Ex Amahlathi municipal manager, businessman's assets frozen by court

The Makhanda high court has provisionally frozen assets worth millions of rand belonging to fraud accused businessman Mcebisi Mlnozi and former Amahlati municipal manager Balisa Socikwa pending a possible application to confiscate.

Both men are facing multiple charges of fraud in connection with an irregular multimillion-rand yellow plant machinery hire-to-purchase tender which cost the Amahlati municipality R92m and left it with nothing to show for the money spent. Mlonzi, on the other hand, benefited to the tune of millions of rand in profit.

The office of the National Director of Public Prosecutions (NDPP) last week successfully sought a provisional restraining order against the two men in terms of which multiple properties, vehicles and other assets were effectively frozen.

But court papers suggest that the R92m that Mlonzi and his company cost the Amahlati municipality might be just the tip of a giant iceberg.

It appears he had similar hire-to-lease contracts with Port St Johns, Nkonkobe, Mbhashe, and Ngqushwa municipalities.

In the case of Amahlati, the municipality paid some R92m to hire equipment for two years which it could have paid R50m to own.

According to court papers, Mlonzi’s modus operandi appeared to be to enter into hire-to-purchase deals with municipalities for expensive plant machinery such as graders, trucks and excavators.

The only problem is that Mlonzi never owned the machinery which he allegedly fraudulently misrepresented would  become the property of the municipality with its hire-to-purchase agreements.

Instead, says Asset Forfeiture Unit senior special investigator Mthobeli Gxowa, Mlonzi would himself hire the equipment from a reputable firm and then lease it on to the municipality at an absurdly inflated pricetag.

Investigations showed that Mlonzi’s company had leased articulated trucks, backhoe loaders, smooth rollers, a grader a jaw crusher, two front end loaders and an excavator at a cost of R917,468 a month from Barloworld.

He in turn leased the equipment to Amahlati at an inflated R6.7m a month, meaning he scored a whopping R5,7m monthly profit out of the deal. Over and above this, Mlonzi also billed the broke municipality for insurance, maintenance and storage of the equipment.

Mlonzi’s company’s lease agreement with Barloworld also gave him an option to purchase the equipment after leasing it for two years on condition that he was up to date with his payments and paid the full purchase price.

But by 2016, when the option came available, Kwane Capital had defaulted in relation to this and equipment being used in relation to four similar contracts in Mbhashe, PSJ, Ngqushwa and Nkonkobe municipalities.

When he failed to cough up in August 2016, Barloworld remotely switched off all the plant equipment leased to him.

But in October, another company BLC Plant Company swooped in and signed a deed of cession with Kwane Capital in terms of which it undertook to pay Barloworld the outstanding R54,6m to become the owners of all the machines across the board. As it turned out, BLC had formed a joint venture with Kwane and Mlonzi became a director of BLC in 2015 where he remained until 2017.

“Had Amahlati approached Barloworld directly they could have purchased the (same) equipment for R42 478 003,34 and owned the equipment. They would have saved R58 178 734.34. In the end Amahlathi paid a lot of money and BLC Plant company ended up owning the equipment.”

The provisional restraint order forces Mlonzi and his company to surrender into a curator’s care a farm in Mthatha, a property in the plush Illovo suburb in Johannesburg, three properties in Beacon Bay, two trailers and 11 vehicles, including a Bentley Continental, a Porsche, two Mercedes-Benz.

Socikwa’s rural home in Qumbu and seven vehicles were to be surrendered to a curator.

Socikwa’s role in the whole affair is alleged to have been to push through an untenable deal against the advice of his CFO and without following mandated procurement processes.

He has been charged with fraud and contravention of the Municipal Finance Management Act

The financial implications to these mostly broke municipalities is so vast that president Cyril Ramaphosa last year demanded a full report on the deals.

The application was moved by Makhanda attorney Marius Wolmarans without notice to either Mlonzi or Socikwa.

The Makhanda high court gave the two men until mid-April to show why the interim order should not be made final. The AFU is likely to move for a forfeiture order after the preservation order is finalised.

Wolmarans on Friday confirmed that the papers had been served on both men.