The DA’s Pieter Van Dalen referred the illegal R5bn sale of fuel reserves to Auditor-General Kimi Makwetu for allegedly contravening the PFMA. In his statement on 26 May 2016 he said:
“The DA will continue to fight for
taxpayers’ money that needs to be accountable, transparent, well managed and
aimed at growing the economy in order to reduce the appalling number of 8.9
million jobless South Africans.”
The DA puts its money where its mouth is. With the thanks of a grateful nation, it fights
lengthy and costly legal battles on our behalf against ANC and government graft
and mismanagement.
Their concern about the misuse of state resources for taxpayers’
money is well-established. For example,
recently DA leader Mmusi Maimane wanted reasons why Nkandla’s architect Minenhle
Makhanya would not be investigated after ‘blowing R155 million on Nkandla’.
However, recently I wrote that in the only city and province
where it governs – Cape Town and Western Cape – the DA is increasingly arrogant
and contemptuous of the people. Hypocritically,
they are less eager to be subjected to the same standard they apply to government
– transparency, accountability and fair and legal process. Regarding the accountable, transparent and
well-managed use of taxpayers’ money, that is a detail that does not apply to
them.
So taking a leaf out of the DA’s activism, this week I requested the
Auditor-General (as I did last year after the city
wasted R28 million on the Cape Town Cup) to investigate the City of Cape
Town’s misuse of resources and non-compliance with the PFMA and MFMA relating
to the Cape Town Stadium, the Nkandla-style white elephant on which they are
throwing our good money to rectify their bad decisions.
Below is the text of the request I made on June 20 to the Auditor-General: Western Cape to investigate if the DA-run City of Cape Town has contravened the PFMA, MFMA and other legislation regarding their controversial business plan for the stadium. I provided a review of the stadium's history from 2006 to present and an analysis of its annual expenses (see blog 'The shocking true costs of Cape Town Stadium: What the city does not want us to know').
I wrote:
Last year I asked Auditor-General Kimi Makwetu to
investigate Cape Town’s R28 million expenditure and loss on the Cape Town Cup.
He replied six months later stating he was concerned and would review it as
part of the city’s annual audit. (He replied he considered it in a 'serious light' and would investigate it as part of the 2015/2016 audit cycle.)
In that matter the City of Cape Town, which is not a professional
sports promoter, undertook a misguided, speculative venture to find
justification for the seldom-used Cape Town Stadium and provide much-needed revenue to cover its high
annual costs.
The stadium is once again the reason I’m writing: the city may be
in danger of repeating that mistake.
As you are aware, the city commissioned International Risk
Mitigation Consultants (IRMC) to investigate business models to generate
revenue for the stadium and Green Point Park precinct – “Business Plan for Cape
Town Stadium and Green Point Park”.
However, IRMC were mandated to investigate only the four or
five revenue-driven models the city gave them. That is, they were not
briefed to investigate alternative cost-saving/ efficiency models for the
stadium – life-cycle costing or similar, well-known tools property managers
use, including stadia operators.
The city was not receptive to, in fact, rejected alternative
suggestions. Their attitude was only they knew best. In short, “public
consultations” that was part of IRMC’s process was a farce because only the
business model options were investigated.
To date the city has never provided any explanation why they
refuse to consider alternatives other than the ones they proposed.
IRMC recommended the “model 5” option (out of five proposed and
investigated) that will see the commercialisation of the stadium and Green
Point Park precinct: restaurants, bars, entertainment venues, a hotel and/or
shops and/or sports institute and parking garage. To achieve this city shall
sell/lease valuable city-owned land in Granger Bay and stadium precinct.
This is not moot and a mere recommendation. The city is going
ahead: they applied for and received zoning approval for commercial activity
for an area that was bequeathed to citizens forever for recreational use.
Where I came in
Six weeks ago – mid-May – I requested mayco member for events
Garreth Bloor for the stadium’s last published detailed annual expenditure –
last year’s. My intention, as part of citizen activism, was to get a better
understanding of the stadium’s costs.
On May 31 he sent me “Plan 2015/2016” figures. These were partial
costs, and as they confirmed a week later, budgeted figures (published last
year).
Provisionally, until I received the actual, historical expenses I
requested, which Mr Bloor said are “available”, over the following two weeks
until Friday June 17 I sent him, stadium director Lesley de Reuck, city manager
Achmat Ebrahim and chief financial officer Kevin Jacoby, copying deputy mayor
Ian Neilson, questions about the stadium’s costs and its management.
Included among the questions, in fact, among the last questions, was: Did they investigate in-stadium cost-saving/efficiency
alternatives that excluded the significantly costly and complex business plan
options in line with benchmark, and rational, life-cycle costing analysis, and
if not, why not.
I suggested not to have done so may expose the city and
ratepayers to fruitless, wasteful and irregular expenditure. The business plan
model option, in which they will enter into a public-private contract, will
expose the city to a risky, speculative and a significantly cost venture.
Regarding the business plan option, I asked how far along is the
legal, regulatory, town planning, etc processes, and if they have begun
financial modelling, budgeting and planning. I asked if financial details –
cost to ratepayers, etc are available. (Note these are yes/no type questions).
I made specific reference to MFMA chapter 4, sections 19 and 33.
The city has not responded to any of my questions. Neither have
they sent me the stadium’s actual costs. On Friday June 17 Mr Jacoby replied
the information is “simply not available”. On June 18 he emphatically said they
will not give me any information. He disingenuously and irrationally
suggested I make a PAIA application, which I had suggested merely is a possibility,
for information he claimed does not exist. (Note there are no legal grounds to deny me the information, and Jacoby et al's conduct is illegal.)
I am requesting the Auditor-General Kimi Makwetu’s assistance to
investigate if the city is contravening the PFMA and MFMA and other relevant
legislation with regard to any aspect of the business plan model and stadium
strategic management, a R4.4 billion asset and arguably the city’s most
important recent investment.
1.
By not considering
cost-saving/efficiency alternatives for the stadium but proceeding with the de
facto business plan option
The PFMA defines “fruitless and wasteful expenditure” as “expenditure
which was made in vain and would have been avoided had reasonable care been
exercised.” This can be due to “negligence and/or poor financial planning”.
As with the Cape Town Cup, fruitless and wasteful expenditure,
which is the result of “negligence and/or poor financial planning”, may result
should the city not investigate and consider cost-saving/efficiency
alternatives, that is, best practice life-cycle costing analysis and similar
tools applied at stadia worldwide, for example, ANZ Stadium (Stadium Australia).
I confirmed with a (named) expert at the Department of
Construction Economics at the University of Pretoria that these analytical tools
are available and can be applied to Cape Town Stadium.
I submit the city is already negligent and displaying poor
financial planning regarding fruitless and wasteful spending because:
(a)
They have not or refuse to
consider well-known methods (life-cycle costing or similar) that may produce
genuine long-term cost and other management benefits for the stadium.
Alternatively, without conducting this exercise, we shall never know if such
benefits are available. As responsible managers they have a fiduciary duty and
in terms of PFMA to explore all feasible options to ensure the public’s
assets and money are well managed.
(b)
Instead they opted for a
commercial-centred modelling exercise reportedly costing R3 million to date in
consultant fees, and have pro forma accepted the recommendations (zoning
applied for and its approval).
(c)
They a priori rejected all
alternative proposals presented during public consultations and at other
times without investigating these alternatives. Some of the suggestions
were rational and sensible e.g. scaling down to save costs.
(d)
By adopting the business plan
model – the only options the city presented for investigation – they are
exposing ratepayers to unknown future financial and market risks, entering into
public-private partnerships that will expose the city’s tax base to outside
interests, pressures and profit-sharing (ratepayers cross-subsidising private entities),
and entering into an irrevocable legally, financially and urban planning-wise
complex arrangement that will see valuable city-owned land being sold on a speculative
basis, thereby permanently alienating citizens’ land and assets.
(e)
The city is attempting to spend
its way out of debt; the debt/cost burden of the stadium will forever be on
ratepayers irrespective which commercial option the city adopts. The
business plan option will not reduce that burden because the stadium itself is
problematic – it’s costly with little use for the purpose it was intended (in 2015
about 18 event days out of 365). Only in-stadium alternatives presented during a
life-cycle costing or similar study may show feasible cost-saving benefits.
2.
Proceeding with the de facto
business plan model
Bear in mind the city received zoning (applied for in 2012)
approval for commercialisation of the stadium and Green Point Park park
precinct, the city is, de facto, proceeding with the business plan model. However,
these details are not forthcoming and, according to CFO Kevin Jacoby, “not
available” (non-existent).
On the basis of MFMA chapter 4: sections s19: capital projects and
particularly s33: contracts having future budgetary implications, read with s22
and 23: publication and (public) consultation of annual budgets, and other
relevant sections of the act, PFMA and other legislation, I request you
investigate the city’s possible non-compliance of the act(s).
The A-G: Western Cape responded they will consider my request.
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