Post Office lease shock

2011-07-16 08:08

The South African Post Office Group is embroiled in controversy after it allegedly entered into a R520-million lease agreement without following regulations.

Questions have also been raised as to why it started paying rent exceeding R20 million 10 months before taking occupancy.

According to Treasury regulations, tenders worth R500 000 or more should be advertised and undergo a competitive bidding processes.

The South African Postal Workers’ Union (Sapwu) insists that the Post Office did not advertise the tender as per the regulations.

Government, the Post Office’s sole shareholder, has confirmed that it is aware of the allegations against the mail and banking parastatal.

The R520-million contract involves transferring the Post Office headquarters from Pretoria to the Eco Park Estate in Centurion.

Sapwu revealed accounting records showing that the Post Office paid R21 million to rent office and parking space 10 months before the mailing and banking parastatal’s personnel could move into the majestic building in Centurion’s prime business location.

The R2.1-million monthly rental for Eco Point, a building located in the estate, in May climbed by 9.5% to R2.3 million. If the contract is fixed on the 9.5% increase a year, the Post Office would have forked out R520 million when the 10-year lease agreement ends.

Post Office non-executive board member Shu’ayb Patel declined to address specific questions linked to the lease
agreement, reasoning that this could compromise an investigation about the parastatal making the deal.

“We have been doing a review since May 2010 on the decision to move the head office to Eco Point. This review is a sensitive process and there are governance procedures we are adhering to,” said Patel.

He said that the investigation had been dragging on for 14 months without completion because it is “extremely detailed”.

“We are now at an extremely sensitive stage and if we deal with the details of the review, I will be compromising the process and individuals involved,” said Patel, who added that it could take few weeks for the investigation to be finalised.

Two weeks ago, Sapwu requested Public Protector Thuli Madonsela’s office to inquire into why the contract was never advertised and there was no competitive bidding process.

In the application, the union names Post Office Group chairperson Vuyokazi Mahlati and executive director for human resources Maphutha Diaz as people who were notified about the lease allegations.

An official whom City Press was referred to by the company that owns the property’s marketing department but who declined to give her name, confirmed that the company did not bid for the Post Office tender.

She said the company, M&T, was introduced to the agent and never actively sought the Post Office as a tenant.

“M&T did not get involved in any tendering process with the Post Office but we were introduced to the parastatal by an external broker.

“This means that we did not have to source the client because the client came to us,” she said.

She declined to name the middleman – citing a confidentiality agreement.

She estimated that the Post Office would have paid approximately R350 million had it opted to buy the building for cash, thereby saving a whopping R170 million.

She refused to comment when asked about why the Post Office started paying rent 10 months before occupying the building.

“You must ask the Post Office that question,” she said.

The union gave City Press a name of the man who had allegedly fixed the deal between the Post Office and the property owners, but he denied all knowledge of the transaction.

Communications department spokesperson Tiyane Rikhotso said that the minister, Roy Padayachee, had requested that the Post Office board furnish him with a detailed report on the lease agreement.

“Those issues have been brought to Minister Padayachee’s attention.

“He has asked the board to provide him with a detailed report and he will figure out what action to take as soon as possible,” said Rikhotso.

Sapwu’s labour-law specialist Tutu Mokoena said the union decided to refer the matter to the public protector after failing to get a response from the Post Office on the complaints.

“We requested an audience with the Post Office chairperson Vuyokazi and human resource executive Maphutha with the aim of raising the allegations but they did not respond,” said Mokoena.

View the full accounting report

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