Department paid triple for ‘dud building’
Johannesburg - The now defunct Department of Public Transport, Roads and Works leased a building in Doornfontein, Joburg, in 2008 for three times what it was paying a previous landlord.
The department’s employees have described the building as filthy.
The department abandoned the Doornfontein building after just a few months of signing the 10-year lease.
A director in the department who helped prepare the lease then left his government job to become a director of the company that owned the building, Union Square Properties 81.
Union Square bought the Doornfontein property for R12 million and sold it a year later for R45m.
The department had leased the building in Sivewright Street for the Department of Community Safety to accommodate impounded taxis. The 3 602m2 property was leased for R100/m2 at R398 750 a month.
The lease was in place for 26 months, which meant the department paid more than R10m for the premises.
The previous premises in Langlaagte was 10 000m2, with a rental of about R36/m2.
A disgruntled employee in the Department of Community Safety, who declined to be named for fear he would lose his job, said that for six months after leaving Langlaagte, they had to do their drills in the street and operate from their cars because the new building was not ready.
“The building in Doornfontein was terrible. The people in the building next door went to the toilet over the wall, there was rubbish thrown over and there were rats. The building leaked, documents were destroyed by the rain and we kept on being broken into,” the employee said.
He said they protested and were moved back to the old building in Langlaagte.
The director in charge of property management at the Department of Public Transport, Roads and Works at the time, Oscar Phoku, who had been on the committee that chose the Sivewright premises, resigned in January 2009 and joined Union Square as a director in May that year.
Phoku insisted there was nothing untoward in this move, saying: “I was never a director of Union Square before I resigned from the department.”
He also said he did not decide on the lease agreement alone, but was part of a committee.
“I wanted to go into business and I got an offer from Union Square. I got a lot of offers, and any company that I would have joined would have done work with the department previously. The property industry is very small,” Phoku said.
He said that by the time he joined the company, the Sivewright building had already been sold.
Nceba Nonkwelo, the director of Union Square in charge of the Sivewright lease, defended Phoku’s move.
“He (Phoku) basically joined a shelf company with no current activities. The idea of him joining Union Square Properties was for him to bring his property industry knowledge and try to revive our company performance.”
He said he had sold the building before the tenants moved out, and the reason the property was sold for such a profit was that it had been refurbished.
“The property was disposed (of) by Union Square Properties 81 with a lease in place, which had a favourable impact on the disposal price of the asset. This is according to property industry norms,” Nonkwelo said.
Department of Infrastructure Development spokeswoman Ramona Baijnath said the premises were vacated because of a breach by the landlord in December 2010. The department defended itself successfully after the landlord had issued a summons, said Baijnath.
Independent financial crimes investigation company IRS Forensic Investigations has been involved in several investigations over the past three years. Its investigations have involved alleged corrupt lease agreements between private companies and the government.
IRS spokesman Chad Thomas said they had looked into the Sivewright building.
“I am totally shocked by the audacity shown in this particular case. A perfectly fine facility is leased legally to the Department of Community Safety for R36/m2. The department decides to rent another facility at almost three times the price per square metre - a facility which isn’t fit for occupation,” said Thomas.
IRS had also looked into Gauteng provincial land sold illegally to Dimension Data that still has not been reviewed, he added.
“We have seen Gauteng provincial land which was originally used as a burial ground for 7 000 victims of contagious diseases leased illegally to a company which built a nightclub on top of the graves called Voodoo Lounge in Linksfield, yet these illegal occupants have not been evicted. These cases have been public knowledge for a number of years now, yet nothing has been done about it,” Thomas said.