Rot cripples social housing agency in the Free State
The SHRA has taken immediate control of non-profit company, the Free State Social Housing Company (Freshco), after investigations uncovered widespread irregularities.
These include failure to hold board meetings, an executive paying himself a R34 000 bonus in December 2017 and failure to pay service providers.
The SHRA, whose recently appointed chairperson is ANC Women’s League president and former Cabinet minister Bathabile Dlamini, has been authorised to investigate allegations of financial, governance and management failures, implement appropriate action to address them and take action against any person found guilty of misconduct or committing a crime.
Freshco is one of the social housing institutions accredited by the SHRA.
The SHRA, which reports to Human Settlements, Water and Sanitation Minister Lindiwe Sisulu, is mandated to deliver affordable, state subsidised rental housing targeted at low to medium income groups and has several social housing institutions accredited across the country.
The SHRA approached the Free State High Court in Bloemfontein to have Freshco placed under administration after property developer Calgro launched a liquidation application against Freshco for failure to pay its debt.
The National Housing Finance Corporation (NHFC) joined Calgro’s winding down application after Freshco failed to make repayments on two facility agreements entered into in 2011 and 2012.
The NHFC was owed about R32 million by Freshco and the liquidation application was only withdrawn after the SHRA paid Calgro, according to court papers.
At the commencement of the provisional liquidation, it emerged that Freshco’s liabilities exceed its assets by almost R39m.
The NHFC maintained that Freshco had been plunged into maladministration and its status necessitated a formal inquiry into its affairs in terms of the Companies Act.
A subsequent investigation found that Freshco paid about R2.9m to a company without any written contract, appointment letter and/or deliverables in just 10 months in 2017.
The probe also found that Freshco’s board failed to hold the minimum number of prescribed meetings and did not commence business rescue proceedings as soon as the company was financially distressed.
Freshco’s board also failed to ensure that the company had an effective and independent audit committee.
On December 17, Judge Nobulawo Mbhele ordered that the SHRA take control of the cash, cash investments, shares and other security as well as all other assets owned, held or administered by or on behalf of Freshco.
The SHRA will report to the NHFC monthly from January 31.
”The applicant (SHRA) is authorised to institute or prosecute any legal proceedings on behalf of the first respondent (Freshco) and to defend any action against the first respondent,” reads Judge Mbhele’s order.
She also gave SHRA the green light to investigate allegations of financial, governance and management failures, implement appropriate action and to take action against any person who may be guilty of misconduct or crime.
The judge authorised the SHRA to take steps as may be necessary during the period Freshco will be under administration to restore it to viability.