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Former Transnet executive to pay back secret profits of R26.4m

Group executive for capital projects Herbert Msagala was part of ‘an unlawful conspiracy’, acquiring various properties and 36 cars.
A deposit made in R200 notes – 10 000 of them – made Msagala’s claim that he earned the R2m from his businesses ‘improbable’. Image: Moneyweb

*A previous version of the article stated that Robert Velosa was personally liable, together with the other respondents, to repay Transnet for the losses suffered. In fact, he was cited as a respondent in his capacity as a trustee of the Msagala Investment Trust, the Msagala Family Trust, and the Msagala Residence Trust. He was therefore not personally liable. Moneyweb regrets the error.

On Tuesday (August 31) Judge Lebogang Modiba of the Special Tribunal handed down judgment against the former Transnet group executive for capital projects, Herbert Msagala, finding that while he was in the employ of Transnet he had derived unlawful secret profits of R26.4 million from IGS Consulting Engineering Services and its sole member, Sipho Sithole.

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The Special Tribunal was established in terms of the Special Investigating Unit and Tribunals Act in 2019 to recover public funds syphoned from the fiscus through corruption, fraud and illicit money flows. 

The Msagala matter was placed before the Special Tribunal in July 2020 after the Special Investigations Unit (SIU) investigated a series of contracts that had been awarded to IGS under Transnet’s New Multi Product Pipeline (NMPP).

The project involved the construction of a 715km multi-product pipeline for the high pressure transportation of liquid petroleum products from Durban to Heidelberg  in Gauteng. Sithole was the only member of IGS.

‘Flamboyant lifestyle’

The NMPP was first investigated by Nexus, at the behest of Transnet, and the Nexus report dated October 13, 2017, found that Msagala was “living a flamboyant lifestyle and owned several properties”.

Read: Transnet investigating suppliers for kickback payments – CEO (Oct 2017)

Nexus lacked the statutory powers to subpoena bank records.

The SIU conducted a lifestyle audit on Mgasala and found that he was living excessively beyond his remuneration at Transnet.

The SIU completed its investigation in May 2020. It found that between January 2015 and December 2016, Msagala, directly and through his Msagala Investment Trusts, received various cash payments amounting to R18.4 million from IGS and Sithole. This was amended to R26.4 million in the trial (see below), on the basis of further evidence gathered by the SIU.

Msagala was dismissed by Transnet following a disciplinary process in May 2020.

In November 2020 the SIU was granted an order to freeze Msagala’s assets and interdict Transnet from paying out his pension benefits, pending the institution of civil recovery proceedings against Msagala.

Msagala, who had established the Msagala Investment Trust, the Msagala Family Trust, and the Msagala Residence Trust, maintained that he had accumulated profits from his several business activities. However he never produced evidence to justify this claim.

Five-day trial

The SIU and Transnet (the plaintiffs) instituted this action in August 2020, seeking to hold the relevant defendants – Herbert Msagala, Loretta Msagala, Bonolo Msagala, IGS and Sithole – personally liable for the loss Transnet suffered as a result of Msagala’s alleged nefarious relationship with IGS and Sithole.

A five-day trial was conducted in May 2021. Msagala’s application to postpone the trial was not granted, and he elected not to participate. His wife Loretta and daughter Bonolo also did not participate. The trial proceeded in their absence.

The plaintiffs alleged that IGS was paid in excess of R160 million for the services rendered under the project, and during that time IGS and Sithole made substantial payments to Msagala or to his trust. 

Damning evidence

The SIU had carried out extensive investigations which resulted in damning evidence:

  • The SIU forensic investigators had traced the cash deposits made into the Msagala Investment Trust to the cash cheques that had been drawn against the IGS bank account. In most instances the reverse of the cheque had been signed by Msagala and contained his details including his cellphone number. There were instances where Msagala’s VIP protectors had cashed the cheques on his behalf, also reflecting Msagala’s details on the reverse side, and had deposited these amounts into the Msagala Investment Trust. The SIU thus established beyond any reasonable doubt that the deposits made into the Msagala Investment Trust account came from the IGS cash cheques.
  • Msagala had transferred moneys from the trust account to purchase various properties, all itemised by the SIU.
  • Evidence was led from crucial witnesses, including Msagala’s VIP protectors, the SIU forensic investigators, employees at Steyn City Real Estate which had sold properties to Msagala, as well as the conveyancing attorney.
  • The SIU chief forensic investigator, Vervandhan Govender, was able to establish that “between November 2015 and September 2016, on each occasion, shortly after IGS cash cheques were presented for payment at Standard Bank Sandton City, cash was deposited into the Msagala Investment Trust Account”. In other words, “whenever Transnet made payments to IGS, IGS made payments to Msagala”.
  • The evidence presented by the SIU demonstrated that it was improbable that Msagala had earned this money from his other businesses. Msagala had not presented books of account for his businesses.
  • The fact that on April 22, 2016, R2 million was deposited in the Msagala Investment Trust Account in 10 000 R200 notes, “renders his version that he earned the funds from his businesses, improbable”.
  • More than 20 of the IGS cheques were cashed at the Standard Bank Sandton City branch, even though IGS’s mother branch is in Polokwane. The Msagala Investment Trust Account mother branch is the Standard Bank Sandton City branch.
  • When Msagala made ATM transfers or IGS channelled money to Msagala for his personal benefit, the payment was broken down into smaller transfers “to avoid scrutiny for purposes of banking and Financial Intelligence Centre controls”.

Assets purchased during the period under review

Msagala acquired 36 cars which were registered to the Msagala Family Trust.

Msagala purchased the following properties amounting to R15.2 million:

  • Bedworth Park, acquired on September 16 2015 for R1.46 million
  • Dainfern, Steyn City, acquired on September 8 2015 for R7 million
  • A Rondheuwel property, acquired on March 23 2016 for R4.56 million
  • A Harrismith property purchased on November 16 2015 for R840 000, and
  • A Phuthaditjaba property acquired on October 8 2015 for R200 000.

Two of the properties were registered in Bonolo’s name, and the court found that it is “highly probable that Msagala paid for this transaction”, and that it is probable that she was not aware of Msagala’s “nefarious activities” and the source of his funds. No order was made against Bonolo.

All the properties were forfeited to the state.

Findings

Very briefly, the tribunal found as follows:

  • Msagala did in fact receive secret profits amounting to R26 423 028.77 from IGS and Sithole, and had made no disclosures to Transnet.
  • “IGS, Sithole and Msagala acted in concert, in an unlawful conspiracy, to benefit Msagala, his family Trusts and his relatives, to the prejudice of Transnet.”
  • IGS and Sithole are jointly and severally liable, with Herbert Msagala, to Transnet, for the amount representing secret profits received by Msagala from IGS and Sithole.
  • The monies recovered in terms of the forfeiture order as well as Msagala’s pension fund preserved in terms of an order granted by Judge Billy Mothle are to be offset against Msagala’s liability to Transnet.
  • A punitive cost order was awarded against the defendants, with the exception of Loretta and Bonolo.
  • The plaintiffs’ costs shall be paid by the relevant defendants “jointly and severally, the one paying, the other to be absolved, on the attorney and client scale”.

Msagala’s “egregious dishonesty” and his, IGS’s and Sithole’s “dishonest and unlawful conduct” warranted the punitive cost order against the relevant defendants.

Read: Transnet still suffers from state capture’s harmful impact

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COMMENTS   29

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There must be many others still in Transnet that helped facilitate such blatant theft.

Wow – great article! So that’s all it takes … a functioning investigative unit and a no s*** judge!

A rap over the knuckles for stealing 26m – that’s a bit harsh. The usual is a year off on full pay before re-instatement.

I recall reading the other day of some poor guy who got 48 years for stealing about 100K.

But that wasn’t for state capture. If it was it might have gone to the concourt where the new precedent is to ask the accused what sort of sentence they’d like.

And then you could say, I’ll take 6 months in hospital.

Where are the orange overalls for this blatant fraudulent conduct?

Pay back ALL the money, and at least 15 years in safe custody in orange overall.
The AFU must impound all his cars and properties.

Where was mighty blind SARS????

I was audited 4/5 tax years and I am an honest tax payer.

TheSpeculater I know exactly how you feel. I have been audited 5/5 times to the point i sit and wait then when the request comes in I submit all the documents the same day. After that I wait MONTHS until I hear from them.
I too am totally honest. how many of the fraudsters even submit tax returns let alone get audited

All the properties were forfeited to the state…like the article said.

No doubt Standard Bank has a perfect explanation ?

“The fact that on April 22, 2016, R2 million was deposited in the Msagala Investment Trust Account in 10 000 R200 notes”

The bank and all the lawyers who handled the property transactions must be investigated.

Looks like Steyn City has become a place of safety where all the crooks hang out.

SARS need to take a little drive there and have a look around.

Problem is they don’t go after crooks they constantly attack the normal tax paying citizen. That takes the eye off the “deployed” cadres handlers.

Why has this guy not been arrested and locked up and the key thrown away?

i would really like to see that the same thing happens to the dubai gupta clan and everybody else who was involved in their activities of the past, after all when are they being called to account for the sa spree?

once “trusts” or “family trusts” pops up, start asking questions

would be interesting to see how much of the actual “hot money” is left – will give an indication of the type of lifestyle that was maintained / entertained by the money

After 27 years we need to now accept there are two kinds of theft in this country.

There is the theft that is allowed and the theft that is not allowed.

It is really that simple, if you think you qualify for the permitted theft, be my guest but don’t cry when the overall comes out or you don’t get a years suspension on full pay and a promotion.

“The trial proceeded in their absence”. This is a crucial precedent indeed! I hope J.Z.takes note

I will bet that there is a Lambo amongst those cars

And then ABSOLUTELY NOTHING HAPPENED. No money was paid back and the perp continued to live a life of luxury aka “flamboyant lifestyle”. That’s the S.A. criminal justice system!!
It’s just all bravado and talk, endless talk about “the full might of the law”, “leaving no stone unturned”, etc. Then nothing happens and there is no follow up.

Good point; did cryin’ Brian ever pay the money back?

No. He declined to pay back any of the R 35 million he got from the Pension Fund. He was there for what 2 years – R 35 million ? No follow up either ? ?

What happened to Eskom is now happening to the Eskom Pension Fund.

A thief never changes its spots.

Where is the grand champion of fleecing the middle class, Kieswetter?

Why are they not running after this huge amount but rather audit and ripoff the middle class?

Bedwetter does not pursue cadres !!

Is there a criminal prosecution to follow ?

I trust SARS are on top of IGS/Sithole, their books must be interesting.

Someone please explain why these looters from state coffers don’t get arrested? Is it because no crime was committed and the gains made by legal means?

To me this amounts to two rules which the Hawks/SAPS are implementing; one for us and the other for connected people.

“Dis darem net te lekker…”

What on earth do you want to do with 36 cars?

Let’s see if any convictions follow.

Right now, state capture and looting is “heads I win; tails I don’t loose”

They won’t pay anything back. Not one cent. And there is nothing any of us can do about it. Deal with it.

oh, and pay your tv licence.

So why is he not arrested?

Quite funny how the most corrupt spend their money on cars… Clearly not the sharpest tools in the shed…

End of comments.

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