Although Free State MECs earn more than R1 million a year they are previously disadvantaged and therefore qualify for loans from the province's development corporation, the Volksblad newspaper reported on Wednesday.

This was how the chairman of the Free State Development Corporation (FDC) Tsietsi Matang justified loans by the FDC to MECs and their families, the report noted.

Matang told the provincial oversight committee on public accounts the FDC had thought long and hard about granting the loans.

"We decided there was no conflict of interests," Matang was quoted as saying.

Former economic affairs MEC Neo Masithela's wife received a corporation loan. Masithela headed the FDC and appointed its current board.

Free State MEC for Finance Tate Makgoe and a business associate received two loans of R2.66 million.

Matang said the board followed the FDC Act in deciding on the loans.

The Act was clear on helping previously disadvantaged people and, according to Matang, included MECs and "so-called politicians", the report read.

"If we exclude people due to their positions, we can lose a case in court," said Matang.

This emerged after the Freedom Front Plus criticised FDC loans to two Free State MECs and their families last year.

Free State Premier Beatrice Marshoff also appointed an independent investigation by auditors KPMG into the FDC's affairs.

The KPMG report, currently before the committee, indicated that the FDC's books were in bad shape and that it had a dysfunctional board. It also noted that loans to the MECs and their families might be against the Public Finance Management Act and guidelines in the ministerial handbook.

Matang and FDC executive head Malefane Mapena both told the oversight committee they disagreed with KPMG's findings.