Poverty funds spent on pyramid scheme

Corruption among Gauteng government poverty relief projects was so rampant that some project leaders allegedly invested funds in pyramid schemes while others bought luxury cars and houses instead of spending the money on intended beneficiaries.

Last week the Mail & Guardian reported that the Gauteng Department of Social Services and Welfare had shut almost all its poverty relief projects, citing corruption, fraud and mismanagement of funds.

In one case a brick-making project, funded to the tune of R1,2-million, was forced to shut down after the project manager disappeared with the funds, according to a dossier called the Exit Strategy Report.

A member of the project, who did not want to be named, claimed the manager used part of the money to buy a brand new Tacuma vehicle. Police are investigating the manager for fraud.

The report, compiled by Mulalo Nemavhandu, manager of the provincial poverty programme, raps the department for not having management systems and monitoring mechanisms to exercise proper oversight over the projects.

The department has spent R50-million since 1997 to fund 336 community projects. But the report says 85% of the projects did not achieve the department’s objectives because individuals empowered themselves and their families rather than their communities.

One of the affected projects is the Iketseng community project in Boipatong, east of Johannesburg.
Iketseng, a baking venture, was allocated R50 000 between 1998 and this year.

The report claims that some funds allocated to Iketseng were invested in Miracle 2000, a Johannesburg-based pyramid scheme. The project has since shut down.

In a new approach to fighting poverty, the department has initiated development centres.

Nemavhandu said: “Instead of inviting business plans as we did in the past, we now initiate development centres. We want to strengthen the work of the department by integrating those activities such as care and support for people living with HIV and Aids, the elderly, children, the youth and people with disabilities.”

The department said it has set aside R19-million to implement the programme.

But the Exit Strategy Report warned that if nothing was done, the department risked being caught in a similar situation.

“From the list of projects funded in 2001, there is absolutely no assurance that funds will not be misappropriated or that fraud will not occur. This is due to the fact that no proper system has been put in place thus far to safeguard against the problem.

“It has been identified that management systems have not changed. Service Level Agreement is still not informed by the Public Finance Management Act and Treasury Regulations.”

Approached for comment this week about the collapse of the projects, MEC for Welfare Angie Motshekga said she could not be held accountable for things done before she took office.

Motshekga said she was unaware of any fraud charges laid against any official or project leader. “I am not aware of any police investigations regarding the poverty relief projects.”

However, last week Nemavhandu confirmed that the department was in possession of police files. On Monday Motshekga’s spokesperson, Panyaza Lesufi, was also quoted in a daily newspaper as saying the department had police dockets.

Regarding the legal team that Nemavhandu said was appointed to probe allegations of corruption and fraud against government officials and project leaders, Motshekga said she was not aware of such a team.

The Democratic Alliance laughed at Motshekga’s comments that she could not be held accountable.

“This does not make sense at all. It doesn’t work that way. Once you become part of any department you should inherit certain responsibilities. It is sad that we have MECs who decline responsibility that preceded them,” said Kate Prinsloo, the DA’s provincial spokesperson on social services.

Other projects hit by corruption, fraud and mismanagement of funds include:

  • The African Early Child Care Project, which received R80 000 to run poultry and carpentry ventures in the Heidelberg area. It was supposed to benefit 20 people, but funds were misused and the project never operated. The Brakpan fraud unit is investigating the matter.

  • Size Laundries was given R1,2-million for the operation of an industrial laundry in Springs, east of Johannesburg. It never got off the ground. The manager is alleged to have misappropriated funds.

  • The South African Citizen Empowerment Organisation was allocated R300 000 for a carpentry and catering venture. The report says two cars were purchased by the organisation, but never benefited the project.

  • The Blyth Makhoane Project was given R20 000 for transportation of the elderly. The project never took off as funds were allegedly embezzled in the name of market research and a feasibility study. Police are investigating the matter.

  • The Krist King Project received R50 000 in 1998 for a sewing and jewellery manufacturing scheme, but the funds were used to buy a minibus instead.

  • The Grass Roots Farmers Project was allocated R45 000 for an agricultural project in Randfontein, west of Johannesburg. The report says ownership of the project was vested in one person, who allegedly did not act according to the business plan and service level agreement. Beneficiaries of the project considered themselves workers of the accused individual.

  • The Mode/Alexandra Disability Movement received R135 000. Mode applied for the funds on behalf of the Alexandra Disability Movement. However, an investigation has revealed that the Alexandra Disability Movement was not aware that Mode had applied, and successfully secured the funds, on its behalf. The project has failed to account for the funds.

  • The Ndiswe Capacity Building Programme was allocated R338 500 for a comprehensive programme for pre-school development and capacity building for the community. The manager of the project died and no other project members could be traced.

  • Unemployment Masses of South Africa received R116 000 for an income-generation project focusing on welding and sewing. There is conflict among management committee members and it is alleged that a R15 000 loan was granted to the chairperson.

  • Nations Hope was allocated R50 000. The project collapsed owing to mismanagement of funds.

  • The Thuthukani Women’s Club was allocated R20 000 to purchase sewing machines. The machinery has since been stolen and the project has ceased to exist.

  • The Zakheni Youth Project was allocated R100 000. The management committee is reported to have disappeared. Only R20 000 is remaining in the project’s bank account.

  • The Vereeniging Alliance for Street Children baking project was given R150 000 between 1998 and this year. There is no clear indication of expenses and it has been referred for financial audit.

  • Ma-Africa Juice received R114 000. The project has since become an individual business.

  • Langaville Agriculture was allocated R700 000 for the implementation of an agriculture project. It is managed by an individual who is also responsible for the training and capacity-building of members. The individual in question has all the power to withdraw money at the bank since the project’s funds were deposited in his personal account. The report recommended that a financial audit be conducted.

  • The Lethlabile O Le Orele Project was allocated R165 000 for food vending. Funds are alleged to have been misappropriated.

  • The Leadership and Management Programme for Safety and Security was allocated R230 000 from the national budget. The project is not operating owing to the alleged mismanagement of funds.

  • Prosa was given R20 000 for the operation of a security service. According to the report, the project’s leader has since disappeared with the money.

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