The administrator of the embattled Chemical, Energy, Paper, Printing, Wood and Allied Workers Union (Ceppwawu) and the union’s investment arm are at loggerheads over the former’s R107-million loan request to enable him to run the affairs of the union.
The Labour Court appointed business rescue specialist Sipho Sono as the interim administrator in March, replacing Thulisile Mashanda. Sunday World understands that Sono hit the ground running and immediately requested a meeting with Ceppwawu Investment (CI) chairperson Peter Tsotetsi.
Following the meeting, which took place on April 21 2022, Sono dispatched a letter to CI, requesting the investment firm to loan the union R107-million, monies which would go towards “the union’s operating costs”.
In the letter, dated May 18, Sono said he had inherited a union in a near “dysfunctional state”. Some of the reasons he advanced for the loan are:
- The union’s outstanding liabilities are in excess of R25-million.
- The management accounts prepared by Mashanda for the year ended December 31 show that the difference between
income from member contributions and normal operating expenses was R27.8-million. - Organisers who are key in servicing members do not have adequate tools of the trade, such as laptops, office space since six offices were closed across the country.
Sono also indicated in the letter that he might approach the court for an extension of the time so that he can successfully convene the union’s congress.
“In a nutshell, the union requires urgent financial injection from CI… I humbly request that the board of CI consider this loan application within a period of 1 (one) week,” Sono concludes his letter.
Tsotetsi in his response to the loan application raised several issues the CI is not happy with.
In the main, he asked for a detailed report on how the R42-million extended to the union under Mashanda’s
tenure was used.
“With regards to the application for loan funding of R107-million, I must state at the outset I was completely taken aback by both the quantum requested and the parlous current state of affairs of the union despite all the loans previously provided,” the letter dated May 26 reads in part.
Tsotetsi then ordered Sono to furnish CI with the following information before the loan application could be considered:
- Why Mashanda took a R5-million loan from Aspen, the terms of the loan and why it should be repaid using CI funds.
- Information on the R8.4-million the union owes to KMNS Inc.
- Give details on administrator costs of R480 000 a month.
- Re-employment of retrenched staff and the union’s actual revenue and expenditure from June 2020 to date.
Sono, in his response dated May 31, was at pains to explain the reasons for the loan.
He said the expenditure of the R42-million loan would be captured in the annual financial statement for the relevant period.
He acknowledged that Mashanda had asked and gotten a loan of R5-million from Aspen and that Aspen had already called in its loan.
Sono said the outstanding fees of R8.4-million to law firm KMNS Inc was due to the firm representing members of the union in “various litigations and arbitrations and also advising the former administrator (which included representing her in various matters).”
With regards to his costs, Sono said the Registrar of the Labour Court had determined his costs at R4 000 an hour.
“Indeed, at face value, the amount of R107-million appears to be high, however, it is what is required to deal with
historical creditors and a provision to subsidise the union’s operating expenses for at least a year, at which point it is anticipated that the campaigns to increase membership will increase revenue to sustain the operating cost base of the union.”
Sunday World reported last month that Ceppwawu is one of the unions flagged by trade union federation Cosatu as having lost thousands of members.
The report, authored by the secretariat of the federation led by Bheki Ntshalintshali, said Ceppwawu had lost almost half of its membership, falling from 84 000 in 2015 to just over 47 000 this year.
Sono and Tsotetsi met again on June 7, trying to find each other. However, the meeting seems to have borne no positive results.
Tsotetsi on July 4 then dispatched a letter to Sono informing him that the CI’s board was not convinced he had provided it with enough information to grant the R107-million to the union.
Tsotetsi asked Sono to meet certain conditions before the CI can advance the requested loan. The conditions include:
- Full and comprehensive accounting for the previous R42-million.
- A detailed plan, roadmap and budget to national congress.
- The reinstatement of all staff who were “wrongfully” dismissed, retrenched and retired by Mashanda in contempt of court orders.
Sono scoffed at these and other conditions put forward by CI in a letter dated July 15. “The loan conditions have a direct consequence of making the interim administrator (Sono) report to the CI. In the circumstances, I consider the loan terms imposed by CI to be a refusal of the said loan application as such terms are untenable and amount to the handcuffing of the administrator by CI for financial reasons,” Sono wrote.
Sono in the letter also copied Labour Registrar Lehlohonolo Molefe.
Mashanda, an accounting and auditing consultant, was appointed by the court in June 2020, after years of contraventions of regulations governing the functioning of trade unions.
At the heart of the court’s decision was the union’s failure to provide audited financial statements for the financial years ending 2014, 2015, 2016 and 2017.
In January, this paper reported on the explosive contents of Mashanda’s report on the finances of the union and its investment arm, CI.
The report alleged that the union’s elected officials mismanaged workers’ funds entrusted to them, leaving workers R8-billion poorer in just two years.
According to the audited financial statements of CI, the entity’s assets under management plunged from R10.1-billion in 2015 to R1.7-billion in 2019, during which period the union’s leaders were allegedly spending money like drunken sailors.
Following its stalemate with Sono, CI roped in its lawyers, Mendelow Jacobs, who hit out at Sono.
“…Despite approximately half of the R42-million having been spent on unsuccessful, ill-advised litigation by the previous administrator, and much of the rest on exorbitant fees charged by herself and her so-called consultants in a highly untransparent manner, without any proper accounting thereof to date… you (Sono) are clearly intent on continuing with more wasteful and spurious litigation, as the recent conduct by you and current attorneys confirm.”
Sono declined to comment.
This paper in December reported that it had seen two proofs of payments dated August 2020 to professional services firm Kreston, which totalled nearly half a million rand.
According to the Companies and Intellectual Property Commission records, Mashanda became the director of Kreston in June 2019 and remains an active director.
Confronted with the conflict-of-interest allegations, Mashanda said: “My full professional background was disclosed prior to my appointment as administrator.”
CI has stakes in Aspen, Sasol, Nampak and Transpaco.
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