Five of the axed FSHS officials, meanwhile, decided to fight back.
They instituted arbitration proceedings against the department in which they challenged the outcome of their internal disciplinary hearing.
Their filings18 laid bare the alleged involvement of Magashule’s office and the roles played by Zwane and his fellow department bosses in the most fundamental decisions that led to the R1-billion RDP splurge.
‘They [the axed officials] simply fell victim to a modern government contagion – i.e. that the powers that be go about their functions in certain ways (whether lawfully or motivated by malfeasance), implement what is decided in higher structures, and when the actions go wrong some subordinate is sacrificed at the altar of the true culprits,’ their legal counsel contended.
Drawing on heaps of documents and records, their submission alleged that ‘the scheme’ was orchestrated by Magashule’s office and implemented by the likes of Zwane, Mokoena and Dlamini: ‘It cannot be overstated that this entire model and the operation of the scheme …
emanates from the office of the Premier and employees in the Department responsible for legal compliance.’
The cornerstone of the ERP, namely the contracts between the FSHS
and the various contractors, was in fact sanctioned by Magashule’s own office, the axed officials argued. ‘The chairperson [of the
disciplinary proceedings] forgot that the State Law Advisors were asked – at the offices of the Premier – to advise on the drafting of the contracts.’
Their counsel added that the ERP ‘was thoroughly researched, contracts drafted and the “OK” given by inter alia Mr Tsoametsi, Mr Taka [the FSHS’s deputy director for legal services], the State Law Advisor and Mr Bertus Venter at the Premier’s office’.
The officials argued that if they had been implicated in an unlawful scheme, it was because they were acting on orders from higher up.
‘The applicants never took the decision to implement the advance payment system,’ reads their submission. ‘[This] was introduced through a decision taken by the Member of the Executive Council
[Zwane], the Head of the Department [Mokoena] and the Chief Financial Officer [Dlamini].’
As mentioned earlier, these arbitration proceedings are ongoing. But it seems almost certain that Magashule and some of his key henchmen, including Zwane, orchestrated and executed the plan that resulted in the FSHS emptying its coffers in record time.
The court application that included Mokhesi’s affidavit was lodged in late 2016. The department sought to have the Bloemfontein High Court review and set aside its contracts with 106 companies: 85 building contractors and 21 materials suppliers. In terms of trying to retrieve some of the misspent money, however, the department instituted action proceedings against just 22 of the companies in an attempt to recover R631 million. Surprisingly, these included all 21 materials suppliers and only one building contractor. The department was clearly targeting the materials suppliers. 19
One of the owners of a materials supplier from which the department sought to recover money told the Sunday Times that the department’s legal bid was a ‘façade’ and a ‘smoke screen’. The R1-billion expenditure drive had been marred by fraud, the businessman said.
According to him, the department had merely cited the 106
respondents to convince the SIU that it was doing something about the looting. He lamented the fact that the department had chosen to try to recover money from the materials suppliers only, seeing as some of them had delivered the goods for which they had been paid. 20 ‘What about those suppliers and contractors who were paid in advance but are not listed as respondents? Why are they being protected?’ the businessman wanted to know.
It sounded to me like the department’s selective legal bid to recover some of the money was a cover-up. I obtained documents and records pertaining to the department’s expenditure during that period and proceeded to analyse them. It was a classic exercise in following the money, and the results were frightening. I began to realise why Magashule may have wanted to take control of the investigative process.
There were several materials suppliers and contractors, who collectively received a fortune as part of the R1-billion ERP, who were seemingly overlooked in the department’s legal proceedings. Some of them were closely linked to Magashule. We’ll start with a few materials suppliers who managed to slip under the radar.
In 2011, while human settlements agency NURCHA was probing the matter, an email was sent to several companies that had received advance payments for materials. The email, of which I obtained a copy, contained the names of all 21 suppliers against whom the FSHS had
instituted action proceedings to recover the R631 million. However, also included in the email were the names of an additional five companies not mentioned in the department’s court filings. These companies had collectively received more than R35 million in 2010/11
alone, according to records from the department’s housing subsidy system.
One such supplier was Friedshelf 863. When I looked at its records at the Companies and Intellectual Property Commission (CIPC), I found the name of one of Magashule’s oldest and most trusted pals. Hantsi Matseke (née Mayeza), a fellow Parys local whose relationship with Magashule goes back to their Hillbrow days, registered the company in 2007. Its name was later changed to Maono Construction, and it features elsewhere in this book. Matseke also registered a joint venture (JV) with a company called Ubuhlebethu Property Developments in October 2010. In other words, the JV was established just in time for the FSHS’s splurge. The JV subsequently scored a contract to build 271 houses in Bohlokong outside Bethlehem. This project was awarded to Matseke and her partner as part of Operation Hlasela, the premier’s development programme.
Matseke became chairperson of the Free State Development Corporation in July 2012. As we will see in later chapters, this state-owned entity has been very kind to Magashule’s daughter, Thoko Malembe, who also later became Matseke’s business partner.
Although the NURCHA email listed Friedshelf 863 as a supplier, the department’s HSS refers to the company as a ‘contractor/builder’. The HSS shows that Matseke’s company received a small fortune from the department. In 2010/11, it was paid just under R6 million. In the following financial year, it received R38 million. By 2014, Friedshelf
863 had pocketed altogether R52 million from the FSHS. The JV, meanwhile, earned just over R23 million for the Bohlokong project.
Matseke said her company should not have been included in the email regarding NURCHA’s probe into the advance payments. She said Friedshelf 863 had been paid as both a supplier and contractor, but didn’t receive any money in advance. Her company was not ‘implicated by the findings of the investigation’, she said.
The HSS suggests that Friedshelf 863 and its JV partner left behind incomplete houses at the Bohlokong project. Matseke said the JV
finished all but seven of the houses it was supposed to deliver. This was due to ‘beneficiary management challenges’.
After being rebranded as Maono Construction, Matseke’s firm began to soar in the Free State. Its contracts from the FSHS alone in the period after 2013 were worth more than R150 million, according to the HSS. In total, Maono bagged more than R500 million in contracts from the FSHS and other departments in Magashule’s provincial government.
Matseke did not take kindly to my questions about her relationship with Magashule. ‘I find this line of question[ing] unacceptable, extremely offensive and hurtful as it creates an innuendo that my companies get contracts as a result of certain perceived relationships.
In short, this is degrading, sexist and undermining to black business women in this country,’ she said. She denied that Magashule played a role in contracts awarded to her companies.
Despite Friedshelf 863 having featured in the NURCHA probe, as suggested by the leaked email, the department chose not to list the company in its court bid, thus shielding Magashule’s chum. Worse s
till, there were suppliers who received money in the 2010/11 splurge that
did not even feature in the NURCHA investigation, let alone the department’s later legal proceedings. The payments to these companies are reflected in the HSS.
One such company that drew my attention was Robs Bricks. The database showed that it had received exactly R7 million, a figure that stood out like a sore thumb among the hundreds of payments. It is highly unlikely that any supplier would have provided materials valued at such a precisely round figure.
The company’s CIPC records confirmed that my suspicions were justified. Like the JV between Friedshelf 863 and Ubuhlebethu, Robs Bricks had been registered just in time for the department’s 2010/11
spending spree. And its sole director was Mohlouoa ‘Blacky’ Seoe, one of Magashule’s former business partners.
Seoe has another company – Robs Investment Holdings – which benefited from the FSHS’s largesse to a much greater extent than Robs Bricks. What’s more, the HSS shows that its success correlates exactly with Magashule’s tenure as premier. Between 2010 and 2017, Robs Investment Holdings netted almost R90 million from the department.
Like its sister entity, it was not mentioned in the FSHS’s court application.
A 2013 progress report on some of the department’s projects sheds light on Robs Investment Holdings’ poor performance. During the R1-billion splurge of 2010, Seoe’s company clinched contracts to build 400 houses in the former homeland of QwaQwa and in the town of Kestell. By February 2013, it had completed only 187 units. According to the report, Robs Investment Holdings had experienced problems with sourcing materials. At the Kestell site, some of the would-be beneficiaries had become so tired of waiting that they had started to
construct their own houses. 21
Like Matseke, Seoe is also linked to Magashule and his daughter Thoko through business dealings. Magashule was once a director in Sambal Investments, another of Seoe’s companies. And I identified at least one property transaction between one of Thoko’s trusts and a company owned by Seoe. This deal, incidentally, went down in Kestell.
Moreover, when I was working on an investigative piece for News24 in 2017, I found CCTV footage showing Magashule, Thoko and Seoe, along with some others, inspecting a Shell fuel station in QwaQwa.
Thoko later scored this property in a dodgy deal involving the FDC, the entity chaired by fellow RDP contractor Hantsi Matseke.22
One of the FSHS insiders I spoke to said the department deliberately excluded Seoe’s companies from the court application. ‘He got advance payments and his two projects were never finished, but he didn’t get sued due to his close proximity to Magashule and Mokhesi,’ said this source.
Peet Pieterse, meanwhile, denied that Open Water had overlooked companies owned by Matseke and Seoe. Robs Investment Holdings and Friedshelf 863 featured in the Open Water report, he insisted.
However, I had asked him about Robs Bricks, not Robs Investment Holdings, seeing as the prior company had received the strangely round figure of exactly R7 million for materials. Pieterse did not indicate whether this entity featured in the Open Water report.
I asked Pieterse why some of the entities included in the Open Water report had apparently been excluded from the FSHS’s legal proceedings against contractors and materials suppliers. He said Open Water did not have a say in determining who the FSHS ended up suing.
‘It may be that the entities did fulfil their obligations in terms of their
agreement[s] with the Department by constructing all the houses, which may therefore cause the advance payments to be of no consequence in civil proceedings had the Department received value for money in terms of the enrichment principal,’ said Pieterse.
A proper analysis of the HSS reveals scores more companies with strong political connections, many of them owned by people close to Magashule’s inner circle.
The entity with perhaps the funniest name must be Mob Business, a closed corporation that was registered in 2002 by Moreki Moroka, the wife of lawyer and long-time Magashule associate Kenosi Moroka.
Magashule and Kenosi were previously co-directors in two companies.
A 2009 Mail & Guardian report detailed how Kenosi Moroka allegedly tried to extract a R2-million bribe from a businessman who needed the approval of the Free State Gambling Board for a deal involving the transfer of shares in a casino company. It was alleged that the lawyer had acted on Magashule’s behalf. 23
Sources who attended gatherings or meetings with Magashule alleged that Moroka is something of a benefactor to the former premier. ‘I’ve been to meetings with Ace and some of his associates where we racked up large bills,’ said one individual. ‘Kenosi would sometimes pull out big wads of cash and settle the bill.’ Moroka strongly denied this. ‘Our client has never been in any meeting where Mr Magashule and some of his political allies held meetings where our client had to settle restaurant bills,’ his law firm said on his behalf.
Moroka should also be familiar with Mokhesi, under whose watch the FSHS drove legal proceedings in relation to the R1-billion RDP
splurge. Moroka and Mokhesi have served together on the board of Centlec (SOC) Ltd, the local state-owned power distributor, since
2013. 24 Incidentally, Seoe has also done a stint as a Centlec director. 25
Moreki Moroka seemingly hit the jackpot when Magashule became premier in 2009. Mob Business pocketed more than R50 million in revenue from the FSHS between 2009 and 2018, according to the HSS.
This included a payment of just over R5 million in 2010/11 to build houses in Bloemfontein. In that same year, Moreki and Mosidi Motsemme, the mother of two of Magashule’s children, bought properties within walking distance of each other in the same upmarket residential estate on the outskirts of Bloemfontein. Motsemme is known in Free State ANC circles as Magashule’s ‘Bloemfontein wife’.
Moroka denied that her business’s successes could be attributed to perceived political connections. ‘The libellous disinformation that seeks to link the operations of Mob Business to the tenure of Mr Magashule as the Premier of the Free State Province are, to say the least, preposterous and malicious,’ said her lawyers.
According to the FSHS’s 2013 progress report, Mob Business left behind 100 unfinished houses in Bloemfontein. ‘Contractor not on site for four months,’ reads the report. ‘Recommend to terminate. ’26
Although Mob Business was listed as a respondent in the FSHS court bid, it was not among the companies against which the department instituted action proceedings to recover money.
Moreki Moroka insisted that her company did finish all its houses in Bloemfontein.
‘As
further
testimony
to
[the]
absence
of
malperformance, the Department duly paid the retention fee to our client, which would not be paid in the event [that] there was defective performance present,’ claimed her lawyers.
10
Rewarding friends and punishing foes
While poring over Tim Mokhesi’s
affidavit and the FSHS’s court
application, I noticed something
interesting.
As mentioned previously, there were 106 respondents in the department’s 2016 court application, including the 22 companies from which the department sought to recover R631 million. Of the 106
respondents, 93 are closed corporations or private companies. The remaining respondents are natural persons listed in their capacity as trustees of trusts that received money from the department.
Relying on the court papers, the Sunday Times had revealed in January 2017 that former SABC chief operating officer Hlaudi Motsoeneng and the wife of sport minister Fikile Mbalula were among those listed as respondents. 1 Motsoeneng and Mbalula, who would become minister of police in March of that year, both hailed from the Free State. Motsoeneng and Mbalula’s wife, Nozuko, were both members of a trust that apparently scor
ed contracts worth about R38
million to build 450 houses in Virginia and Bloemfontein respectively, the newspaper reported. But the houses were never finished.
When asked for comment, Motsoeneng simply stated that he had ‘no interest’ in the issue. Nozuko denied that she had been involved. ‘I’m
very angry,’ she told the Daily News. ‘I’m seeking legal advice on how to clear my name in this regard. I’m being labelled a fraudster. I feel my name has been abused. ’2
The inclusion of Nozuko Mbalula’s name in the court application is interesting in light of her husband’s strained relationship with Magashule. The beef goes back to 2012, when Mbalula aligned himself with the Free State ANC’s Regime Change group. This faction sought first to unseat Magashule as provincial chair before backing the anti-Zuma slate at the Mangaung conference at the end of that year. 3 The group ultimately failed, and the movement fizzled out in 2013.
Nevertheless, the hostility between Magashule and Mbalula continued to build well into 2017. Not long after his move to the police portfolio, Mbalula took aim at Magashule in one of his famously belligerent tweets. ‘Ace Magashule is a definite no no no, the man will finish what is remaining of our movement. He will kill it,’ Mbalula tweeted in June 2017, after it became clear that the premier would run for the position of ANC secretary-general at the end of that year. Mbalula’s animosity was probably heightened by the recent court action implicating his wife in the Free State housing scandal.
I have always suspected that the inclusion of Nozuko Mbalula’s name in the court papers was an attempt by the Magashule administration to settle a political score with her husband. My theory is supported by further compelling indications that the department used its court application to help fight Magashule’s battles.
Of the 93 corporate structures listed as respondents, the department included the names of the managers or owners of only four. Of the four people named, three can be linked to political squabbles with Magashule. While the four entities are listed as respondents, they are,
Gangster State Page 13
