Netone Corruption Scandal Involving Supa Mandiwanzira

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The NetOne scandal was brought to light in 2016 after allegations of corruption were levelled against its management in 2016. [1]

The State-owned mobile network operator came under a lot of scrutiny which led to a series events culminating in the suspension and subsequent dismisal of the senior management including the CEO ,Reward Kangai. Kangai's dismissal spilled into the courts with him challenging his firing but his efforts were in vain .The scandal raged on for over two years and in the process many high profile people were sucked into the issue especially when kangai wrote a report to Emmerson Mnangagwa in December of 2017.


Allegations of Corruption

2016 was a turning point in the history of the State owned enterprise as far as its image and reputation was concerned.[2].The corruption and mismanagement allegations levelled against the top management resulted in the suspension of its CEO, Reward Kangai, and the launch of an investigation.


Sibusisiwe Ndlovu revelations

Ndlovu unearthed several irregularities before presenting them to the board in December of 2015.That is when details emerged of possible revenue leaks at the mobile operator, NetOne where the inventory revealed that the firm was prejudiced of millions of dollars through dubious procurement of both hardware and software equipment.[3].This has saw her come under fire from her superiors who were understood to be against her employment on a permanent basis after the completion of her probation.

In her report she claimed that most of the bank reconciliations dated back to 2010 “presented a significant risk of fraud”


“Critical foreign suppliers that have reconciliation challenges include Nokia Siemens, Gemalto, Convergys, Technotree and Huawei. All suppliers are reflecting higher balances owing than NetOne records. “Suppliers’ reconciliation to statements were not being done. There is risk of double payments, or paying for services not received or product not delivered. Special areas are fuel — Redan supplier reconciliation is problematic,”

Ndlovu claimed.

She also said there was need to investigate why some companies responsible for building base stations among them Masimba, Bopela and Essar were being paid in advance.

“There is need for review of contracts for IT service providers versus value for money as in the case of Gemalto contract. Why need to re-issue sim cards each time a new service is introduced? Competitors do not have to do this. This is costly to the business and inconvenient to customers who are not keen,”

Ndlovu claimed.


Some of the irregularities that were picked by Mrs Ndlovu among them was the fact that the mobile operator made an advance payment of about $600 000 for its mobile money transfer platform-One Wallet, yet it only makes a profit of about $1 000 per month from the business venture.[4].


It was also revealed that NetOne was paying its fuel costs to Redan based on invoices instead of actual consumption.During reconciliation, it was to emerge that the mobile operator got an invoice of about $250 000 when its actual consumption was only about $90 000.


NetOne board chairperson, Mr Alex Marufu confirmed the irregularities cited by Mrs Ndlovu, saying the board was already investigating the allegations. He said they were fully behind Mrs Ndlovu.The then Information Communication Technology, Postal and Courier Services Minister Supa Mandiwanzira said his ministry gave the board the mandate to reform NetOne.[5].

Kangai Suspension

Mr Reward Kangai was sent on three months forced leave to pave way for a forensic audit at the parastatal, amid indications that the mobile phone operator could have lost millions of dollars through underhand dealings in procurement.Board chairperson Mr Alex Marufu confirmed the development saying Mr Kangai would be on full salary during his leave.[6]


The forensic audit

Price Water House Coopers was contracted to carry out an extensive audit on the mobile Operator.

According to a report, NetOne was owed $54 million and this figure includeded $11,2 million owed by Firstel Cellular, a service provider contracted by NetOne to handle the signing up of post paid subscribers.[7]


Prior to the investigation Alex Marufu, NetOne’s board chairman had singled out Firstel Cellular’s relationship with NetOne as a corporate governance concern because Firstel is owned by senior NetOne management, including Reward Kangai.


The amendment allowed Bopela to pass on $2,6 million worth of work to a subcontractor called Macharawanda, which is owned by Agrippa Masiyakurima, the owner of Bopela. This was meant to avoid a Zimbabwe Revenue Authority garnish order.


Other details of the audit that were shared included the appointments of contractors made in contravention of the State Procurement Board regulations and NetOne management’s access to holiday allowances worth over $270,000 which went against the provisions of its human resources policy.

Base Stations Scandal

Reward Kangai reportedly caused the installation of base station towers at relatives’ homes for them to get rentals from the parastatal. In some instances the beneficiaries are said to have received huge payments in advance.[8]A forensic report released recently indicates that one of the beneficiaries is Mr Kangai’s aunt, Ms Joyce Kangai of Goodhope, Harare.

Kangai Dismisal

The NetOne board terminated the contracts of all the managers who were part of the alleged corporate malfeasance at the parastatal, which saw the Government-owned mobile operator losing millions of dollars through illicit dealings by management particularly in procurement. Price Waterhouse Coopers conducted a forensic audit at the instigation of the Auditor-General’s Office and found a number of irregularities.The findings of the audit led to the firing of Kangai and most of the senior management.Mr Reward Kangai, Mrs Memory Mandiya Ndoro (executive public relations and special projects), Mr Prosper Muvengwa (executive retail and sales), Mr Lindon Nkomo (legal executive) and Mr Rafael Mushanawani (chief information officer) were fired.Their (contracts of employment) were terminated with two weeks’ notice in line with the law. Despite the findings (of the audit) against them, the board chose not to go the route of protracted hearings and possible court proceedings.

Kangai's attempt to retain his Job

In October of 2016 Kangai was believed to be contesting the executive board’s judgement to have his contract terminated.


Mandiwanzira Defamation lawsuit against Kangai

Supa Mandiwanzira filed a $7 million defamation lawsuit against former Reward Kangai, claiming he defamed him in an article he caused to be published in the Daily News in May last year based on Kangai’s complaint letter, dated April 21, 2016,addressed to chief secretary to Cabinet, where the former NetOne boss accused Mandiwanzira of corruptly running the parastatal.[9]


Through his lawyer, Raphael Tsivama, Mandiwanzira, claimed that the article was untrue and exposed him to public ridicule and contempt. He added that Kangai further inferred Mandiwanzira hired a bogus South African company, Megawatt, to audit NetOne’s data project at a time another forensic audit was being done Price Waterhouse-Coopers, thus, prejudicing the government

Appeal to Mugabe

Kangai appealed to Robert Mugabe to intervene in his epic duel with Supa Mandiwanzira.Kangai accused Mandiwanzira of running a witch hunt against him and other senior top officials at NetOne.

Approaching the High Court

Reward Kangai filed an urgent chamber application at the High Court challenging the advertisement of his post by his ex-employer .Kangai is argued that he was still the incumbent boss at the state-owned mobile operator since his challenge of the dismissal was still pending in court.[10] Kangai said in his founding affidavit.

“The present application is one of a prohibitory interdict to stop the respondent (NetOne) from filling the applicant’s (Kangai) position of chief executive officer until such time when the court has fully determined the legality of my purported termination under case number HC11003/16 which application is still pending, which application is merely awaiting set down at this stage,I aver that I am still the respondent’s incumbent chief executive officer as the respondent’s purported termination of my contract of employment is unlawful and a nullity. Moreover, the legality of the respondent’s actions is still to be determined by a court of competent jurisdiction under the application aforementioned.”

The former NetOne boss further said he had reasonable fear and well-grounded apprehension of injury that his ex-employer would fill his position before the court reaches a decision in his pending matter, hence the filing of the urgent application.

“The respondent has actively taken steps to fill up my position by advertising the said position as being vacant. The respondent in its proclivity for improbity against me has since advertised as vacant, my contested position on its website notwithstanding the legal proceedings pending and without any notice to me,”Kangai said.

According to Kangai, NetOne advertised his post and issued a deadline for the tendering of such applications as May 5, 2017. In so doing Kangai said NetOne, “so whimsically and cursorily dismisses my right to be heard, a tendency that can be traced back to its vacillation from the fault based procedure to terminate on notice without any regard to the far-reaching effects on myself”.

Case dismissal by the high court

The High Court dismissed a bid by Reward Kangai to stop the parastatal from advertising for his replacement.Justice Lavender Makoni ruled that Kangai had brought an application that was similar to the one which another High Court judge, Justice Priscilla Chigumba, had previously dismissed.


Kangai’s application was dismissed with costs after Justice Makoni ruled that there were no changed circumstances in his matter. The judge said he had brought an application based on the same facts with the one that was dismissed by Justice Chigumba.[11]

Summary of Kangai's 2017 Report to the President

In December of 2017 Kangai wrote a report to Emmerson Mnangagwa in the report Kangai attempted to show how Supa Mandiwanzira as the Minister of ICT was creating a or had created a cartel in the sector.Kangai sensationally claimed that his dismissal from the mobile operator was part of a grand plan by Mandiwanzira to create a cartel in the sector by appointing his loyalists protecting his interests in the process.

NetOne ‘re-structuring exercise

In the report Kangai claimed that ,As early as 30 December 2014 the former Chairman of the Board, Mr Alex Marufu indicated in a text message to him that he was going to destroy empires in NetOne. Soon afterwards, there began the talk of re-structuring of NetOne management. There was no basis given for that re-structuring exercise. He mentions that he was invited to arrange for a lunch with the Minister, Hon. Supa Mandiwanzira at the Meikles Hotel, where he wanted to know why Kangai was against the appointment of Francis Mawindi, former CEO of Telecel, as NetOne Chief Operating Officer (COO).Kangai also alleges that he gave his reasons on the basis of Mahwindi's involvement with NetOne’s Easycall prepaid platform under Brightpoint, a company that the late Solomon Mujuru had interests and had supplied NetOne with a mal-functioning prepaid platform that cost NetOne loss of customers during the 1998-1999 period and his exit from PTC.

Kangai also says that ,events that later unfolded suggest that the re-structuring exercise at NetOne was meant to supplant management with his proxies.[12]

Appointment of Ndhlovu

Mrs Sibusisiwe Ndhlovu, formerly Executive Director for Retail banking at MetBank, was appointed Chief Finance Officer at NetOne, replacing Mr Godfrey Tarupuwa, who was the Company’s Finance Director. Mrs Sibusisiwe Ndhlovu had been forced to resign from MetBank, following a forensic audit at Afre Holding (the Pattisson Timba saga at Renaissance Bank) sanctioned by the Reserve Bank of Zimbabwe, found her unsuitable to hold public office.

Mutandiro appointed COO

Following the unsuccessful security clearance of Francis Mawindi for the post of COO at NetOne, Mr Brian Mutandiro was later appointed COO of NetOne, when in fact, he didn’t meet the qualifications called for in the job advert, claimed Kangai. Details pertaining to that appointment were given to the Zimbabwe Anti-Corruption Commission (ZACC), Commissioner of Investigations, Mr Goodson Nguni on the 14th March 2016. Mr Brian Mutandiro is related to Hon. Supa Mandiwanzira.


Mahwindi and MetBank

Some of the reasons advanced for the failure to security clear Mr Francis Mawindi, related to his tenure as Telecel CEO as maintained by Kangai in the report. He deposited large sums of Telecel funds into MetBank without the authority of the Board. Telecel was later unable to withdraw the money to meet its licence obligations with POTRAZ, resulting in the cancellation of its licence. Mr Mawindi was alleged to be closely related to one of the owners of MetBank, hence the motivation to deposit Telecel funds into the Bank, even without the authorisation of the Board of Directors of the Company.


Kudakwashe Nyashanu was appointed Executive Human Resources at NetOne. Mr Nyashanu was previously employed at Tarcon, a company in which Mandiwanzira has an interest.

The MetBank connection

The Chairman of NetOne, Mr Peter Chingoka is a non-executive Director at MetBank. Mrs Sibusisiwe Ndhlovu, Chief Financial Officer at NetOne is formerly a Director at MetBank.

Mr Ozias Bvute, the CEO of MetBank, was appointed Chairman of POTRAZ by the Minister, Hon. Supa Mandiwanzira in April 2016. Brian Mutandiro had previously been appointed by the same Minister to that non-Executive directorship position at POTRAZ but resigned to take up a more lucrative Executive directorship position at NetOne.

The appointment of Mr Ozias Bvute to POTRAZ by Hon. Supa Mandiwanzira was made with the Minister’s full knowledge that at the time, MetBank owed POTRAZ, US$6.5 million, NetOne US$300 000 (the amount was US$700 000 but was reduced after NetOne CEO, Reward Kangai took legal action against MetBank, a move that didn’t go down well with both Minister Mandiwanzira and Ozias Bvute), Communications and Allied Industries Pension Fund (CAIPF) US$1.6million, POSB, US$2million and Zimpost (exact amount unknown).


Soon after his appointment to the Chairmanship of the POTRAZ Board, Mr Ozias Bvute is said to have re-instated the Acting Director General to his position as Deputy Director, who had previously been fired by the Ishmael Chikwenhere’s Board for violating a Board resolution, which had authorised POTRAZ to open an account with MetBank but to limit deposits to a maximum of US$500 000. Mr Bvute went on to direct POTRAZ management to purchase stands at Crowhill, Harare using funds from the USF at US$22.5million, less the US$6.5million already deposited with MetBank, notwithstanding that the intended move was clearly not in line with the mandate of POTRAZ and certainly not in accordance with the intended use of the USF. In an article entitled “Zimdef loses millions in stands scandal”, the Herald in its 20th December 2017 publication, highlights details of how Zimdef lost millions of dollars in a debt-land swap deal, where the value of the stands from the same Crowhill area where grossly overvalued.

TelOne

Kangai also claimed that After supplanting NetOne management, the Minister, Hon. Supa Mandiwanzira’s next victim was TelOne Managing Director, Mrs Chipo Mtasa and Finance Director, Mrs Ellen Chivaviro. Hon. Supa Mandiwanzira, in a move that had striking resemblance to what he did at NetOne and became his hallmark, orchestrated the publication of an article entitled “TelOne reels under a US$378 million debt” in the Zimbabwe Independent newspaper of 24th December 2016.

The Kangai report concurred that ,the objective behind the 24 December 2016 article was a smear campaign against the TelOne Managing Director and Finance Director to justify non-renewal of their Contracts of Employment, as the Minister had so directed the Board. In much the same way, NetOne management was wrongly blamed by the Minister and former Board Chairman, of “siphoning US$11 million of NetOne funds through Firstel”, the article wrongly blamed TelOne management for the US$378 million TelOne debt and yet almost US$300 million of that, was legacy debt incurred by the former Posts and Telecommunications Corporation (PTC) during the 1980s, 90s time-frame, well before both the current Board and management joined TelOne.

Report Recommendations

The report recommended that the Government of Zimbabwe to :

Send NetOne key management on forced leave, pending the outcome of investigations by a Commission of Inquiry. These are the Acting CEO, Brian Mutandiro, CFO, Mrs Sibusisiwe Ndhlovu, CTO, Mr Darlington Gutu and Executive Human Resources, Mr Kudakwashe Nyashanu. Set up a Commission of Inquiry into the operations of NetOne, covering the re-structuring exercise carried out in 2015, alleged payments of US$10 000 a week to Hon. Supa Mandiwanzira and the appointment of Megawatt Energy by the Minister for a consultancy fee of US$4million and whether the Minister was not conflicted and the alleged bribing of the Minister by ZTE, a company that is linked to Mr Li Xiaodong of Megawatt Energy. It is also alleged that similar payments are being done by TelOne to the Minister. The parcelling of advertising jobs to VPCG, after losing to Jericho. Hon. Supa Mandiwanzira is reportedly linked to the CEO of VPCG, Mr Reg Makuchete. The Commission of Inquiry to investigate the whole ICT sector, POTRAZ, TelOne, NetOne and Telecel.

Mr Ozias Bvute be suspended as Chairman of POTRAZ to clear the way for those investigations.Government must investigate the eficacy of its acquisition of Telecel and the use of funds from the USF, including whether or not, there was a violation of the Postal and Telecommunications Act, Chapter 12:05 by the POTRAZ and the Minister.

Report in Full

Letter By Reward Kangai on Supa Corruption at NetOne

References

  1. [ https://www.techzim.co.zw/2016/07/corruption-mismanagement-netone-highlighted-audit-operator-owed-54-million-debtors-include-management-owned-companies/], Corruption & mismanagement at NetOne highlighted in audit – operator owed $54 million, debtors include management owned companies, Published: 25 July 2016 , Retrieved: 4 January 2018
  2. [ https://www.techzim.co.zw/2016/07/corruption-mismanagement-netone-highlighted-audit-operator-owed-54-million-debtors-include-management-owned-companies/], Corruption & mismanagement at NetOne highlighted in audit – operator owed $54 million, debtors include management owned companies, Published: 25 July 2016 , Retrieved: 4 January 2018
  3. [ http://www.herald.co.zw/netone-scandal-deepens/ ], NetOne scandal deepens, Published: February 2016 , Retrieved: 4 January 2018
  4. [ http://www.herald.co.zw/netone-scandal-deepens/ ], NetOne scandal deepens, Published: February 2016 , Retrieved: 4 January 2018
  5. [ http://www.herald.co.zw/netone-scandal-deepens/ ], NetOne scandal deepens, Published: February 2016 , Retrieved: 4 January 2018
  6. [ http://www.herald.co.zw/netone-ceo-kangai-suspended/], NetOne CEO Kangai suspended , Published: March 15 2016, Retrieved: 4 January 2018
  7. [ https://www.techzim.co.zw/2016/07/corruption-mismanagement-netone-highlighted-audit-operator-owed-54-million-debtors-include-management-owned-companies/], Corruption & mismanagement at NetOne highlighted in audit – operator owed $54 million, debtors include management owned companies, Published: 25 July 2016 , Retrieved: 4 January 2018
  8. [1], Former NetOne boss in base stations scandal , Published: 23 December 2016, Retrieved: 4 January 2018
  9. [2], Supa Mandiwanzira files $7 million defamation lawsuit against former NetOne ceo & Daily News , Published: 9 January 2017, Retrieved: 8 January 2018
  10. [ https://www.theindependent.co.zw/2017/07/07/netone-kangai-wrangle-rages-on/], NetOne-Kangai wrangle rages on , Published: July 7 2017 , Retrieved: 4 january 2017
  11. [3], Kangai’s bid to block replacement fails , Published: 25 July 2017, Retrieved: 4 January 2018
  12. [ https://news.pindula.co.zw/2018/01/03/kangais-full-report-mnangagwa-supa-mandiwanzira-captured-netone-potraz/ ], Kangai’s Full Report To Mnangagwa On How Supa Mandiwanzira Captured NetOne, Potraz , Published: 3 January 2018, Retrieved: 4 January 2018