The controversial R5bn job creation scheme concluded between the Unemployment Insurance Fund (UIF) and Thuja Capital Fund without any due diligence has claimed its first casualty.
The Sunday Times has learnt from two independent sources that Thuja’s boss, Mthunzi Mdwaba, has been removed from the board of state entity Productivity South Africa by employment & labour minister Thulas Nxesi.
Productivity South Africa is an entity of Nxesi’s department tasked with saving and creating jobs, and relies on funding from the UIF, among other organisations. It provides financial support for distressed companies to stabilise them and save and create jobs.
After the Sunday Times exposed the R5bn Thuja scheme late last year, Mdwaba’s deal for the private company — of which his musician son is also a director and which appears to be in direct competition with Productivity South Africa — sparked an outcry.
The Thuja-UIF agreement had been proceeding despite having been rejected by internal UIF adjudication structures because Thuja had no track record. The deal had also been rejected by the Public Investment Corp.
UIF commissioner Tebogo Maruping overrode the objections and motivated for department of labour director-general Thobile Lamati to approve the agreement, which he did. Maruping and Lamati defended the agreement to the Sunday Times at the time, saying that even if the prescribed processes were flouted and the project had no guarantee of success, it would create many jobs.
Nxesi pulled the plug on the scheme after the Sunday Times report.
Approached for comment yesterday, Mdwaba read the questions but did not respond. He has 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.”
The main point he [Nxesi] is stressing is that I have a conflict of interest, in that my personal project competes with Productivity South Africa and would interfere with my duties. Nothing could be further from the truth
— Mthunzi Mdwaba
The Sunday Times understands Mdwaba was removed in terms of the Employment Services Act, which allows Nxesi to remove a member of the board if they acquire an interest in a business or enterprise that may conflict or interfere with their functions as a board member.
Sources also said Mdwaba sent an e-mail to his fellow board members at Productivity South Africa on Wednesday informing them of Nxesi’s intentions and asking them for legal advice and representation to challenge the minister.
“The main point he [Nxesi] is stressing is that I have a conflict of interest, in that my personal project competes with Productivity South Africa and would interfere with my duties. Nothing could be further from the truth,” he wrote in the e-mail.
“For the record, I presented [it] to [the] executive committee and this was reported to the board. My project actually complements and adds to Productivity South Africa, and has absolutely no conflict with what it does. Additionally, and more importantly, I declared [it] to the board [on] no less than three occasions,” Mdwaba added, before saying he regarded the matter as “purely personal”.
Mdwaba’s axing follows Nxesi’s referral of Lamati’s conduct to President Cyril Ramaphosa for a decision on how to proceed.
The action taken against the two follows a forensic report Nxesi commissioned into the debacle. Appearing before parliament’s portfolio committee on employment & labour, Nxesi said a “consequence management plan” had been developed and he could not discuss the forensic report until those implicated in it had had an opportunity to reflect on the findings.
“It is important for me to ensure that this process is done expeditiously to safeguard the integrity of our financial management processes. I will come back to report fully to parliament and the portfolio committee on these remedial steps once they have crystallised into a tangible outcome,” he said.
On Friday Nxesi’s office declined to comment, citing employer-employee confidentiality.
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