Phumelela – Who Is Protecting Who?

Any shareholders concerned enough to act decisively?

Except for global warming, the Phumelela leadership were able to identify a plethora of adverse external factors that contributed to a dismal set of results for the financial year ending 31 July 2019.

Brendon writes in the Sporting Post Mailbag that the fact that the Phumelela leadership did not acknowledge their efforts or lack thereof that contributed to the devastation, reaffirms a leadership team that is in denial of their collective responsibility.

Having ONE cheerleader in the audience to applaud the destruction of R1.2 billion of value when people around the country were shell-shocked by the results and the utterances of the Chair and the CEO, is the patronising cocktail that Phumelela Shareholders ordered and were served.

Who is the Thoroughbred Horseracing Trust that has to date played the waiting game (like every other bystander in the industry, hoping for the self-correction)?

Why would any investor want the current leadership in office for another second when technical insolvency and business rescue is, in no uncertain terms, your destiny?

Is the Thoroughbred Horseracing Trust going to lead the charge in terms of the provisions of section 71(1) of the Companies Act to remove the directors by ordinary resolution with 50,01% majority at the shareholders meeting?

This may be the only way to lead the urgent change required with a recapitalisation of the balance sheet that would see the existing shareholding block of a few individuals being diluted to a point that redresses the power imbalance that continues to threaten the sustainability of the sport.

It is unfortunate that the majority of the Phumelela directors and executives lack what is required of a person holding office in a fiduciary capacity, of a JSE listed entity.

It remains a mystery why these directors and prescribed officers of Phumelela have not stepped down voluntarily and whether they fully understand the provisions of section 77 of the Companies Act that covers liability of directors and prescribed officers. Who is protecting who and at what cost?

Who is responsible for the betting operations reduction in profitability of R201.7 million?

Rob Scott – not to blame

Let me surprise you all by saying that Rob Scott is definitely not responsible for this mess.

I will stand by this statement. Read on!

Could John Stuart be responsible? Maybe.

Ordinarily, any reasonable person would deduce that the Board of Directors are responsible.

But this is no ordinary company and from what I have observed, it may be the only company that is not obliged to operate within the laws, rules and regulations that ordinarily apply to a South African Listed company that operates in a highly regulated environment.


Ordinarily, the Board of Directors are ultimately responsible for the company.

The Board of Directors delegate responsibility to the executive directors to run the day-to-day operations of the company in strict compliance with the delegation of authority (that would set out the general authority and limitations to commit the company on behalf of the Board of Directors).

The following would ordinarily fall outside the general delegation of authority and would require the Board of Directors to convene a (special) meeting in order to discuss, agree and authorise a person (usually a director) to give effect to the resolution in respect of:

1) Appointing a new Chief Executive Officer (“CEO”) following receipt of the resignation letter of the outgoing CEO;

2) Appointing a new Executive, Sports Betting following receipt of the resignation letter of the outgoing Executive Director. It being noted that this position was previously an Executive Director position and only the Board would have the authority to “downgrade” the position to one that is an executive management position;

So how Did the Board of Directors, the Nominations Committee and the Social and Ethics Committee (both sub-committees of the Board of Directors) fulfil their fiduciary duties and comply with the Companies Act, the King Code, the JSE Rules and Regulations, the EE Act, all other legislation to promote equality and prevent unfair discrimination?

In relation to the permanent (not interim or acting) appointment of the Sports Betting Executive to replace the Executive Director, Sports Betting in less than 2 business days of the resignation of the outgoing employee and director.

In this regard, I refer you to the following excerpt of the SENS announcement dated 03 December 2018 under the heading: Resignation of Executive Director, Sports Betting

  • “the board of directors of Phumelela Gaming and Leisure Limited (“the Board”) hereby notifies its shareholders that Mr Vee Moodley has tendered his resignation as Executive Director, Sports Betting effective 30 November 2018″
  • “…, current CEO of Tellytrack, will assume the role of Sports Betting Executive”

If section 3.59 of the JSE Limited Listing Requirements were satisfied in relation to announcing the resignation of Mr. Vee Moodley and the SENS announcement was issued by no later than the end of business day following receipt of their resignation notice, then the following questions are in desperate need of answers:

1) Who did the Board of Directors charge with the responsibility and issues a mandate to, brief and guidelines to commence and conclude an executive search for a replacement Chief Executive Officer and Executive Director: Sports Betting positions?

2) When did the Board of Directors meet re: 1) above and did Company Secretary coordinate same and guide the meeting proceedings?

3) Was a valid notice issued to board members to coordinate the meeting of the Board of Directors in 1) above and, if not, did the members waive their rights to the minimum notice period required in terms of the Companies Act?

4) Who drafted the brief to advertise (and issue to executive search recruitment agencies, media houses and website administrators) the vacancy for the Chief Executive Officer position and when was this brief disseminated?

5) Who coordinated engagements with applicant for the vacancy including pre-screening CVs’ and coordinating the diaries of the interviewing panel to interview identified / shortlisted candidates?

6) Who selected and briefed the interviewing panel on the scorecard and the criteria to objectively evaluate aspiring applicants?

7) How many applications were received for each of the vacant positions and what was the racial and gender split of the applicants?

8) How many applicants were interviewed by the interview panel and what was the racial and gender split of the applicants?

9) How many of the shortlisted candidates that proceeded to the final round of interviews were EE candidates and what was the racial and gender split of the applicants?

10) What were the main concerns raised by the interview panel in appointing an EE candidate for the position of Executive: Sports Betting and Executive: Racing?

11) Was the EE Forum aware of the vacancies and the advertisement thereof and did the EE Forum receive (feedback from employees) or provide (feedback to management and the Nominations Committee) on whether the recruitment processes were open, fair and transparent?

12) Did Phumelela copy the recognised union and allow for the participation of EE Committee for the positions as per the EE plan submitted to the Department of labour (EEA13, Page 3 and 4 signed and dated 30 November 2017 by Mr. Andreas Heide)

13) Did the Social and Ethics Committee and the Nominations Committee discuss the lack of racial and gender transformational challenges in approving and motivating to the Board of Phumelela the appointment of the CEO, Executive: Sports Betting?

14) Did the Social and Ethics Committee and the Nominations Committee consider appointing CEO, Executive: Sports Betting on an interim basis in the interest of sourcing or head-hunting EE candidates and transforming the management and Exco team?

If not, what was the reasoning advanced as the Executive: Sports Betting does not, prima facie, appear to have the requisite experience and track record (based on his prior employment record) nor the appropriate qualification for the said position?

15) Did the successful candidates submit an application and CV’s for the respective positions like all other candidates who applied for the position and were unsuccessful? If so, when and who did the successful candidate submit his application to?

16) Did the board members of the Nominations Committee and the Social and Ethics subcommittees participate in the screening and interviewing of shortlisted candidates?

17) Who compiled a Nominations Committee and Social and Ethics Committee submissions detailing all the information above from points 4) to 16)?

18) Did the Company Secretary play a role in coordinating diaries of the Nominations Committee and Social and Ethics Committee board members to set up a meeting to discuss and deliberate on the submission in 17) above?

19) At the Nominations Committee and Social and Ethics Committee meetings in 17) above, did any committee members express any concerns pertaining to the recruitment process, the final short-listing process and specifically the lack of transformation and EE candidates in the motivation to propose the preferred candidate?

20) Following the meeting of the Nominations Committee and Social and Ethics Committees in 17) above, did the Company Secretary coordinate a meeting of the Board of Directors to discuss the recommendations of the Nominations Committee pertaining to the appointment of the preferred candidate for the vacant position?

21) When did the meeting of the Board of Directors referred to in 20) above occur and if enough notice was not given in terms of the Companies Act, did the members waive their rights thereto?

22) Who compiled the submission to the board of directors to approve the final appointments for the vacant position?

23) Did the Board of Directors approve the appointments at the meeting in 22) above which had to have happened prior to the issuing of the SENS announcement above?

24) Did the entire Board of Directors consent to the SENS announcement or the content thereof prior to its release?

 I believe that any reasonable person would conclude that it is IMPOSSIBLE to achieve all the activities set out in points 1) to 24) within the period of 36 hours, that commenced on receipt of the resignation notice and culminated in the issuing the SENS announcements.

Companies ordinarily take on average around 6 months to recruit and onboard a successful candidate in such senior positions with a recruitment process that is open, transparent and free of unfair discrimination.

 If Phumelela is unable to provide credible answers to the above questions, then is the Public Protector’s findings regarding the industry perpetuating the exclusion of the black majority and benefitting the narrow white minority interests baseless?

The bottom line is that the above appointment is unlawful and makes a mockery of the King Code, the Employment Equity Act, the Employment Equity Plan of Phumelela and the Constitution of the Republic of South Africa.

This mockery was echoed in the appointment of John Stuart, Patrick Davis and recently two other senior white male appointment in the Betting Operations division.

Patrick Davis (pic: hamishNIVENPhotography)

So, in the last financial year, the three most senior appointments (all executives) were all white male, old boys club type appointments.


Well there is overwhelming evidence that the current leadership lacks the knowledge, expertise and objectivity to create, lead, manage and sustain what the company and the industry pays them for!

There are many in the industry who have suspected for some time that the Board of Directors are not in control of Phumelela.

John Stuart

John Stuart

If there was a commission of inquiry, would each of the Phumelela directors provide similar answer to the 24 questions above or will they be confirming that there may be a parallel control structures that have rendered them obsolete.

The current and past board members have contributed to the demise of the industry by not diligently discharging their fiduciary responsibilities with due care.

So, if (or when) the industry collapses, would some of the directors, current and past, be held personally liable for the destruction caused?

What value, if any, can the current directors of Phumelela deliver to the company against the backdrop of the past financial year?

As I said earlier, Rob Scott is not responsible for the poor performance in the Betting Operations division. So, would the person/persons that appointed him stand up and account for their actions? Stepping down is also welcome.

There comes a point when the Presidency and the National Assembly has to make a call whether they want to send in the Special Investigations Unit to SAVE 140,000 JOBS.

I drafted a detailed communication some months ago and I was hoping not to dispatch it in the hope that the Phumelela leadership would have stepped down by now and avert eda political intervention.

That ship has sailed, and the communication will be dispatched shortly to the respective offices for the much needed assistance by 140,000 employees in the industry.

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