Cape Town Stadium: The Auditor-General’s opinion

The Cape Town Stadium has been a thorn in the side of Capetonians since it was built. Under pressure from government and Fifa, in 2006 newly elected Mayor Helen Zille lifted the moratorium she had placed on it saying she was satisfied the “stadium would not be a financial burden on ratepayers”. Ha!

The promises – lies, really – of economic and social benefits from the World Cup and new stadia, as sane people knew, never materialised. Instead we have a legacy of debt and corruption – construction companies colluded on stadium tenders, costing Cape Town over R400m, and FBI allegations South Africa “bought” the 2010 games with $10m in a suitcase.

I’ve written about the stadium often. Despite my criticism of its management, I’m sympathetic to host cities, including my home Cape Town, which do not know what to do with the unused and unnecessary facilities (excluding FNB Stadium).

Cape Town is perhaps the only host city (and Durban?) trying to find a way to defray some of its stadium’s considerable operating and maintenance costs. To this end, they investigated five business plan options.

They also foisted on us the disastrous Cape Town Cup “flop”. The cup lost ratepayers R28m, and was the subject of investigation during Auditor-General (AG) Kimi Makwetu’s 2015-16 annual audit (disclosure: I was the complainant). The city’s Municipal Public Accounts Committee is also investigating now, following hot on the heels of the AG’s audit report that’s presently being finalised.

However, the flaw of the business plan feasibility study is it investigated, per its terms of reference, only the five business models the city proposed. This tunnel-vision, commercial and development-centred approach – a trait of the DA-run city – ignored the fact that cannot be gotten around: the stadium will never be used for the purpose it was built, and will always be a drain on ratepayers no matter what the city does.

The city rejected other suggestions for the stadium that ranged from the fanciful to the realistic and achievable. They are silent about, and ignore, in-stadium options to reduce costs including life-cycle costing methods used at well-run facilities like (ANZ) Stadium Australia. For example, the city is facing ongoing, hefty costs to clean, repair and maintain the stadium’s unique but costly glass roof, rather than replacing/removing it, which will be cheaper in the long run.

But unfortunately, for the city’s hubristic and unrealistic politicians and bureaucrats, it’s better to have a “world class” facility we can’t afford than a scaled-down, but still usable, one as suggested by many. Of course, according to them, the public doesn’t understand and jump to conclusions, as chief financial officer Kevin Jacoby accused me of last week.

The city states annual total expenditure on the stadium is about R40m. But as I found out this year, it excludes significant employee costs that are about R20m for 2015/2016; repairs and maintenance (like the roof); public liability insurance; significant municipal services; current and projected life-cycle asset costs, etc. My estimate of the stadium’s true costs, including these omitted items, is in the R200m range including the once-off Cape Town Cup loss.

Last week Jacoby disputed this estimate (without seeing or asking for the rationale), which was based on the partial, actual information they reluctantly gave me in May after much arm-twisting. It was based on industry benchmarks and reasonable extrapolations – a common engineering (a field I once worked in) and the built environment[i], accounting and economic practice – in fact, far better than construction companies’ thumb-suck World Cup tenders gullible host cities like Cape Town fell for.

I did this exercise because the city (as I write, five months after I first asked) refused, and still does, to give me information about the stadium’s cost, operations and strategic management and business model – information Jacoby told me in June was “simply not available”, i.e., it does not exist. (Among the information allegedly not available is the composition of the stadium’s management team, which he purportedly leads.)

The business plan model council approved for the stadium and precinct is a municipal entity (“MC 30/05/2015, Recommendation from the Executive Mayor”). I don’t know if it’s the same, or a variation of that proposed in the business plan’s option 5B[ii]: municipal entity because the city refuses to tell me. They, i.e., city manager Achmat Ebrahim and Mayor Patricia de Lille through Jacoby, also refused me information about the projected cost to ratepayers and the legal, environmental, urban and legislated impact on the city.

In fact, Jacoby refuses on principle to provide any information despite last week – after his boss instructed him to attend to my AG-instigated, renewed query (see below) – asking me what I wanted to know, but questions he refused, as he did before, to provide answers for. I don’t know why he bothered emailing me.

In considering the municipal entity model in 2014 the then councillor Beverley Schafer compared it to the successful Cape Town International Convention Centre (CTICC) municipal entity Covenco. But that’s mistaking a horse for a camel, which politicians frequently do.

CTICC is an asset that’s desirable and constantly utilised, whereas the stadium is a dodo that cannot be brought back to life, irrespective of the Jurassic Park-type reengineering that’s being done on it. This they don’t understand.

What Jacoby did confirm, though, is the business model approved (“resolved”) will include commercialisation of the stadium and precinct, as they’ve intended and we’ve known all along. I don’t know what this means practically because they refuse to tell me in what capacity the city as owner will act in this arrangement and how much it will cost us. They refuse to tell me anything at all not in the “public domain”. But what’s publically known is nothing of substance.

But we have an idea what they intend from the tender issued for a plot next to the stadium, and the proposal/feasibility study to use it as parking garage (following Brasil’s 2014 World Cup US$550m footsteps apparently).

The published business plan options consultants prepared at great expense, whether or not the city accepted it intact or will alter it, proposed retail, informal and formal trading, entertainment, hospitality, parking and commercial activities in and around the stadium and Green Point Park. We may assume (according to Jacoby, we should not make assumptions even with the information embargo) their municipal entity business model allows for something similar.

In June this year I asked the auditor-general to investigate the business plan model, the city’s failure to investigate in-stadium alternatives to reduce/defray costs and discrepancies in the stadium’s annual expenses.

Makwetu replied last week in an emailed letter dated 31/10/2016 that he “viewed your allegations in a serious light, [but] have decided not to conduct a separate investigation. The matters raised by you in respect of expenditure incurred on the Cape Town Stadium will be considered as part of the 2015-16 audit cycle [now complete; the audit report is being finalised] in line with our mandate and scope of work.”

He said the “business plan model falls outside the scope of the AGSA’s regularity audit, as it is a management prerogative”.

He dryly noted the lack of “communication” between the city and I. But advised me to pursue it with city management to “ensure the issues [I] raised are clarified and addressed to your satisfaction”, which last week I again unsuccessfully tried to do, and was rebuffed. The AG said if my inquiries remain unresolved I should consider referring it to the Public Protector.

There’s not much comfort in his letter except to wait for the annual financial statements and audit report. But he left me with a pearl of an opinion, a conundrum I’m still ruminating on, among the bland, accountant-speak. (Disclosure: I’m a former accountant, and 10 years ago was a contractor on AG audits, a fact Jacoby used to obliquely question my bona fides.)

“The City of Cape Town has classified the stadium [and presumably the park and their precincts] as a community asset for annual financial statement purposes. The stadium is not expected to make a profit, but will be utilised for the benefit of the citizens of the city. Thus, in essence, any plan that is proposed to make the use of the stadium more profitable is not in line with the City of Cape Town’s classification of the stadium [emphasis added]”

I’ve asked Makwetu if it means what I think it means: commercialisation of the stadium, Green Point Park and their precincts – “community assets” – is “not in line” (not permitted) unless the city changes their classification, which can only be done after the usual processes. This week I asked the city manager specifically which legislation or regulation allows for the commercialisation, as the city apparently envisages, of community assets. I was rebuffed.

Jacoby proudly claims he and the city respects and abides by all legislation and precepts governing municipalities and institutions, including auditor-general and public protector. He was not specific, but it would include constitutional, democratic principles; public participation and genuine, meaningful consultation, and not citizens being dictated to and obediently accepting their edicts; access to information, which includes information not already in the public domain; just administrative action and Batho Pele.

In their hubris as our purported overlords, they do not understand these principles. Despite claiming to observe and respect the offices of ombudsman, he rejected with contempt the AG’s entreaty to me, and indirectly the city, viz, “pursue your interactions with the city management to ensure the issues raised are clarified and addressed to your satisfaction”. We have seen similar contempt for constitutional institutions like the ombudsman from the highest political office in the land and the governing party.

Particularly under De Lille, the DA-run city, politicians and many bureaucrats have adopted a combative, ad hominem style in their dealings with citizens, as I have experienced. So their obfuscating over the stadium precinct is not surprising.