How R21,090 municipal land ended up selling for R9.54 million
DURBAN — A property sold by eThekwini Municipality for just R21,090 under a programme intended to provide affordable housing was later sold for R9.54 million to an unapproved beneficiary, according to an SIU investigation that has resulted in three companies’ arrangements with the municipality being declared unlawful and unconstitutional.
The Special Tribunal ruled against arrangements involving Woodglaze Trading (Pty) Ltd, Madupha Business Enterprise CC and Ready Homes CC in the Phoenix low cost housing programme after the Special Investigating Unit found that the three service providers had collectively benefited by approximately R29.14 million.
According to the SIU, Woodglaze accounted for R25.32 million of the alleged unlawful benefit, while Madupha benefited by about R2.26 million and Ready Homes by R1.56 million.
The Tribunal found that the procurement problems were not simply procedural errors, describing the irregularities as going “to the heart” of Section 217 of the Constitution, the Municipal Finance Management Act and eThekwini’s supply chain management system.
The case stretches back more than two decades to a 2000 eThekwini Municipality resolution to use vacant sites in Phoenix for affordable homes targeting first time buyers in lower and middle income groups through the Municipal Human Settlements Infill Housing Programme.
Under the scheme, vacant serviced municipal land could be sold to appointed developers for R30,000, while bulk sites without municipal services could be sold for R100,000, excluding VAT. Developers would construct homes and sell them to beneficiaries approved by the municipality’s housing department.
The SIU investigation, however, found that Madupha and Ready Homes were allowed to participate without prior public advertising or consideration and recommendation through the required Bid Evaluation and Bid Adjudication committees. The companies had originally been subcontractors to Sahamba Construction, which had successfully been appointed to the programme.
Woodglaze’s continued participation was similarly not subjected to the required public procurement process, according to the investigation. The municipality also amended its appointment to allow Woodglaze to take over a property previously allocated to another developer that had failed to perform.
More serious questions emerged when investigators followed what happened to the municipal properties.
The SIU traced 18 properties sold by eThekwini to the three companies and subsequently transferred to third parties. It found that properties intended to advance affordable home ownership were sold to people who were not approved beneficiaries and who may not have been first time homebuyers or fallen within the programme’s qualifying income bands.
Some properties were also developed for commercial purposes, including shops and business parks, while the developers retained the proceeds.
The most striking transaction identified by investigators involved a stand at 155 Canehaven Drive. The municipality sold the property to Woodglaze for R21,090, according to the SIU. It was subsequently sold to an unapproved beneficiary for R9.54 million.
Other municipal properties purchased for R34,200 were subsequently sold for amounts ranging from R350,000 to R9 million.
While the Tribunal has now declared the arrangements unlawful and constitutionally invalid, its judgment does not mean the three companies have immediately been ordered to repay the R29.14 million.
The Tribunal declined at this stage to order a debatement of account or disgorgement, leaving the financial consequences of the invalid arrangements unresolved.
It also sought to avoid disrupting developments already underway. The companies may finish homes on which construction had started by the date of judgment and may complete buildings on sites already contracted to third parties. They cannot begin constructing new homes under the arrangements that have now been declared invalid.
If eThekwini wants development of further properties under the programme to continue, it will have to conduct a new procurement process compliant with the Constitution, the MFMA, supply chain management requirements and its own procurement policies.
The judgment leaves the municipality facing questions over how land intended to help lower and middle income residents into home ownership ended up being transferred through arrangements declared unconstitutional, with some properties ultimately selling for millions of rand.
The SIU investigated the matter under Proclamation R.9 of 2021, which authorised investigations into allegations of maladministration, fraud and improper conduct at eThekwini Metropolitan Municipality.
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