At the time, Empire and Edison occupied the first floor of a building near the Michelangelo Towers hotel at Sandton’s Nelson Mandela Square. Edison only later moved to its current address on 5th Street.
The Signature Hotel now occupies the building that housed their former offices. One of my sources was able to provide me with a floor plan for Edison and Empire’s old offices, including the exact location of the offices of Shantan, Yuri Mohan and the fifteen-odd other employees who worked with them in that building. This source showed me in which office Magashule and Shantan usually met. He said he could not remember exactly how many times Magashule came to Empire and Edison’s offices, seeing as it had been a ‘regular occurrence’. The source claimed Magashule and his driver frequently left the building carrying large bags.
My second source corroborated the story about the bags. He claimed he had bumped into Magashule at Empire’s Sandton offices on two occasions in late 2015, about a month apart. He showed me where Magashule’s driver had parked the car in which they had arrived, near the entrance to the basement parking on the northern side of Nelson Mandela Square. ‘When they were done meeting with Shantan, Ace and the driver would walk out of the building carrying large travel
bags. They put the bags in the back of their car. All of this was done very openly and casually,’ said this source.
I had a look at Magashule’s diary. It was interesting to note that, compared to previous years, he more frequently attended unspecified meetings in Johannesburg in 2015. I excluded meetings in Johannesburg for which his diary indicated a specific purpose or destination, such as ‘Luthuli House’ or ‘AU Summit’. (His stop at the AU Summit in Sandton, coincidentally, occurred in December 2015
and was followed by a ‘family visit’ in ‘Saxon world’, according to the diary.) In 2013, Magashule attended only one unspecified meeting in Johannesburg, according to his diary. This increased to two in 2014, both in January. In 2015, the year in which my sources claimed to have often seen Magashule at Shantan’s Sandton offices, the premier had no less than five unspecified meetings in ‘Sandton’ or ‘Jhb’, the diary indicated.
Shantan Reddy’s company strongly denied my sources’ claims. ‘Any suggestion that a visit by any ANC or Government official to our client’s offices [occurred], be it in Johannesburg or Durban, in relation to business dealings, is specifically denied on the basis that our client and/or its Directors have never engaged any ANC or Government officials in regards to its business, all such business of our client having been done and secured through a rigorous and compliant public process,’ said Empire Technology’s lawyer, adding that the allegations were ‘malicious’ and ‘outrageous’.
Edison’s lawyers also strongly denied the allegations regarding Magashule’s visits to the Sandton offices and said they were ‘nothing more than scandalous and malicious rumour-mongering’.
16
Zuma’s Vrede ‘thank-you fee’
If one were to map the Gupta family’s state-capture exploits, the tiny Free State town of Vrede would feature as a prominent point of interest, along with Dubai, Saharanpur, Saxonwold, Sun City and their former coal mines in Mpumalanga.
The Vrede dairy scandal is one of the most notorious examples of how state resources were allegedly plundered by friends of Jacob Zuma and his ally in the Free State, Ace Magashule. But Vrede also fell prey to another, previously unknown scandal, one that appears to bear Magashule’s and Zuma’s fingerprints. In this chapter, I reveal how more than R220 million in taxpayers’ money was earmarked for a disaster-ridden housing development on the town’s outskirts. A band of politically connected contractors were appointed to build 1 000 houses for some of Vrede’s poorest inhabitants, yet five years after the project began, less than 200 houses were finished. But of greater concern was the fact that, while digging up information on this deal, I began to hear rumours that one of the contractors had channelled a R2-million
‘thank-you fee’ to Zuma. At first, I didn’t make much of this, but information I would later obtain made me pause.
The saga took place while the public and the media were focused on the infamous dairy scandal playing out around the corner from the housing project. As usual, some of the country’s most destitute citizens paid the price for what appears to have been a toxic combination of mismanagement, incompetence and possible corruption.
The saga begins in Jacob Zuma’s home province of KwaZulu-Natal,
where, in 2010, a company called Khaya Readykit started doing work for government. 1 Khaya Readykit specialises in alternative building technologies (ABT). It has a patent on special timber wall panels that are manufactured in factories and then transported to building sites, where they are erected on top of concrete foundations, and covered with a binding agent and a few layers of plaster. According to the company’s website, this method allows it to finish new structures much faster than traditional building contractors can. In addition, the buildings are allegedly just as durable as houses with brick walls, but cheaper to put together. 2 The technique can be used for low-cost housing, clinics and classrooms.
Khaya Readykit’s promise of cheaper, better structures caught the attention of officials in KwaZulu-Natal. To navigate the province’s highly politicised construction environment, the company hired a
‘contracts agent’ for its work with government. 3 Considering the function this person was required to perform, however, he could be described as a ‘fixer’ of sorts. This role was assigned to businessman Vikash Narsai, who appears to have operated on the periphery of Zuma’s circle.
Narsai’s company, VNA Consulting, brands itself as a ‘multi-disciplinary professional services consultancy’ in South Africa’s ‘built environment’. 4 VNA is also unabashedly pro-ANC. In 2012, the company bought a full-page advert in the Progressive Business Forum’s magazine, Progressive Leader. Next to an image of the ANC
flag superimposed onto a map of South Africa, Narsai congratulates the party on its 100th birthday, saying that VNA is ‘a proud supporter of the African National Congress ideology’. 5
Narsai featured vaguely in the Arms Deal mess. He was listed as
witness number 136 in the state’s list of witnesses for the matter. 6
During a meeting with him in 2018, Narsai told me he had been dragged into the Arms Deal probe as a result of VNA’s involvement with the Development Africa Trust, set up by Vivian Reddy, the businessman we met in the previous chapter. In his judgment in the Schabir Shaik trial, Judge Hilary Squires found that money from French arms supplier Thales was flushed through Reddy’s trust and ultimately used to help pay for the first upgrades to Zuma’s Nkandla homestead in the early 2000s. 7
But Narsai was adamant that his company had nothing to do with Zuma’s Arms Deal shenanigans or the Nkandla upgrades. He told me that VNA had worked alongside Reddy’s trust on King Goodwill Zwelithini’s palace, and that the Scorpions investigators had mistakenly identified VNA as a role-player in Zuma’s Arms Deal payments. The Scorpions had been ‘off the mark’, Narsai told me.
More than a decade later, however, VNA did become involved with Zuma and a construction project near Nkandla. Between 2010 and 2012, Narsai seems to have delivered in his role as a ‘contracts agent’
for Khaya Readykit. The company clinched contracts to build thirty early childhood development (ECD) centres for the KwaZulu-Natal provincial government. 8 But it would turn out to be a cursed deal for Khaya Readykit.
In an anonymous letter to a community newspaper in 2017, one of the company’s directors later explained what happened. ‘We were being set up by the KZN [KwaZulu-Natal] contracts agent [Narsai] who directed that the healthy profit [from the ECD centre contracts] be spent delivering free houses to ANC beneficiaries around KZN
including eventually 15 of them at Nkandla,’ this person alleged. 9 A
source familiar with the matter agreed with this interpretation. ‘Narsai motivated for this by saying that Khaya Readykit would get much bigger co
ntracts as a result of the houses we donated,’ the source told me. Narsai denied that he or VNA ever made such promises. He also denied having a close relationship with Zuma, although he admitted that VNA had worked on projects for one of the former president’s organisations. ‘VNA was not involved in the donation of houses prior to 2013 to the Jacob Zuma Foundation as Khaya [Readykit] was already working with the then ANC Youth League in the Province of KZN,’ Narsai claimed in an email. ‘VNA’s involvement with the Jacob Zuma foundation only started in June 2014 when Khaya Readykit was approached and I was the person that was introduced to the Foundation by the owner [of Khaya Readykit].’
During an earlier interview, the businessman admitted that he had been involved in Khaya Readykit’s decision to donate houses in KwaZulu-Natal, but he said the figures were lower than the fifteen mentioned in the newspaper article. ‘We donated four houses to the Zuma foundation, and only one of them was at Nkandla. The rest were all over the province,’ he told me.
Video footage on the Government Communication and Information System YouTube channel shows Zuma handing over one of Khaya Readykit’s houses to a beneficiary at Nkandla in August 2013. Flanked by then social development minister Bathabile Dlamini and a small army of politicians, businessmen and bodyguards, Zuma can be seen cutting a ribbon wrapped around one of the houses before taking an appreciative beneficiary inside her new abode. The president then claims that the Sizakele MaKhumalo Zuma Foundation, a charitable entity headed by his first wife, funded the project. 10
We now know that the houses were sponsored by Khaya Readykit, which seemingly made the donation in the hope of winning bigger government contracts. The donation could not have come at a better time, as Zuma was at the centre of a political firestorm over the state’s latest upgrades to his homestead. What better way to placate supporters in his immediate surroundings than to give them new houses?
About 300 kilometres from Nkandla, residents of the eastern Free State town of Vrede were looking forward to receiving new houses of their own. In August 2013, the same month in which Zuma handed over the houses built by Khaya Readykit in Natal, the council of the Phumelela local municipality, which includes Vrede, approved a layout plan for 1 700 new residential erven on the town’s outskirts in order to house people from the nearby Thembalihle township. 11 What the poor township residents did not know was that powerful politicians were allegedly concocting plans to capture the budget for this new development. Their hopes of becoming homeowners would eventually be dashed by the very leaders who were supposed to have looked after their interests.
At this stage, the Free State provincial government was already pouring money into the Vrede dairy project, just a stone’s throw away from the proposed housing development. The Gupta-linked dairy venture had by then begun to attract some media attention, 12 but the scheming around the nearby low-cost housing project remained under wraps.
A source from the construction industry who was intimately involved in the project alleged that Zuma and Magashule were pulling the strings. This source, who attended meetings with Magashule, said he
was shocked by the premier’s brazenness. ‘Ace met with me and told me that the old man [Zuma] was behind the Vrede houses,’ he claimed.
‘He told me Zuma needed money and that we therefore needed to get the project going.’
This source explained how the ‘corrupt scheme’, as he called it, was put together. ‘From the outset the Vrede project was a means to take money out of the national Department of Human Settlements,’ he told me in 2018. ‘To avoid governance issues, the Free State province was identified as a safe haven to facilitate this. An amount was transferred to the province from which transactions would be made. This included a “thank-you fee” to Zuma.’ This was the first time I heard the phrase
‘thank-you fee’ in connection with the Vrede RDP project, but it wouldn’t be the last.
Current and former FSHS insiders became suspicious when companies from KwaZulu-Natal, and not the Free State, were contracted for the project. The department appointed Tekeweni Civils, an outfit from Durban, as the main contractor, with Narsai’s VNA acting as its consultant. Tekeweni and VNA then subcontracted Khaya Readykit, seeing as government wanted the houses to be built using ABT methods. All of this was done without a tender process. ‘The contract was awarded by our department, but it was on a directive from the national Department of Human Settlements. We started to refer to it as Zuma’s houses,’ one FSHS insider told me. The letter from the anonymous Khaya Readykit director seemingly also confirmed the president’s involvement in the Vrede housing project. Zuma ‘arranged’
the project, this person claimed.13 Yet another FSHS source alleged that after a meeting between Zuma and Magashule in 2013, department officials were informed that the province would invest in a
new low-cost housing development in Vrede.
The FSHS denied that Zuma and Magashule planned the project, but admitted that the contract was awarded without a tender process. In its written response to me, the FSHS said the contract had not needed to go out on tender because the project formed part of the national department’s Enhanced People’s Housing Process (EPHP). The EPHP
programme allows for beneficiaries of low-cost housing to determine who the contractors should be, the FSHS explained. ‘In this case consultation with [the] beneficiaries was conducted and they chose the Alternative Building Technology to be used for their houses resulting in the appointment of said contractors,’ the department told me.
I visited Vrede in November 2018, and the residents I spoke to claimed they were not consulted. ‘We just heard the province was going to build houses for us; we didn’t know how the contractors were appointed,’ said one Vrede local.
Narsai said the national Department of Human Settlements brought VNA in for the Vrede project in late 2013 because of its earlier work with Khaya Readykit. This confirmed what I had already been told, namely that the project’s origins were in national government and not at provincial level.
But there was a potential hitch. As we saw in Part III, the national government in the past took back money for housing projects that the FSHS had been unable to spend. If this were to happen again, the Vrede development risked running out of money.
Faced with a housing department that could not spend its budget, the Magashule administration needed to find new ways to keep its claws in the province’s housing allocation, maintained my sources. If the FSHS
could transfer its unspent money to third-party entities tasked with
housing-related projects, the national government would not be able to reapportion large chunks of the province’s housing budget.
The FSHS’s annual reports contain clues as to how the alleged plan was rolled out. In the 2012/13 financial year, the department transferred over R200 million of its unspent grant money to the Housing Development Agency, the Social Housing Regulatory Authority and two private funds for housing-related projects. 14 In other words, instead of forfeiting its unspent housing grant to national government, the department chose to transfer the monies to third parties. These entities were supposed to use this money for projects related to housing. The total amount the FSHS transferred to third-party entities more than tripled to R620 million in the following financial year.15 This time, some of the largest transfers were made to entities whose principals and other officials were said to be close to Magashule. Bloem Water, for instance, received R230 million to
‘expedite the delivery of water and sanitation services to [housing]
beneficiaries within [the] Free State’. 16 The chair of Bloem Water, Bernard Tefetso Phitsane, is a former business partner of Magashule and his son Tshepiso. 17
Phitsane also sat on the board of the Free State Development Corporation, along with two other known Magashule associates: Thoko Malembe’s business partner Hantsi Matseke, who was appointed FDC
board chair in 2012;18 and Magashule’s former business partner Blacky Seoe. At the end of 20
13, Ikhraam Osman became the entity’s new CEO. Osman had worked under Magashule when the latter was still an MEC. In fact, sources told me that Osman was among the five officials at Magashule’s Department of Economic Affairs and Tourism who were suspended in 1996 by then premier Mosiuoa Lekota over
allegations of dodgy financial dealings. 19
Like Bloem Water, the FDC received some of the FSHS’s unspent funds. In late 2013, the provincial government approved the transfer of up to R100 million from the housing department to the FDC ‘to facilitate the pilot implementation of alternative building technology (ABT) in a people’s housing process (PHP) project in Thembalihle Ext 4, Vrede’, according to a government gazette from March 2014. The FDC was to act as ‘account administrator’ for the construction of 1 000
subsidised houses in the eastern Free State town.20 This was all part of the plan. ‘Paying the money to the FDC was a much safer bet, seeing as Ace was very close to the FDC’s leadership,’ one of my sources alleged.
The department subsequently transferred just over R50 million to the FDC in 2013/14,21 and another R12 million the following financial year. 22 For some inexplicable reason, in its 2013/14 annual report the department stated that the money was meant for the ‘procurement of land’. 23 Yet an earlier township planning report confirmed that the site for the proposed houses was situated on a portion of the farm Krynaauwslust, which belonged to the local municipality. 24 Therefore, there appears to have been no need to procure any land for the proposed development. Another portion of the same farm was later controversially leased to the Gupta-linked Estina for Vrede’s disastrous dairy venture.
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