BPE 211

2020

Media articles and Official Statements Regarding Recent Controversies Accounting and
Auditing Conduct in Relation to Government and Corruption in South Africa

Disclaimer: The views expressed in this collection are not those of the Philosophy
Department of the University of Pretoria nor those of the University itself. These views and
statements are compiled in order to present students with the reality of media coverage of
their profession, demonstrating the real and/or perceived political and social effects of their
profession.
 The insider: Booze, bogus invoices and a Range Rover Sport
Emails reveal the seduction of Acsa, SAA and Transnet treasury
boss, Phetolo Ramosebudi.
25 October 2018 - Susan Comrie

• Update: Just hours after this investigation was published, Transnet’s attorneys called
to let us know that Phetolo Ramosebudi is now the former group treasurer of Transnet
– he resigned after being served with a suspension notice earlier this week arising from
Transnet’s own investigation.

For at least six years, Phetolo Ramosebudi was the “inside man” for controversial financial
services firm Regiments Capital. Ramosebudi was group treasurer first at Airports Company
South Africa (Acsa), then at South African Airways (SAA) and then at Transnet, where he
controlled one of the largest and most sophisticated corporate treasuries in the country.

New evidence shows that during Ramosebudi’s time at these state-owned entities, he was a
Regiments rainmaker: leaking confidential information, allowing the firm to dictate the terms
of a tender, and rubber-stamping questionable fees running into hundreds of millions of rands.
Seemingly in exchange for this extraordinary leg-up, Regiments was asked to pay at least R6.3-
million to Ramosebudi’s private companies and those of a relative – via 14 invoices delivered
to Regiments director Eric Wood. The invoices were for everything from “advisory” work to
supplying liquor and the services of a personal trainer. Yet amaBhungane1 has seen no evidence
that these services were actually delivered, suggesting the invoices were a cover for undue
payments to Ramosebudi. The most intriguing, but least conclusive, piece of evidence is a
quote for a R1.3-million Range Rover Sport. It is attached to an email Ramosebudi sent to
Wood in September 2015, though it appears the car was never bought.

The R229-million headache

To understand why Ramosebudi was so useful to Regiments, we need to start some six years
into his apparent capture, in December 2015, when Transnet was poised to enter into a series
of interest rate swaps that would deliver R229-million in fees to Regiments.

But there was a problem.

1
The investigative journalists
“I need to sort this one out,” Ramosebudi told Regiments’ Wood, forwarding him an internal
Transnet email.

It was 2 December 2015 and the source of Ramosebudi’s headache was Danie Smit, one of his
colleagues at Transnet treasury who had taken it upon himself to prepare a “humble opinion”
questioning the wisdom of entering into the swaps.

Earlier, in November 2015, Transnet had secured a R12-billion “club loan” to finance the
largest purchase of locomotives in South Africa’s history.

Ostensibly to hedge its risk, Transnet decided to enter into a series of complex financial
transactions known as an interest rate swaps.

The deal would swap the “club loan’s” volatile floating interest rate for a fixed one.
Incidentally, it would also channel enormous fees to Regiments and, it is alleged, onwards to
the Guptas.

But now, at the 11th hour, Smit, a seasoned official, was seemingly not convinced the interest
rate swaps were necessary.

Although we have not seen a copy of Smit’s memo, the email trail shows that Transnet’s newly-
appointed chief financial officer, Garry Pita, was persuaded.

“It is well-written and I understand the logic. Phetolo, are you in agreement that we don’t enter
into the swaps?” Pita replied.

This, Ramosebudi told Wood, was what he needed to “sort out”.

Just 20 minutes after his email alerted Wood to the problem, Ramosebudi swung into action.

“I am sorry that you received a conflicting message from Danie who didn’t consult with me on
this,” he wrote in a reply to Pita, leaning heavily on his seniority to Smit.

“As the Head of Treasury I am concern [sic] with exchange rate and inflation expectations and
it is prudent to manage risk appropriately. A proper submission is on the way for approval.”

Ramosebudi’s submission recommended that Regiments be appointed to carry out all of

On 4 December, Transnet entered into the first of a series of interest rate swaps, using a
Transnet pension fund as the unfortunate counterparty.
The same day Regiments received R56.7-million in fees and quickly transferred R42-million
into a Bank of Baroda account. Who benefitted from those funds remains in dispute – while
Regiments maintains the money was for Albatime, a company that acts as a fixer for
Regiments, the Public Protector’s State of Capture report identified one of the beneficiaries as
Tegeta, the mining company co-owned by the Guptas, Salim Essa and Duduzane Zuma.

However, this was not the first time Ramosebudi had reached down, opened a valve and
allowed millions in questionable fees to flow to Regiments. In April 2015, he presented
Transnet with a memo recommending that Regiments receive a R189-million “success fee” on
a separate, Chinese loan, which a recent amaBhungane investigation showed was largely
siphoned to the Guptas’ Sahara Computers. But to understand the symbiotic relationship
between Ramosebudi and Regiments one needs to go back to 2009 when Ramosebudi was
treasurer of Acsa – and Regiments seemingly began grooming him to serve its interests.

High-flyer

In 2009, Acsa was facing a triple threat: a global recession, R17-billion of debt, and new
regulations that precipitated a “cash crunch”. “These conditions made debt difficult to access
and/or extremely expensive,” spokesperson Hulisani Rasivhaga explained via email. To head
off a liquidity crisis, Acsa needed to raise R3.5-billion immediately. Regiments was appointed
as advisors and was promised a modest capital-raising fee, capped at R2.5-million over five
years.

But when Acsa’s treasury department, headed by Ramosebudi, decided to enter into a series of
interest rate swaps on these same loans, Regiments saw an opportunity to exploit its position
as Acsa’s trusted advisor.

In May 2009 and May 2010 Regiments entered into separate deals with Nedbank and Standard
Bank, setting themselves up as intermediaries and asking the banks for an “introduction fee”
for any deals it brought them.

If the banks won the business to execute the interest rate swaps, Regiments would get upwards
of R10-million per transaction – a cost that would be rolled into the fee charged to Acsa.

“[P]art of the narrative,” Nedbank’s head of corporate and investment banking Brian Kennedy
told us, was “if you don’t deal with Regiments you’re not going to do any business with any of
the state-owned entities”.
The result? Between October 2009 and May 2010, Regiments extracted R46.3-million in
“introduction fees” from Nedbank and Standard Bank, invoices, spreadsheets and emails
shows.

While Standard Bank told us it believed Acsa was aware that Regiments was acting as a broker
and earning a fee from the banks, Nedbank claimed that Regiments was at all times Acsa’s
trusted advisor and the fee was not an “introduction fee” but an advisory fee that the bank
merely paid on Acsa’s behalf.

The one thing the two banks do agree on is their claim that the fees they paid Regiments were
above-board for the simple reason that Acsa was aware of the fees, and happy to carry the cost.

Yet from Acsa, Standard Bank and Nedbank’s accounts it appears that Ramosebudi was the
only person at Acsa who was told about these fees, and normally only over the phone. Nedbank
told us it had reason to believe that others at Acsa were informed about the fees but was unable
to present evidence of this and said it was still conducting its own investigation.

Acsa said it could find no record that Regiments or Ramosebudi disclosed these “introduction
fees” to any else at Acsa.

“[Acsa] will need to commission a thorough audit to verify the accuracy of allegations… The
documents we have reviewed thus far, i.e. swap agreements, do not disclose any fees that
Regiments stood to earn from the swap transactions,” Rasivhaga said.

If Ramosebudi was helping Regiments, we wondered, what did he get in return?

Fringe benefits

Had someone been looking over Wood’s shoulder in July 2010 the email from
[email protected] would not initially have provoked much suspicion.

“Dear Eric, Please receive a copy of the research, and will appreciate the review and comments
as soon as possible for finalisation,” Ramosebudi wrote. Attached to the email was not a
research report, but an invoice payable to Riskmaths Solutions for R456 000 for “Actuarial and
Risk management consulting”. Company records show that Ramosebudi was the sole director
of Riskmaths at the time. Two more emails marked as “research reports” arrived in September
and October 2010 from Ramosebudi. Once again there was no sign of any research attached to
the email, only invoices for R798 000 and R460 099 respectively.
A week after Ramosebudi okayed Regiments’ R22.3-million “introduction fee” on the final
Acsa swap, seven invoices arrived in Wood’s inbox from Ramosebudi’s Riskmaths email
account. The first two were from Venus Liquor Store, the trading name of Azana Capital
Markets, another Ramosebudi company. Despite Venus’ modest location in a discount mall in
Midrand, the company billed Regiments more than R400 000 for alcohol, catering and venue
hire for a “Regiments function”. The remaining five – totaling R2.8-million – were from
Riskmaths Consulting. In October 2010, Ramosebudi sent Regiments another invoice from
Azana Capital Markets, not for alcohol but for “19 days” of consulting work at R1 950 an hour,
totaling R296 400.

Acsa confirmed that any deals its employees did with suppliers should have been disclosed in
terms of the company’s conflict of interest policies but told us that although Ramosebudi
disclosed he was a director of several companies; he did not disclose any payments from
Regiments.

SAA’s secrets

By 2013, the cash-strapped national airline was desperate to free up working capital.

And Regiments was poised to profit from its relationship with Ramosebudi, who was now
group treasurer and head of corporate finance at SAA.

In October 2013, Ramosebudi forwarded an internal SAA document entitled “Working Capital
– Scope of Work” from his official “Flysaa” email address to Rams Capital, a new company
he registered shortly before moving to SAA.

He then forwarded the document from his private Rams Capital email address to Wood at
Regiments.

The document described what the airline hoped to achieve from a new “working capital
optimisation” tender. Regiments, which planned to bid for the tender alongside global
consulting giant McKinsey, now knew exactly what SAA wanted to hear. Ten days later,
Ramosebudi repeated the exercise, forwarding the “evaluation criteria” for the tender to Wood
with a request to “please review and comment”.

Over the next three months more emails followed, each time routed via
[email protected] before arriving at [email protected]. There were confidential
presentations from rival bidders like KPMG and emails containing the secret bid prices from
REL Consultants and Boston Consulting Group. In February 2014, SAA awarded the Working
Capital tender jointly to McKinsey and Regiments.

Ramosebudi’s pharmacy

When Ramosebudi moved to SAA, the payments from Regiments continued flowing.

In October 2013, two invoices arrived in Wood’s inbox from Ramosebudi.

The first was from Ka Ditlou Health Services 202 – trading as Rams Pharmacy – for a wide
variety of health products and services, including a dietician and personal trainer. Total: R357
606. The second was from Rams Capital for “Actuarial and Risk management consulting …
work for Transnet”. Total: an identical R357 606. This was not the first time Wood had received
an invoice from Rams Pharmacy. In April 2011, when Ramosebudi was still at Acsa, he had
sent an invoice to Regiments for identical services, but that time for an amount of R212 964.
Company records show that the sole director of Rams Pharmacy is Psychology Ramosibudi, a
relative of Ramosebudi’s despite the different spelling of their surnames.

SAA spokesperson Tlali Tlali told us that employees “must declare any conflict of interest
between the work they do while in the employ of the airline and the work they undertake
privately in their personal capacity” and must “seek permission … whether or not they get
remuneration from doing such private work”. Ramosebudi, he said, had disclosed that he was
a director of one company, but not in the companies that we identified as issuing invoices to
Regiments.

The big one: Transnet

In January 2015, Transnet treasurer Mathane Makgatho resigned amid mounting pressure for
her to sign off the Chinese loan that would eventually channel the R189-million “success fee”
to Regiments. She reportedly told staff: “I arrived here with integrity, and I will leave with my
integrity intact.” Two months later, Wood was posing for photos with then Transnet chief
executive Anoj Singh on Beijing’s popular Wangfujing avenue. Smiling shyly next to them
was Ramosebudi, Transnet’s new group treasurer.

The email of 14 September 2015 was amaBhungane’s first clue that a corrupt relationship may
exist between Ramosebudi and Regiments.
Attached to the email was a quote for a Range Rover Sport with all the bells and whistles:
electric deployable towbar (R23 700), mags (R32 000), panoramic sunroof (R30 200) and
adaptive headlamps (R17 200).

Total cost: R1.3-million – although if Ramosebudi traded in his one-year old Mercedes Benz
ML250 BlueTech, the cost would come down to R784 000.

Ramosebudi, Regiments and Wood all refused to provide any explanation when the Range
Rover email was raised with them.

However, a former Regiments employee told amaBhungane that Wood had offered to assist
Ramosebudi with a discount organised through Regiments chairman Litha Nyhonyha, who
owns a stake in Landrover Waterford, the dealership where the Range Rover was on sale.

AmaBhungane has established that Ramosebudi did not buy this particular Range Rover but
opted to buy a BMW X6 from a different dealer instead.

We have seen no other evidence that Regiments continued supplementing Ramosebudi’s

What we can see is that he used his private email account to send at least one document to
Regiments containing Transnet’s sensitive financial information. We also know that under his
watch Regiments extracted hundreds of million from Transnet.

https://showcase.dropbox.com/s/Evidence-docket-The-insider-booze-bogus-invoices-and-a-Range-
Rover-Sport-gQy65yHBkKgX7voWsx11L