Johannesburg - If Roux Shabangu’s R500m
police lease deal is deemed invalid by the courts, it would have
“far-reaching ramifications” for government’s similar BEE property deals
financed through all the major banks.
This is the contention by
Nedbank, which loaned Shabangu R248m to buy and refurbish the
Middestad building in Pretoria in 2011, in papers lodged with the North
Gauteng High Court this week.
The bank is “intervening” as an
“affected” respondent against the department of public works, which
wants the court to nullify Shabangu’s lease agreement.
court papers, Nedbank’s legal head, Lisa Ruch, warns that all similar
property deals “will be in jeopardy” and if the court ruled in favour of
the department, “public sector funding by the major banking
institutions may be materially and adversely affected”.
only would the validity of the lease agreement and many similar
agreements be affected, but BEE property financing by Nedbank in general
would be seriously compromised,” contends Ruch.
litigation comes hot on the heels of an announcement last week by
Minister of Finance Pravin Gordhan that the department would probe 3 867
lease contracts worth R300bn that the department entered into
with property companies.
Nedbank’s application adds a twist to
the leasing debacle that has claimed the scalps of two ministers and led
to the suspension of police commissioner Bheki Cele and two
The bank is blaming senior department
officials, including axed Minister of Public Works Gwen
Mahlangu-Nkabinde, for the police leasing debacle and said it wanted to
withdraw from funding Shabangu’s purchase of the Middestad building in
Pretoria, but the department reassured Nedbank the lease was valid.
affidavit reveals that on more than seven occasions the department gave
Nedbank “repeated assurances” that it would honour the lease and proper
processes were followed when the lease was signed.
that in a meeting on September 14 2010 between the department and
representatives of the five major banks – Standard Bank, FirstRand Bank,
Absa, Investec and Nedbank – suspended public works director-general
Siviwe Dongwana reassured the executives that none of the leases signed
by the department would be set aside due to the controversy over
Shabangu’s lease with the department.
According to Ruch, this was
after the banks expressed concerns about the department not fully
committing to Shabangu’s lease agreement despite Shabangu’s lease being
similar to leases used by all banks to fund mainly government BEE
Nedbank argues that the main reason banks have
doled out finance for property is because the financee, like Shabangu,
held a valid and binding lease.
“This is because the funding
model used in this case is widely employed by the banking industry in
order to provide public sector funding.
funding is entirely reliant on the validity of the underlying
government leases and the efficiencies of the department in making
monthly rental payments,” says Nedbank.
Ruch contends that the
department gave reassurances that the lease agreement complied with
sections 66 and 68 of the Public Finance Management Act, Treasury
regulations and the department’s BEE strategy
the department’s assurances contradicted Public Protector Thuli
Madonsela’s finding last year that Shabangu’s lease was unlawful and
State attorney Moipone Mosidi said they were studying
Nedbank’s application and were yet to decide whether to oppose it,
although last year her office had declined the bank’s request to
intervene in the case.
There are fears that if the public works
investigation into the leases uncovers more rot, companies that are
found to be on the wrong side of the law could face Shabangu’s fate, and
the funders of those lease contracts could find themselves in Nedbank’s
But if banks are anxious about the outcome of the department’s case against Shabangu, they are not showing it.
Instead, banks approached by City Press for comment welcomed Gordhan’s announcement of a probe into leases.
Marcel de Klerk, an executive from Absa retail and business banking
unit: “We have taken note of the investigation by the department of
public works and would support any measure that ensures improved
“We are engaging with the Banking Association of
South Africa and the department of public works in this regard. We are
comfortable with our existing exposure to the department and all lease
commitments are being met.”
Sizwe Nxasana, the chief executive of banking group FirstRand, said he was not concerned about its outcome.
“The investigation is not a major issue in our lives. I am not losing sleep over it,” Nxasana said.
Billion Group, led by property tycoon Sisa Ngebulana, said it was hoping for a speedy conclusion to the investigation.
Mike Rodel, Billion Group’s chief operating officer: “We believe the
(tendering) system is not as transparent as it could be. It is in
everybody’s interest that the investigation is concluded as soon as
possible so that the government can move forward with awarding new
leases for new office space.” - City Press