The Special Investigating Unit (SIU) and finance management company Kwane Capital are in a legal stand-off over a R92-million tender, which the unit says was “falsely” paid to Kwane by a tiny Eastern Cape municipality.
A week after the SIU filed papers in June in the Eastern Cape High Court, Kwane Capital hit back, filing an interdict application, claiming that the unit was defaming it. Kwane Capital’s director is well-known ANC-linked businessman Mcebisi Mlonzi.
After claims of fraud and corruption, President Jacob Zuma asked the SIU to investigate the tender – for hire-to-purchase plant equipment – that was awarded to Kwane in 2014 by the Amahlathi Local Municipality.
Mlonzi first gained notoriety in 2002, when his then company Zama Resources was the subject of a Public Service Commission investigation. This came after it emerged that Zama had given R55 000 to the chairman of the bid committee that awarded the company a R350-million contract. The official later resigned and the contract was cancelled. In the same year, former ANC MP Tony Yengeni told Parliament that Mlonzi had spent R317 000 placing adverts in newspapers “to clear his name” amid legal battles.
Early last year, media reports claimed that Kwane had paid for a private jet to fly Mzwandile Masina, then deputy minister of trade and industry and now Ekurhuleni’s mayor, and Songezo Mjongile, former Western Cape ANC secretary, to the party’s manifesto launch in Port Elizabeth. Mjongile, who claimed to be a Kwane director, at the time told the Sunday Times that the jet had been arranged for him by his company, Kwane Capital, because there were no flights to Port Elizabeth. Mlonzi, however, said he was not aware of Mjongile being a Kwane director.
The SIU wants Kwane to pay back R92-million “unlawfully” paid to it by the Amahlathi municipality after “misrepresentations”.
In its summons, the SIU alleges that Kwane had hired equipment to the municipality on the basis that it would ultimately become owner of the yellow plant equipment. The SIU said that another owner had leased the equipment to Kwane, with no knowledge that Kwane had promised it to the municipality after a certain period.
The SIU said Kwane “did not have the authority to hire, or sell, or pass transfer of ownership of such vehicles or equipment to third parties … without consent of the true owner. At no time did [Kwane] have any such consent.”
The “true owner” referred to by the SIU was Barloworld, according to documents from the municipality, which Mail & Guardian has seen.
Mlonzi claimed that as the SIU investigation progressed it advised Amahlathi not to make any further payments to the company. When he got wind of this late last year, he was seething and complained about the SIU’s conduct to its head, Jan Mothibi.
After an exchange of letters, both the SIU and the company approached the courts for relief.
According to Mlonzi, in a letter dated April 18 2017, Kwane resorted to court because the SIU had failed to address “complaints, allegations and issues raised”. Instead, Mothibi had “purposefully” obfuscated the issues “by making allegations”.
Mothibi responded a few days later, asking to meet Mlonzi and his legal representative “in an attempt to settle the matter”.
Two days later, Mlonzi said he would only meet if a number of conditions had been met. These included demands for Mothibi to write letters to the municipality withdrawing the allegations of fraud and improper conduct, and to give an undertaking that the SIU would “not engage in similar conduct again”.
In the same letter, Mlonzi said the SIU was making the allegations against him without interviewing him or any Kwane employee. He also accused the SIU of acting beyond its terms of reference and powers conferred on it.
The correspondence also referred to red flags over a contract between Kwane and another Eastern Cape council, the Mbhashe Local Municipality.
Mlonzi said he was aware that the SIU had recommended that Amahlathi municipality set aside its contract with Kwane and that the company, its directors and shareholders be listed on the treasury’s database of restricted suppliers. In the letter, Mlonzi expresses “outrage” about the SIU and Mothibi’s conduct.
But Mothibi refused to meet on these conditions: “If those conditions remain a prerequisite for a meeting, the meeting will not be possible.”
A month later, in June, the SIU filed papers in the high court. But, in a blunder by the SIU, the summons was sent to the wrong Kwane address.
The SIU said that, according to the contract between Amahlathi and Kwane, the municipality would have taken ownership of the equipment at the end of its term in January this year.
Kwane and Mlonzi unlawfully and falsely “induced” Amahlathi to conclude the deal, it said. This was not in “accordance with a system which is fair, equitable, transparent, competitive and cost-effective”, as provided in the Constitution.
A week after the summons was issued, Mlonzi filed an interdict application saying that the SIU was interfering in “contractual relationships” and had unlawfully instructed the Amahlathi and Mbhashe municipalities to cancel their contracts with Kwane. He also said the SIU was defaming his reputation.
SIU spokesperson Nazreen Pandor said the unit had completed its investigation and was now finalising a report for Zuma. “We have made referrals and we have also instituted civil litigation already.”
Pandor said she was unable to comment further as the matter was sub judice.
Mlonzi said he could not comment, saying the matter was subjudice.
Kwane is also the majority shareholder in a company that was recently awarded a R52-million tender to provide water cannons to the South African Police Service.