamati may be required to explain what action he had taken against other senior officials implicated in the scheme, including UIF commissioner Teboho Maruping, who was allegedly found to have ignored internal advice from the UIF's adjudication committees not to sign the agreement.
We’re glad that the minister says the forensic investigation has been concluded and they are starting to hold people to account
— Matthew Parks, Cosatu parliamentary co-ordinator
The transaction was declined by the Public Investment Corporation, which manages the UIF's surplus funds. At the time, another state fund, the Industrial Development Corporation (IDC), disputed both Maruping and Lamati’s claims that the project had its blessing.
Lamati did not respond to a request for comment this week, and calls to spokespeople went unanswered.
Maruping did not respond to calls or text messages seeking comment. However, on Monday night he said he was unaware of the developments and referred the Sunday Times to Nxesi.
On Monday, Nxesi’s office said: “The minister has asked the responsible person/s to furnish the minister with written reasons why the minister should not suspend them.”
His office recently confirmed receiving the 225-page forensic report into the deal.
“The minister has read the said report, which reveals serious allegations of irregularities in the process of the appointment of [the] Thuja Project by the department,” his office said.
“The report has found and established that the senior officials of the department and the UIF failed to ensure that the UIF maintained an effective, efficient and transparent system of financial and risk management, including internal controls, and an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective.”
Late last year, Maruping and Lamati defended their decision to commit, without due diligence, R5bn to what they admitted was an “untested concept” which they told the Sunday Times had the potential to alleviate the country’s unemployment crisis.
The R5bn scheme would have gone towards starting Thuja’s operations, involving investments in listed and unlisted companies in the hope of using the stakes to push companies to employ more people, and unsecured grant funding for the unemployed to start businesses. In return, the UIF would have received a 19% stake in the investee companies, which include an unnamed bank and an insurance firm.
At the time of publication, Lamati defended Mdwaba’s track record as an entrepreneur and global vice-chair at the International Labour Organization. He also denied any conflict between his work at Productivity SA and Thuja.
Despite Lamati, Maruping and Mdwaba’s assertions that the project was a game-changer, Cosatu parliamentary co-ordinator Matthew Parks insisted it was a get-rich-quick scheme.
“We’re glad that the minister says the forensic investigation has been concluded and they are starting to hold people to account. We’re pleased that this has been handed over to the Presidency because we had raised concerns with the Presidency about such instances as well,” he said.
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