CEO Gavin Watson had a 'war chest' to buffer Bosasa against possible legal issues
Politics / 30 January 2019, 5:27pm / Getrude Makhafola
Johannesburg - Bosasa, which was investigated for corruption by the Special Investigative Unit, built a ''war chest'' by transferring millions of rands from the attorneys' trust account to its operations in case authorities froze its bank accounts, former CFO Andries Van Tonder told the state capture commission of inquiry on Wednesday.
"Watson said this was done to mitigate against the risk of running out of funds in case of possible freezing applications to banks by the NPA [National Prosecutions Authority], because of the SIU matter...Watson said this would be a war chest for Bosasa," Van Tonder testified.
Former COO Angelo Agrizzi, who finished giving evidence on Tuesday, wrote an email in June 2016 to Bosasa attorney Brian Biebuyck requesting him to transfer R25 million from the trust account to Bosasa operations. Agrizzi wrote that Bosasa would replace the R25 million once it received a R85 million payment due from the Department of Justice, Van Tonder said.
A 2010 investigation at the Department of Correctional Services by the SIU found evidence of irregular awarding of tenders to Bosasa. The investigators found a trail of collusion and kickbacks paid by the company to high ranking officials to ensure Bosasa received lucrative tenders. Van Tonder, Agrizzi and other executives were implicated in the report. No wrongdoing was found against CEO Gavin Watson, who had boasted to colleagues that he would be never found to have done anything wrong because he never signed anything that was illegal at Bosasa.
Van Tonder testified further about a property company set up mainly to pay for Patrick Gillingham's legal fees. Gillingham was CFO at the Department of Correctional Services at the time.
"The company was a close corporation that belonged to Gavin Watson, and it owned property in Ruimsig in the West Rand. Watson donated the property to me and Agrizzi as an incentive. This company was used to facilitate payments of legal fees for Gillingham so that it was not apparent that payments came from Bosasa. We were given the property by Watson to keep us loyal to him and do what he wanted us to do."
The property company was ultimately liquidated.
Van Tonder corroborated Agrizzi's testimony on Bosasa buying Gillingham's daughter, Megan, a VW vehicle and building of houses for former prisons boss Linda Mti and Gillingham. Van Tonder said the expenses were recorded as costs for construction work at Bosasa offices.
"The building of houses and vehicle purchase were reflected as operational costs to the SA Revenue Services...Sars was never informed of the true situation," he said.
Many activities at Bosasa were hidden from the revenue collector, including two failed prawn farm projects. An expensive aquaculture project, called SeaArk Africa was started by Bosasa in 2005 in the Eastern Cape.
Van Tonder said the project was to grow seawater prawns in a controlled environment and was reportedly touted by the Eastern Cape government officials and Bosasa as having a potential to create at least 11,000 jobs. An American company called Sustainable Resources International was paid R50 million in consultancy fees on the project.
"The American company was paid large some sums of money, chairperson. R50 million was transferred to the Americans for over three years as consultation fees. The project was not successful, and was terminated mainly due to lack of funding... there were also some other operational concerns that prevented the continuation of this project...Bosasa never derived value for money from that project," said Van Tonder.
Bosasa recorded a loss assessment of R138 million in its books for the prawn farm, Van Tonder added.
"The assessed loss was derived from expenses on the project and equipment write-offs. The project's prawn processing plant, that was scheduled for use after the harvesting of the prawns, was never used at all, chairperson. Equipment was written off in the company books for income tax purposes."
Van Tonder said Bosasa then changed SeaArk Africa's business model to become a procurement service for food items for Bosasa at the Department of Correctional Services, where Bosasa had catering contracts. The company was renamed Bosasa Procurement Pty Ltd and sold procured food items at a 20 percent mark up to Bosasa operations.
A Sars investigation into SeaArk Africa commenced, especially on the equipment write-off, said Van Tonder.
"Sars investigated the using of assessed losses within Bosasa procurement as well as the equipment write-off in the books. We had to show that the SeaArk Africa project continued... we did that by starting a prawn farm in Krugersdorp, Gauteng. An entity called Bio-Organics was created for this purpose, which was also wholly owned and funded by Bosasa. Artificial seawater was manufactured specifically for this project to farm prawns."
An excited Watson invited former president Jacob Zuma to view the project, said Van Tonder.
"It was the first time I was introduced to Mr Zuma...we had to show that the project continued."
Evidence leader, Advocate Paul Pretorius, asked: "Was this a genuine, commercially viable business? Are some of the prawns we eat from Krugersdorp"
"It was a successful operation...we bred beautiful prawns," Van Tonder replied.
He said misrepresentations were made to Sars investigators regarding the Krugersdorp project.
"We managed to convince Sars that the assessed loss was indeed legitimate. They only disallowed a small portion of the plant write-off...this was not a lawful result, chairperson."
After the Sars investigation was concluded, Watson instructed Van Tonder to close down the project and retrench all staff. Van Tonder said he told Watson that shutting down the Bio-Organics would contradict what was told to Sars about the continuing project and that it would be illegal to do so. However, the prawn farm was closed down and equipment sold.
The prawn farm, said Van Tonder, was a "smokescreen" used for other purposes by Bosasa.