Sankie Mthembi-Mahanyele clearly knew of irregularities around the Motheo deal, write Mungo Soggot and Justin Arenstein
The government documents at the heart of the Motheo scandal have finally been made available and they indicate that the case against the Minister of Housing, Sankie Mthembi-Mahanyele, is even stronger than previously thought.
The documents show that – contrary to the minister’s claims that whistle blower Billy Cobbett was “incoherent” when he attempted to tell her of the scandal – she was fully and clearly informed of the irregularities when she fired him as housing director general.
They show auditor general Henri Kluever held back some of the more sensational facts available to him from the papers in his much-criticised report on the affair. They offer startling insights into the Mpumalanga government’s irresponsible handling of housing funds and into the opportunism of the developers and their accomplices. And – perhaps most significantly – they provide further evidence of Mthembi-Mahanyele’s relationship with key players in the scheme.
It is now five months since the Motheo scandal exploded with Sankie Mthembi- Mahanyele’s sensational firing of Cobbett – the trusted lieutenant of the minister’s predecessor, Joe Slovo. Since then the controversy has become bogged down in barrages of charges and counter-charges, ranging from the minister’s extraordinary claim that she had never fired Cobbett to allegations that the auditor general himself was pursuing a hidden agenda.
The documents contain two crucial memoranda in which Cobbett details the core of the Motheo scandal: that an unknown housing developer managed to secure a R198-million contract for the construction of 10 500 houses in the middle of nowhere, with the unwitting help of a bank, after provincial housing officials rode roughshod over a string of key procedures.
He gave both memoranda to the minister before she fired him.
The story starts two months before, on March 5, when Mpumalanga housing officials approached Cobbett to discuss an ambitious low-cost housing project, which needed financial backing from the government. They wanted to tap money from the national housing fund to give to the developer behind the project – an unknown company called Motheo, headed by a woman called Thandi Ndlovu who was a close friend of Mthembi- Mahanyele.
Cobbett told the officials that as the province had already locked up millions in subsidies in dead projects – schemes which had come to a standstill – it could not take further national housing fund money for Motheo.
On April 11 Cobbett wrote to provincial housing director Steve Ngwenya to confirm all this, repeating that Mpumalanga’s housing finances were in such a mess that it could not have further national money. “Mpumalanga is already over-committed to such an extent, your administration will not be able to enter into any agreement in respect of the rural subsidy initiative with Motheo.” Mthembi-Mahanyele approved Cobbett’s letter to Ngwenya on April 4. She said in a handwritten note: “Approved. Help Mpumalanga and Free State to speed up the process of disqualifying non-performing projects so that funds are directed to projects that will deliver.”
Just 21 days later, Mthembi-Mahanyele was to go Mpumalanga to open the Motheo project. Cobbett need not have bothered with his letter to Ngwenya. The Mpumalanga housing board had already given the project the green light – on January 16. In fact, Cobbett’s department on March 26 had issued it a R9,2-million national housing fund grant without his knowledge even though he was the chief accounting officer.
When Cobbett found out on April 24, he wrote to Ngwenya demanding the R9,2-million back. On April 25, while the minister was launching the project, Cobbett sent her the four-page memo, fleshing out a conversation with her the previous evening in which he had warned her not to open the project. “I hope that this makes more apparent why I was so concerned about possible misrepresentations in respect of your involvement,” the former director-general wrote.
Cobbett said that his “level of extreme concern arose” when he heard the previous day that Nedcor banker Kevin Gibb – one of the architects of the Motheo scheme – had been suspended by the bank on April 18. (Gibb, who has admitted to a close working relationship with the minister, has emerged as a pivotal player in the scheme. Indeed, some other players say Gibb started lining up contractors last year and only started mentioning Motheo early this year.)
In Cobbett’s memorandum to the minister, he said Gibb had shown him plans for the Motheo project in February and he had been very impressed. But he said he was concerned when Gibb asked him to line up 10 500 subsidies at R17 250 each, as it would have involved the government handing out discretionary allowances on a blanket basis.
Cobbett then explained how he had turned down provincial officials’ request for national funding for Motheo because the province was already severely overextended. Cobbett pointed the minister to the fact that many of the dead projects in Mpumalanga were run by a combination of Nedcor and Murray & Roberts. (Ironically, Murray & Roberts were called on to build the show houses for the Motheo launch.)
He reminded his minister how Mpumalanga province had failed to come back to the national department over the R9,2-million it owed. He told her how after discovering the Motheo project had already been approved in Mpumalanga, he had set about investigating Motheo. “It transpires that the funds for this project were committed on January 16, which means that the funds were already committed when we were approached by Mpumalanga and the funds were committed to a company that had yet to be created.”
He noted that Motheo was only created on February 20 with a share capital of R400, that it had never built a house, that one of its directors was related to a senior Nedcor employee [Granny Seape, Ndlovu’s sister, who resigned immediately after Gibb’s departure], that it had unlawfully lined up national funds, and that it had purported to be involved in a joint venture with Nedcor.
The government documents include a second memo from Cobbett to his minister on Motheo, dated May 15, in which Cobbett alerts her to the sudden resignation from Nedcor of Seape, who headed the bank’s low-cost housing division. He also informs her that Nedcor’s “alleged involvement in the project was not correct, and had not been properly authorised”.
The documents provide intriguing evidence about the minister’s relationship with Motheo’s director, Thandi Ndlovu, who has called Mthembi-Mahanyele her mentor. Relations between Ndlovu and the minister were even closer than previously suggested. In a letter dated May 2, Ndlovu wrote to Nedcor chief Mike Leeming to complain that the bank was bouncing her company’s cheques.
Ndlovu informed Leeming at the bottom of the letter that she had forwarded a copy to the minister. Gibb has confirmed he met the minister in Pretoria two days after being fired.
This week Cobbett told the Motheo commission of inquiry in Nelspruit that Gibb had had “an incredibly close relationship” with Mthembi-Mahanyele and he testified that his minister had introduced him to Seape, whom Mthembi-Mahanyele met “with some regularity – so much so in fact that the minister suggested Seape for a position on one of our industry boards”.
Cobbett told the commission that after realising that Mpumalanga had actually approved the project, he checked the minutes of the board meeting.
“The information was incredibly skimpy,” he said. He then testified about the minister’s reply when he first telephoned her with his concerns and said he was going to the auditor general. “Well, her response falls outside the scope of this commission but after this I phoned my wife to tell her I had probably lost my job.”
Question marks still hang over any improper gains that individuals stood to make from the scheme. It is understood that unsubstantiated evidence was forwarded to the auditor general that Moodley – and possibly Gibb – each had shares in Motheo and thus stood to gain financially from the deal.
Motheo directors have confirmed that the profit margin in their sights was 10% – far above that of most low-cost housing schemes and double the estimate Gibb gave this newspaper when trying to shoot down suggestions that the developers stood to make R4 000 on each R14 000 house.
The documents also contradict claims last week by a representative of the Mpumalanga housing department, Leon Mbangwa, that there was no reason for the province to recover the R9,2-million from Motheo. The documents show that Mbangwa’s own premier, Mathews Phosa, wrote to Cobbett in May to say: “It is hereby confirmed that the provincial government undertakes to return to your department the amount of R9 240 000 within the next few days …” Five months later, the national department is still waiting.
The commission, which was called by Phosa after the auditor general released his findings, was told by Moodley last week that the saga actually boiled down to an elaborate plot on the part of senior government officials and Nedcor to embarrass Mthembi-Mahanyele. Nationally, the ANC has distanced the minister from the scam, claiming that it was a provincial matter and blaming the auditor general’s recomendation of a national inquiry into the scandal on media speculation.
On the further evidence of the Motheo papers released this week, that position has become insupportable.
BLURB: Auditor general Henri Kluever held back some of the more sensational facts available to him