A Gauteng Partnership Fund (GPF) investigation that probed housing loans it granted to Deputy President Paul Mashatile's son-in-law Nceba Nonkwelo's company, for a project that was never completed, has found that the project was not viable and the loans granted were possibly reckless.
The investigation report by Gildenhuys Malatji Incorporated (GMI) was released by Human Settlements MEC Lebogang Maile on Monday.
The investigation was launched to determine the circumstances around the loans totalling R24.9 million to Nonkwelo's company, Nonkwelo Investments, between 2013 and 2017. The loans were for the construction of student accommodation in Highlands, Johannesburg.
However, the project was never completed, and the investigation found that Nonkwelo Investments failed to make a single payment at the end of the moratorium period, “as such, in material breach of the second loan agreement”.
The investigation report stated that the GPF entered into a settlement agreement with Nonkwelo Investments but did not delve further into the details of this settlement agreement.
The project in question was initially for affordable housing, which was then changed to student accommodation, which the investigation found to be legally "uncertain", stating that any approval of funding would be irregular and "not in the best interest of the GPF".
“It would appear that the project itself did not satisfy the requirements of the GPF; at certain stages, however, the GPF may have still attempted to accommodate the developer [Nonkwelo] and/or the project.
“It would appear that various of the policies and procedures may have been amended to resuscitate and/or cater for material changes in the project,” the report read.
The report further stated that the project was no longer financially viable, and as such, the loan agreement as well as the project "ought to have been cancelled“.
“We are of the view that a scope change would not have made the project financially viable since similar challenges initially identified regarding the property still remained and were not addressed,” the report read.
It further stated that the project itself ought to have been reworked, the financial and technical aspects reconsidered, and Nonkwelo’s company be required to apply for the project afresh, “bearing in mind the different or more stringent requirements pertaining to new status quo applications”.
“To merely restructure the nature of the project to'resuscitate' the project and mitigate the costs already disbursed by deciding to disburse further funds was negligent and may amount to financial misconduct in terms of the PFMA [Public Finance Management Act],” the report stated.
However, the investigation report also stated that due to outstanding “material evidentiary documents”, which the GPF could not locate, the investigators could not make “conclusive findings" about whether all applicable policies, procedures, and other laws and regulations were followed in approving Nonkwelo Investments as a participant in the Entrepreneur Empowerment Property Fund (EEPF) programme.
It further found the GPF did not utilise all the remedies for breach of contract at its disposal to yield a more beneficial result or recovery of its monies from Nonkwelo as opposed to what was agreed to in the settlement.