‘Unviable project’: Report flags ‘shortcomings’ in loans granted to Mashatile’s son-in-law

A report released by Gauteng MEC for Human Settlements and Infrastructure Development, Lebogang Maile, has flagged the loans granted to Nonkwelo Investments, a company owned by Deputy President Paul Mashatile‘s son-in-law, Nceba Nonkwelo.

Three loans were granted to Nonkwelo’s company, with an amount of R7.246,126 paid out for a project as part of the Entrepreneur Empowerment Property Fund Program (EEPF).

This programme aims to encourage entities owned by historically-disadvantaged individuals to participate in the affordable housing rental market, through ownership of residential rental portfolios.

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The Gauteng Partnership Fund (GPF) Board authorised the Investment Committee to approve a maximum of R7.5 million loans per project for the acquisition of land and/or building and an additional R7.5 million for development costs.

While the initial agreement between the GPF and Nonkwelo Investments was for affordable housing development, the entity approved a proposal for the project to shift from an affordable housing development to a student accommodation development. This was a breach of the loan agreements.

Findings against GPF processes

According to the report, there were “shortcomings” in the process of assessing the case for proceeding with the project.

“More comprehensive due diligence and procedural steps ought to have occurred prior to the granting of the loan facility to Nonkwelo Investments,” reads the report.

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Regarding the change of scope from an affordable housing development to a student accommodation development, GMI Attorneys, the law firm that conducted the investigation, found that “the legal basis for the scope change by restructuring the project from affordable housing project to student accommodation is uncertain”.

“The Trustees who took or participated in this decision may attract liability as set out in section 9 of the Trust Property Control Act (TPCA).”

The investigation could also not determine whether GPF approved such scope change where no such proposal was forthcoming from Nonkwelo Investments, but rather from a different entity, Nonkwelo Strategic Investments.

“Taking into consideration GMI’s earlier findings that the GPF had no legal basis or otherwise to approve the scope change, any subsequent approvals and/or increase of the original junior loan facility was likewise flawed and/or irregular, the Trustees who took or participated in this decision may attract liability as set out in section 9 of the TPCA.”

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While the Investment Committee was duly authorised to approve funding for the project, the report found evidence that the project “was not viable”.

“By expending further funds and/or approving a senior funding loan to Nonkwelo Investments, this was not in the best interest of the GPF. While this does not form part of GMI’s scope or mandate, it is unknown to us why such a ‘jump’ was allowed. Unless there is a reason for this, it would have otherwise been an arbitrary and possibly a reckless decision.”

The approval of a senior funding loan to Nonkwelo Investments caused the GPF to assume an even greater risk, it said.

Commenting on the report, Maile said: “While the findings are clear about the governance pitfalls, we are, however, of the view that the recommendations are not conclusive.

“Accordingly, we have asked the board to institute a process of reviewing them with an intention of strengthening the areas of weakness.”

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According to Maile, senior management and staff of the GPF had expressed their willingness to cooperate with the investigation.