EXPOSED: ANC secretary general Magashule and daughter involved in dodgy R150 million RDP housing scam

2018-03-28 07:01
Ace Magashule (Elizabeth Sejake, City Press)

Ace Magashule (Elizabeth Sejake, City Press)

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Ace Magashule, the African National Congress secretary general and outgoing Free State premier, has been caught meddling in a housing project to ensure that a company partly owned by his daughter scored contracts worth R150m from his provincial government.

News24 can today reveal perhaps the most damning details to date of Magashule's direct involvement in government contracts that benefit his own family to the detriment of his province's poorest and most marginalised citizens.

Our investigation shows:

  • Magashule and senior provincial officials interfered in a housing project near the eastern Free State town of Bethlehem. After the initial contractor was booted off the project, the provincial government appointed a company in which Magashule's daughter is a shareholder.
  • The company, Unital Holdings, was appointed to build RDP houses without a tender process and has so far been paid nearly R70m by the provincial Department of Human Settlements.
  • Magashule promised locals that they would receive quality housing in a safe environment, but those living in the new houses say they are worse off than before. Their homes don't have electricity, water or working toilets, leaving them exposed to the hazards of pit toilets and open holes containing human waste. 

The saga involves Magashule's direct involvement in the appointment of a "Chinese" company called Unital Holdings to construct 1 050 RDP houses on a plot of land to the north of Bethlehem.

News24 was able to determine that Unital's shareholders are Jianliang Li, a mysterious Chinese South African businessman who seems to have disappeared, and Thoko Malembe, Magashule's daughter. We revealed in January that Malembe was reunited with the premier in 2011 and subsequently scored R9m in a dubious property deal with the Free State Development Corporation (FDC).

Thoko Malembe, Premier Magashule’s daughter, with one of Magashule’s sons, Thato. (Instagram)

 

Malembe appears to have read queries sent to her on WhatsApp, but she did not respond. We could not track Li down for comment on any of his available contact details.

Magashule strongly denies that he had a hand in Unital's appointment, but has not responded to queries about whether he knew his daughter owned shares in Unital.

"The honourable premier is not at all involved in the awarding of tenders or any related processes. The honourable premier was therefore not involved in the appointment of the service provider with regards to the Bethlehem RDP project", his office said in a statement.

But the involvement of Magashule and his provincial government is detailed in court documents and in minutes from council meetings at Bethlehem's Dihlabeng Local Municipality. It is further corroborated by photographs and by several sources familiar with the matter.

The mysterious "Mr Lee"

The story starts in early 2012, when Magashule and then human settlements MEC Olly Mlamleli, currently the mayor of Mangaung, visited residents of the Selahliwe informal settlement near Bethlehem. Magashule and Mlamleli promised the residents that they would be moved to brand new houses in a nearby development.

About a year later, in November 2013, Magashule and several MECs officially launched the Baken Park RDP project. The tract of land for the new houses lies to the north of Bethlehem's town centre and is also known as Vogelfontein. 

"We don't want to build a 'kasi' township here – we want to build a human settlement. We should have schools, recreational places, community halls and many others," a local newspaper quoted the premier as telling excited Selahliwe residents at the launch event.

The launch of the Baken Park housing project by Premier Magashule in 2013 was splashed on the front page of this local newspaper. Magashule promised that the development would consist of quality houses.

 

Sources close to the matter say Magashule then introduced locals to a Chinese businessman, known to them as "Mr Lee". The premier told them that this businessman's company, Unital Holdings, would build decent houses for them.

The "Mr Lee" that was introduced to the locals was, in fact, Johannesburg-based businessman Jianliang Li, Malembe's fellow shareholder in Unital Holdings.

News24 has obtained photos of Magashule and Jianliang Li visiting the site along with then MEC Mlamleli and other government and municipal officials.

Magashule did not answer questions about his relationship with Unital's shareholders.

"The honourable premier and MECs, as well as other elected representatives, do conduct regular visits to projects throughout the province. This is part of oversight and ensuring that quality services are delivered to the people," Magashule and Mlamleli said in a combined response to queries about the photos with Li.

Records from the national Department of Human Settlements' housing subsidy portal (HSS) show that Unital clinched its first contract from the provincial human settlements department in November 2013. This first phase for the construction of 500 new houses in Baken Park's extension 5 had a budget of R63.5m, according to the HSS portal.

Unital clinched a second contract from the provincial department in August 2015 for another 500 houses, with a total budget of R78m.

In April 2017, Magashule's daughter and her partner scored a third contract worth R9m for a further 50 houses. In all, Unital was appointed to build 1 050 houses at a budgeted cost of R150m.

The provincial department said it has so far paid Unital R67.5m for 630 finished houses. It later changed the figure to 568 completed houses.

As we'll see in a moment, the number may be far lower than that, while those residents now living in the new development say they are barely better off than they were in Selahliwe.

Setting up shop

Company records suggest that Li and Malembe set up Unital specifically to benefit from the Bethlehem housing project. The company was registered in May 2013, about a year after Magashule's first visit to the residents of Selahliwe, and only six months before Unital landed its first contract from the provincial department. 

At the time, the fact that Li's partner was Magashule's daughter would not have been widely known. Malembe did accompany Li to the site and to some meetings with the Dihlabeng municipality, according to another source. But her relation to Magashule was not public knowledge. 

It was only in January this year, when News24 reported on the dodgy property deal with the FDC, that her identity as the premier's daughter was placed on the public record. 

The provincial Department of Human Settlements, whether knowingly or unknowingly, also contributed to the perception that Unital had only "Chinese" shareholders. A presentation on provincial housing projects compiled by department head (HOD) Nthimotse Tim Mokhesi in May 2015 lists Unital as a "100% Chinese-owned" company. 

A satellite image from July 2017 of one section of the Baken Park development. (Google Earth)

According to company records, Li and Malembe have since resigned as directors of Unital, leaving one Pfarelo Mutheiwana as the company's sole director. Mutheiwana refused to explain how he came to be the company's new director, or how he knew Malembe or Li. He said his lawyer would respond to our queries, but this did not happen.

News24 obtained Unital's shareholding details by means of a Promotion of Access to Information Act (PAIA) application to the National Home Builders Registration Council (NHBRC), the regulatory body for the home building industry. Jianliang Li owns 70% of the company and Malembe 30%, according to the registration documents Unital submitted to the NHBRC.

Magashule's daughter wasn't just a silent partner on the project. Apart from attending some of the meetings at the local municipality, as mentioned above, she also communicated with other roleplayers involved in the project. News24 has seen emails Malembe sent in late 2014 relating to the development. 

When asked how Unital was appointed for the project and whether there was a tender process, the provincial department claimed that the company was "appointed as a sub-contractor by VNA [Consulting], which is a company appointed by the department as an implementing agent for some of our project[s], of which Vogelfontein is a part."

But News24 pointed out that, according to the department's own records, Unital had a contract with the department itself. The department then refused to address further queries about Unital's appointment. It claimed that we needed to access such records through a PAIA request.

"The Free State provincial government wishes to confirm that due process was followed with the appointment of Unital Holdings. We are not aware of any corruption allegations regarding this appointment," reads a consolidated response later sent by the Office of the Premier and the Department of Human Settlements.

Magashule's meddling

When Magashule first brought Jianliang Li and Unital to Bethlehem, the Dihlabeng municipality already had a land availability agreement in place with another company for an "integrated housing development" at Baken Park.

This company, Emendo Incorporated, is now embroiled in a legal battle with Dihlabeng after its services were terminated. We deal with this case in more detail in a follow-up to this article.

Emendo's directors refused to speak to News24, but the court papers tell a shocking tale of Magashule's alleged meddling in the project. This includes an account of how the municipality allegedly received instruction from Magashule to stop working with Emendo.

The court documents aren't the only indications that Magashule and the provincial government were involved in getting rid of the incumbent contractor to make way for Unital.

Several sources familiar with the matter say Dihlabeng was strong-armed by the provincial leadership to terminate its agreement with Emendo.  

Most of these claims contain very detailed information with regards to how the events unfolded.

Some of these sources say two meetings were convened at the offices of the premier in Bloemfontein in 2014 during which senior government officials, including Magashule, resolved that the Dihlabeng municipality needed to terminate the Emendo contract.

The source says Mlamleli, the then human settlements MEC and Mokhesi, the department's HOD, attended the meetings along with Kopung Ralikontsane, the director general in the Office of the Premier and Mokete Duma, the then HOD for the provincial Department of Cooperative Governance and Traditional Affairs (Cogta). Magashule attended one of the meetings, says the source. 

In their combined response, Magashule and the other officials did not deny that such meetings took place. Duma did not respond to a request for comment.

The premier's office admits that it provided Dihlabeng with "legal advice" on the matter. This was done at the municipality's request, maintains the premier's office. 

"It appeared that the contracts concluded with Emendo Inc were irregular, and as such, it should be reviewed and set aside by a competent court. The office of the premier did not instruct the municipality, but gave legal advice," claimed Magashule's office.  

Council pushes through

Once the provincial leadership had made up its mind, it was up to the Dihlabeng municipality to end its agreement with Emendo. 

Several sources in the local council and in the municipality point to Lindiwe Makhalema, the ANC's then chief whip in the council, as a key roleplayer in the subsequent developments. 

Makhalema, who has since become Bethlehem's mayor, apparently told members of the ANC caucus that the party's provincial executive committee (exco), which is led by Magashule, had decided that Dihlabeng should send Emendo packing. 

The council indeed resolved to terminate the agreement. Minutes from council meetings show further glimpses of the provincial government's role in the matter.

In a special meeting on the Baken Park project by the mayoral committee, the council resolved "to pronounce itself on the letter received from the provincial Department of Human Settlements dated November 13, 2015," council records show.

Dihlabeng says that none of its officials acted improperly in their handling of the matter.

"The municipal manager, Mr Busa Molatseli, and the executive mayor, councillor Lindiwe Makhalema (in her current or previous role as the chief whip), deny putting undue pressure on any official or ensuring that the contract with Emendo Inc. was unduly terminated," said the municipality.

"Worse off than before"

Today, Baken Park is a far cry from what Magashule promised the Selahliwe locals in 2012 and 2013.

When News24 visited the development in January, we found a collection of houses next to the R714 byway that didn't measure up to the lofty vision the premier supposedly had for the project.

When News24 visited the development in January this year, the houses were still not connected to a sewerage system. (Pieter-Louis Myburgh, News24)


 Some of the unoccupied houses have been badly vandalised (Pieter-Louis Myburgh, News24)

 

A group of SACP members pointed out some of the problems with the area – the roads were still untarred, the houses had no water or electricity and some homes were abandoned and badly vandalised because residents didn't want to move into an area with no amenities. 

News24 later obtained a report compiled in September last year by a task team of DA councillors in Dihlabeng. It detailed exactly how poor the execution of the Baken Park project had been.

According to the report, which includes pictures, the area is an impending health and safety disaster.

"The team found that the sewerage pump at the pump station was not connected to the sewerage system as well as not being connected to electricity," the report found.

Because of this, some Baken Park residents built their own pit toilets.

Other houses had "VIP toilets" (portable toilets) that were "connected to neither the immediate pipes of the external sewerage connections nor was the main sewerage system working," according to the report.

"The task team found that the municipality dug a two-metre deep hole for the residents to dump their faeces and other refuse. This is a health concern as well as an environmental concern," the task team found.

It also found that "none of the houses have rain gutters; the distance of the roof overlapping the wall is not according to national building standards; [and] some of the houses have already been damaged by light storm winds during the time of the team's visit."

The provincial human settlements department insisted that "the quality of [its] projects is assured through [its] own inspectors and are also registered with the National Home Builders Registration Council".

The department says it "noted that not all basic services could be completed in time for [the] construction of houses and relocation of beneficiaries". 

It says the bulk infrastructure for water and sewerage has been installed.

"A sewer mainline was completed early in the project cycle and a pump station was completed and commissioned in 2017. The municipality is in the process of connecting households to the sewer mainline," says the department. 

It added that water infrastructure has been installed and that the municipality is in the process of connecting the houses to the water supply.

"In the meantime, water taps were installed outside [the] houses to provide water as a temporary measure," says the department. 

"Regarding roads, the department has completed designs and will start with construction of these in the next financial year. The municipality is working with Eskom and the Department of Energy on supplying electricity to these households," the department promised.

Another alarming feature of the saga is the discrepancies between the figures provided for the number of houses that have been completed so far.

The department first stated that Unital had so far finished 630 houses. It then claimed in a follow-up response that the correct figure was 568.

The DA task team, however, claims it found only 198 completed houses, of which 138 were occupied.

Some of these occupants say they are worse off than they were in Selahliwe. 

"The toilets and the refuge are not collected by municipality and they have dug big holes next to location, next to the houses which is very hazardous for us and it puts our children at high risk," one resident told the task team.

Another Baken Park resident told News24 about the project's numerous problems. 

"When it rains, it leaks into my house. And the problem with the toilets is bad. Some of us go up a nearby hill to relieve ourselves because there aren't any working toilets," he said.

Do you have information for our investigative journalists? Send an email to tips@24.com

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