How Mosebenzi Zwane, Ace Magashule used Free State housing scheme to dish out R600m

Under former minister of human settlements (housing) Tokyo Sexwale, funds were dispersed to the nine provinces in the 2010/11 financial year. At the time, Sexwale was one year into his post and keen to make an impression in former president Jacob Zuma’s cabinet. However, the Free State department put a serious dent in his stint in the housing portfolio as Free State Housing MEC Mosebenzi Zwane devised a scheme to fraudulently utilise R1bn which had been set aside for the creation of low cost housing for the indigent. What played out would read like a drama script as Zwane allegedly forced officials to sign off on R630m, with as little as R200m of that amount going into the actual housing project – Bernice Maune.

By Bernice Maune

At Tuesday’s hearing of the state capture commission, former Head of Department: Human Settlements, Free State Provincial Government Nthimotse Mokhesi told how hundreds of millions were mis-spent.

SC Paul Pretorius, who is leading the evidence, told Judge Ray Zondo that Zwane was the mastermind of an illegal scheme that he appears to have created. When the scheme was exposed and R630m had already landed in the hands of irregular suppliers – some of whom had flouted tender compliance regulations – it was too late as the money had been illegally spent.

While junior employees were disciplined and fired, Zwane walked off without any consequences into a cushy post as minister of mineral resources. According to affidavits and evidence presented by Pretorius, former premier of Free State Ace Magashule was a key player in the illegal plan as he had told the housing department to issue new tenders for bigger houses to be built. This was despite the national government approving 40-square-meter houses.

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This new change in housing dimensions would be communicated and implemented without approval from Sexwale. With the issuing of new tenders under Zwane’s direction and Magashule’s instruction, a database was created which included hundreds of contractors – some of them ineligible. The breakdown of the contractors was as follows;

  • 361 bids received
  • 105 disqualified
  • 147 disqualified for not meeting minimum threshold
  • 109 qualified
  • 81 established
  • 28 emerging

With 500 000 houses set for completion, the contractors were appointed by Zwane at his personal discretion. Pretorius adds that the suppliers were given pre-payments and agreements entered into for them to purchase the materials and begin building. However, by October 2010, no houses were built and R200m had been spent on surveys, title deeds and basic services. The money had effectively disappeared and the project was redundant.

“Neither contractors or suppliers were subject to any bidding processes. Money allocated by national treasury under the division of revenue act  had allocated money to province for a particular purpose, in this case the Free State housing project.

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“The act is clear that if monies are paid to third parties it has to be done in terms of regular processes. You can’t make advanced payments before services are carried out. The Free State had not spent R1bn and devised all sorts of mechanisms to ensure money would be spent.

“National treasury hadn’t approved advanced payment. It was told something different,” said Pretorius.

Ex-Free State head of department, Mokhesi, who reported directly to Zwane,  also told Zondo: even though the National Treasury had knowledge of the scheme and was against it, Zwane insisted it should be carried out.

Watch former Head of Department: Human Settlements, Free State Provincial Government Nthimotse Mokhesi full testimony below at the state capture comission

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