Whistleblower revelations spark arrests and legal chaos at Eastern Cape Development Corporation

The former head of Legal, Compliance and Governance at the Eastern Cape Development Corporation (ECDC), Mandla Gibson Mpikashe (47), and the directors of the law firm Mbabane, Maswazi & Sokutu Incorporated, Simphiwe Mkhululi Mbabane (45), Bayethe Maswazi (49) and Mpumelelo Mkosana (54), appeared before the East London Magistrates’ Court last week on charges of fraud, theft and corruption.

The Hawks arrested them for allegedly illegally deducting R4.2-million from debt they recovered for the ECDC in terms of contracts that were declared unlawful and set aside by the high court.

The alleged fraudulent scheme, first reported by internal auditors and then by whistleblowers on the organisation’s anti-corruption hotline, was reported to the police by the ECDC’s CEO, Ayanda Wakaba, who was subsequently dismissed on unrelated allegations and is fighting the ECDC in court.

According to documents seen by Daily Maverick, external auditors confirmed the fraud. Their report recommended the registration of a criminal case with the South African Police Service (SAPS) in terms of section 34 of the Prevention and Combating of Corrupt Activities Act.

Why does the ECDC matter for the Eastern Cape?

The ECDC’s purpose is to drive economic growth through investment, finance and business support in the province, one of South Africa’s poorest, and it should be leading the implementation of economic development policies.

Lately, the organisation has been mired in controversy. The ECDC CEO, Ayanda Wakaba, was dismissed in September over an unresolved dispute over the spending of a multimillion-rand empowerment fund granted to the province by the National Treasury. The fund was meant to provide a much-needed boost to the provincial economy.

Also read: EC development boss hits back after dismissal over R100m empowerment fund allocations

Wakaba, who is fighting his dismissal, said he had waited 24 months for the spending framework after the fund was implemented. When the framework finally arrived, it was suspiciously backdated, he claimed. As their mission was an urgent one, he and his team had, however, developed their own framework to spend the money.

“It was only 24 months into the implementation of the fund that the department served the ECDC with a formal, signed framework, a huge omission that the board and department appear not willing to take responsibility for,” said Wakaba.

Buildings hijacked

Between 2019 and 2022, buildings belonging to the ECDC, including five factories, were hijacked by the Public Assets Community-Based Tenants and Owners Association (Pactoa). A settlement was reached with Pactoa, and some of these buildings, including 10 residential properties, were handed back. The Hawks arrested members of Pactoa, who will go on trial on charges of fraud and money laundering in April 2026.

Latest case

According to the charge sheet, the State alleges that Mpikashe irregularly colluded with Mbabane, Maswazi & Sokutu Incorporated (reportedly renamed in 2017 to Mbabane and Maswazi Inc) to conclude a service level agreement (SLA) for debt collection services. This firm was appointed to the Panel of Legal Services at the ECDC, but was not appointed as a debt collector. As a debt collector, it would be able to claim 30% of the recovered debt in addition to hourly legal fees.

It is alleged that Mpikashe extended the scope of the law firm’s work to include debt collection without following any lawful procurement procedures. This deviation allegedly created an avenue through which the law firm unlawfully deducted approximately R4.2-million from ECDC funds it had recovered.

The accused appeared before the East London Magistrates’ Court on the day of their arrest. Mpikashe and Mkosana were released on R5,000 bail each, while Mbabane and Maswazi were granted R10,000 bail each. The matter was postponed to 19 January 2026 for further investigation.

Their arrests followed a November ruling by acting Judge Gaynor Appels, in which she ordered that the SLAs on which the deductions by the law firm were based be set aside as unlawful and unconstitutional.

This followed a “self-review” application instituted by the ECDC to set aside these agreements.

According to papers before the court, the SLAs were for collecting debts owed to the ECDC by the Arwa Retirement Fund (“Arwa”) and Express Builders.

Written agreement

According to the civil judgment against Mpikashe and the lawyers, the ECDC’s claim for debt recovery against Arwa emanated from a written agreement between an investment company, Interneuron, which was mandated to manage some of the ECDC’s investments.

“An investigation report revealed that Interneuron, in order to conceal losses caused by it and in breach of its investment mandate, unlawfully transferred to Arwa the sum of R8,918,397.61 from the ECDC’s portfolio of assets,” noted Appels in her ruling.

She said all parties agreed that this debt collection service legal agreement had been concluded without following a competitive bidding process or any other procurement process which complied with the prescribed statutory framework.

In addition, the law firm was not on the approved panel of debt collectors.

“Debt collection services in terms of lawfully procured debt collection SLAs are provided by service providers who are on the panel of debt collectors, on a no collection, no fee basis. Where success is achieved, they are entitled to a commission of 30% of the amount recovered. The commission earned is substantial to offset the risk in providing services on a no collection, no fee basis,” noted Appels.

At the time, however, the existing legal agreement between the ECDC and the law firm only made provision for an hourly remuneration and not for a 30% recovery rate as was provided for in the SLA. Appels said the law firm had already been paid for its services in a legal action filed against Interneuron.

She said that following legal advice, Arwa should have been added as a defendant in the case against Interneuron.

“However, instead of instructing the [law firm] to do what was necessary to join Arwa as a defendant in the action against Interneuron, Mpikashe decided to conclude the debt collection agreement and appointed the same law firm to recover money from Arwa at a commission of 30% of the total sum recovered.

In January 2019, Arwa settled the claim and paid R6-million to the ECDC.

The law firm then deducted a 30% collection fee of R2,070,000 and paid R3,030,000 to the ECDC.

Appels said that in terms of the original agreement for legal services, the full R6-million should have been paid to the ECDC, and the law firm should have received the agreed-upon legal fees.

In the second instance, on 5 May 2017, Mbabane, Maswazi & Sokutu Incorporated was ordered to recover R2.8-million from Express Builders, which was due to the ECDC in terms of a performance guarantee loan agreement.

The law firm was then appointed to recover the outstanding amount and interest from Builders Express as debt collectors, earning it a 30% collection fee of R2,133,724.05.

Fraud and Ethics Hotline

During 2019, the irregularities in the debt collection SLAs were detected by an internal auditor at the ECDC, but Mpikashe convinced CEO Wakaba that the auditors were wrong. Whistleblowers then flagged the issue on the ECDC’s Fraud and Ethics Hotline.

Wakaba instructed the CDC’s internal audit unit to assess whether the complaint warranted the initiation of an independent, external investigation. A month later, on 22 July 2022, the CEO received a report describing the scheme. Mpikashe was placed on special leave on 11 August 2022.

On 6 September 2022, the ECDC appointed SVZ Consulting to conduct an external forensic investigation into the complaint. SVZ’s report was received by the ECDC on 17 October 2022 and contained detailed findings following comprehensive forensic investigative work into the first and second debt collection SLAs. A disciplinary hearing was delayed for months after Mpikashe submitted medical certificates indicating that he could not attend. Eventually, Mpikashe tendered his resignation.

“The unlawfulness of the impugned agreements is clear,” Appels said, ordering that they be declared unlawful and set aside.

A civil lawsuit filed against Mpikashe and the law firm alleges that they lied to the ECDC that the law firm was part of the approved panel of debt collectors.

Lawyers from the ECDC stated: “They remained silent throughout and did not disclose to the ECDC the falsity of the facts.”

These were later established by SVZ, with its report finding that the law firm had unjustly benefited from the actions of Mpikashe at the expense of the ECDC.

In this lawsuit, the ECDC claims that, apart from not being entitled to the recovery fee, the commission claimed by the law firm was excessive. DM