Millions lost in scam at dysfunctional municipality

The forensic report found that they had illegally appointed Misizwe Zulu as an implementing agent for the infrastructure and electricity upgrade project. (Paul Botes/M&G)

The forensic report found that they had illegally appointed Misizwe Zulu as an implementing agent for the infrastructure and electricity upgrade project. (Paul Botes/M&G)

A KwaZulu-Natal government department has failed for nearly three years to bring charges relating to more than R290-million in tender fraud against a former Pietermaritzburg mayor and a municipal manager.

The damning forensic report by Morar Incorporated, which recommending criminal charges against former mayor Chris Ndelela and municipal manager Mxolisi Nkosi, was submitted to then co-operative governance and traditional affairs MEC Nomusa Dube-Ncube in August 2016.

The company was appointed to investigate the appointment of TNT Technology Solutions as an implementing agent for the Independent Development Trust (IDT), which the municipality engaged at the end of 2011 for infrastructure and electrification projects. But the municipality cancelled the project, valued at about R450-million, over a lack of progress, despite R290-million having been paid to the IDT. Only about R200-million was paid back to the municipality, with the report finding that about R82-million was misappropriated by TNT.

Nkosi, a key figure in the KwaZulu-Natal campaign to elect Cyril Ramaphosa as ANC president in 2017 and a former Kokstad municipal manager, was subsequently suspended by the co-operative governance department and then fired.
Nkosi was also a former adviser to another key Ramaphosa ally in the province, ANC deputy provincial chairperson Mike Mabuyakhulu, when he was economic development MEC.

Nkosi was appointed as Msunduzi municipal manager as part of a bid to turn around the municipality, which had earlier been placed under administration by the co-operative governance department over administrative collapse and political infighting in the ANC.

The report found that both Ndlela and Nkosi had received cash payments of more than R1.5-million into their accounts during a period when the companies involved in the scam made a series of large cash withdrawals. Ndlela was replaced as Msunduzi mayor in 2016 by Themba Njilo.

The report found that Ndlela and Nkosi had illegally appointed Misizwe Zulu as an implementing agent for the infrastructure and electricity upgrade project. Nkosi had made payments to the IDT for disbursement to Zulu without council authorisation and had illegally extended the project.

The report found that Nkosi continued to sign off on payments to the IDT despite receiving complaints from council employees that work was not being done on the projects.

It said that a “corrupt relationship” had existed between Nkosi and Zulu, who, with Ndlela, had “planned” to appoint the IDT and allow the municipality to be defrauded.

The report recommended that fraud and corruption charges be laid against Nkosi, Zulu and Ndlela and two other council officials. It also said disciplinary action should be taken against them.

The council should, it said, institute a civil action to recover the money defrauded by the syndicate.

The IDT and TNT were retained “solely” on the basis of an introduction to a council emergency committee the day before New Year’s Eve 2011 by Ndlela, and a presentation by Zulu.

The report described Zulu as the “key person” in the syndicate because he controlled the bank accounts of the entities that were used to defraud the municipality through the IDT.

The money was channelled to a number of individuals and companies, including the Desroches Hotel in Margate, to which R641 000 was paid. According to the report, payments of R39.3-million were made to Matrisolve, a Pietermaritzburg property company, which used the money to buy a golf estate and several beach properties on the South Coast. Zulu was a signatory of the Matrisolve bank account, the report said.

TNT, it said, spent just over R8-million in payments for goods and services that had nothing to do with the Pietermaritzburg infrastructure project.

The report said there was evidence that both Ndlela and Nkosi had “benefited financially” from their relationship with TNT and Zulu.

After being paid, the companies involved in the syndicate had withdrawn large amounts of cash.

“Due to the nature of cash transactions, we could not establish who received the cash after the withdrawals. However, [it was] established that large amounts of cash and other deposits were made into the bank account of Mr Ndlela during the period, the total of which is R1.5- million, which excludes his salary and other payments from the municipality,” the report said.

During the same period, Nkosi allegedly benefited to the tune of R1.6-million. This included a R300 000 cash deposit into his bank account, R150 000 to a finance company for a car he bought and a R200 000 deposit towards his bond.

Zulu denied any wrongdoing, saying he had been an employee of TNT and that he had lost his job when the company was liquidated as a result of being unable to pay subcontractors on the project.

“The municipality cancelled the project with the IDT. The IDT requested a close-out report and we delivered that,” he said. “I have never been interviewed by any forensic auditor. I would welcome it if they would. I am available. There is nothing I would like to hide when it comes to my involvement with the municipality.”

Zulu said the municipality had cancelled the project because of “political interference” in the council caused by infighting between factions in the governing party in the council and in the province.

He said TNT was still owed R24-million by the IDT, which had resulted in it being unable to pay contractors, and the company’s eventual liquidation.

Nkosi said he had done nothing wrong and was still waiting for the forensic auditors to “engage me”.

“No one has bothered to interview me,” he said. “I have not seen the report, but not a single cent was paid into my account. It would be interesting to have a look at that report.”

He added: “The IDT is an organ of state. There are procedures which are followed in making payments to an organ of state.”

Ndlela said he was not privy to the contents of the report. “I have no comment to make, but thanks for bringing it to my attention,” he said.

IDT spokesperson Phasha Makgolane said the organisation had laid criminal charges against the directors of TNT It was also now suing them in their individual capacities for R99 000 000.

He said the IDT had secured a judgement and liquidated TNT, but that its assets did not cover what was owed.

Makgolane said the forensic investigation into TNT had recommended disciplinary action against implicated IDT employees. Most had already left by the time the report was acted upon.

‘’The remaining employees resigned before the disciplinary process against them could be finalised,’’ he said.

He said the ‘’unfortunate’’ delay in acting by the IDT had been caused by its own ‘’governance challenges’’ and changes at Board level.

Democratic Alliance Msunduzi executive committee member Sibongensi Majola said they were still waiting for the co-operative governance department to table three reports on the municipality, which is currently under administration. “We want them to be tabled as soon as possible so that those who looted the city can face the consequences.”

He added: “The challenge here is that investigations are instituted but nothing ever comes of them. There is a serious problem as there is no consequence management. Cogta [co-operative governance and traditional affairs department] is meant to exercise oversight, but from what we see it is at the centre of the problem by holding back these reports.”

*This article was updated after comment from the Independent Development Trust

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