Firm accused of reckless trading bags lucrative tender

Two weeks after being finally liquidated a Durban-based recruitment firm - which owed the taxman R44 million and was accused of “trading recklessly” - was awarded a lucrative city tender for the provision of staff at the Durban International Convention Centre. An investigation by The Mercury has revealed, six months later, Phumelela Business Consultants CC “transferred” the R12 million contract to Nonto HR solutions, a company with common share­holders. According to court papers, Phumelela owed money to Sars through unpaid VAT, PAYE, skills development levies and UIF dating from 2011. There were attempts to settle the debt, but these were rejected by Sars which, in October 2012, took a “money judgment” against the firm for R31.9 million, almost two years before the tender in question was advertised.

When Sars was unable to attach assets of any value, it launched proceedings in the Durban High Court, obtaining a provisional liquidation order in October 2014. The company was finally wound up by court order on June 8, 2015. The contract was awarded to Phumelela on June 26. In the meantime, just three months after the provisional liquidation order was granted, Nonto HR Solutions was established by two of Phumelela’s three directors, Nompumelelo Elizabeth Ngidi (also known as Mpumi Maweni, who is a trustee in the Bongi Ngema-Zuma Foundation set up by President Jacob Zuma’s fourth wife) and Nompumelelo Olivia Ngubane. DA provincial and eThekwini caucus leader Zwakele Mncwango questioned how a company seemingly with no tax clearance was awarded a city contract. “It seems, on the face of it, that the city was basically party to crime, if a company is in liquidation and you continue to do business with it,” he said. “I will be requesting information from city manager S’bu Sithole and treasurer Krish Kumar.”

Sars said it had an obligation to preserve the secrecy of taxpayer information and “we don’t comment on taxpayers’ affairs”. Repeated attempts to get comment from Ngidi and Ngubane, or their lawyers, have been unsuccessful. The Mercury also contacted the liquidator of the company, Siyabonga Mohlomi, who said he would only discuss the matter “face to face” and was not available until this week. The attorneys who acted for Sars in the winding-up application also refused to comment. Responding to questions, the ICC chief executive, Lindiwe Rakharebe, said Phumelela had won the contract as the “most responsive” supplier. “At the time of the submission of their documents, these were found to be in order,” she said. She explained that the provision of the service began in September last year “and the services have been provided to the entity without interruption since that date”. However, she said, in January this year, a letter had been received from attorneys Kanhai, Moodley and Associates stating that Phumelela Business Consultants had been acquired by Nonto HR Solutions which had been providing the services of the contract since January.

The Durban ICC, she said, had no reason to doubt the solvency and financial standing of Phumelela Business Consultants at the time of appointment which had been overseen by the city’s bid adjudication committee. In an affidavit in the winding-up application, Sars representative Helen Templeton described the company as a labour brokerage, “supplying staff to large corporations and municipalities”. She said the company was trading in insolvent circumstances and could be deemed to be trading recklessly. According to documents attached to the court papers, Mpumi Ngidi made several offers to Sars to pay off some of what the close corporation owed, including making a “full and final settlement of R20 million” being the proceeds of the sale of a mine to an “international source”. These offers were all declined by Sars. Ngidi, in an affidavit, also disputed the amount owed.

Templeton, in response, insisted that Phumelela was “commercially insolvent”. Phumelela’s 2011 financial statements, she said, reflected liabilities exceeding income by more than R4 million, draft statements for 2012 showed that expenses exceeded income by R4.6 million, and statements for 2013, while incomplete, showed a net loss of more than R15 million. The debt fell due in 2011 and “there is simply not enough money to pay it”. In another twist, Nonto HR was awarded another R14 million by eThekwini in June this year to recruit “temporary staff” for the Moses Mabhida Stadium. This was done through section 32 of the supply chain management regulation which authorises a state organ to procure goods and services under contracts “secured by another state organ”. The city’s communication department has twice refused to divulge the state organ through which Nonto HR’s services were procured, saying only that “concerned parties should contact the city’s investigations unit if there is a case to be investigated”. According to a notice in the Government Gazette in September, Phumelela’s former Glenwood offices were to be auctioned by Ithala Bank.