Roux Shabangu: Lord of pricey leases

Businessman Roux Shabangu’s R137-million lease of a building that houses the headquarters of the Independent Complaints Directorate (ICD) is in the spotlight after claims that it accounted for a four-fold jump in the directorate’s leasing bill.

In June the Mail & Guardian revealed that Shabangu’s building was twice as large as the directorate required and the cost was way over its budget.

Shabangu is the property owner at the centre of the police leasing scandal that led to police commissioner Bheki Cele’s recent suspension and the unseating of public works minister Gwen Mahlangu-Nkabinde.

The ICD lease appears to have been Shabangu’s first foray into state leasing, preceding his controversial lease to house the South African Police Service headquarters in Pretoria.

In a police portfolio committee meeting on Tuesday MPs asked ICD executive director François Beukman to explain how the directorate’s rental bill had jumped from R4.2-million to R15.6-million in a year.

Democratic Alliance MP Dianne Kohler Barnard told the M&G that Beukman had attributed the increase to the lease with Shabangu.

‘Grossly inflated’

“The rent for the ICD’s premises is reportedly grossly inflated. As a result, the ICD’s total rental expenditure for the past financial year has increased by 400%.” (In fact, although the rental bill increased almost four-fold, the percentage increase is 270%.)

She said she had written to the Public Protector to ask that the lease be investigated. The Special Investigating Unit previously confirmed that it was investigating the lease.

Beukman said that in addition to the Pretoria headquarters, the directorate leased nine provincial and a number of satellite offices. He said he would give Parliament a cost breakdown by Friday.

Shabangu and public works property management director Vusi Mashiane signed the 10-year lease for the building in Vermeulen Street in April 2009. The lease did not specify which department would occupy the building and the ICD only moved in in September last year. It is not clear whether any department had occupied the building in the intervening months or which department paid the lease during that time.

According to the lease, the government was liable to pay R8.8-million rent in the first year, which would escalate by 10% each year.

Assuming the ICD was liable for the second year’s rental of R9.6-million from April 2010—the year that its total lease bill mushroomed—the deal with Shabangu would account for 85% of the increase in the total rent bill.

Twice the space

The M&G previously reported that the directorate had applied to public works for 3 668m2 of office space and set aside R6.2-million for the first year of the lease. But the directorate was assigned Shabangu’s building with its 7 614m2—more than twice the space needed and exceeding the budget by more than 40%.

This guaranteed that the taxpayer would finance Shabangu’s bond repayments, buying him a building and leaving him with hundreds of thousands to spare each month. The M&G has since learned that the building is in the process of being sold.

Since June the M&G has been unable to verify whether or not Shabangu won the contract through an open tender process.

ICD spokesperson Moses Dlamini said the directorate welcomed an investigation of the lease. “[The ICD] never identified any of the 17 buildings that it occupies, nor did it enter into any agreement with the landlords. The ICD merely occupied the buildings that were procured for it by  the department of public works.”

Dlamini said the directorate had only paid for the Vermeulen Street lease after it had occupied the building.

Questions were sent to the department of public works and Shabangu at short notice, but neither was able to respond in time. In June, Shabangu denied any wrongdoing with respect to the lease. At the time, public works did not respond to queries.

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The M&G Centre for Investigative Journalism, a non-profit initiative to develop investigative journalism in the public interest, produced this story. All views are ours. See www.amabhungane.co.za for all our stories, activities and sources of funding.

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