Friday, 15 September 2017

Media Statement: Small Enterprise Finance Agency (SEFA) loses R20 million due to maladministration

Media Statement
by Toby Chance MP - DA Shadow Minister of Business Development

Date: 14 September 2017
Release: Immediate
Type: Press Statement

Yesterday, the Small Enterprise Finance Agency (SEFA), released the findings of a forensic investigation into a R20 million loan deal it made to a failed chicken project in Mpumalanga. The findings were an indictment on SEFA’s corporate governance practices as it found instances of embezzlement, fraud, theft and poor internal controls.

The project involved the construction of four chicken houses for the rearing and sale of 50 000 chickens to be sold every 50 days to Kroons Abattoir (Pty) Ltd in an off-take agreement negotiated by the project’s technical partner, Super Grand (Pty) Ltd. Each chicken house was supposed to be run by a cooperative, and was projected to create over 20 jobs.

 The DA is calling on the Portfolio Committee Chair, Hon Ruth Bhengu, to procced with urgency on the resolution passed by the Committee to ask the Auditor General to conduct an investigation into alleged corruption and maladministration in micro-financing institutions such as SEFA, SEDA and the Department itself.

 Several of the Department’s programmes, notably the Cooperative Incentive Scheme, have been operating under the radar for years and their financial affairs need to be put under the microscope. Should instances of corruption be uncovered, perpetrators have to be identified and subjected to criminal investigation.

 The investigation into the Mpumalanga chicken project came about after an oversight visit by the Portfolio Committee in March. Interestingly, SEFA had arranged the visit to give MPs insight into what it considered as a flagship project and model to be rolled out to the rest of the country.

 Instead of a successful poultry project, the committee uncovered chicken co-ops that had not been paid and two chicken houses that were incomplete. This was despite SEFA having disbursed R17 million of the loan amount needed to fund the project.

 A prima facie case of corruption and maladministration led to SEFA’s internal audit department conducting an investigation.

 Among its findings were:
·         fraud and embezzlement by Super Grand and the supplier of the chicken houses, Eagle Eye, amounting to R5,9 million
·         forgery of contracts and other documents by Super Grand
·         fraud and theft by Super Grand of funds intended as working capital for the cooperatives
·         a faulty due diligence process within SEFA as well as a failure to complete key legal agreements and conditions prior to disbursement of funds.

 As a consequence of the investigation, SEFA has opened criminal cases against Super Grand and Eagle Eye and suspended senior executives and managers overseeing the project pending further investigation.

 Under questioning by members of the Portfolio Committee, SEFA board Chairperson Hlonela Lupuwana-Pemba gave assurances that SEFA was serious about uncovering any other suspected cases of fraud within the organisation and promised to release the full report to the Committee.

 South Africa cannot afford for efforts at job creation to suffer at the hands of corrupt officials who are meant to support small businesses. The DA will continue to hold them to account and hold Minister Zulu ultimately responsible for casting a blind eye over her department for far too long.

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