Key Takeaways
- In 2019 the National Lotteries Commission (NLC) awarded a R4 million grant to the Mshandukani Foundation for borehole installation at Eastern Cape schools and clinics.
- Investigations by the Special Investigating Unit (SIU) revealed that the boreholes had already been drilled in 2016 by Mshandukani Holdings, a company owned by the foundation’s chairperson’s husband.
- Almost the entire grant was diverted to private companies and personal accounts, including R500 000 paid to a firm owned by the wife of former NLC COO Phillemon Letwaba.
- The tribunal found the grant agreement invalid, ordered the foundation’s corporate veil to be pierced, and held the foundation, its directors, and related companies jointly and severally liable for repayment of the R4 million plus 10.75 % interest.
- The case exposed a corrupt “Pro‑Active Funding Quality Assurance Committee” (QAC) that let‑lottery officials bypass statutory safeguards, enabling systematic looting of lottery funds.
Background of the Grant
In February 2019 the Mshandukani Foundation, a registered non‑profit organisation, submitted a funding application to the National Lotteries Commission seeking R4 million to implement a community‑development project that would provide clean water to vulnerable communities in the Eastern Cape. The application, signed by foundation chairperson Pretty Shandukani, claimed the borehole installation would benefit 8 015 people and create 15 part‑time jobs, while also budgeting for operational costs such as salaries, stipends, audit fees, bank charges and travel expenses.
Project Description and Claims
The foundation told the NLC that seven boreholes would be drilled at various schools and clinics, and a final report submitted on 5 November 2019 declared the project complete. An earlier October 2019 progress report stated that the boreholes had already been installed. These statements formed the basis for the NLC’s decision to release the funds, which were transferred to the foundation’s bank account on 20 March 2019 after a remarkably swift approval process.
Discovery of Pre‑Existing Boreholes
The Special Investigating Unit’s probe uncovered that the boreholes cited in the grant application had actually been drilled three years earlier, in 2016, by Mshandukani Holdings – a company owned by Mashudu Shandukani and his wife, Pretty Shandukani. Affidavits from five school principals confirmed that the Department of Education had recorded the boreholes as being completed in 2016, contradicting the foundation’s claim that the NLC‑funded work was new.
Misappropriation of Funds
Despite the boreholes already existing, the SIU found that virtually all of the R4 million grant was siphoned off to private entities and personal accounts. Bank statements showed that R3.6 million flowed from the foundation to Preldon Construction, a company linked to the Shandukani family. From there, R500 000 was paid to Iron Bridge, a firm owned by Rebotile Malomane – the wife of former NLC COO Phillemon Letwaba. No vouchers, contracts or independent engineer’s reports were produced to substantiate any work performed under the grant.
Involvement of Lottery Officials
Phillemon Letwaba, who signed the grant agreement on behalf of the NLC as its COO, had a history of steering lottery contracts to businesses associated with his wife. GroundUp previously reported that Letwaba had recommended a R4.8 million grant for a non‑existent rural soccer tournament to a company where Malomane was a director. The tribunal noted that Letwaba’s actions in the borehole case mirrored this pattern of self‑dealing.
Corporate Veil Piercing and Liability
Judge Brian Mashile, delivering judgment on 13 July 2026, concluded that the Mshandukani Foundation was a sham used to conceal the personal enrichment of its directors. Because the foundation owned no immovable property, the judge ordered that its corporate veil be pierced, disregarding its separate legal personality. Consequently, the foundation, Pretty Shandukani, Takalani Israel Mulandana, Thambatshira Maria Khameli and Preldon Construction were held jointly and severally liable to repay the R4 million, plus interest at 10.75 % per annum from the date the application was instituted until payment.
The Dodgy Funding Committee
The tribunal identified the NLC’s Pro‑Active Funding Quality Assurance Committee (QAC) as the conduit through which the fraudulent grant was approved. The QAC, established under previous NLC leadership, bypassed the statutory distributing agencies that were meant to provide independent oversight. Marubini Ramatsekisa, then manager of grant‑funding projects, and Phillemon Letwaba dominated the committee’s work, effectively turning it into a rubber‑stamp for corrupt decisions. An affidavit from SIU Chief Forensic Auditor Humbulani Gideon Funyufunya disclosed that the QAC’s processes were controlled by Ramatsekisa and Letwaba, from stakeholder engagement to final approval.
Impact and Broader Corruption Context
The QAC’s creation removed a key safeguard in the Lotteries Act, allowing hundreds of millions of rand to be allocated to projects that were never completed. GroundUp’s eight‑year investigation linked the committee to a pattern of looting in which senior officials – including former Commissioner Thabang Mampane, board chairperson Alfred Nevhutanda, and others – personally benefited from diverted funds. The tribunal’s judgment highlighted that the same individuals and entities implicated in the borehole scandal were also involved in a separate R25‑million Olympic Games send‑off scheme that never materialised.
Conclusion and Lessons Learned
The Mshandukani Foundation case illustrates how weak oversight, conflict‑of‑interest relationships, and a deliberately weakened grant‑approval process can enable large‑scale fraud against public funds. The tribunal’s orders – invalidating the grant, piercing the corporate veil, and imposing joint liability – aim to recover the misappropriated money, though the foundation’s lack of assets may hinder full restitution. The episode underscores the necessity of restoring independent oversight bodies, enforcing strict conflict‑of‑interest rules, and ensuring transparency in the allocation of lottery and other public monies.