Gangster State

by Pieter-Louis Myburgh

  Meanwhile, the auditor-general picked up that all was not well with the department’s strategy of transferring unspent grant money to third-party entities such as the FDC and Bloem Water. ‘The transfer of a portion of the human settlement development grant (HSDG) to the receiving entity was not made in accordance with section 16(2) of

  DORA [Division of Revenue Act], as the payment schedule was not approved by Treasury,’ read the AG’s 2013/14 report on the department. 25 It is not clear which ‘receiving entity’ was being referred to. The AG also bemoaned the fact that the department had failed to surrender unspent conditional grant monies that National Treasury had forbidden it to keep. Nevertheless, the FDC now sat with a sizeable chunk of the province’s housing funds. If the FDC had received the money in an unlawful manner, it would be a long and arduous journey for national government to retrieve it.

  In early 2014, the Vrede housing project kicked into gear. After the official site handover in January, work commenced in May that year. 26

  By October, less than six months into the project, the first signs of trouble surfaced. The FDC had paid Tekeweni, the contractor from KwaZulu-Natal, just over R40 million in three instalments, including an ‘EPHP advance’ payment in April. 27 Narsai told me the advance payment amounted to about R17 million and that it was used for materials and other expenses related to the project.

  But there seemed to be very little progress on site. In a letter addressed to the director-general of the national Department of Human Settlements, dated November 2014, Narsai highlighted problems that were hampering the project. They mostly related to what appeared to have been a total lack of planning on behalf of the local municipality and the Free State provincial government. The province’s list of beneficiaries for the project was in tatters, and so Tekeweni and VNA did not really know who they were building the houses for, Narsai wrote. There was also no electricity supply to the site, and the water supply was insufficient. All of this severely affected the small factory Khaya Readykit had opened on site to manufacture their prefabricated

  timber wall panels, explained Narsai in his letter. The manufacturing process and construction on site had to be kept going with power generators and water tanks. Even if the houses could all be finished under such undesirable circumstances, the contractor would not be able to connect them to services, he warned the director-general. It appeared as if the local authorities and the provincial government had done virtually no planning before they started spending money on the project.

  This was because immense political pressure was brought to bear so that illicit funds could begin flowing to the political beneficiaries of the scheme, said one of my sources.

  By June 2015, only five houses had been finished, according to a progress report. ‘The current rate of progress is still of great concern as the contractor will never be able to complete the expected 800–1000

  houses within the 18–24 months construction period,’ warned the report. 28 This was despite the fact that the FDC had by now spent almost R60 million on the project, according to its annual reports.

  Tekeweni and VNA had been on site for more than a year, but the end was nowhere in sight. The main reasons for the severe delays included the late delivery of materials, a lack of fuel and a breakdown of the manufacturing plant, the report found. Furthermore, many of the houses that were still being finished had ‘external and internal cracks

  … on the walls’. 29 By October 2015, only 136 houses were finished. 30

  The project was in serious peril, as all 1 000 units should have been completed at this point.

  The Vrede dairy project had by now become a national scandal, but it was the housing debacle that threatened to boil over and spark serious unrest in the normally quiet town. When the completed houses could

  not be connected to water or electricity, the local community protested and stole most of the tiled roofs. 31

  A follow-up progress report found that cash-flow problems also contributed to the debacle. ‘Spending to date not a true reflection of work done,’ read this report. It found that ‘actual progress’ was ‘sitting at 10% and the project has passed its completion date’. The report recommended a new completion date of 31 March 2016. 32 Some of the role-players involved in the project now started to panic. Based on Khaya Readykit’s original quotes, the less than 200 completed houses should have cost about R18 million. As mentioned earlier, the FDC had by now splurged almost R60 million on the project. People started to wonder where the rest of the money had gone.

  A series of emails between some of the people working on the project, sent in October 2015, raised some serious concerns. One individual alleged that the funds for the project had dried up because Narsai’s VNA had stolen the initial upfront payment from the FDC. ‘The Vrede contract seems to be a textbook case for how not to undertake a housing contract in South Africa,’ fumed the email’s author. The source who gave me the emails also alleged VNA had channelled a ‘thank-you fee’ to Zuma using some of the proceeds of the FDC’s upfront payment. This was the second time I was told about a ‘thank-you fee’, by an independent source.

  Narsai strongly denied this. He said all the money Tekeweni and VNA received could be accounted for. But why were there less than 200

  completed houses, I asked him. Narsai said VNA and Tekeweni had to spend much more money on preparing the sites for the houses than they had anticipated. The local council was supposed to provide platformed sites for each house, along with roads, water and electricity.

  Narsai explained that this was not done. ‘The scope of works changed completely,’ he told me. Tekeweni and VNA had to fork out much more money on work other than building the houses, he claimed. Originally, the project was expected to cost R100 million, but due to the added expenses it was going to cost taxpayers almost R240 million, according to a progress report VNA compiled in February 2015. 33

  One of my sources who worked on the project contested Narsai’s claims. ‘The contractor teams were bloated with various team members to justify the exorbitant fees they were charging,’ he told me. In other words, VNA and Tekeweni were allegedly pocketing large fees instead of spending most of the money on the project. ‘These allegations are strongly refuted by VNA,’ Narsai said. There had been a ‘fixed cost’

  for the houses’ top structures, and it was impossible to exceed this cost seeing as it formed part of the bill of quantities, he claimed.

  VNA’s project-management fee also seemed exorbitant. According to Narsai, VNA’s original fee was valued at 15 per cent of the project’s initial estimated cost, which came to R100 million. The company’s fee, including VAT, therefore amounted to just over R17 million, he told me.

  This did not include Tekeweni’s fees. A professional in the construction industry told me that project-management fees should range between 3

  and 5 per cent of the total project cost. Another South African project-management firm charges between 6 and 9 per cent, according to its website. 34 Narsai was adamant that VNA’s fees were not excessive. In fact, he claimed VNA had spent more than R20 million on the project and therefore actually suffered a loss.

  Selvan Moodley, Tekeweni Civils’ co-owner, also denied that his firm had been overpaid. Moodley told me Tekeweni spent a lot more money than anticipated on earthworks, servicing the sites and related tasks.

  But I was handed an explosive set of documents that seem to explain why VNA might have needed to charge an apparently inflated fee.

  These papers also support my sources’ claims about Zuma’s ‘thank-you fee’ from VNA. A closed corporation called Premier Attraction 1016 received R2 million from Narsai’s VNA in the 2015/16 financial year, according to its financial records. Premier Attraction had invoiced VNA for ‘consulting services’ in June 2015, and Narsai’s company paid the R2-million fee at some point before the financial year ended in March 2016, right in the middle of the Vrede housing project.

  According to the invoice, Premier Attraction had done
work for VNA relating to a ‘Mpumalanga development’. In November 2018, I asked Narsai whether VNA had done any work in Mpumalanga. At the time, I did not mention the invoice from Premier Attraction. Narsai said VNA had only worked as a ‘sub-consultant’ in Mpumalanga between 2003 and 2005. He would later tell me a different story.

  The man behind Premier Attraction is Thalente Myeni, the son of staunch Zuma ally Dudu Myeni. Thalente Myeni and a band of politically connected businessmen were shareholders in a consortium that won a huge contract worth R51 billion to supply new commuter carriages to the Passenger Rail Agency of South Africa (PRASA).

  Dimadox, the company Myeni used for his stake in the PRASA deal, was supposedly located at Zuma’s house in Forest Town, Johannesburg, according to the company’s registration records. In 2005, the Scorpions raided this property during their probe into Zuma’s involvement in the Arms Deal. 35

  There have long been rumours that Zuma and Myeni’s mother were in a romantic relationship. Both have denied this. 36 But the documents detailing Thalente Myeni’s financial affairs suggest there is a close link

  between the Zumas and the Myenis. Thalente once submitted a

  ‘change of bank details’ form to the South African Revenue Service (SARS). One section of the form required the ‘personal details of person providing proof of residential address’. Myeni provided the name and contact details of Duduzile Zuma, Duduzane Zuma’s twin.

  Next to ‘relationship to taxpayer’, Myeni wrote ‘cousin’.

  When I first researched Myeni’s involvement in the PRASA deal, sources claimed he was fronting for Zuma. The latest documents I obtained suggest he was using some of his income from ‘consulting’

  work – possibly including his payments from VNA – for the benefit of Zuma’s family. A bill for legal work done for Duduzile by a Johannesburg law firm was addressed to and apparently paid by Myeni in early 2016, according to the documents.

  VNA’s R2-million payment to Premier Attraction at the time of the Vrede housing project, coupled with Myeni’s apparent ties to Zuma’s family, suggested my sources might have been onto something. Could taxpayers’ money have been extracted from the Free State’s coffers in order to benefit the then president?

  I finally confronted Narsai with Premier Attraction’s invoice in early 2019. He strongly denied that VNA had channelled a ‘thank-you fee’ to Zuma, or that his firm had paid any politically exposed persons in relation to the Vrede project or any other projects. He admitted that VNA had paid Premier Attraction R2 million, but he said it had been for ‘consulting services’ related to a construction project in Bethal in Mpumalanga. Myeni’s company apparently acted as the ‘development manager’. ‘Premier Attraction 1016 and by virtue Thalente Myeni was never involved in the Vrede ABT project,’ Narsai said.

  As mentioned earlier, Narsai initially claimed VNA had not done any

  work in Mpumalanga since 2005. When I asked him why he had changed his tune only after I asked him about the R2-million payment to Myeni’s company, he told me the following: ‘You were not expressly clear about what work we did in Mpumalanga as I understood that you were requesting whether we had undertaken work directly for Provincial Government. The work [in Mpumalanga] I refer to is for a Private Developer hence I responded accordingly.’

  In a follow-up email, Narsai claimed VNA had paid Myeni’s company to take over the Mpumalanga development. He also said that he had first been introduced to Thalente by Dudu Myeni, the latter’s mother and Zuma’s ‘friend’.

  Meanwhile, Thalente Myeni’s apparent involvement in the alleged Durban ‘plot’ meetings in September 2018 raised further questions about how he had been spending some of his earnings from ‘consulting services’. As mentioned in the previous chapter, a Mercedes owned by Myeni was one of the vehicles allegedly used to collect Magashule, his mother, Dudu, and other ‘conspirators’ after one of the gatherings at a Durban hotel. 37 Another Mercedes allegedly spotted on the scene belonged to Empire Technology, the company owned by Shantan Reddy, who later claimed that he was not in South Africa at the time.

  Given the fact that Reddy’s Empire Technology had directly benefited from a Free State contract and Myeni had been paid on at least one occasion by a contractor to Magashule’s erstwhile province, I had to wonder about the links between the various players and the alleged clandestine fightback operation against Ramaphosa. Myeni did not respond to queries, but Reddy strongly denied that he had been involved in any such scheming. In fact, he claimed that he did not know Myeni at all. ‘Our client and/or its directors further deny being

  familiar with, a business associate and/or a partner of Mr. Thalente Myeni, either directly or indirectly,’ said Empire Technology’s lawyer.

  But Shantan Reddy was also the deputy chairperson of his father’s Edison Power Group, and I discovered indisputable financial links between Edison Power and Myeni’s Premier Attraction 1016. In the 2014/15 financial year, Edison paid Premier Attraction just over R240

  000 in three instalments for ‘consulting services’, according to financial records. Although this was a relatively small amount, the implication of these payments was significant. It cast serious doubt over Shantan Reddy’s assertion that he did not know Myeni. Not only were their respective vehicles allegedly spotted outside a Durban hotel at the same time, but Edison, in which Reddy held a senior position, had also made payments to Myeni’s company in at least one financial year.

  Edison stated that it had paid Premier Attraction about R276 000

  ‘over a period of time’ for ‘legitimate services’. Myeni’s company had been among some forty-five ‘emerging subcontracting companies’

  Edison had paid for doing work on one of its many projects, said Edison’s lawyer.

  However, Vivian and Shantan Reddy apparently had no clue that Premier Attraction’s principal was Thalente Myeni, or that their

  ‘emerging subcontractor’ was the son of Dudu Myeni. ‘The directors and/or senior executives of Edison Power are not involved in such appointments. No one was aware of who the principal of Premier Attraction was or indeed who his parents were,’ claimed Edison.

  Back in Vrede, five years after Tekeweni and VNA first began work there, only 166 houses had been finished and occupied by November 2018, according to a written response from the FSHS. In early 2017, Tekeweni had pulled out of the project and the department had

  appointed Maono Construction, again without a tender process, to build the remaining 834 homes. FDC chairperson Hantsi Matseke owns Maono.

  In her budget vote speech in March 2017, human settlements MEC

  Sisi Ntombela discussed the Vrede housing project. Considering that it had already dragged on for more than three years, her speech was laughable. ‘Madame Speaker, as part of our efforts to speed up construction and improve on quality while addressing environmental concerns, we are exploring alternative building technology,’ she told the provincial legislature. ‘The advantage of this technology is faster completion of houses which would enable us to address the backlog quicker. ’38

  Maono Construction’s appointment presented another potential problem. The FDC, which acted as the Vrede project’s account administrator and implementing agent, would be paying Maono. In other words, the state-owned entity Matseke chaired would be paying millions to her own private company. Neither the FDC nor Matseke nor the FSHS viewed this as a conflict of interest. ‘All PHP projects are paid for by the FDC on behalf of the Department of Human Settlements. This is why the previous contractors and Maono would be paid by the FDC,’ Matseke told me. ‘This relationship between the Department of Human Settlements and the FDC cannot be changed simply because Maono has now been appointed to the project.’ She further claimed that she only interacted with the FDC ‘at board level’

  and did not have any ‘operational responsibilities’. ‘In compliance with the applicable requirements, I declared Maono’s PHP appointment to the FDC board and no conflict of interest was raised by the
FDC

  board,’ she insisted.

  Matseke told me that the project was still not finished due to ‘various challenges’. Even though Maono was appointed in 2017, site handover only took place in March 2018. Some of the challenges included a lack of water at the site and problems with the beneficiary lists, she explained. These were the same problems that had been raised in progress reports in 2014 and 2015 by VNA. Matseke said Maono was

  ‘scheduled to complete the project within the allocated time frame of three years’. In other words, the housing project launched in 2014

  would be finished in 2020, if everything went well.

  A provincial government gazette from February 2018 announced that the FSHS would channel a further R156 million through the FDC for the purpose of completing the Vrede project. 39 Including the previous payments made to Tekeweni and VNA, the project cost had now ballooned to at least R220 million. The province seemed to be pouring more and more taxpayers’ money into a project that it was incapable of finishing.

  During a visit to the site in December 2018, I met a young man who lived in a shack with his grandmother. Their makeshift home was erected right next to a concrete platform on which the grandmother’s ABT home should have been built years before. All around them, people lived in shacks next to identical concrete squares. ‘My grandmother was added to the beneficiary list in 2015, so she has been waiting for three years,’ the young man told me. Ironically, he was wearing a bright yellow ANC T-shirt bearing Jacob Zuma’s grinning face. I recalled something the former president had said on more than one occasion about the ANC’s continued rule over South Africa. 40

  Standing in a field littered with shacks and bare concrete slabs, baking under the Free State’s merciless sun, I struggled to remember his exact

  words. ‘The people of Vrede will wait for their new houses until Jesus Christ returns.’ Was that it? It sounded about right.

  PART VI