No World Cup return for city's ratepayers
Shock revelation as probe is launched into Joburg's Soccer City contract
Shock revelation as probe is launched into Joburg's Soccer City contract
May 1, 2010 9:51 PM By ROB ROSE
Taxpayers, who forked out R3.4-billion to build Soccer City near Soweto, will not see any of the estimated R128-million that Fifa will pay the City of Johannesburg as "rental" to use the showpiece stadium for next month's World Cup.
Any Fifa cash not used for World Cup expenses will stay in the bank account Jacob Zuma
Contracts in the Sunday Times's possession show this money will go into a bank account jointly controlled by the city and National Stadium SA, the company appointed to "manage" Soccer City for the next 10 years.
About R60-million of the cash will be sucked up in "pre-World Cup expenses" at the stadium. The remainder will be used for "capital expenditure" and "extraordinary maintenance" at Soccer City after the event.
Ratepayers will not see any financial return on the money spent on the stadium, despite the city's pledge in its 2008 annual report that citizens would get a "long-term and sustainable benefit" from the deal.
Other questions loom over National Stadium SA, after city officials confirmed they had launched a probe into the company's empowerment credentials following a Sunday Times exposé last week.
Share certificates show that Gladwin Khangale, a former security guard, "bought" 26% of National Stadium's "lead investor", Global Event Management (GEM) in October 2007, five months before the city invited bids for the tender.
However, not only did Khangale pay no money for the 26%, but he now claims he no longer owns any part of GEM. Companies Office records show Khangale has also since "resigned" as a director.
City of Johannesburg 2010 executive Sibongile Mazibuko said this week that the city believed Khangale was still a 26% shareholder and anything to the contrary "contradicts our records".
Mankodi Moitse, the city's executive director for finance, confirmed that "investigations" were launched this week into "some aspects" of the contract. However, Moitse said that while they had played a role in the decision, National Stadium's empowerment credentials were not the factor that swung the contract in its favour.
"The bid document submitted by National Stadium contained a share certificate reflecting the 26% shareholding by Khangale, a historically disadvantaged person ... (but) National Stadium was awarded 0.65 points out of a possible 10 (for empowerment)," she said.
She confirmed that "only three proposals (including National Stadium's) were received by the closing date" of the tender.
National Stadium had superior expertise, she said.
A letter from Mazibuko to Investec Bank in May last year confirmed that Fifa would pay the city "as rental for the use of the stadium, an amount equal to 10% of the net ticket revenues" for World Cup matches.
At the time, Mazibuko said gate revenues at Soccer City were estimated at R1.5-billion, which would have made the city's cut R154-million.
National Stadium executive chairman Jacques Grobbelaar told the Sunday Times late last year that, owing to the strengthening of the rand, that amount had dropped to an estimated R128-million. The figure will be finalised by Fifa only after all tickets are sold.
Grobbelaar said that any Fifa cash not used for World Cup expenses would stay in the bank account, rather than go back to the city.
"If, after eight years (when our contract expires), there is still R40-million in that provisional account, this carries over and will remain in the account for the next management company," he said.
Of any money that National Stadium makes at Soccer City after the World Cup, there is a profit-share deal, with the city getting up to 22% of after-tax profits.
These revelations highlight a lack of transparency in government tenders that prevents deals from being properly scrutinised.
Taxpayers, who forked out R3.4-billion to build Soccer City near Soweto, will not see any of the estimated R128-million that Fifa will pay the City of Johannesburg as "rental" to use the showpiece stadium for next month's World Cup.
Any Fifa cash not used for World Cup expenses will stay in the bank account Jacob Zuma
Contracts in the Sunday Times's possession show this money will go into a bank account jointly controlled by the city and National Stadium SA, the company appointed to "manage" Soccer City for the next 10 years.
About R60-million of the cash will be sucked up in "pre-World Cup expenses" at the stadium. The remainder will be used for "capital expenditure" and "extraordinary maintenance" at Soccer City after the event.
Ratepayers will not see any financial return on the money spent on the stadium, despite the city's pledge in its 2008 annual report that citizens would get a "long-term and sustainable benefit" from the deal.
Other questions loom over National Stadium SA, after city officials confirmed they had launched a probe into the company's empowerment credentials following a Sunday Times exposé last week.
Share certificates show that Gladwin Khangale, a former security guard, "bought" 26% of National Stadium's "lead investor", Global Event Management (GEM) in October 2007, five months before the city invited bids for the tender.
However, not only did Khangale pay no money for the 26%, but he now claims he no longer owns any part of GEM. Companies Office records show Khangale has also since "resigned" as a director.
City of Johannesburg 2010 executive Sibongile Mazibuko said this week that the city believed Khangale was still a 26% shareholder and anything to the contrary "contradicts our records".
Mankodi Moitse, the city's executive director for finance, confirmed that "investigations" were launched this week into "some aspects" of the contract. However, Moitse said that while they had played a role in the decision, National Stadium's empowerment credentials were not the factor that swung the contract in its favour.
"The bid document submitted by National Stadium contained a share certificate reflecting the 26% shareholding by Khangale, a historically disadvantaged person ... (but) National Stadium was awarded 0.65 points out of a possible 10 (for empowerment)," she said.
She confirmed that "only three proposals (including National Stadium's) were received by the closing date" of the tender.
National Stadium had superior expertise, she said.
A letter from Mazibuko to Investec Bank in May last year confirmed that Fifa would pay the city "as rental for the use of the stadium, an amount equal to 10% of the net ticket revenues" for World Cup matches.
At the time, Mazibuko said gate revenues at Soccer City were estimated at R1.5-billion, which would have made the city's cut R154-million.
National Stadium executive chairman Jacques Grobbelaar told the Sunday Times late last year that, owing to the strengthening of the rand, that amount had dropped to an estimated R128-million. The figure will be finalised by Fifa only after all tickets are sold.
Grobbelaar said that any Fifa cash not used for World Cup expenses would stay in the bank account, rather than go back to the city.
"If, after eight years (when our contract expires), there is still R40-million in that provisional account, this carries over and will remain in the account for the next management company," he said.
Of any money that National Stadium makes at Soccer City after the World Cup, there is a profit-share deal, with the city getting up to 22% of after-tax profits.
These revelations highlight a lack of transparency in government tenders that prevents deals from being properly scrutinised.
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