Duarte and the housing racket

It was supposed to be a flagship housing project. Eleven years later, Thubelisha Homes is the albatross around the neck of Human Settlements Minister Tokyo Sexwale, who inherited the flop from his predecessor, Lindiwe Sisulu, now defence minister.

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A fortnight ago the Mail & Guardian revealed that housing director general Itumeleng Kotsoane had guaranteed R241,5-million in March to shut down the technically insolvent government housing agent. Although it managed a number of projects countrywide, Thubelisha will infamously be remembered for the disastrous N2 Gateway housing project in Cape Town.

This week the M&G can reveal that:

• While employed by ­government to wind down Thube­lisha, the agency’s acting chief executive, John Duarte, is proposing that his private company take over state projects in which Thubelisha had invested funds;
• In the months before shutting down operations, Duarte and his personal assistant, Emelia McNamara, spent tens of thousands of Thubelisha’s rands on domestic business class flights; and
• Duarte refused the offer of free office space in Johannesburg and rented expensive offices with the shut-down budget.

This week also saw the release of the department’s annual report for 2008-2009, in which the auditor general criticises it for lending R100-million to Thubelisha without complying with the requirements of the Public Finance Management Act.

The department rallied behind Duarte after the M&G established that his company — PTYtrade 407 — had proposed to the Mossel Bay municipality that it continue with projects Thubelisha was contracted to do.

Duarte — husband of Jessie Duarte, the chief operating officer in President Jacob Zuma’s office — denies wrongdoing and says Sisulu’s closure plan for Thubelisha allowed for a private company to be formed by the agency’s staff.

On Duarte’s version his own private benefit when Thubelisha projects are taken over by his company would be allowed. But even if so, a conflict of interest remains in that he would be torn between closing down projects in a way that is beneficial to government as shareholder or to himself as heir to those projects.

The situation would not be unlike a liquidator buying some of the assets that he is supposed to dispose of at maximum value to creditors. Thubelisha officially closed down operations at the end of July but is still winding down the agency’s interests and administration with the assistance of private consultants Learning Strategies. This process could take months to finalise.

Some of its projects have been taken over by the Housing Development Agency (HDA), established in March by Sisulu to replace Thube­lisha in carrying out government’s objectives of providing low-cost housing to the poor. The HDA is headed by former Johannesburg Housing Company chief executive Taffy Adler.

According to human settlements spokesperson Clarence Tshitereke, the R240-million required to close Thubelisha is an ‘estimated figure as of December 31 2008. However, this amount has reduced substantially due to transactions that have taken place. This amount would be less by at least R100-million.”

The funding would cover severance packages for Thubelisha’s staffers, leases, cancelled contracts, operating costs and tax claims.

It remains unexplained why Duarte chose to rent expensive offices in Parktown, Johannesburg, from August when Thubelisha had the option of staying on for free at its Killarney office, now occupied
by the HDA. This was confirmed to the M&G by two independent sources.

Duarte was appointed acting chief executive two years ago, after the disintegration of the agency’s board and the refusal of the national ­treasury to approve the agency’s budget. At that stage Duarte was already the sole director of PTYtrade 407 — a dormant company now used to pursue the Mossel Bay deal.

The M&G is in possession of two documents that illustrate Duarte’s attempts to partner with fellow Thubelisha staff in a private venture — while they are being paid by ­government to finish off Thube­lisha’s work.

The first is an email sent by McNamara — Duarte’s PA — to Colin Puren, director of community services at the Mossel Bay municipality, on July 30. This was a day before Thubelisha ceased to exist operationally. McNamara sent the email on behalf of Allistair Cullum, Thubelisha’s manager of projects in Mossel Bay.

Thubelisha was appointed as project manager by the munici­pality in 2007 to oversee the construction of 327 low-cost houses in Mandela Park. In April 2008, the Herald reported that little progress had been made with the project and that built houses were already beginning to crack.

In the email to Puren, Cullum wrote: ‘Thubelisha was employed by the Mosselbay [sic] Municipality to assist them with all the ­housing projects in Mosselbay. The first project that they gave us was for 327 houses and then you extended it to
1 500 houses. Then they employed us to do the block projects in Joe Slovo, Highway Park, Civic Park and Tarka [all Mossel Bay suburbs].

‘We as Thubelisha put in allot [sic] of work and submitted all documentation to the Housing Department in the Western Cape. We spent R100 000 to get the geotech reports done as was requested from the Housing Department.

‘A further R160 000 was paid to get the boundary pegs done on the erven and 4 houses was built that we never got paid for from the Municipality nor the Housing Department (value of R260 000).”

Cullum then pitches to Puren that Duarte’s company take over the projects. ‘Thubelisha’s operations will be coming to a close on the 31st of July 2009. Pty Trade 407 gave a proposal to the Municipality which is the same people that works for Thubelisha to complete all projects in Mosselbay. We are looking forward for your speedy response.”

Duarte admits submitting a ­proposal to the Mossel Bay municipality, but says this was done at their request ‘after they [the municipality] were informed by the [Housing Development Agency] that they [the HDA] would not be taking over the provincial projects … At no time was the intention to take over uncompleted contracts of Thubelisha. Insofar as the Mossel Bay municipality is concerned the projects discussed were not part of Thubelisha’s projects,” Duarte says.

This, however, contradicts ­Cullum’s clear proposal to Puren: that PTYtrade 407 be appointed to finish the work Thubelisha was appointed for. Duarte also ignores the fact that Thubelisha had already spent R260 000 of government’s money on a project his private company now wants to inherit.

The second document is an email sent by Duarte himself to seven Thubelisha staffers, including Cullum, and one Mandla Gama on August 26. It reads: ‘I want to set up a domain for our e-mails something line (sic) what we had in our Thubelisha e-mails or one we can use as brand, Regards Johno.”

According to well-placed sources this refers to PTYtrade 407.

Duarte responded: ‘I sent it to these individuals as I thought they may be interested. The idea was subsequently abandoned as no one responded.”

The M&G is also in possession of Thubelisha’s travel records for May to July, which show that Duarte and McNamara spent R118 824 in this period, mostly on business-class flights. Duarte states that as part of the closure process, ‘travel would have to be undertaken to the various areas to ensure that the management and finalisation of projects are taken care of and that assets/income of the company is protected”.

Asked to give reasons for each trip, Duarte referred only to Thubelisha projects in Cape Town, Port Elizabeth and East London.

He failed to explain three flights to George during this period, which is the closest airport to Mossel Bay. On two occasions, Thubelisha also paid for non-staffers, Gama and P?Cwazibe, to travel to George.

Tshitereke said the department was aware of Duarte’s visits to Thubelisha projects.

Yet another agency
The Housing Development Agency (HDA) was launched in March, four months before the closure of Thubelisha Homes, writes Ilham Rawoot.

But questions have arisen as to whether another housing agency is the answer to solving the housing crisis.

At the HDA launch, director general of housing Itumeleng Kotsoane said the agency would ‘fast-track housing delivery” and ‘coordinate the availability of land, support municipalities and provinces in project development and implementation”.

The HDA ‘has good people, but they are understaffed with an enormous mandate”, says Marie Huchzermeyer, professor of architecture and planning at Wits University. She says ‘building capacity at local government level” should be the priority, not establishing ‘yet another agency”.

A number of things need to be done differently this time around, says Dan Smit, adviser to Lindiwe Sisulu when she was housing minister. ‘The unusual density structure of our cities is really problematic and makes the provision of public transport quite difficult. The people who bear the brunt are the poor.”

Pivotal to eradicating the housing problem are the restructuring of our cities and redesigning financial instruments to make that happen, he says.

Huchzermeyer says the upgrading of informal settlements is also fundamental to success.

‘The government spends so much money on security ensuring that people don’t build new shacks. So they move to backyard shacks, which just makes the problem more hidden.”