Bad governance: Finance Minister orders withholding of R781m in government grants to Nelson Mandela Bay

10 Aug 2023

Finance Minister Enoch Godongwana has ordered the withholding of hundreds of millions of rands in government grants from the Nelson Mandela Bay metro. The move is linked to the controversial appointment of a former municipal executive director to head the city’s development agency, and the municipality’s failure to suspend its city manager who was arrested by the Hawks.

Minister of Finance Enoch Godongwana put his foot down with the latest coalition government of the Nelson Mandela Bay metro, saying he had ordered the withholding of R781-million in conditional grants until governance in the metro improves.

Godongwana wants the council to overturn the appointment of the CEO of the Mandela Bay Development Agency (MBDA) and also suspend the city manager.

The newly appointed CEO, Anele Qaba, is a former executive director for economic development, tourism and agriculture in the metro. In 2022, after a coalition government under the leadership of the DA’s Retief Odendaal gained control of the metro, Qaba was dismissed from his job and paid a settlement.

Odendaal has explained that the settlement payment was necessitated because Qaba’s disciplinary hearing had been botched.

Odendaal has now informed the Treasury that the current mayor, Gary van Niekerk, knew that Qaba would apply for the top MDBA position, but failed to disclose this vital piece of information at the council meeting during which the settlement agreement was approved.

Van Niekerk became mayor in May 2023 after his party, the Northern Alliance, formed a new alliance with the ANC and the EFF to remove Odendaal’s coalition from the seat of power.

Van Niekerk’s government is the third in the metro since local government elections in 2021.

After returning to the opposition benches, Odendaal wrote a public letter to the chairperson of the MBDA board, Glenda Perumal, objecting to the appointment of Qaba as the agency’s new CEO.

Odendaal wrote that he went to “great lengths” to sever the relationship between Qaba and the metro while he was executive mayor.

“This followed a lengthy disciplinary process which ultimately proved to be so compromised that Council was forced to consider an amicable settlement in the matter at hand.

“It is therefore absolutely nonsensical to reappoint this individual to the most senior position within the municipal entity when there has been a severe breakdown in trust between the municipality and himself.

“Even more concerning, however, is the fact that although the board is very aware of this rather public fallout between Mr Qaba and the Municipality, they will still favourably consider him as the most suitable candidate.

“This raises a number of questions as to whether perhaps there has been undue influence or political interference to make such an appointment,” Odendaal wrote in his letter.

Godongwana intervenes

Much correspondence followed, and Godongwana has now put his foot down.

In a letter written in the wake of a meeting between Treasury officials and Van Niekerk’s office on 8 August, Godongwana demanded that the issue of Qaba’s appointment and the suspension of the city manager be addressed urgently.

The current serving city manager, Dr Noxolo Nqwazi, was arrested by the Hawks in October 2022 for her role in the allegedly unlawful signing off on a R24-million tender for toilets in several informal settlements. The tender was awarded during the pandemic-related National State of Disaster.

She will stand trial with the metro’s former human settlements director, Norman Mapu; Nelson Mandela Bay ANC secretary, Luyolo Nqakula; businessman Xolani Masela and his spouse Nwabisa; as well as former Democratic Alliance councillors Trevor Louw, Neville Higgins and Victor Manyathi.

The councillors were, according to the charge sheet, paid to vote for a motion of no confidence concerning a previous DA mayor, Athol Trollip, in 2018.

Godongwana has now demanded action against Nqwazi and Qaba.

Several large construction projects in Nelson Mandela Bay have stalled due to the withholding of grant money. This includes the electrification of informal settlements, the building of houses, tarring of gravel roads and the replacement of bulk water and sewerage lines.

Godongwana said in his letter: “I am also aware that Qaba left the Executive Director: Economic Development position at the municipality on a settlement agreement of R3-million. The City’s Disciplinary Board report indicates that Mr Qaba was suspended on allegations of gross misconduct as it relates to Supply Chain Management processes on the appointment of a socio-economic consultant.

“I am grossly concerned about the integrity of the City’s decision to appoint Mr Qaba as the CEO of the MBDA within less than four months of being paid R3-million through a settlement agreement,” Godongwana continued.

“This payment is viewed as fruitless and wasteful expenditure which must be recovered. Having read the settlement agreement between the parties, I cannot establish the basis for the settlement agreement except for the council resolution which references the period remaining on Mr Qaba’s employment contract and the lengthy time it took to finalise the disciplinary process which has associated legal costs.

“Clearly there is no rationale in settling the matter with higher costs and still reappointing the same person to a higher position in less than four months.

“I emphasise the concern I have over the governance that the Board of Directors of Mandela Bay Development Entity has with implementing material irregular decisions that contravene statutory prescripts, as well as not obtaining approval of the municipal council when required,” he continued.

“The fact that the Board of Directors failed to consult Council is a clear indication that they have failed to execute their fiduciary duties and therefore I advise your Council to consider taking appropriate steps against them which may include possible dissolution subject to due processes.

“I also advise the Council to take steps against the City Manager… for the loss incurred as a result of the settlement agreement between the City and Mr Qaba,” he continued.

“The second issue that I would like to address is the fraud and corruption case against the City Manager. I am equally concerned that the City is led by a City Manager who herself is alleged to have contravened various provisions of the legislation when appointing Pelatona for the construction of singular toilets, water standpipes and aerators as a Covid-19 intervention in informal settlements, despite the fact that there was already an existing contract in place for this purpose.

“I am aware that the disciplinary board recommended that disciplinary measures be implemented against the officials implicated in the SIU report.

“I have been privy to the Court Order that declared the decisions to be invalid and unlawful and that it should be set aside, which includes the decision to suspend the City Manager through the implementation of the SIU report and have noted that the Council did not do anything to review the Court order.

“There are no reasons that stop the Executive Mayor to table the matter in Council to ensure that finally the recommendations contained in the Special Investigations Unit report are implemented.

“The fact that Dr Nqwazi was criminally charged, and released on bail while still going through trial proceedings, is a concern. The City cannot be led by the City Manager who is criminally charged. I implore the Council to take the necessary steps against the City Manager.”

Godongwana said he would release the grant money to the city only if these issues were addressed in a satisfactory manner, and specifically on condition that no money was paid to the MBDA until the issues around the appointment of Qaba were resolved.

“In the spirit of cooperative governance, I believe the above advice will be embraced to retain order in the City,” the letter continues.

Mayor taking the matter ‘very seriously’

Van Niekerk’s spokesperson, Kupido Baron, said the ongoing issue of the withholding of grant funding resulted in several engagements to find an amicable solution.

He said this included a comprehensive response to the initial letter of demand from the National Treasury.

“Following interactions with the Office of the Minister of Finance, we have now received another letter from the Minister of Finance, raising a number of additional concerns. Needless to say, we are taking this matter very seriously as the issues mentioned could have grave repercussions for the municipality and our capability to implement a number of capital projects.

“Since due diligence is needed to address the matter, an urgent meeting of the Government of Local Unity was called this morning, to determine a way forward. The meeting decided to obtain a legal opinion by providing objective facts to an advocate. This is necessary to avoid irregular, fruitless, unnecessary and wasteful expenditure.

“In addition, a response from Executive Mayor Gary van Niekerk will be sent to the Minister of Finance. The correspondence will include an urgent meeting request with the Minister of Finance, amongst others,” said Baron.

MBDA spokesperson Luvuyo Bangazi declined to comment, saying this was a matter for the council to decide.

Odendaal said the Minister of Finance’s scathing letter vindicated the DA’s opinion that Qaba was irregularly appointed.

He said the DA had laid criminal charges against municipal officials over the toilet tender in 2020.

“This culminated in a number of findings by the Special Investigating Unit which implicated officials in potential wrongdoing. Council launched a high court challenge to the findings but the application was dismissed.

“The minister indicated that due to the court having made a ruling on review, nothing will prohibit Council from instituting further disciplinary processes against Nqwazi,” he said. DM

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Godongwana intervenes

Mayor taking the matter ‘very seriously’