Summary of findings and recommendations – Ivan Motlogeloa // First Garment Rental (Pty) Ltd – B-BBEE Commission


Complainant(s)		Respondent(s)
Ivan Motlogeloa		First Garment Rental (Pty) Ltd
Summary / nature of the complain
On the 6th of June 2016, the Minister issued the B-BBEE Regulations which prescribed the process for handling complaints in terms of the B-BBEE Act. Mr Ivan Motlogeloa for MMK Laundry (Pty) Ltd, (hereinafter also referred to as the complainant), filed a complaint on the 19th of November 2018 with the B-BBEE Commission against First Garment Rental (Pty) Ltd, a private company registered in terms of the company laws of the Republic of South Africa with registration number: 2015/279859/07 alleging practices that are contrary to the objectives of the B-BBEE Act, using the B-BBEE 7 Form as prescribed. The allegations in this complaint are summarised for the purposes of this publication as follows: that on or about March 2017, MMK Laundry (Pty) Ltd entered into a Joint Venture partnership with First Garment Rental (Pty) Ltd t/a Montana Laundries (a Bidvest subsidiary) to jointly bid for the provision of laundry services contract for three (3) years at the Nelson Mandela Children’s Hospital in Parktown, Johannesburg; that subsequent to MMK Laundry (Pty) Ltd and First Garment Rental (Pty) Ltd t/a Montana Laundries being jointly awarded the said contract, the latter performed without the knowledge and/or consensus and involvement with MMK Laundry (Pty) Ltd; that following various attempts to be involved in the said awarded contract, MMK Laundry (Pty) Ltd has unfortunately been unsuccessful; that First Garment Rental (Pty) Ltd t/a Montana Laundries used MMK Laundry (Pty) Ltd as an opportunistic intermediary to secure the said contract with the Nelson Mandela Children’s Hospital to the financial detriment/exclusion of MMK Laundry (Pty) Ltd; and that MMK Laundry (Pty) Ltd has not financially benefited from the said contract in the manner proposed and envisaged in the bidding documents submitted on or about March 2017.
Summary findings of the B-BBEE Commission
The assessment of the allegations and the information gathered make it clear that the matter does not relate to the ownership element of the B-BBEE Act and the Codes of Good Practice, and thus the ownership credentials of First Garment Rental (Pty) Ltd are not being questioned. Further, the validity of the B-BBEE certificates or status of First Garment Rental (Pty) Ltd is also not being questioned. Therefore, the ownership credentials of First Garment Rental (Pty) Ltd are not the subject of this investigation. The copies of the share certificates of First Garment Rental (Pty) Ltd that are at the disposal of the B- BBEE Commission support Werksmans Attorney’s version of shareholding in First Garment Rental (Pty) Ltd. It is also confirmed that the allegations relate to the Enterprise and Supplier Development element and therefore the management control, skills development and the socio economic development elements credentials of First Garment Rental (Pty) Ltd are also not a subject of this investigation. The copy of the B-BBEE verification certificate number A04334 of First Garment Rental (Pty) Ltd issued for the period between the 23rd of November 2016 and the 22nd of November 2017 reflects that the respondent is 51% black owned with 62.89% for the scores of black ownership voting rights and a 53.57% black ownership economic interest and therefore making First Garment Rental (Pty) Ltd a Level Two B-BBEE Contributor. First Garment Rental (Pty) Ltd has, also claimed a score of 35.14% for Enterprise and Supplier Development, however the claims do not include MMK Laundry (Pty) Ltd as the Enterprise Development Beneficiary based on the information submitted by the verification agency during the investigation. The copy of the B-BBEE verification certificate number A05564 of the respondent issued between the 11th of October 2017 and the 10th of October 2018 reflects that the respondent is 51% black owned and therefore making the respondent a Level Two Contributor. The respondent has also claimed a score of 33.92% for Enterprise and Supplier Development, however the claims do not include MMK Laundry (Pty) Ltd as the Enterprise Development Beneficiary based on the information submitted by the verification agency during the investigation. The B-BBEE verification certificate number A06763 of the respondent issued between the 26th of November 2018 and the 25th of November 2019 reflects an ownership score of 40.72% and a 35.47% black women ownership score and 18.23% black women ownership voting rights and therefore making the respondent a Level Two Contributor. The Respondent has claimed a 37.66% score for Enterprises Supplier Development, however the claims do not include MMK Laundry (Pty) Ltd as the Enterprise and Development Beneficiary based on the information submitted by the verification agency during the investigation. The information gathered indicate that indeed First Garment Rental (Pty) Ltd participated in a tender process (RFP) issued by the Nelson Mandela Children’s Hospital. The RFP had as part of B-BBEE requirement stated that the bidders are to be evaluated and selected on the basis of their current B- BBEE status and their willingness to work with black empowered Small, Medium and Micro Enterprises (SMMEs) as a joint venture and that bidders must ensure that this minimum requirement is met. It further stated that B-BBEE plans are to be specific with tangible targets and penalties for non- compliance. The requirement set by Nelson Mandela Children’s Hospital was evidently progressive and aimed at advancing Enterprise Development in line with the objectives of the B-BBEE Act. During February 2017, after the bid had been submitted, First Garment Rental (Pty) Ltd was invited to the Nelson Mandela Children’s Hospital’s preferred bidder briefing where it was communicated that most bidders had not achieved the required threshold for Enterprise Development. At this briefing meeting with the preferred bidders, Nelson Mandela Children’s Hospital made it clear that the tender specifically required/mandated bidders to do as follows: a) identify an existing Enterprise Development service provider to partner with on the tender/project; b) identify the project structure and service responsibility of the Enterprise Development partners, and c) set out the future objectives of the relationship with the Enterprise Development service provider and also specify what the distinct outputs of the relationship will be, so as to monitor same. It was stated at the briefing that the Enterprise Development objectives were not a B-BBEE verification certificate concern or issue, that is the B-BBEE status of the bidder, however, it was about how the project can develop the identified Enterprise Development entity to have specific healthcare experience within a period of 3 (three) years and further sustain themselves as required in line with the B-BBEE Act. The Nelson Mandela Children’s Hospital subsequently requested the bidders to make a specific proposal regarding Enterprise Development. On or about March 2017, First Garment Rental (Pty) Ltd engaged MMK Laundry (Pty) Ltd and proposed that it be its proposed Enterprise Development partner for purposes of complying with the requirements of the tender process and the parties prepared the Enterprise Development plan which was presented to Nelson Mandela Children’s Hospital on or about the 16th of March 2017. Afterward, Nelson Mandela Children’s Hospital requested further information and/or documentation i.e. a copy of the signed Enterprise Development agreement between the parties, a clear split of responsibilities between the parties identified through a workflow diagram, a record of the turnover split between the parties and a set of brief objectives that the parties wish to achieve yearly, inclusive of a description what a successful outcome of the relationship may be. According to the documents considered, the proposal included that the revenue would be split between the parties in equal shares during the first year, during the second year MMK Laundry (Pty) Ltd would receive 83% of the total turnover whereas First Garment Rental (Pty) Ltd would receive 17% and 95% to MMK Laundry Service (Pty) Ltd in the third year whilst First Garment Rental (Pty) Ltd would receive 5%, based on specified projections. For the purpose of submitting the bid to Nelson Mandela Children’s Hospital, the above plan was submitted, however, it is common cause now that First Garment Rental (Pty) Ltd and MMK Laundry (Pty) Ltd did not conclude the Enterprise Development agreement upon the award of the contract to First Garment Rental (Pty) Ltd. It is this aspect that has given rise to the complaint by MMK Laundry (Pty) Ltd. First Garment Rental (Pty) Ltd through Werksmans Attorneys conceded that MMK Laundry (Pty) Ltd was approached to participate in the Enterprise Development proposal for the purposes of meeting the Enterprise Development requirement of the tender. Pursuant to the RFP process referred to above, which included the proposal for Enterprise Development, First Garment Rental (Pty) Ltd was awarded the tender and commenced working on the project on or about June 2017 without the involvement of MMK Laundry (Pty) Ltd as the presented Enterprise Development partner to the Nelson Mandela Children’s Hospital in respect of the terms of the Enterprise Development requirement set by the Nelson Mandela Children’s Hospital.
Recommendations of the B-BBEE Commission
Based on the outcome of the investigation and the conclusion that the matter relates to a contractual dispute that the B-BBEE Commission does not have a mandate to pronounce on, the B-BBEE Commission does not make any remedial recommendations in respect of the complaint. The B-BBEE Commission may, however, refer this report to the Department of Small Business Development to consider whether any intervention is feasible to provide a cost effective and independent platform/structure for Small Medium and Micro Enterprises that have disputes arising from private sector procurement processes to refer them for facilitation given the plight raised by Small Medium and Micro Enterprises, like in this matter, that they often do not have the financial resources to pursue the disputes. In light of the response received from Nelson Mandela Children’s Hospital in their letter dated 19 February 2020, no further action will be pursued in respect of Ms Mandisa Maholwana and Nelson Mandela Children’s Hospital regarding the failure to cooperate and comply with the summons. In line with regulation 15 (12) of the B-BBEE Regulations, any findings or recommendations made by the B-BBEE Commission in respect of an investigation must be in writing, communicated to the Complainant, and published in a manner that the B-BBEE Commission deems appropriate, including on its website. The B-BBEE Commission has resolved to publish the findings in accordance with section 13J (7) (a) of the B-BBEE Act read with regulation 15 (12) (c) of the B-BBEE Regulations in the interest of the public.
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