Prior to the R1.7-billion police headquarters leasing scandal, developer Roux Shabangu was a major beneficiary of "irregular" Land Bank loans.
Roux Shabangu, the businessman at the centre of the R1.7-billion police headquarters leasing scandal, has a history of using political and family connections to make millions from South African taxpayers.
Mail & Guardian investigations reveal details of how, before grabbing at lucrative and questionable state leasing opportunities, Shabangu positioned himself in 2006 to benefit from R130-million in Land Bank loans.
They were part of an “irregular” R1-billion Land Bank loan book that is still being investigated by the Hawks.
One of Shabangu’s partners in the two companies that benefited from the loans was Minister of Co-operative Governance and Traditional Affairs, Sicelo Shiceka, who is being investigated by the Public Protector for allegedly misusing public funds.
Another of Shabangu’s partners was Ram Sookdeo, who headed the Land Bank programme—the Land for Development Finance Unit (LDFU)—that disbursed the loans.
Moreover, it was Shabangu’s cousin, Land Bank official Jabu Shabangu, who introduced him to the two companies’ core shareholders before the loans were approved.
Shabangu was listed in the finance unit’s books as recipient of a third loan, of R260-million, before the unit was shut down in 2007 under a cloud of questions about its legitimacy.
That Shabangu benefited from LDFU loans is separate from the previously reported fact that in 2007, the Land Bank paid one of his companies R10-million from its contentious AgriBEE fund.
The reason for this payment remains obscure and it is still the subject of an independent police investigation.
Plundering and mismanagement of the Land Bank between 2006 and 2008 prompted government to replace the board and the chief executive and the bank was shunted from the ministry of agriculture and land affairs to the ministry of finance.
In the Land Bank’s 2009 annual report Finance Minister Pravin Gordhan wrote that it had been “dogged by allegations of mismanagement, fraud and corruption”.
He said four forensic investigations had been commissioned and their reports had been handed to the Serious Economic Offences Unit of the South African Police Service and the Hawks.
One of these investigations targeted the AgriBEE fund. Fraud-related charges have been laid against four suspects. Another targeted the LDFU.
Driven by former Land Bank chief executive Alan Mukoki, the LDFU approved loans worth almost R1-billion in 2006 and 2007.
This was in spite of three legal opinions, solicited by bank officials, stating that the bank’s legislated purpose was to fund agriculture, not development, and that the LDFU loans were unlawful.
The deals were soft on the recipients because the bank carried 100% of the risk.
Investors would not have to make down payments and they had to service the loans only after about two years.
“It was too good to be true,” said one investor who borrowed from the bank.
But the unit was closed down when a forensic investigation, ordered by the former Minister of Agriculture and Land Affairs, Lulu Xingwana, uncovered serious irregularities and alleged fraud on the part of bank officials, including Mukoki.
In early 2006 a group of investors presented a proposal to the LDFU for funding to develop a Pretoria property, via a shelf company, Idada Trading 61.
One investor was Sookdeo, who had been a bank official until 2001.
Jabu Shabangu told the group the application was in order, except for the fact that the company lacked a black economic empowerment (BEE) component. So he recommended that they partner with his cousin, Roux Shabangu.
“Jabu said he had a relative who was in the construction business and it could help on the BEE side,” said one person close to the deal. Others corroborated this.
Two ANC heavyweights then joined Idada’s board: Shiceka, at the time a member of the Gauteng ANC’s provincial executive committee, and Gauteng legislature speaker Lindiwe Maseko.
“The idea of bringing these politicians [on board] was to go to council and get the work done quickly,” said another person close to the deal, referring to the various bureaucratic permits needed for the development.
In April that year, the bank approved Idada’s R29-million loan.
That same month, Sookdeo was appointed as a consultant to head the LDFU. Astonishingly, he remained an active Idada shareholder while heading the very unit that disbursed loans to the company.
An extensive trail of documents, seen by the M&G, shows that Sookdeo continued to involve himself in managing the account on the bank’s behalf.
At the time a second company, called Westside Trading 570, was formed, including many of the same directors, according to the Companies and Intellectual Property Commission (CIPC) database.
They included Shabangu, Shiceka, Sookdeo, Maseko and Lydia Sebego, who headed the North West health department.
By June, they had also secured an LDFU loan, this time worth R100-million, to develop a Hartbeespoort property.
A third Shabangu company, Golden Dividend 36, was written into the Land Bank books as a “pipeline” project. It had applied for R260-million. An LDFU spreadsheet note on the project states: “File with Jabu Shabangu.”
Sookdeo’s role in Westside is unclear. CIPC records reflect that he resigned in May, after joining the bank, while two shareholders denied he was involved at all.
One source, however, was adamant that while Sookdeo headed the LDFU, he remained a “ghost shareholder” in Westside and that co-director Desmond Golding held his 10% share. Another shareholder first told the M&G that Sookdeo had not been involved in Westside, but later admitted to his shareholding, claiming that he sold his shares before joining the bank.
Sookdeo could not be reached for clarity and Golding denied the claim.
Irregular loan book
Xingwana placed a moratorium on all LDFU payments in October 2007, and neither Idada nor Westside could pay its contractors thereafter. Both developments stalled.
Creditors began to line up and boardroom spats and internal legal battles crippled the companies. By then, Shiceka, Maseko and Shabangu had resigned from Idada.
By last month, Idada owed the bank R25-million. It has since been liquidated, its assets sold for R13-million. Westside currently owes the bank about R100-million and Judy Bornmann, a Westside and Idada shareholder, said Westside was trying to sell the development to pay off debts.
Back on his feet
In October 2007, the same month that Xingwana placed a moratorium on all LDFU transactions, the Land Bank made a hasty and murky R10-million payment to one of Shabangu’s companies, African Dune Investments 123.
Last year the M&G revealed that this payment, allegedly made “irregularly” to him from the AgriBEE fund, was the target of Hawks investigations.
What Shabangu was paid to do is unclear, but the M&G can confirm the following:
- Shortly before the R10-million payment Shabangu approached land affairs director general Thozi Gwanya with a proposal to buy farms to be used in land redistribution, but he was turned away, according to Gwanya.
- At the same time, Shabangu approached Xingwana’s adviser, Sibusiso Gamede, with a proposal. Gamede referred him to Land Bank general manager Herman Moeketsi with the same proposal and within five days R10-million was transferred to Shabangu’s company. Neither Gamede nor Moeketsi would say what Shabangu had proposed.
- Also in October 2007, as revealed by Landbouweekblad, Shabangu offered to buy land from farmers and agents throughout the country on behalf of the state. In a letter, he claimed to have access to a R900-million budget.
- Asked what he was paid R10-million to do and in terms of which state mandate he was trying to buy farms, Shabangu provided a two-page Land Bank letter addressed to his company, approving a R10-million “grant”. Moeketsi had signed the letter after the date of payment.
Ostensibly, the grant was to be used to aid emerging farmers and “educate policy-makers”. Shabangu’s company “will from time to time give progress report (sic)” to Moeketsi.
Shabangu said: “I was a consultant in this project, I made payments to the subcontractors.” He would not say who these were.
‘We were cleared of any wrongdoing’
- Asked to comment this week, Shabangu said: “You seem to think that I am incapable of conducting my business with honesty, integrity and ethics. What I cannot ignore is the fact that you seem determined to discredit my name and that of my company.”
He said his cousin “could not have influenced” the bank’s decision to grant his companies loans as “I was roped in as partner in Idada at a very late stage after the credit-risk assessment was almost complete”.
He claimed that investigations into the deals had cleared them of any wrongdoing.
However, police sources have confirmed investigations into African Dune Investments 123 and the entire LDFU portfolio are still taking place.
- Land Bank chief executive Phakamani Hadebe said the LDFU investigation had been handed to police: “I cannot comment on individual cases.”
- Jabu Shabangu did not respond to requests for comment, but Hadebe said Jabu had previously been suspended and was reinstated after successfully challenging the disciplinary action.
- Shiceka, Maseko and Sebego denied they were cut in because of their political clout and Shiceka denied any involvement in Westside.
- Bornmann said: “Our dealings with the Land Bank have been devoid of any irregularities.” She said Shabangu, Shiceka, Maseko and Sebego “had little or no leverage at all”.
The original version of this article referred to a 2007 forensic investigation that “alleged fraud” on the part of former Land Bank chief executive Alan Mukoki.
Mukoki has since highlighted that he denied the substance of this allegation in the investigators’ report.
The 200-page report by auditing firm Deloitte is part of a body of evidence being investigated by the Hawks.
Hawks spokesperson McIntosh Polela confirmed this week that Mukoki had been investigated for fraud and that a case docket had been handed to state prosecutors. He confirmed this dealt specifically with Mukoki, but he would not detail the charges.
Mukoki said: “I can’t comment on that because I don’t know about it.”
Deloitte had been appointed to investigate the “commencement, management and administration” of the Land Bank’s Land for Development Finance Unit, following a Cabinet decision to investigate financial management at the bank.
The investigators reported various irregularities and ultimately argued that Mukoki “may have committed fraud”, recommending that criminal charges be laid against him.
Justifying their allegation, Deloitte’s investigators argued that Mukoki had been aware of three legal opinions, solicited by his staff, which found that the bank could not approve the unit’s loans as they were outside its legal mandate.
But Mukoki disputed the manner in which bank officials solicited the legal opinions.
“The so-called three legal opinions suggesting that [the unit’s] loans fell outside of the Land Bank mandate were themselves fraudulently obtained. [They] were never part of the Land Bank mandated record,” he said.
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