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The Public Works Department concluded a second office lease deal with politically connected firm Manaka Property Investments, without putting the contract out to tender, says minister Thulas Nxesi.
The agreement between the department and Manaka, a company in which ANC MP Thaba Mufamadi and Limpopo Premier Cassel Mathale have interests, was for offices in Pretoria for the Department of Water Affairs.
The Public Works minister said the lease had been acquired through a “negotiated strategy”.
Nxesi said this strategy was one of seven ways in which the department procured accommodation. It had been used in this case because the building, Manaka Continental, had been vacated by his department and was available immediately.
The lease for 4 133m2 of office space and 31 parking bays cost R91.49/m2 and R476 each for the parking bays – a total of R4 89 million last year.
Under the agreement, the rental escalated at 8 percent a year, Nxesi said in a written reply to a DA parliamentary question.
Mufamadi’s 50 percent stake in Manaka Property came under scrutiny from Parliament’s ethics committee recently after it emerged that the firm had another government lease, for offices in Pretoria for the Department of Home Affairs, valued at R33m a year.
This amount was said to be more than one and a half times what Home Affairs had previously paid for office space.
The ethics committee exonerated Mufamadi, saying he had declared all his financial interests as required by Parliament’s code of conduct. In addition, Mufamadi said the deal had been concluded before his appointment as an MP.
Public Works spokesman Thamsanqa Mchunu said on Friday that the negotiated strategy had been “widely used for at least 25 years”.
With the promulgation of the Preferential Procurement Policy Framework Act and the inception of supply chain management in 2005, “the negotiation strategy was recognised as a lawful procurement strategy within supply chain management under certain circumstances”, he said.
Criteria for a standardised approach had been approved and implemented.
“The stigmatisation of the negotiated strategy within property management has an adverse effect on streamlined service delivery.”
Mchunu said the property management section responsible for the negotiation of the lease had felt at the time it was “the best way forward”.
When asked if the department was confident that this was the cheapest option, Mchunu said the negotiation of the lease had been done comparatively with other leases in and around the area.
“All factors were taken into consideration and the cheapest option (was) chosen,” said Mchunu.
DA MP Dion George, who asked the parliamentary question, said the minister’s reply was “not good enough”.
“I reject the response from Public Works; it’s not good governance and it is not acceptable,” he said.
From his experience in property, the aim was to get the “cheapest deal available”, George said.
He had formally written to the chairman of Parliament’s standing committee on public accounts, Themba Godi, asking him to call the department to appear before the committee and be interrogated on matters relating to lease agreements.
Dion said Godi had not yet replied, but had suggested verbally that it would be best for the committee to wait for the findings of a Treasury review of all government leases. “The question is… how long will it take?” said George.
Nxesi, appointed last year after the axing of Gwen Mahlangu-Nkabinde over her role in the dodgy R1.6bn leases for police office buildings in Pretoria and Durban, has pledged to clean up the department and was instrumental in initiating the Treasury review.
“There are a lot of shenanigans. All big tenders have a problem. It’s a fact that there are serious problems in the department… officials disregarding supply chain management procedures and accepting gifts,” Nxesi reportedly told staff in Durban last week.
According to the Times, Nxesi said that each week a new scandal about leases and construction emerged and some people acted as if they belonged to the department.
“They do shoddy work but know they will get tenders without following procedures.”
At least 4 000 leases would be reviewed, Nxesi said. - Political Bureau