Firm linked to Zuma’s brother loses BEE certificate

Johannesburg - A company previously accused of using President Jacob Zuma’s younger brother as a front has had its BEE certificate withdrawn for allegedly misrepresenting itself in an application.

And Muthelo-BEE, the company that issued the certificate to Midway Two Contractors, has had its accreditation suspended.

Last year Midway Two Contractors became embroiled in a saga in which Michael Zuma and his two business partners allegedly paid R55 million for shares in the company, but never had any decision-making powers.

Now the labour-broking firm, which has made millions from contracts with the police, the City of Cape Town and Transnet, is accused of understating its profits and size to get a better rating on its broad-based black economic empowerment certificate.

Last week, the certificate came under the scrutiny of the Department of Trade and Industry, which oversees BEE certificates, and the SA National Accreditation System (Sanas), which regulates agencies that issue certificates.

Department spokesman Sidwell Medupe confirmed that the department, through Sanas, suspended Muthelo-BEE’s accreditation for three months.

“The suspension is effected as a result of a complaint received by Sanas claiming that incorrect certificates have been issued by Muthelo-BEE to a measured entity,” said Medupe.

Mpho Mutavhatsindi, the verification manager at Muthelo-BEE, said Midway Two Contractors’ certificate was withdrawn last week after the department and Sanas queried it.

The certificate of Democratic Industrial Services, another company in the Midway Two Holdings group, was also withdrawn.

Mutavhatsindi confirmed that the application was misrepresented.

He would not give further details due to “client confidentiality”.

An advertisement announcing the withdrawal was placed in Sowetan on Friday.

Mutavhatsindi said when certificates were issued, the agency relied on information supplied and the declarations made by company officials.

But Danny Naicker, Midway’s chief executive, denied knowledge of the withdrawal or the investigation by the department or Sanas. The company had not received any formal letter, Naicker said. “Why would someone issue a certificate and then withdraw it?

“We gave them the information they requested so what was is represented?”

He said his lawyer would enquire further.

There are three certificates that qualifying broad-based black economic empowerment companies can receive:

* An exempted micro enterprise certificate is for a company with a turnover of less than R5m.

* A qualifying small enterprise certificate is for a company with turnover exceeding R5m, but less than R50m.

* Certificates for large companies with a turnover of R50m or more.

On November 1, Muthelo-BEE awarded Midway Two Contractors the certificate for an exempted micro enterprise.

On Friday, Midway Two Contractors’ financial manager, Collen Mafela, told The Sunday independent that the latest unaudited financial figures for this year showed a turnover of R37m.

Asked why the company had received an entry-level certificate instead of one for a larger enterprise, Mafela would not comment, referring questions to Muthelo-BEE.

“They give me the BEE certificate. I only receive the final product,” he said.

Asked who submitted the information for the certificate, Mafela said there were “quite a number of people”.

A source familiar with the company’s financials, who did not wish to be named for fear of reprisals, said the company had tried to drop its turnover significantly.

The source alleged that the company would otherwise not have received a certificate with a good grading.

Past company financial statements show that Midway Two reported R42.16m in profits at the end of February 2011.

About R11.6m was paid to shareholders in dividends between 2007 and the 2010/2011 financial year.

Midway Two Contractors has been the mainstay of the Midway Two group of companies, which includes Democratic Industrial Services, Midway Two Engineering, Executive Outsourcing and Bambanani Electrical and Cabling.

Last year The Sunday Independent reported that Michael Zuma and his business partners, ANC MP Richard Mdakane and businessman Prince Brayce Mthimkhulu, paid R55m for a 55 percent stake in the group of companies, but had no decision-making powers.

The company was also allegedly duped into buying a certificate for R250 000 from a woman who never produced it.

Midway lawyer Yugen Naidu said the company had recovered R40 000, through a civil suit, and had dropped the criminal charges against the woman.

Midway Two Contractors’ parent company, Midway Two Holdings, is at the centre of a Special Investigating Unit probe into contracts it had with the police between 2005 and 2010, alleged to be valued at R1 billion.

Sunday Independent