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Businessman, Roux Shabangu. Picture: Sarah Makoe
The Department of Public Works (DPW) allegedly concluded a staggering R200-billion worth of property leases for various state departments without going through a competitive bidding process.
This is according to property mogul Roux Shabangu who this week mounted an offensive to fight findings by the Public Protector that his company had been irregularly awarded two lucrative tenders for police headquarters in Pretoria and Durban.
Failure to apply competitive tender procedures in two police leases worth R1.78-billion with Shabangu led Public Protector Thuli Madonsela to declare the contracts invalid in February this year.
But, fighting back this week, Shabangu said he was not the only one. He had identified no fewer than 194 public sector lease agreements in Pretoria alone where DPW flouted normal tender procedures – with only 72 agreements being concluded on the basis of competitive bidding.
This amounts to 73 percent of all property deals concluded by DPW on behalf of government departments in the city.
The Sunday Independent has seen documents listing 266 lease agreements in Tshwane.
The negotiated lease agreements amount to R4.2bn, although the properties themselves are valued at much more. Shabangu said his figure of R200bn included leases of properties throughout the country.
Most of the leases in question were concluded in the 2000s and involve buildings rented by various government departments including Police, Defence, Justice, Water Affairs, Human Settlement Correctional Services and Health. One 50-year lease for only R1.14 a month dates back to 1976, and another 99-year lease for R847.54 a month dates back to 1973.
Two 10-year leases priced at R277 million for the Department of Transport and a R158 million for the Department of Justice rank among the most expensive on the list.
In a letter to Public Protector Thuli Madonsela, dated November 22, Shabangu said his own “investigation” has revealed that “there are some R200bn to R300bn worth of leases and contracts in the current market place which have (allegedly) not been signed off” in accordance with the Public Finance Management Act.
Shabangu said he had evidence that some of the leases were negotiated at rates even higher than those agreed in respect of the controversial Middestad premises leased from his company Roux Property Fund as the national headquarters of the South African Police Service.
Three particularly were highlighted in the letter to Madonsela:
l The Travenna Campus on the corner of Meintjies and Schoeman streets, where government was paying R165 per square metre.
l The Department of Trade and Industry Building in Meintjies Street, where the rental was estimated at R300 per square metre.
l And most extravagantly of all, the Department of Foreign Affairs’ headquarters in Soutpansberg Road at a whopping R450 per square metre.
The Middestad lease – slammed by the Public Protector as being out of line with market-related prices in Pretoria – was concluded at a comparatively modest R110 per square metre, Shabangu claimed.
Now Shabangu has challenged Madonsela in the interests of fairness to subject all 194 deals to the same scrutiny that was brought to bear on his lease agreements for police buildings in Pretoria and Durban.
“In honouring the fundamental principles underlying our constitution and equality in action and before the law,” Shabangu said, “we are therefore asking the public protector to suspend these leases and investigate them just like she did with the Sanlam Middestad lease”.
He said that his company would also like to know what is happening with the Durban lease which was suspended last year pending an investigation which was completed by the Public Protector in October this year.
Shabangu’s complaint is corroborated by a recent affidavit deposed by suspended Public Works acting director-general, Sam Vukela. He puts the number of negotiated leases at a whopping 2 415 out of a total of 2 950 lease agreements concluded by Public Works from 2008 until September 2011.
In his affidavit, Vukela says while “much has been made” of the fact that there was no tender for the Middestad lease, this is not out of the ordinary as office space of the magnitude required for the SAPS headquarters is not easily available especially in the Pretoria CBD.
In terms of Treasury’s supply chain management regulations, negotiated agreements – where normal stipulations that rival bids be pitted against one another in a transparent and competitive process are sidestepped – can only be entered into as deviations from established procedure in urgent or otherwise exceptional circumstances. These Madonsela found had not been applicable in the case of Shabangu’s leasing of the Middestad premises.
“It appears,” she said in her report titled Against the Rules, “from the very nature of the procurement process followed, namely, by entering into a negotiated contract instead of a competitive bidding process, that the constitutional requirements of fairness, equitability and transparency were not complied with.”
But according to Vukela’s affidavit, non-compliance with Supply Chain Management prescripts was frequently justified.
“Should tenders be invited each and every time where (public works) knows beforehand that the tender will be non-responsive to the requirement, it will be a waste of money to place the advertisement,” he said.
Sabelo Mali, spokesman for newly appointed Minister of Public Works Thulas Nxesi, however admitted to Independent Newspapers serious problems had set in under his minister’s predecessors.
He described the process followed by the department in awarding building lease contracts without going on public tender as “flawed and contrary to supply chain policy.”
“All lease agreements in question are subject to an investigation by the SIU. Each and every case will be dealt with on its own merits and I cannot at this stage say what steps the department will take until investigation completed,” said Mali.
Mali added that the fact that government regulations were routinely not followed could not be thought to make it acceptable: “If people were not complying with the prescript of the law, it could not be said that it is common practice.”
Thus far the SIU has uncovered 41 suspect lease deals in an investigation focusing on deals worth R3.3bn.
According to SIU spokeswoman, Marika Muller, the investigation is expected to continue for more than three years, with specific contracts and general procurement irregularities scrutinised.
In addition to the 41 leases under investigation, the SIU is also looking into 10 building and renovation contracts and “a number of department officials who have interests in companies who have contracts with the department.”
In the fallout, four officials including Vukela have been suspended as a result of the SIU’s investigations.
Meanwhile, Vukela through his lawyer Themba Langa, Madonsela, of failing to carry out a thorough investigation into the lease saga.
Langa said Vukela should never have been placed on special leave and has accused former Public Works Minister, Gwen Mahlangu-Nkabinde of being dishonest in the way she removed him.
“What I don’t understand is why the public protector didn’t look at the transaction trails in the department… She never called Vukela to be interviewed (during the investigation). That failure made it possible for her not to receive the proper information,” said Langa.
He also stated that Vukela’s second affidavit “brings into question the basis of the entire public works application” against the Roux Property Fund but said that was not the intention.
Madonsela said she would investigate Shabangu’s complaint after confirming that the SIU is not doing the same investigation.
“Sam Vukela is a member of the top leadership team of that department and he is admitting in his own affidavit that they have consistently acted outside the law.
“On the face of it that is how it appears. But having said that, not every contract that is negotiated is unlawful. The default position in the public sector is that everything has to go either on tender or quotations. And everything above half a million must go on tender,” Madonsela concluded. – Sunday Independent
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