DHS ‘flagged’ dodgy deal

2014-04-25 00:00

THE KZN Department of Human Settlements (DHS) was well aware of the issues being faced at a Phoenix housing development months before the Asset Forfeiture Unit (AFU) seized the properties, documents have revealed.

But National Treasury has accused the KZN DHS of having used the Phoenix development as a mechanism for “fiscal dumping” — to offload cash in the budget that needed to be spent before the end of the 2012/13 financial year — a charge denied by MEC Ravi Pillay.

Court papers were filed last week at the Pietermaritzburg high court by the AFU to seize four large property developments that were built and under the management of Woodglaze Trading — a company run by embattled Durban business tycoon Jay Singh.

Woodglaze is accused of fraudulently accessing grants from the Social Housing Regulatory Authority (SHRA) amounting to R236 million to build social housing units while the SHRA is being investigated for allowing the transaction to take place in the first place. This funding came from the national DHS.

Letters from the KZN DHS head of department reveal that as early as April 2013 the development had been red-flagged by Pillay.

In a letter sent to the SHRA in April 2013, the department’s then acting CEO Mduduzi Zungu said “distressing media reports and public protests” regarding Woodglaze housing project at Phoenix “has propelled Pillay to intervene”. Zungu said that the department was not privy to the details of the R236 million that was paid to Woodglaze by SHRA “as a Capital Restructuring Grant for 1 244 units”.

The letter said “Pillay requires all the documents and agreements that led to the transfer of R236 million to Wood­glaze Trading in order to have a better understanding of the process that was followed and to be able to support the project and make an informed decision.”

Just a month earlier Pillay had personally ordered that the KZN DHS, through SHRA, disburse R101 million to First Metro Social Housing Company, which intended buying the 1 244 units from Woodglaze.

It is this payment that Levy Moshoette, director for internal control systems audit at National Treasury, accused the department of using to dump cash.

In his affidavit he said: “The KZN DHS caused [R101 million], which is quite substantial, to be transferred essentially on March 28, 2013, which is essentially the last day of financial year. In my experience this constitutes fiscal dumping.”

The First Metro transaction was also contrary to the SHRA’s own due diligence report undertaken in February 2012, which found the transaction to be filled with risk.

But the court documents reveal that by September 2013 the KZN DHS made an about turn and ordered that First Metro return the R101 million and the money be used for three other Durban housing developments and one in Pietermaritzburg. The money was not returned. This decision was based on an internal SHRA report, finalised in July 2013 which, highlighting both Wood­glaze and First Metro as deals that took place with weak internal controls, recom­mended a full investigation including lifestyle audits of SHRA employees. The internal report found that if Woodglaze was paid the R101 million it would effectively have been financed twice for the same project.

Pillay said they have requested a meeting with all relevant parties in Phoenix. “We want to ensure that the interests of the Woodglaze residents are protected.”

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.