A flagship housing project for the poor, for which a former subsidiary of the Congress of South African Trade Unions’s (Cosatu) investment arm was responsible, has been brought to the brink of collapse amid accusations of mismanagement and financial misdemeanours.
According to a forensic investigation report commissioned by the Gauteng Department of Housing, the project has more liabilities than assets.
Tsepo, a subsidiary of Cosatu’s investment arm Kopano Ke Matla, was awarded a tender in 1998 to construct Tsutsumane Village in Alexandra, northern Johannesburg. The development was to house sportspeople participating in the All Africa Games held in Johannesburg in 1999. Once the development was complete, Tsepo was to manage it, through its wholly owned subsidiary Semag. Semag now faces liquidation.
After the games, the 1 799 houses were to be transferred to the poor. Some were to be rented out and others sold in a rent-to-buy scheme. Tenants were to qualify for ownership of the houses with the help of government subsidies.
But shoddy workmanship on the houses, combined with poor credit and financial controls, have placed the project under threat, the report says.
A well-placed housing expert told the Mail & Guardian that the union’s investment company “took the money and delivered nothing”. The company owes R86-million arising from the building of the project, yet, says the report, the figure “cannot be verified [by] any supporting document”.
The report says that in October 2000 the housing department deposited just more than R1,5-million into the company’s account, and that this is unaccounted for.
As recently as the end of May this year Semag owed the National Housing Finance Corporation (NHFC) about R23-million and Wozani Security about R490 000. The NHFC, says the report, “seems to have a secured claim” — which means it would enjoy preference in the queue of creditors should the project be wound up.
Selling off Tsutsumane Village to private companies is one option the housing department is considering.
Responding to an earlier call for comment from the M&G, a man who said he was a consultant employed to help manage Semag declined to comment. He said he would get someone else to do so. Nobody did.
Semag paid Nicor, an information technology company 35%-owned by Kopano Ke Matla, a monthly retainer to provide financial administration, accounting and reporting services.
In December last year the then Semag general manager, David Marema, allegedly ordered a R100 000 bonus payment, as a 13th cheque, to staff. This was done without the board’s approval, the report says.
One housing expert has suggested that Marema resigned before having to account for the payments.
Marema told the M&G that he denied the allegations. He blamed the failure of the project on “remote control” by the housing department. He said “political instead of business decisions” had been made.
“When I joined Semag 700 houses were standing empty. A month later they were invaded by so-called homeless people of Alexandra, led by Marks Modiba,” he said. “I solicited police support and it took four months for things to return to normal.”
He said the tenants who moved into the damaged houses became impatient with the slow pace of the repairs and embarked on a rent boycott. The houses were eventually repaired.
“During the rent boycott, Tsepo was nowhere to be found. They did not even attend board meetings.
“By 2001 we reached a 98% payment level. Tsepo came back and started giving us instructions such as to stop with the repairs. They kept postponing the eviction of non-payers. When we were about to evict people, we were told not to do so because the World Summit was [about to take place].
“When the provincial department took over, we were happy that we would have a company that was not interested in profit and that would not interfere. We were disappointed when [Gauteng housing department head S’busiso Buthelezi], without consulting with or a request from the board, hired a community liaison officer — Modiba.
“I strongly objected and wrote to the provincial government wanting to know his role and why he was appointed,” said Marema. The M&G was unable to contact Modiba.
On allegations that he paid his staff bonuses without permission, Marema confirmed that the 13th cheque was paid and said he had the authority to do so. He denied that it amounted to R100 000.
He said Semag’s untenable situation was a result of “reckless trading by shareholders and directors of the company. “Semag never had a peaceful history. It was a difficult and complex project, but I still believe that it has the potential to grow and be sustainable if it observes proper corporate governance measures.”
This is one of the few points on which Marema and the report agree.
“The company’s relatively short trading history has been punctuated by frequent, cyclical management rotation, providing limited stability and continuity,” said the report.
“The composition of the board has, hitherto, consisted exclusively of non-executive-type appointments with local management representation being provided on an invitational basis only.” This means there was no real management of the project.
Kopano this week told the M&G that it has not been involved with Semag since 2001.