The former Free State human settlements department boss has told the State capture inquiry that former human settlements MEC Mosebenzi Zwane told him to submit his resignation if he was opposed to his "solution" of spending the allocated R1-billion for housing to prevent the national department from claiming it.

Mpho Mokoena testified before the commission on Tuesday.

He said in October 2010, Zwane called a special meeting to address them about a "solution" to the department's non-spending of the housing grant. According to Mokoena, Zwane's solution was that they should buy building materials, so that service providers could start working.

"I said this is illegal, you can't pay first before getting the service," he said, adding Zwane had sent his advisor to research the legitimacy of the plan.

"I said I am not comfortable with it. I am not agreeing that we do this plan of yours because it is bordering on illegality."

Mokoena said when he told Zwane he did not agree with the plan, he was told he could submit his resignation.

He also allegedly said should he resign, he would be without a job and his house would be "taken by the banks" and his children would be out of school.

"It was obvious that he was saying that I must resign because I don't want to implement his plan. It was a threat to kick me out of the post I was in or out of the job," Mokoena testified. He told the commission Zwane had approached him with a list of 106 contractors he wanted him to approve.

"My glance at the list was that I saw many companies … for the first time and as a person who has been working in the province for years I could realise that no, there is something wrong here.

"Then I asked him 'Why do you have so many new contractors with so many units, because for us, a new contractor we give 200 or less not more than 200?' and he said 'This is my plan, this is the document that I have the power to allocate and these are the people I am allocating to'."

Mokoena said his team did not know most of the contractors on the list, claiming three companies from the list were "very close" to Zwane.

He testified about the department's cash-flow projection document which was compiled in October 2010.

The projection presented the completion of several thousand units at a total cost of more than R1-billion.

Asked if it was realistic, Mokoena said it was not.

He told the commission they knew they were not going to spend the R1-billion in three months.

The documents were to be given to the national department to persuade it not to take the allocated housing budgets away from the Free State.

But, Deputy Chief Justice Raymond Zondo, who chairs the commission, told Mokoena they were misrepresenting facts to the national department about being capable of achieving their goal.

Asked why they misrepresented the facts, he said he did not have the answer to that.

Zondo said: "It is concerning because you were the HOD, that's a very responsible position and you have certain responsibilities, you're dealing with taxpayers' money, [and] under your leadership the department had not built a single house by October 2010, six months into the financial year.

"And now you are coming up with a document that misrepresents the situation, you send it to national department in order to prevent the national department from taking the money and giving it to other provinces who are prepared to work.

"That was wrong, isn't [it]? It should [not] have happened."

In response, Mokoena said: "That was wrong chair, I'm sorry about that, we shouldn't have misrepresented the facts because we didn't have capacity for this that we put in here."

He told Zondo had he said no to a certain decision, the money could have been saved.

Towards the end of Tuesday's proceedings, Mokoena testified there was not a single project that was completed.

"Instead, we had many more foundations in different areas and in the province, rather than complete houses.

"For me, we didn't achieve anything in terms of complete projects. Although we spent so much money on materials that we bought. And on the running up and down, paying for officials to do inspections. We didn't achieve what we were supposed to achieve."