A controversial property lease linked to Deputy President Paul Mashatile’s son-in-law cost Gauteng taxpayers more than R54 million, while the buildings and parking spaces were used for little more than two years.
The deal, signed in 2008, ended in a costly legal fight and a R35 million settlement paid to Investec Bank in 2014. Despite the size of the payout, the Gauteng government says it has no record of an investigation into how the lease was concluded or why public money was used to settle the dispute.
The property was owned at the time by a company belonging to Nceba Nonkwelo, who is married to Mashatile’s daughter, Palesa. The buildings and parking bays were situated in Sivewright Avenue in New Doornfontein and were used by Gauteng traffic police.
The lease was supposed to run for 10 years. Instead, the department left the property little more than two years after the agreement began, citing numerous problems that made the premises unsuitable.
The legal dispute that followed lasted nearly three years. In March 2014, the Gauteng department responsible for infrastructure confirmed a settlement agreement in which R35 million was paid in full and final settlement of a R70 million claim arising from an alleged breach of the lease.
The settlement was kept secret until now.
The total cost to taxpayers was even higher because the Gauteng government also carried the burden of deposits, rental payments and utilities. The lease, legal dispute and settlement brought the total cost of the arrangement to more than R54 million, even though the buildings were used for only about 28 months.
The department’s legal services unit has no record of an investigation into the circumstances surrounding the conclusion of the lease.
“The department confirms the existence of the settlement agreement concluded on 27 March 2014. In terms of the agreement, an amount of R35 million was payable in full and final settlement of the R70-million claim arising from the alleged breach of the lease agreement,” Gauteng Department of Infrastructure Development spokesperson Theo Nkonki said.
He added that the department had “no record of, or information concerning, an investigation into the circumstances surrounding the conclusion of the lease agreement in 2008”.
“It is therefore unable to confirm whether such an investigation was undertaken or what its outcome may have been,” Nkonki said.
The property deal had previously attracted attention because of the profit made by Nonkwelo’s company. Union Square Properties bought six erven from Stallion Security in June or July 2008 for R12 million.
Union Square was a shelf company that had never traded before the transaction. It secured a bond of R12 million, although the available records do not show which financial institution provided the funding.
Only months after the purchase, Union Square sold the properties to Zambrotti Investments 46, a company linked to the Moti Group, for R45 million. The property’s value had therefore increased sharply after the Gauteng government lease was signed.
The estimated profit was about R33 million. Nonkwelo responded to questions with broader comments but did not directly confirm the profit margins.
The lease was the main factor driving the value of the buildings. The properties were bought for R12 million and sold for R45 million, while the rental agreement gave the buyer a long-term income stream.
The Moti Group purchased the property with financial assistance from Investec Bank, which registered a R50 million bond over the buildings in early 2009. The group later faced debts of more than R1 billion, and its property empire was placed under pressure.
As part of a broader debt restructure, several properties were transferred to an Investec-owned entity. The New Doornfontein properties were included in the arrangement. In exchange for settling the remaining R42 million of the bond, Investec took ownership of the buildings and appointed a property manager.
By then, the lease remained the central source of value attached to the property. But the Gauteng department had already become unhappy with the premises, with the monthly rent eventually rising to more than R550 000.
The department had signed two separate 10-year lease agreements with Union Square. The first was concluded on 3 November 2008, with an effective date of 1 August 2008, and was due to run until June 2018. The second was signed on 20 February 2009, with an effective date of 1 November 2008.
The second agreement was signed seven days after Union Square concluded a sale agreement with Zambrotti Investments. It also changed the financial responsibilities attached to the property.
Under the first lease, the landlord was responsible for maintenance, rates and other costs. The second lease placed those costs on the tenant, meaning the Gauteng department would carry the maintenance and insurance burden.
The property was leased at R100 per square metre for 3 605 square metres. The agreement also provided for 45 basement parking spaces at R450 each per month and 60 shaded parking bays at R300 each per month.
But the property did not have the promised 45 basement parking spaces. It had only 22. The department argued that it should be able to deduct the amounts paid for parking bays that were not available.
The department later cited 56 faults when it defended its decision to leave the premises. The parking shortage was one of the main disputes, while the condition and suitability of the buildings also became part of the legal battle.
The lease was signed by Aziwindini Madzinge, who was then the acting chief director for properties and facilities management. Sbu Buthelezi was running the department at the time and was described as a friend of Mashatile’s.
Buthelezi later said he was not involved in the deal and that the agreement had not been escalated to him because it was concluded within the approved powers delegated to the chief director.
“It appears there was nothing out of the norm and the transaction had not been escalated to either the deputy director-general Gilberto Martins or myself as the accounting officer as it had been executed directly within the approved delegations of authority,” Buthelezi said.
“I do not have and never had any business relationship with Mr Nonkwelo,” he said.
Buthelezi did confirm his personal relationship with Mashatile.
“I am close to Paul Mashatile and I know his family. This has no bearing on my professional relationship with him during my time as HOD,” Buthelezi said.
The department has not responded to questions about whether a chief director had the authority to conclude a lease that created nearly R100 million in financial obligations without referring it to senior officials.
Professor Alex van den Heever of the Wits School of Governance said the lease contained several serious warning signs that required a full investigation. These included the high value, the 10-year term, the 10% annual escalation, the retrospective start date, the deposit and the relationships between the contracting parties and politically connected people.
“The value-for-money of this contract clearly requires justification, as at face value, it makes little to no sense…given the political connections of the parties, the unusual nature of the agreement needs to be subject to considerable scrutiny,” he said.
Nonkwelo denied wrongdoing and rejected any suggestion that political connections influenced the transaction.
He said his business relationships had always been conducted on a “transparent, honest and legally compliant basis” and that he did not “seek, solicit or receive any improper or preferential treatment from any individual or political formation”.
“The transaction…was conducted properly and above-board. I categorically deny any allegation or suggestion that I, or any of my businesses, engaged in any unlawful, improper, dishonest or corrupt conduct in relation to this transaction,” he said.
Nonkwelo also defended his broader business record.
“I have more than 30 years of entrepreneurial, managerial and business experience, during which I have built and managed substantial business interests and engaged with a wide range of business partners, financial institutions and other stakeholders,” he said.
The Moti Group said the R45 million purchase price was based on the income generated by the lease. Its head of legal and compliance, Natalie Graaff, said the property was valued by discounting the rental income over the remaining term at a discount rate of about 12%.
“What we can confirm is that the transaction was negotiated at arm’s length on commercial terms,” Graaff said.
She said the transaction was an ordinary commercial purchase and that the group no longer had records relating to introductions and negotiations from 2008 and 2009.
Graaff also rejected any suggestion that the deal was influenced by political relationships.
“They only met many years later. What we can state is that this was an arm’s length commercial transaction concluded with a willing seller at a price supported by the rental stream in place. Any suggestion, express or implied, that the transaction was procured, influenced or facilitated by any political relationship is denied, and we caution you against publishing any such insinuation,” she said.
The legal battle began after Investec filed court papers in June 2011 seeking about R2.5 million. The Gauteng department defended its decision to vacate the premises, but the parties eventually entered negotiations.
The negotiations continued for almost three years before the R35 million settlement was concluded. Investec declined to discuss the matter, citing client confidentiality and legal, risk and governance requirements.
The unanswered question is why the original lease was signed, why it was changed only months later, why the department left the property so soon and why taxpayers ultimately paid millions to settle the dispute.
The Gauteng government has confirmed the settlement but says it cannot confirm that any investigation was conducted. No indication has been given that the parties who originated the deal will be pursued.
The New Doornfontein lease also formed part of Nonkwelo’s growing business interests. Around the same period, he applied for a licence to sell fuel at Sasol Regina Mundi in Soweto. Over the following years, his fuel business expanded to at least eight Sasol stations around Gauteng.
In 2023, companies linked to Nonkwelo were also able to finance the purchase of two luxury properties: a R37 million home in Waterfall for Mashatile and a R28 million property in Constantia said to be available for the Deputy President’s use.
The R35 million settlement has now placed fresh focus on the old property deal and on how public money was used. More than a decade later, the agreement remains surrounded by unanswered questions, while the Gauteng government has no recorded investigation to explain how the taxpayer ended up carrying the cost.
