Captured FDC and provincial government the reason for increasing Free State unemployment

18 June 2019

The Free State’s grim employment prospects are a direct result of provincial capture. The recent Manpower Group Employment Survey indicates that hiring intentions of 752 employers will be flat in the third quarter of 2019 (July to September) in the Free State with 5% of employers indicating that they would reduce their workforce. According to the survey this is down by 6% on a quarter-to-quarter basis and down by 9% on a year-on-year basis.

The Free State Development Corporation (FDC) was established with a mandate to provide financial and business support to SMME’s and Cooperatives, undertake the development and management of properties and facilitate and promote investment and trade in the province. In terms of its core mandate, the FDC has failed dismally and has, from its inception, been embroiled in state capture controversy that includes among others:

- As far back as 2008 the wife of the former MEC for Economic Affairs Neo Masithela, who was responsible for appointing the FDC board, received a loan from the entity. The former MEC for Finance, and current MEC for Education, Tate Makgoe and his associates received two loans of R2,66 Million (R2,660,000.00). At the time, the Chairman of the FDC Tsietsi Matang defended these loans on the grounds that MEC’s, their associates and families were regarded as previously disadvantaged.

- In one of the most troubling deals, Magashule himself allegedly helped ensure that properties owned by the FDC ended up in his daughter's hands. A concurrent R11 Million (R11,000,000.00) "upfront" rental agreement with petroleum giant Shell helped Thoko Alice Malembe to purchase properties from the FDC while allowing her to pocket a further R9 Million (R9,000,000.00) without so much as lifting a finger.

- AmaBhungane in 2011 linked Mohloua "Blacky" Seoe and Magashule to a suspicious government property deal awarded to a company of which Seoe and Magashule were once co-directors. Seoe was linked to Magashule through their joint involvement in SAMBAL investments which received lucrative lease agreements with the provincial government in 2011.

- In February 2019, 23 of the 24 business tenants which share an office building as a part of the FDC’s flagship “Rent-a-Desk” programme were given 28 working days to vacate the building, contrary to the terms in the contract. The contract stipulated that tenants will be given between 40 and 80 working days’ notice. The imminent end of the programme comes amidst allegations the FDC is in financial ruin and is struggling to function.

- The FDC took over the controversial Vrede Dairy Project from the Gupta-linked Estina in 2014 and immediately appointed a company E’tsho to manage the project that milked between 100 and 160 cows. The professional fees charged by E’tsho, that has other lucrative construction projects in the Free State, amounted to R12 Million (R12,000,000.00) a year while the legitimate beneficiaries were completely side-lined.

- Recently, whistleblower and former South African Airways (SAA) group treasurer Cynthia Stimpel, told the Zondo Commission that a R15 Billion (R15,000,000,000.00) loan sought by SAA in 2015, was bagged by the FDC following a number of requests for proposals. A letter written by FDC Chief Financial Officer Shepherd Moyo said the FDC had earmarked a foreign entity that could offer the required funding at a lower interest rate of between 3% and 4%, through an entity called Grissag, at the request of Dudu Myeni and former president Jacob Zuma.

Other provincial government initiatives such as the Contractor Development Programme (CDP), that was meant to benefit emerging businesses and create employment in the construction industry, allegedly benefited family members of Parys Mayor Joey Mochela, former Premier Ace Magashule and current Premier Sisi Ntombela to the value of R300 Million (R300,000,000.00).

The dismal employment outlook for the Free State is clear proof that a captured state is in fact an impoverished state.

The DA proposes the establishment of a Free State Economic Development Agency (FSEDA) to replace the FDC. Such an agency will cut red-tape for investors and merge national and international investment initiatives and promotion in trade, investment and tourism into a single entity. The FSEDA will have a small staff component with support from the provincial government through a process of incentivised targets linked to time frames in terms of investment into the province (More detail in the DA Blueprint for the Official Opposition in the FSL).

Issued by Roy Jankielsohn, DA MPL and Leader of the Official Opposition in the Free State Provincial Legislature, 18 June 2019