Kabuso report: Why heads should roll

Herald reporter Brian Hayward explains in a nutshell the most controversial issues exposed in the 175-page forensic report.

●Role-players mentioned by investigators include former Bay mayor Nceba Faku and the Bay businessman who spearheaded the proposal for the development, Johann Dreyer.

●Investigators were confounded as to why there was a separate municipal lease for the Madiba Bay Leisure Park and The Willows resort, despite the fact that Willows fell within the boundaries of the park. Yet both companies had the same directors.

●In 2005,  the council endorsed the mayoral committee’s approval of an amendment by East Cape Showcase, the company that managed Madiba Bay Leisure Park, to its original business plan, “without consideration and compliance with the Municipal Management Finances Act (MFMA)”.

●Investigators found  a R2-million grant for the operation and upgrade of The Willows, authorised by Faku, was without initial council approval. Legal opinion concluded  the municipality should lay criminal charges in respect  of that payment against Faku and Dreyer, to recoup the “wasteful expenditure”.

●There was also an apparent irregular “verbal agreement” between Faku and Dreyer, with Faku – the mayor at the time – allegedly allowing Dreyer to manage The Willows outside of the Madiba Bay Leisure Park project.

●East Cape Showcase should be evicted from the land and made to pay over its R1-million “performance guarantee” to the municipality, because the project did not take off, according to legal opinion.

●East Cape Showcase should also pay the municipality R1.4-million in rates on the land, as well as rental – based on the turnover from The Willows resort  which was   about R45-million over a period of  six years.

●The report and legal opinion call for the immediate cancellation of the municipality’s leases with Beachview and Van Stadens beach resorts –  held by companies Isimilo, and mining magnate Kobus Smit’s Buhlebendalo, respectively – while blaming the municipality for allowing the leases to lapse and the lessees for reneging on their promises to upgrade the resorts.

●It suggests that both companies should be evicted from the failed resorts.

●The relationship between Nceba Faku and Buhlebendalo director and Johannesburg- based businessman Mkhuseli Faku – they are reportedly cousins – should be clarified, the legal opinion states.

●Nceba Faku is criticised for awarding a R600000 grant to Isimilo in December 2005 – some four months before the council ratified the payment – for the upgrading of the resort, apparently despite Isimilo’s contract with the municipality clearly stating that it was responsible for such costs. The report’s legal opinion states “the payment should be reclaimed at the insistence of the municipality” and “that criminal charges be laid against councillor Faku”.

●The municipality is also blasted for its poor handling of the failed Embizweni cultural village at Wells Estate, while extensions to the projects were in contravention of the MFMA.

●The municipality should claim Embizweni’s R1-million performance guarantee, as the lease was deemed to have lapsed on February 28 2009, the report states.

●Investigators have called into question the relationship between Jeeva, a Bay property magnate, and the municipality, with the municipality renting vast parts of his Kwantu Towers block next to City Hall, despite less costly office accommodation being available.

●Jeeva’s company Unique Mbane’s multimillion-rand on-again, off-again automatic meter reading deal with the city should be ended “by reason of non-compliance with existing and intended future technologies”.

●Jeeva’s Africorp International property group has unpaid rates and services bills totalling more than R16-million, and although legal action was instituted in 2007 for R8.9-million, it was dropped after complaints by Jeeva to then mayor Nceba Faku, and a negotiation process was entered into. Legal opinion states that “municipal officials or politicians have not been held to account for this fruitless and wasteful expenditure which must surely have been occasioned”.

●Then-mayor Nceba Faku is alleged to have contravened the municipal supply chain policy by self-appointing construction contractors, resulting in R1.4-million of fruitless and wasteful expenditure which should be recovered from him, according to investigators.

●The transaction was condemned by the National Treasury, with “sufficient information available” to justify the issue of a summons to recover the “wasted funds” from then-acting municipal manager Dr Paul Martin and Faku.

●The Red Location Museum curio shop and restaurant lease was allegedly flawed and “irregular”,  investigators said, and police should be called in to investigate a case of fraud.

●The Mandela Bay Development Agency tender to Omega Risk Solutions for security in 2005 should not have been  handled by the body, but instead by the municipality itself. The escalation of payments to the company from 5% to 12.5% constituted “fruitless and wasteful expenditure” which should be recovered from the municipal manager at the time.

●The municipality was found to have a “fixed, if not entrenched, preference” for just five legal firms in the Bay, despite legislation advising that legal work which is outsourced be done  on an equitable basis.

●The council’s suspension and subsequent reinstatement in 2009 of three municipal officials suspended on serious charges in 2007 constituted “fruitless and wasteful expenditure” by the municipality. Those reinstated were Melekile Hani and Mvuleni Mapu, who were on suspension, and David Toyise, who was dismissed and then reinstated.

 The report has called for the municipality to tally the costs of keeping the officials suspended and paid while claims of misconduct against them were investigated, as well as what it paid for legal advice and disciplinary proceedings, which will constitute “fruitless and wasteful expenditure”.

●The decommissioning of the Swartkops power station by Kobus Smit’s company, Ruco Projects, was also called into question in the report.

It was awarded the R2.3-million tender in 1998 to decommission the station, while the company made a further R3-million from the sale of the station’s disused parts.

The company was paid another R2.5-million in 2000 for the station’s redevelopment “with certain conditions”, the report states, although no evidence was found that the municipality monitored the redevelopment.


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