Johannesburg – The Zondo Commission into State Capture has scrutinized details on why the Free State department of human settlements made R600 million in payments to contractors and suppliers for work that was not delivered.
The former Free State head for the department of human settlements, Nthimotse Mokhesi, took the stand at the inquiry on Monday.
Mokhesi’s appearance was centred on an affidavit he wrote while he served as HOD and sought relief from the courts for the department recoup more than R600m that was paid to various suppliers and contractors to build 14 000 RDP houses for the province’s citizens.
Mokhesi has explained that R600m was paid to suppliers and contractors in a fraudulent scheme devised by former human settlements MEC Mosebenzi Zwane and then HOD Gift Mokoena.
In late 2010, the department found itself in a position to lose the bulk of its R1bn housing budget. National Treasury regulations stipulate that a department’s budget can be recouped from a province if not spent within a given financial year.
The national human settlements minister at the time, Tokyo Sexwale, had aimed to recoup the Free State department of human settlements’ budget as it seemed like the province would not meet its target of spending the budget. At the time, in October 2010, only 10% of the budget had been spent.
Zwane and Mokoena were said to have approved payments to suppliers and contractors in a scheme to ensure that the housing budget was not recouped by the national department and redistributed to other provinces, which had met their spending budgets.
The evidence leader for the commission, Advocate Paul Pretorius explained that the scheme entailed agreements with 135 building contactors and prepayments were made to these contractors before the final products were received.
What made these payments illegal was that procurement processes state that contractors should be responsible for acquiring building material and once the first phase of the project was completed, the contractor could begin claiming from the department – through proper checks and balances.
This process did not happen.
Another illegal component of the scheme was how the department also settled agreements with 112 suppliers for building material to be delivered to the appointed contractors.
This meant that the department was taking responsibility for building material being supplied to contractors.
Mokhesi told the commission that this was illegal as it went against the first agreement with contractors which states that they were responsible on their own to ensure that building material was supplied.
Mokhesi explained the illegality of the agreements; “There were some material supply agreements that were entered into with 112 suppliers. These material suppliers would then supply material to the contactors which contradicts the first contract. It now became the responsibility of the department”.
Mokhesi agreed that the general motive for the agreements was to ensure that most of the housing budget was spent as quickly as possible so that it could not be forfeited. The money was paid in five months, between late 2010 and early 2011 with no procurement processes being followed and internal checks being circumvented.
“I think it’s simple, it was to ensure that the department does not lose money back to the fiscus and other provinces. The paying, buying material resulted in this type of process or scheme. There was a possible loss to other provinces of the conditional grant,” Mokhesi explained.
Contractors and suppliers were paid over R600m while no houses were built in 2011.
Mokhesi said it was unclear how many houses had been built so far, but he conceded that very little had been delivered.
Mokhesi, who had drafted arguments for the Bloemfontein High Court to allow the department to recoup the funds, said at the moment the loss to the department had been estimated to be R500m.
The Bloemfontein High Court agreed with the facts supplied by Mokhesi and the province that scheme to ensure the housing budget was spent was fraudulent.
The commission will hear from Mokoena this week.