Forensic reports reveal mismanagement, fraud and corruption in Gauteng Department of Social Development

The Gauteng Department of Social Development (GDSD) is one of South Africa’s largest funders of non-profit organisations (NPOs), playing a vital role in supporting vulnerable people across the province. Annually, the Gauteng provincial government allocates nearly R2-billion to more than 700 NPOs, making Gauteng the country’s leading province for NPO funding.

This support is critical for addressing the needs of vulnerable groups, including children, the elderly, the homeless and people with disabilities, ensuring access to services like shelter, food, healthcare and social support.

However, the GDSD has recently come under scrutiny. In early 2024, Gauteng’s non-profit sector faced a crisis as hundreds of organisations experienced delays of several months in receiving subsidies from the department. Some organisations were forced to close, others had to scale back their services and many found themselves in precarious financial positions.

The GDSD attributed the crisis to “administrative challenges” which had arisen as the department put measures in place to respond to the findings of internal investigations and audits. The acting head of the department, Bongani Ngomane, acknowledged that the funding process had lacked internal controls, creating a “fertile environment for maladministration and fraud”.

A whistle-blower provided Daily Maverick with some of these internal GDSD reports, including six independent forensic audits into corruption and financial mismanagement. These audits cover programmes such as food banks, school uniforms, dignity packs and the Life Health Recovery Centre (now Nkanyisa Recovery Centre).

Daily Maverick cross-referenced these findings with five Auditor-General management reports (2019–2023) and four from Gauteng Audit Services, all highlighting serious concerns about poor governance and weak controls across the NPO funding process — from application and selection to financial management and oversight.

In summary, the investigations reveal:

• Widespread mismanagement of hundreds of millions of rands;


• Prima facie evidence of fraud and corruption by senior GDSD officials;


• Numerous recommendations for disciplinary and criminal investigations, most of which appear to have been ignored;


• A network of senior officials with ties to top politicians, allegedly siphoning off funds meant for NPOs with impunity;


• Questionable NPOs and their leaders colluding with officials to benefit from misappropriated funds; and


• Schemes to bypass procurement processes and appoint hand-picked suppliers.


• Further details on these investigations will be explored in upcoming Daily Maverick articles in 2025.

The Maphosa money shuffle

Following a fraud detection review conducted by the Forensic Audit unit of the Gauteng Provincial Treasury (GPT), three independent forensic investigations, covering the 2016/17 and 2017/18 financial years, were commissioned by the GPT to dig deeper. Bowmans, which conducted two investigations, and BDO (one), investigated three programmes — Food Banks, School Uniforms and Dignity Packs — with a consistent pattern of irregularities. All three fell under the control of the Sustainable Livelihoods Directorate, led by Spinge July Maphosa.

GroundUp has also recently reported on these investigations.

Read more: Gauteng government’s buried corruption probe (part one) — how it went unpunished as nonprofits suffered

The programmes were designed to provide essential items — such as food, school uniforms and sanitary towels — to identified beneficiaries. In a scheme apparently devised by Maphosa, all three programmes were found to be following similar illicit modus operandi.

Simply put, the scheme was developed and implemented to seemingly allow Maphosa and his cronies in the department to subvert and circumvent procurement processes, resulting in the payment of hundreds of millions of rands to providers who had been handpicked by Maphosa, rather than chosen through a transparent, fair and legally compliant supply chain management process.

NPOs selected to “run” the programmes were little more than payment conduits that channelled GDSD money from the department to providers. The process appeared above board because, on the face of it, GDSD money was being legitimately paid to an NPO that was running one of these programmes, but in reality, the money was simply “bounced” from the NPO bank account to the provider.

In return, for doing nothing other than allowing their bank account to be used as a conduit, NPOs were paid a generous “administration fee” and in the case of the Food Banks Programme, NPO centre managers received payments from one of the providers. Maphosa allegedly benefited through kickbacks from a number of the providers.

‘Farcical’ NPO selection processes

The process of selecting NPOs to implement these programmes was deeply flawed. All three investigations found that the process was a sham. Rather than following the proper protocols set out by the GDSD, the selection process was often shambolic, lacking proper documentation and minutes, and failing to adhere to GDSD policy.

The BDO report on the School Uniform Programme had this to say about the process:

“Overall, we found that … the true nature of this exercise was to identify NPOs to serve as payment conduits on behalf of the GDSD… As such, this process was flawed and farcical from the outset… The GDSD essentially undertook a process for the appointment of payment conduits, which process was not in compliance with the PFA, the National Financing Guideline, the SPM or the PFMA. The GDSD manipulated the process to ensure that it limited and circumvented the controls that are in place to manage procurement in the public sector.”

Commenting on the NPO selection process for the Dignity Packs Programme, the Bowmans report says that the process “was probably a sham, with a predetermined outcome and intended to mislead. The process was obviously designed to benefit certain persons and organisations to the detriment of the GDSD and the public at large.” It made similar findings about the Food Banks NPO selection process.

Selection and appointment of providers 

Providers should have been chosen by the NPOs, following a documented competitive and transparent procurement process wherein NPOs would gather three quotes, submit them to the GDSD and make a joint decision about which suppliers to use. However, in all three programmes, the NPOs were simply told which providers to work with.

The selection of these providers bypassed all procurement procedures, with Maphosa simply choosing his preferred suppliers. Once the NPOs received their allocated funding, they were instructed to pay the chosen providers upon receiving invoices.

In the Food Banks report, Bowmans reached the following conclusion concerning this approach to supplier appointments: “The manner in which suppliers were appointed to the Foodbank Programme was not aligned with the Constitution, the PFMA, the PPFA or the NPO Financing Guideline… In our view, this was probably done so deliberately, and in an attempt to circumvent the GDSD’s normal procurement processes to the advantage of suppliers and others, and to the prejudice of the state.”

(Image: Supplied)

Systemic mismanagement

In addition to the illicit “Maphosa money shuffle” scheme, all three programmes were riddled with maladministration and other financial irregularities.

These included a lack of proper processes to manage unspent funding, which was never repaid to the GDSD, and payments made before service level agreements were concluded. Suppliers exceeding the R1-million annual VAT threshold did not charge VAT, yet this was never flagged.

In the Food Banks Programme, beneficiary verification processes were inadequate, with Bowmans’ sampling showing that many recipients did not meet the criteria, and some were untraceable. BDO found that in the 2017/18 financial year more than one in four school uniform packs were never received by the identified schools.

On instruction from GDSD officials, NPOs also paid for expenses entirely unrelated to the programmes being funded. For example, Dignity Packs funding was used to pay consultants’ fees and travel costs for participation in a GDSD panel, and venue and catering costs for a “GDSD School Uniform meeting” at the OR Tambo Southern Sun. Food Banks funding was used to pay for security system upgrades at the rented premises of some of the participating NPOs and for an “MEC event”.

Irregular expenditure

BDO and Bowmans found that all the money spent on these three programmes during the period under review (the 2016/17 and 2017/18 financial years) should be deemed to be irregular expenditure. This amounted to almost R1-billion. Considering that these programmes had all been running for several years before these investigations, the real sum wasted is considerably more.

Kickbacks

During its Food Banks investigation, Bowmans received allegations from a whistle-blower that Maphosa had benefited through kickbacks from providers. These benefits allegedly included business class overseas travel, motor vehicles, property and land, and payment of municipal accounts for Maphosa and his family members.

It was alleged that a stand in Copperleaf Golf Estate and a farm in Laezonia were purchased by a provider for Maphosa. A Deeds Office search has revealed that a plot of land in Copperleaf Golf Estate and a farm in Doornrandje (which borders Laezonia), which were both purchased on the same date (28 January 2015), are registered in the names of Mr July Maphosa and his wife.

Read more: Inside Gauteng’s R500m corruption scheme (part two) — how the ’sustainable livelihoods’ budget was captured

No accountability

All three reports recommended disciplinary and, in some instances, criminal, action against senior GDSD officials including Maphosa. However, no action has been taken against any of those named. Maphosa resigned from the GDSD in 2018 “for personal reasons”.

When questions were raised regarding the investigations into these programmes, Premier Panyaza Lesufi’s spokesperson, Sizwe Pamla, stated that the premier was the MEC for education when the reports were finalised in 2019/20. (However, Lesufi was also acting MEC for social development from November 2019 to June 2020.)

According to Pamla, relevant departmental accounting officers receive all investigation reports and update their immediate political principals (MECs) on the progress of implementing the findings. He said the GDSD has been handling the reports and working on the recommendations, and inquiries regarding progress should be directed to them.

“DSD has been handling the report and working on implementing its recommendations. You can check with them on the progress.

“The premier was briefed by the Gauteng Provincial Forensic Audit Unit on the report and informed that it was submitted to the Directorate for Priority Crime Investigation (Hawks) to implement some of the recommendations,” he said.

Daily Maverick sent questions to Motsamai Motlhaolwa, the spokesperson for the GDSD, on 4 November. A follow-up message was sent via WhatsApp on 6 December, to which Motlhaolwa replied on 7 December, confirming receipt of the questions. On 10 December, Daily Maverick attempted to contact Motlhaolwa by phone for further clarification, but the calls went unanswered.

Additionally, questions were sent to Maphosa on 4 December, but no response was received. In a follow-up phone call, Maphosa told Daily Maverick, “I won’t be answering any questions, thank you.”

However, Mbali Hlophe, who was MEC for social development from late 2022 to May 2024, told Daily Maverick, “The Gauteng Department of Social Development can unfortunately be characterised as a crime scene, owing to the many forensic investigations conducted over the years but not acted upon, resulting in corruption activities and its actors deeply rooting themselves into various areas of the department’s work and procurement.

“Examples of this are visible in the maladministration cases investigated on school uniforms, food parcels, dignity packs, to name a few. The investigations date as far back as 2016 and were curiously not acted on. During my tenure, we sought to deal with this by placing implicated individuals on precautionary suspension.”

All of the suspensions referred to by Hlophe have been lifted and no disciplinary action has yet been taken.

The questions we sent to Motlhaolwa

The findings revealed systemic irregularities, including procurement breaches and misuse of NPOs as payment conduits, with specific allegations implicating Mr. July Maphosa and others. In this context, I would appreciate your responses to the following questions:

1. In all three instances, the independent investigations were commissioned by the Gauteng Provincial Treasury based on their own findings in “fraud detection reviews”. What did GPT find, and why did this prompt the appointment of external forensic auditors?


2. What steps has the GDSD taken to ensure that the policies and processes in place for the selection of NPOs are followed and that adherence to these processes is monitored?


3. What steps has the GDSD taken to ensure that NPOs are not used merely as “payment conduits”?


4. Why were NPOs paid considerable sums of money as an “admin fee” simply for allowing GDSD money to be passed through their bank account to suppliers? This would appear to be fruitless and wasteful expenditure.


5. What steps has the GDSD taken to ensure that financial delegations of authority are adhered to and officials do not sign off on expenditure above their delegated limit?


6. How does the GDSD ensure and monitor compliance with supply chain management policies and the PFMA in respect of selection and payment of providers?


7. What steps have been taken against the officials named in the three reports — internal disciplinary action and/or criminal charges as recommended?


8. Have any of the other recommendations contained in the reports, eg blacklisting suppliers and NPOs, been implemented? If not, why not?


9. There are specific allegations that Mr July Maphosa received various forms of gratification from the providers who benefited from the programmes. These include overseas travel, cars, properties and payment of municipal accounts for himself and/or his family members. Have these allegations been further investigated? If not, why not? If so, what was the outcome?

The questions sent to Maphosa

1. As director of the Poverty Alleviation and Sustainable Livelihoods Directorate, you oversaw the implementation of the School Uniforms, Dignity Packs and Food Banks Programmes (amongst others). Three independent forensic investigations found that in all three programmes the way in which NPOs were selected, the use of NPOs as “payment conduits” and the circumvention of proper supply chain management procedures for the appointment of providers was irregular.

For example, the Bowmans report on the investigation into the Dignity Packs Programme states:

“We therefore conclude that [the] evaluation process followed by the Panel Committee, as is evidenced by the Panel Committee minutes, was probably a sham, with a predetermined outcome, and intended to mislead. The process was obviously designed to benefit certain persons and organisations to the detriment of the GDSD and the public at large. If this inference is correct, it would mean that the actions of Mr Maphosa (who chaired the meeting), and all the officials who took part in this panel process, could constitute fraud and/or corruption.”

The Bowmans report on the investigation into the Food Banks Programme states:

“The manner in which suppliers were appointed to the Foodbank Programme was not aligned with the Constitution, the PFMA, the PPFA or the NPO Financing Guideline… In our view, this was probably done so deliberately, and in an attempt to circumvent the GDSD’s normal procurement processes to the advantage of suppliers and others, and to the prejudice of the State.”

You are identified as the person primarily responsible for this scheme. All of the reports recommended that disciplinary action be taken against you and that criminal action be instituted against you. How do you respond?

2.     The Bowmans reports refer to allegations from a whistle-blower that:

• 
  
  
  
  • Impoqo paid for overseas trips undertaken by yourself to Dubai and China.
  
  
  • Impoqo purchased a Land Rover for you.
  
  
  • You had exclusive access to three Ford bakkies purchased by Morithi wa Sechaba, Philani Development Centre and Impoqo.
  
  
  • Funds from Morithi wa Sechaba were transferred to Tugit, which used the funds to purchase a farm for your parents-in-law and another farm for yourself.
  
  
  • Mr Soorju, who controlled three entities that were GDSD suppliers, paid for a stand in the Copperleaf Golf Estate for yourself. One of Mr Soorju’s companies, Pink Power Trading, bought property for you and your family.
  
  
  • Suppliers paid the municipal accounts of yourself and your family.
  
  
  • How do you respond to these allegations?
  
  
  
  

The questions sent to Pamla

1. The reports named above all identified a systematic and deliberate subversion and circumvention of NPO selection procedures and procurement processes, as well as financial mismanagement and irregular expenditure. It appears as if implicated officials have not been held to account, and no action has been taken against them. Why not?


2. Were any of the recommendations from the three reports listed implemented? If so, which ones, and what impact have they had? If not, why were they ignored?


3. These reports span multiple MECs and HODs, with each tenure appearing to delay accountability. What measures does the premier’s office have in place to ensure continuity of investigations and enforcement, regardless of changes in leadership?


4. How does the premier’s office ensure that reports like these are taken seriously by MECs and other officials, given that one MEC allegedly dismissed them as “not worth the paper they’re written on”?


5. Former HOD Mhlongo claimed that the premier’s office was aware of the Bowmans and BDO reports and that you, in your capacity as acting MEC for the GDSD at the time, requested the reports to be handled by the (then) Premier’s office (Premier David Makhura). The implication is that you were aware of these reports and their contents, but you have denied such knowledge. Were you aware of these reports?


6. What steps, if any, did the premier’s office take to pursue disciplinary or criminal action against implicated officials at that time? What steps have you, in your capacity as premier, taken to ensure implicated officials, some of whom are still working for the GDSD, are held to account? DM

Additional reporting by Takudzwa Pongweni.

Daily Maverick will continue to report on this story in 2025. 

Wendy Orr is an apartheid-era whistle-blower, a former commissioner of the Truth and Reconciliation Commission and previous programme director of the Anti-Corruption Coalition.

Mark Heywood is a social justice activist and former editor of Maverick Citizen, a section of Daily Maverick. He is the former executive director and founder of SECTION27 and has been a human rights activist most of his life. He has also advised Change Starts Now and Rise Mzansi on issues of social justice.