A forensic investigation has found the Gauteng Partnership Fund (GPF) bent over backwards and went out of its way to ensure that Deputy President Paul Mashatile's son-in-law Nceba Nonkwelo's ill-fated project got off the ground. 

The explosive report, released by Human Settlements MEC Lebogang Maile on Monday, said it also appeared as if the GPF board tailored and amended policies and procedures to accommodate the project even when it was clear it was not financially viable.   

According to the report, compiled by Gildenhuys Malatji Incorporated, Nonkwelo's company, Nonkwelo Investments, was also potentially granted "special treatment" when the GPF approved his multimillion-rand project to build affordable housing.

The investigation only interviewed two GPF employees and did not interview Nonkwelo or Mashatile but relied on reviewing documentation to make its findings.

News24 previously revealed the GPF had granted Nonkwelo a series of loans of about R25-million between 2013 and 2017 to build student accommodation, which he never did.

Maile ordered the GPF board to investigate the allegations and whether there was any undue influence in granting the loans.

News24 found:

• The GPF registered a R5.7-million bond for Nonkwelo Investments on 4 April 2013. Exactly a year later, on 3 April 2014, the GPF cancelled the bond.
• On the same day the loan was cancelled, the GPF registered an R8.4-million bond over the same property. That bond was cancelled on 1 August 2017.
• On the same day, the GPF registered two other bonds of R7.1-million and R17.8-million. This is the bond that is currently registered on the property.

The report found the GPF, and its board members contravened the PFMA and its own policies when it potentially irregularly approved a scope change for Nonkwelo's project from social housing to student accommodation.

The scope change was approved even after it became clear the project was no longer viable.

The GPF then continued to grant loans to Nonkwelo Investments but failed to recoup the R11-million owed to it by Nonkwelo. 

Special treatment

According to the report, the same project Nonkwelo Investments submitted to the GPF for approval had been submitted a year prior by Ludwe Consulting.

The project was approved but put on hold due to the client's adverse credit score. 

"Subsequently, the seller of the property cancelled the sale with Ludwe Consulting and entered into a sale agreement with Nonkwelo Investments," the report said. 

It is further unclear how Nonkwelo Investments came to know of the fact that Ludwe Consulting's approval was going to be cancelled and that the property would become available for purchase by it.

The report added due diligence reports were submitted at the commencement of Nonkwelo's application - not after it had been approved.

"It may then follow the developer and/or project may potentially have been granted special treatment herein.

"Whilst such [a] finding may be considered circumstantial, same is derived from a reasonable and probable inference."

The investigation further noted, once the project was approved, "it appeared" the GPF amended particular policies and procedures to cater to Nonkwelo's project.

This included the GPF's investment policy, which subsequently allowed for 100% funding to be approved.

'Greater risk'

According to the report, it was evident Nonkwelo's project was not viable as no significant work had been done while the project experienced severe cost overruns.

Yet the GPF seemingly bent over backwards to ensure the project continued.

"There may appear [to be] negligence on the part of the developer and the GPF in that a proper site investigation and due diligence may not have been conducted prior to the approval of the various funding," the report said. 

Before receiving a third loan in 2017, Nonkwelo resubmitted another project proposal when his original idea did not pan out.

The proposal suggested a scope change which would not only recategorise the project from social housing to student accommodation but would double the number of units to be built from 45 to 90.

The GPF irregularly approved the scope change and continued to approve more loans to Nonkwelo Investments and spend more money.

"By stepping in and approving a senior funding loan to Nonkwelo Investments, we are of the considered view that this caused [the] GPF to continue to assume even greater risk," the report said. 

We were also not provided with documents indicating how the initial challenges of the project would now suddenly be overcome with a restructure of the project.

In granting further funding, the board might have committed financial misconduct, it added. 

"It was therefore not prudent of the IC [investment committee] and/or the Board of Trustees to restructure the project without having addressed these issues and having identified solutions. 

"To merely restructure the nature of the project to 'resuscitate' the project and mitigate the costs already disbursed by deciding to disburse further funds was negligent and may amount to financial misconduct in terms of the PFMA."

Little effort to recoup money

Despite this, the GPF had not attempted to properly recoup the R11-million in debt from Nonkwelo - another breach of the PFMA.

Instead, the GPF entered into a settlement agreement in September 2020 where both parties would agree to sell the land that Nonkwelo was meant to develop, to pay off the debt.

According to GPF legal and compliance manager Thandiwe Kuzawyo, who spoke to investigators, this agreement was not enforced because of the current investigation, which took place three years later.

The report said the agreement witnessed by Mashatile's daughter, Palesa, failed to consider the land was worth a fraction of the debt, about R2.4-million at most. 

"We are of the considered view that the GPF may not have utilised all of the remedies available to it in terms of the loan agreements in order to recover the monies owed by Nonkwelo Investments," it added.

The remedies include charging penalty interest, claiming damages, or even recovering "the monies due to the GPF from Mr Nonkwelo personally".

"If no steps have been taken since the signature of the settlement agreement in September 2020 to date, such conduct or omission would also be negligence and in contravention of the PFMA as well," the report said.

Conflict of interest

While Mashatile served as MEC for human settlements from 2016 until 2018, the investigation was "unable to locate any evidence of any actual or perceived conflict of interest with any of the staff or trustees involved in the process at the various stages". 

"From the various minutes availed, no conflicts of interest were disclosed at any given point in time."

According to the report, the GPF's conflict of interest policy was only introduced in 2016.

It did not require Nonkwelo to declare his relationship to the MEC because an MEC is not an employee or trustee of the GPF.

It added it was outside its scope to determine whether Mashatile as MEC should have declared the relationship. 

However, Maile, in a previous interview with News24, said the investigation must also look into any possible influence exerted over the GPF board by Mashatile and examine whether GPF policies and processes were adhered to.

'Not as simple as that'

Speaking to News24, Maile attempted to distance Nonkwelo from any wrongdoing, saying the weaknesses found through the investigation "were not created by him" but rather internal weaknesses in the GPF.

When News24 pointed Maile to sections where Nonkwelo was implicated in these "weaknesses", Maile responded by saying it was "not as simple as that".

He launched into a diatribe about reckless lending by banks and, when asked to clarify if this meant the GPF recklessly granted loans to Nonkwelo, replied: "No, I was not there; the fact that the findings say perhaps they should not have funded [the project] it does not mean it was reckless. I was not there. I don't know why they gave the loans. There's always a context for everything."

He added: "We gave these issues to the investigators, and they gave us a report, and that is why I say the report is not conclusive, and that is why they [the investigators] say on certain matters they did not have this or that and we could not conclude. It's their report.

"My opinion does not matter because this is a report on a process based on information at their disposal." 

News24 previously reported Maile had referred to Mashatile as his "older brother" and "comrade" and, in the same interview, said the investigation would not be a cover-up and would be independent.