Opinionista Helen Zille 8 July 2018

From the Inside: The Case of Cape Town’s Disappearing Prime Real Estate

Last week my colleagues and I tried to figure out how the most valuable piece of real estate in the provincial government’s property portfolio disappeared from the Western Cape’s asset register and ended up in the ownership of a national government entity.

Writers of detective fiction could learn a lot from government. In fact, some of the stories we uncover are so amazing, they bring to mind Mark Twain’s famous adage:

Truth is stranger than fiction. This is because fiction is obliged to stick to credible possibilities; Truth isn’t.”

I had occasion to quote Twain last week, as my colleagues and I tried to figure out how the most valuable piece of real estate in the provincial government’s property portfolio disappeared from the Western Cape’s asset register and ended up in the ownership of a national government entity.

I first learnt about this when the province’s legal adviser phoned to inform me that we could not proceed with our plan to develop affordable housing on prime land near Cape Town’s Waterfront because we no longer own the 3.3-hectare site that lies at the heart of the larger precinct earmarked for redevelopment.

The lawyer informed me of this extraordinary development shortly before Cape Town’s Municipal Planning Tribunal was due to consider our rezoning application for the property on 3 July. Rezoning the property is a necessary step in our plan to develop affordable housing on the site through public and private cross-subsidisation.

Unbeknown to me, the switch in ownership had first come to light about two months ago, when the Auditor General found a discrepancy between the properties listed on the Western Cape’s asset register and the records in the Deeds Office.

According to the Deeds Office, on 28 February 2018, Erf 1955, part of the famous Somerset Precinct alongside Cape Town’s Waterfront, was transferred to the National Health Laboratory Service (NHLS) without the knowledge of anyone in the province.

It is important to understand that Erf 1955 is not just any old piece of real estate. Worth hundreds of millions of rand, it is perhaps the most sought-after property in South Africa. It was also central to the intrigue that culminated in the firing of Ebrahim Rasool from the Western Cape premiership, after he was accused of underhand dealings with a Dubai consortium which had its eye on this property (along with almost every other property developer).

It is hardly the kind of site that could slip away unnoticed, under the radar.

So how was ownership of the property secretly transferred without the title deed holder (the provincial government) knowing anything about it? Whodunnit? Why? And How?

After all, even the tiniest financial transgression in the provincial government is picked up by our rigorous system of checks and balances, with dire consequences for the transgressor. A recent example was the six-month investigation into the irregular expenditure of R76.90 that occurred in my office.

So how come property, probably worth around R1-billion, could simply vanish off our asset register? As Sherlock Holmes would have asked: Why didn’t the dog bark?

After a week of putting together the pieces of the puzzle, I am a little closer to unravelling this mystery. I think I know what happened. I am even beginning to understand how it happened. But I am a long way from working out why it happened when it happened, and with such apparent ease. That will still require some serious additional detective work.

Our investigations so far have revealed the following: Dr Karmani Chetty, NHLS chief executive officer, signed a certificate on 7 February 2018, and lodged it with the Registrar of Deeds. The certificate reportedly stated that Chetty had been unable to obtain the necessary documentation (including the title deed) from the provincial government, but (despite this) all the legal requirements had been met to transfer the property to the NHLS, in terms of a Schedule to the NHLS Act (37 of 2000).

Without further ado, the property was duly transferred. From one day to the next, the balance sheet of the financially crippled NHLS became R1-billion stronger, at the expense of the Western Cape government which had been stripped of a R1-billion asset.

Next, I learnt that the property transfer had been managed by Hogan Lovells, the London headquartered law firm that hit the headlines recently when Baron Peter Hain revealed, in the House of Lords, allegations that the company had masterminded moves to shift control of South Africa’s criminal justice system into the hands of Zupta (Zuma and Gupta) cronies.

So, the obvious question arose: Had the law firm perhaps also found a way of capturing the most valuable real estate in the country, behind the convenient fig-leaf of the National Health Laboratory Service Act? If so, on whose instructions, and for what purpose?

The timing of the first recorded move to effect transfer – in 2012, at the height of the Gupta State Capture strategy, and 12 years after the enabling legislation was promulgated – added fuel to the fire of our suspicions.

Was this yet another example of the “Zupta” strategy, drawn straight from the Russian Mafia’s playbook, of using front politicians to grab real estate, tenders and contracts, under the cover of an obscure law?

I learnt that such Deeds Office transactions had become so commonplace in recent years that the national Department of Public Works had launched operation “Bring Back” to reclaim state properties that were misappropriated, unlawfully occupied, or illegally transferred in similar fashion.

But, the question still remained: how did this get past the tight mesh of checks and balances in the Western Cape government?

To try to answer this question, I spent much time, with the assistance of officials, trawling through the files.

The first correspondence on the matter can be traced back to 2012, when the NHLS wrote to the provincial Department of Transport and Public Works, claiming ownership of the property and buildings on Erf 1955. It based this claim on a Schedule to the National Health Laboratory Service Act that deems the NHLS to own the properties from which it operates.

The province obtained a legal opinion which was unambiguous:

The NHLS is not entitled to the transfer of Erf 1955, Green Point, or any of the buildings there.” This opinion was duly sent to the NHLS’s lawyers.

From this point, discussions focused on the relocation of the NHLS away from its premises on erf 1955 to a different part of the city. The provincial government undertook to pay for this move, in order to free up Erf 1955 for urban regeneration and redevelopment in this prime location.

This interaction appears to have been abruptly halted in February 2016, when a law firm, Diana Mabasa Inc, sent a query to the general contact email at the City of Cape Town (Contact.Us@Capetown.gov.za).

It is an intriguing letter for a law firm simply to send to a municipality’s general enquiries email.

In complex legalese, it asserts that the property had automatically been transferred to the NHLS in terms of a Schedule to Act 37 of 2000, and requests a copy of the title deed to be able to record the change of ownership in the Deeds Registry.

It ends with a request to “kindly forward this email to the responsible municipal official for attention and send a copy thereof to me”.

Nicette Jorissen, the senior secretary who dealt with the incoming correspondence on the general public email address, tried to figure out what to do with it. Through a circuitous route, the letter landed up with Saul Jacobs, a conveyancing officer, who responded the next day (23 February 2016) to say that the property had been transferred to the provincial government in terms of a land swap.

Not to be deterred, the law firm sent another query to Jacobs on 11 March 2016:

Please advise, as a matter of urgency, whether Deed of Grant No CPF31-28/1923 is available or not for the above-mentioned transaction. The time at our disposal is limited.”

To which Jacobs responded on 16 March 2016, referring the law firm to a specific provincial official, a Francois Joubert (who had by then retired).

On 25 April, 2016 a Winton Gibbs responded on behalf of the province. To my amazement, his letter stated that the property had only been registered in the name of the province on 17 March 2016, five days after receipt of the NHLS’s legal correspondence to the City, requesting a transfer of the property to themselves. In other words, the transfer of the property in the Deeds Office, from the City to the province, was registered 34 years after the property swap was agreed in 1982.

Why was there a delay of over three decades before the land swap between the City and the province was recorded in the Deeds Office? It is essential (in order to unravel the full mystery) to get an answer to this question.

It is also important to establish exactly when and why the management of this case, on behalf of the NHLS, was removed from Diana Mabasa Inc and transferred to Hogan Lovells.

Interestingly, for complex legal reasons, the delay in the transfer actually assisted us in 2016. But what is the situation now? Lawyers are adamant that, at most, the NHLS may be deemed to own the buildings (or sections of buildings) from which they operate, but definitely not the entire 3.3- hectare property.

So where to from here?

As things stand, this impasse could prevent us from proceeding with the plan to redevelop the site with a significant component of affordable housing, cross-subsidised by new market opportunities as a sustainable urban development model.

We cannot go straight to court to reclaim the property because the Intergovernmental Relations Framework Act requires us to go through a long process of negotiation and mediation with national government first.

But everyone understands that a long delay is unaffordable, because of the inevitable cost escalations. The component of affordable housing in the redevelopment would shrink significantly, and cost a lot more.

The best way forward would be for the NHLS to acknowledge that this transfer occurred illegally, and give us power of attorney to continue with the redevelopment, starting with the rezoning application. If there was no ulterior motive behind the land transfer, there should be no reason for the NHLS to reject this request.

But if they refuse, there are other urgent legal remedies at our disposal, given the fact that speed is of the essence in maximising the affordability of the planned dwelling units.

But the implications stretch way beyond this particular project.

I thought of some of these implications while reading newspaper reports on the public hearings, currently under way countrywide, dealing with the issue of expropriation of land without compensation.

Who knows, while all the public drama unfolds, what might be happening quietly, behind our backs, right there in the Deeds Office without any of us being any the wiser? DM

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