City of Johannesburg’s R280-million real estate deal ‘crime scene’

8 Nov 2021

The City of Johannesburg’s tainted sale of Kgoro Central, the ‘most important piece of undeveloped real estate in South Africa’, cheated municipal coffers of at least R280-million but seems to have made some politically connected people very rich.

Stand on the rooftops of any of the big corporates – Alexander Forbes, EY, Werksmans – and you can see it: three hectares of prime land, hijacked from the city.

In 2008, the City of Johannesburg (CoJ) agreed to sell the land above the Sandton Gautrain station to a politically connected developer for R280-million.

But the developer, the Regiments Kgoro Consortium, never paid the purchase price. Despite taking possession of the land in 2013, the development never happened, and the project went into liquidation.

The land – described as “arguably the most important single piece of undeveloped real estate in South Africa” – is now out of the city’s hands and is destined to be sold by the liquidator.

Why was this allowed to happen?

It has long been suspected that the deal was tainted. But evidence to support that suspicion never emerged.

Now, a three-part amaBhungane investigation has uncovered how:

The consortium’s majority shareholder, State Capture kingpins Regiments Capital, promised to bankroll a mining venture linked to a member of the bid evaluation committee.

A senior fixer from the ANC’s investment arm, Chancellor House, appeared on the outskirts of the deal.

Former mayor Parks Tau’s brother-in-law and a mysterious trust with ANC pedigree received R10-million.

Regiments, which has a long-standing policy of ignoring amaBhungane’s questions, did not make an exception for this story.

The city, under ANC leadership, still stands by the deal, saying that it is not unusual for a development to take more than a decade to get off the ground, while former mayor and political rival Herman Mashaba has slammed the Kgoro deal as “not only absurd but highly suspect”.

So, is the Kgoro deal a victim of political warfare? Or “exhibit A”, demonstrating how the city was held hostage by the Regiments patronage machine and the broader Kgoro consortium’s ties to the ANC?

The tender

Let us begin in 2008.

The new high-speed Gautrain was under construction. Its main station – Sandton – was being built underground. Above ground were three hectares of prime land, ripe for development.

In June 2008, the City of Johannesburg opened bidding to developers. Four companies submitted proposals.

One of them, the Regiments Kgoro Consortium, had no track record as a developer. But its major shareholder, Regiments, was influential in the city. It ran the city’s debt management fund – termed a “sinking fund” – and was a regular donor to the Johannesburg branch of the ANC.

It also had big dreams: a 65-floor tower housing a five-star hotel, luxury apartments, an art gallery, retail and restaurants built around a humming square.

“Imagine if you could live, work and play at the epicentre of Africa’s financial and economic hub, or step out your door and be immersed in a vibrant, Afropolitan milieu. This is Kgoro Central,” the high-end promotional video promised. The name of the proposed development, Kgoro, means “gateway” in Setswana.

In December 2008, the city awarded the project to the Regiments Kgoro Consortium for a purchase price of R280-million.

The rival Sandton Spirit Consortium had offered a higher price, but lost out. The rival Zwelethu Consortium – which included the National Union of Mineworkers’ property investment arm, Numprop – was furious and threatened to take the deal to court.

Undeterred, the City signed a deal with the Regiments Kgoro Consortium’s special purpose vehicle, Cedar Park Properties 39, on 3 July 2009.

Kgoro Residential Brochure

Rewind: what are we missing?

One of the people who sat on the bid evaluation committee was William Mathamela, then the City’s treasurer.

In August 2008, one month before the bids closed, Mathamela received a letter that had nothing to do with his day job.

Mathamela’s correspondence appears amongst Regiments’ internal emails which, through leaks and seizures by the NPA, have become public.

The letter, addressed to “Mr. W Mathamela, TLD Mining”, came from Itumeleng Lute, a mining consultant hired to help secure mining prospecting rights on two farms in the Namaqualand district of the Northern Cape.

“I hereby write this letter as a competent person appointed by your company, TLD Mining Projects, to request proof of availability of funds to back up the prospecting right applications,” Lute wrote.

TLD Mining was actually not Mathamela’s company, but Lute clearly believed otherwise: “It would be desirable to provide proof of availability or commitment of an amount of at most R 900,000.00 per project, which must be provided separately for each prospecting right application,” he wrote.

Mathamela forwarded the letter to Regiments director Eric Wood.

Within a few hours, Regiments had delivered a copy of its financials and two letters of support offering to invest R900,000 in each of TLD Mining’s projects.

Regiments’ prompt and generous response was addressed to Lute but delivered to Mathamela’s CoJ email address.

Three months later, Mathamela sat on the bid evaluation committee that recommended the Regiments Kgoro Consortium be awarded erf 575.

There is no indication that he declared a conflict of interest, or recused himself from the meeting.

Shortly thereafter, Regiments made a payment of R40,000 for “mining rights” to the Northern Cape department of mineral resources and energy.

Regiments forwarded the proof of payment to Mathamela.

Assessing the evidence

On the face of it, this looks like the tender was tainted: Regiments appears to have promised to bankroll a mining deal for a city official who, three months later, apparently helped Regiments to secure a multibillion-rand piece of city property.

But is it that simple?

Mathamela, who is now the chairperson of Johannesburg’s refuse removal company Pikitup, denies that he had any personal stake in TLD Mining.

“I wasn’t a director or shareholder... I had no involvement,” he told us when we called him last year. He had merely “introduced” Regiments to a childhood friend who was looking for investors in a mining venture. “I was facilitating to help somebody,” he told us.

TLD director Tebogo Dipico had a different recollection of events: “[Mathamela] was going to get on board at a later stage... When I said I wanted an investor, he said he could do that... As an investor [Mathamela] was going to take an active role at a later stage.”

Mathamela denied this in several lengthy letters from his lawyers: “The supposed ‘relationship’ can be summarised as a friendly introduction of parties, having similar goals, by our client.”

They also stressed that at the time Mathamela made the introduction, he had no idea he would be asked to evaluate Regiments’ bid for erf 575.

Would Regiments have known, when it promised to invest R1.8-million in TLD’s mining venture, that Mathamela would sit on the bid evaluation committee and have influence over the tender for erf 575?

Maybe not. But Regiments might have had multiple reasons to curry favour with Mathamela. He played a critical role on the city’s risk committee which oversaw Regiments’ other big deal: the sinking fund contract.

And Mathamela should have known he had placed himself in what could be perceived as a conflicted situation.

After all, he introduced a childhood friend to Regiments over a business deal. And when a request for a commitment of R1.8-million came, Regiments produced one within hours. As we’ve already explained, all this correspondence passed through Mathamela’s hands.

If his dealings with Regiments were indeed compromising, Mathamela’s presence would have tainted any Regiments business with the City, including the sale of erf 575.

Asked why he failed to declare a conflict of interest and recuse himself from the bid evaluation committee, Mathamela’s lawyers would not commit to whether he actually declared any conflict or instead had not regarded himself as conflicted.

Citing Mathamela’s inability to retrieve a copy of the declaration, they only said: “Should any declaration and/disclosure have been necessary, our client would have made such a disclosure.”

But if Mathamela had done nothing more than “the casual introduction of friends”, as his lawyers claim, why did he continue to keep such close tabs on the TLD Mining deal?

We have noted that shortly after the tender for erf 575 was awarded, Regiments paid R40,000 for “mining rights” and forwarded “the requested proof of transfer” to Mathamela’s City email address.

Then, a few months later, Regiments asked Mathamela to fill in a draft agreement, setting out the details of the joint venture between TLD Mining and Regiments “as per your discussions with Eric”.

Later, Mathamela would ask Regiments to “action the three month bank statements urgently” to secure a TLD mining right.

Asked to explain this, Mathamela’s lawyers told us: “Mr. Dipico felt that it will be best if most of the communication was handled by our client, as our client knew the investors.”

All of this, they told us, should be seen “in the context of our client assisting his (then) friend with a commercial transaction”.

Mathamela also complained that Dipico owed him money on another business venture: “Mr Dipico’s allegations… are spurious and vexatious and can only be attributed [to] a concerted attempt by Mr Dipico to tarnish the reputation(s) of our client(s) due to the now-strained relationship.”

Dipico did not deny that he owed Mathamela money, and said the funds were being repaid. But he continued to insist that as far as TLD is concerned, Mathamela stood to benefit from the proposed mining venture.

“[H]e arranged for that Financial Competency letter from Regiments, with the understanding that he will get a stake in TLD... that wasn’t a favour,” Dipico claimed.

Dipico added another intriguing allegation: “When the whole State Capture thing happened with Regiments, he did give me a call to say, ‘there’s trouble’... He said the Regiments Capital issue might come up.”

Mathamela told us he did not recall this conversation.

A question of integrity

The mine would never actually materialise. TLD failed to convert its prospecting rights into working mines, and Regiments would write off the R40,000 mining investment within a year.

But by this point, Mathamela had resigned as City treasurer and re-emerged as Regiments’ new business partner through a new company, Pro-Grace Investments.

Together, Regiments and Prograce would earn R30.6-million in consulting fees for helping the City of Tshwane to restructure its long-term debt. For more, read our Nedbank investigation

Mathamela’s lawyers have described our questions as “extremely regrettable” and “contemptuous”. Their full response is available in our Evidence Docket.

Questions around Mathamela’s credibility and integrity matter, and not only for him. In March 2020, he returned to the City as the chair of City Power before being rotated, earlier this year, to act as the chair of Pikitup.

But, as Part Two of amaBhungane’s investigation shows, Mathamela was not the only figure ensnared in the web of influence spun by Regiments in the Kgoro deal. DM

Keep reading Daily Maverick for Part Two of the R280m Joburg ‘crime scene’: Strategic friends.

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