The payment of social grants next year to millions of South Africa’s poorest people is in jeopardy – and that appears to have much to do with the chaotic and dubious management of the relationship between the South African Social Security Agency and one company, Cash Paymaster Services. In this investigation, amaBhungane shows how the company got its current multibillion-rand contract using an apparently fraudulent empowerment deal – and then dumped its expedient fronts in favour of a politically connected businessman. By Craig McKune for AMABHUNGANE.

Cash Paymaster Services director Serge Belamant used a thinly veiled black front to win a R10-billion South African Social Security Agency (Sassa) contract.

Then he quietly dumped these black partners and used irregularly derived Sassa funds to sign on and pay off a businessman who regularly consorts with a close friend of social development minister Bathabile Dlamini – she who oversees Sassa.

The lucky man, Brian Mosehla, pocketed a quick R83-million cash in the process.

The evidence suggests top Sassa officials turned a blind eye to Belamant’s fronting – and together they misled South African courts.

It also raises worrying questions about Dlamini’s possible role and whether the R83-million might have been used to pay off officials and politicians.

‘Just fuck off’

AmaBhungane’s efforts to get answers from those implicated in this article were met with evasiveness, belligerence, accusations of harassment, and silence.

In a lengthy e-mail exchange, Belamant sidestepped key questions but said Cash Paymaster and its United States-listed parent company Net 1 UEPS had been “cleared on all counts” in investigations by US and South African authorities. Belamant is Net 1’s executive chairman.

His response was not accurate. The US Department of Justice (DOJ) and the US markets regulator, the Securities and Exchange Commission (SEC), opened bribery investigations into Net 1’s Sassa contract in November 2012.

The SEC later closed its investigation with the disclaimer that this “must in no way be construed that the party has been exonerated”. The DOJ investigation remains open.

A Hawks investigation found no evidence of wrongdoing.

Dressing down this amaBhungane reporter in Parliament, Dlamini said: “I feel that you are disturbing me. I am not going to discuss anything with you.”

Mosehla e-mailed to say: “I would appreciate if you stop contacting me, I am very disappointed in your journalism and wish you well in righting untrue facts about me (sic).”

Dlamini and Mosehla’s mutual acquaintance is Lunga Ncwana, best known for channelling the notorious fraudster Brett Kebble’s money to the ANC.

AmaBhungane visited Ncwana’s house in Fresnaye, Cape Town. He said: “Just fuck off. Do you think I’m corrupt? You are fucking mad. If you want to investigate someone, why don’t you investigate the fucking Guptas. Don’t you want BEE (black economic empowerment) guys to make money?” Then he had his security guard and the man who had been polishing his R1-million Mercedes SUV frogmarch this reporter from the front door of his R65-million home.

Sassa declined to answer questions.

Part 1: ‘Probably not the best BEE deal’

In April 2011, Sassa issued its request for proposals seeking to subcontract for five years the distribution of social grants to about 15-million South Africans.

Sassa promised to favour bidders who gave an equity stake to historically disadvantaged people.

Two months later, Cash Paymaster’s chief financial officer filled out Sassa’s bid forms by hand.

He claimed Cash Paymaster should be awarded “historically disadvantaged individual” preference points and listed three black companies that Cash Paymaster was putting forward as its black partners.

The accompanying column asked the bidder to describe the percentage of the contract value to be “managed or executed” by each empowerment partner. The finance officer drew a curly bracket to encompass all three black-owned companies and wrote “74.57%”.

Sassa’s tender documents had carefully explained that where individuals “are not actively involved in the management and daily business operations and do not exercise control over the enterprise commensurate with their degree of ownership, equity ownership may not be claimed”.

Therefore, Cash Paymaster was specifying it would substantially subcontract three-quarters of the Sassa job to its black equity partners.

This was not true, as we shall see later.

Later that year, when Sassa considered and compared the bids, two red flags were raised over Cash Paymaster’s claim, but they were ignored.

The first was a legal opinion drafted by an advocate and an attorney. They recommended that Sassa’s bid adjudication committee should investigate to establish “the level of capacity and competency” of the partners and the “veracity of the allocation of the 74.57% contract value”.

Tender records show that just one committee member reacted, raising a second red flag. Discussing this in a meeting with the adjudication committee chairperson, he said: “What is key here, chairperson, the tender does not have a black economic empowerment component.”

But the complaint was literally laughed out of the room. The committee minutes record another member saying of the complaint: “I am not sure if it’s a fair question in any case [laughter].” And that was that.

In January 2012, Virginia Petersen, then Sassa’s chief executive, wrote to minister Dlamini to recommend that Cash Paymaster win the tender. In her memorandum, Petersen ignored the red flags and simply repeated Cash Paymaster’s bald claim that the black partners would “manage/execute” 74.57% of the contract value.

The contract was awarded that same month.

But who were they?

When the contract was awarded in 2012, amaBhungane phoned Belamant to ask him about his black empowerment consortium.

He seemed uninterested and uninformed: “Our BEE, I won’t even argue, was probably not the best BEE deal. But we thought, you know what, if we’re going to win this or lose this because of BEE, well so be it.”

Of the three black companies, he knew one well: Born Free Investments 272. Cash Paymaster had previously distributed social grants in a handful of provinces, and for this it had often used Born Free and its owner, Mazwi Yako, as a BEE partner.

Yako previously made headlines when journalists discovered he had cut a former social development minister Zola Skweyiya’s wife into two of his companies, while he partnered with Cash Paymaster. They denied this was bribery or related to social grants contracts.

Belamant barely knew anything about his other two partners: “One is led by a woman, I can’t remember her name; she’s a teacher. So I think there’s a lot of teachers involved in that one, which I’ve always supported because I think that teachers should be supported in a better way.”

He meant Retles Trading, which involved two teachers, Bulelwa and Jongi Makoetlane.

A married couple, the Makoetlanes founded Retles in 2008. For a few years, they supplied textbooks to Western Cape schools before the company fell on hard times. By 2011, when they signed up with Belamant, the company was in the process of being deregistered, but with “big money” in sight, it was restored, explained one person with direct knowledge.

Retles’ business address was the Makoetlanes’ humble pink home in a cramped, working-class lane off Steve Biko Street in Gugulethu, Cape Town. The property can be distinguished from the neighbours’ by a black Mercedes E300 sedan parked behind a security gate.

Perhaps coincidentally, the Makoetlanes’ house is just around the corner from Lunga Ncwana’s mother’s house. Ncwana is the one who is friends with minister Dlamini.

Last month, Bulelwa confirmed knowing him: “Yes, I grew up with Lunga.” But she refused to answer further questions.

Belamant knew even less about his third black partner: “The other one is driven… I think it’s more like a financial banks company, and I’m not 100% sure what they do to be quite honest.”

AmaBhungane told him it was called Ekhaya Skills Consulting. Belamant said: “Okay. You can’t quote me on that, but I believe you.”

Ekhaya was not a “financial banks company” by any stretch. It was a small outfit, run by one woman who advertised that she provided “skills training” for employers – it too was being deregistered and had to be resuscitated before the Sassa deal.

When amaBhungane noticed in 2012 that Ekhaya’s owner’s brother, Patrick Ntshalintshali, was doing work related to Net 1, this reporter called him to ask if he was involved with Ekhaya and the Sassa tender. Ntshalintshali was adamant: “Nah. Not at all. I’m not involved in this deal at all. I was not invited.”

This was a plain lie, it turns out. Sassa tender records have subsequently shown that it was Ntshalintshali who signed Ekhaya’s contract with Cash Paymaster and attended Sassa’s bid presentations on behalf of the consortium.

It is not clear what Ntshalintshali was trying to hide, but amaBhungane has confirmed that he was at the same time working for Lunga Ncwana, minister Dlamini’s friend. This included being the public face for a company that was secretly 95% owned by Ncwana’s family trust.

Asked recently to explain, Ntshalintshali said: “Clearly in your books the only person that tells and knows the truth is you, Craig. The South African courts, FBI and SEC are incompetent to you. Continue to create as many stories in your mind as you possibly can. Just leave me out of it. So stop harassing me. Never e-mail or talk to me again.”

An irregular contract

Within days of Sassa giving Cash Paymaster the grants payment contract in 2012, a losing bidder, the Absa-owned AllPay, sued. AllPay argued that the tender was irregular and the contract should be set aside.

It was a titanic and well-publicised case that wound its way to the Constitutional Court.

In sworn affidavits, Belamant and a senior Sassa official confirmed “that Cash Paymaster indicated, when tendering, that grant payment services to the value of 74.57% of the contract would be ‘managed/executed by their BEE partners’”.

Again, this was false, as we shall soon see.

In November 2013, the Constitutional Court agreed that Sassa’s tender was irregular because of two main flaws.

The first was a last-minute technical change to the tender specifications that had the effect of taking AllPay out of the running and shooing in Cash Paymaster.

The second was that Sassa had failed to investigate Cash Paymaster’s empowerment credentials. In a scathing ruling, the court described this as an essential failing: “Substantive empowerment, not mere formal compliance, is what matters.”

Allowing “a misrepresentation that historically disadvantaged people are in control and exercising managerial power even when that is not the case … amounts to exploitation”, it ruled.

Exploited

But misrepresent and “exploit” is what Cash Paymaster and Sassa appeared to do, amaBhungane can reveal.

AmaBhungane has obtained a copy of Cash Paymaster’s contract with Retles, Ekhaya and Born Free, the three tendered black partners. Cash Paymaster had submitted the contract with its bid in 2011, but neither Cash Paymaster nor Sassa appear to have disclosed it to the courts.

AmaBhungane reviewed Sassa’s extensive 2011 bid committee records and found multiple references to Cash Paymaster’s claim that the BEE consortium would “manage and/or execute” 74.57% of the contract value – but there are no indications that the bid committees considered the terms of the BEE contract.

This was a serious oversight, because the contract presented a peculiar circular arrangement in which Cash Paymaster will subcontract 74.57% of the Sassa contract to the black partners, as had been indicated – but buried in the fine print was another clause explaining that the black partners would subcontract 74.45% of the work back to Cash Paymaster, apparently leaving them just 0.12% of the contract value.

In other words, the contract materially contradicted what Cash Paymaster stated in its 2011 bid; what then Sassa chief executive Petersen’s 2012 wrote in her memorandum to Dlamini recommending Cash Paymaster should win; and sworn court statements by Belamant and a senior Sassa official.

Petersen recently told amaBhungane that she had read the contract. Asked to explain the contradictions, she said she had performed “to the best of my ability at the time with the knowledge available to me”.

“That sounds like fronting to me, but maybe I’m just old-fashioned,” exclaimed a lawyer familiar with the matter when amaBhungane described this to him. He did not want to be named.

Dumped

When amaBhungane heard a rumour a few years ago that Cash Paymaster was replacing its tendered empowerment consortium with another one, one of Cash Paymaster’s tendered black partners, Mazwi Yako, said this would have been irregular.

He said: “If you submit a tender, it gets awarded on the basis of what you have submitted. I cannot submit a tender today, and when you award it to me and then say, oh by the way here’s Craig, he’s a friend of mine, I want my partner to be Craig today. It was awarded and evaluated on the basis of what was evaluated in those documents, and I have a legally binding agreement that was also submitted, and that still stands.”

But Cash Paymaster ultimately did substitute its tendered black partners in exactly this manner.

According to Cash Paymaster’s empowerment contract, the black partners were supposed get 3.2-million Net 1 shares. According to its bid, these were worth R1.5-billion.

But this payoff would happen only once Cash Paymaster had secured the Sassa contract and successfully fended off any subsequent litigation, such as the AllPay suit.

After ruling in November 2013 that the contract was invalid, the Constitutional Court had to rule on what Sassa should do about the problem.

It was not an option for grants payments to be interrupted; therefore, in a follow-up ruling in April 2014, the court ruled that Cash Paymaster could keep its contract for now, but Sassa had to run a new tender. If Sassa found no suitable candidates, Cash Paymaster could keep the contract until it expired on March 31, 2017.

Sassa only received three bids. Officials decided none of these made the cut, and Sassa cancelled the tender in November 2015.

Cash Paymaster now had its already half-executed Sassa contract in the bag, yet it did not consummate its long-outstanding empowerment deal. The black partners’ promised payoff of R1.5-billion in Net 1 shares appeared to vanish.

Instead, Belamant had already cut an enormously lucrative empowerment deal with someone else the year before: Mosehla, the one who shares Lunga Ncwana as a mutual friend with minister Dlamini.

Part 2: Getting closer to minister Dlamini

“We don’t get a R1.7-billion contract without being pretty close to the minister nationally as well as to [provincial ministers],” quipped Belamant when the Mail & Guardian cornered him with bribery allegations in 2005.

For more than 15 years, the government has contracted Cash Paymaster to distribute social grants, initially in a few provinces and now throughout the country.

In 2005, the M&G had stumbled upon proof that Cash Paymaster’s then black empowerment partner paid for a former social development minister Zola Skweyiya’s home renovations.

At the time, Belamant denied trying to capture the minister in order to influence social grants policies, but he distanced himself from his empowerment partners’ activities, claiming that he couldn’t force them to comply with Net 1’s strict governance rules.

Since the early 2000s, reporters have dredged up more than a handful of bribery allegations involving Cash Paymaster’s empowerment partners and politicians and officials with oversight of social grants.

Belamant typically responds with a Gallic shrug and an assertion of deniability. “Between you, me and a bar of soap”, he likes to say of his black partners, he does not know what “they” get up to.

But once more, through his empowerment partners, Belamant has found himself curiously close to a minister.

Lunga Ncwana

The connective tissue is formed by Lunga Ncwana, the one who thinks amaBhungane should rather “investigate the fucking Guptas”.

Ncwana became rich and famous when, as an ANC Youth League leader, he and his political comrades signed up as black empowerment partners for the infamous, and now dead, investor Brett Kebble.

Notably, when Kebble did not want to be seen to be currying political favour by donating large sums to the ANC, Ncwana kindly stepped in to funnel Kebble’s political payments for him.

Later entrapped in a web of fraud allegations, Kebble hired hitmen to have himself shot in an “assisted suicide”, a court found.

The Kebble saga sullied Ncwana’s name, and he all but vanished from the public eye. But since 2012, amaBhungane has received numerous tip-offs alleging that Ncwana was involved with Net 1 and the Sassa contract.

In one case, a person with direct knowledge alleged: “Look to Brian’s [Mosehla’s] friends [to understand the Sassa tender]…. Obviously Brian is not powerful enough to pull this deal off. These guys… are all linked to Brian through Lunga, through Patrick, etc.”

According to another: “Lunga tells the minister what to do.”

This person alleged that Ncwana advised Dlamini on who to appoint to key committees that are deciding on Cash Paymaster’s future with Sassa.

Another described how, while Net 1 and Mosehla – who then had an option to become its empowerment partner – were dealing with fallout from the Sassa contract in 2012, “Lunga was always around”.

This person described details of how Ncwana allegedly had direct knowledge of Net 1’s handling of Sassa-related affairs.

Another person with good knowledge of Dlamini’s role alleged that Ncwana had been seen in at least one official meeting: “We know he’s there. Senior officials have talked about telling him to piss off.”

These allegations could not be independently verified.

On the three occasions when Ncwana did make the news, he was accompanied by Bathabile Dlamini.

The first was a small celebration of the homecoming of a prominent politician from a traditional initiation ceremony. The second was Ncwana’s own party after he bought a Cape Town football club.

The third was Ncwana’s own wedding, where his best man was none other than the lucky Net 1 beneficiary Brian Mosehla. They are also business partners elsewhere.

In other words, Ncwana, friend of the minister, is intricately tied to both Cash Paymaster’s tendered empowerment partners, as well as to Mosehla, the man Net 1 quietly replaced them with.

Lunga Ncwana’s best man

This is how Mosehla got rich, fast.

Ten days after Sassa announced in January 2012 that it was contracting Cash Paymaster to pay grants, Cash Paymaster’s parent Net 1 signed a BEE deal with Mosehla’s consortium.

It was a 15% discounted option for Mosehla and a group of broad-based BEE groups – charities, women’s groups, community health support initiatives and so on – to buy Net 1 shares.

But almost none of the groups had even heard of the deal or Net 1, amaBhungane revealed at the time.

Given the vast majority of Net 1’s revenue was to come from the Sassa grant, Mosehla’s deal seemed timed to ride on the value of the contract.

But Net 1’s share price crashed through 2012 as the high-profile AllPay case was fought in the Pretoria high court, and Mosehla’s option was never exercised and eventually expired.

An R83-million payday

Net 1 and Mosehla did a new empowerment deal the following year. This time they did not mess around.

Net 1 sold the shares when the stock was rock bottom, then it bought them all back once the stock had soared, leaving Mosehla flush with cash.

Here is how it unfolded.

Belamant and Mosehla signed the new deal in December 2013. The terms were much better for Mosehla than the flopped 2012 deal in that they came at a much larger discount and were paid for with a vendor loan from Net 1. The share price was particularly low because the Constitutional Court had just invalidated the Sassa contract.

Belamant announced that this was a deal “we believe epitomises the spirit of the meaningful transformation that the late president Mandela fought and stood for”.

Nelson Mandela had died five days earlier.

After a series of delays, the shares were issued in April 2014, at a 25% discount to the rock bottom December price – even though the share price had risen substantially in the interim.

It seemed like Mosehla was receiving a free gift from Net 1, but in June 2014 Net 1’s operating subsidiary Cash Paymaster received its own R275-million windfall from Sassa.

AmaBhungane recently reported that Cash Paymaster and Sassa officials misrepresented their contract to justify the R275-million payment.

The auditor-general has since declared the Sassa payment to be irregular, and it is now being investigated.

Perhaps coincidentally, four days after announcing the Sassa windfall, Net 1 bought back about half of Mosehla’s shares in order to extinguish his Net 1 loan.

This left him with a stake worth R241-million, effectively given to him just days after Net 1 had wangled an irregular R275-million from Sassa.

Then in August 2014, Net 1 quietly repurchased the remainder of Mosehla’s shares, exchanging them for R83-million cash and a 12.5% stake in Cash Paymaster.

In other words, with a bit of help from the South African taxpayers, Sassa officials and Net 1 shareholders, Belamant handed Mosehla huge cash wealth, apparently without the latter having to lift a finger.

By way of comparison, Mosehla made more in this quick Net 1 deal than South Africa’s fourth highest paid chief executive in the same year.

Coincidentally, Lunga Ncwana bought himself a R28-million mansion in Bishopscourt one month later.

No denial

Belamant did not deny Ncwana’s links to his consortium.

He said: “I cannot comment on Mr Ncwana specifically (I believe that I have met him a number of times – regarding, amongst other things, the funding of a soccer club – we did not fund it), except that if he did or does form part of our black empowerment lobbying group and assists with our business objectives, we would have no problem with his involvement or that of any other person(s) for that matter as long as these individuals adhere to [the US Foreign Corrupt Practices Act] rules and regulations.”

And he said there was nothing untoward in what amaBhungane had discovered about the initial abandoned empowerment contract and the huge payout to Mosehla.

He said: “Sometimes things are complicated because they are and not because of any other reason. We wanted to do an empowerment deal (we believe in black empowerment for South Africa that is tangible and realistic) which would allow our black partners to be empowered without debt as soon as possible.”

Photo: President Jacob Zuma and Minister of Social Development Bathabile Dlamini during the official opening of the Disability Rights Summit held at Saint Georges Hotel in Centurion, 10 March 2016. (Photo: GCIS)

Dlamini was irate when this reporter sat next to her in Parliament and asked about Ncwana and the Sassa contract.

She said:

“You are not going to tell me who I am close with. Because then you must look at all politicians and who they are close to and who is funding their parties.”

In a subsequent written response, her spokesperson said:

“You have alluded to a close relationship [with Ncwana] and I would like to believe that a journalist of your caliber would be able to substantiate this claim and ask direct questions as a matter of fact. It looks like one is being subjected to the court of public opinion. You must be commended for being bold.”

Dlamini is now widely ridiculed as being the “Minister of Smallanyana Skeletons” after she warned her ANC comrades not to speak publicly about corruption because “all of us in the [ANC National Executive Committee] have our small skeletons and we don’t want to take all skeletons out because hell will break loose”.

She is yet to disclose her own skeletons. Meanwhile, hell is threatening to break loose at Sassa. DM

Main photo: Dr. Serge Belamant, Chairman and Chief Executive Officer, NET1 UEPS Technologies celebrated the issue of ten million SASSA cards (Photo: MasterCard)

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