KDM set to fork out R2 billion for Civic Centre rental

2016-05-11 06:00

THE KwaDukuza Concerned Citizens Group has undertaken making the community of KwaDukuza and surrounds aware of the facts regarding the proposed development of a shopping mall and civic precinct on the land where the sporting facilities currently stand. They have, thus far, compiled the following information:

· KwaDukuza Municipality's (KDM) original plan was for re-development of the KwaDukuza Golf Course only and did not include the Recreation and Country Club Grounds and the building of a mall. KDM did not advertise its intention in any of the local newspapers. KDM's intentions appear to be to do the deal in a somewhat surreptitious manner. The developer claims that re-development of the golf course bid was advertised on the municipal website on 3 December 2013 and in local and national newspapers.

· KDM did not consult with its citizens as is required by legislation. Due processes have not been followed. Ratepayers and ward residents have not been consulted in the decision making process. Most citizens are unaware of their intentions.

· The tender process was procedurally unfair because the preferred bidder changed the specifications of the development during the bidding process to include a mall, changing the site to a mixed use site and including the central sports complex that was not originally included.

· Timing of the preferred bidders “gift” of a R6 million skills development centre could not have been more improper, considering that the bidder's tender was undergoing the bidding process. KDM in approving this “gift” compromised the credibility and integrity of the supply chain management process of the mall development and that both KDM and the preferred bidder did not comply with ethical and moral standards. Furthermore, KDM appears to have done too little groundwork and did not consider the negative financial impact on the entire region by embarking on a project of this magnitude e.g. increased rates, electricity, water, etc.

· The overall site area to be acquired by the developer is 24,213 hectares at a cost of no less than R8 million. The area is to be utilised as follows: mall development 8,4726 hectares, civic centre 2,0908 hectares; road reserve 1,2408 hectares; future development including future road reserves and servitudes 8,0374 hectares and wetland 4,4097 hectares area to be maintained by developer. It is significant to note here that plans are in place to re-zone this area from private and public open space to general commercial zone and new street reservation in terms of the KwaDukuza/Stanger Town Planning Scheme.

· Inference to be drawn from land acquisition is that as the existing sports complex has been deliberately allowed to decay over the past 21 years with very little maintenance and no upgrades. The argument advanced is that as a result of the dilapidated condition of the sports complex it is not worth more than the R8 million. However, if the area is re-zoned as commercial first and then subsequently put out to tender, surely it will fetch much more than the bid price, perhaps more in the region of R50 million.

· Anticipated capital expenditure for the proposed development as provided by the developer is expected to total R707 million. The breakdown is as follows: infrastructure development R49m, sports facilities relocation a paltry R3m, retail centre R390m, civic centre R265m.

· KDM maintains that it is experiencing fiscal constraints, given the economic meltdown that is likely to escalate with consumers failing to pay for services. Furthermore, it maintains that it will be difficult to arrange finances given its current financial strength; that it will be required to inject some equity and that it will have to make re-payment of the debt all of which will strain its cash flows.

· Against this backdrop, hardly a week goes by without an article appearing in our local newspapers singing the praises of how good this municipality is performing as it wins accolades and awards aplenty. Also, we are bombarded with clean audit reports; how much this municipality has done and achieved for this region via expensive billboards displayed all over town, etc, in the light of all this their arguments seem shallow when all of these accolades are taken into account. There is also no indication whatsoever whether any tangible efforts were made to obtain funding from national government or any financial institution. And, if the municipality is really so good on all fronts as it claims, then surely obtaining finance for this project should be a cake-walk! Unless of course, all of this is electioneering talk; everything is not as rosy as they would like everybody to believe and it really is the calm before the storm.

· KDM accepted the BOT (Build Operate Transfer) model as a vehicle to deliver construction of the civic centre. This is an expensive model to use as it is obviously overpriced and the ratepayers will be compelled to fund the entire project. This model has immense financial implications for ratepayers. According to information only five wards out of a total of 27 wards (now 29) in this region contribute to the rate base. The total rentals payable to the developer will be R1, 730 billion over a 20 year period.

· However, should the municipality elect to finance this project at a cost of R265 million over a 10 or 15 year period, the total repayments inclusive of capital and interest totals R465 million and R548 million respectively. The municipality is therefore paying in excess of between R1, 290 billion and R1, 182 billion respectively.

· In simple terms, the municipality will repay R1, 730 billion over a 20 year period to the developer for a civic centre which costs R265 million. This effectively covers the developers entire capital cost of R707 million for the entire project i.e. mall and civic centre. The developer ends up owning the mall at the expense of the ratepayers. While the civic centre will be transferred to the municipality on the preferred BOT model option.

· Our primary concern is the enormous financial implications such a huge development will have on the ratepayers of the region, the social impact the mall will have being housed in a residential area that is surrounded by no less than five schools within close proximity of the mall as well as the effect the re-location and decentralisation of our sports facilities will have on our sports people and the community as a whole.

· A very important question also needs to be raised here considering the current economic climate as well as the municipality's inability to perform deliver and service the area under its jurisdiction. Should the municipality be wasting public funds to undertake such a project? Is a civic centre costing R265 million really an absolute necessity?

The KwaDukuza Concerned
Citizens Group (KCCG)

Send the KCCG comments on the above points. Email kwadukuza.ccg@gmail.com
Share your thoughts for publication with the Stanger Weekly by emailing Jyothi.Laldas@media24.com

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