As set out in the terms of its appointment, the Commission was instructed to include in its Report, specific recommendations regarding the Commission’s findings concerning the officers of the Provincial Administration involved, Mpumalanga Housing Board Members (including the Board’s Secretariat), the existing procedures (or deficiencies therein) and the existing financial control mechanism (or lack thereof).

The Commission has, in passing, touched on certain aspects of this instruction in regard to officers of the Provincial Administration, members of the PHB and the Secretariat.

Due to time constraints, however, the Commission has been unable to formulate detailed recommendations in regard to existing procedures and the existing financial control mechanisms. It may also be inappropriate to do so in the light of pending changes to the national legislation.

If so required the Commission will attend to this matter in a separate report.

Finally, one written submission was made to the Commission by E G Janse van Rensburg. This is included as Exhibit A 136 to this report. Once again the Commission has been unable to address the issues raised in this submission.

Each instruction in the terms of reference has been individually dealt with in Chapters 4 to 8 of this report. In each chapter the Commission sets out its conclusions in relation to the issues raised in the relevant portion of the terms of reference. For purpose of convenience these conclusions are summarised in the following paragraphs.

10.1 PROVINCIAL HOUSING BOARD APPROVAL.

10.1.1 Quorum.

There was no quorum at the PHB meeting so that the purported ratification of the Exco decision allocating 10 500 subsidies in respect of the Rural Housing Project was invalid.

10.1.2 Adequacy of Information

The information presented to Exco and PHB was hopelessly inadequate in terms of the requirements of the Manual.

None of the members of the PHB or the Secretariat made any attempt to obtain the required information.

It was therefore impossible for the members of Exco and PHB to adequately apply their minds to the matter.

10.1.3 Funding

It is common cause that the availability of funds for the project was never considered as part of the PHB approval process.

10.1.4 Misrepresentation

Various role players took comfort from the involvement of Nedcor in the project. However none of them made any effort to establish the extent of Nedcor’s involvement. It is clear from the evidence gathered supported by the documentation that Nedcor did not misrepresent their involvement to any of the parties concerned.

10.1.5 Subsidy agreement

10.1.5.1 Absence of proper authority

Since there was no quorum at the PHB meeting of 30 January 1997 the decision taken at that meeting to allocate subsidies was invalid. Accordingly the subsidy agreement is invalid.

10.1.5.2 Non-compliance with the Manual

10.1.5.2.1 Draft Agency Agreement

The proposed agency agreement would have had no material impact upon the validity of the agreement and it is therefore unnecessary for the Commission to find whether the consensus to omit the draft agency agreement was reached before or after signature of the agreement.

10.1.5.2.2 Incorporation of the additional allowances

The Commission recognised the arguments advanced by the AG in regard to the non-variation clause but concluded that the parties had de facto regarded the addendum as binding and that the developer had since regularised the position by signing the addendum to acknowledge that position. The addendum still requires signature by a representative of the PHB but will of course remain an addendum to an invalid contract.

10.1.5.2.3 The interest free loan

As the contract provides for the discharge of the developer upon transfer of the completed top structure to the local authority (regardless of whether a beneficiary is identified or not) there appears to the Commission to be no basis for the suggestion of an interest free loan facility as the developer is only being paid for work already completed and handed over.

10.2 MOTIVATION AND REASONS FOR ENTERING INTO THE AGREEMENT.

Arising from the testimony received and documentation gathered the Commission is of the opinion that the motivation and reasons of the parties participating in the project for entering into the agreement were as follows:

10.2.1 The Province

A genuine desire and commitment by every Provincial representative who gave evidence to expedite the delivery of housing to the poorest section of the rural community.

10.2.2 Nedcor

A desire to facilitate and support the delivery of rural housing both nationally and provincially.

10.2.3 Motheo

To establish a commercial enterprise for delivery of housing to communities in rural areas with no employment and very poor living conditions utilising the concept of women themselves being involved in building homes for their families.

10.3 FULL IMPLICATIONS OF THE AGREEMENT

10.3.1 Evaluation process to identify the appropriate developer

Evidence was adduced by Moodley to the effect that project management and economic empowerment were the overriding considerations. On the other hand Cobbett asserted that track record is everything.

In practice the developer was identified by Gibb, proposed by him to the Province and accepted by Exco and PHB without any acceptable evaluation process.

10.3.2 Authorisation

The chairperson had at least tacit authority to sign contracts on behalf of the PHB. However the approval of the subsidies for the Motheo Contract was taken at a meeting without the requisite quorum thus rendering the approval invalid and, with it, inescapably, the agreement.

10.3.3 Funding

The formalistic view is that the PHB was so over committed at the time of signature of the agreement that there was a serious risk of it being unable to meet its commitments as and when they became due without assistance from the Provincial budget.

There was a misunderstanding by Provincial officials of the attitude of the NDH in regard to the approval of the project.

Provincial officials believed that the project could be accommodated by applying the management mechanisms dealt with in the body of this report. The Commission is unable to make a finding on that assessment but accepts that it is at least possible that the project may have been accommodated.

However, with the benefit of hindsight and in the absence of any further Provincial allocation, the formalistic view referred to above is probably correct. The issue may, of course, become academic in view of the invalidity of the contract.

In any event the current state of the national over commitment raises serious reservations as to the justification for the isolation of Mpumalanga and the Motheo Project as the recipient of a demand for refund when other provinces find themselves in a far worse position.

It appears to the Commission that the issue requires resolution by means of a process of negotiation, possibly at MinMec level.

10.3.4 Accountability and responsibility

In relation to "approval" of the subsidy allocation, the Commission finds that primary responsibility for the failed approval by virtue of the absence of a quorum lies with the Chairperson and, to a lesser degree, the Head of the Secretariat.

The Commission further finds that a degree of responsibility can be attributed to the members of PHB present at the meeting for failing to ascertain whether a quorum was present.

Inadequate Information

Once again primary responsibility for inadequate information being provided to the PHB must rest with the Chairperson, as he was well aware of the requirements as set out in the Manual. The Head of Secretariat failed to raise the issue of inadequacy of information before the Exco and Board meetings of January 1997 and is consequently, to a lesser extent, responsible therefor. Co-responsibility in this regard must also rest with members of the PHB for permitting the resolution to be taken with inadequate information.

The parties who must bear responsibility for the deficiencies in the agreement are as follows:

• Absence of agency agreement
  Moodley and Ngwenya for either failing to delete the reference thereto or attach the draft agreement in accordance with their respective understanding of the consensus reached.

• Absence of annexures
  Moodley in the first instance and Ngwenya in the second for failing to ensure that all of the annexures to the document were attached.

10.3.5 Undue financial benefit

The Commission’s overall conclusion is that there is no evidence that anybody or any body unduly benefited from the subsidy agreement.

 10.4 GENERAL

10.4.1 Job Mthombeni

Questions have been raised as to whether Mthombeni had a conflict of interests at the time he participated in the PHB approval of the project. The Commission found no shred of evidence to suggest that Mthombeni had any business or social relationship with Dr Ndlovu or Motheo before he received an invitation to join the board of that company in March, well after PHB approval. Mthombeni impressed the Commission as a patently honest and creditworthy witness whose primary reason for accepting the offer of a directorship in Motheo was the opportunity it afforded him as representative of his constituency – the emerging builders. The Act specifically provides for members of the Boards to recuse themselves in matters in which they have a conflict of interests. There are a number of instances in which PHB members recused themselves when particular matters came up for decision – indeed Mthombeni was among the PHB members who had done so on prior occasions. The Act specifically dictates that the Board should have a spread of members who, by their qualifications, should add value to the Board. It is a matter of regret to the Commission that there should have been any suggestion that Mthombeni had acted improperly.

10.4.2 Misappropriation of taxpayers funds.

The Commission has expressed its conclusion that there is no evidence to support the assertion that anybody unduly benefited from the subsidy agreement. Whatever the technical irregularities in the process of application for and approval of the housing subsidies, the fact of the matter is that Motheo has, in all material respects, used the funds it received in the performance of its contractual undertakings. Whilst the Commission has not purported to undertake a detailed analysis or verification of the project works, the forensic investigation and the Commissioner’s own observations during the course of a private and unannounced site inspection of the development at Tonga East and Tonga West appeared to support the assertion that the money had been spent in the provision of services as contended. Indeed Motheo appears to have gone to some length to continue with the project for as long as the funds lasted notwithstanding the refusal by the Province to make any payments.

10.4.3 Ministerial Involvement in the selection process.

Although not part of the Commissions terms of reference there was no evidence before the Commission of any participation by the National Ministry in the process of evaluation and the awarding of the housing subsidies. It must be stressed that this was not a focussed issue of the investigation.

10.5 Recommendation

10.5.1 Finally it is with some hesitancy that the Commission ventures outside its terms of reference to offer a recommendation as to a future course of conduct. It does so in the belief that the present set of circumstances cannot be allowed to continue.

10.5.2 In spite of the conclusion that the subsidy agreement under which the development is being undertaken is invalid, a significant amount of work has been done by or on behalf of Motheo and a payment of R9 million has been made. Some three or four thousand sites have water services available for connection when construction of houses begins and service roads cover significant areas of the proposed project sites. There is a significant danger, that if left in their present condition, the value of the water reticulation system and the roads themselves will deteriorate dramatically.

10.5.3 More significant is the fact that expectations have been raised in the communities concerned where people are waiting for houses and hoping for the employment opportunities that the developments will bring with them.

10.5.4 The parties, being Motheo and the PHB and the Department, still have a working relationship notwithstanding the effective suspension of payments under the contract for the last six months.

10.5.5 In the circumstances, and without seeking to be prescriptive, the Commission suggests that the parties consider the following actions:

1. The process of PHB approval (subject to the qualifications set out below) be undertaken as a matter of urgency subject to clarification of funding availability from the National Department. In this latter regard the partially completed nature of the contract, the obvious misinterpretation of the discussion in March 1997 and the raised expectations of the communities in these areas should be raised to secure such assistance as is necessary outside of funds freed by cancelled or inoperative prior projects.
2. In order to ensure proper PHB approval Motheo needs to provide a proper application which will require evidence of the support it professes to have both in the form of the existing expert project team and from other established companies in the building industry.
3. The subsidy agreement and the addendum need to be revised and properly updated including the process of obtaining formal Land Availability Agreements.
4. The negotiation should have regard to the following qualifications:
• The possible reduction in number of houses at each site.
• The building programme in appropriate manageable phases.
• Indemnities from sub-contractors or any other creditors of Motheo.
• Badplaas and Hazyview be scrapped or delayed.
• Amsterdam be significantly reduced because of possible risk of oversupply.
• If Badplaas and Hazyview are scrapped a negotiated compromise in regard to a refund of the design fee will be required.
• Most advanced sites be proceeded with first.

1. Inventory of Exhibits A
2. Inventory of Exhibits G
3. Schedule of Witnesses 
4. Summaries of Evidence 
5. Inventory of Submissions received in terms of invitation set out in Premier’s notice. 
6. Summary of Deloitte & Touche Forensics Report (Exhibit A137) 
7. Memorandum of Understanding dated 7 February 1996

ANNEXURE 1

INVENTORY OF EXHIBITS A
 

ANNEXURE 2

INVENTORY OF EXHIBITS G

Number

1. Listing of PHB members to 31 January 1997
2. Listing of PHB member from 1 February 1997
3. Form CM 1 : Motheo
4. Form CM 46 : Motheo
5. Form CM 9 : Motheo
6. Form CM 26 : Motheo
7. Form CM 5 : Motheo
8. Form CM 2 : Motheo
9. Minutes of the Motheo Board dated 20 February 1997
10. Resolution of the Motheo Board dated 4 March 1997
11. Letter of MJ Mthombeni dated 14 May 1997
12. Letter of Motheo dated 14 May 1997
13. Memorandum of Understanding : Nedcor/the Department/Murray & Roberts
14. Memorandum of Mr S Moodley dated 25 November 1996
15. Mr L Appasamy’s undated note
16. Reports of K Cheriyan dated 7 January 1997
17. Minutes of the 18^th Exco Meeting held at 16 January 1997
18. Report on Rural Housing Projects dated 27 January 1997
19. Minutes of the 18^th PHB meeting held at 30 January 1997
20. Attendance register of the 18^th PHB meeting
21. Unsigned memorandum of the MEC dated 14 January 1997
22. Detailed Expenditure; Mpumalanga Provincial Administration
23. 1997/1998 Cash Flows as at 29 April 1997
24. Workings of R Naidu re savings on cancellled projects
25. Cash flow allocations
26. Motheo proposal dated 6 March 1997
27. Motheo proposal provided by Motheo
28. Submissions to the Portfolio Committee on Housing : Mr S Moodley
29. The first draft agreement and the comments of Mr K Shribuvasab thereon
30. Subsidisation agreement dated 14 March 1997
31. Motheo resolution dated 24 February 1997
32. Letter of the Department dated 14 March 1997
33. Letter of the Department dated 3 March 1997
34. Letter of Nortier and Associates dated 11 March 1997
35. Progress payment draw certificates
36. Letter of the Department dated 1 April 1997
37. Motheo : Claim against first draw
38. Request for advance
39. Payment advice for R4 000 000.00
40. Deposit slip for R4 000 000.00 dated 4 April 1997
41. Printed ACB transaction
42. Letter of Nortier and Associates dated 24 March 1997
43. Letter of the NDH dated 11 April 1997
44. Submission note dated 2 April 1997
45. Letter of the NDH dated 24 April 1997
46. Letter of the NDH dated 12 May 1997
47. Letter of the NDH dated 21 May 1997
48. Letter of Mr F M Mbatha undated
49. Letter of Mr F M Mbatha dated 30 May 1997
50. Letter of Jay Incorporated dated 8 April 1997
51. Deed searches

ANNEXURE 3
 

ANNEXURE 4

SUMMARIES OF EVIDENCE

See summaries contained in the record of evidence.

ANNEXURE 5

INVENTORY OF SUBMISSIONS RECEIVED IN TERMS OF THE INVITATION CONTAINED IN THE PREMIER’S NOTICE

1. Submission by E G Janse van Rensburg
Exhibit A136