‘I honestly thought that doing the right thing is the ultimate’
Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants.
Mercy Phetla is chief financial officer and acting municipal manager at Mamusa Local Municipality in the North West province. She’s been in the press quite a bit recently about some rather chilling goings-on at Mamusa. Last week it was reported in Moneyweb that she received death threats after she uncovered corruption and irregular payments. That happened within weeks of taking up the CFO post in April 2021. One might have thought that uncovering fraud and corruption would be applauded at the Mamusa Municipality but apparently not. There was an attempt to remove her from this position in December 2021, on the basis that supposedly she was the one involved in corrupt dealings. It turns out that there’s a bit more to the story than meets the eye. We asked Mercy to join us today on CFO Talks to get her side of the story and also just to understand, as a CFO, what kind of pressures she faces in the South African municipal and public sector.
Mercy, just give us a bit of background to this story, so that people in South Africa and also for our listeners outside South Africa can understand. How did you end up there and when did the death threats start coming?
I was appointed as the CFO in April 2021. How did I end up here, that’s a very good question. I didn’t even know that the town of Schweizer-Reneke existed, when I drove here for the interview it felt like it was at the end of the world. I was job hunting when I saw the advert, so I Googled about Mamusa and saw that there were a lot of things that the Auditor General has raised, a lot of things that gave me chills, but because I had been with Auditor General, I knew my capabilities and I thought I could turn this thing around. What interested me most was when I was told that the President has been here twice, he has such an interest in Mamusa and to see Mamusa get out of the red. So I thought maybe I can make a name for myself there.
When I got here in April 2021, I was denied access to the bank but then I was able to print out the bank statements and I saw that there were some credit cards. I then requested for a guy in Nelspruit who was assisting me, to get whoever was responsible from FNB to get me into the bank as the CFO. Then the private banker for the municipality came from Mahikeng. These officials internally, including the MM, were telling me that they cannot put me on the banking, they don’t know how. So that’s when FNB came and did it themselves and that’s when I did a thorough analysis on what is happening with the bank account. Seeing the credit cards was the first thing that caught my eye and then I called a meeting with my team and asked what is this, but I couldn’t get information.
I decided to write to FNB and ask them because the Municipal Management Finance Act clearly states that we cannot have a credit card or debit card as a municipality. Then they said we don’t know but we can’t answer you on email or over the phone, so can we come to your office and meet you.
Towards the appointment is when I discovered that 90% of the suppliers for Mamusa had debit orders, they were receiving money through debit orders.
That is a bad practice, it’s not actually allowed.
That’s a staggering figure that you’ve just dropped there, 90% of suppliers at Mamusa were on debit orders, whether they were supplying goods or not, they were getting money every month.
That’s what I am saying, that is correct, yes. I spoke to FNB again and told them to reverse these debit orders. They said we can reverse them but only to 40 days and then the rest we shall investigate and then later on credit the account of the municipality. So we took it from there and on May 7 we were able to recover R1.1 million from these fraudulent transactions in one day.
I then spoke to the municipal manager and asked if I would be safe if I investigated this further and the municipal manager said let’s get a private investigator, let’s stop this. Then I submitted a full report to the finance portfolio committee and when I submitted it in May it was the first time that the municipality had a finance portfolio committee sitting in the past three years.
So I submitted and they were happy, I was praised at that point, we went to council, they approved and said get service provider to investigate. But when the investigation started, those praises went out of the window, we started fighting amongst each other for no reason and then I asked if it was because of the investigation, should we stop or what. I didn’t know that the people who were stealing were the ones I was working with. The only ones who were supporting me at the time were the junior staff.
What has happened to those workers who were receiving the stolen money?
Nothing, they are stealing even more, they are still there.
Have you laid any charges against the people making threats and the people who you suspect are the ones stealing?
Yes, I did, I opened cases. There’s also the Centre for Good Governance and Social Justice Forum that also assists me and they have also laid charges from their side.
But I can tell you, North West is lawless.
You joined Mamusa in April 2021, which is about a year now, I understand that they have stopped paying you but you continue to work. They have now stopped you having access to the FNB bank account. So I guess you’re doing whatever work you can without access to those bank statements and accounts. How do you manage to operate like that because you’re almost in a war with the existing municipal management team?
Honestly, at this moment, no one is working, and the municipality has been closed since March 23 by community members and some employees of some dissatisfaction. So nothing is working and to this date, Moonsoft, which is our financial software system, has also suspended the system because of non-payment. So there’s no governance, nothing is happening, it’s chaos.
Is this something that you want to carry on getting involved with, it sounds like it’s a nightmare or have you just determined that you’ve got to stay and fix this?
Honestly, I am seriously exhausted, I’m forced now by some of the employees who say, we have supported you and if you leave, we are going to be victimised. Some of them have been unfairly suspended. So I am just staying to fight that and also for the community. After the Moneyweb article, the community came together, especially the whites, they are now fundraising money for court. Their support has been overwhelming but honestly, my spirit is tired.
Talk about the threats and explain to people where these threats came from and what they are saying exactly.
Before these threats, there were other ones whereby I was followed in January by GP-registration cars everywhere I went. There was a drone that was flown over my house, checking my movements and then a person came to alert me that this is what you were doing at this time. They were showing me pictures of me and there were messages that said we know your every movement.
Then recently, these people have been calling me, they first sent me messages to say watch out, we are sent to kill you.
It turned out these are all prisoners, they told me there was a person who brought my name and all my details [to the prison] and what car I drive and where I stay and my pictures, so that they can threaten me. Then they told me that they were supposed to kill me by last Friday. Then I realised that these people were the same ones who were escapees from Rooigrond Prison and that got me a little bit worried.
That’s why I saw it as a real threat because when I went to the police here to report it, they were laughing, and they said it’s nothing. Then the next thing I see an article about the escape, and they actually escaped before Friday, and they said they were sent to kill me on Friday.
But you remain in Mamusa to sort out this mess.
Yes, I am still here trying to sort out this mess. I am also encouraged by the Centre of Good Governance guys to say let’s try to fight it. I sometimes really get discouraged because when I look at the number of cases, they have opened but then nothing is happening, I do ask myself is it worth it.
As a result of the Moneyweb article, I received positive responses from government and the police. As we were preparing to start this interview, I was also sitting with the Special Investigating Unit to gather more evidence, which I gave them. The community also stood up to say that you cannot keep on wasting money and on the other hand you are not getting paid, let us assist you, we will fundraise. So they have been collecting and fundraising for the court case that is coming up.
The applicants are the Centre of Good Governance and Social Justice and some of the residents. We are asking the court to intervene and to nullify all these suspensions, all these council meetings that were not in accordance the standing rules of order and not in accordance with legislation. Also, to intervene where I was removed unlawfully as a CFO.
The manner in which you were removed, it was by a person who purports to be the municipal manager at Mamusa but I guess he’s not working either, maybe explain that, how did that happen?
No, he’s not working, he’s only managing what is entering into the account and releasing it, that’s it. He’s not working. He knows nothing, he didn’t even qualify to be the director of community services, he knows nothing. He was one of the first people who I actually befriended when I got here, you see how they say friends become enemies.
In the year that you’ve been at Mamusa, can you put a figure on the irregular spending or illegal tenders? How much, for example, was going into these credit cards every month, if you had to add that up?
If I add up everything, including the money that has been lost or short deposited with cashiers, it’s above R40 million.
Before Mamusa, you had a similar experience at another municipality in Mpumalanga, you again uncovered corrupt dealings and you were fired from the municipality. Just explain very briefly what happened there?
Yes, when I got here and I saw similar things in my first week, I thought maybe I should just resign and run away because I know where this thing is going to go. I was appointed CFO at Pixley Ka Seme District Municipality on August 14 2017. At some point in 2019 there was a tender, we advertised it in 2018 and they started working, it was from the Water Services Infrastructure Grant but in the procurement plan we said we were going to do two projects with that.
The one was 35-kilometres of water and then the other one was supposed to be a refurbishment of a water treatment works. We advertised this one of 35 kilometres and not the other one, the acting municipal manager at the time said we must wait. When we were paying, it seemed like they were claiming more than what they should because we were past the R16 million that we should pay.
Then in June when working on year-end, I saw that from that R30 million we overspent with about R1 million and something. So I called the managers and asked what happened. Then we found that they have also been paying for the project that we did not advertise but they fabricated the payment certificates. So I raised this issue and I told the municipal manager who was there that I could see fraud there.
That’s why they threatened me because I am too straightforward and honest.
So he said he would find out from the mayor and come back to me the next day. Then the next day he asked me for all the documents, the payment vouchers, everything. So I said no, I can’t do that, I am the custodian of original documents but I gave him copies. He left and then he said leave it, leave this because it’s going to be dangerous for you. If you don’t care about your life, then think of your kids. Then I realised there’s something wrong here.
If I leave it and the Auditor General comes, because we don’t have a lot of tenders, we don’t have more than 30, mainly they do 30 samples. So they are going to get this and then it will be like it’s me who has done it. Some people brought evidence forward that there was no work done. That’s when I raised and they said let’s get the audit committee to investigate and when the audit committee starting investigating, they were not investigating that, they were more interested in how I was doing my work. They couldn’t find anything wrong, but they went to a council meeting and gave me special leave. I then asked why am I going on special leave when I am preparing financials. They said the mayor had decided I must go on special leave.
So I went on special leave and then they gave me intention to suspend and I thought what is this intention to suspend, what have I done. Then the next thing they come with charges saying that you have participated in a tender, like I had an interest in a tender, just a lot of rubbish there. They said the information is from the Auditor General and then they said there’s a court order that I forged to bring me back to work, but it was not received through me, it was received through somebody else. They just brought up some things to take me out of the system and they ran through the disciplinary process very quickly and then they dismissed me. That is it.
Are there any books that you have read that have inspired you?
The book that I have been reading over and over again is The Subtle Art of Not Giving a F*ck
by Mark Manson.
