The FSHS, it seemed, had decided at an early stage that it would apportion most of the blame to the suppliers of building materials, despite the fact that the department’s primary contractual relationship had been with the builders. This would create an opportunity for Magashule’s associates and other politically connected beneficiaries to escape scrutiny and avoid being held financially accountable.
The department subsequently appointed Open Water, a private forensic auditing firm, to probe the matter. It also appointed two private engineering firms to determine the scale of the wastage.
Considering the earlier probe by the AG and the involvement of the
National Urban Reconstruction and Housing Agency (NURCHA), an arm of the national Department of Human Settlements, there was no shortage of investigations into the saga.
The Special Investigating Unit had also been on the scene since early 2012. While briefing Parliament’s portfolio committee on housing in August 2012, Sexwale said that the SIU had been tasked with probing the Free State contracts under ‘Special Presidential Proclamation No.
35’, 41 which called for a wide-ranging investigation into fraud and corruption involving the national and provincial housing departments and local authorities. 42 Sexwale also told the committee that the Free State’s housing debacle involved irregular expenditure of at least R500
million. 43 Later, in court filings, the department itself indicated that about R500 million of taxpayers’ money had been flushed down the toilet.44
‘No stone will be left unturned in our drive to arrive at the centre of any housing related questionable financial misconduct,’ Sexwale vowed before the committee. ‘This is disheartening because this is poor people’s money. I will be taking this issue to the Cabinet. ’45 He even suggested that the provincial department could be placed under administration in accordance with Section 100 of the Constitution.
With only months to go before the ANC convened in Mangaung for its national conference, Sexwale’s statement was a barely veiled attack on Magashule and his provincial administration.
But it would be his final say on the matter. Sexwale’s bid to become the ANC’s deputy president at the party’s fifty-third national conference was a complete failure. He did not even make it onto the eighty-member NEC.46 Zuma axed him as housing minister not long thereafter. 47
9
Fall guys and fat cats
Magashule must have been relieved that Sexwale was no longer around to scrutinise his province’s housing projects.
In 2013, Olly Mlamleli and Tim Mokhesi began legal proceedings to try to recover a significant chunk of the misspent fortune. The FSHS
served summonses on 22 of the more than 100 companies involved in the saga. These companies, mostly materials suppliers, had altogether received R631 million throughout the 2010/11 and 2011/12 financial years. 1 In court papers, the department maintained that the suppliers had benefited from ‘unjust enrichment’, and it wanted them to pay back the money. 2
It was a curious strategy. Going after the materials suppliers was all well and good if the department could prove that they received money without supplying any materials. But it made no sense that the department chose not to pursue the contractors as well. After all, the contractors had received more than R500 million among them, and the department was already on record saying that these companies were at least as guilty as the materials suppliers when it came to the non-delivery of houses.
Mokhesi’s later affidavit summed up the scale of the fiasco: When the department awarded the construction contracts, it split particular housing sites amongst different contractors – for example, several contractors would be appointed to build houses in a particular township, with each contractor responsible for a particular number of houses in that township.
It was therefore difficult, if indeed possible at all, to determine which contractor had been responsible for what. The difficulties were exacerbated because, in a single township, there were various results
– some houses may be completed; others partly completed; others not built at all or barely started; and where construction work had been done, it was often faulty.3
Mokhesi also bemoaned the fact that none of the contractors or suppliers had kept proper records of their projects, as stipulated in their agreements with the department. ‘The contractors’ paperwork was either totally inadequate or simply did not exist,’ he said. ‘Nor have the material suppliers themselves ever provided proper reports to the department.’
Yet, for some reason, Mokhesi and his department targeted only a select batch of materials suppliers to try to recover some of the money.
The FSHS finally dismissed five of the six suspended officials in June 2015. 4 Other heads would roll later, bringing to eleven the number of officials the department fired. Yet, despite the department’s insistence that the officials had been solely responsible for the ‘unlawful and fraudulent scheme’, 5 it failed to lay criminal charges against any of them.
Mokhesi would later allege that Mokoena, the former HOD, had been
‘directly responsible’ for the payments.6 Yet he was not among those who were dismissed. Instead, Mokoena got a plum job as head of human settlements at the Mangaung metro. 7 Of Zwane, Dlamini and Tsoametsi there was no mention. Corney Twala, another top official, also dodged the bullet of dismissal. He was absorbed by the provincial Department of Social Development, where he became a senior
manager. 8 So, not only did the department fail to lay charges against the alleged culprits, but the province and the local metro also provided some of them with a safety net.
The axed officials, however, were not so lucky. I spoke to one of them.
This person provided me with a troubling account of events that preceded their dismissal. This account is supported by documents filed in arbitration proceedings and by corroboration from other sources.
The arbitration matter, instituted by five of the dismissed FSHS
staffers, was still ongoing at the time of writing.
When Sexwale first became aware of the R1-billion fiasco, he desperately wanted to bring Magashule to book. That is why he insisted that the SIU probe the matter. The unit’s investigation formed part of a wider SIU probe into RDP projects in provincial departments and municipalities all over South Africa. Their work on the Free State contracts, however, was allegedly severely hampered and eventually derailed by the involvement of Open Water, the forensic outfit appointed by the department to investigate the matter in mid-2012.
Although the firm was technically contracted by the FSHS, several sources told me that the order to appoint it came from Magashule himself. They maintained that Magashule had a close relationship with Open Water’s chairman, Reavell ‘Ricky’ Nkondo, a former spy boss at the National Intelligence Agency.
The premier’s official diary, obtained through a Promotion of Access to Information Act (PAIA) request, confirms that there was contact between Magashule and Nkondo after Open Water was appointed by the FSHS. In one instance, Magashule met Nkondo for a ‘private meeting’ at Free State House, the premier’s official residence, one evening in mid-July 2013.
I asked Peet Pieterse, Open Water’s CEO, about his partner’s meetings with Magashule. He replied: ‘Mr Nkondo cannot recall the private meeting with Mr. Magashule but agrees that he did meet with the Premier on occasion. We generally briefed the Premier on investigations during ExCo meetings, in the same manner and meetings where other forensic auditors provided feedback on investigations.’ The purpose of the ‘private meeting’ at Magashule’s residence therefore remains a mystery.
A member of one of Magashule’s earlier executive councils told me Open Water had been brought into the Free State by Magashule shortly after he became premier in 2009. ‘The province needed to verify its payroll system, and Ace told us to use Open Water,’ said the source.
From that point onwards, the firm acted like ‘cleaners’ when it came to the Magashule administration’s shadiest contr
acts, this person alleged.
‘They covered up a lot of things, but they also did some good work,’
claimed the source.
Pieterse denied that they were pulled into the Free State by Magashule. The firm was previously known as Ramathe Fivaz and had been present in the province since 2001, he said. He took exception to Open Water being referred to as Magashule’s ‘cleaners’. In his defence of the firm, he made a rather curious remark. ‘We were probably rather Mr Magashule’s henchmen than cleaners and we were not well liked as our appointment resulted in employees and office bearers being dismissed and/or criminally charged,’ Pieterse contended in a written response. He said he could ‘categorically’ state that Magashule ‘never once asked [Open Water] to manipulate any findings or omit any evidence from [their] reports’.
But the perceptions of an unusually close relationship between the
firm and the then premier prevailed. One of my sources told me Open Water’s chairman, Nkondo, married Rooksana Moola, a staffer in Magashule’s administration, after the firm started working in the Free State.
Pieterse insisted that this presented no problems whatsoever. ‘Mr.
Magashule’s administration was vast and she [Moola] did not work in close proximity to Mr. Magashule, or even in his office, and therefore the insinuation that they married as a consequence of Mr. Nkondo being that close to Mr. Magashule is not only mischievous but devoid of fact or truth.’
If there is anything to say about Nkondo, it is that his career as a government spook was seemingly eventful. In 1997, then Pan Africanist Congress (PAC) politician Patricia de Lille included Nkondo’s name on a list of former ANC underground operatives who had allegedly acted as double agents for the old apartheid government. 9
The ANC denied the existence of such a list. His name also surfaced during the 2003 Hefer Commission of Inquiry into allegations that NIA spooks had spied on National Director of Public Prosecutions (NDPP) Bulelani Ngcuka. Nkondo was portrayed as a functionary of the Zuma camp in the highly politicised ‘spy wars’ of the early 2000s. 10
After Open Water’s appointment by the FSHS, the SIU’s Free State branch was apparently strong-armed out of the probe.
A source in the law-enforcement environment with insight into the matter claimed that at one point the SIU was asked to stop its investigation. ‘The SIU was told to stop working on the Free State contracts,’ he told me. ‘I don’t know where that order came from, but it must have been from a very senior political office.’
Another source, an SIU insider, said Open Water effectively blocked
the SIU’s investigative efforts. ‘We were told by the department that Open Water took computers, documents and other records,’ this source said. ‘When we asked for certain documents, Open Water would tell us they didn’t have it.’
Contrary to normal investigative procedure, Open Water also allegedly failed to compile a record of what exactly they had taken from the department. This added to the SIU’s headaches. ‘When we asked for a certain document or contract and Open Water said they didn’t have it, there was no record of what they had taken to determine if they were being honest with us,’ said my SIU source.
Most alarmingly, the Open Water team allegedly took some documents related to the R1-billion splurge to Magashule’s office. ‘All the documents were taken to Ace’s office on the fourth floor [of the Lebohang Building in downtown Bloemfontein],’ claimed one current FSHS insider.
Pieterse denied all of this. ‘We kept detailed inventories of each document removed from the department as well as the documentation and electronic data returned.’ He said he knew nothing about documents that may have been taken to Magashule’s office. ‘The investigation relied on a vast number of records and to remove certain records to “take” to the Office of the Premier would serve no purpose to influence the outcome of the investigation,’ Pieterse maintained.
The Open Water CEO said the firm had ‘never obstructed or prevented any investigative agency in performing their work and has always and will always co-operate with such agencies, which was also the situation in the FS housing matter.’
However, the tone of his response made it clear that there had indeed been friction between Open Water and the SIU. ‘The SIU was
appointed approximately a year before Open Water was appointed and one would expect that after such an extended period they would have collected the documentation required. When we were appointed they made little progress,’ said Pieterse.
An SIU investigator had asked Open Water for the firm’s mandate for its investigation, but Open Water refused to comply. ‘I respectfully advised him that he held no proclamation to subpoena me for the information, whereafter no further requests for any documentation were received from the SIU,’ said Pieterse.
The strangest thing about Pieterse’s response was that he tried to convince me that Open Water and the SIU had been tasked to probe entirely different matters. ‘My understanding was that the SIU was mandated to investigate the development and delivery of low-cost housing at the time for the period ended July 2010.’ The Free State’s R1-billion RDP splurge only occurred at the end of that year. ‘It is therefore obvious that we investigated different matters and therefore we could not have restricted the SIU or any other law enforcement agency in performing their work,’ maintained Pieterse.
But it wasn’t ‘obvious’ at all.
The SIU, in a formal response, made it clear that it had probed the same advance payments Open Water investigated. ‘The investigation pertaining to the unauthorised payments of advances by the Free State Department of Human Settlement[s] regarding the 2010/2011 and 2011/2012
financial
years
is
finalised.
The
findings
and
recommendations are contained in a report addressed to the Office of Presidency, who acknowledged receipt of the said report on 2 October 2015,’ the SIU said in a letter it sent me in October 2018.
Even FSHS HOD Tim Mokhesi confirmed the SIU had been on the
scene. ‘The prepayments matter relating to material suppliers were investigated by the Special Investigation Unit (SIU),’ he said in a written response.
Considering Open Water’s alleged meddling, one can’t help but wonder how thorough the SIU report was.
The SIU also told me that it had referred three matters to the National Prosecuting Authority for criminal prosecution. The NPA ‘in turn referred [the three cases] to the Hawks for finalisation’. But that was more than three years ago. It appears as if these cases were added to the mountain of investigations that ground to a halt once the Hawks got hold of them during Zuma’s years in power.
Open Water started its investigation on 19 June 2012 and submitted a preliminary report a mere ten days later. It was on the basis of this report that the department suspended and later dismissed eleven officials.11
But Open Water’s methodology apparently left much to be desired.
My source within the group of axed officials claimed that the investigators did not even bother to interview any of the alleged culprits. ‘The Open Water guys came to the department, took our gadgets [computers and other electronic equipment] and then told us to leave the premises,’ said the former official. ‘They never spoke to us to collect our side of the story.’
The firm and some of its key executives have been accused of employing similar tactics elsewhere. A Sunday Independent report from 2017 detailed how an Open Water report had implicated a local logistics company in a supposedly dodgy deal with South African Airways Technical. It had then emerged that Open Water had not interviewed the implicated company’s managing director before it
concluded its probe. 12
A 2016 report by amaBhungane highlighted further concerns over forensic work by Pieterse and Open Water, this time involving the Council for Scientific and Industrial Research (CSIR) and its then CEO, Sibusiso Sibisi. 13
&nb
sp; Pieterse’s forensic work was also severely criticised by a judge in the Eastern Cape High Court in 2005. A forensic report compiled by Pieterse formed the basis of a fraud case against three senior officials from the Eastern Cape Development Corporation (EDC). 14 Mcebisi Jonas, the EDC’s then CEO, was among the accused. 15 The fraud charges were viewed as being part of a political witch-hunt, and Jonas and his co-accused were eventually acquitted. 16 In his ruling, Judge Dayalin Chetty said Pieterse’s report showed ‘a complete lack of objectivity’, was ‘severely wanting’ and displayed an ‘erroneous interpretation of the applicable legislation’, according to a Mail &
Guardian report.17 The newspaper seemingly directly quoted from the judgment, but Pieterse claimed the publication got it wrong. ‘The Eastern Cape matter was my first encounter with the influence of politics and the media on reality,’ he told me. ‘I have no doubt that in a different time or a different province the outcome of the trial would have been different.’
Meanwhile, after the FSHS officials were suspended, they naturally demanded to see Open Water’s report. They wanted to see for themselves how the probe had concluded that they were the guilty parties. ‘We wrote to them [Open Water] and asked for the report, but they never got back to us,’ claimed one of the axed officials. Some of the suppliers implicated in the FSHS’s legal proceedings would later have similar problems, the owner of one such business told me.
Frustrated, the suspended officials turned to the SIU in Bloemfontein.
‘We asked the SIU if we could see the Open Water report or any of the documents that supposedly proved we were guilty,’ my source explained. ‘He told us Open Water took all the department’s records.’
Even the SIU failed to obtain the Open Water report, my unit source told me. Pieterse claimed the SIU never asked for the Open Water report.
Gangster State Page 12