Sunday, August 15, 2010
SAPS paying 'R100m too much' for lease
Money could instead have covered the salaries of 260 constables for 10 years
Aug 15, 2010 12:00 AM | By STEPHAN HOFSTATTER and MZILIKAZI WA AFRIKA
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.
Comments by Sonny
The 'fast guns' take on the 'slow thinkers!'
Corruption will never cease!