Labour court upholds dismissal of former lab service CEO

The labour court has ordered former National Health Laboratory Service (NHLS) CEO Joyce Mogale to pay more than R22m in damages to her former employer, and dismissed her claim for unfair dismissal.

It also declined to uphold the unfair dismissal claim brought by the estate of former NHLS CFO Sikhumbuzo Zulu.

Mogale and Zulu were suspended in February 2017 in the wake of a forensic investigation, which the NHLS board initiated after allegations of corruption and maladministration levelled by the National Health Education and Allied Workers Union. Mogale and Zulu were dismissed in 2019 after a disciplinary hearing.

The dismissals, affirmed by labour court judge Connie Prinsloo, were based on irregularities with three commercial contracts.

In the first, Mogale breached her delegated authority and signed an R83.9m contract with Blue Future for IT equipment. The NHLS board had approved a contract worth only R26m. There were only 5,310 NHLS employees at the time, yet the contract was for 7,000 laptops and PCs.

In the second contract, she initially approved a deal for R72.1m with the vehicle leasing company Afrirent, but then signed a contract for R79.7m. She also signed a service-level agreement with an unwarranted penalty clause that ballooned the costs still further. Over a five-year period the NHLS paid Afrirent more than R15m in penalties for vehicles that travelled in excess of 2,000km a month, and R18.3m for vehicles that stood idle. The damages relate to this contract.

In the third contract, Mogale signed a R63.5m addendum to a contract with wide area network firm DV8, without obtaining board approval.

Prinsloo found Mogale had violated the Public Finance Management Act, the NHLS supply chain management policy and her employment contract.

The conduct of Mogale, Zulu and other senior staff raised questions about the financial controls in place at the NHLS, the judge said.

“It paints a concerning picture of an entity where control and accountability are inadequate or even non est and it raises serious questions as to the competence and skills of the management and other key employees of the NHLS,” said Prinsloo in a ruling handed down on September 13.

“The way in which Mogale, Zulu and their subordinates operated and advised, reminds this court of the proverbial blind leading the blind.” 

The judge said Mogale maintained she had been appointed to cut costs and turn the NHLS around, yet failed to apply her mind to the information brought to her by subordinates.

“She abdicated her responsibility to exercise due diligence, which was her contractual obligation... She followed her subordinates and she acted on what they told her, without any question whether they had considered the financial implications of the contracts or whether they were even qualified to do so,” the judge said.

NHLS board chair Eric Buch welcomed the labour court’s findings, saying it demonstrated the board’s commitment to holding those responsible to account, however long it took. The board had had no knowledge of any impropriety when it appointed Mogale, he said.

“In addition to being a medical technologist she had an MBA and had been a regional manager in the NHLS so understood the organisation. The question that still sits in my mind was how much was incompetence and how much was intentional malfeasance,” he said.

kahnt@businesslive.co.za