1. Presentation to the Standing Committee on Public Accounts
PROVISIONAL REPORT ON THE INVESTIGATION INTO THE EMPLOYMENT OF
MR GB MOKGORO AT THE DEPARTMENT OF PUBLIC WORKS AND PAYMENTS IN THIS REGARD TO HONEY CLOUD ENTERPRISES (PTY) LTD
- 23 October

2. OUTLINE OF THE PRESENTATION
1. Background to the investigation
2. Findings of the investigation
Observations 2

3. BACKGROUND TO THE INVESTIGATION
The Public Service Commission (PSC) was requested by SCOPA to investigate the regularity of the employment of, and payments made to Mr GB Mokgoro at the Department of Public Works (DPW). The following Terms of Reference (ToR) were approved:
To investigate the regularity of the employment of Mr Mokgoro from June 2016 to June 2018; and payments made in this regard to Honey Cloud Enterprises (Pty) Ltd.
The Minister of Public Works & Chairperson: SCOPA were informed accordingly.
In addition, the PSC also received a similar request from the Director-General (DG) of the DPW, requesting “… an investigation into the appointment of Mr Boitumelo Cox Mokgoro”.
The PSC previously investigated the secondment of Mr Mokgoro from the IDT to the DPW from 2012 to 2015 – the secondment was found to be irregular since the approval by the EA occurred on a date after the secondment and Mr Mokgoro was not an employee of the IDT (PSC reported to the Minister of Public Works).
During the current investigation the regulatory framework applicable to secondments and SCM processes were analysed and compared with the process followed by the DPW. Further information was obtained from documents obtained and interviews conducted with senior employees. 3

4. FINDINGS: Secondment of Mr Mokgoro
The secondment of Mr Mokgoro from Honey Cloud Enterprises (Pty) Ltd to the DPW with effect from 1 November 2015 is found to be irregular based on the following:
The secondment was not in accordance with the following prescripts:
Section 217 of the Constitution, read together with section 38 of the PFMA, stipulating that when the State contracts goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost effective in that other companies were not provided an opportunity to tender for the required service.
Section 15(2) of the PSA, stipulating that the EA of a department may, with the approval of the employer concerned, approve the secondment of a person in the service of an organ of state, another government or any other body, to the department in that Mr Mokgoro was neither employed by, nor in the service of Honey Cloud Enterprises (Pty) Ltd prior to his secondment to the DPW. This also applies to his first secondment previously from IDT to the DPW in that Mr Mokgoro was an external Board Member of the Audit Committee and not an employee of the IDT. 4

5. FINDINGS: Secondment of Mr Mokgoro (continued)
PSR, 2001, Chapter 4/II/A specifying that posts in the SMS shall as far as possible be filled through open competition whilst persons are to be appointed to the SMS in a temporary capacity only for a fixed term or for a specific project in that Mr Mokgoro was seconded to the DPW for a number of years since 2012 to date (1st period of secondment from the IDT was from March 2012 to October 2015, and 2nd period of secondment from Honey Cloud was from 1 November 2015 to date).
Regulation 13(c) of the PSR, 2016, stipulating that an employee shall not conduct business with any organ of State or be a director of a public or private company conducting business with an organ of State (Mr Mokgoro is the Director of Honey Cloud Enterprises).
The approval on 2 December 2015 by the Minister of Public Works, Mr TW Nxesi, MP, in respect of the secondment with effect from 01 November 2015 is not in compliance with the following Constitutional Values and Principles (CVPs) enshrined in section 195 of the Constitution:
A high standard of professional ethics must be promoted and maintained.
Efficient, economy and effective use of resources must be promoted.
Public administration must be accountable 5

6. FINDINGS: Secondment of Mr Mokgoro (continued)
Approval in respect of the following extension of the secondment was provided after the commencement date:
From 01 to 30 November 2017, as approved by the Minister of Public Works, Mr NPT Nhleko, MP, on 12 November 2017.
From 01 to 31 December 2017, as approved by the Minister of Public Works, Mr NPT Nhleko, MP, on 7 December 2017.
From 01 June 2018 to 30 November 2018, as approved by the Minister of Public Works, Mr TW Nxesi, MP, on 6 June 2018.
The entering into a contracts with retrospective effect more than six (6) weeks after Mr Mokgoro’s secondment with effect from 1 November 2015 is not in compliance with the following CVPs enshrined in section 195(1) of the Constitution:
A high standard of professional ethics must be promoted and maintained.
Efficient, economy and effective use of resources must be promoted.
Public administration must be accountable. 6

7. FINDINGS: Secondment of Mr Mokgoro (continued)
The entering into a contract with retrospective effect on 13 November 2017 regarding the extension of the secondment of Mr Mokgoro from 01 to 30 November 2017 is not in compliance with the CVPs mentioned.
Honey Cloud Enterprises was purchased in August 2015 as a shelf company, and the seemingly utilization of this entity as a vehicle through which Mr Mokgoro was seconded with effect from 1 November 2015 is regarded as an effort to circumvent the regulatory framework relating to secondments.
The extension of the secondment is contra to Regulation 13(c) of the PSR, 2016, stipulating that an employee shall not conduct business with any organ of State or be a director of a public or private company conducting business with an organ of State in that Mr Mokgoro is the Director of Honey Cloud Enterprises (Pty) Ltd. 7

8. FINDINGS: Payments of Mr Mokgoro
Mr Mokgoro was seconded from Honey Cloud Enterprises with effect from 1 November 2015 at an annual cost of R2 205 077,40. This amount was arrived at by the DPW as follows:
Salary p/a
Explanatory notes
R1 800 000
Salary paid to Mr Mokgoro with effect from 1 March 2013. R
R1 800  % increase with effect from 01 April ’13 since Mr Mokgoro did not receive the 5.6% cost-of-living adjustment awarded with effect from 01 April ’13 to members of the SMS.
R2 
R1 926  % increase with effect from 01 April ’14 since Mr Mokgoro did not receive the 5.7% cost-of-living adjustment awarded with effect from 01 April ’14 to members of the SMS.
R2 
R2 060  % increase with effect from 01 April ’15 since Mr Mokgoro did not receive the 5.5% cost-of-living adjustment awarded with effect from 01 April ’15 to members of the SMS. 8

9. FINDINGS: Payments of Mr Mokgoro (continued)
Payments to Honey Cloud Enterprises (Pty) Ltd was irregular based on the following:
 1. No justification existed for awarding a higher % cost-of-living adjustment to Mr Mokgoro than that determined by the MPSA for members of the SMS in 2013/15.
 2. The fact that Mr Mokgoro is/was remunerated at a higher scale than that applicable to members of the SMS is in contravention of the following prescripts:
Section 7(3)(b) of the PSA, stipulating that a HoD shall be responsible for the efficient management and administration of his/her department, including the proper use and care of State property.
Chapters 1/V/A & 4/IV/A of the PSR, 2001, specifying that the principles of compensation include equal pay for work of equal value.
Chapter 1/V/C.9 of the PSR, 2001, stipulating that an EA shall set the salary of a part-time or temporary employee proportional to the salary of an equally graded full-time employee.
Chapter 3/7 of the SMS Handbook, stipulating that the remuneration of a person on contract will be equal the remuneration package of an equivalent permanent worker.
Par 5.1 of PSCBC Resolution 3 of 1999, stipulating that the remuneration of a worker on contract shall equal the remuneration of an equivalent permanent worker. 9

10. FINDINGS: Payments of Mr Mokgoro (continued)
Part A, paragraph 6.4(a)(i) of the National Secondment Policy, specifies that an employee shall be seconded with retention of his/her salary. However, the newly established Honey Cloud Enterprises (Pty) Ltd never paid a single salary to Mr Mokgoro. As a result, the PSC is not sure what was used as a baseline by the DPW in determining the remuneration paid to Mr Mokgoro.
Honey Cloud Enterprises (Pty) Ltd was purchased by Mr Mokgoro as a shelf company with the sole purpose of acting as a vehicle through which he could be seconded to the DPW at the salary scale of R2.4 million per annum. This can be regarded as a deliberate and intentional circumvention of the regulatory framework.
Compensating Mr Mokgoro at a high salary scale applicable to Chief Director / Deputy Director-General level, with due regard to his qualifications, expertise and experience, is not in compliance with the following CVPs enshrined in section 195(1) of the Constitution:
A high standard of professional ethics must be promoted and maintained.
Efficient, economy and effective use of resources must be promoted.
Public administration must be accountable. 10

11. OBSERVATIONS
Certain documents requested from the DPW (e.g. agreements entered into and documents regarding the recruitment process followed in 2015 for the post of Head of Finance: PMTE) were at the finalization of this investigation still awaited.
According to Mr Mokgoro’s CV he was a member of the Ministerial Task Team at the DPW from March 2011 to February However, the DPW in its report to SCOPA indicated that it launched a turn-around strategy in 2012 and therefore seconded Mr Mokgoro from the IDT to the DPW with effect from 1 March 2012 to 28 February 2013.
Mr Mokgoro’s CV provided to the PSC during the investigation of the matter at hand, did not include copies of his educational qualifications.
4. The DPW indicated to the PSC that no performance agreement was entered into with Mr Mokgoro for the 2012/13 Financial Year, whilst the DPW failed to provide performance agreements requested in respect of the 2013/14, 2016/17 and 2017/18 financial years.
5. The DPW failed to provide proof of the outcome of the assessment of Mr Mokgoro’s annual performance to the PSC.
6. SARS indicated that tax matters relating to Honey Cloud Enterprises (Pty) Ltd and Mr Mokgoro are being investigated. 11