More than R13m has allegedly been siphoned out of the embattled Construction Education & Training Authority (Ceta) through two contracts meant to provide and administer a biometric system designed to combat fraudulent learner enrolment in training programmes.
At least R6m of this was paid by Ceta to joint venture EZG Vest and Coinvest Africa to administer the system, despite a warning by the auditor-general (AG) and an internal whistleblower that there were irregularities in the appointment process.
The other R7.1m was paid to Grayson Reed, a company appointed by Ceta in 2018 to provide the system, which included biometric scanners and a portal to keep track of learners' attendance and automatically link it to payment of stipends.
The biometric system was meant to verify the identity of learners and ensure that only registered individuals participate in Ceta-funded training programmes. It would have been integrated with Ceta’s Indicium management information system, which is used for registering learners and managing training data, Ceta said on its website.
Despite the system never being operational, Ceta, under CEO Malusi Shezi, proceeded to make monthly payments to the joint venture, essentially for operating a nonexistent system, between March 2022 and July 2023 as part of a R50m contract awarded to the two companies in 2021.
The payments only stopped after Coinvest became embroiled in a tender controversy at the National Student Financial Aid Scheme (Nsfas), where it was one of four companies awarded a multibillion-rand contract to make direct payment of students’ allowances into their bank accounts.
Each company was meant to make R330m in profit during the five-year contract, but the tender was stopped after irregularities were picked up in the procurement process. Among them were that none of the companies had a banking licence and all were relatively new to fintech and could not demonstrate adequate experience in the field.
The then Nsfas CEO, Andile Nongogo, was also found to have had a previous relationship with Coinvest, after overseeing the awarding of equally controversial business to one of its directors, Tshegofatso Ntumba, while he was CEO at the Services Seta (SSeta). Nongogo took special leave over the scandal, and was eventually fired from Nsfas.
A finding two weeks ago by the AG’s team in Ceta’s ongoing audit suggested that any money spent on administration of the system could attract a fruitless and wasteful expenditure outcome for the organisation as there is no evidence that the system is in “operational use” and accessible on Ceta’s domain.
Communication from the AG’s auditors, seen by the Sunday Times, reads: “The biometric system is now not in operational use, nor is it in a condition necessary to be used in the manner intended by management. As such, it is not contributing to service delivery or the entity’s mandate at this time. Furthermore, management’s ability to access the system is in question as during verification of the system it was noted that the system is now not able to be accessed from the Ceta domain.”
However, the AG's findings are not official, as the audit is ongoing and Ceta's management is engaging the AG's team on the findings.
Ceta’s former IT manager, Bongani Sibanyoni, who was terminated and is now challenging his dismissal in the labour court, said the system was never delivered.
While on the face of it these developments might speak to a lapse in process, it is the intercompany relationships that point to a more sinister possibility of a network of individuals allegedly colluding through various entities to siphon monies out of sector education & training authorities
“I was the IT manager during the time of procurement of the so-called biometric system, around 2021/22,” Sibanyoni told the Sunday Times. “I can confirm that I was responsible for all IT systems at Ceta, and was the most senior IT personnel during that period. I had four subordinates reporting under me at the time.
“All specifications for procurement of IT systems would be drafted from my then IT department, and the TOR [terms of reference] of this particular biometric system was neither drafted from the IT department nor presented at BSC [bid specification committee] by my department ...
“There was never a biometric system that was deployed in the Ceta IT infrastructure that I was responsible for, and can categorically confirm that Ceta did not have any such functioning system in its ICT software assets, at least until I was dismissed in August 2023.”
EZG Vest could not be reached for comment, despite numerous attempts on their contact information filed with the Companies and Intellectual Properties Commission.
Ceta CEO Shezi did not answer questions put to him, instead opting to retain law firm Sithi and Thabela to send letters claiming questions and previous stories published about Ceta were defamatory towards him, and threatening legal action.
Questions related to this article were initially sent 11 days ago. Ceta executive manager Lebogang Phasha, through a letter from the law firm, requested more time to comment, or they would approach the court for an interdict.
The law firm's candidate attorney, Reabetswe Khoabane, stated that the request was made in good faith and in the interests of being fairly heard before publication.
The Sunday Times agreed to this. However, six days later, on Wednesday this week, after discussion on issues pertaining to the enquiry, Khoabane issued a final letter of demand, giving the Sunday Times 48 hours to undertake not to publish this article, saying it was defamatory and claiming the publication did not have any sources for the information in the article.
“Given the reputational harm suffered by our client, the continued harassment through baseless weekly inquiries, and your failure to act in good faith, we are proceeding with legal action against your publication and Mr Skiti for defamation,” she wrote in the letter.
While on the face of it these developments might speak to a lapse in process, it is the intercompany relationships that point to a more sinister possibility of a network of individuals allegedly colluding through various entities to siphon monies out of sector education & training authorities (Setas). Nongogo and Shezi, who as accounting officers are central to the scheme, would have overseen the appointments or allegedly ignored warnings about irregularities in the appointment process.
Research by the Sunday Times, as well as similar forensic investigation by the Organisation Undoing Tax Abuse (Outa), show that Coinvest and Grayson Reed — the companies initially awarded the R24m Ceta tender to provide the biometric system in 2018, are related through their directors.
Grayson Reed, which was paid R7.1m of th eR24m after the contract was terminated, is also linked to tender controversy at SSeta,where it was awarded a similar biometric system contract at a whopping R162m, with no tangible results.
The companies are linked through former Coinvest director Artwell Makleve who, paperwork analysed by Outa shows, also held interests in Grayson Reed and was active in the company’s bid at SSeta. He is also the husband of current Coinvest director Marilyn Mpho Makleve.
Mpho Makleve did not respond to questions sent to her e-mail address last week for her and her husband to consider.
While Shezi was not accounting officer at the time of Grayson Reed’s appointment, he was at Ceta when EZG Vets and Coinvest were appointed in 2021 to administer the nonexistent biometrics system. A management report issued by the AG in 2022 flagged among other things, that the award could be irregular because the procurement process was flawed.
The flaws included that the tender was advertised for a shorter period than the required days. Additionally, minutes for the bid's evaluation and bid adjudication could not be found.
At the time of the flagging, Ceta had not made any payments under the contract. However an internal Ceta payment schedule, seen by the Sunday Times, shows that payments to the joint venture were made between March 31 2022 and July 28 2023.
For example, one of the invoices seen by the Sunday Times shows that Ceta was invoiced an amount of R572,488 in August 2022. This comprised:
- R234,782 for project management;
- R62,608 for help desk support; and
- R33,515 for monthly administration per learner; while
- the rest of the money went towards “variable one-off costs” which included:
- maintenance per device;
- prepaid cards for learners; and
- verification of learners.
It is not clear why the payments were stopped, but the timing of it coincides with when Nongogo was placed on special leave and Werksman’s Attorneys and advocate Tembeka Ngcukaitobi were conducting an investigation into the direct payments contract award.
An excerpt of Ngcukaitobi’s report read: “The Grayson Reed consortium tender at SSeta was tainted by irregularities which include allegations that the Grayson Reed consortium was unable to perform in terms of the SLA [service level agreement], despite having been paid for their services. This results in their contract being prematurely terminated.
“Considering that the SSeta contract included the provision of direct payment of stipends for students, it is concerning that the same entities that failed to perform as required at SSeta have been appointed at Nsfas,” it continued.
Besides the business relationship through shared directorship in Nosh Capital, Shezi and Nongogo’s relationship goes back to when they were at the University in KwaZulu-Natal, and they both worked at auditing firm KPMG, as well as at the Auditor-General of South Africa.
Despite this relationship, Shezi signed off on a R1m in grant funding in November 2023 for a company in which Nongogo’s former wife is a director.
Shezi did not respond to questions about whether he viewed himself as conflicted, what role he played in the decision to award the funding, and whether either party declared that they knew each other.
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