Magashule and daughter in money-for-jam property scandal

Johannesburg - Controversial ANC secretary general and Free State Premier Ace Magashule is implicated in a dodgy property deal with the Free State Development Corporation (FDC) that saw his long-lost daughter score R9 million for doing nothing.

Magashule's business links and dealings have been thrust into the spotlight after the Hawks raided the premier's office in Bloemfontein last week in search of documents relating to the infamous dairy farm deal in Vrede that benefited the Gupta family.

Magashule's one son works for the Guptas and he has been implicated for many years in "capturing" the Free State's government expenditure.

News24 can reveal that 27-year old Thoko Alice Malembe, Magashule's estranged daughter with whom he was reunited in 2011, scored a contentious property deal with the FDC, a government entity with a chairperson who is said to be a long-time ally of Magashule.

Malembe was born shortly after Magashule went into exile in the late 1980s and was reunited with the premier in 2011, partly thanks to the intervention of ANC president Cyril Ramaphosa. [See "Ace, Malembe reunited" below]

Neither Magashule nor Ramaphosa have denied the story.

Since this reintroduction, the young businesswoman's fortunes have improved drastically, largely due to a string of government tenders and property deals she secured from the provincial government under Magashule's control.

In one of the most troubling deals, Magashule himself allegedly helped ensure that properties owned by the FDC ended up in his daughter's hands. A concurrent R11m "upfront" rental agreement with petroleum giant Shell helped Malembe to purchase one of these properties from the FDC while allowing her to pocket a further R9m without so much as lifting a finger.

As a result of the latter property deal, a once thriving fuel station was forced to shut down, leaving more than 60 employees in the rural town of Phuthaditjhaba in the eastern Free State without jobs.

News24 has obtained video footage of Magashule and a group of men, including two FDC board members, inspecting this property in 2014. They were joined by a young woman who appears to be Malembe.

Malembe also happens to be a business associate of Hantsi Matseke, the FDC's chairperson and a long-time ally of Magashule. Malembe’s and Matseke's respective companies have both greatly benefited from government contracts in the Free State and have worked together on some of these projects [See "Ace, Malembe and the FDC chair" below].

Ace's visit

One Thursday afternoon in December 2014, a convoy of two black BMWs and two SUVs rolled into a busy Shell fuel station in the heart of Phuthaditjhaba, the capital of the former eastern Free State homeland of QwaQwa. One of the vehicles, a white SUV, had emergency lights flashing on its roof, announcing to onlookers that someone important had come to visit their rural corner of the Free State.

At that time the property belonged to the FDC, the state-owned entity chaired by Matseke.

Magashule did not respond to queries about why he had visited the petrol station.

Security footage of the visit shows a young woman getting out of one of the vehicles before getting into the back of one of the other cars. Moments later, after the woman had again exited the car, Magashule emerges from this vehicle.

Malembe did not reply to our questions about whether or not it is her in the video.

News24 established that some of the other men visible on the video is Vish Maharaj, an FDC board member, and Mohloua "Blacky" Seoe, a former FDC chairman who later became an ordinary board member. AmaBhungane in 2011 linked Seoe and Magashule to a suspicious government property deal awarded to a company of which Seoe and Magashule were once co-directors.

Seoe has since resigned from the FDC board.

"Eish, you know what, I don’t have any comment on that, thanks," Seoe said when queried about the visit to the Shell garage.

Maharaj denied that he’d visited the site. But when News24 showed him the CCTV footage, he ignored News24's subsequent queries.

Several former petrol attendants at the garage have confirmed that Magashule and a group of people visited the premises.

The video also shows the premier, the young woman and Maharaj, along with several other men, walking around the premises, before later convening near the fuel pumps. They remained there for about five minutes for what appears to have been a rather earnest discussion. In all, the group spent about 15 minutes at the fuel station.

"Ace was there with bodyguards and some other people. It looked like he was checking out the place from corner to corner," says one former petrol attended who was on duty that day.

Another former petrol attendant says that the talk among staff at the time was that Magashule himself was going to take over the fuel station.

Trouble with the FDC

To the garage's former owners, the premier’s visit would not have been the first sign that their business was facing serious trouble. Though the former owners declined to speak to News24, court documents filed in a protracted legal battle with the FDC shed some light on the saga.

The former owners used to rent the property from the FDC.

In June 2014, six months before Magashule's visit, the FDC notified the then owners that the lease agreement between the two parties had expired earlier that year, and that it wanted to cancel the agreement.

In October of that year, the FDC applied for an eviction order at the High Court in Bloemfontein.

The court ruled in June 2015 that the FDC was within its rights to ask its tenant to leave the premises. The court had, of course, not been made aware of the underlying political machinations that seemed to have informed the FDC's actions. The then owners continued to fight the matter before deciding to call it quits in May 2016, after which they vacated the site later in that year.

A once thriving business that employed some 65 people suddenly became abandoned. When News24 visited the site earlier this month, it was still deserted.

"I haven’t found a new job. It has been very difficult for me and my family," said another former petrol attendant. He added that many of his former colleagues were in a similar position.

Another former garage employee blames Magashule.

"Many families lost their jobs because of Ace. We are struggling," he told News24.

With the previous business shut down, the FDC could now start the process of transferring the property to Magashule's daughter.

Two sources familiar with the FDC’s handling of this deal claim that "the big man", a reference to Magashule, had exerted pressure on FDC staff to ensure that Malembe’s trust became the property’s new owner.

"When the FDC’s handling of this deal was questioned internally, FDC staff were told to keep out of it, seeing as the big man was behind it," says one such source.

Magashule denies this claim.

"The premier has not exerted any pressure on any FDC official to do or not to do anything," said Tiisetso Makhele, his spokesperson. 

The FDC also denies the allegation. 

"Management was never put under pressure by anybody and certainly not [by] the premier," said Ikhraam Osman, the FDC's CEO. 

The second Shell

Meanwhile, in April 2015, the owners of another Shell fuel station in Botshabelo outside Bloemfontein –  which also operated on land owned by the FDC – were informed by the government entity that it wanted to sell the property.

The owners of this business also declined to speak to News24, but they too took the matter to court, affording News24 a fair amount of insight into the FDC’s questionable conduct in the matter.

Like the Phuthaditjhaba transaction, sources familiar with the FDC’s bid to sell the Botshabelo property have claimed that Magashule’s shadow loomed large over the deal.

In March 2015, the FDC placed an advert in The New Age newspaper in which it invited "Black persons, Black owned entities or consortia to submit proposals to purchase some of [the FDC’s] excess land".

The advert was also run in the April 2-9 edition of The Weekly, a local newspaper.

According to the court papers relating to the Botshabelo property, one of the business’s long-time owners, Richard Kudhuga, submitted a proposal to buy the property for R5.5m via a family trust.

But the FDC instead accepted a significantly lower offer from Botlokwa Holdings, Malembe’s company.

"When questions were raised as to why the FDC would sell the property for a lower amount, FDC personnel were told that the deal was being driven by Magashule and that they shouldn’t query the deal," said one source.

Magashule and the FDC both denied that the premier had meddled in either the FDC’s Phuthaditjhaba or Botshabelo deals.

The exact amount that the FDC was going to sell the property for is still under dispute.

A deed of sale between the FDC and Malembe’s company, signed by both parties in September 2015, shows that Malembe had secured the property for just under R2.9m.

When the applicant queried why the FDC decided to sell the property for so much less than his proposed price, the FDC claimed that the transfer attorneys had mixed up the Botshabelo property and the one in Phuthaditjhaba.

"Mudzusi Majiedt Attorneys are handling two transfers on our behalf one for R2 880 000.00 [the Phuthaditjhaba site] and one for R4 000 000.00. We are of the view that Mudzusi Majiedt Attorneys might have forwarded the incorrect Deed of Sale to you and we have since requested them to send the correct Deed of Sale to you," the FDC wrote to the applicants in June 2016.

The FDC’s letter seemed to be at odds with the signed deed of sale, which made it very clear that the FDC had agreed to sell the Botshabelo property, and not the one in Phuthaditjhaba, to Malembe’s Botlokwa Holdings for R2.88m, the same amount as the Phuthaditjhaba transaction.

The FDC subsequently sent the applicants a new deed of sale document, which purported to show that the FDC would sell the property to Malembe’s MMAT Trust for R4m. But unlike the earlier deed of transfer, this document was not signed and contained no date of agreement.

But even if the latter deed of sale was authentic, the FDC was still going to sell the property to Malembe for a lower amount than Kudhuga’s offer.

In March 2017, the High Court in Bloemfontein dismissed Khuduga's application to review the FDC’s bid process and to set aside its decision to sell the property to either Malembe or the MMAT Trust.

Acting High Court Judge Sharon Chesiwe ruled that "it is an extremely serious matter for a court to intervene in decisions that were taken by the elected representative of an organ of state [and that] if [an] open court has to intervene at all, it should be done in extreme circumstances".

She also ruled that "there were strategic considerations that gave [Malembe or her trust] advantage, despite their considerably less costly bid". Chesiwe’s ruling does not elaborate on what these "strategic considerations" were.

The fact that Malembe is in fact the daughter of the province’s premier and a business associate of the FDC’s chairperson was, of course, not factored into the ruling.

The FDC has also not yet transferred the property to Malembe’s trust, pending the outcome of an appeal by the applicant.

Fuelling suspicion

The Phuthaditjhaba property, on the other hand, which Magasahule inspected in December 2014, does now belong to Malembe’s trust.

According to deeds office records, Malembe’s MMAT Trust purchased the property from the FDC for R2.88m – the same purchase price on the original signed deed of sale for the Botshabelo property – in April 2016.

As is the case with the Botshabelo property, the FDC appears to have sold the Phuthaditjhaba site for less than what it was worth.

According to a valuation report filed in the court case, the property’s market value was R3.5m in 2012, four years before Malembe’s trust bought it.

The FDC also used to rent the property to the previous owner for about R30 000 a month, an income it will no longer be earning. What’s more, the FDC previously held a 18% share in the business. Since selling the property to Malembe, the state-owned entity will therefore no longer be entitled to 18% if the business’s profits.

But not only did Malembe score the property at a very good price, she also managed to secure it without having to put up much of her own money, whilst pocketing almost R9m. All of this was achieved thanks to a highly favourable agreement between Malembe’s trust and Shell.

A "notorial agreement of lease" between Shell and the trustees of the MMAT Trust, filed at the deeds office on January 25, 2017, stipulates that Shell agreed to pay an "upfront rental" fee of R11.5m. Through this transaction, Shell would rent the property for 15 years.

The R11.5m was paid to law firm Cliffe Dekker Hofmeyr (CDH), the notary attorney for the lease deal.

"On receipt of the upfront rental CDH shall issue a guarantee of R2 600 000.00 in favour of Mudzusi-Majiedt Attorneys, [the] attorneys attending to the registration of the transfer of the property into the name of the Lessor [Malembe’s trust]. The guarantee will be made payable on the simultaneous registration of the transfer of the Property into the name of the Lessor and this Lease," reads the document.

"The balance of the upfront rental [R8.9m] will be paid to the Lessor on Registration," according to the agreement.

In other words, R2.6m of the R11.5m upfront lease was directly channelled towards helping Malembe’s trust buy the property from the FDC. This left her with R8.9m to do with as she pleased. 

Shell responds

Shell says that it became aware of the FDC’s intention to sell the Phuthaditjhaba and Botshabelo properties in 2015, after which it asked the FDC if it would consider selling the sites to Shell.

“The FDC communicated to Shell that they would not be willing to sell the properties to oil companies. [The] FDC wanted to sell land to increase black female ownership in the province – this is a practice we support in terms of transformation,” Shell said in a written response.

The FDC introduced Malembe’s MMAT Trust as the intended buyer of the properties to Shell in October 2015, after which negotiations for the Phuthaditjhaba lease agreement began, added Shell.

The company says that it was not aware of Malembe’s links to either Magashule or Matseke. 

"If the FDC has corrupted this practice [of selling state-owned land to increase black female ownership] we were not aware and did not take part in this," said Shell.

"It would a be a major concern to Shell if that is the case [Malembe’s connections to Magashule and Shell]. That would not be something we could get in involved in, and we would review this transaction if it is indeed the case," Shell added.

"The MMAT trust requested that a portion [of the R11.5m upfront rental] be paid to the FDC and the balance be paid to the trust. We have no control over what our landlords do with their prepaid rental, Shell said when probed about the fact that the company had effectively bought the property in Phuthaditjhaba for Malembe.

The company also insists that the upfront rental amount constitutes a fair market value and made full business sense to Shell.

"For all our lease deals we get a third-party valuation to assess market value. Over a 15-year period, R11.5m works out to R63 888.00 per month, which is well below market value for that site," said Shell.

With regards to the former service station employees in Phuthaditjhaba who’d lost their jobs, Shell claims that the site will soon undergo an upgrade, after which it will be reopened.

"Once the site is up and running it will create jobs in the area, potentially more jobs than previously, as we intend to put in a full shop offer that was not at the site [previously]. This will employ more cashiers, merchandisers, bakery staff, back office [staff], etc, says Shell. 

- Do you have information for our investigative journalists? Send an email to tips@24.com

Ace, Malembe reunited

News24 learnt last year that Malembe’s stepfather reached out to Deputy President Cyril Ramaphosa around 2010. He asked Ramaphosa to contact Magashule so that Malembe could be reunited with her father.

Ramaphosa, speaking through his spokesperson, Tyrone Seale, did not deny his role in the matter, but he declined to discuss it in any detail.

"This is a private matter and it would not be appropriate for the deputy president to comment," said Seale.

"I am not prepared to entertain any questions on the private affairs of the premier," said Tiisetso Makhele, Magashule’s spokesperson.

Two sources familiar with the matter say that Magashule’s reunion with Malembe is well-known in the ANC’s Free State circles.

"Malembe doesn’t share the premier’s surname, so she is in the perfect position to receive tenders from the province. It is like she is Ace’s secret daughter," said one source.

In March 2011, Malembe posted a picture of herself on Facebook apparently showing her and another woman attending the "state of provincial address". It is not clear which province she’d referred to.

In May of that year, she posted the following: "Viva anc viva had a great time inside lithuli [sic] house." This appears to be a reference to Luthuli House, the ANC’s headquarters in Johannesburg.

Another Facebook post from June 2011 reads as follows: ". . . "

When News24 asked Malembe about the reunion, she at first did not attempt to deny it.

"But you said the questions are related to the business [Botlokwa]. It has nothing to do with the business, my darling. So, if it has nothing to do with the business, please… Are we talking about the business, or about my personal life, because those are two different things, let’s be clear about that," Malembe said in a telephonic interview.

However, at the end of the conversation, Malembe denied that she had any links to the premier.

"You’re not doing your homework very well. If you do your homework you’ll know who my parents are. I have no relationship with the guy [Magashule]. I have nothing to say on the guy," said Malembe.

"Magashule himself has told people about finding his daughter. The young lady also sometimes visits him at the premier’s residence in Bloemfontein," said one of the sources familiar with the issue.

A second source familiar with Malembe’s business confirmed the story, adding that a Maria Magashule, a niece of the premier, also worked at Botlokwa Holdings.

News24 was able to find Maria Magashule’s name on a database of people linked to Botlokwa’s Johannesburg telephone number. When News24 asked her about Magashule and Malembe, she asked us to call her the following day. Since then she has not answered our phone calls.

In 2014, Malembe posted a picture of herself and Thato Magashule, one of the premier’s sons implicated in the #Guptaleaks, on her Instagram account.

Ace, Malembe and the FDC chair

In June 2012, not long after the Free State premier had found his long-lost daughter, the FDC appointed one Hantsi Mayeza as its new chairperson.

Mayeza now goes by the surname Matseke after getting married to businessman Peter "Kop" Matseke.  She was also appointed as the state-owned diamond mining company Alexkor’s new chairperson in 2015.

Matseke’s husband is a business associate of Gupta lieutenant Salim Essa, according to an amaBhungane report. According to another media report last year, the Guptas allegedly once wanted Hantsi to serve on the board of Sanral.

Several sources News24 spoke to confirmed that Magashule and Hantsi Matseke were long-time friends and allies. They both hail from Parys in the Free State, where, according to deeds records, Matseke still owns at least one property.

Magashule’s spokesperson chose to sidestep our queries about the premier’s relationship with Matseke.

"The premier has been living in Parys for a very long time and, given his prominent role in the liberation struggle as well as his political stature and his passion to engage with communities throughout the province, he knows and is known to many people," said Tiisetso Makhele.

Matseke’s company, Maono Construction and Property Development, has several links to Botlokwa Holdings, the company owned and run by Magashule’s daughter. On its website, Botlokwa lists 32 Silwood Road in Bramley, Johannesburg as its business address. News24 did a deed search on the property and found that it belongs to Matseke’s Maono Construction.

Malembe could not explain why this address appeared on her company’s website.

"I don’t know what is on the website, I haven’t looked at the website. How long ago was that? It is probably an address that we got… But currently we are operating in Randburg and in Bloemfontein. I don’t know, I would literally have to check that," said Malembe.

However, she admitted that Botlokwa had a business relationship with the FDC chairperson’s company.

"We do have sub-contract work that we got from her on construction and we have a business relationship based on the construction," said Malembe.

According to records of government tenders in the Free State, Botlokwa Holdings has been reaping contracts from provincial departments and municipalities for an amazingly diverse range of products and services. This includes contruction projects, grass cutting services, the supply of accessories for emergency vehicles and "fleet branding".  

The company lists the Ngwathe local municipality in Parys, Magashule’s hometown, as one of its clients on its website.

Like Malembe’s Botlokwa Holdings, Matseke’s Maono Construction has greatly benefitted from contracts dished out by government departments and municipalities in the Free State.

To date, the company has secured contracts worth a whopping R515m from entities such as the provincial departments of human settlements, public works, and police, roads and transport, according to Maono’s website.

Maono’s first major contract, at least according to a list of completed projects provided on its website, was a R36m project to build 500 RDP houses in Magashule’s hometown of Parys.

Matseke asked for queries to be emailed to her, but she did not respond.

Magashule denied that he had influenced any of the above contracts.

"The premier has no role to play in the procurement processes of the departments of the provincial government and less so in that of municipalities," said Makhele.