EXCLUSIVE: How land owners will score millions from Hermanus protests

2018-05-30 09:02
Schulphoek (Jenni Evans, News24)

Schulphoek (Jenni Evans, News24)

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The owners of a contentious piece of land at the heart of violent housing demonstrations in the coastal town of Hermanus stand to score a massive windfall of millions of rands if the state, through the Western Cape provincial government, buys it back from them.

As the communities of Zwelihle and Mount Pleasant near Hermanus protested over a lack of adequate housing during demonstrations earlier this month, the owners of the Schulphoek property were negotiating with the Western Cape to sell the piece of land back to the state.

News24 can reveal that the provincial government could shell out much more than the rumoured R34m to the owners of the protest-stricken Schulphoek – which they bought from the Overstrand municipality less than a decade ago for an effective R5m following a controversial land deal.

The rest of the developmental improvements that were supposed to form part of the sale have still not been completed, including a link road and bulk infrastructure in the area.

READ: Hermanus Schulphoek land owner agrees to sell amid protests

A convoluted history

The Schulphoek land has a convoluted and confusing history, stretching back more than 18 years.

On December 10, 1999, the Greater Hermanus Municipality entered into a fixed-term "development facilitation agreement" with RabCav, a consortium consisting of Rabie Construction and the Cavcor Property Group. In terms of this agreement, RabCav would be responsible to facilitate and implement the development of tracts of undeveloped land designated by the municipality.

The idea entailed RabCav bearing the responsibility of financing, managing and developing these properties, which would in turn earn the municipality some much needed revenue upon their sale. In return, RabCav would be entitled to charge a fee based on a percentage of the value added to the property by these developments.

On December 5, 2000, Pierré Uys, the then provincial MEC for Local Government, incorporated the Greater Hermanus Municipality into the Overstrand Municipality. Overstrand took over all the rights and obligations that had accrued to the Greater Hermanus Municipality, including the development facilitation agreement with RabCav.

Promises we keep

During a meeting with the Zwelihle community on June 29, 2005, RabCav's Leslie Viljoen told residents that the Schulphoek property would be developed in order to fund houses, business premises and community facilities. The proceeds generated from the development of Schulphoek would be used to fund improvements in the communities of Zwelihle and Mount Pleasant.

But the development never materialised. The Overstrand Municipality's municipal manager, Coenie Groenewald, stated that a downturn in the economy had halted the development of Schulphoek.

"The envisaged Schulphoek development did not materialise as a result of, inter alia, the downturn in the economy. Other pieces of land were also included in the Rabcav contract. In order to fast track development, an agreement was reached between Overstrand and Rabcav to sell Schulphoek to Rabcav, subject to a clause that Rabcav releases the other portions of land as per the agreement. One of these areas is the Swartdam housing project, currently being developed by Overstrand." 

Despite the apparent economic downturn, RabCav finalised the luxurious Fernkloof Golf Estate, 5km north-east of Zwelihle, in 2004. The 27-hole golf course and luxurious gated communities raked in a hearty R260m, and sold out its erven within six hours.

Tit for tat

The sale of Schulphoek happened in 2010 when the Overstrand Municipality took steps to get the development rights for several municipal properties back from RabCav.

It struck a second deal with RabCav, allowing the property developer to purchase the Schulphoek portion, in return for relinquishing any developmental rights for the remaining properties of Grotto Beach, Voelklip and Swartdam.

This option to purchase was based on a clause in the original 1999 development facilitation agreement, which gave RabCav the first option to purchase any property it developed in terms of the agreement, including Schulphoek.

The deal was mired in controversy at the time, as the sale was not advertised to other prospective bidders. The patch of land also partly consists of indigenous milkwood forest, used by locals to conduct their cultural initiation rites.

The Zwelihle Community Development Trust (ZCDT) objected to the sale of the land and maintained that the portions of land that forms the bulk of Schulphoek were historically sold to the Greater Hermanus municipality on condition that any proceeds were used exclusively for the Zwelihle community's benefit.

It also raised concerns that the development of Schulphoek was earmarked as a means to subsidise the development of Zwelihle and Mount Pleasant communities. In the absence of the Schulphoek development, funding for Zwelihle and Mount Pleasant would evaporate.

The ZCDT also raised an issue that, while relying on the option to purchase contained in the development facilitation agreement, both the municipality and RabCav had ignored the clauses requiring public participation and community involvement in the development.

Similar objections were raised by the Hermanus Ratepayers Association (HRA) against the sale of the land. In addition, the HRA also raised concerns that the Overstrand Municipality was in fact selling a Milkwood Conservancy as part of the transaction, and held that the sale of such a conservation area to be impermissible.

Schulphoek, line and sinker

Despite the objections, the municipality and RabCav pressed ahead. The property purchase agreement saw Rabcav obtain the 50-odd hectare Schulphoek property for an effective R5.3m, despite the purchase agreement being for a total of R23.2m.

The balance of R17.9m consisted of additional developmental improvements which Rabcav would agree to provide in the area. This included electrical connections worth about R3 million and an access and link road worth another R14 million. A further R1.4 million would be payable for fees, levies and charges, arriving at the R23.2 million total price.

But the road linking Schulphoek Road and Kus Road with Church Street near the Hermanus Beach Club has not been built. The bulk infrastructure that would also form a part of Rabcav's payment has also not been put in place.

According to the Overstrand municipality, Rabcav had already paid the R1.4m, for rezoning charges.

Overstrand's Groenewald confirmed that neither the link-road nor the bulk infrastructure have been built by Rabcav following the sale of the property eight years ago. 

However, Groenewald maintains that the consideration of either of these developments in the purchase price of the property is irrelevant, as both the link-road and the electricity infrastructure will still have to developed in terms of the conditions of sale of the land.

This means that Rabcav would still have to build the road, now valued at R30m, even if the Western Cape Government purchased the property from it.

The link-road (pink) between Church Street and Schulphoek Road has not been built.

Rabcav asks for more

Now, with community members demonstrating about the lack of housing, the Western Cape government was forced to step in and purchase the property.

Section 14(3) and Section 90(3) of the Municipal Finance Management Act prohibits a municipality from reversing the sale of a property once it has been sold. This is to prevent the possibility of a municipality selling off its property for a song, only to purchase it back later at a heavy premium. 

However, the Act places no similar restriction on provincial governments when purchasing land sold by municipalities.

Western Cape Human Settlements MEC Bonginkosi Madikizela earlier refused to disclose the amount Rabcav wanted for the property. Asked if it was more than the rumoured R34m, Madikizela told News24 that "he [the seller] asked for more than that". Madikizela said the government would not just pay the asking price, as the land would have to go through comparative valuation processes.

Considering that RabCav effectively only paid R5.3m for the Schulphoek land, the property developer stands to gain massively should the deal proceed.

Leslie Viljoen, speaking on behalf of RabCav, sidestepped detailed questions posed on the transaction. 

"There is an 18-year history to this story which has been in the public domain on and off since 1999, both fact and fiction. It is not possible to give a balanced perspective by answering a few short questions and, due to the sensitivities around the latest political developments, we do not think it prudent to debate this further in the media."

Ironically, his words echo those that then Overstrand mayor Theo Byleveldt told IOL in 2010. He reportedly said that the Fernkloof and Schulphoek developments had spanned 10 years, and it had been difficult to explain their "finer details" in the press. He believed that there had been "a lot of vexatiousnous behind the controversy".

Eight years on, and the same questions are being asked by demonstrators in the streets of Hermanus.

Questions posed to Viljoen - about whether their asking price for Schulphoek included or excluded the outstanding infrastructure it was required to build - were met with a copy-and-paste of his earlier response.

Negotiations Ongoing

Madikizela's office indicated that the purchase price had not been agreed upon. A valuation of the property still had to be conducted on the land parcel before any figures could be thrown about. They did, however, indicate that the original conditions of the sale of the property would be taken into account when negotiating a purchase price.

Tensions have flared up in recent weeks in Zwelihle as local residents took to the streets to protest the lack of adequate housing in Hermanus. The resulting protests have seen the Western Cape town shut down for several days, hobbling local businesses and the community.

Mayor Dudley Coetzee told community leaders at a meeting at Overstrand Municipal offices last week: "My priority is to get Schulphoek back. Never mind how it got there [to the current ownership]."

He said this while a large group of people sang and marched up and down Magnolia Road outside.

Read more on:    cape town  |  housing  |  land  |  service delivery  |  protests

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