During the 2019 elections, President Cyril Ramaphosa promised the residents of Alexandra that the ANC-led government would build a million houses, many of them in the settlement’s overcrowded township.

What few people knew was that the residents of Alexandra were supposed to have a stake in a multi-billion rand property development on the other side of the M3 highway in Sandton.

In 2008, the city had awarded erf 575 – three hectares of prime land above the Sandton Gautrain station – to the well-connected Regiments Kgoro consortium.

In its bid, Regiments had promised that a 5% stake would be given to an “Alexandra Local Community Trust” along with a share of the R1.8-billion in profit that was anticipated to flow from the development. 

That promise was never fulfilled. But neither were the numerous other promises that the consortium made to the city. Instead of scrapping the deal and developing a new plan, the city kept indulging a tiny and influential elite.

In part two of amaBhungane’s investigation, we explore who got rich off the “highly suspect” deal that saw “arguably the most important single piece of undeveloped real estate in South Africa” being hijacked from the city. 

The brother-in-law, the spook and the mysterious ANC-linked trust

During the bidding for erf 575, the Regiments Kgoro consortium sold itself as a broad-based black economic empowerment structure. 

But it took two amaBhungane access-to-information demands – one in 2012 and another in 2020 – to reveal a list of shareholders, although the full list of names of those with an interest in the deal is still not known.  

Regiments Capital, the company that became infamous for facilitating State Capture, held the biggest chunk: 76.5%. 

Another 8% was held by Vermogen Real Estate, a subsidiary of the Industrial Development Group (IDG), run by Mxolisi Mbetse and Bajabulile Swazi Tshabalala. 

Mbetse, who died in March, had a track record in both government and business, but it was his partner, Tshabalala, who was more intertwined with Regiments, as our previous investigation into an Ekurhuleni land deal showed. 

Tshabalala, who is now the vice president of the African Development Bank and a director of MTN, has repeatedly refused to discuss her dealings with Regiments.

Another 5% was held by the professional team (architects and quantity surveyors) and 2.5% went to a women’s group, Loato Properties.

Which left 8% for three “strategic partners” and a mysterious trust:

• 2% would go to Sipho Twala, a businessman and the brother-in-law of Parks Tau, the city’s then MMC for finance and economic development, and future mayor.

Twala previously denied having any business dealings with Regiments. This time he said he could only discuss our questions “after the elections”, adding that he had questions of his own. Attempts to contact him after the elections drew a blank.

Tau, who is now Gauteng’s MEC of economic development, told us he was unaware that his brother-in-law would benefit from the Kgoro deal at the time. “Mr Twala is a businessperson in his own right, and I would not be privy of his business interests unless such are brought to my attention,” he told us in a written response. 

He became aware of Twala’s involvement, he told us, “only at the point of his exit”, which as we shall see was in 2014.

• 3% would go to Sizoma ITS, run by Thabo Kubu, a former senior intelligence service official, who once ran the ANC’s internal vetting process for members of parliament. Kubu told us he was unaware of his status as a “strategic partner”.
• 0.5% would go to the Morwa Mmaseboga Trust, controlled by advocate Fana Nalane. Nalane said he received shares in lieu of payments for some legal work he had done for Regiments. He said he did not know why he had been designated a “strategic partner”.

The final 2.5% would go to the Transvaal Urban Machinery Investment Trust, an opaque trust controlled by Twala. 

Although the Transvaal Urban Machinery Investment Trust was seemingly never formally registered, its name is steeped in ANC history. Established in the 1970’s, the Transvaal Urban Machinery was an Umkhonto we Sizwe division that carried out operations in apartheid South Africa. 

The beneficiaries of the trust’s 2.5% stake in Kgoro remain a mystery.

The consortium agreement, signed the day before bids closed in September 2008, locked its BEE shareholders in until 1 January 2014. 

The wait would be worth it, Regiments promised: after the land and development costs were deducted, the net profit was anticipated to be R1.8-billion. That meant a modest 2.5% stake, like the one held by the Transvaal Urban Machinery Investment Trust, could one day deliver millions.

Silent trusts

Although Regiments owned 76.5% of the Kgoro deal on paper, it had promised in its 2008 bid that 17.5% would be owned by various benevolent trusts:

• 10% by the Education, Research and Policy Studies Trust;
• 2.5% by the Youth Trust;
• 5% by the Alexandra Local Community Trust.

Records show that the trusts were only registered three years later, in 2011. The directors of Regiments became the trustees of the first two trusts – the education and youth trusts – and were given “absolute discretion” to select beneficiaries. 

The records for the third trust, which was intended to benefit the people of Alexandra, are incomplete. But Mphathi Nyewe, an attorney who was treated as a de facto trustee, told us that the trust never got off the ground. 

A share register provided by Regiments’ attorney confirms this: despite Regiments’ claim that Kgoro’s shareholders included numerous broad-based empowerment trusts, no shares were ever transferred to these entities. 

But does the official share register provide a full picture of the Kgoro deal? 

Emails from the Regiments server – made public in part through leaks and seizures – suggest that while the trusts may have been left behind, Regiments was busy devising options for how an influential group of elites might be cut in.

Size 7 shoes

Back in October 2009, Regiments had emailed consortium members asking them to provide their shoe sizes so that safety boots could be bought for an upcoming site visit to inspect erf 575.

Two email addresses jump out on that list: [email protected] and [email protected]. 

The “chh” domain belongs to Chancellor House, the notorious ANC funding vehicle, and the email addresses to Mamatho Netsianda (its founder and managing director) and Zwelibanzi “Miles” Nzama (a senior executive).

Netsianda did not respond to the email, but Nzama appears to have requested a size 7 safety boot. 

Nzama was a valuable asset to Regiments: “He is assisting with access in certain public sector opportunities,” Regiments’ chair Litha Nyhonyha told the company, according to minutes of a May 2010 meeting. 

At the time, Regiments and Nzama, representing Chancellor House, were exploring a deal to buy a portion of Redefine Property’s government-tenanted buildings. The plan was to secure “soft” commitments from government that the leases would be renewed as soon as the Regiments-Chancellor House consortium bought the properties.

“Regiments to front the transaction until government commitment required,” minutes of the planning meeting read. 

This suggested government officials were expected to act in the interests of Regiments and Chancellor House and not necessarily in the best interests of the fiscus.

We put such an implication to Nzama, but he declined to offer any specific response, saying: “I have every right to participate in any economic opportunity in [South Africa]. I am a private person and had never been a public official… so this attempt to create an impression that my involvement in business amounts to corruption is unfortunate, discriminatory and insulting.”

This was not the first time Regiments had partnered with Nzama either: in 2007, Nzama put together a R300-million BEE deal with Capitec. Regiments was offered a generous R54-million stake, funded by the IDC. But when the share register was finalised, Nzama had disappeared from the deal.

Emails from the Regiments server, however, indicate that Nzama was hiding behind a nominee shareholder or proxy, meaning that although his name appeared nowhere in the share register, he secretly held a stake worth at least R25-million.

SIDEBAR: THE MARVELLOUS MR NZAMA 

In 2012, amaBhungane raised questions about Nzama’s role in the Capitec deal. At the time, business tycoon Tshepo Mahloele provided us with a share register showing that Nzama had never been a shareholder in Keabetsoe Holdings, the special purpose vehicle that held a third of the Capitec BEE deal, including Mahloele’s own stake. But emails that have emerged from the Regiments server indicate that Nzama’s stake was held by Blessing Rugara, a lawyer and apparent proxy for the Chancellor House executive in Keabetsoe. Nzama would not discuss this, but emails he sent to Regiments confirm the arrangement: in 2009, Regiments agreed to pay R1.35-million to buy a portion of Nzama’s shares in Keabetsoe. By 2011, the shares had still not been transferred, but Nzama assured Regiments: “Blessing and I met with the lawyer working on the unbundling of my shares in Keabetsoe.” 

Rugara did not respond to our emails, while Mahloele, who now owns one of the largest media groups in the country (which includes the Sunday Times, Business Day and Financial Mail), told us via email, “I was not privy to arrangements between Mr Nzama and Regiments and the proxy arrangements in relation to the shares. The statutory records of Keabetsoe did not indicate he was a beneficial shareholder.” Shortly after we sent questions in 2012 about the shareholding, Rugara transferred half of his shares to Nzama, making him a 23% shareholder of Keabetsoe with a stake that, in 2012, was worth roughly R73.6-million. 

So, when Nzama cropped up at the erf 575 site visit, we wondered: was Nzama hiding inside Kgoro as well?

Strategic friends?

Nzama has flatly denied this, but there was some circumstantial evidence to make the question worth asking.

In January 2010, a spreadsheet was put together identifying various shareholders of the “Regiments Ladies Group” which was intended to own 2.5% of Regiments’ 76.5% in Kgoro.

The spreadsheet – “Regiment Women Group.xlsx” – was pretty straightforward: names, ID numbers, addresses, gender, race. But it also contained a second tab with a list of seven “strategic investors” including Nzama, Twala, Tau and Makhubo. 

These names had appeared together before: Nzama had cut both Tau and Makhubo’s wives into the 2007 Capitec deal; in 2008, Regiments had asked Nzama, Twala, Tau and Makhubo to be “strategic partners” in a R205-million deal with Vox Telecom.

In Regiments parlance, “strategic partners” are generally people who bring political connectivity to a deal. 

In the Vox deal, Regiments had described the strategic partners as part of “a network of friends and business associates” and “accomplished… leaders in… business; politics and government”.

At the time Tau had been offered a R1-million stake in the Vox deal, he was the city’s MMC for finance and economic development, giving him political oversight of Regiments’ lucrative sinking fund contract, JPC and the ongoing sale of erf 575. 

Tau withdrew from the R205-million Vox deal in August 2008, just before it was signed. But his participation went far enough that the IDC had already approved the transaction with Tau’s name on the list of beneficiaries.

“[T]he time from which I initially considered participation and the ultimate decision was a matter of weeks. At the time of considering participation, I had taken into account that Vox… did not do business with the city. I however still elected not to participate after due consideration,” Tau told us.

He added that as MMC his duties included oversight of the entities in the department, and not the adjudication of tenders.

It is possible the list of seven “strategic investors” was an error, a hangover from the Vox deal.  However, while the list in the Kgoro spreadsheet contained some of the names from the Vox deal, it also had some new ones, suggesting that the list of strategic investors was compiled for the Kgoro deal.

Zukile Nomvete, a “strategic partner” in both the Vox deal and “Regiment Women Group.xlsx”  spreadsheet, confirmed that there was a proposal for him to be given a stake in the Kgoro consortium, but that ultimately the shares were never transferred.

 The other strategic investors we spoke to denied knowing anything about a plan to cut them into Kgoro.

“If someone at Regiments saw me as a ‘strategic investor’ with a view of approaching me to participate, unfortunately that never occurred as the share register which you apparently inspected confirmed that am not a Kgoro shareholder,” Nzama told us over WhatsApp. Instead, he said he had been interested in buying into the development.  

Tau provided us with a detailed statement [link] but in summary told us: “I am not and have not been an investor in the Kgoro consortium.”

211109-AmaBhungane-Part 2-R…

A city-wide conflict of interest

One thing is clear: Regiments wanted political cover and subsequently found other ways to secure influence in the city. 

By 2011, as the Kgoro deal headed into turmoil (something we will explore in part 3) the City found itself deeply conflicted when it came to Regiments and the Kgoro consortium. 

After the May 2011 local government elections, Tau had been promoted to mayor and Makhubo stepped into his shoes as finance MMC. 

Makhubo had a long-standing relationship with Regiments: in 2005, he had helped Regiments to secure the lucrative sinking fund contract from the City, and had received a 10% cut ever since. 

Aside from the millions paid to Makhubo’s consulting company, Regiments also made regular donations to the Johannesburg branch of the ANC: R250,000 for an elective conference in July 2008, another R250,000 for the realignment of branches in August 2010, R166,750 for T-shirts and R488,206 for posters for the May 2011 elections. 

When the MMC for economic development, Jason Ngobeni, resigned from the City in August 2011, his department asked Regiments to pay for the farewell party. Regiments agreed to donate R100,000 towards the event.

The City declined to comment on this aspect of the investigation: “We have not been granted access to the interviews you may have conducted with the parties you refer to nor of the other ‘evidence’ you refer to and which you have based your conclusions on. We are therefore unable to comment,” City spokesperson Nthatisi Modingoane told us.

But he added: “As a principle the City of Johannesburg does not condone the use of influence (including political influence).”

Cashing out

In June 2013, the City transferred ownership of erf 575 to the Regiments Kgoro consortium. The agreement the City had signed meant that it would not be paid the R280-million purchase price on transfer, but only when the sectional title schemes were registered.

• We explore this more in Part Three, coming soon.

While the City would be forced to wait for its money, the consortium’s shareholders could start cashing out and cashing in.

On 1 January 2014, the lock-in period for the BEE shareholders ended. The first to bail was Twala and the Transvaal Urban Machinery Investment Trust.

On 8 October 2014, Regiments paid Twala R3.47-million – a 50% down payment for his 1.96% stake – and R1.53-million for 50% of the trust’s 1.83%. From what we have been told, Twala was paid more because he had loaned money to the consortium. 

Together the amounts added up to a neat R5-million. Both amounts were deposited into Twala’s bank account. 

Regiments would pay another R5-million to Twala and the trust six months later: R3.47-million into Twala’s account and R1.53-million into a new Standard Bank account established for the trust.

In January 2015, Tshabalala sold IDG’s stake to Regiments for R9-million. In October, Kubu sold Sizoma ITS’ stake to Regiments for R3.4-million.

While this was substantially less than the millions promised in Regiments’ early projections, it was still money for jam.

The masterstroke

By the end of 2015, Regiments owned more than 90% of the Kgoro deal. 

It was masterful: Regiments had persuaded the City to hand over erf 575 by promising, amongst other things, that a broad-based black-owned consortium would benefit from its development. But once the property was transferred into the consortium’s name, most shareholders had cashed out.

Regiments would now use that same asset – still not paid for – to raise funding for the development that would, in theory, deliver more than a billion rand in profit for what was left of the consortium.

But none of this would have been possible without the City’s eagerness to keep the deal alive, despite growing evidence that the Regiments Kgoro consortium would not stick to their end of the bargain. DM

Read Part One here. Keep reading Daily Maverick for Part Three of the R280m Joburg ‘crime scene’: Never-ending goodwill.

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