Former minister’s decision to order the department to conclude lease agreement with Cultiver Investments, as part of land acquisition strategy programme declared irregular and unlawful
The Special Investigating Unit (SIU) welcomes the order of the Special Tribunal, which declared a decision of the then Minister of Rural Development and Land Reform, Ms. Maite Nkoana-Mashabane, to order the Department to conclude a land reform lease agreement with Cultiver Investments was irregular and unlawful.
The SIU approached the Special Tribunal to declare the lease agreement irregular and unlawful after it emerged that Ms Nkoana-Mashabane had ordered the Department of Rural Development and Land Reform (the Department) to conclude a lease agreement for a chicken farm in Limpopo Province. The agreement was concluded despite three independent forensic reports advising against the lease. Surprisingly, neither the Department nor Ms Nkoana-Mashabane had challenged the SIU’s civil action.
In January 2019, Ms Nkoana-Mashabane ordered the Department to conclude a lease agreement with Cultiver Investments, as a beneficiary on its provincial land acquisition strategy programme, to run operations of Mike’s Chicken.
The lease agreement followed an agreement reached between Cultiver Investments and Ms Nkoana-Mashabane for Cultiver Investments to withdraw a High Court application on condition that the Department will sign a lease agreement. The High Court application sought to compel the Department to conclude a lease agreement following the expiry of a one-year caretaker agreement with Cultiver Investments in respect of the Mike’s Chicken farm.
In May 2013, the Department and Mike’s Chicken concluded an agreement for the sale of nine immovable properties. The immovable properties comprised of chicken hatchery farms which the Department acquired as a going concern for approximately R137 million and appointed Cultiver Investments as a caretaker. Cultiver Investments represented by Muziwempi Twala later acquired 90% shares of the business and Michael-John Nunes and Christiaan Jacobus Albertus remained with 10% of the business.
The Department decided against the lease agreement after three independent forensic reports commissioned by the Department under then Minister Gugile Nkwinti found that:
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.
The Directors’ drawings and dividend decoration led the business to a position of perpetual liquidity and depleted working capital.
In March 2019, the SIU was made aware of the decision to conclude a lease agreement and investigated the circumstances under which the decisions were made. The SIU instituted legal action in the Special Tribunal, a forum set up to adjudicate of matters emanating from SIU investigations, in November 2019 for the decision of Minister Nkoana-Mashabane to be declared irregular and unlawful.
On 19 April 2023, the Special Tribunal ordered that the lease agreement entered between the Department of Rural Development and Land Reform and Cultiver Investments dated 11 January 2019 is declared irregular and unlawful. Furthermore, Special Tribunal directed the Tribunal Registrar to convene a case management meeting with the parties to determine the further conduct of the matter for the determination of the appropriate consequential remedy.
The SIU was authorised by Proclamation R.24 of 2017 to investigate irregularities, malpractices, corruption and fraud in the acquisition and leasing of Mike’s Chicken and / or immovable properties and assets and the appointment of beneficiaries and strategic partners, and to institute civil proceedings in a Special Tribunal or any Court of law to correct any wrongdoing it uncovers in its investigations.
The SIU is empowered to institute civil action in the High Court or a Special Tribunal in its name, to correct any wrongdoing uncovered during its investigations caused by acts of corruption, fraud, or maladministration. In line with the Special Investigating Units and Special Tribunals Act 74 of 1996, the SIU refers any evidence pointing to criminal conduct it uncovers to the National Prosecuting Authority (NPA) for further action.
Source: Government of South Africa