More Kwane Capital contracts red-flagged in Eastern Cape
In the past week two more fleet contracts awarded to Mcebisi Mlonzi’s company, Kwane Capital, by municipalities in the Eastern Cape have been flagged for irregularities.
The multimillion rand contracts, with the Port St Johns and Mbhashe local municipalities, were entered into in 2013 and 2015 respectively.
These are in addition to
Kwane Capital’s contracts with the Amahlathi, Alfred Nzo and Raymond Mhlaba municipalities.
In Port St Johns the contract was to assist the cash-strapped municipality to access finance to enter into a contract to buy heavy equipment.
A forensic investigation report from 2016 detailed how the municipality was battling to secure funding through conventional avenues, so it put out a tender to procure the equipment.
The equipment, which included two graders, a roller, a bulldozer, an excavator, a truck with a winch and a tractor with a grid roller, was to be procured through a hire purchase agreement.
The contract was awarded to Mlonzi’s Laman Financial Services, which later became Kwane Capital, for a price of R31.5-million to be repaid over three years. The plan to repay the debt was for the municipality to use the plant equipment to grade roads in the municipality and then claim from the Municipal Infrastructure Grant.
The investigation found that within 18 months the municipality had repaid the R31.5-million debt, but continued to pay a further R10million over six months. Mlonzi claimed a total of R52-million from the municipality, saying the difference was interest from the sale.
But this was dismissed by the municipality, which produced documents to show that the R31.5million included interest and finance fees.
“The municipality further contended that this amount clearly stated in appointment letter received by Laman [Financial Services] on 23 August 2015 and was never disputed by them until July 2015,” said the report.
A reconciliation of the municipality’s payments to Laman Financial Services found instances of overpayment and double payment, and instances where Laman invoiced separately for work already catered for in instalments. It was also found that though Laman charged the municipality for training employees in the use of the equipment, this training was not done.
The report recommends that criminal charges be laid against Mlonzi, Laman Financial Services and an unnamed official who is no longer employed at the municipality. It also recommends that the municipality recover the R10-million.
The Laman group of companies was also found to have financed R300-million worth of earthmoving equipment without being registered with the National Credit Regulator.
But the report’s recommendations were not implemented.
Mlonzi said the council had not understood that the R31-million was the price of the equipment and R22-million was for finance fees and maintenance costs. “This matter was settled in the courts after the council realised their error, and a court order for the full settlement was issued. They then paid what was due to us,” he said.
Last week the Mbhashe municipality received a report by the Special Investigating Unit that detailed how officials awarded two fleet supply contracts to Kwane Capital despite the company producing a tax clearance certificate for another company owned by Mlonzi.
Municipality spokesperson Ncebakazi Kolwane confirmed a special council meeting had been held to discuss the SIU report, and said the council had resolved to first “scrutinise” and “interrogate” it before deciding what to do.
“However, any inquiry that relates to the findings of the SIU report must be directed to the SIU. The municipality cannot comment about the findings at this stage, as it is still a matter under consideration,” she added.
Mlonzi said: “Yes, in error we submitted Kwane Fleet Services’s tax clearance instead of Kwane Capital’s, but we submitted a CSD number of Kwane Capital. CSD allows the municipality to look for a clearance certificate themselves, using the internet.” — Sabelo Skiti