Unaccountable 00030 | Sfiso Buthelezi- The MP who derailed Prasa
By Lucas Nowicki for Open Secrets
Who are the board members and executives at Prasa who enabled and participated in the looting of the Passenger Rail Agency of South Africa (Prasa)? This week we turn to Sfiso Buthelezi, a former deputy minister of Finance and current member of parliament whose six years as Prasa’s first board chairperson saw the parastatal procurement process systematically undermined and its coffers drained.
It is easy to forget the social impact of corruption when South Africa’s political elite is rarely held to account. In Unaccountable 23, 24, 26, and 29 we outlined evidence of corruption against multinational corporations, politically connected businesspeople and middlemen who profited from corrupt contracts from Prasa, the grossly mismanaged state-owned passenger rail company. They could not have done so without the assistance of senior members of the board and executive. This week we turn out attention to Sfiso Buthelezi, whose six years as Prasa’s first board chairperson saw billions looted from the parastatal, some of which is alleged to have gone to the chairperson himself.
Buthelezi was board chairperson from 2009-2014, during some of Prasa’s most vital years. In this period, Prasa undertook a significant modernisation program to manufacture modern train and rail infrastructure for millions of commuters. However, this industrial program and buButhelezi was board chairperson from 2009-2014, during some of Prasa’s most vital years. In this period, Prasa undertook a significant modernisation programme to manufacture modern trains and rail infrastructure for millions of commuters. However, this industrial programme and budget was captured by a network of companies and businesspeople who systematically bypassed the procurement process under the watch of Buthelezi. This contributed to the rapid breakdown of Prasa’s infrastructure and service, forcing over half a million commuters to find more expensive forms of public transport over the last decade, according to the recent National Household Travel Survey (NHTS).
Buthelezi is now the chairperson of the Standing Committee on Appropriations in Parliament, responsible not just for allocating funding to government departments, including SOEs like Prasa, but also for ensuring compliance with the Public Finance Management Act and other procurement legislation.
Yet it is precisely these laws that Buthelezi stands accused of violating through multiple forensic investigations into corruption and maladministration at Prasa. It is untenable that he remains in this position of trust and he should be removed until a full investigation into all the allegations has been completed.
Buthelezi’s revolving door between public and private interests
Sfiso Buthelezi joined Umkhonto weSizwe, the armed wing of the ANC, in 1981. He was arrested in 1983 and spent nine years in prison on Robben Island until his release in 1991, according to a City Press profile.
After South Africa’s 1994 democratic elections, Buthelezi worked for Jacob Zuma while the former president was MEC for economic development in KwaZulu-Natal. After spending a few years in senior public sector roles, Buthelezi joined the private sector after 1999 to become the Chief Operating Officer of Makana Investment Corporation, an investment vehicle for Makana Trust, a vehicle for former political prisoners founded by politically connected businessman and former Robben Island prisoner Peter Paul-Ngwenya.
Makana Investment Corporation has a number of subsidiaries and shares in a spectrum of companies, including JSE-listed Cadiz Holdings and Sebenza Forwarding and Shipping. Both these companies have been implicated in benefitting from irregular Prasa contracts while Buthelezi was board chair. These accusations were from the 2015 Public Protector’s report and subsequent forensic investigations into Prasa contracts.
In 2005, Minister of Transport Jeff Radebe appointed Buthelezi to the board of the South African Rail Commuter Corporation (Sarcc) – a predecessor to Prasa. Sarcc, at that time, was planning a significant modernisation of South Africa’s rail service for the 2010 Fifa World Cup, which required a significant increase in government funding. A major element of this modernisation was the consolidation of passenger rail services in South Africa into a single entity: Prasa. Buthelezi was appointed Prasa’s first chairperson in 2009.
Ten years on the board
Prasa’s board reports directly to the Minister of Transport and is mandated to ensure that Prasa complies with necessary laws and regulations. This includes the Public Finance Management Act, according to Prasa’s Board Charter. The Charter also requires all board members to avoid and promptly disclose conflicts of interests and duties.
Buthelezi was Prasa’s longest-standing board chairperson, holding the position from 2009 to 2014. In his final statement as chairperson in Prasa’s 2013-2014 annual report, Buthelezi congratulated his board and ex-GCEO Lucky Montana for making major progress in the modernisation programme and for creating a rail service as a “priority for our people”.
However, the release of Public Protector Thuli Mandonsela’s 2015 Derailed report shattered the facade of good governance, modernisation and progress that Buthelezi and Montana tried to sell. The report was based on 37 complaints lodged by the South African Transport and Allied Workers Union in 2012, which alleged serious maladministration, nepotism, corruption and whistle-blower victimisation at Prasa.
Public Protector shatters the facade
Madonsela’s report revealed systemic corruption and maladministration at Prasa, where the procurement process was consistently flouted, leading to billions in irregular expenditure under Buthelezi’s watch. Derailed was also the first of multiple allegations leveled against Buthelezi for profiting off irregular Prasa contracts while he was board chairperson.
Prasa — under then CEO Lucky Montana — frustrated the Public Protector’s attempts to access necessary tender documents. This led Madonsela to defer multiple complaints to a second investigative report. Importantly, she also ordered Prasa and National Treasury to investigate hundreds of Prasa contracts and to “take measures” against any findings of maladministration and procurement abuses.
In February 2016, National Treasury and Prasa’s new board commissioned multiple forensic auditing firms to investigate Prasa contracts worth more than R10-million from 2012, as per Madonsela’s recommendations.
Prasa also commissioned Werksmans Attorneys to conduct extensive investigations. Significantly, the findings were used to set aside the multi-billion rand corrupt Siyangena and Swifambo contracts in court – the latter contract being the subject of Unaccountable 24 and 26.
The Treasury investigations revealed a staggering level of corruption and maladministration at Prasa: out of the 216 contracts investigated – worth a combined value of around R15-billion between 2012-2015 – only 13 were found to be above board. The investigations into 30 of the contracts recommended Buthelezi and his board be criminally charged for contravening the Public Finance Management Act.
In a response to Open Secrets, Buthelezi claimed not to be privy to the Treasury investigations because he had already left Prasa.
The Public Protector, Treasury and Werksmans investigations revealed that Prasa’s procurement process had been captured by a network of private interests enabled by Buthelezi, his board, Montana and a number of executives. In previous Unaccountables, we highlighted people involved in this network, including Roy Moodley and Makhensa Mabunda.
The reports were a scathing indictment of Buthelezi’s tenure as Prasa’s board chairperson, but even more troubling were allegations that Buthelezi’s companies profited from Prasa contracts without him disclosing any conflicts of interest.
Profiting from Prasa?
A complaint in the Public Protectors’ Derailed report was the first allegation that companies linked to Buthelezi irregularly profited from Prasa contracts while he was chairperson. Madonsela investigated Buthelezi’s alleged failure to disclose a conflict of interest involving Makana Investment Corporation, which has a 15% stake in Cadiz, a company that allegedly provided advisory services to Prasa for a major rolling stock contract.
Montana, in defence of Buthelezi, rejected the accusation that Cadiz won any Prasa contracts and provided the Public Protector with an “undated” declaration form which listed Buthelezi’s involvement in Makana and a seemingly misspelled Cadiz as “Cadaz” Holdings. Buthelezi likewise denied all allegations that he improperly profited from any Prasa contracts.
Makana bought shares in financial services group Cadiz for R41-million in 2004, introducing BEE ownership, according to a Mail & Guardian article. Makana’s founder, Ngwenya, was nominated as Makana’s representative on Cadiz’s board, with Buthelezi as his alternate, according to the article. Buthelezi resigned from Cadiz in 2010 but remained a director of Makana until 2016, according to company records.
Madonsela deferred the complaint to be dealt with in the second report because Prasa failed to provide relevant documents “to verify” Montana’s claim that the conflict of interest had been declared. However, the second Prasa report, released in 2019, was done by current Public Protector Busisiwe Mkhwebane after Madonsela’s term expired.
Mkhwebane dismissed almost all of Madonsela’s deferred complaints — including on Buthelezi. Railway-activist coalition #UniteBehind rejected Mkhwebane’s Prasa report as a “whitewash” that protected powerful figures implicated in corruption at Prasa, including Buthelezi and Montana.
Makana Investment Corporation and Cadiz were also implicated in the shady locomotive contracts at Transnet. Both companies formed part of the local consortium which partnered with China North Rail in the contracts which were set up to provide billions in kickbacks to the Guptas, as detailed in Unaccountable 22.
A 2018 Fundudzi forensic investigation into the Transnet contracts notes that Buthelezi was a director of Makana investments until 2016, meaning that Buthelezi was both a member of Parliament and director at Makana while the contracts were active. Makana and Cadiz are not the only companies linked to Buthelezi that are alleged to have received profitable government rail contracts.
The Swifambo saga
Buthelezi’s Makana Investment Corporation has a 55% majority stake in Sebenza Forwarding and Shipping, which is alleged to have profited from multiple Prasa contracts without Buthelezi disclosing his interest. Most notably in relation to the corrupt 2013 Swifambo contract.
In Unaccountable 24 and 26 we detailed how Swifambo Rail Leasing, a local front for Spanish railway company Vossloh Espana, was established to benefit from a massive 2012 Prasa contract worth R3.5-billion for the supply of locomotives. The entire procurement process was rigged to favour Vossloh Espana’s locomotives — the locomotives Swifambo’s bid was based on — according to a 2017 Horwath Forensics (now Crowe Forensics) investigative report for the Hawks.
In July 2012, Prasa’s board met to consider the bids for the locomotive contract, with both Buthelezi and Montana in attendance, according to former board chairperson Popo Molefe’s founding affidavit in Prasa’s successful 2017 bid to get the contract set aside.
The board approved Swifambo as the preferred bidder for the R3.5-billion contract just months after the front company had been established. This decision was “irrational, arbitrary and in breach of the board’s obligations”, according to Molefe.
The former chairperson said the board’s decision to award the mega contract without necessary information was “astounding”. Non-executive director at Prasa, Bridgette Gasa, also raised serious concerns to Buthelezi and Montana about Swifambo’s ability to fulfill its contractual obligations, according to Molefe’s affidavit. Despite these concerns, the board proceeded with the dodgy contract, which was signed in March 2013.
Buthelezi defended this decision at the State Capture Commission, saying that the tender had already gone through the different committees which evaluate the bids.
The 2017 Horwath money-flows report also revealed that more than R450-million out of the R2.7-billion paid by Prasa for locomotives that were too tall for parts of South Africa’s railway lines was lost in a web of shelf companies, multinational corporations and shady political networks, as documented in Unaccountable 26.
Some of the items bought with the Prasa locomotive money included a Western Cape wine farm and a state-of-the-art Italian kitchen. With the R3.5-billion contract failing to provide any usable locomotives, Prasa’s long-distance passenger rail service has crumbled, seeing a 90% drop in passengers over the last 10 years.
Buthelezi is implicated in the Swifambo scandal by signing off on the deal in violation of his board chairperson duties. He is also, however, implicated through a conflict of interest.
Horwath’s analysis of Swifambo’s bank account revealed that shipping and logistics company, Sebenza Forwarding and Shipping, received R99-million from Swifambo Rail Leasing. Buthelezi was a director at Sebenza, and he also approved Swifambo’s bid as Prasa chairperson in July 2012, according to Horwath. Buthelezi resigned as a director of Sebenza in 2012 — before Swifambo paid the R99-million.
However, Horwath alleges that Buthelezi failed to disclose his interest in Makana Investment Corporation and its majority stake (55%) in Sebenza. Horwath states that the Buthelezi-linked Sebenza is Prasa’s “preferred forwarding and clearing service provider” for imported railway infrastructure.
Buthelezi remained a director of Makana until 2016 — long after Swifambo paid Sebenza and after the too-tall locomotives arrived in South Africa in 2014 and 2015 — according to company records. However, he was not the only one in his family alleged to profit from the deal.
Inala Shipping, a company owned by Buthelezi’s brother Nkanyiso, also profited from the Swifambo contract, according to a 2017 News24 article. News24 alleged that Swifambo appointed Inala, who in turn appointed Sebenza to handle the customs and clearing for the locomotives. Sebenza confirmed to News24 that Swifambo had paid it R99-million and that it worked with Inala, but denied Buthelezi’s involvement, as did Buthelezi. The R99-million allegedly went to pay VAT and customs fees on behalf of Swifambo, according to Sebenza. Sebenza said Inala profited around R1.5-million, which it said was the majority of the profit from the deal.
However, Horwath investigators found that as per Swifambo’s contract with Prasa, the cost of shipping was a responsibility of Prasa, and Swifambo. Additionally, Horwath could not find any billing by Swifambo for shipping costs besides one Swifambo income statement which details R3,988,195 in “clearance fees”.
Horwath’s report for the Hawks recommended that Buthelezi be investigated for his role in the deal, particularly the “critical relationship” of the Prasa chairperson and his “(undisclosed) relationship with Sebenza”. Yet, after presenting this damning report to investigating officer Major General Khana of the Hawks in 2017, the forensic investigators never heard back and Buthelezi walked away unscathed.
More than just one contract?
The massive Swifambo locomotive contract was not the only Prasa contract that Sebenza scored with Prasa. The 2017 News24 article alleges that Sebenza scored at least two other Prasa contracts before the Swifambo contract.
Sebenza allegedly invoiced Prasa for around R42-million in relation to Prasa importing steel tracks from European manufacturer Tata Steel France in 2013, according to the article. Additionally, Vossloh Kiepe, Vossloh Espana’s sister company, paid Sebenza R13-million in 2011 in relation to an air-conditioning contract. The contract was severely criticised by the Democratic Alliance in 2013, who questioned why Prasa was buying fully imported air-conditioning units at double the price of local ones. Although the contract was not subject to Horwath’s investigation, it involved many of the same parties involved in the 2012 locomotive contract.
The Horwath report notes that the contract was plagued with “significant irregularities” and that Prasa was investigating it. News24 alleges that Buthelezi was still an active director of Sebenza when Vossloh Kiepe paid the clearing company for importing and clearing the air-conditioning units.
Buthelezi has denied all allegations, stating that he never abused his chairmanship to “influence procurement decisions” and that he has always adhered to conflict-of-interest policies.
He stated that he was a non-executive director at Sebenza until December 2012, did not influence procurement decisions while on Prasa’s board and did not personally benefit from companies involved in the Swifambo contract. Buthelezi submitted an affidavit to the Zondo Commission, stating that there was “no truth” to the allegations that he profited from any Prasa contracts awarded to Cadiz, Makana or Sebenza. He also denied that he had failed to disclose relevant conflict of interests. Buthelezi referred Open Secrets’ questions on his relationship with Sebenza and Makana to this submission to the Zondo Commission..
However, in a response to the News24 article in 2017, the Ministry of Finance confirmed that Makana has a 55% shareholding in Sebenza, but rejected that Buthelezi profited from any of the Sebenza contracts. This response came just after Buthelezi was appointed deputy finance minister by Jacob Zuma.
This means that from 2012, Buthelezi was still an active director of Makana Investments until 2016, which had a majority shareholding in Prasa’s “preferred clearing and forwarding company”, Sebenza, according to the Horwath report. In that period, Buthelezi’s board also signed on Swifambo and oversaw the delivery of the too-tall locomotives. This challenges Buthelezi’s blanket denial that he benefited from Prasa contracts.
Rewarded for negligence
Buthelezi departed Prasa in late 2014, leaving the parastatal in disarray. Popo Molefe and his new board were left with the mammoth task of cleaning up the parastatal. But his predecessor faced no investigations or disciplinary processes.
In addition, law enforcement has been criticised for a lack of investigations into Buthelezi and the rest of his board. Molefe’s board lodged dozens of criminal charges in 2015/2016, many in relation to the Swifambo and Siyangena contracts. In a 2017 letter to Hawks head Berning Ntlemeza, Molefe accused the Hawks, and its investigating officer Major General Alfred Khana, of failing to investigate the charges.
Four years later, and not a single case has seen the light of day.
Buthelezi declined to comment on whether he had faced any investigations or disciplinary hearing, but he confirmed that no criminal charges had been laid against him since the 2016 Treasury investigations became public.
“I suggest that the first question you should pose should be directed to those who were supposed to lay criminal charges against me and the question should be why have they not done so since 2016,” he said in an email to Open Secrets.
Despite the allegations against him, Buthelezi has been promoted to key government positions since he left Prasa. Buthelezi — who had a history of working alongside Zuma — was admitted as an ANC MP in 2016. One year later, in one of Zuma’s infamous Cabinet shuffles, Buthelezi was appointed deputy finance minister alongside Malusi Gigaba as minister. As deputy finance minister, he chaired the board of the Public Investment Corporation, responsible for managing nearly R2-trillion in assets.
In 2018, Buthelezi was made deputy minister of agriculture, forestry and fisheries. In 2019, he was removed from Cabinet and appointed chairperson of the Standing Committee on Appropriations in Parliament. The committee has the vital task of allocating budget funding to government departments, including SOEs like Prasa. The committee is also tasked with upholding the Public Finance Management Act, which Buthelezi is accused of violating in the Treasury and Werksmans investigations.
Civil society has since 2017 called for Buthelezi to be investigated and removed from holding public office because of his history at Prasa. But to date, he remains unmovable, and the inaction suggests that he continues to have the blessing of senior individuals within the state and governing party.
If the South African Parliament is serious about accountability, then Buthelezi should be removed as chairperson of the Standing Committee on Appropriations to allow for a full public investigation of this matter. Such a process should either clear him of any wrongdoing or recommend his prosecution for his role in the destruction of Prasa.
Unaccountable, we have not forgotten.