DA opposes shady R100 million loan for Mantsopa Local Municipality

By David van Vuuren, DA Chief Whip in the Free State Provincial Legislature:

The DA in the Mantsopa Local Municipality today voted against a motion brought by the ANC that sought to appoint a Mr Zidhaan Pillay, on behalf of Municipal Infrastructure Finance PTY LTD, as an agent to apply for a R100 million loan from the Development Bank of South Africa (DBSA).

Mr Pillay is alleged to have been implicated in a R1,5 million bribery scandal in KwaZulu-Natal’s eThekwini Metro. He is director of various companies under Aaliqah Group and appears to have links to President Jacob Zuma.

Mr Pillay was appointed by the Free State Provincial Department of Cooperative Governance and Traditional Affairs (COGTA), in a letter by the Head of Department, Mr Mokete Duma, to serve as agent for all loan applications to the DBSA on behalf of municipalities in the province. Mr Duma himself is currently before court defending a 127 charges related to fraud, including that of his alleged involvement in defrauding the Moqhaka Local Municipality of R11 million during his time as the municipality’s municipal manager.

Under the agreement Mr Pillay will receive a R250,000.00 security fee for facilitating the loan application to DBSA and should the loan be granted a once off fixed fee of R2,5 million will also be paid to him.

Despite DA Councillor Tania Halse’s best efforts in council today, to obtain information for what specifically the loan will be used for, officials could not give any clarity. The loan quotation makes conflicting references of the loan amount. The agreement for the loan is for R100 million, but it stipulates that R50 million can be in the form of a loan, while the additional R50 million can be in the form of a grant from the National Department of Trade and Industry. This in itself is extremely worrying.

Councillor Halse opposed the motion on these grounds as well as the fact that the Mantsopa Local Municipality has been unable to manage its own finances effectively for the last five years. The municipality has received three consecutive disclaimer of opinion audit outcomes.

The DA argues that it in principle cannot support a loan until such time as that the municipality’s finances are brought in line with the Municipal Finance Management Act (MFMA) and a clear strategy for infrastructure development and its cost and needs analysis has been done and approved.

The DA has serious concerns surrounding this entire affair and fear that other municipalities in the province may also be looking to secure loans through what appears to be a highly irregular process.

I have today written to Finance MEC Elzabe Rockman, requesting her to immediately place a moratorium on municipal loan applications and the facilitation of the R250,000.00 payment to Mr Pillay until the validity and necessity for further processing has been established.

The DA wants to know:

  1. Whether the appointment of Mr Pillay followed the prescripts of the Public Finance Management Act (PFMA).
  2. Whether the agreement between Municipal Infrastructure Finance PTY LTD and the Mantsopa Local Municipality is in accordance with the MFMA.
  3. Whether a thorough cost analysis of the R100 million loan amount was done.
  4. What the loan amount will be utilised for specifically with regards to identified infrastructure projects.
  5. Why the Mantsopa Local Municipality’s Chief Financial Officer, who is qualified to compile loan application on behalf of the municipality, was not used for this purpose.
  6. Under what authority has the HOD for COGTA, Mr Duma, appointed Mr Pillay.
  7. Whether the provincial Treasury is aware of the loan application and whether it gave its consent to proceed with it.
  8. How the loan will be serviced.
  9. How a loan from the DBSA can be split into two and contain a grant from the National Department of Trade and Industry.
  10. Whether any other municipalities in the Free State have followed the same process for securing loans through Mr Pillay.

MEC Rockman, as custodian of the province’s finances, should immediately institute a moratorium and launch an investigation into this matter. The whole affair appears to be illegal and looks like nothing but a money laundering scheme.