Roux Shabangu.
Parliament’s scrutiny of businessman Roux Shabangu’s lease agreement with the police’s Independent Complaints Directorate (ICD) has flushed out new evidence to suggest the public works department “blind signed” the ICD and bundled into a building it could not afford.
It also appears that the department blew more than R13-million on this building while it stood empty for 18 months.
Just 10 months before public works signed the lease with Shabangu it approved a lease with another company — Mati Properties — for the same building for substantially less than Shabangu received.
This suggests Shabangu’s lease could have been inflated, although his business partner, Japie van Niekerk, has denied this.
South African businessmen and dodgy officials are making hundreds of millions of rands from leasing scams. But how does it work? Watch our dummy’s guide.
In terms of value per square metre, the Mati Properties lease was worth 40% less than that awarded to Shabangu. And Shabangu’s lease was set to escalate at the top-end rate of 10% a year, compared with 8% for Mati.
Over a 10-year period, this difference in escalation will substantially affect the overall lease cost.
As it happened, Mati did not buy the building as originally planned and the lease agreement was not concluded. The reasons for this are disputed.
The seller, Sayed Mia, said Mati could not come up with the money by the agreed date. But Mati director Calvin Mojapelo said Mia reneged on its sale agreement specifically so that he could sell to Shabangu, who ultimately won a more lucrative lease.
On Thursday, public protector Thuli Madonsela confirmed she would investigate the ICD lease, which is already under investigation by the Special Investigating Unit.
Under fire
The ICD has come under close scrutiny from Parliament’s police committee twice this month. MPs demanded that the directorate explain why its rental expenditure ballooned fourfold in one year, from R4.2-million to R15.6-million.
Part of the ICD’s explanation was that the lease with Shabangu was way over its budget, a point public works, which manages state leases, allegedly failed to disclose.
In turn, MPs demanded that the ICD explain why it then agreed to move into the building without clarity on how the lease would affect its budget.
Chastising the directorate, police portfolio committee chairperson Sindi Chikunga cut Tuesday’s meeting short: “I don’t believe continuing with this meeting will take us anywhere. We need to invite the department of public works and treasury to be part of the meeting when we discuss this matter again,” she said. “It is clear that you took matters for granted when dealing with this matter. I can’t understand why.”
The committee will reconsider the matter next Tuesday.
‘We had no choice’
The ICD’s representations to Parliament, interviews with directorate spokesperson Moses Dlamini and independently sourced documents suggest a shambolic operation by public works that ultimately forced the ICD’s hand, a full three years after it applied to the department for a new building.
Public works has not responded to Dlamini’s claim that the ICD had no choice, but the timeline of events is suggestive:
- In October 2007 the ICD wrote to public works requesting a new lease. The directorate was growing and was split uncomfortably between two buildings in Pretoria.
- In March 2008 public works invited the ICD to view three buildings. The directorate approved the Structura building in Pretoria. Six months later, public works signed a lease with Structura’s owners, Dlamini said.
- Refurbishments at Structura began only in March 2009, a year after the visit. These cost the ICD R770 000.
- The ICD was due to occupy the building in May, but Dlamini said this was postponed many times until September 2009, when the ICD was told the landlord could not meet some security obligations. These included the installation of biometric scanning and the blocking of access from a neighbouring building. Sorting out these issues was public works’s responsibility, Dlamini claimed, yet after each postponement, “exactly the same issues remained”.
- By this time, Dlamini said, public works had signed a lease for a different state entity for a building still occupied by the ICD, at twice the price. When the ICD failed to move out the landlord took it and public works to court.
- Meanwhile, public works had signed a lease with Shabangu for his and Van Niekerk’s City Forum building on April 14 2009. The Mail & Guardian has a copy of the lease. It is understood that this building was destined for the human settlements department. Curiously, this lease, worth R137-million, was dated to commence a month and a half before it was signed. In other words, the state was liable for payments from March 1 2009. However, the ICD occupied it only in September 2010. This suggests that public works paid for a lease on an empty building for 18 months, which would have cost more than R13-million.
- In January 2010 public works suggested that the ICD move into Shabangu and Van Niekerk’s City Forum and human settlements move into Structura. Following a site visit the ICD wrote to public works that the building seemed adequate. ICD head François Beukman stressed that he needed clarity on some issues before the ICD could commit, including a copy of the lease and sight of alternative building options.
- In response, public works’s property manager, Vusi Mashiane, said human settlements had already began to move into Structura. “Should ICD not occupy [City Forum], fruitless expenditure will be incurred,” Mashiane said.
- In June, Mashiane wrote to the directorate saying that “the lease commitment for [the building] would commence from July 1 2010”, requiring it to start paying rent on a building it did not occupy. Beukman refused this in writing, “since the building is not yet ready for occupation”. The M&G has seen these letters.
- In July, Dlamini said, the ICD asked once again to be shown the lease. The following day, it received a copy, but this was “illegible”. Subsequent requests were ignored, he claimed, until after ICD had moved into the building.
- On September 15 the ICD moved into City Forum, twice the size it required and about double the cost of Structura. Dlamini said the ICD never agreed in writing to move into City Forum.
Pressed on why the ICD had moved in without considering other options and without having seen a copy of the lease, as it had demanded, Dlamini said: “We were pressured. We were basically bulldozed. We were dealing with a government department in good faith and we did not expect anything untoward.
“We had been looking for accommodation since October 2007. Our staff had grown from 46 to 99. Public works led us to believe this was the only option. We didn’t have any other choice, but we didn’t know we’d have to pay such a huge amount.”
Public works did not respond to questions.
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