Cashing in on Ekurhuleni’s money for the poor?

A City of Ekurhuleni aid programme to benefit the poor was generously expanded – but the beneficiaries were often commercial companies, raising questions about misplaced priorities and political favours.

Under City of Ekurhuleni mayor Mzwandile Masina allocations to fund community and poverty alleviation projects ballooned from a modest R20-million to R100-million in 2017 – but the process of selecting and monitoring beneficiaries was opaque, posing the risk that a laudable programme was diverted to buy favour and influence.

Municipalities are empowered to make charitable grants – “grants-in-aid” (GiA) – in terms of section 67 of the Municipal Finance Management Act.

But critics, including some members of the mayor’s own party, say the process poses risks that projects may be handed to political favourites, have little to do with helping the poor and that few measures are taken to ensure that projects actually meet requirements.

Projects amaBhungane investigated showed little community involvement or benefit. For example, under the Ekurhuleni social services cluster, the lion’s share went to sport, recreation, arts and culture causes – often entertainment events – while comparatively little went to health and social development providers such as day care centres and places of safety.

The 2017 R100-million splash of cash was repeated in 2018, before being reduced to R40-million.

It was Masina who boosted the programme, although his predecessor, Mondli Gungubele, first suggested ramping up expenditure in line with a new community empowerment programme he called Mintirho Ya Vula Vula, meaning “good deeds speak volumes”.

At a media briefing on 29 September 2016, shortly after Masina’s appointment following the 2016 local government elections, the new mayor announced the city would “be increasing the GiA kitty to R100-million with immediate effect – to give impetus to our pro-poor policy statement”.

Masina’s first adjustment budget in February 2017 increased the 2016/17 grants funding from R20-million to R100-million.

AmaBhungane’s efforts to get the municipality to disclose documents verifying and accounting for project expenditure proved fruitless.

We did manage to obtain a report to the mayoral committee from the city corporate legal services department on the allocation of the 2018/2019 funds, which in that year were reduced to R40-million

The report noted the downward adjustment was to “find an alternative way to distribute the funds” though it did not explain why this was necessary. It also revealed the downward adjustment was unforeseen and had caused a delay because “the GiA processes had to be repositioned to ensure measurable impact”.

Whilst the document boasts of “a sound and fair administrative process” which received a clean report from both internal and external auditors, it confusingly notes that “Corporate Legal Services department discussed the Audit Findings with the Grants-In-Aid committee and the three Departments gave an undertaking to avoid recurrence of these audit Findings”.

The report shows that half of the R40-million was allocated for distribution to the city’s economic development department, while the other half had to be shared in the social services cluster, which comprises the departments of health and social services on the one hand and sport, recreation, arts and culture on the other.

The document reflects tremendous need, saying for example that there were 1 237 applications to the economic development department, of which only 28 were approved to share the R20-million.

They mostly consisted of small businesses requiring start-up or working capital. The same applicants may not apply in consecutive years and the report gives no indication of the success of failure of previous disbursements.

In the social services cluster there were even more applications – 1 487 – of which 73 were chosen to share the R20-million.

Of this, the sport, recreation, arts and culture department got to disburse R16.5-million to 20 applicants, and the health and social development department, which tackles the core social deficits in the city, only R 3.5-million to 57 organisations – the majority providing early childhood development support, such as day care.

A funding preference for entertainers

Commercial companies which hosted entertainment events were allocated amounts from R200 000 to R2-million.

Traditional beneficiaries of GiA (non-profits such as crèches and home-based care, and cooperatives) received far smaller amounts, generally in the range of R15 000 to R30 000. This is not because they requested smaller amounts, but because they generally received far less than they asked for. The entertainment companies generally received close to what they asked for.

Money was given to some strangely selected projects: a million rand to train pool players; a “lifestyle event” featuring live hip-hop; R800 000 for sparsely described “funding to do business logistics”.

Approached for evidence that events occurred, some companies said they had lost the evidence, or had given all the paperwork to the municipality.

The municipality favoured companies which it said they would develop local talent.

Almost R7-million was allocated to develop entertainers, although the motivation submitted to the Ekurhuleni mayoral committee provided scant detail on implementation. Examples included R1.4-million that went to discovering stars of talent; R1.2-million on developing entertainers; R1.2-million on promoting disadvantaged artists; and R1.5-million on turning art and music from hobbies to professional opportunities.

Ekurhuleni spokesperson Phakamile Mbengashe told amaBhungane that funding events that encourage local talent is a legitimate use of GiA, and that the scheme is not exclusive to non-profits or non-governmental organisations.

He said the policy priority areas for financial assistance include arts, culture and heritage.

Applicants must satisfy the council about the cost-effectiveness of the projects to be funded and demonstrate their ability to execute such projects.

GiA: a loosely defined concept

Was the municipality entitled to broaden the scope of GiA? Making grants is enabled by section 67 of the Municipal Finance Management Act, which regulates the transfer of municipal money to bodies outside of government for non-commercial purposes.

Although it mentions transfers to “an organisation or body serving the poor or used by government as an agency to serve the poor”, it does not limit transfers to such bodies.

However the Ekurhuleni GiA policy document summarises its targets as follows: “The projects, funded or part funded by these Grants can be as modest as community soup kitchens, food gardens, feeding schemes and early childhood development centers, or could involve substantial allocations aimed at inter alia promoting local tourism, destination marketing, creating job opportunities, economic development and sporting events.“

Other major metros – Johannesburg, Cape Town and eThekwini – allocate much smaller amounts to GiA – and all three confine their grants to formally registered non-profit and community based organisations. (See alongside: How others allocate their GiA funds.)

How others allocate their GiA funds

AmaBhungane obtained the GiA budgets of three other major metropolitan municipalities to see how they interpreted beneficiaries and allocations.

The cities of Cape Town, Johannesburg and eThekwini allocated the funds strictly to non-profits and community based organisations which had been formally registered. Johannesburg allocated R5-million per year between 2016 and 2019.

Cape Town allocated R4.6-million in 2016, R1.5 million in 2017, R6.4-million in 2018 and R17.9-million in 2019. EThekwini allocated R3-million to 107 beneficiaries in 2017.

A municipal councillor who spoke to amaBhungane on condition of anonymity raised concerns that non-profits were obliged to compete with profit-making companies.

“It doesn’t make sense how a commercial event with corporate, media, and alcohol sponsors is evaluated and funded through the Grant-in-Aid programme. Priority should be given to projects that will have a sustainable impact and are community development centric.”

The councillor conceded that commercial events were good exposure for the municipality and boosted the local economy. But he questioned the rationale of approving commercial events using the GiA policy rather than a separate policy meant for such occasions.

Click here to access the City of Ekurhuleni’s 2018/19 beneficiary list directly.

“There is a lot that goes behind the scenes when a company wants to host an event. Various departments such as communication and marketing, tourism and economic development, safety and security must be involved. There must also be a community buy-in,” said the councillor.

However, when it comes to approving GiA beneficiaries, the council has not much influence, he claimed.

“As councillors were are given a list, and we just approve because we are under the impression that officials and the GiA committee have done due diligence.”

How fairly are allocations made?

An open letter circulated in 2019 to law enforcement agencies and the media highlighted GiA as one of various problem areas where officials and politicians were said to have irregularly awarded multi-million-rand tenders to politically connected companies.

A year later, the municipality itself warned the public not to pay anyone to approve funding applications.

In a statement dated 23 September 2020, the municipality said it had been inundated with complaints from residents receiving calls from a scammer soliciting money to purportedly fast track their GiA applications.

“The scammer who claims to be involved in Grant-in-Aid adjudication, solicits amounts of about R3 000 from applicants, and recites their personal information contained in their applications to gain their trust. All applicants for Grant-in-Aid are handled and processed free of charge – the City will never ask for money to do so,” the statement read.

The favoured?

A key allegation has been that GiA grants have gone to political favourites. These claims are hard to substantiate, but we noted three cases that appeared to have some political undertones. The municipality insists there is no political interference and all grantees went through a stringent selection process and were awarded funds on merit.

Forward Creations (Pty) Ltd: The sole director of Forward Creation is Palesa Hadebe, daughter of Khosi Mabaso, who was then the member of the mayoral committee for corporate and shared services. Hadebe received R507 000 to host a Women’s Day event in 2018. Her mother was a member of the mayoral committee that approved a list of recommended beneficiaries.

Municipal spokesperson Agnes Masilo, in an emailed response to amaBhungane, confirmed that Forward Creations was among the beneficiaries forwarded to the mayoral committee, but only after officials had concluded the selection process.

The mayoral committee’s role is to check compliance and adherence to policy and budget and not necessarily vet the qualifying applicants, said Masilo.

Women’s Day event in 2018 (Picture: Palesa Hadebe).

But she did not respond to the question of whether Mabaso declared that one of the beneficiaries was her daughter. The Ekurhuleni GiA policy states pertinently that “each committee member/official involved in the Grant-in-Aid scheme is required to sign a declaration of interest independence” which includes warranting “that he/she is not in any way whatsoever related to or associated with any of the funded beneficiaries”.

Hadebe, the daughter, said the event occurred on 18 August 2018 at Germiston Lake, and “it was successful… A lot of businesswomen were invited to come to showcase their businesses. They were selling food, cosmetics, clothes, etc. I, therefore, believe the program has benefited the citizens of Ekurhuleni.”

To support her claims, she forwarded photographs to amaBhungane. They show a sparsely populated event.

Nokokhokho (Pty) Ltd: Established in 2016 by sole director Sello Sekhokho, who was funded R1.2-million in 2019 to build a science laboratory at Emmangweni Primary School in Tembisa.

Sekhokho is a prominent ANC member in Ekurhuleni who once ran to be the ANC Youth League Gauteng chair. On social media, he posts his interactions and support for various ANC leaders, including Mayor Masina, whom he describes as a personal friend.

However, both he and the municipality denied any conflict of interest because officials, not politicians, administered the process.

Sekhoko said: “We furnish the municipality with reports as and when they need them, and it should be noted this is a five-year-long project which will be supplying them with chemicals, consumables and the general maintenance of the building housing the laboratory.” Sekhokho said he intended to use his own funds to buy the laboratory supplies.

XBE Suppliers cc: Received R1.05-million in 2019 to organise a pool tournament. XBE’s sole member is Thabang Xaba. According to his Facebook profile, he is a staunch ANC supporter.

“I am a supporter of the ANC, not a member; hence I follow most political leaders on my social media,” Xaba said in an email response to amaBhungane.

Xaba did not give any specific details on the tournament. Instead, he referred amaBhungane to the municipality.

“This event took place in line with our application and report submitted to the sports, recreation, and arts department … it is unfortunate we submitted the original report, and we didn’t keep a copy,” Xaba said.

City spokesperson Mbengashe said as part of the build-up to the tournament, roadshows and seminars were held across Ekurhuleni. The workshops focused on training young people to become professional pool players, and 500 people from various townships attended.

The missing oversight

XBE Suppliers was not the only company which could not provide evidence that project requirements had been fulfilled. AmaBhungane approached several companies from the 2018/19 beneficiary list. While some responded to questions; almost none would or could show evidence of how they spent their funds.

Below are three examples:

XBG Holdings (Pty) Ltd: Owned by Kholisa Ncuru, described on her LinkedIn profile as a flight attendant. The company asked for R2.25-million and received R2-million to host an urban market lifestyle event in Ziba Park township in 2019.

According to company registry the company was established in 2017. Ncuru’s predecessor as sole director is popular businessman Gary Magagula, who previously benefitted from GiA in 2016 to host a New Year’s Eve bash. Magagula resigned from the company in October 2018, according to the registry.

Ncuru declined to give details on how she spent the money. “There was a confidential memorandum of understanding between the company and municipality which requested reports, pictures, and invoices to be sent to them in original formats. I would appreciate, as part of your investigations, to refer back to the City of Ekurhuleni as they have what you require,” Ncuru said.

The municipality said XBG focused on providing commercial opportunities to local entrepreneurs in free-stall spaces to sell their products or services.

Black 2 Pers Trading and Other Eterprises (Pty) Ltd (sic): Registered as a company in 2017, was paid R800 000 for business logistics, job creation and fighting poverty, according to the motivation on the 2018/19 GiA report to council.

According to one of the directors, Wandile Mahandule, the company hosted a concert, “Breaking Chains and Fighting Drugs”. He could not remember when the event was held.

Mahandule, who owns the company along his brother Wonga, asked amaBhungane to email questions. But he did not respond.

City spokesperson Mbengashe said he could not give details about this project, as the relevant department was still to furnish him with information.

Mawa Entertainment (Pty) Ltd: Paid R200 000 according to the 2018/19 GiA report for “contributing to the development of society in entertainment, job creation and service delivery”. Neither the municipality nor the director of the company, Tebogo Mabuya, was able to supply details.

Mbengashe admitted that some beneficiaries had not fulfilled their end of their bargain. “Over the years, a few beneficiaries have defaulted from their reporting requirements, hence through the corporate legal services department, letters of demand were issued to them to repay the disbursed funding.”

Mbengashe said all reports from suppliers were physically printed and stored in the archives and would need to be physically fetched from the offices. However, due to staff working remotely due to the pandemic, retrieval of the documents would take some time.

After a week of promising to provide the information, he instructed amaBhungane to go to the offices ourselves, which we did.

After a number of visits and a lengthy to-and-fro, a senior official at the GiA office advised amaBhungane to approach each relevant metro department and request the documents directly from them.

We approached the sport, recreation, arts and culture department as many of the companies of interest had obtained their grants via it.

AmaBhungane met with a senior manager but he did not supply any information despite our follow up attempts.

An official whom amaBhungane encountered at the department’s offices said organisations were required to give reports outlining how the organisation used the money.

“The challenge we have is that, yes on the system, chances are organisations did submit the report, but most likely it will be a written report maybe with a picture or two as proof. It is not expected that organisations will submit invoices as well… Remember, we are dealing with small organisations and non-profits which are not financially savvy.”

This contrasts starkly with the requirements of the Act and with Ekurhuleni’s GiA policy.

The Act imposes strict reporting requirements, including the submission of audited annual financial statements and monthly reports on actual expenditure against a grant.

Smaller entities “serving the poor or used by government as an agency to serve the poor” are exempted from strict reporting provided the grant is below a threshold – which Ekurhuleni’s policy set at R100 000 – and the municipal accounting officer “takes all reasonable steps” to ensure the money reaches its intended destination.

The Ekurhuleni policy nevertheless stipulates that beneficiaries below R100 000 must submit budgets, certified bank statements and certified financial statements, and that the muinicipal accounting officer must obtain from them “receipts of the actual expenditure incurred and any other appropriate evidence”.