* As at the time of this investigation report, investigators were not in a position to make findings as to whether the approval of the developer in the participation of the EEPF Programme had been done in accordance with applicable laws or applicable procedures due to not being provided with all the relevant information and/or documentation to enable the investigation team to make a finding. However, GMI noted that if these documents never existed, the approval which was granted for participation in the EEPF Programme would have been irregular. Alternatively, if the documents did exist, but were inadequate and/or or did not meet the necessary requirements, the approval would also have been irregular.
* There were shortcomings on the project appraisal. More comprehensive due diligence and procedural steps ought to have occurred prior to the granting of the loan facility to Nonkwelo Investments.
* GMI was unable to determine whether Nonkwelo Investments even requested a scope change, or whether such scope change was rather at the behest of a different entity called Nonkwelo Strategic Investments. Also, the legal basis for the scope change by restructuring the project from affordable housing project to student accommodation is uncertain.
* The trustees who took or participated in this decision may attract liability as set out in section 9 of the Trust Property Control Act. It is further unknown or uncertain that GPF approved such scope change where no such proposal was forthcoming from the developer i.e., Nonkwelo Investments, but rather from a different entity i.e., Nonkwelo Strategic Investments.
* Taking into consideration GMI’s earlier findings that the GPF had no legal basis or otherwise to approve the scope change, any subsequent approvals and/or increase of the original junior loan facility was likewise flawed and/or irregular, the trustees who took or participated in this decision may attract liability as set out in section 9 of the TPCA.
* Whilst we are mindful that the investment committee (IC) was duly authorised in terms of the 2016 GPF Delegation of Authority (DoA) to approve funding from R5 million to R20m, as further alluded hereunder, it was evident that the project was not viable.
* By expending further funds and/or approving a senior funding loan to Nonkwelo Investments, this was not in the best interest of the GPF. Whilst this does not form part of GMI’s scope or mandate, it is unknown to us why such a “jump” was allowed. Unless there is a reason for this, it would have otherwise been an arbitrary and possibly a reckless decision. By stepping in and approving a senior funding loan to Nonkwelo Investments, investigators expressed a view that this caused GPF to continue to assume an even greater risk.
* The invoices and vouchers availed confirm the total amount of R7 246 126.83 was disbursed as outlined by management. Documentation provided by management shows drawdowns wherein GPF deducted the equity for Nonkwelo Investments from its invoices rendered. Further, that in respect of invoice C0416, the GPF paid for the difference between the purchase price and Nonkwelo’s Investment equity of R500 000 as required with the first approval. No sufficient information provided to confirm payment of equity directly to the attorneys. Agreements do not specify the manner and/or form of the equity contribution required.
* Due to the material breach of the agreement, the GPF was entitled to recover its monies through already agreed security measures. The GPF decided to enter into a settlement agreement with Nonkwelo Investment instead of proceeding with the other securities.
* Subsequent to that, there was a settlement agreement that was signed by Daniel Molokomme, GPF’s erstwhile acting CEO and witnessed by Ms Thandi Kuzwayo, GPF’s current legal and compliance manager. Mr Nonkwelo signed the settlement agreement on behalf of Nonkwelo Investments, with Ms Palesa Nonkwelo witnessing same. The aforementioned settlement agreement was entered into on the premise that the monies owed to the GPF by the developer were R9 624 537.17 as per the certificate of balance dated 24 June 2020, There was indeed a scope change in respect of the project which was not permissible and/or valid. The cost overruns pertaining to the scope change would likely be irregular.
* The disbursements made by the GPF to the developer in the total amount of R7 246 126.83 were confirmed.
* Further, this amount was disbursed with reference to the Annual Financial Statements (AFS) and audited by the Auditor General of South Africa (AGSA).
* No bank statements to verify same documents nor to independently verify or confirm why the remaining amounts were not disbursed.
* There was initial compliance with the Bridge and Term Loan Facility Agreement, however, the bulk of the conditions were not met due to senior funding being cancelled/withdrawn by the National Housing Finance Corporation (NHFC).
* This cancellation led to the Term and Bridge Loan Facility being cancelled and/or restructured by the GPF as it was concluded on the basis that it would be accompanied by a senior loan as referred to in the definitions portion of the loan and the annexed Advanced Conditions.
* Nonkwelo Investments failed to make a single payment at the end of the moratorium period, as such was in material breach of the second loan agreement.
The Star