An SIU investigation led to a R4 million National Lotteries Commission (NLC) grant for an Eastern Cape borehole project.

Consequently, the boreholes were found to have been constructed three years earlier.

The grant was awarded to the Mshandukani Foundation, a registered non-profit organization (NPO). It claimed it would provide clean water to rural communities, benefit more than 8,000 vulnerable people, and create 15 part-time jobs. The SIU found that boreholes had already been installed in 2016 by Mshandukani Holdings, a company owned by Mashudu and Pretty Shandukani. The foundation did not fund a new project.

Instead of funding a new project, most of the lottery grant was allegedly diverted to private companies. It also flowed into personal bank accounts.

The Special Tribunal has now ordered those involved to repay the R4 million grant, plus interest. This is the second major ruling involving the Mshandukani Foundation. Earlier this year, the Special Tribunal found the foundation was involved in a fraudulent R25 million Olympic Games send-off project in 2016. The event never took place, and investigators found that much of the funding had been channeled through a network of companies linked to former NLC Chief Operating Officer Philemon Letwaba and former NLC legal head Tsietsi Maselwa.

The Mshandukani Foundation applied for the grant in February 2019. It promised to implement a community development project that would provide clean water to schools and clinics in the Eastern Cape.

In its application, foundation chairperson Pretty Shandukani said the project would serve 8,015 vulnerable people. The budget included operational costs, such as salaries. It also covered stipends, audit fees, travel expenses, and bank charges.

The foundation later submitted reports claiming that seven boreholes had been installed and that the project had been completed, but auditors noted discrepancies in the documentation and timelines.

The SIU found those claims to be false.

Affidavits from five school principals, along with confirmation from the Chris Hani District Department of Education, showed that the boreholes had already been drilled in 2016 by Mshandukani Holdings, three years before the lottery grant was approved. Tribunal Judge Brian Mashile said the evidence was overwhelming. “The overwhelming, undisputed and credible evidence before this tribunal firmly establishes that the boreholes were constructed in 2016.”

The judge also noted that none of the respondents provided invoices, contracts, bank records, or other documentation showing how the R4 million grant had actually been spent. According to the Tribunal, the money quickly flowed out of the foundation’s bank account after the NLC transferred the R4 million grant in March 2019.

The account held just R6,000 before the payment of the grant:

• Eldon Construction received R3.6 million.
• Funds were later transferred into Pretty Shandukani’s personal bank account.
• Additional payments were made to Mshandukani Holdings.
• R500,000 was paid to Iron Bridge, a company owned by Rebotile Malomane, the wife of former NLC COO Philemon Letwaba.

Letwaba had personally signed off on the grant. This was not the first time he was linked to funding involving his wife’s company. Previous investigations found he had also recommended a R4.8 million lottery grant for a rural football tournament that benefited another company in which Malomane was a director.

The Special Tribunal ruled that:

• The NLC’s decision to award the R4 million grant was unlawful and has been set aside.
• The grant agreement between the NLC and the Mshandukani Foundation is invalid.
• The corporate veil protecting the foundation should be lifted because it had no assets capable of repaying the funds.
• The Mshandukani Foundation, Pretty Shandukani, Takalani Israel Mulandana, Thambatshira Maria Khameli, and Eldon Construction are jointly and severally liable to repay the R4 million.
• Interest of 10.75% per annum will accrue from the date the SIU instituted proceedings until the amount is fully repaid.

The Tribunal also questioned how quickly the grant was approved. The NLC’s Pro-Active Funding Quality Assurance Committee (QAC) approved the application on 8 March 2019. Pretty Shandukani signed the funding agreement a week later, and Letwaba signed it on behalf of the NLC on 15 March. Just five days later, the full R4 million had been paid into the foundation’s account.

Only 11 days passed between the committee’s approval and the transfer of the funds.

Moreover, the SIU found that the QAC had become central to widespread corruption.

According to SIU Chief Forensic Auditor Humbulani Gideon Funyufunya, the committee’s operations were effectively controlled by Letwaba and former grant funding manager Marubini Ramatsekisa. Thus, the approval process was reduced to little more than a rubber stamp.

An independent investigator described the arrangement as: “Like putting a jackal in charge of keeping the chickens safe.” The ruling marks another significant victory for the SIU’s ongoing efforts to recover millions of rand lost through corruption involving National Lotteries Commission grants.