SPOORNET chief executive Zandile Jakavula bought an exclusive riverfront property from the rail parastatal at a fraction of its value – and then had Spoornet officials renovate it, initially using public money.
Jakavula last month repaid Spoornet for the renovations to the Port Alfred property – but it appears the total amount he paid remained well under market value. Jakavula may also have trouble explaining away what seems to be an abuse of power.
”On the face of it, this appears to be a case of a wanton abuse of public office for personal enrichment,” said Colm Allan, head of the watchdog Public Service Accountability Monitor (PSAM) at Rhodes University this week. ”In terms of the Public Finance Management Act, it is illegal for the accounting officers of public entities like Spoornet to use their position, or information obtained as a result of their position, for private gain.”
Jakavula bought the former railway house at 11 Van der Riet Street, on the banks of the scenic Kowie river, for about R83 000 from Spoornet in June 2001 before it was renovated.
The subsequent renovations – by Spoornet Property Services at his request – cost, according to the parastatal, a further R363 000. He settled the difference last month, bringing the total amount he paid to about R450 000, out of a loan from Transnet’s mortgage scheme. State-owned Transnet is Spoornet’s parent company.
Port Alfred estate agents say the true value is much higher: before the renovations and before Jakavula bought it for R83 000, Spoornet rejected their offers of at least R200 000. Now, renovations done, they value the property almost twice the R448 000 total Jakavula paid.
This means that if Spoornet had sold the property on the open market, it could have made a significant profit. It also means that if Jakavula decides to sell the property tomorrow he stands to make the profit, which otherwise would have accrued to the parastatal.
Spoornet denies any impropriety, saying ”it was a straightforward business deal whereby Spoornet sold an unutilised asset”.
The house, a pleasant river’s edge cottage in the holiday town, was unused and in a state of bad repair for some time. Spoornet this week said Jakavula became interested in buying a holiday home early last year.
Spoornet property management and asset protection services head Chain Vilakazi said Jakavula expressed this interest during a personal conversation between the two.
”When I found this house in our asset books, I approached him and asked him to go look at it. He looked at it and then decided that he was interested,” he said.
Spoornet, Vilakazi said, decided to ”get rid” of the property, because it was not part of its core business. In June 2001, Spoornet signed a deed of sale with Jakavula, who in turn paid about R83 000 by cheque. Before he started to use the house, Jakavula requested Spoornet officials to commission renovations to the house.
Vilakazi said Spoornet agreed to use R365 000 from its operational budget to facilitate the renovations, because Jakavula had made a ”firm” commitment to repay the amount.
Asked whether the treatment afforded to Jakavula was common with all Spoornet officials, Vilakazi said: ”It is not about seniority. It is about the fact it made business sense. We did not go against policy.
”We are empowered as executive managers to do whatever we do, as long it does not compromise the interests of the company. In this case we did not do that. In fact we made plus-minus R2 000 profit,” Vilakazi maintained.
Port Alfred deeds office records show that Jakavula was registered as owner of the property in December last year. Vilakazi denied knowledge of private offers – much higher than Jakavula’s – made the year before. ”No one addressed any offer to me in this regard. I never spoke to any estate agency about that house,” he said.
The Mail & Guardian, however, has found evidence of three separate offers made by private buyers to Spoornet or Transnet in 2000 through estate agents attached to leading property agency Pam Golding.
- Pam Golding agent Wendy Viet this week said a client of hers had made a written offer of R267 000 about June 2000, with an expiry date of September 15 that year. This was before the house was renovated. She said her client, a KwaZulu-Natal doctor was willing to up the offer to R350 000, but was rejected.
”I contacted Piet Olivier [Spoornet’s operations manager in Port Elizabeth], who asked a [Philip] Horowitz, [a senior Transnet housing official], to deal with the offer. I faxed the offer to Horowitz among other people that I was referred to,” she said.
After the M&G told her that the house was sold to Jakavula for R83 000, she said: ”It was unfair. My buyer was so annoyed at the time – he was actually annoyed with me. He was furious – he had flown up all the way to see the place.”
In the end, she said, he thought her agency had misled him and that it was never really on the market.
- Susan Maclellan, also at the time with Pam Golding, said a client of hers offered R270 000 for the property. Told about the R83 000 price tag, she said: ”It was a giveaway – that property is right on the river! The offer I had was rejected.
”They [Spoornet] said they would repair it and keep it as a holiday incentive for their staff.”
- Another Pam Golding agent, who refused to be named, said her client offered between R200 000 and R250 000. ”My offer was written … We were told that there were internal bids and that we were competing against them.”
The M&G also learned that a valuator from Spoornet visited the Pam Golding offices about a month ago – about the time Jakavula settled the renovation cost – asking what the house was worth.
Spoornet confirmed this week that it had dispatched an employee, Dirk Esterhuizen, to value the house. He valued the house at R450 000 after renovations.
Spoornet did not base the initial R83 000 paid by Jakavula on a valuation. Rather, says Vilakazi, it was the ”book value”. Jakavula paid for the renovations separately in two instalments: one of R300 000 on April 11 and the other R65 000 on April 16 – bringing the total to R448 000 – about the same as Esterhuizen’s valuation.
The estate agents this week, however, said the post-renovation value is much higher. Viet said: ”Now we’d expect it to go for R800 000.”
The inherent problem in Jakavula buying from his own organisation, ordering his officials to renovate it, and then having another official value it, is that there can be no certainty the correct price was arrived at – as is suggested by the higher prices offered by private buyers and higher valuations from estate agents.
Another question that can be posed is the potential loss of interest by Spoornet after the parastatal advanced money for the renovations. Spoornet this week acknowledged this, and promised to look at the issue now that it has been raised.
In an interview with the M&G at the Spoornet headquarters in Braamfontein, Vilakazi said the allegations of conflict of interest against Jakavula were being orchestrated by elements that sought to ”discredit” his boss.
He said the Spoornet management was satisfied the housing deal was not irregular. ”That is why this issue is not being raised internally and you get all this anonymous allegations to the media,” he said.
Jakavula headed Spoornet’s sister company, the commuter rail operator Metrorail, before he joined his current employer in 2000. He is credited with transforming the ailing Metrorail.
At Spoornet he is also hailed for ringing in positive changes, which have reportedly turned the company from a loss-maker to a profitable one.
The revelations regarding the Spoornet house will be unfortunate and could present the Department of Public Enterprises, which manages parastatals like Transnet and Spoornet, with a challenge. The PSAM’s Allan said: ”The Minister of Public Enterprises should initiate an immediate disciplinary investigation and call for the South African Police Service to investigate possible charges of fraud against the officials involved.
”The case should also be carefully considered for prosecution in terms of the Corruption Act. The minister should be seen to act decisively to suspend Mr Jakavula pending the outcome of the investigation,” he said.
”This would send a clear message to the South African public that he will not tolerate the plunder of public resources for the personal enrichment of those tasked with managing them,” Allan said.