Minister Thulas Nxesi: R5 billion agreement between UIF and Thuja

23 November 2023

TW Nxesi MP, Minister of Employment & Labour: court application to set aside the R5 billion agreement between UIF and Thuja

Programme Director

Deputy Minister Boitumelo Moloi

Acting Director General Dr Alec Moemi and senior officials of the Department

Members of the Fourth Estate

Ladies and gentlemen

Good day

Let me begin this press conference by saying the following.

Over the last few weeks very serious allegations of corruption against myself and two of my Cabinet colleagues, as well as the SG of the ANC, have been widely distributed in both the electronic and print media.

These allegations have been made by Mr Mthunzi Mdwaba, the CEO of Thuja Holdings, and former Chair of Productivity SA, in relation to a R5 billion agreement that was concluded in December 2022 between his company and the Unemployment Insurance Fund (UIF), a state entity established in terms of the Unemployment Insurance Act, 2001 that is mandated to minimise the burden of unemployment and create opportunities for job creation and retention, as well as skills development, through schemes that will alleviate the effects of unemployment. I should flag that this agreement was signed without the knowledge of the executive authority or of National Treasury.

Backgound

1. At the core, Mr Mdwaba alleges that I do not have a lawful or legitimate basis for stopping the implementation of the R5 billion agreement between his company and the UIF.

2. The new, more recent allegation is that I would approve the implementation of the agreement to pay R5 billion rand into the coffers of his company in return for a corrupt fee of 10% of the contract amount – R500 million. [Where would you even put/hide such an amount? How would I be able to siphon off money from a deal I have already stopped?]

3. This agreement was signed on the 14 and 18 December 2022, by Mr Mdwaba and the then Director-General (DG) of the Department of Employment and Labour (DEL), Mr Thobile Lamati, respectively. It is an agreement between Thuja Holdings Proprietary Limited, a company with Registration number: 2022/865843/07 and DEL or UIF for, inter alia, funding of job creation, allegedly assisting the UIF in creating employment, at an initial aggregating cost of R5 billion.

4. Interestingly, on the 05th January 2023, the then Acting Director General, Advocate E.M. Yawa, wrote and alerted Mr Mdwaba to the fact that whereas the agreement was signed, it did not comply with applicable law. In terms of section 54(2) of the Public Finance Management Act (PFMA),1999 as amended, read with the National Treasury Practice Note on “Applications under Section 54 of PFMA, by Public Entities”, dated 13 July 2006, such an agreement needed to be approved by the Minister of Employment and Labour and the Minister of Finance. Having not been so approved, Advocate Yawa brought to Mr Mdwaba’s attention that the ‘agreement’ is illegal and invalid.

5. I heard of this agreement only through media reports. The media raised several concerns about the process followed and the capacity of Thuja to deliver on the signed agreement. After considering the media reports and calls by, amongst others COSATU, and following initial probing, I established that approvals by the UIF governance processes, including the interim Labour

Activation Programme (LAP) National Adjudication Committee (LNAC), were not obtained and consequently instructed the Accounting Officer, in January 2023, to suspend the implementation of the project, and to stop any contemplated payments to Thuja.

6. Today, acting as the Executive Authority of DEL, I signed my affidavit and we are filing a court application to set this agreement aside.

Mr Mthunzi Mdwaba’s Allegations

7. Mr Mdwaba’s allegations of seeking bribes against myself, and others, are false and unsupported by any actual evidence. Let me be clear: I categorically deny these recent allegations of corruption. [You must ask why Mdwaba waited nearly a year to come up with these allegations?] Mdwaba will now have to prove these allegations in a court of law.

8. The source of Mdwaba’s bitterness towards me personally, dates back to his failed attempt to secure the position of Director General of the International Labour Organisation (ILO), when government withdrew its support for his candidature after it emerged that he failed to disclose that the South African courts had declared him to be a delinquent director. Government was also made aware of a court judgment in the Western Cape, that had found that Mdwaba is a lawbreaker, was not an honest witness and lacked the elementary attributes of good leadership for the position he held at the University of the Western Cape (UWC) as Chairperson of Council. In the circumstances, continued support for Mdwaba’s candidature would entail serious reputational risk for South Africa.

Executive Authority responsibilies

9. As the Executive Authority (Minister) I am under a sworn duty to support and to take lawful decisions that only advance the public interest and the obligations of government, to safeguard the public finances, and where the law requires, to refuse to pay any public funds in pursuance of an agreement that does not advance governmental or public interests. In simple terms, I have taken the decision to have the agreement concluded by the UIF with Mdwaba set aside, because it was concluded in breach of section 54(2) of the PFMA.

10. Section 54(2) of the Public Finance Management Act No. 1 of 1999 (“PFMA”) provides that: “Before a public entity concludes any of the following transactions, the accounting authority for the public entity must promptly and in writing inform the relevant treasury of the transaction and submit such relevant particulars of the transaction to its executive authority for approval of the transaction…”

11. In terms of the PFMA, the Executive Authority, in relation to a national department, means the Cabinet member, who is accountable to Parliament for that department. I am that Cabinet member, and I am accountable to Parliament for the DEL. The accounting authority referred to in section 54(2) of the PFMA is a body referred to in section 49 of the PFMA and in this case, it is the DirectorGeneral (“DG”), who is the accounting authority in terms of section 11 of the Unemployment Insurance Act 63 of 2001. The relevant treasury referred to in section 54(2) is the National Treasury as established in Chapter 2 of the PFMA.

Damage to the country and the Rule of Law

12. There is nothing that could undermine the integrity of our democracy and system of constitutional governance more than false allegations that a group of cabinet members have, in a corrupt scheme, deliberately conspired to frustrate the implementation of a viable job creation project by demanding the payment of corrupt fees from a service provider. These allegations will now be tested in court.

Application Filing in Court

13. Today, I signed my affidavit in support of various orders, chief amongst being the setting aside of the agreement. I have brought this application on an urgent basis. In that affidavit I challenge Mdwaba to present his evidence in support of his allegations that I have demanded any payment of a corrupt fee in relation to the agreement. If he cannot produce that evidence, I have asked the Court for an interdict to stop him from promoting his campaign of false and unsupported lies.

14. I have also requested the President to issue a specific proclamation to have this agreement investigated by law enforcement agencies. It seems that Mdwaba has not approached law enforcement authorities to report the alleged crimes because he is content with making unsupported allegations against me, in the hope that if he throws enough mud, some of it will stick. This strategy and the allegations will be tested in court.

15. Now that I have filed the application to set aside the agreement, I have given Mdwaba the right platform to prove his claims and his right to the implementation of the agreement. I urge him to utilise the correct legal forum and to desist from the path of slander and libel.

Labour Activation Programme

16. DEL, in its statement released on the 22nd November 2023, provided detailed clarification on the role of the Labour Activation Programme (LAP), which is a programme of UIF, what it does, and how it fits into the alleviation of unemployment in South Africa. The LAP was created in tandem with the new mandate of DEL to stimulate job creation, enhance employability of the unemployed, preserve existing jobs and to improve operational efficiencies of companies in distress.

The creation of the LAP was introduced with the main objective and goals of: creating opportunities for employment; skilling and re-skilling of unemployed clients; combating long-term unemployment, and alleviating Poverty and a Reduction of Unemployment. LAP also manages the Temporary Employer & Employee Relief Scheme (TERS) as a sub-programme. The sub-programme’s aim is to enable the retention of workers in companies that are facing financial distress. LAP provides support through its TERS for up to a maximum period of 12 months. It is critical that the Department, UIF and LAP are not defocused from fulfilling this mandate.

17. As indicated above, Section 11 of the Unemployment Insurance Act provides that the DG is the Accounting Authority of UIF, and the UIF Board is established to advise the Minister. The Minister is therefore far away from the financial operations of LAP, and there are clear governance structures and segregation of duties, determined by the UI Act read with the PFMA. It is critical that these legal prescripts are observed and enforced, exactly to prevent fraudulent and corrupt schemes from accessing public funds.

18. The real issue is whether the Thuja deal is legal andvalid, and due processes were followed in terms of the law.This is an issue to be settled by the court. Mdwaba’s 10% bribe allegation will also be placed on record and subjected to the scrutiny of the Court.

Postscript: R3 billion

19. As we were preparing to file papers, further allegations have been made, apparently by an anonymous individual seeking immunity for past crimes committed. The allegation is that the former DG (Mr Lamati) and myself colluded in illegally siphoning off R3 billion from LAP programmes. [This flies in the face of Mdwaba’s claims that I spent the last year pushing Mr Lamati out of his position as DG. A strange way to treat a ‘co-conspirator’!]

20. On the last issue of R3 billion, I am happy that this will be investigated by law enforcement agencies to establish the processes followed and the roles of all parties concerned. To this end, I have instructed all staff members to fully cooperate with state agencies investigating the matter.

21. I have also mandated DEL (including the UIF and LAP), through the new Acting DG, to strengthen internal business processes including risk management, financial controls and consequence management, as well as to increasecapacity in project and programme management, governance, and digitalisation to improve effectiveness and efficiencies, and to combat fraud and corruption.

The UIF and Compensation Fund organisational architecture has been comprehensively reviewed exactly to achieve these objectives.

Issued by Sabelo Mali, Spokesperson to the Minister, 23 November 2023