The unit told parliament how municipal land was ceded to private developers, who sold it on for a profit
Private developers selling government property worth R21 000 for R9.5 million was part of the Special Investigating Unit’s (SIU’s) corruption findings regarding a Durban housing project meant to benefit low- and middle-income families.
On Wednesday, during a presentation to parliament’s standing committee on public accounts, SIU chief operations officer Leonard Lekgetho detailed how the City of eThekwini, in a R28.1 million project to cede its land to private developers for social housing, failed to monitor the project.
The R28.1 million was for the city to service the stands, whereafter eThekwini would sell the land to private companies that would build houses.
Lekgetho said the SIU, in March, had approached the Special Tribunal to retrieve the lost R28.1 million.
“We are currently waiting for further court processes to pursue [the money],” Lekgetho said.
The housing project relates to a council resolution taken in 2000 to make 29 municipal stands available — some serviced and others not — in the Phoenix area of the city.
Three developers were sourced through an open tender process to construct houses for families earning less than R3 500 — for low-income households, representing 25% of beneficiaries — and R3 501 to R5 000 for middle-income homes, making up 75%.
Lekgetho said the unit’s investigation found that the intended work set aside for the 29 sites was not carried out because the “irregularly appointed” companies sold the state properties for an inflated profit instead of building much-needed houses.
He added that it had been recommended that the National Prosecuting Authority charge 20 officials — including the company directors and four eThekwini officials — and that the city employees face disciplinary action.
Nosipho Jama, the SIU’s head of investigations in KwaZulu-Natal, said that no supply-chain management processes were followed for the project.
“Before the sites were allocated [to the three winning bids], one developer was replaced without following due processes by other developers that were not appointed through the SCM [supply-chain management] processes,” she told parliament’s standing committee.
Jama added that the city would have sold the serviced stands in Phoenix to developers for “R30 000 each”, while the unserviced stands would have been about “R100 000 each”.
“But what we found in Phoenix was that the developers were developing and selling the sites, and were benefiting in terms of the profit,” she said.
She provided an example of how, during a visit to the stands, the SIU found that a site was sold for R34 000 to a developer, VAT included, and the company, in the act of “corruption”, sold the land for R500 000.
“There was one site that was sold [to a developer] for R21 000, but it was sold for R9.5 million. That was the trend, there [are] more examples [of] where they were deriving a profit.
“The issue is that the municipality failed to monitor and assess the activities of the developers,” Jama added.
Lekgetho, responding to questions from MPs, said the companies had since been blacklisted on the treasury’s central supplier database, “meaning that the companies will not provide services to any other government entity”.
He added that the SIU could not reveal the names of the developers yet because implicated companies were afforded a right of reply, “which is the process unfolding now”.
“In the next meeting, we will be able to [give names of companies], particularly those names where the investigation is finalised and we have given the people the right of reply,” Lekgetho said.