Nehawu hits jackpot in Ithuba deal

Cosatu affiliate, the National Education, Health and Allied Workers Union (Nehawu), has scored a jackpot with a significant shareholding in the Ithuba Holdings consortium that secured the almost R400 million per annum contract to operate the national lottery. The Sunday Independent has reliably learned that Nehawu is part of the consortium through its investment arm, Nehawu Lottery Investments. It also holds a stake in Kwabo Holdings, which also forms part of the consortium announced by Trade and Industry Minister Rob Davies as the winning bidder for the lucrative contract.

While unclear what the extent of Nehawu’s shareholding is, it is understood to be significant as it exists through two vehicles in the consortium; Kwabo Holdings and Nehawu Lottery Investments. Its involvement may also raise questions about possible political influence, in spite of Davies’s assurances that the selection process was above board. The consortium, which was announced as the preferred bidder ahead of current operators Gidani, is believed to have been founded by businesswoman Charmaine Mabuza. Nehawu’s shareholding in the company is likely to raise further questions about the activities of Cosatu and its unions’ investment arms following previous incidents where conflicts of interest were identified, and where politically-aligned unions were benefiting from the state’s coffers.

This week, such relationships came to the fore when it was revealed through court papers that the SA Clothing and Textile Workers Union had tried to influence media coverage of independent broadcaster e.tv through its shareholding in its ownership. Nehawu spokesman Sizwe Pamla would not comment on the issue. This was revealed in the affidavit of e.tv’s former chief executive, Marcel Golding, who controversially resigned citing such alleged pressure to interfere with broadcaster. Cosatu itself had to answer questions in 2012 when it emerged that Raubex, a company in which its investment arm, Kopano Ke Matla, had a 3 percent stake, was linked to the e-tolls project. The confederation has since said Raubex was only involved in constructing roads that were later tolled, not in the e-tolls project. Cosatu is against e-tolls.

Some of the directors of Ithuba include Seth Phalatse, who is apparently set to be the chairman of the consortium. Phalatse is a former owner of the Gemco firm that was formed in 2004 by arms manufacturer BAE Systems. BAE Systems sold Gripen and Hawks jets to the government as part of the R70-billion arms deal being probed by the Seriti commission. Phalatse sold Gemco in 2010, and is a non-executive director for, among others, International Ferrochrome Metals, a firm which also benefited from the arms deal through loans provided by BAE Systems and the German Frigate Consortium. The latter was contracted, as part of the arms deal, to supply corvettes to the SA Navy in a deal worth about $2bn. The loans were part of the offsets enlisted to create jobs in the country.

Mabuza, who is one of the directors of Ithuba, is a former chief executive of Empilweni Payout Services. The company was one of the service providers contracted by provincial governments to distribute social grants since 1999 before this function was centralised by the SA Social Security Agency and a R10bn tender to do this awarded to Cash Paymaster Services two years ago. Mabuza is also the chairman of the South African Boards of Sheriffs. DTI spokesman Sidwell Medupi said the department would not comment on the details or make-up of Ithuba until negotiations with the company had been concluded. These were expected to be concluded at the end of next month, and if negotiations were not successful discussion would be held with the current operator Gidani.

The DA this week said it would conduct its own “due diligence investigation” to ensure that Ithuba was capable of running the lotto, that it was above reproach and that its directors have no connection to any political party or organisation. The party had already raised suspicions about Ithuba, saying its efforts to find information about the company were fruitless and the phone call made to the only phone number available reached the Nelspruit Sheriffs’ office. “If successful, Ithuba will win a licence worth billions. Over the term of the outgoing operator, the lotto reportedly generated revenues of more than R6bn per year. “Given the scandals that have surrounded the lotto over the last decade, the new operator must be appointed transparently,” said DA trade and industry spokesman Geordin Hill-Lewis.