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Kalahari oasis embroiled in Lotteries scandal

Publish date: 08 August 2019
Issue Number: 672
Diary: Legalbrief Forensic
Category: Corruption

Undeclared conflicts of interest and incomplete or shoddy construction characterise many projects funded by the National Lotteries Commission (NLC). Legalbrief reports that a hard-hitting investigation has revealed several questionable grants involving lottery funds. A common thread in the scandal is Phillemon Letwaba, COO of the NLC and various companies linked to him. The GroundUp investigation reveals that several strategies underpin various uncompleted projects which have received millions in funding. Firstly, money is directed to them making use of a 2015 amendment to the Lotteries Act that allows the Minister of Trade and Industry, the NLC or its board to identify projects to be funded without receiving applications. This is known as proactive funding. The problem with proactive funding is that there is often no rigorous prior scrutiny of the projects awarded money by NLC officials. Secondly, the probe reveals that the projects are often based in towns far from large cities – and the scrutiny of the media. Thirdly, the appointment of service providers such as construction and engineering companies for multimillion-rand construction projects is left to the recipients of the funding and, as a result, they do not have transparent tender processes. The NLC’s own audits seldom check for conflicts of interest on the projects themselves. This is despite regulations of the Lotteries Act requiring organisations that receive grants to procure ‘goods or services’ using a ‘transparent and competitive process’.

Legalbrief reports that Kuruman which is known as the ‘Oasis of the Kalahari’ was home to David Livingstone when he took up his first missionary position in 1841. GroundUp recently visited the Northern Cape town to investigate three different projects: an old age home, a drug rehabilitation centre and a library and museum meant to celebrate the life and work of sangoma, author and African storyteller Credo Mutwa. Almost R60m was granted to the three projects. However, the Daily Maverick reports that two are still under construction almost two years after they received Lottery funding, while the museum has a single exhibit, and the library’s shelves are empty. Addressing the delays in construction, NLC spokesperson Ndivhuho Mafela said ‘it is in the nature of construction that you have unplanned delays which impact on the overall completion of the facilities’.

Full Daily Maverick report

GroundUp has established that PKT Consulting Engineers, which is involved in the construction of the retirement home and museum and library, has links to Letwaba and members of his family. Letwaba, his wife Daisy, and his brother Johannes, as well as their father Oupa, who has since died, were all directors of PKT before they resigned on 1 March 2017. On the same day, Themba Mabundza was appointed as the sole director of PKT. The 37-year-old is an active director in 54 different companies across a wide spectrum of industries. Two of the companies of which he is a director have received grants from the Lottery. One, Life for Impact in the 21st Century, was awarded R8m in April 2017, and a further R2.1m just over a month later. The grants were made via the NLC’s Arts, Culture and Natural Heritage sector. Zibsimanzi, a second off-the-shelf company where Mabundza is a director, received a R4.8m grant from the NLC’s Sports sector on 21 November 2017. Last November, GroundUp revealed how Upbrand Properties, a company in which Letwaba’s brother, Johannes, was the sole director, signed a R15m contract to build a rehabilitation centre near Pretoria. Although Johannes Letwaba subsequently resigned his directorship, the Companies and Intellectual Property Commission records confirm that he was a director at the time of the signing of the multimillion-rand contract.

First Ground Up Investigation

Second Ground Up investigation

Despite this damning evidence, the NLC issued a statement clearing its COO of any conflict of interest. ‘The NLC follows strict prescribed processes and continually encourages its employees to disclose matters of conflict of interest where applicable. It has since engaged individuals who may have been highlighted in some of the issues raised around the implementation and funding of the project and is satisfied with explanations provided.’ It added that it received a clean audit for 2018/19. After learning of GroundUp’s visit to Kuruman, the NLC alleged that journalist Raymond Joseph was falsely ‘claiming to be from a mine that is working in partnership with the NLC’. ‘We encourage beneficiaries who have been approached in this manner or by anybody claiming to be a representative of the NLC to report this to the organisation’s fraud line.’ The SA National Editors Forum (Sanef) responded by saying that while the NLC is entitled to defend its record, it is not entitled to make false accusations against journalists investigating it. ‘It is an abuse of the anti-fraud line to use it to deter journalists asking questions. The NLC is obligated by Section 32 of the Constitution’s Bill of Rights and the Promotion of Access to Information Act to provide information on how its funds are spent. The NLC appears to describe its funding beneficiaries as its “community” that must be “protected” and whose funding information is confidential. This is an incorrect understanding of the NLC’s role with respect to the recipients of Lottery funding, who in fact must be held accountable by the NLC and the public for the way they spend their funds. The NLC falls under the auspices of the Department of Trade and Industry and should act with the dignity expected of a state institution.’

NLC statement

Sanef statement

NLC chairperson Alfred Nevhutanda said he would bus journalists from various media houses to the Northern Cape for a site inspection ‘to write a story from an observer's point of view’. A SowetanLIVE report notes that he has also indicated that although the board was satisfied with the internal processes in the funding of these projects, they will investigate allegations of a conflict of interests involving staff members. ‘I assure the Economic Development Minister Ebrahim Patel and the South African citizens that the NLC remains committed to clean governance and all allegations of misuse of funds by the beneficiaries are taken serious and investigated thoroughly,’ Nevhutanda said. NLC spokesperson Ndivhuwo Khangale said the reports were designed to shift the organisation's focus away from funding rural-based non-profit organisations.

Full report on the SowetanLIVE site