As the Mpumalanga housing scandal escalated this week a picture emerged of a profitable schemefor its developers. Justin Arenstein, Stefaans Brmmer and Mungo Soggot report
MPUMALANGA’s controversial rural housing scheme hands the developer a profit mark-up that exceeds the gains typical of low-cost housing deals. A consultant to Motheo Construction – the company set up by a friend of Housing Minister Sankie Mthembi- Mahanyele to execute the R185-million deal – this week said the profit margin was pegged at about 5%, or just over R9- million.
Some say the profits from the R185-million scheme could be much more if everything goes according to plan, had everything gone according to plan. One organisation close to the project has calculated Motheo’s potential gain as at least R35-million, a figure also cited by a senior government source.
The executive director of the Building Industries Federation of South Africa, Ian Robinson, said even 5% was “on the high side” assuming there was negligible risk involved and no extra capital requirements.
Motheo’s founder and friend of Mthembi- Mahanyele, Thandi Ndlovu, has referred all inquiries to the provincial housing officials.
It also emerged this week that established contractors stood to gain from the project – despite its black empowerment banner. And questions surround the actual benefit of the project for the rural communities it targetted.
Controversy over the Mpumalanga rural housing scheme has already cost Housing Department Director General Billy Cobbett his job after he alerted the auditor general to a string of procedural irregularities. The auditor general is now investigating, with the help of forensic auditors.
The intervention has put the deal under pressure but so far it has not been frozen or shelved.
Last week Nedcor fired its personal credit chief, Kevin Gibb, who helped set up the Motheo deal. This week, Mpumalanga’s housing board chief, Saths Moodley, resigned and fellow board member Job Mthombeni, Ndlovu’s co-director in Motheo, was given 24 hours to leave his board post.
Meanwhile, Gibb’s role in the scheme has grown clearer.
Nedcor’s executive director, Mike Leeming, said his bank had begun probing Gibb after it received letters from two of Motheo’s suppliers, who were also Nedcor clients. They “complained of Gibb’s behaviour”, in particular his attempts to beat down their prices – unusual conduct for a banker.
Gibb, who has been described as “Mr Housing” in the province, replied: “Wherever possible I would encourage suppliers to reduce prices for products for low-cost housing. I do not negotiate final prices. This is done by the companies concerned.”
Nedcor has financed a series of low-cost housing schemes through Gibb, but it remains unclear why he was so deeply involved in the Motheo deal.
Gibb introduced Ndlovu to provincial housing officials. He insists he was sacked because he threatened to blow the whistle on Nedcor’s failure to provide adequately for its bad debts, saying he has documentary proof.
But Nedcor’s chairman, Chris Liebenberg, dismissed these claims as “nonsense”, saying Gibb was sacked for “very serious” breaches of internal procedure.
While Motheo has been touted as a “black empowerment” vehicle, significant evidence has emerged that established contractors stand to benefit. Construction giant Murray & Roberts (M&R) met with Ndlovu before the project was approved by the province’s housing board in January.
A confidential letter quotes M&R senior executive Chris Cudmore as saying: “As a start to a potentially long-term and mutually beneficial relationship, we have offered substantial support to Motheo to help get their seven projects under way. We have jointly agreed to not publicise our involvement at this stage.”
M&R this week confirmed it had built 26 of Motheo’s 100 show houses and provided technical advice – for a total R300 000 fee – and had tendered to Motheo to build a portion of the 10 500-house project.
M&R Housing’s managing director, Rob Henderson, said: “I understand we would be looking at 1 000 or so houses, but that is dependent on Motheo.” Henderson said the M&R tender involved the use and training of local labour.
Other established firms, including Grinaker, are also eyeing a slice of the action.
Commenting on M&R’s reluctance to publicise the partnership, Cudmore this week said the company had been involved in several high- profile projects across Mpumalanga, adding: “We really did not want to get in the way of Motheo’s PR efforts.”
The rural housing scheme – which is geared to save costs by packing relatively large houses into a “high density” settlement – has been fted by provincial housing officials because of, among several features, its 40m2 units.
But social workers this week raised concerns that the houses were grouped too closely together – some in inaccessible, remote places. (The contract stipulates that new local authorities would be created to manage some of the new settlements.)
Social workers said some tribal authorities had refused to have the developments on their land. They said the houses were earmarked for families of up to seven people. Two families would be housed in coupled units under one roof, with no room for extensions.
“The design of both the houses and the way they are placed is in total contradiction to rural living, needs and socio-economic situations,” said one.
Reports suggest local authorities have been touring villages to find families for the new “agri-villages”.
Mpumalanga Premier Mathews Phosa, who bolstered his anti-corruption image this week when he acted against the provincial housing board, downplayed talk that the African National Congress was preparing to isolate Mthembi-Mahanyele.
He questioned why Cobbett had raised the alarm after the national department had authorised an initial R9,2-million payment to Motheo.