Sasol has finally done the right thing when it terminated a lucrative multi-million-rand contract of NJM Heat Treatment & NDE Services (NJM), a company that was investigated by the chemical giant for fronting black people and BEE fraud.
This comes after Sunday World exposed NJM in a series of articles that it was using black executives as fronts for the company to fraudulently score tenders at Sasol.
In an internal memorandum to Sasol officials, the group’s head of chemical and energy supply chain Russell Mlambo said that NJM’s contract was terminated with effect from Monday this week.
“Please note, with immediate effect, the service provider NJM Heat Treatment & NDE Services (Pty) Ltd (1007455) should not be used for the Heat Treatment Maintenance; Shutdown and Refractory Dry-Outs contract (CW26807) at Sasol and Ekandustria Operations (SEO). After a second investigation into allegations levelled against the entity, we have been instructed by Sasol legal to terminate all agreements with NJM. Therefore, the entities (sic) contract has been terminated as at 4 December 2023,” said Mlambo.
Mlambo also said that NJM was also blocked from purchasing, meaning there will no longer be new purchase orders (POs) to be loaded for NJM in the petroleum company’s system.
“No further work post 30 December 2023 will be accepted, and all purchase orders have to be cancelled as from 1 January 2024. The service provider may continue to work on all-existing purchase orders until 30 December 2023. Thereafter, access to site will be blocked and all remaining open POs are to be deleted or made complete. This ruling applies to all inspection services and post-weld heat treatment,” said Mlambo.
A fortnight ago, we reported that Sasol had extended the contract of the engineering company despite findings of the investigations sanctioned by the chemical giant that NJM had committed fraud through BEE fronting.
Sasol launched forensic investigations against NJM after media reports about the company’s alleged BEE fronting.
The entity’s alleged questionable corporate governance further came to light when it was revealed in the Joburg high court that the company misrepresented its BEE status 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 the NJM directors Mark Smith and Alex Roditis that they intended to sell the shares of other shareholders, other than those held by Zinyana, equaling 25%, to another black businesswoman, Vanessa Chungu, to enable the company to be 51% black woman-owned compliant.
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.
Madzivhandila 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.
Chungu ownership only on paper
He said Chungu’s ownership was only on paper, but not that which would economically empower her as a black woman.
Given the seriousness of the allegations, Sasol contracted a law firm, Cronje, De Wal-Skhosana Inc, to conduct a 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 investigations 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 termination of NJM was hailed by Sasol’s many service providers and staff as a step in the right directions to end BEE fronting.
Sasol media relations manager Matebello Motloung said: “Sasol can confirm that the contractual relationship between us and NJM has been terminated following conclusion of a due diligence process in line with our processes and code of conduct. As a result of the termination and removal of the entity from our lists of accredited service providers, no further or new work will be contracted with NJM while they remain de-selected from our database. NJM has been duly notified of Sasol’s decision in this regard, we accordingly consider this matter closed from our perspective.”
NJM’s lawyer Fraser Van der Watt said: “The NJM directors have always had a cordial relationship with Sasol. The directors, as advised by their and NJM’s attorneys, are of the view that NJM is definitely BEE compliant. This accords with the view of an independent verification agency. Interestingly, the so called “investigations” to which you refer have been conducted by an entity that does not have the expertise to conduct BEE investigations.
“The so called “investigation report”, which was signed by a candidate attorney, did not follow correct process and can hardly be compared to an independent verification report by an independent verification agency mandated by NJM to carry out an independent investigation. The name of the independent verification agency, for your edification, is B4i, who is an extremely reputable, well known BEE verification agency staffed with lawyers, accountants and other experts capable of properly conducting an investigation and compiling a proper verification report.”
He added: “NJM is of the view that the termination is not valid, and that the investigations conducted regarding alleged BEE fraud and fronting followed an unfair process and its findings were based on partial information. There never has been any BEE fraud and fronting, and any allegations in that regard are simply false. NJM is of the view that Sasol does not have all the facts at its disposal and, accordingly, does not accept the decision of Sasol to terminate its contract. NJM is of the view that the matter will be cordially resolved in a mediation process provided for in the contract.
“Clearly, the loss of a lucrative contract will affect any company’s business operations and finances, as well as, in the case of NJM particularly, the livelihood of 400 employees and their families. NJM remains of the view that the matter will be cordially resolved in the mediation process. At no time has NJM ever committed a BEE fraud nor has there been any fronting. This has been verified by NJM’s attorneys and by the independent verification agency.”
Visit SW YouTube Channel for our video content
