The Special Investigating Unit (SIU) welcomes the judgment handed down by the Special Tribunal, declaring the National Lotteries Commission’s (NLC) decision to award a R4 million grant to the Mshandukani Foundation unlawful, reviewing and setting it aside, and ordering the repayment of the funds together with interest.
The Tribunal ordered that:
- The NLC’s decision to award the R4 million grant under Project M12663 is declared invalid and reviewed and set aside.
- The grant agreement between the NLC and the Mshandukani Foundation is declared invalid and void.
- the foundation’s corporate veil be pierced and that the foundation’s separate legal personality is disregarded;
- The Mshandukani Foundation, Ms Pretty Shandukani, Mr Takalani Israel Mulandana, Ms Thambatshira Maria Khameli and Preldon Construction repay the R4 million jointly and severally; and
- R4 million to bear interest of 10.75% per annum from the date the application was instituted until payment.
The order follows an SIU investigation which uncovered serious irregularities in the award and use of the grant, revealing that the funding application was based on a project that had already been completed several years earlier and that the grant funds were diverted to entities linked to the foundation’s leadership.
The SIU’s investigation found that the Mshandukani Foundation, a registered non-profit organisation (NPO), applied in February 2019 for grant funding of R4,708,000 to implement a community development project aimed at providing clean water to communities in the Eastern Cape.
The application, signed by the Mshandukani Foundation’s Chairperson, Pretty Shandukani, to the NLC indicated that the project would benefit 8 015 vulnerable people and create 15 part-time jobs. It also included operational costs such as salaries, stipends, audit fees, bank charges and travel expenses.
Former NLC Chief Operating Officer Phillemon Letwaba approved the application on 12 March 2019 and notified the foundation that its application had been successful. On the same day, Ms Shandukani signed the grant agreement.
On 20 March 2019, the NLC transferred R4 million into the foundation’s bank account. At the time, the SIU found that the account held a balance of only R6,004.87 and was controlled by Ms Shandukani and her husband, Mr Mashudu Mshandukani.
The SIU’s financial investigation traced the movement of the grant funds and found that they were redirected to entities linked to the foundation’s leadership and individuals associated with the NLC.
The SIU also established that the 2016 borehole installations had been carried out by Mshandukani Holdings (Pty) Ltd, owned by Mr Mshandukani, and not under the 2019 NLC-funded project.
The R4 million grant was distributed to various individuals and organisations, including R3.6 million paid to Preldon Construction CC, a company owned by Ms Mshandukani. Additionally, from the R3.6 million, R500,000 was paid by Preldon Construction to Ironbridge Travelling Agency and Events (Pty) Ltd, a company owned by Mr Letwaba’s wife, Ms Rebotile Malomane, and R550,000 was paid by Preldon Construction to Mshandukani Holdings, purportedly as a loan.
Furthermore, Preldon Construction made several payments: R700,000 to Mshandukani Foundation, R2.1 million to Mshandukani Holdings, R150,000 to an associate, and R120,000 to Mr Mshandukani’s personal account. Additionally, R39,675 was paid to Rocbit Drilling Equipment.
A quantity surveyor appointed during the investigation found that the borehole work itself was of poor quality. The investigation also established that Engcobo Local Municipality had no legal authority over the schools and clinics because responsibility for water services rests with the Chris Hani District Municipality in terms of the Water Services Act.
Furthermore, the Mshandukani Foundation lacked the necessary approvals under the South African Schools Act and had failed to consult the Department of Basic Education as required.
The SIU also discovered that two employees of Mshandukani Holdings, a geologist intern and a receptionist, had been listed as members of the foundation without their knowledge or consent. The SIU found that neither the foundation, Mr Letwaba, Ironbridge Travelling Agency and Events, nor Ms Malomane had provided any explanation for how the grant funds were used.
The Tribunal noted that the SIU has referred the Tribunal to three additional matters involving parties implicated in these proceedings.
President Cyril Ramaphosa authorised the SIU, through Proclamation R32 of 2020, to investigate allegations of corruption and maladministration at the National Lotteries Commission and to recover financial losses suffered by the State.
The Tribunal’s orders form part of the SIU’s ongoing efforts to implement investigation outcomes, recover public funds lost through corruption and strengthen consequence management across the public sector.
In line with the Special Investigating Units and Special Tribunals Act 74 of 1996, the SIU will refer any evidence of criminal conduct uncovered during its investigation to the National Prosecuting Authority for further action.
Enquiries:
Selby Makgotho
Spokesperson: Special Investigating Unit
Cell: 083 718 6128
SIUMedia@siu.org.za