In another twist involving the public protector’s office‚ the Minister of Co-operative Governance an.
There is growing discontent over the multi-billion rand housing project in Lamontville, south of Durban.
Angry residents accuse senior managers of the project of causing divisions in their community.
Allegations have also surfaced that the project manager and two ward councillors have "selectively appointed their own friends" to benefit from the R250million project to build new houses, revamp old flats and clear slums.
The project is under the eThekwini municipality and is due to be completed in 2010.
It is mainly aimed at boosting the the township's economy and attracting foreign tourists. Several residents have established companies in the hope of benefitting from the project.
But now angry residents say only a few have been awarded contracts through the back door because they were friends with project manager Sicelo Duma and two councillors, whose names are known to Sowetan.
Duma is alleged to have colluded with the councillors in creating a database for companies belonging to their friends to get contracts.
The project was stalled for two months following allegations of favouritism.
"We were encouraged by the province to establish our own construction companies to benefit from the project," one resident said.
"But the councillors, including municipality officials, sidelined us because we would not give them kickbacks."
When the project hit rock bottom residents formed the Lamontville Business Forum with Qonda Msomi as chairman. Msomi agreed that the project had problems.
"I can assure you that the matter is being attended to," Msomi said.
Morgan Naidoo of the eThekwini municipality said the project had encountered problems in the past but these ha been resolved.