Ithala boss threatened to sue

2011-10-17 00:00

FORMER Ithala Bank CEO Sipho Shabalala, an accused in the controversial “Amigos” case involving a R1 million donation to the ANC as the result of the awarding of a state tender, received a severance package of R1,7 million because he threatened to take legal action against his former bosses.

Ithala chairperson Dr Mandla Gantsho disclosed this to the KZN Legislature standing committee on public accounts (Scopa) on Friday. Gantsho said the package was not a golden handshake, but a settlement.

He said the background to the deal was that Shabalala, who had been suspended from his position, had a few months left on his contract, which was due to end this month.

“We asked for him to give us this time so we could begin the process to recruit a new CEO. This was because his case had nothing to do with Ithala and we needed to give him his salary up to the end of his contract.” With leave pay it amounted to about R897 000.

Gantsho said Shabalala threatened to take legal action over certain other payments that he believed were due to him and this led to the overall payment of R1,7 million.

Ithala Bank, an entity under the KZN Department of Economic Development and Tourism, received an unqualified audit with “matters of concern”. These included irregular expenditure of over R19 million. Material losses to the value of over R90 milllion had been incurred as a result of a write-off of irrecoverable loans and advances. The A-G also expressed concern over the lack of systems of control and monitoring.

Scopa chairperson Makhosi Khoza asked about a long-standing concern involving loans to politicians and people working in government (related party loans), which were not being serviced.

Ganthso said decisive action had been taken and all related party loans had stopped. He said that at present there were just seven such loans remaining amounting to R28 million. Of these there were regular payments on an amount of R15 million owing, but R13 million is in arrears.

Mark Steele of the Democratic Alliance asked about losses of R39 million on Ithala Properties. Gantsho said R28 million of this involved the controversial company, Dolphin Whispers, which went into liquidation and failed to complete the Point Waterfront residential development. He admitted that losses were being incurred in the Ithala property portfolio and said a reason was low tenancy in the bank’s properties.

“Maybe we need to invest money to maintain our ageing properties better and have started discussion on recapitalisation,”

On Friday the Department of Economic Development and Tourism with the entities it oversees appeared before Scopa. Ithala, Dube Tradeport, KZN Growth Fund, KZN Tourism Authority, Agri-business Development Agency and the KZN Rehabilitation Trust Fund all received unqualified audits with “matters of concern” except the Rehabilitation Trust Fund, which received a disclaimer. The fund was disestablished, but not all financial matters have been wound up.

Scopa members expressed concern at the long list of transgressions found by the A-G in all the entities and said they believe the department should be exercising better control. Steele commended the department for being one of the few in the entire country that had a handle on goods and services and had reduced expenditure on consultants, advertising and the use of transport and venues. “We need to note this with approval,” he said.

nalini@witness.co.za

KZN departments run up R1,4 bln in unauthorised expenditure

THE 2010/2011 audit outcomes for KZN’s 16 government departments and 34 public entities have revealed unauthorised expenditure to the tune of R1,4 billion, as well as a virtually complete failure to manage government information systems, according to the Inkatha Freedom Party.

IFP KZN shadow MEC for finance Roman Liptak said the latest figure for unauthorised expenditure represents an increase of some R500 million from the previous financial year.

Liptak said even more disconcerting is that only a small fraction of the R1,4 billion in unauthorised expenditure has been detected by the departments and entities themselves.

“The fact that R1,27 billion of the R1,4 billion of unauthorised expenditure was detected by the A-G points to a wholesale failure of internal controls, lack of capacity and ignorance of the Public Finance Management Act, particularly in supply-chain management across government departments,” said Liptak.

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