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Durban - The Special Investigating Unit (SIU) is hot on the heels of Durban businessman Dumisani Tembe, who allegedly defrauded the government of more than R88 million in an “illegal” 10-year lease agreement for the Royal Hotel office space.

Tembe is accused of submitting a fraudulent tax clearance certificate to secure a lucrative 10-year lease with government; of charging almost double the lease rate; and lying about parking facilities being part of the deal when in fact he rented parking space for government staff from another company.

Tembe entered into a lease agreement with the Department of Public Works for the use of the building using a fraudulent tax clearance certificate, the SIU alleges in court papers.

The building’s office space is currently occupied by Department of Labour staff in the Durban city centre. According to the summons filed by the SIU in the Durban High Court, Henque 2042 CC, which owns the Royal Hotel Towers on Anton Lembede (Smith) Street in the Durban CBD, allegedly submitted a fraudulent tax clearance certificate when it concluded the lease agreement with the Department of Public Works in 2010. Henque lists Tembe as its sole director.

The alleged fraud was discovered by the SIU during its investigation of allegations of maladministration and corruption in relation to the affairs of the department, which is responsible for procuring offices for departments, The agreement with Henque was for the Department of Labour to occupy 10 floors of the AAA-graded offices, described in the marketing brochure as of “international standard, upmarket and secure”. The offices are in the same building as the Royal Hotel, but are not related and have different owners.

Typographical errors on Henque’s tax clearance certificate set alarm bells ringing for the SIU investigators, they state in court papers. The word “tender” was incorrectly typed as “tenders” and “photo copies” was typed as a single word “photocopies”. They also found the text alignment and spacing were incorrect and that Henque’s tax affairs were not in order on the date the clearance certificate was supposedly issued by Sars.

“The conduct of the first defendant (Henque) thus warrants the lease agreement being declared void ab initio as it was conducted via unlawful and/or fraudulent conduct,” read the summons.

The SIU wants Tembe to pay back R88.1 million he received from Public Works, as the lease increased annually by 9.5%. According to the SIU, the Public Works was also misled to believe the office space came with 77 undercover parking bays for Department of Labour cars and officials in the same building “thus deviated from the normal procurement strategy and awarded the tender to the first defendant (Henque) based on a negotiated procurement strategy”.

However, investigations later revealed that Henque had sub-leased bays at the Royal Parkade in an adjacent building as there was no parking space at the Royal Hotel Towers.

Henque is further accused of overcharging for the office space which, in 2010, saw the department paying R157.18, (VAT included) per square metre monthly, when it ought to have been R75.

This cost taxpayers R29.4 million more than what they should have paid. In 2013, property experts raised the alarm that the department was paying “about double” for the upmarket office space despite better deals being available.

KZN Labour department spokesperson Lungelo Mkamba referred queries to Public Works. Public Works spokesperson Thami Mchunu would not respond to questions about whether the lease agreement was being reviewed or could be terminated.

“The department is aware of this issue. It is in court and the department will not engage on it until the court process is finalised. The department will abide by the court decision.” said Mchunu.

Tembe is no stranger to legal problems relating to property deals. In 2011, a planned move by Durban’s Labour Court into the Liberty House building in the city hit a glitch when it emerged that Tembe, who was buying the building and had leased it to the Labour Court, had not paid for it.

MTN, which owned the property, asked the Durban High Court to stop the Labour Court from moving in. Ownership of the building reverted to MTN which then entered into a new deal with the Labour Court for the office space.

Tembe could not be reached for comment.