The Special Tribunal has declared a R4 million grant awarded by the National Lotteries Commission (NLC) to the Mshandukani Foundation unlawful. The grant was intended to fund a clean-water project for communities in the Eastern Cape.
The Special Investigating Unit (SIU) has welcomed the judgment.
The Tribunal reviewed and set aside the NLC’s decision to award the grant under Project M12663. It also declared the grant agreement between the NLC and the Mshandukani Foundation invalid and void.
As a result, the Tribunal ordered the repayment of the R4 million, together with interest at 10.75% per annum. The interest will run from the date the application was instituted until the full amount is paid.
The Mshandukani Foundation, Pretty Shandukani, Takalani Israel Mulandana, Thambatshira Maria Khameli and Preldon Construction must repay the money jointly and severally.
The Tribunal also ordered that the foundation’s corporate veil be pierced. This means that its separate legal personality will be disregarded for the purpose of recovering the funds.
Grant Was Intended for Eastern Cape Communities
According to the SIU, the Mshandukani Foundation applied for funding in February 2019.
The foundation requested R4.708 million from the NLC. The money was intended for a community development project that would provide clean water to communities in the Eastern Cape.
The application stated that the project would benefit 8 015 vulnerable people. It also promised to create 15 part-time jobs.
In addition, the application included operational costs. These included salaries, stipends, audit fees, bank charges and travel expenses.
Former NLC Chief Operating Officer Phillemon Letwaba approved the application on 12 March 2019.
On the same day, Pretty Shandukani, the foundation’s chairperson, signed the grant agreement.
Eight days later, on 20 March 2019, the NLC transferred R4 million into the foundation’s bank account.
However, the SIU found that the account had a balance of only R6 004.87 before the grant was paid. Shandukani and her husband, Mashudu Mshandukani, controlled the account.
SIU Traces R4 Million Grant
The SIU then investigated the movement of the money.
According to the unit, the investigation found that the grant funds were redirected to entities linked to the foundation’s leadership and people associated with the NLC.
The investigation also uncovered another concern.
The SIU found that boreholes mentioned in the project had already been installed in 2016.
Mshandukani Holdings (Pty) Ltd, a company owned by Mashudu Mshandukani, had carried out the work.
Therefore, the SIU found that the boreholes did not form part of the 2019 NLC-funded project.
The SIU said that Preldon Construction CC received R3.6 million from the R4 million grant. Pretty Shandukani owns the company.
The money was then used for several payments.
For example, Preldon Construction paid R500 000 to Ironbridge Travelling Agency and Events (Pty) Ltd. Rebotile Malomane, the wife of former NLC Chief Operating Officer Phillemon Letwaba, owns the company.
Furthermore, Preldon Construction paid R550 000 to Mshandukani Holdings. The payment was reportedly made as a loan.
Other payments included:
R700 000 to the Mshandukani Foundation.
R2.1 million to Mshandukani Holdings.
R150 000 to an associate.
R120 000 to Mashudu Mshandukani’s personal account.
R39 675 to Rocbit Drilling Equipment.
Concerns Raised Over Borehole Project
The investigation also raised concerns about the quality of the work.
A quantity surveyor appointed during the investigation found that the borehole work was of poor quality, according to the SIU
.
Meanwhile, the investigation found that Engcobo Local Municipality did not have legal authority over the schools and clinics involved in the project.
Instead, the SIU said responsibility for water services falls under the Chris Hani District Municipality in terms of the Water Services Act.
The foundation also faced questions about the required approvals.
According to the SIU, the Mshandukani Foundation did not have the necessary approvals under the South African Schools Act. It also failed to consult the Department of Basic Education as required.
In addition, the SIU discovered that two employees of Mshandukani Holdings had allegedly been listed as members of the foundation without their knowledge or consent.
The two employees included a geologist intern and a receptionist.
No Explanation Given for Use of Funds
The SIU said the foundation and other parties did not explain how the grant money was ultimately used.
These included Phillemon Letwaba, Ironbridge Travelling Agency and Events, and Rebotile Malomane.
The Tribunal also noted that the SIU had referred three additional matters involving parties implicated in the proceedings.
SIU to Refer Criminal Evidence to NPA
President Cyril Ramaphosa authorised the SIU investigation under Proclamation R32 of 2020.
The proclamation allowed the SIU to investigate allegations of corruption and maladministration at the National Lotteries Commission.
It also allowed the unit to recover financial losses suffered by the State.
The SIU said the Tribunal’s judgment forms part of its ongoing efforts to recover public funds lost through corruption.
The unit also aims to strengthen consequence management in the public sector.
Furthermore, the SIU said it would refer any evidence of criminal conduct uncovered during its investigation to the National Prosecuting Authority (NPA) for further action.
The case remains part of the SIU’s broader efforts to recover public money and hold those responsible for irregularities accountable.
