Jo’burg is filthy because R1.3bn has been syphoned from PikitUp

The loss of nearly R1.3 billion through “fraud and corruption” at Johannesburg’s waste management company Pikitup — according to an investigative report — is evident on the city’s streets, which resemble a dumpsite. 

Despite a forensic investigation by law firm Malatji and Co Attorneys finding that Pikitup’s chief financial officer, Litshani Matsila, was “grossly dishonest” and “a threat to the best interests” of the city-owned entity in the way he “collapsed” purchasing systems, the new board appointed by the coalition government of then mayor Thapelo Amad renewed his  contract on 1 March. 

The lack of consequences following the loss of nearly R1.3 billion through “irregular and wasteful” payments to fleet-leasing companies, which charged “exorbitant” rates that “did not correlate” with work done, flies in the face of current mayor Kabelo Gwamanda’s assertion that the new administration was stabilising the city’s “fragile state of finances”. 

Gwamanda, who was elected last month as Johannesburg’s fourth mayor since November 2021, made the remarks in his first State of the City address on Tuesday. 

According to the investigation, Matsila “abused his powers” by instructing that R568 111 should be paid to a software company despite it having no contract to do business with Pikitup. 

The investigation further found that Matsila — throughout his first four-year tenure from March 2019 to February this year — lied in his declaration forms when he said he was not a director, yet he had interests in six companies. 

The Municipal Systems Act, Matsila’s Pikitup contract and the City of Johannesburg’s ethics policy require senior executives to make full disclosures of interests, including shareholding and directorships, and failure to do so will lead to “appropriate disciplinary proceedings”. 

A day before his first contract ended on 28 February, an independent disciplinary hearing found Matsila guilty on six charges, including abuse of power, failure to disclose information and irregular expenditure, and recommended that he be dismissed “with immediate effect”. 

But a senior city official, who spoke on condition of anonymity, called the coalition government a “shambles” for not only “burying” the November 2022 forensic report into Matsila, but for also supporting his contract renewal after Johannesburg’s annual general meeting in March. 

The forensic investigation began in September last year. The Mail & Guardian has seen the report. 

R1.3 billion ‘corruption’

The findings against Matsila stem from an investigation into “fraud, corruption and mismanagement” related to the awarding of more than R1.26 billion to 18 companies to provide Pikitup with 124 vehicles for its waste management at four depots.

The 18 companies were “unsoundly and unreasonably” appointed on a 24-month “as-and-when” basis following the 31 July 2020 lapsing of the previous 32-month lease agreement Pikitup had with the rental company, Avis, the report stated. Pikitup has only 24 functioning vehicles out of roughly 130 needed to do its work. 

Investigators said Matsila “abused his powers” by usurping Pikitup’s fleet and creditors department — the latter being responsible for the payment of invoices — and contravened the Municipal Finance Management Act and Pikitup’s fleet management policy, among other regulations.

“In addition, the CFO [chief financial officer], after the appointment of the service providers for ad hoc services, would receive requests for augmented services, such as trucks and other services, directly from the depots — a system which he had implemented contrary to either any discernible SCM [supply-chain management] or fleet management process. Thereafter, and without any due SCM or official procurement process, the CFO would unilaterally select the service provider to provide the service(s) requested,” according to the report. 

“Ultimately, the CFO would also sign off on the invoices of the service provider he had selected to perform the service. He would then further prioritise the payment of some service providers over others. In conducting himself in that manner, the CFO effectively collapsed the internal checks and balances prescribed by the organisation’s codes, policies, procedures and standing practice. 

“The CFO failed to promote sound, efficient, effective, transparent and accountable administration and due compliance with uniform SCM processes, as one would have expected of a senior employee in his role.”

The report added that the submitted and paid invoices from the 18 companies had a raft of “anomalies”, including invoices that had no trip sheets, time sheets, departmental checklists or work and compliance certificates. 

The invoices also had rate calculations that did not “correlate with the total amount charged”, some of which “were even paid on the same date they were received, which is not the norm”, the investigators said in their report.

“The supplier called Velman utilised the same invoice number for two different invoices in different amounts, whereafter both invoices were paid by Pikitup without querying the duplicate invoice numbers. 

“The above anomalies indicate that there was no specific system followed in relation to the payment of these service providers,” the report found. 

“Moreover, some invoices that were paid did not have purchase orders and service entry numbers, [among] other anomalies. This illustrates that the organisation’s fleet management standard operating procedure was not followed.

“The evidence we have gathered clearly demonstrates that the CFO became the be-all and end-all within the organisation and particularly in relation to ad hoc fleet services.”

In total, Matsila disbursed R1 267 307 013.70 to the companies in what the report deemed “irregular and wasteful expenditure”, according to a calculation of the list of invoices the M&G sourced. 

More irregular payments

On 10 March last year, Pikitup paid — on Matsila’s “instructions” and without any supporting authorisation signatures — Opto Africa Holdings R568 111, despite not having an agreement in place from May 2021 to 28 June last year, after Opto’s initial eight-month contract ended in April 2021, and before the new one-year contract began in June last year. 

Opto Africa, suppliers of software, upgrades and maintenance on weighbridges, allowed Pikitup to continue using its systems after April 2021, and invoiced the city’s entity on a monthly basis. 

In November 2021, Opto Africa blocked Pikitup from its systems after the entity was in arrears in its monthly payments, and the waste-management company could not fill landfill sites. 

Pikitup prepared a memorandum acknowledging that the R568 111 fee amounted to “irregular expenditure”, and the entity’s managing director, Bukelwa Njingolo, approved the irregular expenditure report on 10 May 2022, after the 10  March 2022 payment of Opto Africa. 

“Albeit that the managing director approved the irregular payment of invoices after the fact, in May 2022, the CFO’s conduct is in direct violation of his contract of employment, the organisation’s code of ethics, the purchase and accounts payable policy, as well as the Municipal Finance Management Act and its regulations.

“In particular … the CFO also blatantly contravened the SCM policy by instructing an employee to make payment in the absence of a valid contract being in place between the organisation and that service provider,” according to the report.

Conflict of interest

The investigators said Matsila was “not being truthful, forthcoming, open and honest” when he failed to disclose his active directorships in six companies. 

The companies are Litshani Accounting Services, Litshani Transport Services, Avhatakali Driving School, Matsila Chartered Accountants, Mukatshelwa Investments and Tshivhilinge Poultry Farming. 

Pikitup’s policies require disclosure of interests “to assist management to identify and manage any potential conflicts of interest among employees, especially in senior management positions”.

The investigation emphasised that Matsila was also bound by the law to disclose his interests. 

“What is apparent from Mr Matsila’s conduct in this regard is that he failed to disclose any and all of his financial and business interests, as set out in … the Municipal Systems Act, with the board on the start date and on an annual basis thereafter. 

“This non-disclosure is serious in nature because it illustrates that the CFO, [whose] role is a position of trust, acted in a manner that was not honest and without the requisite integrity expected of a senior manager in his position,” said the report.

Disciplinary and dismissal

On 27 February, Musatondwa Musandiwa, who chaired Matsila’s disciplinary inquiry, described in his written ruling the rigmarole Matsila put the hearing through by making “all manner of attempts at postponing the hearing so that a finding cannot be made against him before 28  February 2023”. 

This included Matsila not filing written submissions for a recusal application he filed against Musandiwa, nor filing any papers at the actual disciplinary inquiry to detail his defence on the six charges brought against him. 

Matsila “thwarted” investigations into him at every turn, including “defiantly wiping out” information from his Pikitup-issued phone by restoring it to factory settings, while it was needed by a data analysis company appointed by the city entity during the investigation into Matsila’s “wrongdoing and misconduct”, Musandiwa’s inquiry stated. 

Musandiwa ruled that Matsila cleaning his work phone was an attempt to “conceal information to the detriment of the employer”.

“There is no other explanation why Mr Matsila would erase the phone. Indeed, because he did not attend or provide his written representations, we do not have the benefit of his evidence before this [inquiry],” he wrote.

“The fact that he erased his phone speaks to dishonesty on his part. This behaviour by Mr Matsila is outstandingly bad and warrants an inference that the trust relationship between him and Pikitup has been destroyed.”

Musandiwa called Matsila “the author of his own misfortune” after he refused to attend his inquiry and tell his side of the story.

“Had he availed himself and submitted his written representations to the charges, this matter would have been deliberated properly with the benefit of both sides. Mr Matsila did himself a great disservice by refusing to attend the hearing or even taking part in the entire process” Musandiwa said.

“As a result, having regard to the evidence before me and the authority cited above, I recommend that the appropriate sanction to be imposed against Mr Matsila is dismissed on all charges with immediate effect.”

A high-ranking city source, who is aware of the report and the disciplinary inquiry, said mayor Gwamanda and mayoral committee member responsible for finance, Dada Morero, were aware of the damning findings against Matsila, including his dismissal. 

“The coalition government is in shambles because the mayor and Morero know that Matsila is corrupt, but still rubber stamped the Pikitup board’s decision to renew the CFO’s contract,” said the source, who spoke on condition of anonymity. 

“Johannesburg residents should know that the city will remain filthy for a long time to come.” 

Responding on behalf of the city, the mayor and Pikitup, Johannesburg spokesperson Nthatisi Modingoane said the process followed by the previous board in initiating the forensic investigation was “unprocedural”, without elaborating. 

Modingoane added that Matsila’s contract was extended by three months and not four years, and that the Pikitup board was waiting for the completion of the investigation by the city’s internal investigative unit into Matsila before deciding on his future.

“Therefore, the city and entity have not ignored the allegations levelled against senior officials but have sought to follow processes to protect the city from financial, legal, and reputational risks.”