The National Lotteries Commission has funded projects in which Chief Operating Officer Phillemon Letwaba has failed to explain his interests adequately. Photo: Raymond Joseph
23 October 2019
There’s an old Afrikaans saying: “Ek ken perdedrolle en ek ken vye, en hierdie is nie vye nie.” Loosely translated it means: “I know horse manure and I know figs, and these are not figs …”.
Having written a number of articles on the National Lotteries Commission (NLC) in the past, I follow closely what is happening at our country’s main gambling controller. To be more exact: I try to follow where the spoils of the punters end up. Do they reach the bank accounts of the thousands of very deserving non-profit organisations or does the money end up with unscrupulous Lottopreneurs?
Two weeks ago a story appeared in GroundUp about Sershan Naidoo, who was a very senior NLC staff member, taking the commission to court, alleging unfair treatment.
The subsequent reply of the NLC’s spin doctor, Ndivhuho Mafela, was very interesting, although I could only fathom it up to a point. These are no figs, I thought.
The NLC’s reply conjured up images of white-clad angelic figures with halos. The NLC’s processes “have gone through and passed audit scrutiny”, Mafela writes. Then he states: “Suffice to say that, the NLC is following the spirit and letter of the law when implementing related approved NLC policies.” Now that is selling horse manure, I thought.
To be fair, Mafela is mostly correct. The NLC is doing some pretty amazing stuff. Its 2017/18 report indicates that payments were made to more than 5,400 beneficiaries, totalling over R2 billion. The beneficiaries include everything from small rural schools to major charitable organisations. To be able to channel this much money to so many organisations takes some doing and a lot of dedicated hard-working staff members.
I suppose one would expect a percentage of crooks among the thousands of beneficiaries. You will inevitably encounter the opportunists, out to become instant millionaires, but not by playing the Lotto like the rest of South Africa. The challenge is how you deal with the crooks, especially once they get exposed.
Do you deny, deny, deny, or do you start taking responsibility? Or, as is seemingly the case with the NLC, do you resort to badmouthing the messenger?
It was early in 2018 that Denzhe Primary Care appeared on the radar. Prior to that, at the end of 2017, I wrote about suspicious grants by the NLC totalling more than R12 million to a Limpopo-based non-profit organisation (NPO), Vhembe Health & Fitness. When I eventually managed to track down the chairperson of the NPO, he couldn’t provide details of how the money was spent, saying the laptop on which the details were stored had been stolen along with his car during an armed robbery. The NLC was equally unhelpful and refused to make available specific information about the project.
Only partly dissuaded by the NLC’s complete lack of transparency, I tried my luck at a second “local” beneficiary.
The NLC’s list of beneficiaries showed that R20 million was paid to Denzhe Primary Care in 2017. A quick search showed that the NPO is based in Vhembe, at Mandala Village in Nzhelele, Limpopo. According to founding documents filed at the Department of Social Development, the aim of the NPO was to deal with the prevention of HIV and AIDS, and also to educate people about the virus.
We set about trying to find the “drug rehabilitation centre” that Denzhe was supposed to have built. We couldn’t find any such centre and no-one at the address knew anything about the NPO.
Surprisingly, emails to the NLC to get more information about Denzhe were all channelled to the NLC’s Chief Operations Officer, Phillemon Letwaba. He told me that the money was, in fact, allocated for a project in Gauteng. “This is one of the good projects that we are happy about and your balanced reporting will really assist the NLC in informing the public about the work that we do in a reliable and accurate manner,” Letwaba said.
One of my first questions to Letwaba was why a dormant Limpopo-based NPO with no track record of handling big projects would be chosen to handle a project in Gauteng, which it later transpired was awarded R27.5-million. The NPO was non-compliant in terms of the NPO Act as it had not filed any statutorily-required annual reporting documentation to the Department of Social Development since 2012.
Letwaba responded by sending me the gazetted regulations. “The requirements for NPOs to access funding from the NLC are very clear from the regulations and confirmation from Social Development of filing of returns is not one of them,” he wrote back.
So much for following the spirit of the law. The legislation requires the NLC to check that the beneficiary has an NPO number, but according to Letwaba, it’s not necessary to check whether there is compliance with the NPO Act. So, according to its COO, the NLC doesn’t even need to check whether the directors of organisations listed on funding applications match those listed at DSD – as long as they provide an NPO number.
Requests for the NPO’s financial statements were refused. (A later Promotion of Access to Information Act (PAIA) application for the information was refused by the NLC, as was the subsequent appeal.)
It also took several emails to Letwaba to find out who the “faces” behind Denzhe were. And then, gradually, the bigger picture started appearing. It was not pleasant.
It turned out that the driving force behind Denzhe was controversial Pretoria-based lawyer and seasoned Lottopreneur Lesley Ramulifho, who is also very well acquainted with Letwaba. Among their connections is that Ramulifho’s girlfriend, Melanie du Plessis, has been a partner in a kitchen design business since September 2016 with Daisy Bontle Letwaba, Letwaba’s wife. Ramulifho has also done legal work for the (former) National Lotteries Board - since renamed National Lotteries Council, and the Department of Trade and Industry, under which the NLC falls.
Questioned about Denzhe and the drug rehabilitation centre, Ramulifho was extremely evasive. With the bits and pieces of information at my disposal I published a story about how “pop-up NPOs” were scoring big from the Lottery. It was a straightforward story about how non-compliant and very questionable NPOs receive hundreds of millions of rands in Lotto funding. But it prised open a Pandora’s box. Over the next few months more documents were leaked to us and more whistle-blowers made contact.
The Denzhe grant turned into a major embarrassment for the NLC. Instead of properly investigating the fraud, the NLC kept on defending the project, emphasising that Denzhe “complied with all mandatory requirements in terms of the funding regulations”.
Much has been written about the Denzhe project and it even caught the eyes of the Carte Blanche team of investigative reporters. The one thing that is certain is that there is still no functioning state-of-the-art drug rehabilitation centre. More than R20-million of the R27.58 million of the NLC’s grants cannot be accounted for. Leaked bank statements show how the money was used to fund, among other things, Ramulifho’s extravagant lifestyle.
But my comment is not about the fraud – it’s about the people defending what are very obviously not “figs”.
When I first asked Letwaba in February 2018 about Denzhe, he must have known that all was not well. Less than a month before that, the real manager and owner of the rehabilitation centre, Ado Krige, burst into the NLC offices, demanding that they pay attention to the problems and address a growing conflict between him and Ramulifho over how the money was being used. On 17 January 2018, Krige sent a detailed follow-up letter to the NLC’s commissioner, Thabang Mampane, explaining — among other things — that the project was a mess. He also told her that Denzhe was a front that was being fraudulently used to obtain money from the NLC.
Yet, in spite of the warning in writing, the very next day Letwaba approved additional funding of R5.6 million for the project. At the time Letwaba was standing in as acting commissioner while Mampane was on leave.
Maybe Letwaba was not paying attention. Maybe he was out of the office when Krige highlighted the fraud, but it’s unlikely. The NLC’s fraud department had already been notified of what was happening in June 2017 by a whistle-blower. They should also have been aware of the complaint laid with police in December 2016 by Denzhe founder and chairperson Takalani Tshikalange, complaining that the NPO had been hijacked and used to secure Lotto funding.
According to leaked documentation, R15 million of the initial R22 million grant would have found its way to the contractor, Upbrand Properties. The founding director of Upbrand Properties is Johannes (Joe) Kgomotso Letwaba, brother of Phillemon.
When Phillemon Letwaba was confronted with this fact last year, he denied any of his family were involved. “I have checked with all my family members and none of them is a director on Upbrand Properties and this information you can check it with CIPC directly. Additionally they have no knowledge of any contract signed between Denzhe and Upbrand Properties,” he said.
It seems as if Letwaba’s memory lapse was subsequently cleared up because just a month later the NLC issued a statement in which it confirmed both the contract and the directorship. In a response to the SA National Editors’ Forum (SANEF) on 6 December 2018, it is admitted that Upbrand Properties was the contractor appointed. “On discovering the potential conflict of interest the COO engaged his brother to resign his directorship and relinquish his shareholding of the company. The COO further declared the matter with the NLC Commissioner. There are records to this effect.”
Yet again the NLC tried to sell journalists horse manure instead of figs.
The saying “there is no better sight than hindsight” often works well in journalism when trying to piece together a series of events. In Denzhe’s case, paging through piles and piles of documents and creating a timeline of documents and dates proved to be invaluable, because we could go back and forth, constantly finding more and more irregularities. Some of these irregularities were so blatant that it seems almost impossible that the NLC’s staff (and especially senior management) did not realise what was happening. Unless, of course, they didn’t want to?
Perhaps if I was an NLC employee tasked with checking the credentials and progress of the project, I would have flagged a number of issues. Like the fact that the “Denzhe constitution” submitted to the NLC was that of a church group. It states it was approved and accepted on 13 August 2010, but only signed on 9 September 2016 (the same day that the funding application was submitted). None of the signatories to this constitution matched the names of the directors of the Denzhe NPO registered with the Department of Social Development on 1 February 2012.
Perhaps I would have expressed my concern about the fact that Denzhe’s bank account lay dormant for many years. It was only on 1 October 2016 that Ramulifho deposited R100 into the account, taking the balance to R168. How can acceptable audited financials be prepared for two years when absolutely nothing happened in the NPO over that period? (So again, we’re back to what in a far-fetched way may be described as following the letter of the law, but definitely not the spirit of the law.)
I can continue like this, but there are just so many anomalies that should have raised red flags. The reality is that the NLC had been aware of this for some time, yet chose to try and sweep it under the carpet. To make matters worse, more organisations in which Ramulifho or his colleagues were involved received tens of millions in Lotto funding. In May this year I did a story on the very expensive toilets that were built by Zibsifusion in Limpopo. The same names appear and it boggles the mind that the NLC could decide on this NPC, given the track record of the people involved.
Instead of dealing with fact-driven reporting supported by documentation, the NLC has resorted to wild and defamatory smear campaigns against anyone, including journalists, who expose wrongdoing.
I have never met Sershan Naidoo, the former spokesperson of the NLC who is now taking his former employer to the Labour Court. I have not exchanged a single word with him, but he has my sympathy. I want to believe that he formed part of the vast majority of NLC staff members serious about what they do and serious about protecting the integrity of the institution and the billions of rands of public money it dispenses.
Mr Naidoo, I think you know the difference between horse manure and figs. What the NLC’s spokesperson is trying to sell about you and about its great systems smells like pure horse manure.
Views expressed are not necessarily GroundUp’s.