Deon Malherbe (retired Hermanus Attorney)
"The hand of the 70s Nat is showing from the mayoral robe! Intolerance of any criticism, suspicion mongering vis a vis our political aspirations, and the arrogance that the mayor can close the debate"
"The cavalier manner that council dealt with public owned land is improper and should be set aside, the transfer is unlawful and reckless"
Linda Griffith (Chairperson of the Hermanus Rate Payers Association)
"In all good conscience, can we in Hermanus really condone and support what the Council is doing"
"Surely this piece of coast should be kept open for the people in adjacent Mount Pleasant and Zwelihle to have a park, a recreation area and access to the coast and rock pools. It should not be sold off for another walled, gated development"
John Williams (Environmentalist and Chairman Save Bantamsklip Association)
Hermanus Ratepayers Association Letter:
Letter to Anton Bredell, MEC for Local Government, Environmental Affairs and Development
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23 July 2010
Anton Bredell
MEC for Local Government, Environmental Affairs and Development
Dear Mr Bredell,
This concerns the Overstrand Municipality (OM) and its relationship with Rabcav, a private joint venture partnership. It relates more specifically to the accounting for the Fernkloof Estate Development and the alienation of municipal land referred to as Schulphoek.
We are asking for your intervention, as we have reasons to believe that the Council failed to comply with the provisions of the Municipal Finance Management Act No 56 of 2003, its own Asset Management Policy and the Access to Information Act No 2 of 2000. There is concern that a property development is tacitly authorised that can hardly be lawful in terms of Section 2 of NEMA and the Integrated Coastal Zone Management Act, as a large portion of the property is a protected forest and as the proposed development would fall into the coastal setback line.
The Rabcav Development Facilitation Agreement
In December 1999 the Council of the then Greater Hermanus Municipality entered into a so-called Development Facilitation Agreement with Rabie Property Developers and Cavcor Property Developers, trading as the joint venture 'Rabcav', whereby Rabcav would facilitate the development of certain vacant municipal properties in Hermanus. Fees and commissions and other conditions were written into this contract. The agreement even contained a secrecy clause that was clearly invalid. The agreement was to expire in 2005.
It is an open secret that this agreement was born out of fear in certain political circles dominating the then council in Hermanus that the national government would seize all vacant municipal land and claim it for social housing or for the grazing of goats. By firmly committing such vacant land for high value development at an early stage and binding itself contractually to Rabcav, subject to conventional penalties, the then council sought to counter more effectively such apprehended initiatives by national government.
When the OM succeeded the old local authority, this questionable agreement was adopted, subject to amendments of the secrecy clause and of the facilitation commission for the golf estate development (Fernkloof Estate Development).
Fernkloof Estate
The problem with the Fernkloof Estate development is that the local authority and/or Rabcav have failed and refused to render proper accounts and make them available to the rate paying public. There is reason to believe that municipal land was used in a manner that needs to be classified as a fruitless & wasteful expenditure; fruitless & wasteful insofar as the Council alienated most valuable land and sunk undisclosed amounts of ratepayers' funds into infrastructure, without any profit or benefit for the local community, while the facilitator walked off with a facilitation fee and other commissions worth R83, 5 million and the privately owned Hermanus Golf Club received upgrades of its course and infrastructure to the value of R30,5 million. This matter needs to be properly investigated by forensic means!
Vacant municipal land adjacent to the Hermanus Golf Club was "identified" for development in terms of the Rabcav agreement in 1999. In 2004, the OM, acting as the owner/developer and Rabcav as facilitator, publicly stated that all the plots had been sold for R260m. Today, those parties claim that only R247 million was realised. Be that as it may, it is clear that Rabcav did not carry the developer's risk, it merely billed the municipality an exorbitant amount for commission, fees and costs.
In terms of the agreement, the proceeds of the sales are public funds and should have been paid to and administered by the Municipality with Rabcav being paid facilitation and other fees/costs, as and when earned or incurred. This has not happened. According to public statements made by various municipal officials, the executive mayor and certain councilors, Rabcav has had control of these public funds at all relevant times. The executive mayor confirms this and said that the municipality was ‘not at liberty to make the detailed accounts of a private company open to public scrutiny’.
We believe that in violation of the MFMA, no financial accounts for this public sector development have been rendered, audited or in any other way scrutinized and approved. The financing of the entire development has been shrouded in secrecy. It is impossible to establish what expenditure the municipality incurred and what it got in return.
It is difficult for Ratepayers to accept that the greater Hermanus community has been the major beneficiary from this development. We request that you exercise your supervisory powers and demand the release of full financial statements to be audited, and if necessary the matter to be forensically investigated.
Lapsed Facilitation Agreement used to justify illegal sale of Schulphoek
Apart from the Hermanus Golf Course site and the Old Station site a further three sites were identified in the Rabcav Agreement: Voelklip 711, Grotto Beach and Schulphoek. The ‘development’ of the Voelklip and Grotto Beach sites had to be abandoned due to public protest, as the DA-led council was understandably partial to the wishes of its constituency. The proposed Schulphoek development has equally been opposed, but did not attract the same level of attention from the DA's constituency, because of its proximity to Zwelihle and Mt Pleasant.
Schulphoek is an area of the coast with rock pools and natural vegetation, including a 25ha milkwood forest. The resident the Mount Pleasant and Zwelihle and their forerunners have used it for recreation since the beginnings of Hermanus. The OM has been neglecting the area. Braai facilities and the rock pools have deteriorated to such an extent that the OM put up signs declaring the area to be ‘unsafe’.
Schulphoek sale to Rabcav
The Schulphoek site is 46ha in extent and consists of a portion of remainder of erf 243 Hermanus and erf 314 Zwelihle. It is situated between the black township of Zwelihle and the sea. (Schulphoek). 25ha of the site is a milkwood forest.
At the end of January 2010, Council took the decision to transfer Schulphoek to Rabcav for a consideration of R6.1m. The property has since been transferred. The deed of transfer lists Cavcor CC and Cape Theme Parks (Pty) Ltd as the new owners. We believe that the transfer was unlawful and without valid reason and needs to be undone.
We request you to intervene, to demand full disclosure from the municipality and obtain a temporary interdict that prohibits and prevents the current owners from transferring the property to a third party. It is our understanding that municipal assets may only be alienated if it has been established that they are surplus assets and not needed to meet the municipality's statutory obligation. The market value of the asset needs to be established by independent valuers. The asset needs to be offered by tender in a fair and transparent process and the social and financial value of the various tenders needs to be carefully evaluated. It is clearly understood that the property should not be alienated below market value.
Part of the motivation for the sale of Schulphoek according to the Municipality is as follows:
‘A further outcome of the transaction is that Rabcav which was appointed in 1999 by the former Greater Hermanus to develop the portions of land in question, will suspend its facilitation agreement with the Council and renounce its claim to any additional sections of land in terms of the agreement’.
This is not a valid reason in terms of the MFMA or the Asset Management Policy, as the Rabcav agreement had expired anyway in 2005 and had not been validly extended for a further 3 years as contemplated in the agreement and as required by the MFMA.
Moreover, the OM did not follow due process, as provided for in section 14 of the MFMA. Accordingly the alienation of the property was fatally flawed and unlawful. :
- The sale was not properly advertised.
- The tender process was not fair, equitable, transparent and competitive. OM did not invite genuine tenders, as it was a foregone conclusion that Rabcav was to get Schulphoek as a consolation prize for the cancellation of the Facilitation Agreement.
- It is not clear what the fair market value of the property is. A raw land value of R6.1 million is ridiculously low, where a retail land value of R200 million has been estimated.
- With the exception of the cash consideration of R 6,1 million, other financial benefits claimed are largely challenged, as they are largely costs born by any developer.
- There are no binding agreements covering the consideration in kind (capital expenditure for infrastructure etc).
- It is not clear what the economic value the community will received in exchange for the asset. The people from Mt Pleasant and Zwelihle used the area traditionally for recreation. It would appear that the development would cut off their access to the sea. Accordingly there is a negative community value.
- It is not clear why this asset should be disposed of at all. It is deemed to be eminently suitable for housing and recreation for the adjacent community.
- Additionally the OM Asset Management Policy has not been followed.
A tender needs to comply with other applicable statues as well. In terms of Section 2 of NEMA the milkwood forest would enjoy special protection.
In addition to questions about the legality of the alienation of the property, a further concern is that an environmental record of decision (RoD) relating to a previous development proposal for the property, that predates the commencement of the alienation process, expired with the passage of time. A new RoD was issued following this expiry, apparently without a full review of the circumstances pertaining to the development now envisaged by Rabcav. We bring to your attention that a substantial portion of the alienated property falls within the default coastal set back line as set down in the Integrated Coastal Management Act No.24 of 2008 (ICMA). Access to the sea shore historically enjoyed by the Zwelihle and Mt Pleasant communities is likely to be made difficult through the creation of a gated residential development on the property (the RoD was issued for a development that envisaged free public access). The development intended by Rabcav is therefore both environmentally and socially objectionable and needs to be reviewed in terms of compliance with ICMA and of the National Environmental Management Act.
Please acknowledge receipt of this letter and indicate when we may expect to hear from you regarding release of the Fernkloof financials and an investigation and cancellation of the illegal sale of Schulphoek.
Yours faithfully
Linda Griffiths
For and on behalf of Hermanus Ratepayers Association
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