The Special Investigating Unit (SIU) welcomes the judgment handed down by the Special Tribunal declaring unlawful and unconstitutional the arrangements under which Woodglaze Trading (Pty) Ltd, Madupha Business Enterprise CC and Ready Homes CC were appointed to develop low-cost housing in Phoenix, eThekwini, KwaZulu-Natal.

The order follows an investigation by the SIU, which found that three service providers for the lowcost housing project unlawfully benefited approximately R29 141 421. The service providers’ names are Woodglaze Trading, Madupha Business Enterprise, and Ready Homes.

The Special Tribunal found that the procurement irregularities in the matter were “not minor administrative slips” but went “to the heart of Section 217 of the Constitution, the Municipal Finance Management Act (MFMA), and the municipality’s supply chain management regime”.

The matter stems from a 2000 resolution by the eThekwini Metropolitan Municipality to use vacant sites in Phoenix for affordable housing for first-time homebuyers in lower- and middle-income groups under its Human Settlements Infill Housing Programme (MHSIHP).

The municipality intended to sell vacant serviced land to service providers for R30,000 and bulk sites without municipal services for R100,000, excluding VAT. The service providers would develop the sites into residential dwellings and sell them to beneficiaries approved by the Municipal Housing Department.

On 5 September 2002, the municipality advertised for service providers to take over and develop 130 sites within two years.

However, the SIU’s investigation found that Madupha Business Enterprise and Ready Homes were appointed and continued participating in the programme without prior public advertisement, consideration and recommendation by a Bid Evaluation Committee (BEC), or Bid Adjudication Committee (BAC).

Woodglaze Tradings’s continued participation was similarly not reviewed in accordance with the statutory framework or subjected to a public procurement process.

The municipality subsequently amended its appointment letter to allow Woodglaze Trading to take over a house previously allocated to Universal Property Development, which had failed to perform.

The investigation further established that Madupha Business Enterprise and Ready Homes were originally subcontractors to Sahamba Construction, the successfully appointed service provider, and that the terms of their participation and allocation of sites were negotiated and arranged with parties within the municipality.

The SIU traced 18 properties forming part of the MHSIHP that were sold by the municipality to Woodglaze Trading, Madupha Business Enterprise and Ready Homes and subsequently sold to third parties.

The investigation found that the three service providers acted contrary to the purpose of the programme by selling properties to people who were not approved beneficiaries and who may not have been first-time homebuyers or within the applicable subsidy income band. Some sites were also developed for purposes not provided for under the programme, including business parks and shops, while the service providers retained the proceeds from the sales.

In some instances, properties sold by the municipality for R34,200 were subsequently sold by the service providers for amounts ranging from R350,000 to R9 million. For example, a stand situated at 155 Canehaven Drive was sold by the municipality to Woodglaze for R21,090 and subsequently sold to an unapproved beneficiary for R9.54 million.

Woodglaze unlawfully benefited from the MHSIHP to the value of R25,321,099, Madupha Business Enterprise R2,256,894, and Ready Homes R1,563,428.

The Tribunal has declared the arrangements under which the three service providers were appointed unlawful and constitutionally invalid.

The Tribunal further ruled that:

• No debatement of account or disgorgement order be made at this stage, meaning there is no immediate repayment order.
• The three service providers may complete dwellings already commenced at the date of the judgment and sell completed dwellings in accordance with applicable law.
• Service providers are prohibited from commencing construction of any new dwellings under the invalid arrangements.
• Should eThekwini wish to continue developing further dwellings under the programme, it must institute a lawful procurement process compliant with the Constitution, the MFMA, the applicable supply chain management framework and its own procurement policies.
• Where any of the three service providers has paid for undeveloped sites and concluded contracts with third parties, they may continue completing buildings on those sites.
• Where sites remain undeveloped and have not been sold to third parties, the respondents may place further evidence before the Tribunal for consideration of just and equitable relief.

The SIU is empowered by Proclamation R.9 of 2021 to probe allegations of maladministration, fraud, and improper conduct within eThekwini Metropolitan Municipality.

The SIU remains committed to protecting public resources, advancing clean governance, and reinforcing constitutional values in the management of State contracts.

Enquiries:
Selby Makgotho
Spokesperson: Special Investigating Unit
Cell: 083 718 6128
SIUMedia@siu.org.za