Bheki Cele's R500m police rental deal

01 August 2010 - 02:00 By MZILIKAZI wa AFRIKA and STEPHAN HOFSTATTER

A billionaire businessman has clinched a dodgy R500-million property deal with police chief General Bheki Cele that will result in the police moving their headquarters to a building he bought this week.

The Sunday Times can reveal that Cele signed the deal to move SA Police Service top brass - including minister of police Nathi Mthethwa, his deputy, Fikile Mbalula, and administrative staff - to Roux Shabangu's building almost two months before he bought it.

The deal never went out to tender, violating Treasury regulations that all contracts over R500000 must go through a competitive bid process. After three days of queries from the Sunday Times, the Department of Public Works could not explain why it had flouted Treasury rules.

"We will give you a written response by Monday or Tuesday," said spokesman Lucky Mochalibane.

Shabangu confirmed he bought the 18-storey Middestad Sanlam centre in Pretoria on Wednesday for R220-million and claimed he was still "negotiating" with the police to move in.

But the Sunday Times is in possession of a lease agreement for Middestad between Shabangu's company, Roux Property Fund, and the SAPS, signed by Cele and public works official MB Tlolane on June 1.

The lease will run for 10 years from today and specifies cheques should be made out to Shabangu's company. Projected expenditure under "actual cost calculations" totals R520947435. The police will occupy 21747m² of office space. The remaining 16000m² is mostly made up of shops on the ground floor.

SAPS headquarters is housed in the Wachthuis building just around the corner.

It is owned by Encha Properties, which declined to disclose the rental it charged. However, a police insider said the Wachthuis lease was also worth about R500-million, and was set to run for another 10 years.

This is supported by the fact that Encha registered two bonds with Investec over the property for a total of R415-million.

Unless the Wachthuis lease is cancelled, taxpayers could be forking out almost R1-billion in the next decade to house SAPS headquarters.

Several senior officials apparently have serious reservations about the move. "They don't understand why you should rent a new building when there is enough space (at Wachthuis)," said one official close to police management.

For R500-million, at least 10000 new constables could be patrolling South Africa's streets.

Cele said the new space was needed to house the top brass and between four and six specialised units. He could not specify how many police officials would move.

"There are so many units that came under my direct command and they have to be where I am. The minister, the deputy minister and some of the commissioners are moving into the new building with me."

Cele could not explain why he signed the lease in June for a building that was bought this week. "Every day I sign piles and piles of documents and the lease is one of them. If there were any irregularities maybe supply chain management can answer that."

Cele's choice of landlord suggests political considerations trumped efficient use of taxpayers' money at a time when the government claims it can't afford pay hikes for striking public servants.

Wachthuis owners Encha Properties belongs to the Moseneke family, who are close allies of former president Thabo Mbeki.

Shabangu, on the other hand, appears to be well connected to President Jacob Zuma's government, having attended Zuma's inauguration as a VIP guest. He denies using his political clout to close deals.

"I am a businessman and not a politician," he said. "Not everyone who attended that function was there because of political connections."

The billionaire whose family hails from Swaziland started as a humble maize distributor in Mpumalanga.

Today his R1.4-billion property empire includes Protea and Jabulani malls in Soweto and Alex Plaza in Alexandra. He's also a partner in a massive R1.5-billion office and retail development in Mbabane, Swaziland, and a R1.2-billion mall in Mogale City.

He was previously accused of colluding with bank officials to buy properties on auction and sell them back to the government at a handsome profit, but denied this emphatically. "Ag no - that is not correct. We negotiated (farm sales) on behalf of the government and were paid a fee - that is all," he said this week.

Meanwhile, SAPS officials told the Sunday Times Cele has also signed a deal to move police in Durban to another building Shabangu is negotiating to buy.

Shabangu was in Durban on Friday trying to clinch the deal, which he refused to elaborate on, saying negotiations were "at a sensitive stage".

He would only confirm that police would be moving into his Pretoria building. "I (have) just bought (the) building and police want to move in as Wachthuis is apparently flooding and horrible."

He also claimed the validity of Encha's Wachthuis lease was questionable. "There is a big controversy over the validity of (that) lease."

But Encha Properties CEO Dr Sedise Moseneke told the Sunday Times his company had a "lawful lease" to accommodate police headquarters at Wachthuis.

He denied there was anything wrong with the building: "The property is maintained to the highest standards and to date we have not received any complaint whatsoever from our tenant."