Questions are being asked about attempts by the Durban Metro to conclude a massive office rental deal without putting it out to tender.
The deal, worth R68-million over 10 years, threatens to tarnish the image of Durban municipal manager Mike Sutcliffe as questions are raised about why he backed a contract by “private treaty” with a mystery trust involving undisclosed empowerment partners.
Sutcliffe, a former senior African National Congress leader in KwaZulu-Natal and the former chairperson of the Municipal Demarcation Board, pulled back from the deal only after strenuous objections from other property companies and his own municipal officials — and after the media and opposition politicians started probing the affair.
The controversial deal came to light only when rival property companies noticed a newspaper advertisement — a legal requirement — calling for any objections to the proposed contract before it went ahead.
Several companies objected and at least one, Broll — which boasts Tokyo Sexwale as an empowerment partner — hurriedly made a counter offer that was at least R5 a square metre cheaper.
Nevertheless, Sutcliffe appeared to be committed to pursuing the original deal and took the unusual step of first referring Broll’s objections and its counter offer to the first deal’s initiator, property developer Grant Foreman, for his response.
Competing offers or objections would normally be referred to municipal officials for an evaluation.
Foreman strenuously defended his bid to Sutcliffe, reminding the municipal manager that the number one reason council had chosen his bid was his “50% empowerment” credentials.
However, after attempts by the media to obtain more information about the deal, Sutcliffe last week unexpectedly recommended the termination of the private treaty negotiations and told the city’s executive committee the rental opportunity would now be advertised in the usual manner.
Such private treaty contracts are highly unusual when government bodies are seeking goods or services that are available from various competitors. They are generally used only when the government is compelled by particular circumstances to enter negotiations with a specific party.
This deal, one of the biggest blue-chip rental opportunities in the Durban central business district in years, does not appear to have any exceptional circumstances that would have justified deviating from normal tender procedures.
Earlier this year Sutcliffe was given extensive powers by the council to change and renegotiate tender agreements, despite advice from the council’s own lawyer that such wide discretion was legally suspect.
This week Sutcliffe denied there was anything untoward about the office rental negotiations with Foreman and said the council had simply been pursuing an unsolicited but attractive bid.
However, he admitted that Foreman’s proposal was not that “attractive” to start with and that the council had “knocked him down” to R40 a square metre after fairly extensive discussions.
Sutcliffe directly contradicted both Foreman and his own municipal procurement mandate by claiming that empowerment was “never an issue” during the negotiations and that he had no idea who Foreman’s empowerment partners might be.
At the core of the question marks over the deal lies the identity of the empowerment partners purported to hold a 51% interest in the proposed contract.
The actual lease agreement was concluded with an entity called the Yorker Trust, but the identity of the beneficiaries of the trust is hidden behind the veil of a nominee company.
According to trust documents obtained by the Mail & Guardian, the initial trustees are Owen Charles Foreman and Julie Melody Foreman. The beneficiary of the trust is DS & T Nominees Ltd, a nominee company run by accounting firm David, Strachan and Tayler.
Foreman confirmed this week that there was a 51% empowerment component in the Yorker Trust.
“The individuals prefer not to be disclosed at this stage, but will do so in due course,” he said.
Meanwhile, municipal sources say the file on the Yorker Trust deal has gone missing.