Thanks to whistleblower, arrests imminent in massive housing fraud

National Prosecuting Authority spokesperson Velekhaya Mghobozi confirmed this week that the Hawks have handed the NPA a docket and that an arrest will take place shortly.

Mghobozi would not elaborate, beyond saying that a fraud investigation is “at an advanced stage”.

Central to the scandal is a company called Khasu Engineering Services, which an engineer appointed by the Special Investigating Unit found had completed only four of the 3,000 low-cost houses envisaged by the scheme – despite receiving the full R86-million contract price.

After an on-site inspection, the engineer found work to the value of only R20-million, much of which was of a poor quality.

A cash-flow analysis by a forensic accountant hired by the SIU found that the owner of the company, Frank Khotso Khasu, shifted millions of rands through at least 167 accounts during the first year of the contract, many held by his friends, business associates and relatives. The Johannesburg-based accountant, Anton Kriel, said he was angered that “the money was not used to build houses for poor people … it’s a crime against humanity, in my opinion”.

In another development, amaBhungane learned this week that Khasu has been placed on “precautionary suspension” by the Cooperative Governance and Traditional Affairs (Cogta) department, where he was a chief director on an annual salary of at least R900,000.

He has been suspended on full pay since November last year until now, following the publication of a Mail & Guardian story in June 2014 revealing that he had been hired by Cogta despite an ongoing Hawks investigation of the Vryburg housing debacle.

At the time Cogta spokesperson Dumisa Jele said that “the necessary steps will now be taken to establish the facts and determine the actions, if any, that need to be taken. Impropriety of an sort will be dealt with in an appropriate manner on the basis of sound legal advice.”

This week Jele said that Khasu’s suspension related to the fact that he had not declared his business interests when applying for his government job, in line with section 30 of the Public Service Act.

AmaBhungane tried to speak directly to Khasu on Wednesday but was told by an unnamed interlocutor that he was in a meeting.

Later his lawyer, Ismail Ayob, established contact with the amaBhungane office, saying that neither he nor Khasu knew anything about an impending arrest in relation to the Vryburg housing project. He described the allegations against Khasu and his company as “far-fetched”.

Ayob said that the departmental disciplinary hearing against Khasu had used the M&G article as part of its case against him, but had been forced to amend and shorten the charges when it had been unable to substantiate them.

The lawyer also charged that amaBhungane had based its previous articles about Khasu Engineering Services on an unnamed source, rather than on the findings of Kriel and the other SIU consultant. In the M&G article published in June last year, Khotso said: “I don’t want to comment. I have no story and I have said this before: I have nothing to say about this. It happened five years ago.”

The housing project began controversially in 2007 when the Naledi (Vryburg) council appointed Khasu’s firm to build the houses and provide bulk services in extensions 25 and 28 of Huhudi township without issuing a tender.

It justified this on grounds that the houses were urgently needed. The report of the independent engineer appointed by the SIU found that Khasu was entitled to only R59-million for the entire contract and called for the overpayment to be recovered.

The theme was taken up by the Democratic Alliance in the National Assembly. Replying to a DA parliamentary question late last year, the Cogta Minister, Pravin Gordhan, revealed that Khasu Engineering Services had not repaid overpayments made it to by the Naledi municipality of about R46-million.

The DA called on Gordhan and the North West MEC for Cogta “to urgently intervene and to institute the necessary criminal and disciplinary action in terms of section 32 of the Municipal Finance Management Act. Criminal charges must be laid.”

The DA quoted a technical report by the North West human settlements department as saying that only some of the internal water services for the 1,500 stands in phase one of the project were completed; that there was still an outstanding requirement to install internal water and sanitation services for 1,500 stands in phase two; that the quality of the structures on the ground did not warrant the expenditure incurred; and that the top structures needed extensive remedial work.

The SIU identified “numerous” fixed properties registered in Khasu’s name and said it had asked the Asset Forfeiture Unit to put a caveat on all of them.

Pharie Sefali is a GroundUp reporter on a three-month internship with amaBhungane, the Mail & Guardian Centre for Investigative Journalism. Drew Forrest is a journalist with amaBhungane. This article has also been published in the Mail & Guardian and on the amaBhungane website today.