Former NHLS CEO ordered to pay R22 million after approving irregular contracts

The former CEO of the National Health Laboratory Service (NHLS), Joyce Mogale, has been ordered by the Labour Court to pay R22 million to the NHLS for damages because of her conduct.

This comes after the court dismissed an unfair dismissal claim against Mogale and her co-applicant, the estate of the later former chief financial office (CFO) Sikhumbuzo Zulu.

Mogale and Zulu were suspended and dismissed in May 2019 following a disciplinary hearing after the NHLS board became aware of irregularities in February 2017.

Former NHLS CEO and CFO dismissed because of irregular commercial contracts

Their dismissal stemmed from three separate irregular commercial contracts at the NHLS.

In the Afrirent vehicle leasing irregularity, Mogale allegedly approved a contract for R72 million without the board, way above the limit of her authority, and then upped the contract even further to R79 million without any due process.

She signed a service-level agreement with an unwarranted penalty clause, which ballooned the cost even further. The Afrirent irregularities led to a judgement that Mogale has to pay back R22 million to the NHLS.

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In the Blue Future contract IT equipment irregularity, the NHLS Board authorised procurement worth R25 million.

Mogale allegedly then, without competitive tender, summarily procured for R83 million (not the approved R25 million) and mostly for goods that had nothing to do with the tender.

In the DV8 wide area network irregularity, the former CEO signed a R63,5 million addendum to the contract without tendering and with no specifications of the goods to be purchased, leaving a wide open for malfeasance.

Debt outstripped NHLS’ paltry cash balance – board chair

Speaking at the time Mogale and Zulu were suspended, the chairperson of the board, Professor Eric Buch, said: “At the time of their suspension, the NHLS debt to its suppliers was in excess of R800 million, which outstripped its paltry cash balance.”

Judge Connie of the Labour Court adjudged the pair’s dismissal, and in her judgment on 13 September, said the pair “breached the lawful, reasonable, and fair instructions of their employer, and they failed to exercise due diligence and care.”

Prinsloo found that her conduct was in violation of the Public Finance Management Act, the NHLS Supply Chain Management Policy, and her contract of employment.

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The NHLS welcomed the judgment and said it was a victory for governance and the losses the NHLS suffered as a result of the conduct of its most senior employees.

“This judgement is salient as it provides further evidence of the probity and diligence of the board and its efforts to hold those responsible to account, however long it takes,” Buch said in a statement on Tuesday.

He added that since the pair’s dismissal, the NHLS now has substantial reserves and its staff have received reasonable annual increases, while annual tariff increases have remained below 5%.

Blue Future case still in court

Meanwhile, Mogale and former head of supply chain management Graham Motsepe; manager contracts and tender compliance Mthunzi Mthimkulu; legal manager Sibusiso Mthenjane; and the owner of Blue Future, Pierre Petersen, are all on trial in the Palm Ridge Magistrates Court, consequent on charges laid by the NHLS Board in 2017.

Pretorius was found guilty of fraud in his tender submission to the NHLS and is awaiting sentence.

Buch said he is still optimistic that those responsible will also be charged on the Afrirent and DV8 matters.

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