EML Energy; Eldridge Mothlake vs. Sunday Times


Tue, Jul 3, 2018

Ruling by the Press Ombud

27 June 2018

PARTICULARS

 

Lodged by

 

 

Maphoso Mokoena Attorneys

 

 

Date of article

 

 

27 May 2018

 

Headline

 

 

State airline’s R2,4bn fuel con – Music promoter got SA Express ‘dodgy deal’ worth R67m a month

 

 

Page

 

 

Front; and inside

 

Online

 

 

Yes

 

Author of article

 

 

Mzilikazi wa Afrika

 

Respondent

 

 

Susan Smuts, internal ombud

Complaint                                            

The complaint is that the article:

·         was demeaning of EML Energy (EML) and its founder, Mr Eldridge Mothlake, as it portrayed the company as a fly-by-night business owned by a questionable individual; and

·         falsely and misleadingly stated that EML had a R2.4-billion fuel supply contract with SA Express and an inflated R67-million per month contract; and that SAX has paid it an amount of R2.4-billion.

The complainants add that the journalist did not verify his information with them, and conclude that the reportage has caused them reputational damage.

The text

The article said that “a little-known music promoter” (Mothlake) had been awarded a R2.4-billion, three-year deal to supply SA Express (SAX) with fuel (calculated at R67-million per month), despite the troubled airline already having had a contract to receive jet fuel from SAA.

The newspaper revealed that two SAX executives, Sam Vilakazi and Merriam Mochoele, allegedly engineered the deal with EML, without any tender process and the knowledge of the airline’s board and management.

“SA Express did not receive one drop of fuel for the R2.4-billion deal,” wa Afrika wrote.

Mothlake reportedly said that he could not comment, while neiher Vilakazi nor Mochoele could be reached for comment.

The story said that the newspaper had seen the contract, which had become the subject of an investigation.

“Little is known about Motlhake, who has a habit of posting pictures of himself with South Africa’s rich and powerful on Facebook,” wa Afrika wrote. He added that little was known about EML as well, and that no public records existed of Mothlake having previously handled contracts of this magnitude.

The arguments

The complainant

In addition to the complaint, Maphoso inter alia says:

·         Motlhake is a qualified electrical engineer, with more than seven years of experience in the aviation industry, and is the founder of EML, which had been registered in 2006 and started operating in 2010;

·         The company is a member of the Joint Inspection Group and is an ACSA approved “through-putter” with an aerospace liability insurance of $1-billion, with fuel guarantees of R67-million at refineries;

·         The company’s first aviation fuel supply contract was with the City of Tshwane through its Wonderboom Airport, for three years; EML has supplied Jet A1 and Avgas with fuel, and has successfully performed in accordance with the requirements until the contract has expired; and

·         The company has various contracts, nationally and internationally, and has been proudly operating from Gauteng Depot Denel Aviation Campus in Kempton Park since 2015.

The company confirms that Mothlake indeed co-owned the operational premises as reported in the article, and states that his music promotions activities were “nothing but a mere passion”.

Maphoso says the newspaper has relied on misinformed sources in this regard, and states that the company’s information is readily available on www.EMLnergy.com.

Sunday Times

Demeaning

Smuts says that, while Mothlake’s business interests are varied and include interests in the fuel sector, it is also true that he has worked as a music promoter and that he was the CEO of an events company.

She points out that the story did not say that Mothlake was “nothing more than a music promoter”, but merely that he was a “little-known music promoter” (which was true). It is evident from the story that he has other business interests besides music, she adds.

The internal ombud submits that Motlhake elected not to respond to a question in this regard.

She concludes, “In the circumstances, we stand by our description of him. We accept Motlhake have the experience he says he has in the energy industry, but it does not contradict any aspect of the story we published.”

EML-SAX contract for the supply of jet fuel

Smuts says the first item in the annexure listing the terms of the contract states that EML was to guarantee the monthly availability of JET A1 product to the value of R67-million at all locations required by SAX. She argues, “Based on this figure, the contract was worth R2.4-billion over three years.”

She also submits that the newspaper has seen correspondence from SAX’s Victor Xaba to Merriam Mamabolo requesting her to sign the EML contract on his behalf, and therefore disputes the assertion that EML does not have such a contract.

The internal ombud adds:

·         The story did not traverse whether or not EML had been paid;

·         Despite having had an opportunity to comment on the contract and its fulfilment, Motlhake elected to respond only that he could not comment due to contractual obligations;

·         SAX stated that the contract was irregular – its board did not approve the deal, in contravention of procedures, and the contract did not go to the board adjudication committee; and

·         EML had confirmed in a meeting with SAX that the contract had been issued without following the airline’s procurement processes.

From the above, the internal ombud concludes that the newspaper was justified to describe the contract as dodgy, and declines to retract the story or to apologise for it.

The complainant again 

Maphoso replies that the article has misrepresented the value of the contract. He submits that:

·         point 1 on page 18 of the contract is about of the scope of EML’s capacity at a refinery – this value would reset every month as all the invoices of the previous month would have been paid within 30 days as per point 2 of the same page – which does not represent the value of the contract;

  • the cost of the contract is based on point 10 on page 18, which varies each month on a need-to-have basis – this would work in conjunction with the pricing schedule on the last page that also varies every month as per point 9 on page 18. (He says SAX would send EML their requirements whereas there will be a purchase order to perform the required service);
  • EML has supplied just over 10,000 liters of Jet A1, as opposed to the comment that there has not been a single drop of fuel delivered to SAX; and
  • the value of the contract to date has come to about just under R200 000, as it is based on an as-and-when-services-required deal; and
  • EML has not received R2,4-billion.

Clarification prior to analysis

I have asked both parties for clarification on various issues. Here are the questions, with their corresponding responses.

Not one drop received

The article said, “SA Express did not receive one drop of fuel for the R2.4-billion deal.”

I wanted to know from Sunday Times where this information came from (in other words, how it justified this statement, which the article presented as fact).

Smuts replied that SAX’s spokesperson Refilwe Masemola has telephonically responded to questions by the newspaper, saying that the company had not received any fuel from SAX.

She added that, according to a response from SAA spokesperson Tlali Tlali, SAA managed the fuel requirements for SAX for a number of destinations.  She says he told the reporter that SAX had notified SAA in August 2017 that it had been planning to contract EML – but that this had not been implemented as contracts with oil majors had still been in place.

My question to EML was as follows: “Can you provide me with any evidence that it has delivered on the deal – even if not fully, then partly? Also: Mr Maphoso says EML Energy has supplied just over 10,000 liters of Jet A1 – that sounds terribly little to me. Any comment on that?”

The response was, “[Please receive] Delivery Notes, Purchase Orders and Statement from SAX for all the required services to date. The volumes and service are low due to the nature of their requests and as per the contract that we have.”

 ‘Dodgy’, ‘irregular’

The headline said, “Music promoter got SA Express ‘dodgy deal’ worth R67m a month”.

Based on Smuts’ statement that SAX, in its response to the reporter, stated that the contract was irregular, I asked her if she could provide me with the relevant documentation to this effect.

She replied that the response from SAX to the newspaper’s questions was replete with references to the questionable nature of the contract. She says the responses included that:

·         EML had confirmed that the contract was issued without following the airline’s procurement processes, and that they engaged directly with some executives;

·         SAX’s board had not approved the deal, nor had procurement for the supply contracts gone through its bid adjudication committee;

·         a full internal investigation had been undertaken;

·         SAX had said it viewed the fuel agreement as “operationally senseless and financially irresponsible” while the SAA agreement was still in place; and

·         the two SAX executives who signed the deal had been suspended as a result of the deal.

Smuts added that Public Enterprises Minister Pravin Gordhan used the word “dodgy” when he introduced the new chairperson of the SAX board, when referring to a R67-million-a-month fuel supply deal that had recently been stopped, she explained.

Deal ‘inflated’

The sentence read: “SA Express confirmed that its current fuel supply deal with SAA came at an average cost of R45-million a month, meaning, the dodgy EML Energy deal was inflated by roughly R22-million a month…

I wrote the following to both parties: “This statement seems to assume that EML was the only supplier in this regard (as the deal could not have been inflated if the difference between R45-million and R22-million was made up of contracts with other suppliers). Or am I missing something, somewhere? I need to understand the reasoning behind this statement, and I need a comment from both parties on this issue, please.”

Smuts replied that SAX already had an agreement with SAA in terms of which the latter procured and managed fuel for the former. She says this agreement had been in place for ten years, and covered Johannesburg, Cape Town, Durban, George, Port Elizabeth, East London, Bloemfontein, Richards Bay, Kimberley, Gaborone, Harare, Victoria Falls, Lusaka, Lubumbashi and Walvis Bay.

She submitted, “Despite the existence of this agreement, SA Express entered the agreement with EML [which included] the following destinations: Bloemfontein, Cape Town, Durban, East London, George, Kimberley, Port Elizabeth, Richards Bay, Pilanesberg, Denel Aviation. Even if the EML contract wholly displaced the SAA contract, it [still] would have been inflated by the amount referred to.”

Referring to the contract, Maphosa essentially repeated what he had already stated in the complaint (regarding the “misrepresentation” of the value of the contract, with special reference to page 18 of the contract).

In short, he argued that there was a difference between the scope (read: the availability) of the fuel, and its actual value.

Analysis

Demeaning; fly-by-night

The story inter alia said:

·         “A little-known music promoter was awarded a R2.4-billion, three-year deal to supply SA Express with fuel…”; and

·         “Little is known about EML and no public records exist of Mothlake previously handling contracts of this magnitude.”

The complaint is that the article was demeaning of EML and its founder, Mothlake, as it portrayed the company as a fly-by-night business owned by a questionable individual who had been no more than a little-known music promoter – and yet, in spite of that has acquired a lucrative contract.

In this regard, Maphosa argues that all EML’s information was available on its website. However, this website only contains information about what the company is in business for, and who its officials are – there is no reference to its track record in the relevant field.

If there was such a track record, readily available to the public and therefore also to wa Afrika, I probably would have asked what Mothlake’s interest in music had to do with the contract. But that was not the case. EML’s website should be the place to showcase its business, and yet it was conspicuous by its absence.

I also note that the article did not stated that EML had received that amount of R2.4-billion, as argued by Smuts.

Given these arguments, I am not going to blame Sunday Times for its reporting on these issues.

Not one drop received

The question is if Sunday Times was justified in reporting that SAX “did not receive one drop of fuel for the R2.4-billion deal”.

I cannot ignore Smuts’ response, namely that Masemola had telephonically said that the company had not received any fuel from EML.

The internal ombud’s other response in this regard is as important, namely that Tlali Tlali told wa Afrika that SAX had notified SAA in August 2017 that it had been planning to contract EML – but that this had not been implemented as contracts with oil majors had still been in place.

It is also noticeable that Tlali Tlali, in an email dated 26 May 2018, said that SAA purchased and managed jet fuel for SAX in several places (he mentioned 15 locations in total), and added that he was not aware that the latter had ever complained that it was not getting enough fuel from the deal with SAA. He stated, “The contracts entered into with suppliers, are for the full requirements of SA Express and we manage fuel for them.” (My emphasis.)

EML, on the other hand, has provided me with purchase orders, delivery notes and a statement from SAX for required services to prove its point.

However, the purchase orders were not of much help, as four of those (dated September 15 and 21, October 12 and November 16, all in 2017) all had a zero price unit and a zero total price. The only purchase order with an amount attached to it was dated 20 April 2018, to the total amount of R72 767.49.

The details of the delivery notes that Maphoso sent me are as follows:

Date delivered

Litres

3 August 2017

1 500

15 August 2017

1 402

15 September 2017

5 001

22 September 2017

2 502

12 October 2017

3 700

1 November 2017

2 400

8 November 2017

2 458

11 November 2017

1 290

24 January 2018

2 145

25 January 2018

4 165

2 February 2018

2 145

6 February 2018

1 340

According to these documents, the total amount of litres delivered are 30 048.

The third document Maphoso provided me with is a tax invoice statement, from EML addressed to SAX. The total amounts concerned (comprising ten tax invoices) ranged from 6 July 2017 to 18 May 2018 – totalling approximately R100 000.

This results in quite an interesting situation, as on the one hand both Masemola and Tlali Tlali denied that EML has delivered any fuel to SAX – and yet there are some documents that apparently prove that delivery has taken place.

The question if delivery has taken place despite a “dodgy” contract (see below), is not for me to unravel.

From a journalistic perspective, though, wa Afrika was justified in making the statement in question, purely based on information provided to him by official sources (Masemola and Tlali Tlali).

However: Because the information supplied by Maphosa seems to contradict that of Masemola and Tlali Tlali, Section 1.9 of the Press Code may become relevant. It states, “Where a news item is published on the basis of limited information … the reports should be supplemented once new information becomes available.”

The onus is on Sunday Times to pursue this matter further within a reasonable space of time – and to report on it, if it is found that EML has indeed delivered some fuel to SAX (whether that was done according to a “dodgy” contract or not).

 ‘Dodgy’, ‘irregular’

The headline said, “Music promoter got SA Express ‘dodgy deal’ worth R67m a month.” The story also stated that Gordhan had “hinted at another dodgy R67-million deal, believed to be the EML deal”, and elsewhere it called the deal “dodgy”.

SAX itself has stated that the deal was irregular and has undertaken a full investigation into it. In that case, surely Sunday Times was justified to echo that impression.

In this instance, the newspaper was merely the messenger.

Deal ‘inflated’

The sentence read: “SA Express confirmed that its current fuel supply deal with SAA came at an average cost of R45-million a month, meaning the dodgy EML Energy deal was inflated by roughly R22-million a month…

The reasoning behind the newspaper’s mathematics was that the contract was awarded for R67-million a month (as stated in the introductory sentence to the story), while the SAX has confirmed that the average value of the deal was (only) worth approximately R45-million a month – hence the suggested “inflated” amount of R22-million.

The question is if this reasoning was correct and justified.

The issue is about the use of the word “cost”.

This brings me to Annexure “A” of the contract (on page 18). Under the headline “scope of work”, the first bullet said: “Guarantee the Monthly Availability of JET A1 Product to the Value of R67,000,000 at all locations required by SAX.” (My emphasis.)

This required EML to have a certain amount of fuel per month available – it did not say that that was what the company had to deliver to SAX (read: what the contract would cost per month).

This means that the introductory sentence was justified, which merely said that EML had been awarded a R2.4-billion, three-year contract to supply SAX with fuel. That amount reflected the maximum worth of the contract, which might, or might not, realise (depending on the market).

However, applying the same argument (read: taking the difference between availability of fuel and actual deliveries into account), this also means that while the deal had “cost” SAA R45-million a month (I have no reason to doubt this figure), the actual “cost”, according to the contract, was not R67-million per month (as that amount reflected the availability, not deliveries). In fact, based on the information EML has provided me with, the actual cost of the deal has been far from realised.

Having taken the above into account, the simple fact remains that SAX’s fuel deal with SAA cost the airling R45-million a month, and that the mere availability of fuel to the value of R67-million could reasonably be understood as “inflated” – even given the difference between availability and actual cost.

No right of reply

The story said: “Mothlake yesterday claimed that he was in church and could not answer questions. Neither Vilakazi nor Mochoele could be reached for comment.”

The complainants say that the journalist did not verify his information with them.

Smuts replies that, despite having an opportunity to respond to a question about entering into the deal with some executives and not with the bid evaluation committee or board, Motlhake elected not to respond.

I have asked the internal ombud for specifics about the communication between wa Afrika and Motlhake.

On the day prior to publication, wa Afrika sent Mothlake a Whatsapp message, saying that he was doing a story about what Gordhan said was a “dodgy deal” between EML and SAX.

He asked him:

·         How did EML end up signing a three-year fuel deal with SAX worth R2.4-billion as there was no tender for such?

·         SAX said the deal was unsolicited – so who approached him about the deal?

·         Since EML had not supplied fuel to any airline before, how did he reach the R67-million per month agreement, and what was this agreement based on?

·         Did he know that SAA was supplying SAX with fuel for the same routes that EML was supposed to be supplying it with?

·         As a businessman, did he not see anything untoward by entering into a deal of this magnitude with some of the airline’s executives, and not with the Bid Evaluation Committee, or the board?

·         He has been a music promoter for years, so when did he register EML and who are some of his clients?

·         How much has he been paid from this deal to date?

He provided him with his cell number, office number, email address and Twitter handle.

One of Mothlake’s responses read, “I will call you as soon as I am out of the church service.”

After several Whatsapp messages between the two of them, Mothlake eventually wrote: “Note that I can’t comment due to contractual obligations but I can confirm that the report are not truthful nor factual!”

From this information, I am satisfied that wa Afrika did give Mothlake an opportunity to respond. Had he replied that he did not have enough time to respond, it would have been a different matter. However, he refused to comment. It is a bit rich to complain about this issue, after he had had the chance to proffer his views, and had declined to do so.

Reputational damage

Given all of the above, if follows that I have no reason to believe that the reportage has caused Mothlake any unnecessary reputational damage.

Finding

The complaint is dismissed.

Appeal

The Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Appeals Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at Khanyim@ombudsman.org.za.

Johan Retief

Press Ombud