Former KwaZulu-Natal Treasury head Sipho Shabalala has been sentenced to an effective 15 years in prison for his role in the so-called “amigos case”, involving the award of a R44m contract for water purification plants by the provincial government.
In June this year, judge Dhaya Pillay found Shabalala, 56, guilty of corruption, fraud, money laundering and contravening the Public Finance Management Act.
On Thursday she handed down sentences amounting to 45 years but ordered they run concurrently with the 15 years she imposed for corruption.
The sentence was in line with what prosecutor Mlu Magwanyana proposed, while a probation officer recommended five years of “house arrest”.
Pillay said she had considered a heavier sentence but had “restrained herself”, given Shabalala's age and health. His failure to testify was “tragic” and he was taking the fall while the real villains went free.
She likened the offences, which involved funds destined for the alleviation of poverty, to “treason”.
Shabalala told the probation officer he did not acknowledge responsibility for the crimes because he was “executing orders from his principals”. He immediately applied for leave to appeal his conviction and sentence.
Pillay said she would hear argument on this on Tuesday and extended his bail until then.
He was arrested with 22 others, including ANC heavyweights Mike Mabuyakhulu and Peggy Nkonyeni, in 2010 in what became known as the “amigos case” — a reference to how the accused referred to each other in correspondence.
Charges were withdrawn against Mabuyakhulu and Nkonyeni, but the Zondo Commission recently recommended they be recharged.
The contract for the supply of water purification plants, or “watakas” as they were called, was given to Cape Town-based businessman Gaston Savoi's Intaka Holdings and the money came from the poverty relief fund.
Shabalala stood trial in the absence of the other accused after being granted a separation of trial.
While it was initially alleged that Savoi paid more than R1m into then attorney Sandile Kuboni’s trust account as a “donation” to the ANC, as thanks for contracts, it emerged in evidence that some of it was used to pay expenses related to a farm owned by Shabalala and his company, Blue Serenity, which owned a hotel in Pietermaritzburg.
Pillay found that he, as head of the Treasury, flouted procurement processes and put pressure on colleagues to approve the R44m contract.
She said he held the “purse strings”, a powerful man who abused his position.
Watakas were no solution to the problem of drought
— Judge Dhaya Pillay
In sitting on the “round-robin” panel he had been a player and a referee. He initiated and recommended the procurement of the watakas and pushed for usual tendering processes to be waived.
He did this to secure the so-called donation of R1,053,000 to the ANC from Savoi.
Pillay said not only was the donation “absolutely prohibited”, but Shabalala had initially not disclosed it to the party and used some of it to pay off his debts.
She also noted the role of then economic development and finance MEC Zweli Mkhize in the saga, saying he had supported the deal and urged then local government MEC Mike Mabuyakhulu to sign off on the release of funds from the poverty alleviation fund.
Municipalities had been “burdened” with watakas, which could not be used during a drought.
Mkhize's evidence that communities wanted water purification facilities “was patently false”.
“Watakas were no solution to the problem of drought,” Pillay said.
“Mkhize was a state witness who, unsurprisingly, was favourably disposed ... to the accused. His credibility must be weighed against the backdrop of both the possible implications for himself of his participation in the transaction and the social ties between the Mkhize and Shabalala families.”
She found both MECs and Shabalala influenced the procurement of watakas and Shabalala “drove the project” until Intaka was paid, in full, before it supplied the plants.
The “dubious” escalation in price from an initial R715,000 to R2m for each plant remained unexplained by Shabalala.
The evidence showed Shabalala had given Savoi “a free hand to manipulate the terms of the deal” to his own advantage, including reneging on an undertaking that he would build a manufacturing plant in KwaZulu-Natal.
Intaka had made a direct profit of R30m from the poverty alleviation fund, “a shameful indictment on Shabalala and all those who pretended to advance the cause of the poor while they pocketed extraordinary profits”.
Regarding the “donation”, she said it had been paid into Kuboni's trust account on Shabalala's instruction, who claimed Savoi was “uneasy about disclosing his identity as a donor to a political party”.
This was “concealing an illicit payment”.
Pillay said Mabuyakhulu had, in an affidavit, acknowledged receiving R1m from Shabalala and stated it had been used to “to defray expenses arising from the then upcoming June 2008 conference” in his capacity as ANC KwaZulu-Natal treasurer.
While his affidavit had been admitted into evidence “for reasons not disclosed”, Mabuyakhulu did not testify.
“The amount of the donation and why it was not reflected in the financial records of the ANC called for a credible explanation. And Shabalala gave no explanation why he gave MEC Mabuyakhulu only R1m and not the full R1,053,000 his attorney had received as the donation.”
She said it did not matter whether the payment of R1,053,000 was to bribe Shabalala or a donation to the ANC, or both.
“On either basis it was an unlawful inducement.
“On Shabalala’s version he used it as an unauthorised, unsecured, interest-free loan. Of course, he had to pay it over to the ANC once the ANC was alerted to it,” she said.
Savoi, Kuboni and the other accused will be back in court on November 14.
They also face charges relating to a contract for the supply of oxygen machines and watakas to the provincial department of health.
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