South Africa- How State, Taxpayers Get Milked

President Zuma

President Zuma

Companies with good political connections are milking taxpayers by providing office space to various government institutions in Pretoria for up to four times the normal price.

A month-long investigation by sister publication Rapport has revealed that an ambitious project to accommodate the Department of Trade and Industry (dti) and its agencies in one building complex in Sunnyside in Pretoria has turned into a fiasco.

Plans for new offices took shape in 2001under the then minister, Alec Erwin.

Land owned by the city council in Sunnyside in Pretoria was identified for the project. It was decided to develop it as a partnership between the state and the private sector.

In terms of such an agreement the building would have been built and managed for 25 years by the private sector before it would become the property of the state (or in this case, the property of the Tshwane Municipality) .

But things went wrong from the outset. After the state initially identified the Thusano consortium (comprising among others RMB Properties, Grinaker and Drake and Scull ) as preferred bidder, they were suddenly pushed aside around 2002  in favour of Rainprop – a group in which ANC bigwigs such as Cyril Ramaphosa, Siyabonga and Sheryl Cwele and Tokyo Sexwale were initial shareholders.

Rainprop began development of the project shortly afterwards and in 2004 entered into a contract in terms of which they would receive a “base fee” of R108m per year, which would be adjusted for inflation every year.

That means that by 2028, when the contract ends, taxpayers would have already paid more than R5bn for a property that would have cost about R500m to develop.

In addition to the basic rate, the department also pays the consortium several millions annually for  “consumables “, municipal accounts and unfinished construction – the building should have been completed ten years ago. The unfinished construction and other orders have cost the department already R34m in the past four years alone.

The cost of the offices compares  poorly with the rates of other government departments whose buildings were developed and managed under similar contracts.

Last year, the department paid R196m for office space of 35 183 m2 .

The department of international relations and co-operation in the same year paid R191m for a new headquarters of 138 590 m2 .

This department thus paid R5m less for a building that is almost four times bigger than that of the dti.
The department of basic education pays nearly R60m less per year for a building that is as big as the dti’s building.

The dti and the Treasury, which approved the entire transaction with Rainprop, however, insists that spending is not excessive because the contract supposedly includes all facets of management , furnishing and maintenance of the building complex .

Rapport ‘s research , however, shows the opposite.

* The annual report of the Companies and Intellectual Property Commission ( CIPC ) , which is based in Block F, shows that they spent  R18m to replace their furniture .
* The Competitions Tribunal , which works in Block C, indicated in 2012 that from then on they would accept financial responsibility for “matters relating to security and facility management”.
* The dti says in its annual report that it paid at least R4m for security services that “had to be included in the fixed payment (to Rainprop)”.
Rainprop’s political connections
The Rainprop Consortium, which has offices in the dti building they are currently managing, consists of ten consortium members. Among the political connections count :
* Prop5 which owns 20% of Rainprop as well as shares in Experience Delivery Company ( EDC ) , the company that manages the building .
Siyabonga Cwele , minister of state security and his wife , Sheryl, were both directors and shareholders in Prop5 when Rainprop won the tender. Cwele says he resigned in 2006.
His former business partner Mpho Scott – like Cwele an ANC MP at the time of the bidding process – in turn says he and Cwele resigned in “2002 or 2003″ from Prop5. ” We gave up our shareholding and didn’t make a cent from the transaction,” Scott said.
Sheryl Cwele resigned when her ex-husband abandoned his directorship , said Mbali Swana, Prop5’s managing director.
But according Prop5 ‘s share certificates, Sibonela, a company where Cwele is still listed as an active director, held shares in Prop5 until 2008.
Cwele has not responded to further enquiries.
Swana said he and his partner, Sibongile Swana, are now Prop5’s only shareholders. Annual statements show that last year he earned R2.7m in dividend income from Rainprop and EDC.
* Rebserve Facilities Management, which owns 20% of Rainprop.
The businessman and now ANC deputy president Cyril Ramaphosa was one of Rebserve’s directors when the dti awarded the contract to Rainprop. Ramaphosa said he was not involved in the bidding process, “and had no knowledge (of the bid). I understand the contract was awarded after I resigned.”
Another shareholder in Rebserve was Mvelaserve Management Services , a subsidiary of a company of which Tokyo Sexwale, the former minister of human settlements, was a director. Sexwale did not return calls for comment .
* Zwelinzima Holdings, which owns 15% of Rainprop.
Its three directors are: Tumelo Motsisi, founder and former CEO of Kopano Ke Matla, Cosatu’s controversial investment company; Lonwabo “Fez” Mahlati , who was also involved in Kopana Ke Matla and Violet Nogxina.
The latter is married to Adv. Sandile Nogxina, the department of mineral resources’ former director general and now South Africa’s ambassador in Mexico.


( Courtesy Fin24 & AGENCIES …….. Source ……. Our Freelance Contributor in Cape Town)

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