ANC man cashes in on town's water

He bought Ermelo reservoir, then leased it back for huge profit

21 April 2019 - 00:06 By GRAEME HOSKEN


An Mpumalanga businessman and prominent ANC member bought an Ermelo council property and reservoir for R431,000, then leased it to the municipality for nearly double that amount every month. Now he is at the centre of a Hawks fraud and corruption investigation.
The probe is looking into the sale of a 1.3ha property to the Democracy Family Trust by the Msukaligwa local municipality 11 years ago. The property has on it a reservoir and a water-pressure structure that pumps water to the town.
The sole trustee, Samuel "Dube" Democracy Zwane, is an ANC Mpumalanga provincial executive committee member.
After buying the property, Zwane charged the municipality R800,000 a month to rent the land, according to a lease agreement seen by the Sunday Times.
In September 2017 he successfully sued the municipality for R53.6m in rental arrears dating back to 2011.
The land was one of two adjoining properties Zwane bought from the municipality. He bought the first in July 2005. He built a shopping centre and fuel station on the properties.
According to court documents, the municipality has never challenged the legality of the lease. Despite the 2017 judgment instructing the municipality to pay its debt, it is believed the local authority has paid Zwane only R5m. He is now owed R70.8m.
Two sources with knowledge of the deal told the Sunday Times that Zwane had allegedly threatened to throttle the town's water supply if he was not paid.
Zwane, speaking through his lawyers, declined to comment. His lawyers said the 36 hours given to respond to questions was insufficient.
Last week the Hawks investigators seized financial documents from the municipality. Hawks spokesperson Brig Hangwani Mulaudzi said detectives had "obtained documents for analysis".
"We are investigating a case of fraud and corruption," said Mulaudzi.
He said the Hawks had referred the matter to the Special Investigating Unit (SIU) for a presidential proclamation and for assistance in further investigation.
Mulaudzi declined to comment further until "certain individuals are approached for statements".
SIU spokesperson Nazreen Pandor said the unit could not comment.
A whistleblower who alerted the Hawks to the sale and lease said the alleged crimes were discovered during a council meeting in January last year.
"The municipality presented their financial records. Among them was a R56.3m legal bill, but there was no explanation as to what it was for," said the whistleblower.
Investigating, he discovered the lawsuit that dated to 2016.
"In court records I found agreements for the sale, lease and how the municipality had paid for the relocation of water-servitude pipes so Zwane could develop his property. The agreements were signed by different Ermelo municipal managers between 2008 and 2016.
"The documents show how in 2013 Zwane swapped his properties for a property of the same size across the road next to the airport. When the airport management learnt of his plans to build a shopping centre and fuel station and put a stop to it, he had the property swap reversed.
"At that point there was no lease agreement with the municipality. That only came in February 2016 when they signed the lease agreement, backdated to 2011."
According to the Municipal Financial Management Act, a municipality may only sell a capital asset if a decision has been taken in a council meeting, the asset is not needed to provide minimum basic services, and a fair market value for the asset is obtained.
The whistleblower said the sale and rental had been kept secret from the council, until the legal bill had been discovered.
"No explanation has ever been provided about the rental, why it was signed in 2016 eight years after the property was bought, or why it was backdated to 2011."
Court documents seen by the Sunday Times show how the municipality acknowledged the agreement's legality.In a letter dated September 4 2016, in response to Zwane's summonses a month earlier, the municipality appealed for 90 days' grace, "whilst looking for the best possible solution"."We are aware of the obligation we have in terms of the agreement and will do well on the current instalment going forward."Issued with a default judgment in January 2017 after it failed to pay, the council at first challenged it, then dropped it.Msukaligwa municipality spokesperson Mandla Zwane said he could not comment because the matter was under investigation.Zwane's former lawyer, Petrus Slabbert, who represented him during the court case, confirmed the court order but declined to say how much Zwane had been paid, citing client confidentiality."The municipality never denied the contract. All they wanted was a postponement to come up with payment arrangements."Mpumalanga ANC spokesperson Sase-kani Manzini confirmed that Zwane was a provincial executive member of the party.

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