A forensic investigation has found a R300,000 Film Office launch escalated into a R2.87m boxing-event payment, with then-acting Mandela Bay Development Agency chief executive Unati Peter allegedly directing that the payment be rushed through before the normal approval process was complete.
The report found Peter allegedly created a cost spreadsheet that SAIL Rights Commercialisation was supposed to prepare.
The event was billed as the triple-header Zibondiwe Ziyabila eGqeberha Boxing Spectacle and was hosted by Showtime Productions, the MBDA and the Nelson Mandela Bay municipality.
It featured title bouts involving Gqeberha boxers Nozipho Bell and Razell Mohamed, and Knysna’s Mbuyiseli Ndukwaka.
The MBDA paid SAIL R2.875m, including VAT, on June 2 for the event at the Nelson Mandela Bay Stadium four days later.
Showtime Productions was the boxing event organiser, while SAIL acted as an intermediary under its existing commercial agency relationship with the MBDA, helping to arrange the sponsorship and administer payments at Peter’s request.
The report references an unsigned June 3 letter of acceptance naming Showtime Productions as the company that would stage and manage the event.
It also records SAIL’s invoice to the MBDA and its later reconciliation of the funds.
SAIL’s head of commercial, Andre Homan, said the company assisted the MBDA under an existing commercial agency relationship after Peter introduced it to Showtime Productions on May 13 and asked it to help facilitate a sponsorship arrangement.
“SAIL was not the event owner, organiser or promoter, and had no responsibility for staging or operating the event,” Homan said.
“Showtime Productions was the event organiser.”
He said SAIL director Malcolm Drysdale dealt with both the MBDA and the organiser, helped facilitate their agreement and arranged payments at Peter’s request.
Homan said SAIL did not manage the event, prepare its operating budget or enter into the event management agreement between the MBDA and Showtime Productions.
According to Homan, SAIL warned Peter against the investment because of the short lead time, the amount involved and the risk that ticket sales and publicity would not justify the cost.
Once the MBDA decided to proceed, SAIL negotiated the organiser’s proposed R2.5m event amount down to R2.2m, excluding VAT.
Homan said SAIL invoiced the MBDA for R2.875m, including VAT, to administer the funding, but that the full amount was not its fee.
He said SAIL paid R1,802,150 to Showtime Productions and R397,850 to Boxing SA on the organiser’s behalf, before returning about R157,972 in surplus funds to the MBDA.
Homan said SAIL recorded 27 hours of work and charged R134,300 for administration and professional services, with travel and other direct costs accounted for separately.
According to Homan, Peter approved those costs on June 1.
A spokesperson for Showtime Productions, whose name is being withheld for safety reasons, confirmed the company did the triple header tournament for the MBDA.
“SAIL is the service provider that negotiated with Showtime the amount of the entire event for R2.2m.
“Showtime’s agreement was with SAIL to provide an international triple header, live acts and all entertainment at the stadium with payments of all the logistics involved,” the spokesperson said.
When contacted, Peter said he did not have a copy of the report.
“Kindly direct all correspondence to the office of the CEO,” Peter said.
MBDA board chair Khulile Nzo said they had received the forensic report and were dealing with the matter internally.
He said an employee had been issued with a notice of intention to suspend.
The investigation started after the auditor-general raised issues, along with parliament.
Asked about SAIL’s account that it had warned Peter the event might not be commercially viable, Nzo said that was still to be established.
“The report clearly shows that the expenditure was unlawful, unauthorised and irregular,” he said.
Nzo did not say whether the R2.875m had been formally recorded as irregular or unauthorised expenditure, or whether the municipality had reimbursed the MBDA.
Asked whether the agency would seek to recover money, he said it would evaluate its options at the appropriate time.
He said the board was committed to clean governance and took allegations of wrongdoing seriously.
“This is just one of a series of investigations that are under way.”
The leaked report by Ziklag Consulting found no documentary evidence showing how the approximately R2.5m cost for the event, excluding VAT, was made available from the original R300,000 allocation.
“The investigation did not receive documentary evidence demonstrating the specific municipal budget adjustment, virement or other financial approval through which the approximately R2.5m amount had been made available from the original R300,000.00 allocation,” the report says.
The R300,000 allocation related to the Film Office launch.
The report says MBDA board documents later recorded an estimated implementation cost of about R2.5m for the boxing event.
The board considered the MBDA’s involvement on May 27 and authorised the agency to act as implementing agent, while allowing Peter to continue making arrangements.
But the approval was subject to compliance with governance, procurement and financial management requirements.
The report says Peter instructed MBDA officials on June 1 to release the SAIL payment that day and to treat it as urgent.
SAIL had issued a tax invoice or quotation for R2.5m excluding VAT.
With R375,000 VAT added, the total payment was R2.875m.
The report says the payment was processed and authorised on June 2, while the normal supporting supply chain documentation and approval process remained incomplete.
“The evidence therefore established that the R2,875,000.00 payment to SAIL was processed and authorised on 2 June ... following the acting CEO’s instruction of 1 June ...” it says.
A purchase order for the payment, dated June 2, listed Peter as head of department.
But the approval sections for the SCM practitioner, head of finance and chief financial officer had not been completed.
“This is evidence of failure to follow internal SCM processes,” the report says.
The investigation found that Peter’s instruction to process the payment “constituted an unauthorised and irregular expenditure”.
One finance official told investigators she raised concerns that the municipality had indicated only R300,000 was available, while the stadium did not have enough budget for the balance.
She said the invoice contained no purchase order request, supply chain documents or detailed breakdown of the R2.5m amount.
She said Peter nevertheless instructed that the payment proceed and later directed that it be accommodated and released by 8.45am the following day, despite the absence of supporting documents and the unavailability of the SCM practitioner.
Another official told investigators that she did not sign the payment batch because she was not comfortable with the documentation.
She said there was no quotation and that a purchase order would ordinarily be generated only after receiving a quotation.
The report records one supply-chain official’s account that she was instructed to process the purchase order without signed supporting documents and that it was issued “under duress”.
In another account to investigators, an official said Peter later accused her of trying to sabotage him and told her to “stop being naive”.
She said she had already received what she described as threats and was concerned about losing her job.
However, the report said allegations of threats, victimisation and statements about the official’s employment remained her account and “were not independently corroborated by the evidence reviewed”.
The report also examined an Excel spreadsheet, titled Book1.xlsx, which was part of the paperwork for the SAIL purchase order.
It says Peter created the document at 8.24am on June 2.
He sent it to an MBDA official 24 minutes later with the message: “This PO is for SAIL.”
The spreadsheet set out R2.2m for event fees, R110,000 in administration fees, R50,000 for travel and accommodation, and R140,000 in contingencies.
The amounts totalled R2.5m before VAT.
“The cost breakdown was to be done by SAIL. However, evidence shows that it was done by Peter,” the report says.
It found that the spreadsheet could not independently corroborate the costs underpinning the payment.
The report also identified conflicting information about the event’s cost.
While SAIL’s initial invoice reflected R2.5m excluding VAT, later correspondence reflected a negotiated event fee of R2.2m, together with additional costs.
“The subsequent costing was not the same as the original invoice forming the basis of the 2 June ... payment,” the report says.
“The evidence did not establish that the later R2,200,000 costing had been incorporated into the procurement documentation before the initial payment was made.”
The report’s main findings were:
- The purchase order and payment were processed before normal SCM and approval processes were completed;
- There was no complete documentary record supporting the quotation process; and
- There was no documentary evidence for the increase from R300,000 to about R2.5m.
It concluded that Peter had “intentionally circumvented SCM processes”, contrary to the board’s resolution requiring compliance with governance, procurement and financial management requirements.
The report also says Peter did not seek clarity from the acting municipal manager about the increase from R300,000 to R2.5m, and did not obtain board approval for the increase.
It recommends that the appropriate authority consider applying consequence management under MBDA policies and procedures.
The report further recommends the implementation of tighter procurement controls and says the MBDA should determine whether any expenditure requires classification, disclosure, recovery or further consequence management.
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