Hijackers seize R118m state social housing project

The Social Housing Regulatory Authority, which falls under the national human settlements department, has allowed a much-needed R118 million development to be “hijacked” through alleged corruption by the company appointed to run it, documents seen by the Mail & Guardian show. 

The damaging effects of the hijacking of Sondela Village in Ekurhuleni, Gauteng, were evident during the M&G’s visit this week. 

The gated complex, which was developed in 2020 and 2022, belied its multi million-rand, taxpayer-funded price tag, rotting away because of mounting debt, lack of maintenance and because it has had no electricity supply since July 2022. 

At least 10 of the flats in the complex have allegedly been taken over by the hijackers. Some of them have advertised the units for rent on property websites for as little as R1 500 a month and demanded a R1 000 deposit “to secure the flat before viewing”. 

“In the event that you may not like the flat, your deposit will be refunded instantly,” reads one ad. 

In a document from August last year, Biansha van Staden, the acting executive for compliance, accreditation and regulation at the Social Housing Regulatory Authority (SHRA) conceded that Sondela had been “hijacked by a number of illegal landlords”.

The document was addressed to Lebo Makate, of the Gauteng Rental Housing Tribunal’s secretariat, which was apprised of the highjacking of Sondela. In her letter, Van Staden stated that “illegal occupants” had made administration and maintenance of the housing project difficult for the entity.

“[Rent collection] has not been possible as a result of the hijacking of the project and widespread resistance from the tenants, at the orders of the hijackers.”  

This resulted in the SHRA having to pay R337 812.50 to an external company, over the period from July to last month, to investigate widespread mismanagement and hijacking at the complex.

The investigation follows the June Johannesburg high court order which the SHRA obtained against the nonprofit company Let’s Care South Africa, which it had appointed to build and administer the Sondela social housing project. 

According to court documents, the order placed Let’s Care under the SHRA’s administration after the state entity deemed its chosen company to be riddled with “financial mismanagement”. This included owing the City of Ekurhuleni electricity payments and failing to collect rental income because of the hijacking. 

The court order also made the SHRA responsible for Let’s Care’s accounting and legal costs, as well as all the company’s expenses and liabilities. 

These included the more than R11.6 million Let’s Care allegedly owes to Evening Shade Properties — the company that sold the land for the Sondela development. 

This was for value-added tax that Let’s Care had not paid during the sale, rental income shortfalls and additional construction which Evening Shade said it had helped with during the building of the social housing project. 

The R11.6 million debt is part of a lawsuit filed in the Johannesburg high court by Evening Shade in July to liquidate Let’s Care which, the court filings allege, is not in a position to pay back its debt. Section 345 of the Companies Act, which Evening Shade is relying on for its lawsuit, allows for an easier liquidation application when debt is not paid, secured or resolved by agreement within three weeks. 

Let’s Care has allegedly owed Evening Shade since October 2022. 

A background search shows that the company had no previous building experience, with Sondela the only listed project under Let’s Care’s portfolio. It also has Sondela as its listed address. 

A Let’s Care director named in the liquidation lawsuit, Bob Mukahanana, resigned in April, according to a company search. 

But Van Staden wrote in her letter to the Gauteng rental tribunal that despite these gross irregularities, the mismanagement and the legal action against its appointed company, the SHRA had stated its intention to continue doing business with Let’s Care South Africa. 

“The SHRA, as an administrator, has identified a need to engage the tribunal directly in order to ensure that [Let’s Care’s] rights are represented and protected in the future,” Van Staden wrote, adding that the SHRA wanted “to restore” the non-profit company. 

According to Statistics South Africa’s general household survey for 2020, 11.4% (or 1.9 million households) in the country were informal, while a further 4.3% (or 731 000 homes) were traditional dwellings that were far from economic centres as a result of apartheid’s separate development spatial planning. 

It was these figures that led Human Settlements Minister Mmamoloko Kubayi to say in a statement in the SHRA’s 2020-21 annual report that the government, through its agencies, wanted to alleviate the “social housing demand”. 

“Our government’s policy on social housing is an important intervention towards integrating divided cities by delivering affordable rental housing for low- to middle-income groups, who mostly do not qualify for free [state-funded] housing but also do not earn enough to qualify for bank financing to purchase a house,” Kubayi wrote.

“In the end, successful government interventions, through SHRA, are about devising impactful policies, strengthening the regulatory framework and delivering houses in areas with social and economic infrastructure.”

In a reply to a question from Economic Freedom Fighters MP Mandisa Makesini in parliament in March, Kubayi said her department had a national housing needs register — a programme to register individuals needing assistance from the government. 

She said that more than 2.4 million people on the register were still waiting for the government’s assistance.

However, after building more than 460 units in Sondela Village, the state entity has allowed the complex to decay. 

An early-childhood development centre, meant to cater for children living in the complex, is gathering dust and rapidly falling apart because it has never been used.

Throughout the complex, the M&G observed broken windows, as well as exposed electrical wiring and plumbing pipes due to the cracking facade of the buildings. Moreover, not all the units meet the specifications mentioned in the SHRA’s reports, with some flats not fitted with tiles, stoves or cupboards, among other missing features.

According to the SHRA’s annual reports and internal documents, Let’s Care was paid nearly R46.9 million to complete phase one of Sondela in the 2020-21 financial year and more than R71.2 million for phase two in 2021-22.

The company was supposed to receive a further R200 million for phase three, which has apparently been abandoned as building materials, including bricks, lie discarded across a barren patch of land adjacent to Sondela. 

The lack of maintenance has forced the residents to take care of Sondela themselves, including paying private tractor owners to cut the grass in the overgrown open areas this week. 

Residents have also assumed responsibility for waste management — the collection and disposal of Sondela’s trash — while cars and ground-maintenance equipment owned by Let’s Care stand abandoned and decaying in the complex. 

The M&G sent questions to the national human settlements department as well as to the SHRA. 

The human settlements spokesperson, Hlengiwe Nhlabathi-Mokota, deferred all queries to the housing agency.

Lesego Diale, the marketing and communications manager at the SHRA, did not respond to questions related to whether the state entity was concerned about the risk of losing its assets, owing to the liquidation lawsuit which had been filed against Let’s Care. 

Diale also did not respond on why the SHRA wanted to “restore” the company it had appointed, despite the fact that it had been implicated in a raft of corrupt practices and accused of mismanagement. 

Although a background check showing Let’s Care did not have building experience prior to the Sondela development, the SHRA spokesperson defended the company’s appointment, saying it was “an accredited [social housing institution] under the regulation of the SHRA”. Diale did not elaborate on what that meant.

However, she admitted that the SHRA had unearthed “mismanagement” in Let’s Care, which was why a court order was sought to place the company under administration, in line with section 12 of the Social Housing Act.

Diale responded on behalf of Let’s Care, which is now legally the state’s responsibility. 

“Since the [June 2023] administration order, and through a supply-chain process, the SHRA appointed Big Bell Investment, trading as CityNet, to assist with the administration and associated property management services of the entity. 

“The previous [Let’s Care] board and management are no longer part of the business,” she explained. 

“In the past six months since the administration order, the SHRA and CityNet have worked tirelessly to regularise the tenants and stabilise the project. There is still resistance from rogue tenants aimed at frustrating the administration process.”

Sondela tenants who spoke to the M&G this week said CityNet had never been to the complex to do property management. 

They criticised the SHRA for choosing Let’s Care, accusing both of allowing the buildings to degenerate through lack of maintenance and because they had not paid rates, taxes and other municipal bills. 

According to First National Bank records, at the end of November 2022, Sondela residents had collected R26 041.58 towards paying for the property’s utilities. 

But Let’s Care obtained a freeze  order from the Johannesburg high court in February. Residents are still blocked from accessing it. 

The CityNet office on the property has broken windows and a damaged door, with no sign that the management service provider has done any work in the past six months.

The M&G has seen documents showing that residents bought their electricity from a prepaid vendor appointed by Let’s Care, which allegedly did not transfer the money to the municipality, leading to power being cut off. 

But Diale said the forensic investigation included probing allegations of financial, governance and management failures; verification of all contractual arrangements and assessment of services and amounts claimed by creditors.

“The forensic team is in the final stages of [its] investigation and the report is due on 31 January 2024. 

“The SHRA will consider the findings of the forensic investigation to begin legal proceedings, if any, against any and/or all parties implicated in the current distress of the project,” she said. 

The SHRA had to comply with legislation, Diale said, adding that the forensic probe formed part of the compliance and was completed last month. 

“Therefore, this forensic investigation is not optional but mandatory in terms of the Social Housing 

Act and the duty of care that the SHRA has as custodians of public funds.”