State capture: Free State government spent R600m, with no houses built

The Free State department of human settlements on Monday came under the spotlight at the state capture inquiry for “fraudulently” paying R600m to companies for work that was not done.

The payments took place during 2010 and 2011 for what was a R1bn project to build low-cost houses in the province. At the time, Mosebenzi Zwane was human settlements MEC and Ace Magashule was premier.

More than 100 suppliers and contractors benefited from the advance payments — with no work done.

Free State human settlements head of department (HoD) Nthimotse Mokhesi made this revelation while in the commission hot seat on Monday. Mokhesi was not the HoD when the prepayments were processed. He was, however, made familiar with the controversies around the matter upon assuming the position of accounting officer of the department, and took a view that the whole thing was “fraudulent”.

According to him, the reasons that were advanced for paying companies before they had done any work was the provincial government’s fear at the time that failure to spend the cash would result in the National Treasury channelling it to “better-performing provinces”.

In October 2010, Free State human settlements, along with three other provinces, was warned by its parent national department that it was moving at snail’s pace in spending the allocation. Seven months into the financial year, only 10% of the funds had been spent.

Then-minister Tokyo Sexwale demanded an explanation of how the provincial government was going to avoid underspending on the ambitious project, which was meant to deal with a housing backlog.

Zwane and his team put together a presentation of how they were going to “improve expenditure” in an attempt to convince Sexwale and the Treasury.

Their plan opened the floodgates of alleged procurement irregularities, with more than R500m spent in just three months — January, February and March 2011 — in a rush to beat the financial year-end cut-off.

In January, the provincial department paid out R149m. It then spent R220m in February, before closing the financial year with prepayments to the tune of R170m in March.

Mokhesi conceded that this was an unorthodox way of doing things, particularly that the companies that won the tender were handpicked without an open tender process.

As for the work, it was shoddy as suppliers and contractors did as they pleased and underdelivered, having been paid before construction could resume.

“In a standard contract, the contractor is responsible for purchasing material and to convert that material into a product that being the foundation of the houses and only then can they claim, but that did not happen in this case,” said Mokhesi. “Building materials were not delivered and in cases where they were delivered it was not in quantities that are required or paid for.

“This is what we were faced with. The certification of the material never happened. When it happened, it was to a very lesser extent.”

Mokhesi will continue giving evidence on Tuesday.

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