R27 million paid to suspected ANC front company established on 1 July 2022

Issued by Dr Mpho Phalatse – DA Johannesburg Caucus Leader
12 Oct 2022 in News

The following remarks were delivered by the DA Johannesburg Caucus Leader, Cllr Mpho Phalatse, as the Hillbrow SAPS, where she was by Section 79 Chairperson for Economic Development and Joburg Caucus Deputy Leader, Cllr Bongani Nkomo, and Cllr Leah Knott.

Today, we are here at the Hillbrow South African Police Service to lay criminal charges against the Johannesburg Property Company (JPC), a City-owned Municipal Entity that appears to have engaged in an act of fraud or corruption involving millions of taxpayers’ money siphoned off to a company linked to the ANC.

It is alleged that the JPC paid R27 million to a company that had only been registered for two-months at the time of receiving the payment in September this year. We were reliably informed that part of this R27 million would be used to destabilise the coalition government of which I was the Executive Mayor, by funding the payment of bribes to Councillors in order to entice them to vote against our government.

In early September, I, as the Executive Mayor, was informed by the then Member of Mayoral Committee (MMC) for Economic Development, Cllr Nkululeko Mbundu, about information he had received from a whistle-blower.

In their detailed submission, the whistle-blower alleged that the JPC had made irregular payments amounting to or around R27-million to a company that was fronting as a conduit through which to channel money from the City to the African National Congress (ANC). It was further alleged that this money would be used to finance nefarious activities intended to destabilise the then Multi-Party Government.

The basis of this multimillion-rand transaction relates to a lease agreement that was contracted between the JPC and a company, to lease Proton House. The premises at Proton House were intended to be utilised as office space for the City’s Group Finance Department.

Part of the lease agreement, according to the JPC, obliged the City to reinstate the building upon expiry or termination of the contract.

Upon the expiration of the initial contractual period, the City continued to occupy the premises, thereby extending the lease on a month-to-month basis.

When JPC issued a notice to terminate the agreement, the City was obliged to pay the Landlord for reinstatements, as well as any rental arrears and interest that had been accrued.

Having received this alarming information, I immediately requested the Acting City Manager to investigate the matter.

In a report to the Acting City Manager, the JPC Chief Executive Officer, who authorised the payment, submitted that R27-million was paid to the Lessor of Proton House on 05 September 2022. The report asserts that this amount was a negotiated outcome emanating from a Settlement Agreement concluded by the City and the Landlord. The final amount of R27-million was defended by JPC on the basis that it was intended to pay for the arrear rentals and interest accrued, as well as to cover the costs of reinstatements.

However, we would like to highlight a few alarming points of contention that require further investigation:

  • While the JPCs report asserts that a portion of the R27-million was intended to settle rental arrears and interest accrued, we are informed that the building has been vacant for over a year.
  • The second component of the R27-million, which in fact appears to be the largest portion of the final amount that was paid, relates to the reinstatement costs. We are reliably informed that initial estimates of the reinstatement costs were R2.2-million. However, for some reason unbeknownst to us, that initial quote was ignored. Instead, the JPC is alleged to have appointed a new Quantity Surveyor who then prepared a Bill of Quantities which resulted in a new estimate for reinstatements at over R20-million.
  • The JPC report neglects to mention the fact that the building has indeed been vacant for an extended period and that the initial estimates for reinstatements were inflated from R2m to more than R20-million.
  • The JPC has yet to provide documentation to support the claims made in respect of the contents of the settlement agreement, nor have they attached the lease agreement which would have spoken to the specifics of the reinstatements.

Moreover, it is important to note that the final R27-million appears to have been paid to another company that was not the contracted Landlord or lessor of the property. The money was paid to Nthwese Projects and Trading, which, according to the CIPC, was only established on 01 July 2022, with a physical address in Boksburg and postal address Bushbuckridge in Mpumalanga. We are informed that this company has ties to an ANC linked businessman who faced corruption charges in 2010.

Further to my request to the Acting City Manager, I instructed the City’s Group Forensic and Investigation Services (GFIS) Unit to investigate the matter. They then enlisted the services of an external company to conduct a forensic investigation into the transaction.

Since the ANC-led coalition’s installation in the City, we have been informed that an instruction was issued to all City Boards, compelling the Entities to put all decisions made since 01 September 2022 in abeyance. We understand that though this was a City-wide instruction, it was intended to target specifically the JPC Board.

The JPC Board was in the process of charging the CEO of JPC in relation to this matter. However, the ANC-led government has since blocked that process from taking course.

At the same time, GFIS’s investigation has been undermined, as the ANC has not only terminated the services of the company appointed to investigate the dubious transaction, but we are also informed that the capable Acting Group Head of GFIS was removed from her position.

So, when we allege that money exchanged hands to successfully pass the motion of confidence against the former Speaker, Cllr Vaso Da Gama, we do not so out of spite, but with knowledge of dodgy transactions that were already on the go.

The unlawful coalition of the corrupt, led by the ANC have already initiated sweeping changes to the City’s senior management, by removing a capable Chief Operations Officer (COO) and appointing an individual well-known for his strong links to the ANC cabal.

We also intend to refer this matter to the Public Protector as it demands the attention of all critical law enforcement and investigative agencies. We will continue to monitor this case and see it to its conclusion.

Whether in government or opposition, we are determined to see corrupt acts and their actors stopped in their tracks and prosecuted.

Corruption cannot be swept under the carpet, and even our current position in Council will not stop us from continuing to close the taps of corruption. Left to their devices, the ANC will ensure the collapse of service delivery and of Joburg as a whole.

We trust that now that we have activated the necessary processes that will see this matter properly investigated, the truth of how and why the Multi-Party Government was so hastily and illegally collapsed will become clearer.

We will not shirk our constitutional and legal obligations to report corruption because we were illegally removed.

As the Democratic Alliance, we will not rest and allow corruption to take centre stage at the expense of service delivery for the residents of Joburg.