Rubbished: An illegal dumping site in the Sondela Village social housing project in Gauteng. (Delwyn Verasamy/M&G)
The Social Housing Regulatory Agency (SHRA) faces a legal showdown after allegedly reneging on payments of a R30-million load debt owed to Nedbank.
The debt stems from the “hijacked” R118 million Sondela Village social housing project, in Ekurhuleni, Gauteng, which has been tainted by allegations of financial mismanagement and internal governance conflicts.
Documents seen by the Mail & Guardian reveal the SHRA is stuck in a legal and financial quagmire, highlighting broader issues within the country’s social housing sector.
According to the documents, in March 2021, Nedbank gave a loan of more than R23.6 million to Lets Care South Africa, the non-profit company appointed by the housing agency to develop Sondela Village.
In a document from August last year, Biansha van Staden, the acting executive for compliance, accreditation and regulation at the SHRA, conceded that Sondela had been “hijacked by a number of illegal landlords”.
Sources in the department and at Nedbank have indicated the bank is preparing to take legal action over the loan debt.
Lets Care was appointed to construct and manage the property as part of the human settlements department’s social housing programme. The loan supplemented the R118.1 million Lets Care South Africa received from the state housing authority in two tranches of R46.9 million and R71.2 million in the 2020-21 and 2021-22 financial years, respectively.
The state was saddled with Lets Care’s debt after successfully petitioning the Johannesburg high court in June last year to administer Sondela Village owing to the “financial mismanagement” the SHRA said was rife at the non-profit company.
“The state is responsible for Lets Care’s liabilities now that it is the court-appointed administrator. Nedbank is currently exhausting all mediation efforts to try and get payment to show to the high court its collection efforts, should the SHRA continue its non-payment stance,” said an insider, who requested anonymity.
Decaying: An abandoned car and what was intended to be a crèche at the Sondela Village social housing project in Ekurhuleni, Gauteng. (Delwyn Verasamy/M&G)
Internal documents support the claims, showing the company had agreed to pay a monthly fee of more than R390 000 from June 2022. Lets Care’s interest arrears are more than R6.1 million, according to the notes.
Nedbank spokesperson Joanne Isaacs did not answer detailed questions about the property debt and possible legal action, saying only: “Nedbank is unable to comment due to client confidentiality.”
A well-placed source said SHRA has struggled to maintain and manage Sondela Village, which has about 460 units, owing to the property being “hijacked” and under a rent boycott since October 2022, and with no electricity since July of that year after the City of Ekurhuleni disconnected the supply over non-payment.
Rentals at Sondela Village range from R1 000 to R3 000 a month.
“Because there is no money coming in, the debt cannot be serviced, municipal bills cannot be paid and security services are not installed.
“There are just no funds to do this for many of our social housing projects,” a human settlements departmental official said, speaking on condition of anonymity.
The debt has caused disagreements within the SHRA, which has affected governance after a split in the management and board of directors on whether to pay Nedbank or not, owing to the housing authority not having a budget for this.
“The executive management took a proposal to the board to settle about R15 million of the debt because SHRA cannot run away from the fact that we are now responsible for Sondela Village,” said a source with knowledge of the housing authority’s management, who also asked not to be named. “The board did not approve payment of the debt and senior people were subsequently removed from their positions after the proposal,” the insider added.
On 24 March, the housing authority’s board chairperson Busisiwe Nzo was removed by the human settlements ministry. Subsequently, chief executive Sandile Luthuli, was “out of the office for an indefinite period”, according to an internal SHRA memo to staff dated 18 July.
A City Net notice to residents. (Delwyn Verasamy/M&G)
Pulane Thobejane replaced Nzo as board chair, but the latter is still listed as a director on SHRA’s website.
The staff memo did not elaborate on why Luthuli was out of the office, saying only that Lebowa Letsoalo would be the acting chief executive during his absence.
“We assure you of the SHRA continuity and stability in delivering on our mandate,” reads the memo, which was signed by Lesego Diale, the housing authority’s marketing and communications manager.
Diale did not respond to questions sent on Monday. Repeated requests for responses were ignored, including text messages to Mandla Mochoko, who is part of SHRA’s communications team.
As reported by the M&G on 27 July, SHRA is struggling to adhere to its mandate to produce affordable housing, building a low 25 037 units in the 2022-23 financial year, down from a high of 77 626 in the 2018-19 reporting period.
Human settlements departmental spokesperson Nosipho Zulu said the slow delivery of housing was caused by an “increase in material supply and labour costs”, with the 2022-23 annual performance plan stating that the pandemic had also affected the pace of construction.
“The risky outlook, coupled with government fiscal imbalances, limits what can be funded. It further gives a fair warning that some of the developmental needs, as well as social ills of the country, will remain unattended,” reads the performance plan.
In her budget vote on 17 July, Human Settlements Minister Mmamoloko Kubayi acknowledged the backlog in delivery, as well as the mismanagement of SHRA-appointed social housing institutions, such as Lets Care, which were chosen by the state to deliver homes.
“The scope for increasing the quantity of units in this sector is huge, matched with an ever-growing demand, especially in secondary cities. We will review our social housing delivery processes at the SHRA to ensure that developers who want to play in the sector are not held up by unnecessary red tape,” Kubayi said.
State entities had “to improve on the turnaround of approval of projects, work closely to ensure [fewer social housing institutions] go through liquidation, and improve customer service at SHRA by ensuring transparency in decision-making [processes] and accountability”.
Lets Care is also subject to a high court liquidation process after Evening Shade Properties — the company that sold the land on which Sondela Village is built — brought legal action against the non-profit for an unpaid R11.6 million debt.
The debt, according to Joburg high court papers, was for the VAT Lets Care had not paid during the sale, rental income shortfalls and construction, with which Evening Shade said it had helped during the building of the social housing project.