R600 MILLION MOTORSPORT RIP-OFF IN GAUTENG - DA CALLS FOR PROBE
Leaked documents to the Democratic Alliance show that more than R600 million is to be paid for motorsports promotion in Gauteng that will do little to boost the economy or create jobs.
We will be paying R150 million over three years for the A1 Grand Prix, R444 million over seven years for the Super Bikes World Championship, and R39 million for three years of the Super Stars series.
A report by Bowman Gilfillan prepared in October last year for Blue IQ, an agency of the Gauteng Department of Economic Development (DED), is extremely critical of glaring irregularities in the Motorsports projects and the high-risk contracts entered into.
Identified deficiencies include:
- Gauteng Motorsport Company (GMSC) was corporatised without Treasury approval
- Supply chain compliance is unknown
- It is unknown what amounts have already been paid out
- The assets and licences attached to the project are unknown
- The contracts are either silent on Governing Law or a foreign Governing Law applies
- No breach clauses
- Government obligations beyond the scope envisaged by the PFMA
- No financial cap on the amounts to be spent for hosting the events
- No exchange control clearance from the SA Reserve Bank
According to the report, "we could not determine the value that DED is deriving from these activities". It points out that government generally does not sponsor professional organizations like Mamelodi Sundowns or PSL, and that "unfortunately, the contract under review is structured such that it could be argued that DED is primarily sponsoring the Formula 1 and A1 Grand Prix organizations and nothing more".
The big winner apart from the overseas motorsport controlling bodies is a mysterious local company called Nightsbridge Investments. They look set to score about R56 million in "management and consultancy services", taking 10% commission for arranging the deals, and 12.5% of income from events. According to the report, it is contrary to the PFMA to delegate a core function to a private company like Nightsbridge.
All the contracts look like a giant rip-off, with little spin-off benefit for the local economy.
It would have been even worse if the department had gone ahead with the Formula One as this would have cost billions to rebuild the Kyalami race track and pay the ruinous fees to Bernie Ecclestone, who is more rapacious than FIFA.
R2 466 000 was, however, spent on a Master Plan Study for an F1 Race Track, paid to Tilke GmbH & Co.KG, a German firm of engineers and architects.
Other wasteful spending includes R30 million sponsorship last year for the Renault F1 road show, and R65 million (unconfirmed figure from an industry source) for the GO-GP.org.za logo to be displayed by the BMW Sauber F1 team, which is a ridiculous way to market the province as most people would think GP stood for Grand Prix rather than Gauteng Province.
In my view, this is not mere inefficiency and poor judgement, but probably involves high-level corruption. After all, Kgalema Motlanthe once said when he was ANC secretary-general, "Almost every project is conceived because it offers opportunities for certain people to make money".
Top ANC figures who must account for their role include Paul Mashatile, who pushed the motorsport project as Finance MEC and then as Premier, and Tokyo Sexwale, the Seat Holder of A1 Team South Africa (it is unclear whether he has resigned this position since he became Minister of Human Settlements).
I am reminded of the R600 million wasted in the Phakisa fiasco to build a F1 race track at Welkom in the Free State, and the poor return for the R92 million spent on the A1 Grand Prix when it was run in Durban.
I suspect that a large amount of money spent on the Gauteng motorsports project may have found its way to the ANC and possibly individual ANC officials.
It is not sufficient for Cachalia to simply pull the plug on the F1. He must institute a forensic probe into the motorsport contracts, and hold accountable all those who got us into this scandal. There should be prosecutions, not simply dismissals.
Cachalia must recover as much money as possible, and repudiate the contracts if he can, although there are very high cancellation costs due to the one-sided way in which they were drawn up.
The Gauteng Motorsports Company was born in sin and should be closed down.
There are other aspects of this scandal that we are investigating. My colleague Dr Gavin Lewis MPL, will be asking questions to establish the true costs of this project and the best means to limit the damage.
If it becomes clear that criminal charges are justified but the department refuses to lay them, then I will lay them myself.
This is a test for Premier Nomvula Mokonyane to live up to her pledge to ensure clean and effective governance.
Statement issued by Jack Bloom MPL, Democratic Alliance (Gauteng) corruption spokesman, August 11 2009
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