More than R4m of the money meant for SMMEs is unaccounted for while some of the funds covered a sub-contractor’s overdraft and a donation to a small firm.
This is according to a leaked audit report compiled by JK Structures and Finecorp – the firms contracted to manage Nelson Mandela Bay’s controversial R21m drains project.
The probe revealed that a letter – contained in the report – had been sent to sub-contractors Mbumba Projects and Sholden Lukwe Construction, which were handling the payments to about 900 SMMEs by the Black Business Caucus leadership, instructing them to deduct R500 from each small business for them to formalise its structure.
The letter was signed by Black Business Caucus convener Baba Ningi – who was recently killed – co-ordinator Lithemba Singaphi and secretary Nomasomi Matinise.
Some of the financial irregularities highlighted in the report, handed over to the municipality on Friday, raise questions about whether or not these might be linked to the recent SMME killings.
Police have previously said they were investigating whether the suspected hits were linked to the SMME infighting.
Ningi was one of a number of people murdered in the city recently in what police suspect is a killing spree linked to infighting by SMMEs.
Meanwhile, details of the audit report come after JK Structures and Finecorp analysed the bank statements and payments of Sholden Lukwe Construction and Mbumba Projects.
It alleges that at least 18 companies received double payments and another firm was paid three times.
Giving a financial breakdown of how much money went in and out of the accounts, the report alleges that Sholden Lukwe Construction could not account for R2.7m and Mbumba Project Managers R1.6m.
“Auditing the income and expenses from Sholden Lukwe and Mbumba shows that they are in possession of money from the SMMEs to ensure payment of all other SMMEs that were not paid,” the report reads.
Dozens of SMMEs have claimed that they have not been paid, sparking protests in the city in January.
The report calls on Sholden Lukwe Construction and Mbumba Project Managers to transfer all outstanding money back to the municipality.
It also reveals that:
● Forty-four payments were made to SMMEs by Sholden Lukwe Construction that did not have a portfolio of evidence to prove they did any work;
● Of these 44, 10 SMMEs were paid double;
● Payments ranging from R6,000 to R25,000 were also paid out by Sholden Lukwe Construction, even though they did not form part of the agreed R15,000 and R30,000 packages;
● Mbumba Project Managers billed the municipality R9,600,000 for payments to the SMMEs when bank statements showed that only R9,084,358 was actually paid to them;
● A company called the Hloni Group was paid R59,456.76 instead of the due amount of R28,956.76 by Mbumba Project Managers; and
● Mbumba Project Managers had an overdraft of R381,972.60 and also used R250,000 for “personal use”.
The report claims these two amounts surpassed the company’s management fee of R450,000. The fee was part of an R11m payment the main contractors alleged it received.
In a written response from Mbumba Project official Khaya Mconi to Finecorp, Mconi states that the SMME leadership had requested that R500 be deducted from each SMME to formalise its structure.
Mbumba Project’s Vusi Rapiya said he had not seen the audit report but that Finecorp had requested certain information from his company.
“This was submitted and it was the last time we heard from the contractor.”
Asked about the R1.6m being unaccounted for, he said: “It is utter nonsense, and we have no idea how they arrived at that figure of R1.6m.”
He said the only money his company had left from the project was the R500 deductions for the Black Business Caucus.
“But it would seem that the main contractors are deliberately seeking to abdicate themselves from their contractual responsibilities and shift whatever blame to the sub-managers, despite them claiming their full fees.
“Another example is their ... incorrect assumptions with regards to the overdraft facility.
“They seem hellbent on portraying that Mbumba used money meant for SMMEs for its own purposes and this is despite the explanation of how the money was disbursed.”
He said his company was only paid R9.3m, and not the R11m highlighted in the report.
Asked about the donation of R35,000 to the Hloni Group, owned by Cecil Lonwabo Neti, Rapiya said that amount had been deducted from their management fee.
Neti could not be reached for comment.
On the companies that were paid without supplying any evidence that work was carried out, Rapiya said the names of the companies were supplied by Black Business Caucus secretary Matinise, who gave them a second list of companies to pay.
Rapiya confirmed there were duplicate payments but said this was probably due to human error.
“The R250,000 they are referring to is part of our expenses deducted from our fees of R450,000.
“We would like to categorically state that our contract was with JK Structures, but it is rather surprising that they would go behind our back and submit a report to the municipality that adversely implicates us,” he said.
“One wonders as to the motive behind their actions.”
The Black Business Caucus was responsible for compiling a list of all SMMEs that would receive work packages along with their banking details.
Matinise refused to answer specific questions.
“Any irregularities should be dealt with by the contractors,” she said.
Sholden Lukwe Construction’s managing director, Zolani Lukwe, said he did not know anything about the allegation of R2.7m being unaccounted for.
“I have not seen the report. I sent all my documents to the contractor.”
Lukwe said he would not be able to answer specific questions because his laptop had been stolen on Saturday.
“My house was burgled on Saturday,” he said.
“I had to buy a laptop yesterday [Monday]. They are restoring my e-mails now.
“But I can’t comment more as I have not seen the report.”
On the payments ranging between R6,000 and R25,000 – which differed from the hundreds of other payments to SMMEs, he said the Black Business Caucus had told him who to pay and how much.
“They gave us a list of companies to pay.
“The SMME leadership told us some companies had also been left off the original list but they did carry out work.
“We are busy dealing with that,” he said.
Singaphi said that to the best of his knowledge portfolios of evidence had been supplied by all the companies paid.
“If this did [not] happen, Sholden Lukwe Construction must answer.”
He said he was unaware of the payments ranging between R6,000 and R25,000. “But we must find out who in the leadership gave these specific instructions if they are true.”
On the R500 deductions, Singaphi said it was made clear in meetings with the SMMEs leading up to the project that this money was needed to form a proper structure.
“This was raised in meetings and it was agreed to establish a chamber.”
Nelson Mandela Bay mayor Mongameli Bobani said if there was even a hint of corruption he would call for a full forensic investigation.
“I have not seen the report but if there are any abnormalities I won’t hesitate to do a forensic investigation,” he said. “We will not allow any municipal money to be used like that.”
DA councillor Nqaba Bhanga said his party had sent the report to President Cyril Ramaphosa, the Special Investigating Unit and the National Treasury to investigate alleged corruption linked to the project.-  Additional reporting Rochelle de Kock