Who paid for the five new private homes that are part of the president’s homestead? The answer may prove to be the real Nkandla scandal.
President Jacob Zuma could not afford the five houses he had built at his homestead since 2009 – three of which cost R19.5‑million – an amaBhungane investigation has concluded.
This raises the question of who coughed up the money.
It also suggests that the real Nkandla scandal is yet to emerge, given that Zuma has a history of plugging the gap between his income and expenditure with donations and soft loans from friends, family and benefactors (See “A history of hand-outs” below).
This comes at a time when opposition parties are pressing the new Parliament to respond to public protector Thuli Madonsela’s damning Nkandla report – and at a time when the Special Investigating Unit (SIU) is closing in on contractors who may have benefited improperly.
Although the cattle kraal, chicken coop, fire pool and retaining walls were the target of Madonsela’s opprobrium, the five new structures that Zuma claims he had built for himself have so far largely escaped scrutiny.
Although they were a private project, they became entwined in the controversial R246-million state-funded security upgrades because Zuma’s private contractors were also employed by the state.
The protector was unable to make a finding about the houses, partly because the president appeared to flout the law by ignoring her questions. Zuma has always denied the state paid for them, but a close analysis indicates he must have received a helping hand.
Information unearthed by amaBhungane discloses that Zuma’s builder, Moneymine Enterprises, quoted a price of R19.5-million for the first three of the five houses that were built. The figure was extracted by combing through the 12 000 pages of public works documents obtained through access-to-information litigation last year.
Zuma denied to Madonsela that he had any bond for the first three houses. But in any case, commercial loan repayments on R19.5-million would be unaffordable on – and consume most of – his R2-million-plus annual salary (See “The phantom bond that does not measure up”).
How, then, did he afford the lavish extensions?
Neither the president nor any of his contractors has been willing to say how he paid for the “private” work done at Nkandla, and the presidency again did not respond to questions about this.
The president’s lack of candour raises red flags, exacerbated by the obfuscation and evasion proffered by his lawyers and supporters (See “The timing of an intertwining” below).
Ultimately, the evidence suggests, Zuma can only have paid for his private houses in two ways – either by cross-subsidisation or through a benefactor. Both are problematic.
Option one: Hidden subsidy
The work on the president’s private residences could have been cross-subsidised in some way by the state’s huge expenditure on the “public” part of the Nkandla project (See “Following the paper trail for JZ’s pads” below).
Both the department of public works and the building contractors at times conflated the “public” and the “private” work at Nkandla.
In one document, Zuma’s builders described the department as the “client” in respect of the private contract they were completing for him.
The department strenuously denies that it ever entered into any formal arrangement with the contractors it inherited from Zuma to pay for, or subsidise, Zuma’s private construction.
The contractor concerned, Moneymine, did not respond to questions about whether Moneymine may have privately subsidised Zuma.
Option two: Hidden benefit
The president may have received some undisclosed benefit or loan that has allowed him to afford the R19.5-million-plus outlay.
But a benefit or loan ought to have been disclosed in his Cabinet declaration of interests.
No such disclosure is made in the publicly accessible information of Zuma’s register for the years in which the houses were built.
Madonsela, who accessed the private portion of Zuma’s register during her investigation, makes no allusion in her report to there being any such declaration by him.
Zuma failed to answer Madonsela’s direct question about “the amount that you paid for the construction of the three new dwellings?”
He also did not respond to an amaBhungane invitation last week to disclose the source of the funding for his private building or any declaration he has made in that regard.
The documents released by public works department also do not clearly establish that public works did not subsidise Zuma’s private costs.
The architectural plans on which the costs were based have been withheld, and Zuma’s architect, Minenhle Makhanya, appears to have been effectively in sole control of the cross-over between the public and private work.
Makhanya’s designated lawyer did not respond to questions.
Phillip Masilo, a legal adviser to the public works ministry, said that his team has gone through all payments made by public works: “From that analysis and dates when payments were made, reasons for payments etc, it was clear that no payment was done for any work or anything relating to the building of private residences except for security-related matters.”
But the department’s documents disclosed to amaBhungane show that the private and public projects partly overlapped in time and that the allocation of public and private costs was neither clear nor undisputed.
For instance, an initial charge to Zuma’s account for a portion of the bulk earthworks was later rescinded.
Madonsela herself drew attention to the void in the record about Zuma’s private project. She noted: “I am not able to establish if costs relating to [Zuma’s] private renovations were separated from those of the state in the light of using the same contractors around the same time and the evidence of one invoice that had conflated the costs ... “
A weak link?
City Press recently quoted an unnamed senior ANC source as saying that ANC-aligned businessmen are seeking “a solution” to the latest Nkandla saga. The paper’s source suggested that Zuma’s backers were prepared to “repay” his contractors for any amounts the SIU recovers from them in respect of work done on the security upgrade for which they had overcharged the state.
If accurate, the report indicates unease about what the contractors might reveal if they are squeezed.
That concern appears to be well founded. The SIU has been criticised for its investigation of Nkandla, given its focus on mid-level departmental officials, but a source familiar with the thinking at the unit says it has adopted a deliberate approach that may prove effective in exposing bigger fish – by applying pressure lower down the food chain.
The unit has confirmed preparing civil claims against those “who illegitimately gained money out of ... the Nkandla procurement.”
It is understood the unit has notified contractors that they will be liable for any overcharging that can be proved once the unit has conducted an independent audit and costing of the work performed.
The SIU source indicated that if the contractors are faced with sizable civil claims, they might be more willing to open up about any kickbacks or other irregularities.
The City Press article suggestion that any loss suffered by Zuma’s contractors would need to be reimbursed by his backers makes little sense – unless they, like the SIU, suspect his private improvements might have been cross-subsidised in some informal way.
The phantom bond that does not measure up
One funding possibility for Zuma might have been a mortgage bond borrowed from a bank.
Indeed, when the president defended himself in Parliament, he referred to a bond, saying: “I am still paying a bond to this day.”
This begged the question of whether this bond had funded the further expansion of Zuma’s private household beginning in August 2009. During her investigation, public protector Thuli Madonsela wrote to the president, asking him to make available “a copy of the registered bond relating to your private residence and any other relevant documentation and/or information pertaining to the funding thereof”.
In her report Madonsela indicated that, in his annual register of interest declarations, Zuma had only disclosed the existence of one bond in respect of his residence at Nkandla (See “A history of handouts” below).
The president did not reply to Madonsela’s letter or to repeated reminders. Finally, in a written answer Zuma refused to comply, arguing the bond “relates to the first phase of the development and well before I assumed the office of president … it does not relate to the period of your investigation, nor does it shed light on any aspect thereof.”
From this it was clear that Zuma was referring to the bond raised during the Schabir Shaik era in the early 2000s, for an earlier, more modest phase of building at Nkandla. And in any case, Zuma would not have been able to afford a bond for R19.5-million, as was quoted for the three new dwellings.
The instalment on that amount over 15 years is R197 782 a month. At the time his private residences were completed, Zuma had been president little more than a year and earned a monthly salary of R197 288.
Following the paper trail for JZ’s pads
Among the Nkandla documents obtained by amaBhungane are two that provide a clear indication of the cost of President Jacob Zuma’s new houses at Nkandla.
Document one is a tender submitted to the department of public works in mid-June 2010 by Moneymine, then officially the president’s privately contracted builder for his three houses. In its bid to be part of the proposed Nkandla security upgrade, the company listed its only current project as “Kadunusa homestead”, which was slated to be completed by “30/06/2010” – the end of that month. Kadunusa is apparently a misspelling of KwaDunusa, another name for where Zuma’s homestead is located.
The project is listed as being managed by “Minenhle [Makhanya] Architects”, the “client” is entered as the “department of public works” and the contract value is R19 454 100. Moneymine, this document suggests, was under the impression that the department was responsible for the private work it was doing for Zuma.
Document two is titled Preliminary Cost Estimate No 3. It is an early department costing of the Nkandla project and indicates that the expense of the three new houses Moneymine was building was to be split between the public and private accounts.
The state was listed as picking up the tab for one house – tagged as a “new guesthouse” – for R6 471 360. Two “private residences” were for Zuma’s account at a cost of R12 942 720. Later, the “guesthouse” no longer appears in the department’s accounting.
There is no further documentation indicating who paid for the three new private residences.
The department declined to provide clarity on the issue. The combined value of the three houses, R19 414 080, is very close to the cost of the work Moneymine said it was doing for the department in its June 2010 motivation. – Sam Sole & Lionel Faull
A history of hand-outs
A forensic audit report, which KPMG prepared in 2006 for the National Prosecution Authority before Jacob Zuma’s aborted corruption trial, set out in stark detail the extent to which he had relied on others to pay his debts. In the words of the report: “The financial position of Zuma deteriorated over time … Zuma’s cash requirements by far exceeded his ability to fund such requirements from his salary.”
The report foreshadows new concerns about how Zuma was able to finance the R19.5-million construction of three new houses at his Nkandla homestead, commissioned in August 2009 on an annual presidential salary of just over R2-million.
KPMG identified the benefactors who have come to his rescue before, several of whom helped Zuma to pay for an early phase of relatively modest building improvements at Nkandla in the early 2000s. They include:
- Schabir Shaik: R4 072 500 Shaik styled himself as Zuma’s “financial adviser”. He used his proximity to Zuma as a trump card to promote his own business. Over a 10-year period, Shaik paid more than R4-million towards Zuma’s expenses, including some of the early Nkandla improvements. When (retired) judge Hilary Squires convicted Shaik for corruption in 2005, he flagged the “mutually beneficial symbiosis” between Shaik and Zuma.
- Nelson Mandela: R1-million Elder statesman Mandela came to Zuma’s rescue in June 2005 with a R1-million cheque deposit shortly after then-president Thabo Mbeki had dismissed him as his deputy following Shaik’s corruption conviction.
- Jurgen Kögl: R1 075 091 Like Shaik, Namibian businessperson Kögl became known as a “financial adviser” to Zuma, and helped Zuma with a loan to meet repayments for a bond on a Killarney flat and a Mercedes-Benz E-class 230.
- Julie Mahomed: R431 000 Julekha “Julie” Mahomed was Zuma’s lawyer and testified during Shaik’s trial. KPMG identified several payments made from Mahomed’s law firm’s trust to Zuma in 2004 that he used to pay his Nkandla builder.
- Vivian Reddy: R324 110 Durban businessperson Reddy appears to have become involved in funding Zuma’s Nkandla development when financial pressures made it difficult for Shaik’s companies to pay for it. Reddy later also met some of the repayment obligations on a R900 000 bond from FNB that Zuma obtained on Nkandla in 2002. Reddy serviced the bond until 2005, after which Zuma tried to take it over. Zuma has told the public protector that the 2002 bond he obtained with Reddy’s assistance did not cover the R19.5-million improvement he commissioned in 2009.
- Khulubuse Zuma: R180 000 Zuma’s nephew, Khulubuse, intervened in 2005 to pay Reddy back for some of the bond repayments his uncle owed Reddy. But Zuma couldn’t pay Reddy because he was overdrawn at the bank.
- Nora Fakude-Nkuna: R174 200 In 2000 Fakude-Nkuna, a longtime friend of Zuma, paid the architects’ fees for the first phase of the then deputy president’s Nkandla estate. She also channelled money through another Zuma nephew, Raymond, to pay the builder at the time. – Stefaans Brümmer, Sam Sole & Lionel Faull
The timing of an intertwining
The sequence of events described by those sympathetic to President Jacob Zuma – and partly by the president himself – implied that the state could not have subsidised his private construction work because it was already well under way when he became president in May 2009.
In November 2012, responding to media reports exposing the scale and cost of the security upgrades at Nkandla, an emotional Zuma told Parliament: “By the time government came, the contractors were on site that had been enlisted by the family ... A wrong impression has been created in the country, that the government has built a home for me. That is not true.”
A task team, set up by Public Works Minister Thulas Nxesi in October 2012 to probe the upgrades, perpetuated that narrative. Their report submitted to Nxesi noted: “On May 21 2009 the professionals of DPW [the department of public works] visited the president’s residence and prepared a … proposal on security upgrades to be effected. At this time the construction of the residence by the Zuma family was already under way. The work had progressed as follows: House 1: all works completed up to roof height; House 2: building works was up to below roof height; House 3: building works was up to below roof height.”
But this description of progress on Zuma’s private project is taken from a document dated more than a year later: May 25 2010.
Evidence drawn from DPW documentation, Madonsela’s report and satellite images, shows Zuma’s contractors began building the three private houses in late August 2009, when public works was already on board. The two projects (private and public) were intertwined. – Sam Sole & Lionel Faull