Geoff Makhubo and Parks Tau involved in R30 Million State Capture Deal

6 December 2018

Today, I have noted a report by amaBhungane which conclusively shows how the past ANC Leadership of the City of Johannesburg lined their own pockets at the expense of the residents.

The report by amaBhungane shows how Cllr Geoff Makhubo – the former MMC for Finance within the City and current Leader of the ANC’s Johannesburg Region – and Cllr Parks Tau – the former Mayor of the City - orchestrated a windfall of at least R30-million for Makhubo by allowing him to unduly act as broker for Regiments Fund Managers, giving the fund managers unfettered access to lucrative deals within the City.

In 2006, Regiments Fund Managers received a contract to manage the City’s “sinking fund” - a pool worth billions of Rand set aside to meet the City’s future debt repayment needs.

By 2015, Regiments had amassed an estimated R300-million in fees.

According to the report by amaBhungane, documents show that Regiments agreed to pay 10% of its fees to Makhubo’s company, Molelwane Consulting, in exchange for Makhubo’s “maintenance of strategic relationships with the COJ [City of Johannesburg].”

This means that Makhubo, who was tasked with exercising political oversight on one of the City’s largest contracts, was also gorging himself and benefitting his mother on the very same contract.

Importantly, Makhubo during his tenure as the MMC of Finance failed to relinquish his 67% stake in the Molelwane Consulting. Indeed, the City’s Integrity Officer has confirmed that up until 2018, Makhubo has officially declared his interest in said company.

Interestingly, neither City officials nor the Integrity Commissioner were ever advised of the corrupt alliance between Makhubo, his company, Regiments and Tau.

More so, Tau, in his roles as MMC for Finance and as later as Mayor failed to not only disclose this information but assisted Makhubo in facilitating deals for Regiments.

In his response to amaBhungane, Tau admitted that, “I was aware that Regiments and Molelwane had a business relationship.” And yet the City had no knowledge of such a relationship. This knowledge was kept in secret and behind closed doors.

Makhubo was continually allowed to benefit from criminal and unethical behaviour resulting from his conflict of interest.

Under Makhubo, Regiments came to profit richly. Evidence, allegedly in amaBhungane’s possession, shows how Regiments used Makhubo to access deals within the City.

In correspondence, Regiments is said to have, provided a shopping list of expectations, including lucrative deals which they expected Makhubo to deliver.

The report shows that Regiments received almost everything on their wish-list:

“In January 2011, the city agreed to release R18.4-million of Regiments’ fees; in March, Regiments facilitated a smaller R250-million loan for the City and received R1.25-million as a raising fee; and in December, Regiments was one of two bidders awarded Johannesburg Property Company tender.’’

Makhubo’s final mission was the delivery of the sinking fund contract; despite Regiments not being the preferred bidder and having been disqualified from the initial tender process, only to be saved by Tau’s intervention.

In addition to this, a report had also found that Regiments’ fees were excessive.

By 2011, amaBhungane suggest that Regiments had already “invested” quite heavily in both Tau and Makhubo – apart from Molelwane’s 10% stake.

The article shows that not only was Regiments a regular donor to ANC coffers, but that the company had allied itself with ANC funders for some of its other BEE deals. One such deal shows how both Makhubo’s and Tau’s wife received a lucrative set of shares then worth R3-million; the shares are now said to be worth approximately R50-million. An identical stake was allocated to Makhubo’s wife.

The depth of criminality and the arrogance displayed by the ANC, Makhubo and Tau is astounding to say the least.

Indeed, their actions also paved the way for the state capture project to reach into the very heart of the City itself through Regiments’ facilitation of a R290 million deal to Denel.

New evidence proffered by amaBhungane now suggests that Regiments was ‘double-dipping’ and received a R3.42-million fee from Denel, seemingly for securing the R290-million in debt from the sinking fund.

What is clear from the article is that Regiments Capital bought influence in the ANC by benefitting its leadership, their families and paying for the ANC’s Regional Elective Conference. One is left wondering whether the City’s final forensic investigation will deem this to be the first case of state capture identified in the City of Johannesburg.

Last week, a sitting of Council approved a report authorising the City Manager to enter settlement negotiations with Regiments in order to terminate the City’s relationship with this institution, which has been linked to the nefarious state capture project.

However, the City will reserve the right to pursue civil and/or criminal legal action following the conclusion of an independent forensic investigation which is at an advanced stage.

Since coming into office, the multi-party coalition government has committed itself to ridding the City of rampant corruption which was allowed to fester within the City under the leadership of the ANC.

As such, I have instructed the City’s legal team to explore options for both civil and criminal legal proceedings so that the City may recover monies owed to it. This includes monies given to Regiments due to its excessive pricing, conflict of interests and corrupt activity.

The ANC, and particularly Cllr Geoff Makhubo, has consistently fought the multi-party government’s efforts to combat corruption in the City. We have always suspected that this is due to their concern that someday they would be implicated. It appears this day has come.

The City will not rest until all those involved in this criminal conduct face the full might of the law. I call upon Councillors Tau and Makhubo to do the honourable thing and resign from public office. This will not save them from the impending criminal and legal action, but it is the least they can do for the residents of the City of Johannesburg whose trust they have violated.

Issued by Luyanda Mfeka, Director: Mayoral Communications, Office of the Executive Mayor, 6 December 2018