By Fred Kockott
Fears are mounting that the government-funded development agency, Ithala Finance Development Corporation, is turning into a piggy bank of sorts for KwaZulu-Natal's political elite.
Concerned that nothing is being done to stop this, former senior staff of Ithala have been leaking Ithala loan documentation and associated information to the Sunday Tribune, hoping these disclosures will spark some action.
They also accuse top Ithala representatives of granting loans to themselves, friends and family.
Among Ithala's clients are Dr May Mkhize, the wife of KwaZulu-Natal Finance MEC, Zweli Mkhize. As the MEC in charge of the province's coffers, Mkhize allocates development funds to Ithala.
In addition to receiving R13-million in state-funded loans to buy a farm outside Pietermaritzburg, May also applied for Ithala loans for other enterprises, including one that was set up specifically to service municipalities and the government's public works programme. Her partners in this venture were Pretty Mbanjwa and Ntombi Shabalala - the wives of the head of transport, Dr Kwazi Mbanjwa, and head of treasury, Sipho Shabalala.
Loans have also been granted to various top Ithala executives, including Ithala Chief Executive Officer, Sipho Nyembezi who earns R2,45-million a year. The chairman of Ithala's board, Precious Lugayeni, Ithala's divisional manager of Audit and Risk, Phillip Ntsimane, and Mohsin Mia, the son of an Ithala director, Mac Mia, have also been granted Ithala loans.
Documentation provided to the Tribune indicates that Ithala's own approved lending policies - and in some instances, laws - have been ignored in the awarding of some of these loans.
In Mia's case R5-million was paid out before any security had been registered.
Nyembezi opted not to comment and Ithala's legal services division did not respond to queries.
Wholly-owned by government, Ithala comprises two separate legal entities, Ithala Development Finance Corporation which provides state-funded loans in line with an approved lending policy, and Ithala Limited which operates as a retail bank, and does not hold any government development funds.
It is the coffers of the development finance corporation that have been used to advance loans to officials and enterprises connected to leading politicians and top officials.
Mkhize said as Ithala generated its own profits through money lending, these loans could not be considered state-funded.
On the possible conflict of interest arising over his wife receiving Ithala loans, Mkhize said, "As the MEC representing the government's shareholding in Ithala, I do not get involved in any recommendations to Ithala. The financing deals are entered on the basis of the business sense it makes to those assessing the applications."
"I don't get the list of who Ithala loans money to and I don't ask. It's not my business to get involved. Any member of the executive, the legislature, municipalities or government departments are perfectly entitled to get loans from Ithala, as is any other person in the province," said Mkhize.
Mkhize said loans to Ithala staff and board members were above board, and in line with approved lending policies.
"There is a process whereby a person who has an interest in the loans, will not participate in the final decision," said Mkhize.
Mkhize said the issue of political connections was not relevant.
"What's relevant is that procedures are transparent and in line with good governance," he said.
Mkhize is the first representative of the provincial legislature to declare that a close relative, his wife May, had received R13-million from Ithala to buy and run a farm, Ruitspruit, outside Pietermaritzburg.
Another document in the Tribune's possession lists Mkhize himself as the applicant for an earlier loan of R17 million to buy this farm. The loan submission cites Mkhize as the applicant. Although the project was deemed "mariginally viable", it was recommended by the loan writer that Mkhize's R17 million loan be approved by the credit committee with only R13,5-million being offered as security in the form of mortgage bond on the property.
Mkhize denied having made such an application.
Documents show that May Mkhize had also applied for loans for Pipeway Precast (Pty) Ltd, which specialises in storm water drainage, applied for an Ithala loan of R13,2-million. According to the loan submission, Pipeway Precast did not declare in its loan submission that it's representatives were wives of an MEC and two top government officials.
May is also a representative of Inhlasi Business Enterprises CC which applied for a R10-million Ithala loan to convert itself into a and acquire a 70 percent shareholding in Dynamic Crane's Systems and Dynamic Cranes Systems Natal .
After consulting his wife May yesterday, Mkhize advised the Tribune that nothing had come out these loan applications, and that the only existing Ithala loan that May had was for their farm.
He said it was unfortunate that disgruntled former staff were turning to the press, leaking confidential documentation.
"These matters should be reported internally and addressed by the board," said Mkhize.
Among former staff members interviewed by the Tribune is a former manager in Ithala's credit risk department who resigned after clashing with senior management over the approval of various loans and non-compliance with the Financial Intelligence Centre Act.
He said many recipients of loans were falling far behind in the scheduled repayments, as happened in the case of a top representative of the National African Federated Chamber of Commerce.
"The guy owed more than R2-million. He had not paid a single installment for years," said the official who had personally dealt with the matter.
"We tried chasing him legally. We found two properties in Umhlanga Rocks... We got him into court, secured a liquidation order. It was done and dusted.
"We were then later instructed to stop the interest on his accounts, to give him time to sort his finances out. That was a year ago."
Ithala communications manager, Zama Luthuli, declined to comment.
Luthuli said the Tribune's queries needed to be addressed by designated officials who had been tasked to provide a written response, but it was not furnished for publication on Saturday.