Questions raised over Mega CEO Xola Sithole’s suspension

Mega CEO Xola Sithole
Mega CEO Xola Sithole

Directors of the Mpumalanga Economic Growth Agency (Mega) have erred in suspending chief executive officer (CEO) Xola Sithole on unspecified charges and proposing a golden handshake for him.

Sithole has been on suspension since February 4, but he has not been formally charged. The hurried suspension has sparked allegations that the board, whose term expires in three months, want the CEO out so that Mpumalanga Finance and Economic Development MEC Eric Kholwane could extend its term by 12 months.

Sithole’s term as CEO expires in December. City Press understands that the board of Mega has offered to pay him out to leave quietly. Sithole was suspended alongside chief financial officer Evert Lodewyk and the general manager for funding, Gijimane Dladla.

Sithole has turned down many irregular transactions and proposals at Mega. He took over about three years ago and has been hailed for setting Mega on a path to attract investment and support emerging businesses. He has been instrumental in re-establishing the organisation, which has been ravaged by massive corruption and looting.

Kholwane told City Press this week that, according to the law, the board should have consulted him and he should have then ratified its decision before it acted. Kholwane said he had received a letter from the board about its intention, but he had not applied his mind.

“This is a purported suspension,” Kholwane said. “The board can’t remove the CEO without my concurrence … it’s a purported suspension because I’ve not concurred. The board can’t act outside the law,” he said.

Three sources within Mega said that Sithole was being victimised for disapproving of a number of irregular transactions, including:

. Refusing to give a R5 million loan to SA Go Fibre, a company owned by Mega secretary Petunia Morgan’s son. The company did not meet lending criteria and Morgan allegedly worked with her son in pursuing litigation against Mega for declining SA Go Fibre’s Promotion of Access to Information Act application to find out how its loan application was declined;

. Questioning the allocation of R3 million and R8 million to Raizcorp and Dalamba Victorious Trading Enterprise, respectively, without procurement processes being followed; and

. Questioning the allocation of R10 million for township economy revitalisation to an entity called Spazamart.

The sources said that Sithole was not in Mega board chairperson Davis Mculu, Morgan and Kholwane’s good books. Kholwane and Morgan have a 14-year-old son together, but they are no longer in a relationship.

Kholwane defended the three transactions. He said that Raizcorp and Spazamart had made presentations about their incubation programmes.

“Mega can’t lend people money and not ensure that they’re successful. These companies came to make presentations that would support businesses,” he said.

The MEC said that Dalamba had already been allocated R14 million to build a shopping complex in Kinross and the Mpumalanga legislature found that the building was a white elephant. The legislature, he said, mandated him to inject R8 million through Mega.

“It was through the recommendation of a legislature portfolio committee that we see to it that this project comes to finality,” Kholwane said.

The board’s response:

Mculu said that Sithole and the three officials were placed on precautionary suspension pending an investigation into “very serious allegations” of financial misconduct.

He said that Morgan signed a declaration form when her son’s company applied for funding and recused herself. Mculu provided copies to City Press.

Mculu said the board noted in the allegations levelled against the MEC that he channelled funds to certain entities.

“We cannot comment on the truthfulness of these allegations, but only assure the public that the main reason for the board’s decision to place the three executive employees on precautionary suspension pending thorough investigations is to probe such allegations to get to the bottom of them,” he said.

“The board wants to make sure that, at the expiry of its term, it leaves no stone unturned, and lays the right foundation and precedent for its successors to bring those guilty of the misconduct to justice,” Mculu added.

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