Nkandla: How IDC splashed R10m on bailout

Thandeka Nene's conduct worried some officials. (Jackie Clausen)

Thandeka Nene's conduct worried some officials. (Jackie Clausen)

Just who is Thandeka Nene – and what is her hold over state institutions?

Nene was the sole member of Bonelena Construction CC, one of two building firms nominated by the public works department to do the major work on the security upgrade at President Jacob Zuma's Nkandla homestead.

Documents regarding the controversial development obtained by amaBhungane show:

  • When Bonelena was liquidated, the state-owned Industrial Development Corporation (IDC) intervened to keep the firm going, providing extra funding when the prospect of recovering its loans appeared doubtful;
  • When Bonelena's failure to meet deadlines led public works to cancel the contract, exposure in court of Project A – the department's code name for Nkandla – was a large concern for the department. Public Works Minister Thulas Nxesi also intervened, leading the department to backtrack and reach a compromise with Nene; and
  • She had such high-level access that when part of the work was awarded – supposedly erroneously – to the other main contractor (See "Nkandla's money mine", Page 4), the public works' deputy minister intervened and the architects were obliged to write her a grovelling apology for their error.

IDC to the rescue

Documents obtained by amaBhungane relating to the June 2012 liquidation of Bonelena suggest the IDC went to extraordinary lengths to rescue Nene, who at that stage owed the corporation nearly R20-million.

She had concluded a loan agreement with the IDC in February 2011.

In April 2012, the public works project manager cancelled the Nkandla contract with Bonelena, citing repeated failures to reach agreed construction milestones.

Nene and her lawyers refused to accept the cancellation, arguing it was unlawful and unfair, as she had completed 95% of the work.

In May 2012, a Durban car-hire firm, Reebib Rentals, applied to liquidate Bonelena over R190000 it was allegedly owed. A final winding-up order was granted in the High Court in Pietermaritzburg on July 18.

Lobbying

Meanwhile, Nene was lobbying vigorously to overturn the contract cancellation.
Her lawyers wrote to the department threatening legal action and she refused to hand over the keys to the Nkandla site so that another contractor could take over.

She also wrote to the new minister, Thulas Nxesi, on June 15 2012, noting: "I have great respect of the president … and take cognizance of the security measures of the project."

She wrote to him again on July 20, noting: "We have received phone calls and text messages from creditors threatening to approach the media. We have also received phone calls from the media inquiring as to the nature of the project and the payment delays. We have not commented and will not be held liable for any resultant reports that may surface as a result of the media."

Earlier, the Durban public works regional office had written to the Pretoria head office warning about the possible fallout for Zuma – referred to as "the Principal".

"The severe implications of cancelling the contract is expected to end in court cases between the contractor and the department. This will result in all the project information being subjected to public scrutiny," the regional office said.

"This is an unacceptable risk to this office and could result in political fallout that could possibly influence the Principal's political position very negatively."

Nxesi pays up

The letters had the desired effect. On July 31 2012, a teleconference was held with Nene and her lawyer at one end and the minister and his senior department advisers at the other. An urgent agreement was reached to pay Bonelena about R7-million.

Neither Nene nor her lawyer disclosed that the company had already been placed in final liquidation.

Bad faith?

In September 2012, after the money had already been paid out, one senior official, Gerard Damsta, expressed outrage at discovering this.

In an email to the department's chief legal adviser, he wrote: "I have learnt today with great shock and disappointment … that Bonelena was provisionally liquidated on 4 June 2012 … This means that Bonelena negotiated with the employer [the minister and others from the department of public works] … when it was already not in a competent position to have done so …

"The conduct of Ms Nene in all of this is what I need your legal expertise for …

"Can it be labelled as fraudulent? Bad faith?? … What recourse does [the department] have under these circumstances?"

But, instead of fraud charges, Nene got a rescue package from the IDC to take her company out of liquidation.

Good money after bad?

According to a report by liquidator Eugene Nel, the IDC proposed and funded the rescue scheme.

On top of its R20-million, the corporation agreed to put up a further R10-million to pay the liquidators, fund the payout of preferred creditors (such as banks and the South African Revenue Service) and offer concurrent creditors – such as Reebib Rentals – 50c of every rand owed.

According to Nel, the offer was generous as the company's financial position was so dire that, if it was simply wound up, preferred creditors would have got a reduced payout and there would have been nothing at all for others.

The IDC insists that the decision to assist Bonelena to exit liquidation was "not influenced by politics whatsoever".

IDC public relations manager Mandla Mpangase told amaBhungane it viewed the liquidation as "erroneous" and that Bonelena had existing contracts "based on which the IDC will recover its money".

"Bonelena continues to honour its repayment arrangement with the IDC."

He declined to give details but the liquidation report suggests Bonelena will have to score some sweet new deals to be able to repay the loan.

Security?

At the date of the provisional liquidation, Bonelena owed about R32-million to creditors, of whom the IDC was the largest, with R20-million owed to it.

The liquidators judged two contracts – a prison upgrade and a school building project – were worth keeping the company solvent for.

However, the IDC's security was calculated at only R11.5-million – not a major comfort when its R20-million loan was pushed up to R30-million to secure Bonelena's release from liquidation.

In return for the cash injection, the IDC demanded that a quantity surveyor and an accountant appointed by the IDC should be given full access to help to manage the company.

AmaBhungane's attempts to communicate with Nene for clarity on the current state of the company were fruitless.

Other friends in high places

The public works documents obtained by amaBhungane provide other evidence of Nene's clout, despite officials and contractors complaining about the company's performance.

When Moneymine was allocated work that had been earmarked for Bonelena, Public Works Deputy Minister Hendrietta Bogopane-Zulu got involved and ordered that the decision be reversed.

The architects were obliged to write to the department and the deputy minister apologising for the error, saying: "We meant no disrespect."

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.

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