Hlaudi, Mbalula’s wife sued in R1bn housing ‘fraud’ spree

Hlaudi, Mbalula’s wife sued in R1bn housing ‘fraud’ spree

strongman Hlaudi Motsoeneng and Sports Minister Fikile Mbalula’s wife Nozuko – as trustees of two trusts – allegedly received millions from a “fraudulent” R1-billion spending spree by the Free State government meant for houses for the poor – which were never built.

At the centre of it all was Mineral Resources Minister Mosebenzi Zwane, who, while he was MEC for human settlements, sanctioned the payments of hundreds of millions of rands to companies that had not done any work for the government.

Now new MEC Sisi Ntombela’s department is suing the 106 contractors, including Motsoeneng and Nozuko Mbalula in their capacities as trustees, and materials suppliers that received upfront payments to build more than 14,000 RDP houses – many of which were never delivered. The department wants to recover more than R600-million.

Details of how the department spent almost R1-billion in five months are in a damning affidavit by department head Nthimotse Mokhesi filed in the High Court in Bloemfontein last month.

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According to the affidavit, Zwane, his then head of department Mpho Mokoena and other senior officials concocted the scheme after the then human settlements minister Tokyo Sexwale threatened to shift the funds to other provinces because the Free State, and three other provinces, were underspending.

The province had spent only 10% of the R1.3-billion allocated by the National Treasury for RDP houses by October 2010.

Zwane and Mokoena, apparently afraid of losing the funds, came up with a plan to accelerate spending. This was rejected by Sexwale’s department, which warned the payments were “unlawful and must stop”.

But this warning seems to have been ignored. Hundreds of millions were paid to contractors and suppliers between November 2010 and March 2011 without proof that houses had been built. However, by the financial year-end, the national Department of Human Settlements reallocated about R263-million of the funds to other provinces. As a result, Zwane was axed.

The Special Investigating Unit probed the payments and its findings led the Treasury to press the provincial department of human settlements to recover the funds.

Mokhesi revealed that many invoices submitted were fraudulent – and companies were even paid in December, when contractors had closed. Other companies, such as brickmaking giant Corobrik, were paid without submitting an invoice. The company has indicated it will repay the money.

Court papers revealed that Motsoeneng and Mbalula, as trustees of the Imbuma Trust and MM Development Trust, received millions of rands between 2010 and 2011 to build 350 low-cost houses in Virginia, Free State, and 100 in Bloemfontein. An internal progress report showed not a single house was built.

The value of their contract is estimated to have totalled more than R38-million.

Motsoeneng and Mbalula were trustees of both trusts and both are cited as respondents. Other MM Development trustees were Morné Ernst and Mmahlajwane Maria Chaka, who are also cited in papers. Imbuma trustees included Ernst and Mohlolo Lephaka.

Both the MM Development and Imbuma trusts appear to have been deregistered and it is unclear who the registered beneficiaries were.

When approached for comment on Friday, Motsoeneng said: “No, no. I am not going to get involved in those matters. No comment, my dear.”

Zwane, through his spokesperson, referred the Sunday Times by e-mail to the provincial department of human settlements and would not respond to specific questions.

block_quotes_start It was also a fraud on the public – on all who expect state funds to be spent properly, including on improving the standard of living of the poor

Nozuko Mbalula had not answered detailed questions at the time of going to press.

Mokhesi, in the court papers, said the underspending had been caused by an announcement by Free State premier Ace Magashule in 2010 that the province was going to build “bigger and better” 50m² houses instead of the standard 40m² RDP house.

By then the tender process was in full swing and preferred companies had been shortlisted.

But Magashule’s announcement caused “long delays” as department officials had to restart the process and come up with new specifications to meet “the political promise”. During this period the tender lapsed and was cancelled.

When payments resumed, even companies that had been disqualified during the tender process for various reasons were recipients of Zwane’s generosity.

“The payments were unlawful because no contracts were in place with the suppliers, no proper procurement process had been followed, neither the national department nor the National Treasury had authorised – or indeed even knew about – the payments. Nor had the contractors and suppliers done any work or supplied materials,” said Mokhesi.

According to his affidavit the department entered into agreements with suppliers, paying them before materials had been delivered.

The contracts, too, were unlawful, Mokhesi argued, because the department did not follow any lawful procurement process.

“I submit that the department’s scheme was a fraud on the national government, specifically on the fiscus.

“It was also a fraud on the public – on all who expect state funds to be spent properly, including on improving the standard of living of the poor, on those in the Free State and in other provinces with an expectation of receiving state-funded housing; and on all taxpayers,” the papers read.

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