Debt crisis hits development

2008-11-09 00:00

Five directors, including former president Nelson Mandela’s grandaughter, Nandi Mandela, involved in three major developments in the city may have to repay millions of rands to Ithala Bank, raising doubts about their ability to finance the local projects.

In jeopardy are the Camps Drift Waterfront development, a hotel complex in New England Road and a shopping centre at the Qokololo Stadium in Edendale.

The directors are currently the subjects of a forensic investigation instituted by the KZN Finance Department, into how one of their companies, Dolphin Whispers, managed to secure a R48 million loan from the government-owned Ithala Bank when the maximum loan limit was R15 million.

Dolphin Whispers was involved in the development of a multimillion rand 10-storey complex as part of the revamp of Durban’s Point Road. The company went into liquidation last year after failing to pay the company it had hired to fix defects. The company also defaulted on its loan repayment to Ithala.

Finance and Economic Development MEC Dr Zweli Mkhize told the province’s finance portfolio committee last week that the the forensic investigation is due to be completed by the end of November.

The directors of Dolphin Whispers could face legal action and will have to repay the money and Ithala staff responsible for approving the transaction could be fired.

Mkhize said that from the statement of assets and liabilities submitted at the time of the loan application, it appears that some of the directors have assets. Their existence and value will be determined when legal action is instituted.

DA MPL Johan Krog warned the department not to drag its feet as this could give the directors time to offload their assets.

Three of the five directors of Oceanspray, the company awarded the contract by Msunduzi Municipality to develop the Camps Drift waterfront, are also directors of Dolphin Whispers. They are Mandela, Vaughn Charles and Craig Simmer. The other two directors of Oceanspray are local accountant Roshan Morar and Sean Murphy.

Similarly, three of the four directors of New Ground, the company to which Msunduzi gave the contract for the developments of the New England Road hotel complex and Qokololo Stadium, are also directors of Dolphin Whispers. They are Mandela, Marcel Henry and Henry Masinga.

The environmental impact assessment (EIA) on the New England Road project has been completed and the development has been given the nod by the Environment Affairs Department.

Residents have a short time to appeal against the decision. The Witness has learnt that so far there have been at least three appeals.

One of these is based on the type of hotel to be developed on the site. When the project was first mooted, residents were told that this would be a City Lodge. However, it seems from the latest report that a more down-scale hotel is planned.

For the Camps Drift project, a hydrological report is being drawn up on the impact of the development on the Msunduzi River. According to sources, this report should have been done by now.

City manager Rob Haswell was contacted to find out what assurances the municipality has received that the projects are on track. He was off sick and did not get back to The Witness by the time of going to press.

Chairman of council’s economic development and planning committee, Pops Chetty, said he will be calling a meeting with officials this week to discuss the matter.

Mandela was not available for comment, but Henry assured The Witness that the predicament of Dolphin Whispers will have no impact on the Pietermaritzburg projects.

He said all the directors involved in the local projects were minor shareholders in Dolphin Whispers and that they welcomed the investigation by the Finance Department as a means of clearing their names.

Earlier, Simmers had told The Witness that the Durban situation arose because of a specific problem involving a shareholder not being able to provide funding. He said this person was not a director of the companies involved in Pietermaritzburg.

Henry said New Ground is a separate entity and is involved in a number of other developments, including the Durban Stadium and the Sibiya Casino.

There have been lengthy delays in the progress of both projects, which were awarded in 2005.

The new council after the 2006 election took a long time finalising agreements. Questions were raised on a number of issues and sources at the time said councillors were suspicious that a well-connected political elite had garnered these three development projects in the city.

They questioned the fact that Mandela was a director in both companies.

The R3-billion waterfront project is set to include shops, a convention centre, hotels, office parks, upmarket residential areas and an Olympic canoe and kayak slalom water course.

The proposal on the New England Road development offered a City Lodge-type hotel, restaurant and 35 simplexes. Plans for Qokololo included sports facilities, a shopping centre, taxi rank and petrol station.

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