BOOK EXTRACT: Gangster State - Jacob Zuma's R2m 'thank-you fee'

Gangster State: Unravelling Ace Magashule's Web of Capture by Pieter-Louis Myburgh, published by Penguin Random House.
Gangster State: Unravelling Ace Magashule's Web of Capture by Pieter-Louis Myburgh, published by Penguin Random House.

On Thursday morning, it emerged that Durban businessman Vikash Narsai had filed a R10m defamation suit against Pieter-Louis Myburgh and Penguin Random House publishers for revelations in Myburgh’s book Gangster State: Unravelling Ace Magashule’s Web of Capture.

Narsai, Myburgh reveals, may have been involved in a R2-million ‘thank-you fee’ paid to former President Jacob Zuma allegedly in exchange for Narsai’s company being appointed as a project manager for a massive housing project near the Free State town of Vrede. 

Years after the project to build 1 000 homes for members of the community in desperate need, less than 200 homes have been built. The project is over budget and far behind schedule, and is estimated to have ballooned to a cost of R200m. This is an extract from Gangster State that sets out what Myburgh uncovered.

A follow-up progress report found that cash-flow problems also contributed to the debacle. 

‘Spending to date not a true reflection of work done,’ read this report. It found that ‘actual progress’ was ‘sitting at 10% and the project has passed its completion date’. The report recommended a new completion date of 31 March 2016. Some of the role-players involved in the project now started to panic. Based on Khaya Readykit’s original quotes, the less than 200 completed houses should have cost about R18 million.

As mentioned earlier, the [Free State Development Corporation] FDC had by now splurged almost R60 million on the project. People started to wonder where the rest of the money had gone.A series of emails between some of the people working on the project, sent in October 2015, raised some serious concerns. One individual alleged that the funds for the project had dried up because Narsai’s VNA had stolen the initial upfront payment from the FDC.

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‘The Vrede contract seems to be a textbook case for how not to undertake a housing contract in South Africa,’ fumed the email’s author.

The source who gave me the emails also alleged VNA had channelled a ‘thank-you fee’ to Zuma using some of the proceeds of the FDC’s upfront payment. This was the second time I was told about a ‘thank-you fee’, by an independent source.Narsai strongly denied this. He said all the money Tekeweni and VNA received could be accounted for. But why were there less than 200 completed houses, I asked him. Narsai said VNA and Tekeweni had to spend much more money on preparing the sites for the houses than they had anticipated.

The local council was supposed to provide platformed sites for each house, along with roads, water and electricity. Narsai explained that this was not done. ‘The scope of works changed completely,’ he told me. Tekeweni and VNA had to fork out much more money on work other than building the houses, he claimed. Originally, the project was expected to cost R100 million, but due to the added expenses it was going to cost taxpayers almost R240 million, according to a progress report VNA compiled in February 2015.One of my sources who worked on the project contested Narsai’s claims.

‘The contractor teams were bloated with various team members to justify the exorbitant fees they were charging,’ he told me. In other words, VNA and Tekeweni were allegedly pocketing large fees instead of spending most of the money on the project. ‘These allegations are strongly refuted by VNA,’ Narsai said. There had been a ‘fixed cost’ for the houses’ top structures, and it was impossible to exceed this cost seeing as it formed part of the bill of quantities, he claimed.VNA’s project-management fee also seemed exorbitant. According to Narsai, VNA’s original fee was valued at 15 per cent of the project’s initial estimated cost, which came to R100 million. The company’s fee, including VAT, therefore amounted to just over R17 million, he told me. This did not include Tekeweni’s fees. A professional in the construction industry told me that project-management fees should range between 3 and 5 per cent of the total project cost.

Another South African project-management firm charges between 6 and 9 per cent, according to its website.34 Narsai was adamant that VNA’s fees were not excessive. In fact, he claimed VNA had spent more than R20 million on the project and therefore actually suffered a loss.

Selvan Moodley, Tekeweni Civils’ co-owner, also denied that his firm had been overpaid. Moodley told me Tekeweni spent a lot more money than anticipated on earthworks, servicing the sites and related tasks.But I was handed an explosive set of documents that seem to explain why VNA might have needed to charge an apparently inflated fee. These papers also support my sources’ claims about Zuma’s ‘thank-you fee’ from VNA.

A closed corporation called Premier Attraction 1016 received R2 million from Narsai’s VNA in the 2015/16 financial year, according to its financial records. Premier Attraction had invoiced VNA for ‘consulting services’ in June 2015, and Narsai’s company paid the R2-million fee at some point before the financial year ended in March 2016, right in the middle of the Vrede housing project.

According to the invoice, Premier Attraction had done work for VNA relating to a ‘Mpumalanga development’. In November 2018, I asked Narsai whether VNA had done any work in Mpumalanga. At the time, I did not mention the invoice from Premier Attraction. Narsai said VNA had only worked as a ‘sub-consultant’ in Mpumalanga between 2003 and 2005.

He would later tell me a different story.The man behind Premier Attraction is Thalente Myeni, the son of staunch Zuma ally Dudu Myeni.

Thalente Myeni and a band of politically connected businessmen were shareholders in a consortium that won a huge contract worth R51 billion to supply new commuter carriages to the Passenger Rail Agency of South Africa (PRASA). Dimadox, the company Myeni used for his stake in the PRASA deal, was supposedly located at Zuma’s house in Forest Town, Johannesburg, according to the company’s registration records. In 2005, the Scorpions raided this property during their probe into Zuma’s involvement in the Arms Deal.

There have long been rumours that Zuma and Myeni’s mother were in a romantic relationship. Both have denied this. But the documents detailing Thalente Myeni’s financial affairs suggest there is a close link between the Zumas and the Myenis.

Thalente once submitted a ‘change of bank details’ form to the South African Revenue Service (SARS). One section of the form required the ‘personal details of person providing proof of residential address’. Myeni provided the name and contact details of Duduzile Zuma, Duduzane Zuma’s twin.

Next to ‘relationship to taxpayer’, Myeni wrote ‘cousin’.When I first researched Myeni’s involvement in the PRASA deal, sources claimed he was fronting for Zuma. The latest documents I obtained suggest he was using some of his income from ‘consulting’ work – possibly including his payments from VNA – for the benefit of Zuma’s family.

A bill for legal work done for Duduzile by a Johannesburg law firm was addressed to and apparently paid by Myeni in early 2016, according to the documents. VNA’s R2-million payment to Premier Attraction at the time of the Vrede housing project, coupled with Myeni’s apparent ties to Zuma’s family, suggested my sources might have been onto something. Could taxpayers’ money have been extracted from the Free State’s coffers in order to benefit the then president?

I finally confronted Narsai with Premier Attraction’s invoice in early 2019.

He strongly denied that VNA had channelled a ‘thank-you fee’ to Zuma, or that his firm had paid any politically exposed persons in relation to the Vrede project or any other projects. He admitted that VNA had paid Premier Attraction R2 million, but he said it had been for ‘consulting services’ related to a construction project in Bethal in Mpumalanga.

Myeni’s company apparently acted as the ‘development manager’. ‘Premier Attraction 1016 and by virtue Thalente Myeni was never involved in the Vrede ABT project,’ Narsai said.As mentioned earlier, Narsai initially claimed VNA had not done any work in Mpumalanga since 2005. When I asked him why he had changed his tune only after I asked him about the R2-million payment to Myeni’s company, he told me the following: ‘You were not expressly clear about what work we did in Mpumalanga as I understood that you were requesting whether we had undertaken work directly for Provincial Government. The work [in Mpumalanga] I refer to is for a Private Developer hence I responded accordingly.’

In a follow-up email, Narsai claimed VNA had paid Myeni’s company to take over the Mpumalanga development. He also said that he had first been introduced to Thalente by Dudu Myeni, the latter’s mother and Zuma’s ‘friend’.

* This is an extract from Gangster State: Unravelling Ace Magashule's Web of Capture by Pieter-Louis Myburgh, published by Penguin Random House.

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