Global chemicals and energy company Sasol has extended the contract of the engineering company found by its forensic investigation to have committed BEE fronting.
Sasol launched forensic investigations against NJM Heat Treatment & NDE Services (NJM) after media reports about the alleged fronting.
NJM’s alleged questionable corporate governance further came to light when the company revealed in the Joburg High Court recently that it misrepresented its BEE status in a bid to get an Eskom tender.
The newspaper also stumbled upon a document in which NJM’s former CEO Jack Madzivhandila complained about fronting involving its 26% shareholder Baleseng Zinyana and another 25% shareholder Vanessa Chungu.
He said he was informed in 2017 by NJM directors Mark Smith and Alex Roditis that they intended to sell the shares of other shareholders, other than those held by Zinyana, equalling 25% to another black woman, Chungu, to enable the company to be 51% black-woman owned.
He said he was later informed that Chungu bought the shares but because she did not have the capital she would pay for them from dividends. He said several years later Chungu still had not paid for the shares because the company had not declared or paid dividends.
He also said the company’s turnover was reduced so that the profit margins would remain low, thereby diminishing the chances of dividends being paid out.
As a result, Chungu would forever be indebted while on the other hand, the company continued to benefit from a good Broad-Based Black Economic Empowerment (BBBEE) assessment scoring.
He said Chungu’s ownership was only on paper but not that which would economically empower her as a black woman.
Sasol contracted a law firm, Cronje, De Wal-Skhosana Inc, to conduct forensic investigation, which revealed in its report that NJM was BBBEE non-compliant. In the report, which we have seen, the law firm’s Kimberly Ketsise, said investigation yielded a non-compliant outcome on NJM Heat Treatment & NDE Services’ claim of 51.23% black-female ownership.
“It is an established fact that NJM has refrained from declaring dividends since the acquisition of shareholding by black shareholders, notwithstanding the company’s consistent profitability at the close of each financial year.
“The appointment of Madzivhandila as a director and CEO appears to have been more symbolic than substantive – a manifestation of tokenism,” read the report.
The report further said Madzivhandila indicated he felt discouraged and inhibited from actively participating in NJM’s core activities.
The daily operations falling within the purview of his appointment were, in practice, managed and overseen by Smith and Riditis, said the report.
“Furthermore, a significant income disparity of 119.80 has been discerned between the average earnings of two white male directors and that of the black female director, income disparity five years subsequent to her respective appointments (sic),” read the report.
According to the report, there exists no substantive indication or corroborative evidence demonstrating active participation by Chungu at the strategic decision- making level, despite her assertions of unrestricted involvement as a board member in shaping strategic directives.
The conclusion of a legal relationship with a black shareholder was for the purpose of NJM achieving a level 2 BBBEE compliance status without granting black shareholders the economic benefits that would reasonably be expected to be associated with the status or positions held by those black shareholders, said the report.
“Thus the company’s 51% black female ownership deposed from 2018-2020 can also not be confirmed as true and correct.
“The company’s validated ownership and present ownership cannot be confirmed as true and correct.
“Evidence of fronting practice is confirmed herein where there was a deliberate circumvention or attempted circumvention of the BBEEE Act and the codes.”
Sunday World has established that despite damning findings against NJM, Sasol extended its contract, which was supposed to end this coming Thursday, by another six months to run until May next year.
NJM’s lawyer, Fraser Van der Watt said: “As far as our client is aware, Sasol is following its own internal process insofar as an investigation is concerned and our clients have not received any reports and understands that any investigations are ongoing.
“Our clients deny that NJM’s black female ownership of 51% cannot be confirmed as true and correct, as our clients believe that this will be confirmed in the report following the outcome of any investigations.”
Van der Watt added: “Our client denies that there were any fronting practices on NJM’s part or that there was a deliberate or attempted circumvention of the BBBEE Act and its codes.
“Our clients deny that there has been any misrepresentation. Our clients believe that this will be confirmed in the report following the outcome of any
investigations.”
Sasol media relations manager Matebello Motloung said: “The matter is still under investigation and, therefore, we cannot comment on it now.”
