ANC-aligned Johannesburg Property Company rams through a multibillion-rand property deal
Treasury has asked questions about the City of Johannesburg’s plan to spend billions of rands on leasing properties while it refurbishes its offices, but the city has already approved it.
In a near-bankrupt and hobbled city where homeless people sleep in bus shelters and on the streets, the City of Johannesburg has passed a plan to spend R1.4-billion on high-cost property leases and an additional R2-billion (rising to R12-billion) to renovate the Metro Centre.
Whistle-blowers at the Johannesburg Property Company (JPC) have told DA chief whip Leah Knott that the majority of the leases are going to ANC property mogul Lonwabo Sambudla, a favoured contractor.
A spokesperson for his company, Bayete Capital, said they had not heard anything from the JPC and that they had tendered along with other companies. Sambudla is a longstanding ANC member and former CEO of the ANC Youth League’s Lembede Investments.
An ANC Soweto branch chairperson, Enos Sithole, chairs the JPC board, Sunday Times reported in September.
JPC spokesperson Lucky Sindane said last week: “The city is currently finalising the evaluation process of the Metro Centre office accommodation. The [executive adjudication committee] considered a report of the bid evaluation committee. The report was then recommended to the Accounting Officer (City Manager) for his approval. We are still awaiting (his) approval.”
Asked if the National Treasury had alerted it to a tender bid review because of a questionable process, Sindane said, “There was a query from the National Treasury. We responded to it on Friday 24 November 2023. There are no leases concluded.”
At the weekend, Daily Maverick confirmed that Johannesburg city manager Floyd Brink had approved the property plan. He made it subject to public participation, city oversight, a biannual review and a mechanism for the city to step in if the JPC incurs risk.
Metro Centre upgrade
For nine years and 11 months, the city plans to spend lavishly on temporary office accommodation for staff while it rebuilds the Metro Centre, which will cost between R800-million and R2-billion in the short term – and much more in the medium term, according to documents and reports.
The Metro Centre was closed in September following a fire, the second at the building this year.
The city can refurbish in four to six years, say property experts consulted by Daily Maverick. Staff do not need to be moved out, they say. City administrators disagree, saying the centre is uninhabitable.
The Metro Centre revamp is part of a much bigger, city-wide “Office Space Optimisation Plan” conceived by the JPC and designed by Sambudla’s Bayete Capital.
It is budgeted at an additional R12-billion plus construction costs. (Bayete’s spokesperson, who does not use his name, said 50 other companies had responded to the call for design to emphasise that the party man was not favoured.)
The city’s plans to spend on its accommodations come amid a deepening collapse of its finances as well as service chaos for its residents.
“In 2021/22, the City had an unfunded budget of up to R3.8-billion. Unauthorised, irregular, fruitless and wasteful expenditure has accumulated to R21-billion. The City is only able to collect 75% of its budgeted revenue,” the Johannesburg Crisis Alliance wrote in a letter to President Cyril Ramaphosa last week. The Alliance is a network of civil society organisations representing thousands of residents.
“Johannesburg, once hailed as Africa’s richest city, is facing a deepening struggle for survival. (It) is facing massive disinvestment by business, which is aggravating the wicked challenges of unemployment, poverty and homelessness.
“The anger and frustration of residents will give way to violent protests unless something is done,” the alliance wrote.
In this context, the property plan is a questionable priority.
In a letter to Mayor Kabelo Gwamanda, Floyd Brink and the National Treasury, DA councillor Andrew Marais had questions: Was there a bid specification committee? Did it sit? Was there a bid evaluation committee? Where is its report? Was a tender briefing session held to ensure competing proposals?
“We are concerned that a recommendation report to appoint a particular service provider (Sambudla’s Bayete) may have been presented at the public adjudication meeting without an opportunity having been given to other service providers,” the letter reads.
The city council may not enter leases longer than three years without consulting the National Treasury.
But in a May memorandum to the council, the JPC said: “In terms of SCM (supply chain management) processes, all new office leases must be procured through a competitive bidding process. However, the City Manager can, in certain circumstances, deviate from this process.”
The JPC said, “Decanting the Metro Centre and finding alternative rentals will cost the City about R120-million per annum based on the 70,000m2 needed. For a ‘plug-and-play’ facility (recommended due to urgency), rentals should cost the City approximately R135-million (per annum).”
The estimated gross lease cost should be R6-million to R7.8-million monthly (R72-million to R93.6-million a year).
The JPC issued the request for proposals (RFP) without a public tender briefing; it will not make a copy of its bid evaluation committee report public.
The first JPC memorandum said it would take five years to refurbish the Metro Centre at an estimated cost of R800-million. However, in six months it has doubled both the spending and the time it will take to fix the Metro Centre.
The JPC’s Sindane denied the refurbishment was a vanity project and said a 2019 report concluded that the Metro Centre was “uninhabitable”, “meaning it is unsafe for use and occupation”.
“Further to that, early this year, the Department of Employment and Labour served the city through the Johannesburg Property Company with the confirmatory notice that needs urgent action,” said Sindane.
Read more in Daily Maverick: Joburg coalition plans to blow R2-billion on tarting up its own offices as city services collapse
No Metro Centre for 10 years
Director of Intaprop, Carollyn Mitchell, speaking in her personal capacity, said the property lease specs were a “blank cheque” for contractors or brokers.
It was, for example, for a total space (75,000m2) larger than the sprawling Metro Centre (65,000m2), which raised concerns. A nine year, 11 month lease does not need to be registered against the title deeds – only if the lease is 10+ years does it get registered on title deeds.
The estimated gross lease value/cost was R6-million to R7.8-million monthly. Mitchell said the tender document provided that “the landlord may agree to contribute a larger tenant installation cost”, and that this was open to manipulation.
“This will have the effect of further raising the rental above prevailing market rates. This is a blank cheque. JPC’s complete failure to maintain the iconic Metropolitan Centre, which is the home of the city, has collapsed the city,” said Mitchell.
She said the closure of the Metro Centre had created mayhem.
Plans can’t be passed to allow for the city’s development. And there is no clear way for residents to access city departments for the many vital local services its people need.
“The city is not going to have a home for 10 years. This is unacceptable,” said Mitchell.
The market cost for building a brand new 75 000 square metre building should be between R1.4-billion to 1.8-billion.”
A second property manager in the city says several companies expressed an interest in the RFP.
The property manager, who requested anonymity, said the city had considered a deal with Transnet. This was cheaper because the leases would be between two state entities.
The Carlton Centre, now owned by Transnet, has many empty floors. Asked for an assessment of the planned deals, he said, “Ten years is excessive (for the temporary leasing) and the current price tag of R2-billion to fix the 60,000m2 Metro Centre is considerable.”
He said a good contractor could do it for R600-million at current property renovation rates. But he said that R1.4-billion was within the realm of possibility in the private sector.
JPC’s chequered record
“The proposed leases and the plan to renovate Metro Centre was brought by the CEO of the Johannesburg Property Company, Helen Botes, who has long been directly implicated in corrupt deals in the city,” Knott wrote in an article.
The SIU implicated the JPC in a R470-million Covid fogging deal it said was corrupt. The previous coalition in charge of the city brought charges against Botes, but they were dropped when the ANC/EFF coalition regained office this year. (See Mark Heywood’s report below.)
Read more in Daily Maverick: The great Covid-19 swindle (Part Three): Johannesburg City Council – ‘It’s a free-for-all’
The Commission of Inquiry into State Capture heard evidence of how Johannesburg property deals were used to round-trip funds to the ANC by the late mayor Geoff Makhubo.
The property plan suggests it is being rushed ahead of the election to boost party coffers, especially as the ANC has stacked the JPC board with cadres and the party needs help to pay its debts. DM