:: Zuma's State Leasing Billion Rand Corruption Clusterfuck ::
Shabangu: my R50m bribe | Money could instead have covered the salaries of 260 constables for 10 years | 'Deal didn't come via Zuma friendship' - Shabangu | He lies, says Roux Shabangu’s former lawyer | State officials punished for applying rules | Taxpayers suckered in new police leasing deal | Public works 'bullied' ICD into lease
In a report in June 2011, the Public Protector's second report into the lease scandal, titled Against the Rules Too, followed an earlier one which stated that the Pretoria Police lease was "invalid". The second report said:
- Mahlangu-Nkabinde was guilty of "improper" conduct and failed "statesmanship" for going ahead with both leases after two legal opinions found them invalid;
- That Mahlangu-Nkabinde placed pressure on her director-general Siviwe Dongwana to sign the lease agreement, and he feared for his personal safety and that of his family;
- Cele was guilty of "maladministration" and "unlawful" conduct for driving the R1,1billion Durban deal;
- The Treasury should consider blacklisting Shabangu's company, Roux Property Fund, for its involvement in "unlawful and irregular procurement";
- Rentals for both buildings were inflated by up to 300 percent. In Durban alone, floor space worth R78 million was added without justification; and a new tender issued for the Durban lease in April but shelved after the Sunday Times exposed it last month was allegedly rigged to suit a previous offer by Shabangu.
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Shabangu: my R50m bribe
February 26 2012 at 10:14am | Dianne Hawker and Gcina Ntsaluba | Weekend Argus
The Department of Public Works offered R50 million to property mogul Roux Shabangu to “walk away” from the controversial Pretoria police headquarters lease.
This allegation is contained in an explosive 60-page affidavit in which Shabangu aims to absolve himself of any wrongdoing in the lease deal, which led to the axeing of two ministers and the suspension of police Commissioner Bheki Cele.
The affidavit is accompanied by more than 900 pages of documents which Shabangu believes will exonerate him.
Shabangu said former Public Works minister Geoff Doidge tried to get him to abandon the deal soon after Public Protector Thuli Madonsela began investigating.
“I was approached by Doidge to attend a meeting in Durban… Doidge said that DPW (Department of Public Works) would pay (The Roux Property Fund) R50m to walk away from the lease,” he said.
“I, in no uncertain terms, told them that I would not do so,” Shabangu said.
In the affidavit, Shabangu does not mention who else was present or the exact date of the meeting.
He later said that another meeting took place in September 2010 at OR Tambo International Airport, attended by a delegation from Public Works and headed by the former IF property mogul Roux Shabangu has his way, top-ranking government officials, former ministers and suspended public works officials will take the stand to defend their actions in the R500 million police lease scandal.
In papers before the Pretoria High Court, Shabangu says he believes oral evidence should be given to clear up the confusion over the controversial lease, and to unravel the differing versions. This could force senior government officials to explain just how and why Treasury regulations governing the awarding of public sector contracts were not followed – and who was ultimately responsible.
The Department of Public Works has taken Shabangu’s company – Roux Property Fund – to court over the lease agreement which was declared invalid after an investigation by Public Protector Thuli Madonsela.
If the court accepts Shabangu’s argument, suspended police commissioner Bheki Cele could be called to give evidence in what would be the second public hearing about his role in the lease saga.
A public inquiry into Cele’s fitness to hold office is expected to start on March 5, following his suspension by President Jacob Zuma in October last year.
“The court will be requested to dismiss the application or to refer the application to trial or oral evidence… The application – as it stands – is fraught with obscure allegations which require explanation and clarification,” Shabangu said in a 60-page affidavit.
“The former national commissioner, General Cele, also features prominently in the matter. There is no explanation by him. The same applies to the absence of an explanation by the former minister of public works, Ms (Gwen) Mahlangu-Nkabinde.”
Shabangu may go further than calling Cele and Mahlangu-Nkabinde; he suggests other cabinet members could also be asked to give evidence.
He says it is clear that the decision to proceed with the lease, announced by Mahlangu-Nkabinde on December 7, was passed at the highest level of government.
“In the circumstances it is reasonable to assume that the matter would have been discussed at cabinet level… ,” Shabangu said.
Other central players include axed minister Geoff Doidge, who now serves as an ambassador in Sri Lanka, and former public works director-general Siviwe Dongwane. Former acting director-general Sam Vukela could also be called to explain why he submitted two differing affidavits in the case.
Shabangu argues that the case should be dismissed by the court because of “fatal deficiencies” in how it was brought. He questions why key players in the lease saga have not been joined as parties, including decision-makers within the department and police, and the chairman of the Special National Bid Adjudication Committee.
“A complete record of the relevant proceedings has not been made available and no reasons have been given by the decision-makers for the administrative actions. “
His lawyers have asked the Department of Public Works to provide crucial documents, including all police and public works files and correspondence on the lease, and all the documentation presented to the Bid Adjudication Committee. Shabangu believes Nedbank, “who is a necessary party with a real and substantial interest in the proceedings”, should also have been joined.
He questions why Vukela was asked to depose an affidavit in the case when he was not director-general at the time the contract was finalised.
The Department of Public Works will have 15 days to reply to Shabangu’s claims. - Weekend Argus
» » » » [IOL]
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Money could instead have covered the salaries of 260 constables for 10 years
Aug 15, 2010 12:00 AM | Stephan Hofstatter & Mzilikazi Wa Afrika | Times Live
Property mogul Roux Shabangu will receive more than R100-million over the market rate, thanks to a dodgy lease for the South African Police Service's new headquarters.
'The actions are based on sound business ... he was not involved in any underhand dealings'
The money that would likely have been saved had the R521-million lease followed normal tender procedures could have been used to pay hundreds of new police recruits to patrol our streets for 10 years.
Instead, it was awarded directly to Shabangu, a personal friend of President Jacob Zuma.
Documents in the Sunday Times's possession show Shabangu's company, Roux Property Fund, will be paid a gross rental of R110/m², escalating at 10% a year, for the Middestad building in Pretoria.
Neither the SAPS nor the Department of Public Works has disputed this figure.
But until this week JHI, the company which is managing Middestad, was advertising office space as being vacant from August 1 and September 1 for a gross rental of R55.36/m².
JHI confirmed the offices were previously used by the Road Accident Fund, which was paying the listed price, and would now be occupied by the SAPS.
Gross rental is the standard commercial property industry benchmark, defined as the total rent payable including operating costs, but excluding VAT, water and electricity.
Another recent bid for a government lease for the Middestad building, seen by the Sunday Times, offered a gross rental of R85/m² with an escalation rate of 8%. This deal would have saved the SAPS about R130-million - enough to pay 260 constables their annual salary of about R50000 for 10 years.
Shabangu has admitted his relationship with Zuma but denied using "any political influence of whatsoever description" in getting the deal approved, his lawyer Natalie Visagie said.
"The actions of my client are based on sound business principals and he was not involved in any underhand dealings," Visagie added.
The Sunday Times revealed last week that the deal was likely to face two probes - by the Public Protector and by the Special Investigating Unit (SIU).
This week the presidency announced the SIU would probe tender irregularities in five departments, including public works and the SAPS. The probe would look into irregularities in "contracting for goods, works or services, including leased accommodation" by public works on behalf of the SAPS.
Nedbank, which is financing the Shabangu deal, said office space in Pretoria's CBD was at a premium because of high demand from government departments.
"A gross rental of R110m² for a long-term government lease in a large building in Pretoria is (therefore) not out of line with the market," said Ken Reynolds, Nedbank's Gauteng property finance executive.
Asked whether Nedbank was worried about the controversy surrounding the lease, Reynolds said: "For this deal and other similar deals it is the bank's policy to ensure that correct procedures have been followed and if there is any suspicion of irregularities, we do not do the business."
But property analysts, recent property reports and actual listings for the Middestad building all suggest the SAPS rental is inflated.
A commercial leasing consultant at a leading Pretoria company, who did not want to be identified, said gross office rentals of buildings such as Middestad averaged R55/m²-R65/m². "R65/m² is for brand-new renovated stock - the kind of stuff advocates like, near Church Square," she said.
This is supported by two recent reports. The latest SA Property Owners Association office vacancy survey puts average rentals for B-grade buildings in the Pretoria CBD, like Middestad, at R57.5/m².
The B grading is based on industry norms, including location, quality of finishing and the number of parking bays.
The Rode report, released by Rode & Associates in June, which the company says is used "intensively" by banks, puts the average rental at R57.33/m².
» » » » [Times Live, via Citizen Alert]
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'Deal didn't come via Zuma friendship' - Shabangu
2011-06-17 12:01:28.0 | SAPA | Sowetan
Property tycoon Roux Shabangu on Friday denied that he was a friend of President Jacob Zuma and that it was the Department of Public Works who approached him in connection with a controversial building lease.
Speaking at a press conference in Irene in Pretoria, Shabangu said a lawyer who had sent the Sunday Times a letter claiming he was a friend of Zuma’s had had her services terminated.
Referring to the R500 million lease of the Middestad Building in Pretoria to the police, Shabangu said he had been approached by public works officials. He did not say who specifically in the department had approached him.
“They came to us, but referred by the previous owners. That’s how the deal landed in our hands.”
The deal was sharply criticised by the Public Protector, advocate Thuli Madonsela, earlier this year.
She found national police commissioner Bheki Cele guilty of maladministration and criticised Public Works minister Gwen Mahlangu-Nkabinde for going ahead with the deal despite receiving legal advice to the contrary.
Shabangu said there was a perception about businessmen that “if he’s black he must be connected to government officials”.
As far as he was concerned the Middestad deal was valid and that he was not responsible for the Department of Public works not following processes, Shabangu said.
» » » » [Sowetan (Deleted) :: Cache]
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He lies, says Roux’s former lawyer
Mariechen Waldner | City Press | 2011-06-19 10:00
Controversial property developer Roux Shabangu’s former lawyer denies his claim that she falsely penned a letter stating that Shabangu was a long-standing friend of President Jacob Zuma.
Pretoria lawyer Natalie Visagie stands by the letter she wrote in response to newspaper inquiries about Shabangu’s role in police commissioner General Bheki Cele’s controversial R500-million property deal for a new police headquarters.
Visagie told City Press on Friday: “I deny the (Shabangu’s) allegations. I have no further comments.”
Her reaction came after the billionaire developer called a special press conference to put on record that he was not a friend of Zuma.
This was after Visagie wrote to the Sunday Times, which broke the story of the controversial police leasing deal last year, saying that her client (Shabangu) was Zuma’s friend.
Zuma has yet to comment on the claim.
Shabangu told journalists he wished to rectify claims about the “so-called” long-standing friendship he supposedly had with Zuma.
“I do not have a long-standing friendship whatsoever with our president”, he assured journalists.
“What I do admit”, he said, “is the fact that I am a supporter of the ANC as a political party. I am a member of the ANC’s Progressive Business Forum.”
He “acknowledged” that there had been “misreporting” and said he had “taken the necessary steps in trying to rectify this matter”.
During question time, Sunday Times journalists presented Visagie’s letter. It stated: “President Zuma is a long-standing friend of my client.”
The journalists also told Shabangu that he had claimed Zuma’s friendship in an interview with them last year.
Shabangu responded: “I distance myself from that letter,” adding that it was written without his consent and that it was the reason he had fired Visagie as his lawyer.
» » » » [City Press]
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State officials punished for applying rules
Stephan Hofstatter & Mzilikazi Wa Afrika | 19 June, 2011 03:42 | Times Live
Four government officials who refused to bend the rules to approve R1.6-billion police lease deals were threatened, victimised and suspended - and one was even fired.
Yet almost a dozen others that should be disciplined have yet to face the music.
The provisional report on the police's controversial R1.6-billion property leases by public protector Thuli Madonsela gives a detailed account of what went on behind the scenes and the fallout between those doing their jobs and their political masters.
The first casualty was former public works minister Geoff Doidge, who was axed by President Jacob Zuma on October 31, soon after launching an internal probe.
Doidge hadhalted the R1.1-billion Durban lease pending the probe and suspended the R500-million Pretoria lease. The buildings involved are owned by businessman Roux Shabangu, who is close to Zuma.
Days after Zuma appointed Gwen Mahlangu-Nkabinde as the new Minister of Public Works on November 1, she reinstated the Pretoria deal with Shabangu.
This was despite two legal opinions, sought by her department, which concluded that the deal was illegal and should be cancelled.
Hours after she allegedly put "pressure" on her director-general, Siviwe Dongwana, to reinstate the deal with Shabangu, she suspended him.
Dongwana told investigators that General Bheki Cele had summoned him to a meeting five days after he was appointed director-general.
Cele complained about a public works official from Durban, Irene Nel, who dealt with the police portfolio, saying that she was challenging his authority.
Dongwana said Cele was "extremely upset that a junior official had raised concerns about the accommodation requirements" of the SA Police Service.
"National commissioner regarded Ms Nel's inquiries as meddling in the affairs of the SAPS and further stated that she was running his department for him," he said.
Nel became another casualty after she raised the alarm over the SAPS irregularly negotiating with a landlord - before public works even knew of their space needs.
She questioned why the SAPS wanted to relocate the child protection and family violence units away from communities they served and also raised the flag on the tender process not being followed.
She was subsequently removed from the SAPS portfolio.
Dongwana said that after Doidge put the Durban lease on hold and started an internal investigation, he began receiving calls from Shabangu complaining the department had "an agenda against him".
Shabangu accused Dongwana and other officials of being "obstructive".
The report states: "As time progressed, Shabangu's demeanour became more aggressive to the extent that Mr Dongwana had to implement additional security measures at his office in order to avoid confrontation with Mr Shabangu."
Dongwana said after Mahlangu-Nkabinde replaced Doidge, "Shabangu's approach towards him became much more confident and demanding".
"Shabangu further referred to the new minister as his elder sister and showed him sms messages on his cellphone of communications between him and the new minister in connection with the new lease."
The SAPS head of property management in KwaZulu-Natal, Brigadier Thembinkosi Ngema, also expressed concern regarding the R1.1-billion lease to his provincial commissioner Monnye Ngobeni "about meeting the landlord of the building in the absence of the Department of Public Works".
For his pains he was "removed from (the) area of responsibility", the report said.
Nel told the Sunday Times she was "just doing (her) job" and declined to comment, as did Doidge, Dongwana and Ngema.
Meanwhile, Shabangu changed his tune on Friday, claiming Zuma was not his friend. This was after earlier telling the Sunday Times otherwise in two interviews and in a letter from his former lawyer, Natalie Visagie. The letter from Visagie reads: "The facts are: President Zuma is a friend of long standing of my client."
On Friday Shabangu said he had fired Visagie for "misrepresenting" his brief. She could not be reached for comment.
» » » » [Sunday Times]
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Taxpayers suckered in new police leasing deal
Craig McKune | Amabunghane / Mail & Guardian | Jun 03 2011
At the heart of it is the same business person responsible for the other inflated leases. Roux Shabangu, the BEE business person at the centre of the police leasing scandal, was the proud recipient of another multimillion-rand state lease -- for a building twice as large as the government required and way over its budget.
The R137-million, 10-year lease (which the Mail & Guardian has seen) by the department of public works is for a Pretoria CBD building as the headquarters for the police department's Independent Complaints Directorate (ICD).
According to the M&G's calculations, taxpayers have once again bought Shabangu a building the state itself could have bought for less.
In an interview this week Shabangu's business partner, Japie van Niekerk, said Shabangu had bought the building because his political connections had told him the public works department wanted to lease it.
This claim was not answered by either Shabangu or the department.
Van Niekerk also stands to benefit because he lent Shabangu the money to buy the building.
Van Niekerk told the M&G that the lease, signed in April 2009, was Shabangu's first foray into the lucrative state leasing business. It was a trial run for his controversial R500-million lease agreement for the new South African Police Service headquarters in Pretoria and a yet unconsummated R1.1-billion lease for the police in Durban. These were signed in July and November 2010, also with the department of public works.
The Pretoria SAPS lease was the subject of a damaging report by the public protector, raising questions about the involvement of national police commissioner Bheki Cele, Public Works Minister Gwen Mahlangu-Nkabinde and senior officials.
The protector is about to release a report on the Durban lease.
Taxpayers to the rescue
Shabangu's company, Majestic Silver Trading 275, bought the ICD building, 114 Vermeulen Street, from Pretoria property mogul Sayed Mia in September 2008.
Mia, who owned the building for almost two years, sold it to Shabangu for R23-million, R10-million more than he paid for it.
After Shabangu bought Vermeulen Street, he and Van Niekerk mysteriously transferred it between them twice, with Shabangu’s Majestic Silver ending up as the owner for an escalated purchase price of R41.8-million. Shabangu owed the full amount to Van Niekerk’s company, HMKL 3, in the form of a private bond.
Van Niekerk would not say what interest Shabangu was paying him for the bond other than that it was "prime linked" and had to be paid off over 10 years.
Assuming a 9% interest rate, Shabangu would have to pay Van Niekerk about R530 000 a month for the next decade. Once that is done, the building will belong to Shabangu, unencumbered by debt.
But according to Shabangu's April 2009 lease agreement with public works, the government would pay him R729 280 a month for the first year, escalating by 10% a year -- so that by year 10 he will be paid a handsome R1.9-million a month.
In other words, Shabangu’s bond repayments would be serviced by the taxpayer. Van Niekerk would earn big interest on a big bond and Shabangu would have hundreds of thousands of rands to spare each month.
Problem 1: Insider information
Asked to explain the property transfers and whether Shabangu had secured the lease by legal means, Van Niekerk said: "To get there, I’m going to have to give you some history."
He explained how he and Shabangu had gone into partnership a decade ago to build shopping malls in "deep rural areas" (see “Roux is like my little brother" below).
In 2008 public works announced a new policy to favour BEE companies in the allocation of long-term state leases. "Shabangu … jumped at the opportunity. For him to go and buy a building in the CBD and get the government to rent it from him is an easy deal, a very lucrative deal.
"Roux asked for help with the first one, which was Vermeulen Street. The building was standing empty and he had information that public works was interested in renting that building."
Here is problem number one. Someone gave Shabangu inside information and, on the basis of this, according to Van Niekerk, Shabangu wanted to buy the building, with an eye to being awarded a lucrative state lease.
Van Niekerk said he did not know who gave Shabangu the information and he was adamant that when they bought the building they had no guarantee Shabangu would be awarded the lease.
"All these guys are politically connected. That’s what we do," he said.
As it happened, just three months after Shabangu’s Majestic Silver bought Vermeulen Street from Mia, Shabangu was authorised by a company resolution attached to the lease to "negotiate and sign a lease agreement with the department of public works".
This statement highlights two important points:
It proves that Shabangu was in talks with the department almost immediately after buying the building, if not before.
It suggests the department did not follow an open tender process and chose to negotiate directly with Shabangu, opening a window for him to be unfairly favoured.
Asked to comment, Mia said: "I sat with that building for a long time and I couldn’t get a lease. That’s all I can tell you."
Problem 2: tender process
Asked if an open tender process was followed, Van Niekerk said: "Public works wanted that building. I don’t know if there was an open tender process."
He said that an open tender would not have been necessary because the department had identified the building and simply needed to approach Shabangu as the owner.
This is incorrect. According to established procurement procedures designed to prevent corruption clear steps should be followed in such cases.
First, the department looking for a lease -- in this case the ICD -- should identify a need for new accommodation and supply a needs assessment and budget to public works.
Public works then decides whether to follow an open tender process or, if it can provide a valid reason, unavoidable urgency, for example, it can choose to approach property owners and negotiate a lease.
If it chooses an open tender, the department must advertise and choose the most appropriate bidder based on a technical evaluation, cost and empowerment credentials.
When this was put to Van Niekerk, he pointed a finger skyward in a "eureka!" moment: "Oh, yes, he did go through that process. I know there was a tender that went out. I do remember something like that."
For more than two weeks the department has failed to explain how Shabangu was awarded the lease.
Problem 3: an inflated lease
Approached for comment, Moses Dlamini, the ICD spokesperson, said he did not know whether an open tender process was followed -- that was public works’s responsibility -- but the ICD had submitted a needs assessment and a budget.
The ICD needed 3 668 square metres of space, with 105 parking bays, at a budget of R6.2-million for the first year of the lease.
But with Shabangu’s building the ICD got 7 614 square metres and 102 bays, for which it had to pay R8.8-million in the first year. The rent would increase at a top-end rate of 10% a year.
In other words, the ICD received more than twice the space it needed at more than 40% above its budget.
Mia is the same business person who later sold Sanlam-Middestad to Shabangu. Sanlam-Middestad is the building Shabangu acquired in the SAPS Pretoria leasing scandal.
Cele has protested that he cannot be blamed for the fact that two SAPS leases were awarded without an open tender.
But there is one more glaring coincidence -- both the SAPS and the ICD report to the same ministry -- that of police.
Asked who decided that the ICD needed a new building, Dlamini said: "The top management of the ICD was responsible. At the time the ICD was housed in two different offices because of space constraints."
Shabangu has refused to answer detailed questions (see "I’ll tell the ANC on you!" below).
'Roux is like my little brother'
Roux Shabangu is a big man. He has presence, he is intelligent and has unbelievable drive, according to property developer Japie van Niekerk.
"I like to call it 'horsepower'," said Van Niekerk, a charming man who refuses to talk on the phone.
Sitting in his office in Lyttelton, Pretoria, this week, surrounded by collages of shopping mall developments, Van Niekerk described his relationship with Shabangu in glowing terms.
"Ten years ago, Roux Shabangu came to me and had nothing. I saw a lot of myself in him when I had nothing. I wanted to help the guy."
He said he gave Shabangu a car, clothes, an office and a secretary. "And I offered him a stake in some developments."
Van Niekerk's New Africa Developments was building malls in "deep rural areas", where a lot of time needed to be spent negotiating with locals, "securing the land from the local chiefs" and "going through the government".
Shabangu was good at this, said Van Niekerk. "He was instrumental in obtaining the land. He was good at negotiating. He liked to engage with communities.
" I went out of my way to teach him to do the right things, to get the right attorneys and the right auditors. I explained that tax is a thing that you need to pay so the business sits legally clean.
" He was like my little brother. He went through the process of crawling and walking and then he was ready to run.
"That is where Vermeulen Street came in," Van Niekerk said, referring to Shabangu’s first state lease.
By then, about two to three years ago, Shabangu had bought his own office space in Irene, Van Niekerk said.
" In that time, he came to me and said he wanted to do these government buildings."
This was after the department of public works announced a policy in 2008 to award long-term state leases to black property owners.
"He wanted to jump and I said: 'You must do it'."
It was easy money.
Van Niekerk funded Shabangu's first deal, which he explained in detail (see main article, above).
"Subsequent to that, I had no dealings with Roux."
'I'll tell the ANC on you'
Instead of denying that he secured a lease by means of political connections, Roux Shabangu said he would use his political connections to deal with the Mail & Guardian.
In a hotly worded response to questions, Shabangu turned on his business partner of 10 years, Japie van Niekerk, suggesting there was "growing animosity" between them because Shabangu had entered the property market, "the so-called 'white man’s terrain'".
He also accused the M&G of seeking "to put our government, its leadership, state organs and Nedbank [who bonded his purchase of Sanlam-Middestad] into disrepute".
"By continuing to pursue its own agenda, M&G has helped us confirm what we have always suspected, identify one of the culprits [sic] …
"With regard to [the Independent Complaints Directorate headquarters at] Vermeulen 114, suffice to say it was a legitimate transaction between two astute business partners who have been doing business together for over 10 years.
"We want to put it on record that we will not be drawn into accusations that are a foregone conclusion in the eyes of [the] M&G. Seemingly, Mr Van Niekerk knows everything and has all the answers. In view of all this, it might be in M&G's best interest … to stick with its sources and publish what it wants.
"NB.If you choose to report selectively, as has been the case in previous articles, we reserve the right to escalate your questions to other newspapers, all ANC and government structures and our response to that effect."
State leases costing billions
Public Works Minister Gwen Mahlangu-Nkabinde has finally realised the state is wasting billions on state leases of the kind described on these pages.
In her budget speech this week she announced plans to slash spending on state leases over three years.
"The leasing portfolio is costing the state a lot of money. The department has, in the past year, spent billions on leases and functional accommodation for client departments," she said.
"Investment in repair and maintenance, continuous maintenance and construction of new government buildings could generate major savings for the state."
Last week the Mail & Guardian exposed how state leasing had reached scandalous proportions. Businesspeople around the country are using their political connections to secure inflated state leases, which, in turn, service overblown bonds, enriching them at the expense of taxpayers.
Public works 'bullied' ICD into lease
Parliament's scrutiny of businessman Roux Shabangu's lease agreement with the police's Independent Complaints Directorate (ICD) has flushed out new evidence to suggest the public works department "blind signed" the ICD and bundled into a building it could not afford.
It also appears that the department blew more than R13-million on this building while it stood empty for 18 months.
Just 10 months before public works signed the lease with Shabangu it approved a lease with another company -- Mati Properties -- for the same building for substantially less than Shabangu received.
This suggests Shabangu's lease could have been inflated, although his business partner, Japie van Niekerk, has denied this.
In terms of value per square metre, the Mati Properties lease was worth 40% less than that awarded to Shabangu. And Shabangu's lease was set to escalate at the top-end rate of 10% a year, compared with 8% for Mati.
Over a 10-year period, this difference in escalation will substantially affect the overall lease cost.
As it happened, Mati did not buy the building as originally planned and the lease agreement was not concluded. The reasons for this are disputed.
The seller, Sayed Mia, said Mati could not come up with the money by the agreed date. But Mati director Calvin Mojapelo said Mia reneged on its sale agreement specifically so that he could sell to Shabangu, who ultimately won a more lucrative lease.
On Thursday, public protector Thuli Madonsela confirmed she would investigate the ICD lease, which is already under investigation by the Special Investigating Unit.
Under fire
The ICD has come under close scrutiny from Parliament's police committee twice this month. MPs demanded that the directorate explain why its rental expenditure ballooned fourfold in one year, from R4.2-million to R15.6-million.
Part of the ICD's explanation was that the lease with Shabangu was way over its budget, a point public works, which manages state leases, allegedly failed to disclose.
In turn, MPs demanded that the ICD explain why it then agreed to move into the building without clarity on how the lease would affect its budget.
Chastising the directorate, police portfolio committee chairperson Sindi Chikunga cut Tuesday's meeting short: "I don't believe continuing with this meeting will take us anywhere. We need to invite the department of public works and treasury to be part of the meeting when we discuss this matter again," she said. "It is clear that you took matters for granted when dealing with this matter. I can't understand why."
The committee will reconsider the matter next Tuesday.
'We had no choice'
The ICD's representations to Parliament, interviews with directorate spokesperson Moses Dlamini and independently sourced documents suggest a shambolic operation by public works that ultimately forced the ICD's hand, a full three years after it applied to the department for a new building.
Public works has not responded to Dlamini's claim that the ICD had no choice, but the timeline of events is suggestive:
- In October 2007 the ICD wrote to public works requesting a new lease. The directorate was growing and was split uncomfortably between two buildings in Pretoria.
- In March 2008 public works invited the ICD to view three buildings. The directorate approved the Structura building in Pretoria. Six months later, public works signed a lease with Structura's owners, Dlamini said.
- Refurbishments at Structura began only in March 2009, a year after the visit. These cost the ICD R770 000.
- The ICD was due to occupy the building in May, but Dlamini said this was postponed many times until September 2009, when the ICD was told the landlord could not meet some security obligations. These included the installation of biometric scanning and the blocking of access from a neighbouring building. Sorting out these issues was public works's responsibility, Dlamini claimed, yet after each postponement, "exactly the same issues remained".
- By this time, Dlamini said, public works had signed a lease for a different state entity for a building still occupied by the ICD, at twice the price. When the ICD failed to move out the landlord took it and public works to court.
- Meanwhile, public works had signed a lease with Shabangu for his and Van Niekerk's City Forum building on April 14 2009. The Mail & Guardian has a copy of the lease. It is understood that this building was destined for the human settlements department. Curiously, this lease, worth R137-million, was dated to commence a month and a half before it was signed. In other words, the state was liable for payments from March 1 2009. However, the ICD occupied it only in September 2010. This suggests that public works paid for a lease on an empty building for 18 months, which would have cost more than R13-million.
- In January 2010 public works suggested that the ICD move into Shabangu and Van Niekerk's City Forum and human settlements move into Structura. Following a site visit the ICD wrote to public works that the building seemed adequate. ICD head François Beukman stressed that he needed clarity on some issues before the ICD could commit, including a copy of the lease and sight of alternative building options.
- In response, public works's property manager, Vusi Mashiane, said human settlements had already began to move into Structura. "Should ICD not occupy [City Forum], fruitless expenditure will be incurred," Mashiane said.
- In June, Mashiane wrote to the directorate saying that "the lease commitment for [the building] would commence from July 1 2010", requiring it to start paying rent on a building it did not occupy. Beukman refused this in writing, "since the building is not yet ready for occupation". The M&G has seen these letters.
- In July, Dlamini said, the ICD asked once again to be shown the lease. The following day, it received a copy, but this was "illegible". Subsequent requests were ignored, he claimed, until after ICD had moved into the building.
- On September 15 the ICD moved into City Forum, twice the size it required and about double the cost of Structura. Dlamini said the ICD never agreed in writing to move into City Forum.
Pressed on why the ICD had moved in without considering other options and without having seen a copy of the lease, as it had demanded, Dlamini said: "We were pressured. We were basically bulldozed. We were dealing with a government department in good faith and we did not expect anything untoward.
"We had been looking for accommodation since October 2007. Our staff had grown from 46 to 99. Public works led us to believe this was the only option. We didn't have any other choice, but we didn't know we'd have to pay such a huge amount."
Public works did not respond to questions.
» » » » [Amabunghane & Mail & Guardian]
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