DADDY’S GIRL
17
The R9-million freebie
Since coming to power, the ANC has consistently promised to tackle South Africa’s alarmingly high unemployment rate. President Cyril Ramaphosa renewed the ANC’s vows regarding job creation at the party’s 2019 election manifesto launch in Durban. Considering some of the characters who shared the stage with him at this event, the declaration was a farce. Not only has the ANC government continuously failed to make meaningful inroads into reducing unemployment, but some of its top leaders have actively destroyed existing jobs through their questionable conduct.
Secretary-general Ace Magashule is one such leader. As premier of the Free State, Magashule seemingly had a hand in ensuring that the Free State Development Corporation effectively sold his daughter, Thoko Malembe, a property that was once the site of a thriving business. In the process, Thoko pocketed R8.9 million. The deal ultimately destroyed the business and cost its employees their jobs and livelihoods.
Thoko has been at the centre of some of the most egregious examples of Magashule’s alleged state-capture schemes. As mentioned in Chapter 3, she only met her father relatively late in life. Her mother had followed Magashule into exile in Tanzania, where she gave birth in 1990. Magashule later returned to South Africa without them and they apparently lost touch. Thoko was reunited with her biological father in 2011. Ironically, it was Ramaphosa who played a key role in getting them back together. When I first started looking into Thoko’s business
dealings in the Free State, sources familiar with the matter told me that her stepfather – a man with a few political connections of his own –
asked Ramaphosa to facilitate a reunion, which he duly did.
Ramaphosa’s people have never contested this version of events. ‘This is a private matter and it would not be appropriate for the deputy president to comment,’ his spokesperson told me in January 2018, shortly before Ramaphosa became president of South Africa.
Magashule and Thoko have been equally coy about their relationship.
Thoko at first denied that Magashule was her father. ‘I have no relationship with the guy,’ she told me in early 2018, while Magashule’s spokesperson said he would not ‘entertain any questions on the private affairs of the premier’. Shortly after News24 published an article I wrote about Thoko’s dealings with her father’s administration, another report appeared in the Bloemfontein Courant detailing how she had benefited from alleged tender maladministration and tender rigging. 1 Magashule lashed out at the media. ‘They will say this one or that one has a lot of work – so what?’ he asked during his final State of the Province Address in February 2018. ‘There are processes of procurement, so I as premier, believe in radical economic transformation. I will not be bullied into not supporting black business because of all these allegations of corruption against me. ’2
His remarks contained an apparent contradiction. On the one hand, Magashule was adamant that people such as Thoko won government contracts through proper procurement processes. On the other hand, he seemed to suggest that businesses like Thoko’s won contracts because of his support. He had inadvertently acknowledged his power and influence within the province’s procurement environment.
Before I dig into some of Thoko’s many government deals, allow me
to comment on the privacy issue. The spokespeople for both Magashule and Ramaphosa insisted that the then premier’s relationship with his daughter was a ‘private’ matter. I believe that this argument cannot be upheld in the face of strong indications that their relationship, to a large extent, revolved around dubious deals involving public funds and assets.
I have also been asked why people like Thoko should not be allowed to do business with government. When it can be shown that their dealings are free of nepotism and corruption, there should be no reason to prohibit family members of public servants from dealing with the state. Thoko was well within her rights to do business with government provided her powerful father remained at a distance. But he did not, and all indications are that her success was largely attributable to Magashule’s meddling.
While studying at the University of Johannesburg (UJ), Thoko did an internship at a Free State provincial government contractor. Sources alleged that Magashule ‘forced’ the company to take her on board.
According to one of her social media accounts, Thoko graduated from UJ with an honours degree in logistics management in June 2014.
Posing next to her in her graduation photo was Thato Magashule, the premier’s younger son.
Before her graduation, Thoko co-founded Botlokwa Holdings with Joy Hlongwane, a relative of Fana Hlongwane, one of the controversial figures at the centre of the Arms Deal saga. According to sources, Thoko told Joy that she would secure work for their nascent company in the Free State. The earliest documented indication that she made good on her promise can be found in the Ngwathe local municipality’s 2013/14 annual report. According to this, the municipality seated in
Magashule’s hometown of Parys paid Botlokwa Holdings R2.1 million for ‘protective clothing’ for municipal employees. 3
At some point, Botlokwa teamed up with Maono Construction, the company owned by FDC chairperson and fellow Parys local Hantsi Matseke. According to its website, Maono Construction secured contracts worth more than R500 million from the Free State government while Magashule was premier. These included the RDP
projects mentioned in Part III. Matseke told me that Botlokwa became Maono’s ‘enterprise development’ partner, but secured revenues of only about R2 million through the partnership. Matseke, however, was also present on the fringes of the property deal unpacked in this chapter.
In early 2014, Ikhraam Osman, who had worked with Magashule at the Free State Department of Economic Affairs and Tourism in the 1990s, was appointed CEO of the FDC. Sources claim that Osman, along with Matseke and a few other FDC officials, abetted Magashule’s capture of the state-owned entity’s purse.
The FDC, which has a mandate to grow and support the Free State’s economy, partners with a wide range of businesses all over the province. One such business was a Shell fuel station in the eastern Free State town of Phuthaditjhaba, the former capital of the QwaQwa homeland. The FDC owned the land on which the petrol station was situated, and the petrol station’s owner rented the site from the FDC. It was a thriving business, according to sources familiar with the saga. It employed about sixty-five petrol attendants, shop assistants, cleaners and other staff, who in turn fed many more mouths in a corner of the province where unemployment and poverty are about as bad as it gets.
In June 2014, the petrol station’s owner received notice from the FDC
that it intended to cancel the lease agreement for the site. In October,
the FDC applied for an eviction order at the High Court in Bloemfontein. One afternoon in December, while the eviction matter was still being heard, a convoy of SUVs and luxury sedans arrived at the petrol station. Footage from the business’s security cameras captured the day’s events.
Thoko Malembe alighted first from one of the SUVs. She walked over to one of two BMWs that formed part of the convoy and got in. She emerged after about a minute, followed by Magashule and a guard or aide who held an umbrella over his head. They were joined by about five other men. Sources identified Vish Maharaj, an FDC board member, and Mohlouoa ‘Blacky’ Seoe, a former FDC chairperson and one of Magashule’s old business associates, among them. The group walked around the petrol station as if inspecting it, before reconvening near the fuel pumps, where they stood for about five minutes, apparently locked in earnest discussion. The group then broke up and left the site in their respective vehicles. Some of the petrol station’s former employees recalled the visit and agreed that it appeared as if the visitors were doing an inspection. It was after this that rumours began to circulate among the staff that Magashule wanted to buy the business for his daughter.
In June 2015, the Bloemfontein High Court ruled that t
he FDC could ask its tenant to vacate the site if it wanted to, seeing as the original lease agreement had lapsed. The petrol station’s owners tried to fight the ruling, but they eventually relented in May 2016. The business was shut later that year and all the employees immediately lost their jobs.
Shell’s corporate head office, meanwhile, learnt that the FDC planned to sell the property. Seeing as it had supplied fuel to the business’s previous owner, the company naturally had an interest in the matter.
According to a written reply from Shell to my inquiries, they were told that the FDC wanted to sell the site to ‘progress black female land ownership in the Free State’. When Shell entered the negotiations, the FDC indicated that it was considering selling the property to an entity called the MMAT Trust. Thoko Malembe happens to be the sole trustee of the MMAT Trust, which she registered at the Bloemfontein master’s office in 2016. Shell, who told me it had no idea Magashule’s daughter was behind the MMAT Trust, supported the deal. ‘It is in line with our transformation agenda to progress black female business ownership,’
the company said.
According to deeds office records, the FDC sold the property to the MMAT Trust in April 2016. But it was not a straightforward transaction. Instead of having to put up her own money or secure a bank loan, Thoko effectively scored the property for free while simultaneously pocketing R8.9 million. A notarial lease agreement filed at the deeds office explains how it worked: Shell agreed to pay the MMAT Trust R11.5 million as an ‘upfront rental’ to lease the site for fifteen years. ‘On receipt of the upfront rental CDH [Cliffe Dekker Hofmeyr, the notary attorneys for the lease deal] shall issue a guarantee of R2 600 000.00 in favour of … the attorneys attending to the registration of the transfer of the property into the name of the Lessor
[MMAT Trust],’ stated the lease agreement. ‘The guarantee will be made payable on the simultaneous registration of the transfer of the Property into the name of the Lessor and this Lease.’ The agreement also stipulated that ‘the balance of the upfront rental will be paid to the Lessor on Registration’. In other words, when the property was finally registered to the MMAT Trust in early 2017, Shell effectively gave Thoko the money to buy the property from the FDC, plus an R8.9-
million windfall that went straight into her trust’s account. Thanks to the FDC’s willingness to sell the property to the MMAT Trust and Shell’s concomitant involvement, Magashule’s daughter became a millionaire with the stroke of a pen.
It was a strange deal, but Shell maintained that it made good business sense. The upfront rental worked out to about R64 000 a month, which, they told me, was ‘below market value’. Shell intended to appoint a new franchisee to operate the petrol station, but it first had to upgrade the site. The new landlady, Thoko Malembe, would not have to fork out a cent for these upgrades. According to the notarial lease agreement, Shell would be responsible for these expenses. The fuel giant told me it had submitted building plans to the local municipal council and was awaiting approval. ‘Once the site is up and running it will create jobs in the area, potentially more jobs than previously, as we intend to put in a full shop offer that was not at the site,’ one of Shell’s executives promised in January 2018. ‘This will employ more cashiers, merchandisers, bakery staff, back office [staff] etc.’
More than two years after the property was effectively gifted to the premier’s daughter, the site remains abandoned. A few days after the ANC’s 2019 election manifesto launch in Durban, I checked in with one of the previous petrol attendants who had lost his job. ‘There is still nothing happening there, no building or upgrades,’ he told me.
‘Ace destroyed our lives.’
Thoko is the only winner to have emerged from the transaction. Even the FDC has suffered a financial loss. The SOE had held an 18 per cent share in the former operator’s business, which earned it a slice of the petrol station’s profits. It had also received a monthly rental fee of about R30 000 before the business was closed down. After the deal
with Thoko, these income streams dried up.
I asked several sources familiar with the FDC’s dealings how this could have happened. They all pointed to Magashule. ‘This is just one example of Ace’s grip on the FDC,’ said a former MEC and erstwhile Magashule ally. ‘He appointed its board members and executives and made sure the money flowed in the right direction.’ Two other sources who had insight into the deal with Thoko claimed Magashule influenced the transaction. ‘When the FDC’s handling of this deal was questioned internally, FDC staff were told to keep out of it, seeing as the big man was behind it,’ alleged one of them, in reference to Magashule.
My sources also claimed that Matseke and Osman, the FDC’s chairperson and CEO respectively, had deliberately furthered Magashule’s interests. ‘Ace placed those two at the FDC for exactly this reason,’ said one. Tiisetso Makhele, Magashule’s spokesperson at the time, denied the allegation. ‘The premier has not exerted any pressure on any FDC official to do or not do anything,’ he insisted.
Osman echoed this sentiment. ‘Management was never put under pressure by anybody and certainly not [by] the premier,’ the FDC chief executive told me.
In a written response, Matseke admitted that she knew ‘Mr Magashule and his daughter Ms. Thoko Malembe … on a personal basis’, but strongly denied any impropriety. ‘FDC board members get appointed in accordance with the FDC Act and by the MEC
responsible,’ she stated in response to my questions about Magashule’s alleged role in high-level appointments. Allegations that she had influenced the property deal with Thoko were ‘baseless’, she insisted.
‘I, in my capacity as the chairperson of the FDC, only interact with the
FDC at board level and therefore have no ability to influence any operational transactions.’
None of the implicated parties, however, were able to provide me with a sound reason as to why Magashule visited the property along with his daughter and FDC officials just before negotiations to sell the site to Thoko’s trust began. Thoko herself has only provided me with broad comments and remarks. ‘Everyone has freedom of trade. U can call it whatever u want, that’s ur view,’ she said in a text message after I asked her if her dealings amounted to corruption or nepotism.
Shell conducted an investigation into the matter after my article appeared on News24 in January 2018. ‘To date the investigation has not demonstrated any awareness of the landlord’s political affiliation from Shell’s side,’ one of the company’s executives told me. As for the petrol station’s former employees and their families, they are all eagerly waiting for the business to one day reopen its doors. Until such time, they remain mostly unemployed, their prospects further curtailed by Ace Magashule’s version of ‘radical economic transformation’.
18
Vogelfontein
Thoko Malembe’s reunion with her powerful father seemingly brought her great joy and a sense of belonging. ‘Theres no greater feeling like being reunited with ur family, knowing who u are n where u come from,’ she wrote on her Facebook page in June 2011. The reunion certainly seems to have set her on a path towards wealth and success.
When she finished her degree in logistics management in 2013, she was spared the trouble of having to look for a job. She was just twenty-three years old when her newly established companies started clinching contracts from the Free State provincial government led by her father.
One particularly troubling project would ultimately net one of her businesses government contracts worth R150 million. This story centres on a failed low-cost housing development on the outskirts of Bethlehem in the eastern Free State. As with the Shell fuel station debacle, Ace Magashule’s shadow again loomed over the deal.
In early 2012, Magashule and human settlements MEC Olly Mlamleli visited Bethlehem’s Selahliwe informal settlement. They promised residents living in shacks that the provincial government would soon launch a new development nearby and that they would all be moved to proper houses. 1 The pre
mier and the MEC were back in Bethlehem in April the following year, but this time their visit was a low-key affair.
Photos of the gathering show Magashule, Mlamleli and other government officials meeting with a Chinese businessman at a tract of open land officially known as Baken Park. Bethlehem locals call the area Vogelfontein. According to sources familiar with the matter,
Magashule introduced the Chinese businessman, whom he referred to as Mr Lee, as the property developer who had been appointed by government to build houses at Vogelfontein for Selahliwe’s shack dwellers.
Mr Lee was in fact Jianliang Li, a Chinese–South African businessman based in Johannesburg. A month after meeting with Magashule at Vogelfontein, Li co-founded a company called Unital Holdings. His co-director was none other than Thoko Malembe.
Unital’s company records contain an interesting piece of information: for her residential address, Thoko listed the Gupta-owned property in Saxonwold where Tshepiso Magashule had lived and where her father sometimes met with contacts. Registration documents submitted by Unital to the National Home Builders Registration Council confirm that Thoko was also a shareholder in the company. She owned 30 per cent, while Li held the remaining stake.
Magashule and his allies in government apparently tried their best to conceal the fact that his daughter would benefit from the Vogelfontein contract. In a presentation on the Free State’s housing projects, human settlements HOD Tim Mokhesi listed Unital as ‘100% Chinese-owned’.
Magashule and some MECs returned to Vogelfontein in November 2013 to formally launch the RDP project with a small sod-turning ceremony. The Eastern Free State Express covered the event. ‘We don’t want to build a “kasi” township here – we want to build a human settlement,’ Magashule told the local newspaper. ‘We should have schools, recreational places, community halls and many others. ’2 The Selahliwe community was elated.
In the same month, the FSHS awarded a contract worth almost R64
Gangster State Page 24