A construction company has secured a court order to attach assets worth R470m from the department of human settlements for more than a decade of “systematic underpayment for subsidised housing projects in Mpumalanga”.
XJR Construction, which has built thousands of RDP houses since 2014, says it was paid R103,000 a house instead of the proclaimed subsidy quantum of R164,000, resulting in substantial losses over the last decade.
It claims the provincial department was in turn being paid the full subsidy by the national department.
The writ of execution was granted against Mpumalanga human settlements MEC Speedy Mashilo and human settlements minister Thembi Simelane in the Mpumalanga High Court on Monday.
Despite ignoring summons on numerous occasions over the past three years, the department has now filed an urgent application to have the judgment rescinded and halt the attachment. It claims building costs vary between provinces. The matter is scheduled to be heard on Tuesday.
XJR has built 2,566 RDP houses, for which completion certificates were received across the Gert Sibande municipality since 2014.
I have dealt with seven or eight heads of department over the past 10 years
— Paul Mthabela, company director
The company’s director, Paul Mthabela, said he had repeatedly raised concerns about the price discrepancy between the rates paid in Mpumalanga and those paid in other provinces.
“All the houses we built have been signed off, and we received happy letters [in respect of them], and they are now occupied by beneficiaries as we speak,” Mthabela said this week.
“The dispute started when we looked at what contractors in other provinces were being paid for the same work we were doing. We realised something was wrong, and that what we were receiving was not correct,” Mthabela said.
The dispute dates back to 2014, when XJR was awarded a contract to build 400 RDP houses.
Having also undertaken projects in Limpopo and KwaZulu-Natal, Mthabela said his company knew the rates paid in Mpumalanga were significantly lower.
XJR built houses in the towns of Leslie, Kinross, Bethal and Embalenhle.
The 2014 RDP housing project earned the company an award for best informal settlement upgrade project in the province in the 2014/15 financial year.
Mthabela said while standard RDP houses measured 40m², the Mpumalanga department required the company to construct larger units usually intended for disabled beneficiaries.
“From day 1, we questioned why we were not being paid according to the proclaimed subsidy amount. The department’s own status reports reflected a subsidy quantum of R110,000 [for a 40m² unit], yet we continued to receive R103,000 per unit,” he said.
The discrepancy also created tensions with subcontractors.
“Because many of these subcontractors were working in other provinces, they believed we were underpaying them. We had to explain that we ourselves were being paid less than the approved rate.”
Despite the dispute, XJR was subsequently awarded two additional contracts to build 500 houses each — after being assured the matter would be resolved.
“I have dealt with seven or eight heads of department over the past 10 years. Nobody stays there for long, and there have been different MECs during that period,” Mthabela said.
He alleges that when he raised the issue of payment disparities last year, the company was removed from an RDP housing project before it had been completed.
[People] were threatening me, telling me that ‘this is Mpumalanga’ and I should stop pursuing this matter
— Paul Mthabela
Mthabela said he was contacted by people warning him to stop pursuing the matter.
“They were threatening me, telling me that ‘this is Mpumalanga’ and I should stop pursuing this matter.” He declined to say any more about the threats.
In court documents, Mthabela further claimed the provincial government had reported to the national department of human settlements and the National Treasury that the houses had been built at the full subsidy amount of R164,000 a unit.
On April 24, the court granted XJR a default judgment ordering the department to pay approximately R319m in respect of three claims, plus legal costs. The court also ordered that the company be reinstated.
On Friday, the national department of human settlements confirmed it had applied forthe judgment to be rescinded and had also launched an urgent application to stay execution of the court order.
Simelane’s spokesperson, Tsekiso Machike, said while the minister annually proclaims the subsidy quantum for RDP houses, actual construction costs may vary depending on local conditions.
“Practically, the cost of building materials may differ from one area to another, depending on factors such as transportation distances from suppliers. Competition among contractors may also affect pricing, especially during periods of low construction activity,” Machike said.
He said contractors sometimes accepted projects at rates below actual building costs during difficult economic periods.
“It is therefore possible that a subsidised house may be built at a price lower than the subsidy quantum, but expenditure exceeding the subsidy quantum is not permitted.”
Mpumalanga human settlements spokesperson Freddy Ngobe said the department was challenging the warrant of execution and could not comment extensively because the matter was before the courts.
“The department disputes several of the allegations made by XJR and does not accept the characterisation of events as presented in the company’s court papers,” Ngobe said.
Responding to questions about the department’s failure to file opposing papers or attend court proceedings, Ngobe said the matter had been handled by the Office of the State Attorney.
“The department is therefore not in a position to confirm the number of occasions on which XJR may have served court papers on the office of the state attorney, as service of legal documents and management of court processes are handled through the appointed legal representatives.”
Ngobe added that the department “rejects any suggestion that it deliberately failed to participate in the proceedings”.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.