State defends Limpopo deal

2012-11-02 22:02
(Picture: <a href=\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\http://www.shutterstock.com\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\>Shutterstock</a> )

(Picture: Shutterstock )

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Pretoria - National Treasury and the health department on Friday defended the decision to buy a Limpopo building owned by controversial property mogul David Mabilu.

A joint statement released by the National Treasury and the health department said buying the building was part of "buy-out clauses" in the 10-year lease agreement which was reached "long before national government intervened in the province in December 2011".

The Limpopo provincial public works department had awarded Mabilu's company, Project Management and Facilitation Co-operation (Promafco), a tender for the construction and lease to the provincial government of a residential property for doctors.

"Included in the lease agreement was a clause giving the provincial department of health an option to buy the property from Promafco," said the Treasury and the health department.

"The purchase of the property was done in terms of this clause and therefore it would have been illogical to issue a tender when government was exercising its right as per the lease agreement."

The buy-out clauses in the lease agreement outlined a formula which had to be used for determining a fair purchase price.

"Applying this formula, a purchase price of R359m [excluding VAT] was derived and this was subsequently revised down to R328m [excluding VAT].

"Subsequently, the national department of health and national treasury negotiated the price down to R298m (excluding VAT), a price which consulting engineers said was fair."

The Mail & Guardian reported on Friday that the move to purchase the building had angered senior provincial government officials and members of the provincial cabinet

According to the report, the provincial authorities allege Mabilu was paid more than R300m for a building worth far less.

In their response, the departments said buying the building was the viable option as an evaluation conducted by external consulting engineers revealed that the rental rate of return of the lease was higher than the industry norm.

Secondly, the rental (reported to be at R2.1m in the Mail & Guardian) had an escalation of nine per cent per year, which was deemed to be fairly high.

Thirdly, by the 10th year the rental per month would have increased to R4.5m (excluding VAT).

"This would have brought the total rental paid over the lease period to more than R400m, and government would still not own the property at the end of the lease period. Taking all of these factors into account, government came to the conclusion that it would be in its best interest to buy the building."

The two departments also sought to dispel allegations of breaching the Public Finance Management Act. They said Limpopo's financial position was out of the woods.

"As of 1 November, the province had cash [amounting to] R2.3bn in its account before further transfers to the province by national government.

"Compare this with the overdraft of over R700 during the same period last year, on top of which the province was seeking an additional R1bn.

"The cash balance [of the province] excludes the R298m [excluding VAT] already set aside for the purchase of the building... So money is no longer a problem in the province."

The departments said the property developer "has not been paid a cent" and the money was in a trust account.

Sometimes referred to in the media as "Malema's sugar-daddy", Mabilu made headlines for spending around R15m to charter a plane which ferried his associates to Mauritius for a wedding junket.

He was also reported to have also deposited "piles of cash" into Julius Malema's Ratanang Family Trust, named after the expelled youth league leader's son.

- SAPA
Read more on:    david mabilu  |  julius malema  |  polokwane  |  government spending
NEXT ON NEWS24X
SHARE:

Read News24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
5 comments
Add your comment
Comment 0 characters remaining
 

Inside News24

 
/Sport

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Magical Massinga

Spend 5 nights at the gorgeous Massinga Beach Lodge in Mozambique and only pay for 4 from R13 220 per person sharing. Includes return flights, accommodation, transfers and romantic turndown. Book now!

Kalahari.com - shop online today

Deal of the week!

20% off Afrikaans books, music and DVDs. Offer valid while stocks last. Shop now!

Save up to R1000 on Hisense smartphones!

View the large range of Hisense smartphones. Buy today and save up to R1000!

Hot gaming titles – available for pre-order!

Call of Duty: Advanced Warfare Day Zero Edition, Far Cry 4, Grand Theft Auto 5 and more. Pre-order now!

Get a free eBook

Buy 3 eBooks and get the cheapest FREE. Offer valid while stocks last. Shop now!

Bargain box – 60% off

Reduced prices, very limited stock. While stocks last. Hurry and shop now!

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25

Horoscopes
Aquarius
Aquarius

Be open, network and share your intentions and ideas as these may be the vital seeds to the imminent change that can be starting...read more

There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.








Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.