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- The Special Tribunal overturned a decision by former rural development and land reform minister Maite Nkoana-Mashabane to approve a land reform lease to Mike's Chicken.
- This followed an investigation by the Special Investigating Unit into the Department of Rural Development and Land Reform.
- Nkoana-Mashabane ordered that the lease agreement be entered into after a shareholder in the company running the chicken farm offered to withdraw litigation.
Former rural development and land reform minister Maite Nkoana-Mashabane "frustrated due process" and "flouted constitutional values" in approving a land reform lease agreement after investigations found irregularities and that the beneficiary was not a viable concern, the Special Tribunal found.
In January 2019, Nkoana-Mashabane ordered the department to conclude a lease agreement with Cultiver Investments, as a beneficiary of its provincial land acquisition strategy (PLAS) programme, to run operations of Mike's Chicken.
The agreement was concluded despite three independent forensic reports advising against the lease, said the Special Investigating Unit (SIU) in a statement on Tuesday.
According to the summary of facts in the ruling handed down by Judge Lebogang Modiba on 19 April, the department and Mike's Chicken agreed to the sale of nine immovable properties in Farm Doornbult, Limpopo, in May 2013.
This comprised chicken hatchery farms, which the department acquired as a going concern for R137 million. The department paid the full purchase price to Mike's Chicken. At the time, Cultiver was not a shareholder in Mike's Chicken.
Mike's Chicken, its shareholders Michael-John Nunes and Christiaan Jacobus Albertus Kirstein, and Cultiver, represented by Muziwempi Twala concluded a shareholder agreement on 12 June 2013, in which Cultiver acquired 80% shareholding in Mike's Chicken, which later increased to 90%. Nunes and Kirstein retained the remaining 10% shares each, later decreased to 5%.
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"Subsequently, the department approved Cultiver as a PLAS beneficiary and entered into a one-year caretaker agreement with it in respect of the Mike's Chicken farm. Cultiver took occupation of Mike's Chicken farm and its operations," reads the ruling.
Thus, the department owned the chicken farms, but Mike's Chicken remained a business, running the farms' operations.
In February 2014, the Ministerial Coordinating Committee commissioned two investigations into the acquisition of Mike's Chicken and the approval of Cultiver as a PLAS beneficiary, one by Deloitte & Touche, and another by the department itself. Thereafter, the department commissioned the National Empowerment Fund to conduct a due diligence exercise on Mike's Chicken, as Cultiver had applied for grant funding for Mike's Chicken’s operations.
The Deloitte and departmental investigations found irregularities in Mike's Chicken's acquisition and the approval of Cultiver as a PLAS beneficiary, while the NEF found that it is not a viable enterprise.
According to the SIU, the independent investigations found the following:
- There were irregularities in the approval process for the acquisition of Mike’s Chicken;
No due diligence was conducted on the project;
No beneficiary verification or vetting was conducted;
There was no recapitalisation strategic partner identified for the project;
Certain officials contravened the Public Finance Management Act in relation to the transaction;
The business was not profitable, and its long-term viability was in question;
There was a lack of suitable business strategies dealing with challenges, especially the high input and low local prices; and
The directors’ drawings and dividend decoration led the business to a position of perpetual liquidity and depleted working capital.
"As a result, the department declined Cultiver's application for grant funding. In the meantime, the caretaker agreement expired. The department refused to enter into a long-term lease agreement with Cultiver. Cultiver went into business rescue," reads the ruling.
In January 2017, Cultiver, its business rescue practitioner and Mike's Chicken instituted an urgent application to compel the department to extend PLAS benefits to Cultiver, which the department opposed based on the investigations.
In July 2017, a proclamation was issued, authorising the SIU to investigate the department, including the acquisition of Mike's Chicken and the selection of its beneficiaries and partners under the PLAS programme.
In February 2018, Nkoana-Mashabane replaced Gugile Nkwinti as minister.
"In August 2018, Cultiver's Mr Twala addressed a letter to Minister Nkoana-Mashabane to intervene in its dispute with the department. He tendered to withdraw the Polokwane application if the department entered into a long-term lease with Cultiver. Subsequently, and before the Polokwane application was heard, Minister Nkoana-Mashabane took the second decision, instructing the department to withdraw its opposition of the Polokwane application and regularise the lease between the department and Cultiver."
The department concluded the "impugned lease agreement with Cultiver" in January 2019.
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The SIU learned about these developments in March 2019, and started investigating, resulting in its application to the Special Tribunal to review and set aside Nkoana-Mashabane's decision as well as the lease agreement. The application was opposed by Cultiver, but not the department.
Modiba found "not only did Minister Nkoana-Mashabane frustrate the due process that was in progress as a result of the Polokwane application and the SIU investigation, she flouted the constitutional values that underpin public administration as set out in s195 of the Constitution by failing to act impartially, fairly, equitably and without bias".
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"Minister Nkoana-Mashabane has since been replaced [by] other ministers who are not opposing the application to set aside the second decision. It is improbable that ministers who replaced Minister Nkoana-Mashabane and the department would not defend the second decision if it was rational and in the interest of the PLAS programme and the fiscus."
Furthermore, the Special Tribunal directed the Tribunal Registrar to convene a case management meeting with the parties to determine the further conduct of the matter.
In its statement, the SIU welcomed the ruling.
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In 2019, Nkoana-Mashabane was hit with a personal costs order by the Land Claims Court, which found she had been "grossly unreasonable" in discharging her duties.
Despite this, she remained in President Cyril Ramaphosa's Cabinet. She was moved from the rural development and land reform portfolio to women, youth and persons with disabilities in the Presidency in 2019.
She didn't survive Ramaphosa's Cabinet shuffle in March this year, and was replaced by Nkosazana Dlamini-Zuma.
Nkoana-Mashabane has subsequently resigned as an MP.
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