Illustrative image | sources: Former PRASA CEO Lucky Montana on July 31, 2015 in Johannesburg, South Africa. (Photo: Gallo Images / City Press / Leon Sadiki) Auswell Mashaba (Photo: https://www.amce.co.za/)

A R3.5bn Prasa contract for much-needed new locomotives derailed in 2015. Transactions linked to the deal and labelled as fraudulent are now surfacing in ongoing liquidation proceedings. The court records and other documents point to a massive alleged looting spree that came at a great cost to long-suffering rail commuters.

Almost R500-million from a failed contract for much-needed new locomotives disappeared into a web of private accounts, trusts and companies controlled by or linked to the main role-players in one of South Africa’s largest tender scandals to date.

Some of this money was used to buy a stake in a wine and olive farm in the Western Cape, and to help cover the building costs for a palatial residence in one of Gauteng’s most exclusive lifestyle estates.

Scorpio’s latest investigation, drawing from ongoing liquidation proceedings, other documentation and source accounts, reveals that hundreds of millions of rand that should have been used to supply the Passenger Rail Agency of South Africa (Prasa) with new trains was “fraudulently” diverted to businessmen Auswell Mashaba and Makhensa Mabunda, and to entities and individuals linked to them.

Mashaba was a director of the now-liquidated Swifambo Rail Leasing, a shelf company that in 2012 clinched a R3.5-billion contract to deliver 70 new locomotives to Prasa. Mabunda, a businessman with longstanding links to then Prasa CEO Lucky Montana, was viewed as one of the masterminds behind the deal. This view seems to be borne out by the latest evidence of Mabunda’s considerable financial benefit from the doomed locomotives deal.

These latest revelations underpin the astonishing degree of greed and callousness at the heart of South Africa’s most costly public procurement scandals — while the Swifambo disaster effectively left thousands of poor and working-class South Africans without reliable transport, Mashaba and Mabunda’s personal fortunes shot to levels that most South Africans can only dream of.

Scorpio can reveal that Mashaba used R24.5-million of the alleged Prasa loot to acquire a controlling stake in a wine and olive farm in the Western Cape, while Swifambo diverted R5-million of the money it had received from Prasa towards the building costs of a 3,200m² mansion in the upmarket Waterfall Equestrian Estate in Gauteng owned by Mabunda and his wife.

Swifambo’s liquidators have identified at least R425-million in allegedly fraudulent payments made to accounts linked to or controlled by Mashaba, some of his business associates, and to other former Swifambo directors. Scorpio has learnt that this figure is expected to increase as investigations into Swifambo’s financial dealings continue.

The liquidators traced a further R66-million in payments made from Swifambo to companies and private accounts directly linked to Mabunda. This is in addition to questionable payments of about R75-million that one of Mabunda’s companies directly received from Vossloh España, the Spanish manufacturer Swifambo had subcontracted to supply the new locomotives before the deal collapsed.

In their court filings, the Swifambo liquidators argue that the contract’s implosion was caused by the “reckless” and “fraudulent” diversion of funds from the Swifambo accounts.

Through the “dissipation” of these vast sums of money, Swifambo became “unable to perform its contractual obligations towards Prasa and/or unable to pay its creditors, suppliers and/or sub-contractors,” reads the court papers.

The money was diverted into a network of companies, trusts and bank accounts, “none of whom were entitled to any such payments”, according to court filings.

Alec Moemi, the department of transport’s director-general, recently told Members of Parliament that Prasa’s long-distance rail service is in a state of collapse as a direct result of the Swifambo saga.

The allegedly fraudulent payments identified by the liquidators come on the back of earlier indications that the Swifambo deal may have been accompanied by high-level graft. This includes substantial payments Swifambo and its directors had made to third parties linked to then president Jacob Zuma and his family.

The Swifambo contract was found to have been fraudulent and corrupt in earlier judgments by the Johannesburg High Court and the Supreme Court of Appeal.

Despite these rulings and other red flags, Prasa’s Swifambo contract is not currently the subject of any active investigations by South Africa’s law enforcement or prosecutions bodies.

Mashaba trust’s R85m windfall

The apparent looting spree kicked into gear in April 2013, right after Prasa made its first of eight payments totalling R2.6-billion to Swifambo Rail Holdings and Swifambo Rail Leasing. These were the two sister entities Mashaba and his associates had set up for the deal.

The initial tranche from Prasa amounted to R460.5-million, and it landed in Swifambo Rail Holdings’ account on 5 April 2013. Swifambo Rail Holdings later changed its name to Railpro.

A mere four days after the first Prasa payment, Mashaba began moving large sums of money to the Mamoroko Makolele Trust, of which Mashaba and his wife, Joyce, are the trustees. In their court filings, the liquidators refer to it as the MM Trust.

Mashaba transferred R22.5-million to the MM Trust on 9 April 2013, the first of four such transactions. Between April 2013 and July 2015, he dumped a whopping R85-million in this trust. These funds all originated from Swifambo Rail Holdings or Swifambo Rail Leasing. Each of these transfers was preceded by a massive tranche of Prasa money landing in the accounts of the latter-mentioned entities.

Large amounts of Prasa money was also flushed through the Swifambo accounts to other entities owned by or linked to Mashaba, including A-M Consulting Engineers (AMCE) and AM Investments. These entities received altogether R61-million from Swifambo.

Mashaba appears to have read detailed queries sent to him on WhatsApp, but he did not respond.

Fat of the land

In April 2013, large amounts of money also started flowing from the two Swifambo entities to WKH Landgrebe, an auditing and accounting firm based in Randburg, Johannesburg.

An initial amount of R8.8-million was transferred from Swifambo Rail Holdings to WKH Landgrebe on the very same day that Prasa made its first payment to Swifambo. Between April 2013 and December 2016, WKH Landgrebe received altogether R30-million from Swifambo in 15 tranches. In other words, Mashaba was shifting some of the proceeds of the Prasa locomotives contract to this rather obscure accounting firm.

The liquidators’ court filings don’t expressly detail why he did this, but the documents contained enough clues for Scorpio to determine that WKH Landgrebe used a large chunk of the money it received from Swifambo for a property transaction on behalf of Mashaba’s MM Trust.

According to a payment schedule filed by the liquidators, the accounting firm channeled R24.5-million towards a transaction involving a company called Okapi Farming. Company records show that Mashaba became a director of Okapi in January 2013, a few months before WKH Landgrebe started distributing the funds it had received from Swifambo.

Deeds office records in turn reveal that Okapi owns tracts of farmland outside Robertson in the Western Cape. The jewel in Okapi’s property portfolio is Orange Grove Farm. According to its website, Orange Grove is a working wine and olive farm that also offers luxury accommodation in several cottages spread over the foothills of the Langeberg mountain range.

Scorpio was able to determine that WKH Landgrebe used the R24.5-million it received from Swifambo to secure a 60% shareholding in Okapi on behalf of Mashaba’s MM Trust.

With the assistance of WKH Landgrebe, Mashaba had therefore diverted R24.5-million from the locomotives contract to help his trust become the majority shareholder in Orange Grove Farm and the other tracts of land owned by Okapi.

Asked whether the accounting firm had effectively helped Mashaba to launder some of the proceeds of the Prasa contract, WKH Landgrebe, through its attorney, stated that the matter was “sub judice”.

“As such, I confirm my instructions to the effect that my client would prefer to deal with same in the proper forum (as is currently the case) and my client’s comment on the questions posed below by you, is therefore reserved for the time being,” said WKH’s Landgrebe’s attorney.

The firm may also need to account for at least a further R16-million directly linked to the botched locomotives contract. Apart from the R6-million left over from the Okapi farm deal, Mashaba’s AM Investments paid about R10-million to WKH Landgrebe. This was after AM Investments had received about R31-million in Prasa locomotives money from Swifambo.

Sterling work

In mid-January 2015, Prasa transferred R444.5-million to Swifambo Rail Holdings. This was the sixth instalment for the locomotives deal. Including the five earlier payments from Prasa, the Swifambo entities had by now received an eye-watering R2.2-billion. Astonishingly, Swifambo had not yet delivered a single locomotive to Prasa.

There was, however, much progress being made with an entirely different project. Construction work on a palatial residence in the Waterfall Equestrian Estate north of Johannesburg was at an advanced stage, as shown by Google Earth’s historic satellite images. According to Deeds Office records, the house was being built on 1.2 hectares of land leased to Mabunda’s Makhensa Family Trust. Building plans submitted to the City of Johannesburg show that the new residence, once completed, would offer its owners a staggering 3,200m² in floor space. Houses of more or less the same dimensions in that estate are currently on the market for as much as R69-million.

But Mabunda wasn’t building his impressive new house with money from his own pocket, at least not entirely. Scorpio can reveal that R5-million was drained from one of the Swifambo accounts to help fund the construction of the private residence. This formed part of some R66-million Swifambo Rail Leasing and Swifambo Rail Holdings had diverted to entities and accounts controlled by Mabunda, or to third parties who used the funds for Mabunda’s benefit.

According to the Swifambo liquidators’ court filings, Swifambo Rail Leasing in February transferred exactly R5-million to an entity called Sterlings Living. This was less than a month after Swifambo Rail Holdings had received the sixth instalment from Prasa. The R5-million Swifambo Rail Leasing paid to Sterlings Living directly emanated from the R444.5-million Prasa had paid to Swifambo Rail Holdings a few weeks before.

The court documents don’t reveal what the R5-million was for. It merely states that the money Swifambo paid to Sterlings Living “was paid by it directly to Sterlings for and on behalf of the first defendant [Mabunda] in respect of private and/or personal expenses which the first defendant incurred with Sterlings”.

According to its website, Sterlings designs and installs bathrooms, kitchens and living spaces for “the discerning individual who demands the best”.

Hanlie Sterling, who runs and co-owns the business with her husband, confirmed that Sterlings had worked on the Mabunda home in Waterfall Equestrian Estate and that the R5-million the company received had been for this project.

An attorney acting for Sterlings Living later stated that the company “was at no stage aware of any corrupt dealings nor knowingly a party to the receipt of any funds relating to corrupt activities”.

In his response to the liquidators’ summons, Mabunda says he does not know where Swifambo got the money that it paid to Sterlings. He therefore couldn’t admit or deny “that the source of such payments was received from Prasa”, according to his plea.

Mabunda’s millions

In the period during which Prasa was paying the Swifambo entities, the latter transferred nearly R61-million to Mabunda’s personal bank account and to four companies he controlled. For these payments, Mabunda filed a stack of invoices for “professional services” and “advisory” work that he and his companies supposedly did for Swifambo in connection with the Prasa contract.

But the invoices merit a degree of suspicion, to say the least.

Swifambo Rail Holdings paid nearly R28-million to a Mabunda entity called Enerwaste. According to invoices, this was a “transaction success fee for the successful award of the tender for the supply of locomotives”.

Enerwaste earned a “1% success fee” for assisting Swifambo in responding to Prasa’s original request for proposals (RFP), according to Mabunda’s plea.

However, Enerwaste isn’t active in the rail industry. According to documents obtained by Scorpio, the company successfully applied for a licence to operate “a facility for the thermal treatment of Health Care Risk Waste (HCRW)” in an industrial area in Pretoria.

The invoices filed in the liquidation proceedings don’t quite explain why a company operating in the medical waste business supposedly worked on a tender for locomotives. Mabunda and his attorney did not respond to queries regarding these and other payments.

The two Swifambo entities also paid nearly R24-million into Mabunda’s personal bank account. According to the court filings, the largest portion of this money was paid to him on the back of a series of vaguely-phrased and barely coherent invoices.

Mabunda received more than R18-million for “transaction advisory services for the and [sic] rene implementation of NNIP by Swifambo Rail Lesasing icluding [sic] advice and acquisition of strategic companies”, the invoices tell us.

Finally, between July and October 2016, Swifambo Rail Holdings transferred R2.8-million to Beyond Corporate Travel in three tranches. At the time, Mabunda and his then wife, Cindy, were this entity’s only directors. In his court filings, Mabunda maintains that these payments were for “accommodation, flights, subsistence and travel including subcontractors’ costs assisting with the renegotiating of the contract with Prasa and Vossloh Espania (sic).”

However, at this point in time, the locomotives project had already ground to a halt amid court applications by Prasa to have the contract set aside and to recoup the monies it had paid to Swifambo. It is therefore unclear why it would have been necessary for anyone to rack up R2.8-million in travel bills for business trips related to the contract during this timeframe.

Social media posts by Cindy Mabunda suggest Beyond Corporate Travel had on more than one occasion organised private holiday excursions for members of the Mabunda family.

“Thank you yet again Beyond Corporate Travel for arranging our holiday … We really can’t wait to get there,” she posted on Facebook in September 2017.

Scorpio asked Mabunda and his attorney whether money from Swifambo had bankrolled any private holiday trips. They did not respond. DM