How a small town blew R2bn on dodgy deals

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One of the country's worst-run municipalities went on a R2-billion spending spree, which has been exposed in a series of explosive reports.

Free State premier Ace Magashule knew about the rot at Matjhabeng municipality as far back as 2009 - but no action has been taken against any of the implicated officials.

The municipality spent R1.6-billion of its R1.7-billion budget on "unaccounted expenditure" and property, according to the latest auditor-general's report.

In addition, the municipality, according to the AG, wrote off bad debts totalling R1-billion in the past four years. The R1.6-billion includes R876.3-million on property, R258.5-million through unaccounted expenditure, R227.8-million in debts incorrectly written off and R230.3-million on "unauthorised, fruitless and wasteful expenditure".

Several reports by a forensic company, as well as a commission of inquiry headed by the then co-operative governance MEC Mosebenzi Zwane, show how Matjhabeng - which, according to its website has a population of "more than 500000" - got itself into such a mess.

They show that, on one occasion, officials tried to destroy documents stashed in wheelie bins, while investigations were under way. Some of the reports are over a year old. Magashule this week admitted that there were "problems" at Matjhabeng that were reported to him as far back as 2009. However, he said he was never made aware of the full extent. "I didn't know about these details and these billions."

One of the men implicated in ripping off public funds is Jaqui Gao. Magashule said he had stopped Gao's company, Rui Star, from doing business in Matjhabeng because of suspected corruption involving Matjhabeng's former municipal manager, the late Thabo Pietersen.

The company had up to that point received at least R20-million in tenders. "We picked up about Rui Star supplying substandard bricks and supplying (bricks) for Pietersen's house (in Bloemfontein)," he said.

The reports also detail that:

  • R200000 was paid into the account of ex-mayor Mathabo Leeto's husband, Lehana, by photocopy company Gestetner after it was awarded an "irregular" R15-million tender;
  • R1.5-million was approved for renovations to the mayoral house, deemed to be "personal enrichment"; and
  • Former municipal manager Dr Ben Malakoane signed questionable tenders worth R80-million - 10 of them in one day, shortly before he resigned to join a company that benefited.

The Zwane report found Malakoane "grossly negligent" and "undermining the rule of law" for signing contracts "without following due process". The report recommended a "dedicated forensic investigation" into his role in the sale of council land to Pinnacle Point for a R500-million shopping mall.

Magashule admitted he was close to Pietersen and Malakoane saying: "They are my comrades."

Leeto is mayor of the Lejweleputswa district municipality in northwest Free State and has widely been tipped to be promoted by Magashule to an MEC.

Asked if she'd repay the costs of her home renovations, Leeto said there was "no determination made nor any finding that there was an irregularity on my part".

Her husband Lehana confirmed that the R200000 was indeed deposited into his bank account but couldn't explain how. He was unable to prove, as he claimed, that the money had been returned.

Said Magashule: "I think it's completely unfair if you want to blame me for all of this. I can't protect anyone. I'm not that powerful."

Matjhabeng spokesman Modise Mahlatsane said the council was still waiting for the final report from investigating firm Ramathe Fivaz and had never seen Zwane's report.

Mahlatsane said the council was implementing an "action plan" to deal with the auditor-general's "queries and recommendations".

Gao denied any wrongdoing. "People are jealous. I know Pietersen because I used to go to his office to demand (outstanding payments)." Efforts to get comment from Malakoane proved fruitless.

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