The Special Investigating Unit (SIU) has welcomed a landmark judgment by the Special Tribunal declaring the National Lotteries Commission’s (NLC) decision to award a R4 million grant to the Mshandukani Foundation unlawful, setting aside the funding agreement and ordering the money to be repaid with interest.
Siu on Wednesday said the ruling forms part of the unit’s ongoing efforts to recover public funds lost through corruption and maladministration at the National Lotteries Commission following investigations authorised by President Cyril Ramaphosa.
SIU spokesperson Selby Makgotho said the judgment marked another important step in ensuring accountability for the misuse of public funds.
“The Special Tribunal’s judgment reinforces the principle that public funds must be used for their intended purpose and that those who benefit unlawfully from state resources will be held accountable. The SIU remains committed to recovering financial losses suffered by the State and ensuring consequence management across the public sector,” Makgotho said.
In its order, the Special Tribunal declared the NLC’s decision to award the R4 million grant under Project M12663 invalid and reviewed and set it aside. The Tribunal also declared the grant agreement between the NLC and the Mshandukani Foundation invalid and void.
The Tribunal further ordered that the foundation’s corporate veil be pierced, meaning its separate legal personality would be disregarded in order to hold those behind it personally accountable.
It ordered the Mshandukani Foundation, Pretty Shandukani, Takalani Israel Mulandana, Thambatshira Maria Khameli and Preldon Construction to repay the R4 million jointly and severally. The amount will also attract interest at 10.75 percent per annum from the date the legal application was instituted until full payment is made.
According to the SIU, its investigation uncovered extensive irregularities surrounding the grant application and the subsequent movement of the funds.
The investigation found that the Mshandukani Foundation, a registered non profit organisation, applied in February 2019 for R4.708 million to implement a community development project aimed at providing clean water to communities in the Eastern Cape.
The proposal claimed the project would benefit 8,015 vulnerable people and create 15 part time jobs while covering expenses including salaries, stipends, travel costs, audit fees and bank charges.
The application was signed by the foundation’s chairperson, Pretty Shandukani, and approved by former NLC Chief Operating Officer Phillemon Letwaba on 12 March 2019. On the same day, Shandukani signed the grant agreement.
Eight days later, on 20 March 2019, the National Lotteries Commission transferred R4 million into the foundation’s bank account.
However, the SIU found that the project for which funding had been approved had already been completed several years earlier, rendering the grant application fundamentally misleading.
Investigators established that borehole installations cited in the application had in fact been carried out during 2016 by Mshandukani Holdings (Pty) Ltd, a company owned by Mashudu Mshandukani, and not as part of the 2019 NLC funded project.
The SIU’s financial investigation also traced how the grant money was distributed after it entered the foundation’s account, which at the time held a balance of only R6,004.87 and was controlled by Pretty Shandukani and her husband, Mashudu Mshandukani.
Investigators found that R3.6 million of the grant was paid to Preldon Construction CC, a company owned by Ms Mshandukani.
From that amount, Preldon Construction transferred R500,000 to Ironbridge Travelling Agency and Events, a company owned by Letwaba’s wife, Rebotile Malomane. Another R550,000 was transferred to Mshandukani Holdings as what was described as a loan.
Additional payments included R2.1 million to Mshandukani Holdings, R700,000 back to the Mshandukani Foundation, R150,000 to an associate, R120,000 into Mashudu Mshandukani’s personal bank account and R39,675 to Rocbit Drilling Equipment.
The SIU also found that a quantity surveyor appointed during the investigation concluded that the borehole work itself was of poor quality.
Further investigations revealed that Engcobo Local Municipality had no legal authority over the schools and clinics where the project was allegedly implemented because responsibility for water services rests with the Chris Hani District Municipality under the Water Services Act.
The SIU also found that the Mshandukani Foundation had failed to obtain the necessary approvals under the South African Schools Act and had not consulted the Department of Basic Education before undertaking the project.
Investigators further 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 said none of the foundation, Letwaba, Ironbridge Travelling Agency and Events or Malomane provided satisfactory explanations regarding the use of the grant money.
The Tribunal also noted that the SIU had referred it to three additional matters involving parties implicated in the proceedings.
Makgotho said the SIU would continue pursuing the recovery of public funds while referring any evidence of criminal conduct uncovered during its investigations to the National Prosecuting Authority for possible prosecution.
