Dear Premier and Minister,
Further to earlier discussions and Emails, I copy you on a media release for today.
I do not know whether any of these deals have come before cabinet, or will come before cabinet, but I do know that they are being prepared for cabinet to consider.
As they are clearly not in the Province's best interest, I thought it good to send the detail to both of you.
Kind Regards,
Robin Carlisle MPL
ANC Provincial government Departments rush to push through BEE scam deals before the election.
Province will lose at least R54.8m if deals go through
Members of the commercial property sector have alerted the DA that a number of properties in which the Provincial government is a tenant, or about to become a tenant, have suddenly changed hands. On investigation, the DA was able to identify three of these purchases.
The DA was also able to obtain certain details of the leases from sources close to the Provincial Treasury.
In its investigation, the DA has obtained the advice of one of SA`s leading commercial property brokers and evaluators.
In every case, the directors of the purchasing companies are the same, and their various companies are registered at the same address.
In every case, the rentals to be paid by the Province are far in excess of current market rates (at least R54.8m in total over the life of the leases), and in two buildings where the Province is an existing tenant, the new rental is almost double the existing ones.
This scam has been made possible by the Property Charter for the commercial property sector which requires a minimum of 26% black equity in buildings in which the Province rents space, unless their annual turnover is less than R5m.
National Government, working secretly with the Provinces, has decided to go way beyond the charter. During last year the "Property Incubator Program" was initiated which will basically exclude all white landlords who do not have black equity partners from ever entering into leases with government departments.
The scam uncovered by the DA is yet another variant of the unlawful abuse of so-called broad based Black Empowerment.
The scam works like this.
An official from the Western Cape Public Works Department (usually one Miz Penny Penxa, a senior member in the Property Management Department) approaches white landlords whose leases with the Province are due for renewal. She advises them that the leases will not be renewed because the landlord has not achieved the required BEE status in terms of the Charter.
Shortly afterwards, the landlord is approached by an agent offering to purchase the building.
The agent also has a document from the Public Works Department stating their intention to renew the lease at a far higher rental than the current lease.
This document is supported by a a rental evaluation from a property evaluator which is far higher than the market rentals being obtained in similar properties in the neighbourhood.
Thus the purchaser is enabled to buy the building on the surety of the Province's intention to lease.
In essence, the buyer funds the purchase from the new high rentals at the taxpayers` expense.
This is unlawful and contrary to both the provisions of the Constitution and the Public Finance Management Act. If it is not stopped dead in its tracks, it will spread thru national and provincial governments like an aggressive cancer, consuming vast sums intended for service delivery.
The three scams:-
1.The Hurteria Building, York Street, George (erf numbers 15018 and 19335)
This was the old Nelson Mandela College and is now empty. It is to be used by the Western Cape Health Dept as Nurses training college.
Hurteria was purchased from the Port Elizabeth Technicon for R18M by River Bend Trade and Investments 57.
The River Bend Directors are Juan Carl Gossman of 16 Uitsig Close; Dressage Close, Constantia Hills and Peter James Volkwyn of 22 Snowball Street, Protea Valley, Welgemoed. The company`s official registered address is PFK House, 45 Main Road, Claremont.
The valuation was provided by one Mr Weideman at R98 per SM totalling R250000 pm.We are informed that this is an extremely high rental for this building.
Never-the -less, the Provincial Government`s Public Works Department increased its offer above the valuation to R273000 per month on a 10 year lease escalating at 9% per annum.The rental to be paid over the 10 year lease woulf be R50M.
Our commercial property advisors consider this lease to be 44% above the market rate.
Thus over the 10 year period of the lease, the Province and the taxpayer would be forking up some R22m more than the normal market rentals.
2.No 3 Rensburg Hof, Courtney Street (erf numbers 8685, 8688 and 8690)
The Province is the current tenant in this building, and the existing lease had expired on 30.9.2008.The existing rental is R256500 (inc VAT) per month
Rensburg Hof was purchased for R35m from Swanvest 11 (sole shareholder Mr Louis Van Rensburg - 0833777232) by Boomerang Trading 48 (Pty) Ltd.
The Boomerang Trading Directors are Juan Carl Gossman of 16 Uitsig Close; Dressage Close, Constantia Hills and Peter James Volkwyn of 22 Snowball Street, Protea Valley, Welgemoed. The company`s official registered address is PFK House, 45 Main Road, Claremont.
The valuation was again provided by Weideman at R409000 per month, an increase of R152500 or 59% per month. Again,.we are informed that this is an extremely high
rental for this building.
Notwithstanding this enormous increase, the Provincial Government`s Public Works Department increased its offer above the valuation to R450000 per month on a 10 year lease escalating at 9% per annum.This is an increase of 75% on the current rental. The rental to be paid over the 10 year lease woulf be R80M.
Our commercial property advisors consider this lease to be 23% above the market rate.
Thus over the 10 year period of the lease, Province and the taxpayer would be forking up some R18.4m more than the normal market rentals, and R39m more than if they had extended the current lease with a 9% escalation.
3. No 2 Maynard Plaza Building, Wynberg.(erf number 145385)
The Province is also the current tenant in this building. The existing rental is R220000 (inc VAT) per month and the lease expired in April 2006.
The building was purchased by Pacific Breeze Trading 52 for an unknown amount.
The Pacific Breeze Directors are Juan Carl Gossman of 16 Uitsig Close; Dressage Close, Constantia Hills and Peter James Volkwyn of 22 Snowball Street, Protea Valley, Welgemoed. The company`s official registered address is PFK House, 45 Main Road, Claremont. In this case there is also another director - Miz Ntombizodwa Yvonne Lungcuzo of 15 Altona street, Oakglen, Bellville.
We are informed that the agent for this deal was Marlon Parring of Baker Street Associates (Cape Town) (Pty) Ltd trading as Baker Street Properties (contact details 0828932832).
Provincial Government`s Public Works Department offered a lease of 5 years escalating at 9% with an opening rental of R408000 per month, an increase of R188000 per month (or 85%) over the existing lease. The rental to be paid over the 5 year lease would be R29.3M.
Our commercial property advisors consider this lease to be 49% above the market rate.
Thus over the 5 year period of the lease, Province and the taxpayer would be forking up some R14.4m more than the normal market rentals, and R13.5m more than if they had extended the current lease with a 9% escalation.
There can be no doubt that Messrs Volkwyn and Gossman will make a financial killing if these deals are approved by Cabinet. Mr Volkwyn is also a Director of Grand Parade Investments, the black empowerment arm of Grand West Casino, which ex-Premier Rasool made a substantial beneficiary of gambling tax cuts now worth over R75m. He is also a director of GPI Slots and the Worcester Casino.
On the 16th March, I advised both Premier Brown and Finance Minister Strachan that we were deeply concerned about a number of leases being rushed to Cabinet for approval just before the election.
A copy of this media release will be sent to them today, as well as to the Auditor General.
Every employee in the Property Management Department, as well as the senior administrative and political management of the Public Works Department must have been aware of these matters. Regrettably, none of them blew the whistle on the scams.
Accordingly, once the DA has assumed power, this entire matter will be subject to extensive forensic audit if this is not already underway.
Statement issued by Robin Carlisle, Western Cape Democratic Alliance MPL, March 30 2009
