Cape Town Stadium: The Auditor-General’s opinion
The Cape Town Stadium has been a thorn in the side of
Capetonians since it was built. Under
pressure from government and Fifa, in 2006 newly elected Mayor Helen Zille
lifted the moratorium she had placed on it saying she was satisfied the “stadium
would not be a financial burden on ratepayers”.
Ha!
The promises – lies, really – of economic and social
benefits from the World Cup and new stadia, as sane people knew, never
materialised. Instead we have a legacy
of debt and corruption – construction companies colluded on stadium tenders,
costing Cape Town over R400m, and FBI allegations South Africa “bought” the
2010 games with $10m in a suitcase.
I’ve written about the stadium often. Despite my criticism of its management, I’m
sympathetic to host cities, including my home Cape Town, which do not know what
to do with the unused and unnecessary facilities (excluding FNB Stadium).
Cape Town is perhaps the only host city (and Durban?) trying
to find a way to defray some of its stadium’s considerable operating and
maintenance costs. To this end, they
investigated five business plan options.
They also foisted on us the disastrous Cape Town Cup “flop”. The cup lost ratepayers R28m, and was the
subject of investigation during Auditor-General (AG) Kimi Makwetu’s 2015-16 annual
audit (disclosure: I was the complainant).
The city’s Municipal Public Accounts Committee is also investigating now,
following hot on the heels of the AG’s audit report that’s presently being
finalised.
However, the flaw of the business plan feasibility study is
it investigated, per its terms of reference, only the five business models the
city proposed. This tunnel-vision, commercial
and development-centred approach – a trait of the DA-run city – ignored the
fact that cannot be gotten around: the stadium will never be used for the
purpose it was built, and will always be a drain on ratepayers no matter what the
city does.
The city rejected other suggestions for the stadium that
ranged from the fanciful to the realistic and achievable. They are silent about, and ignore, in-stadium
options to reduce costs including life-cycle costing methods used at well-run
facilities like (ANZ) Stadium Australia.
For example, the city is facing ongoing, hefty costs to clean, repair
and maintain the stadium’s unique but costly glass roof, rather than replacing/removing
it, which will be cheaper in the long run.
But unfortunately, for the city’s hubristic and unrealistic
politicians and bureaucrats, it’s better to have a “world class” facility we
can’t afford than a scaled-down, but still usable, one as suggested by
many. Of course, according to them, the
public doesn’t understand and jump to conclusions[1],
as chief financial officer Kevin Jacoby accused me of this week.
The city states annual total expenditure on the stadium is
about R40m. But as I found out this
year, it excludes significant employee costs that are about R20m
for 2015/2016; repairs and maintenance (like the roof); public liability
insurance; significant municipal services; current and projected life-cycle
asset costs, etc. My estimate of the
stadium’s true costs, including these omitted items, is in the R200m range including
the once-off Cape Town Cup loss.
This week Jacoby disputed this estimate (without seeing or
asking for the rationale), which was based on the partial, actual information
they reluctantly gave me in May after much arm twisting. It was based on industry benchmarks and
reasonable extrapolations – a common engineering (a field I once worked in) and
the built environment,
accounting and economic practice – in fact, far better than construction
companies’ thumb-suck World Cup tenders gullible host cities like Cape Town
fell for (Zille: “The financial model will not be a burden on
ratepayers”).
I did this exercise because the city (as I write, five months
after I first asked) refused, and still does, to give me information about the
stadium’s cost, operations and strategic management and business model – information
Jacoby told me in June was “simply not available”, i.e., it does not exist. (Among
the information allegedly not available is the composition of the stadium’s
management team, which he purportedly leads.)
The business plan model council approved for the stadium and
precinct is a municipal entity (“MC 30/05/2015, Recommendation from the
Executive Mayor”). I don’t know if it’s
the same, or a variation of that proposed in the business plan’s option 5B[2]:
municipal entity because the city refuses to tell me. They, i.e., city manager Achmat Ebrahim and Mayor
Patricia de Lille through Jacoby, also refused me information about the
projected cost to ratepayers and the legal, environmental, urban and legislated
impact on the city.
In fact, Jacoby refuses on principle to provide any information despite this week – after
his boss instructed him to attend to my AG-instigated, renewed query (see below)
– asking me what I wanted to know, but questions he refused, as he did before, to
provide answers for. I don’t know why he
bothered emailing me.
In considering the municipal entity model in 2014 the then
councillor Beverley
Schafer compared it to the successful Cape Town International Convention
Centre (CTICC) municipal entity Covenco.
But that’s mistaking a horse for a camel, which politicians frequently
do.
CTICC is an asset that’s desirable and constantly utilised,
whereas the stadium is a dodo that cannot be brought back to life, irrespective
of the Jurassic Park-type
reengineering that’s being done on it.
This they don’t understand.
What Jacoby did confirm, though, is the business model approved
(“resolved”) will include commercialisation of the stadium and precinct, as
they’ve intended and we’ve known all along.
I don’t know what this means practically because they refuse to tell me in
what capacity the city as owner will act in this arrangement and how much it
will cost us. They refuse to tell me
anything at all not in the “public domain”.
But what’s publically known is nothing of substance.
But we have an idea what they intend from the tender
issued for a plot next to the stadium, and the proposal/feasibility study
to use it as parking
garage (following Brasil’s
2014 World Cup US$550m footsteps apparently).
The published business plan options consultants prepared at
great expense, whether or not the city accepted it intact or will alter it, proposed
retail, informal and formal trading, entertainment, hospitality, parking and
commercial activities in and around the stadium and Green Point Park. We may assume (according to Jacoby, we should
not make assumptions even with the information embargo) their municipal entity business
model allows for something similar.
In June this year I asked the auditor-general to investigate
the business plan model, the city’s failure to investigate in-stadium
alternatives to reduce/defray costs and discrepancies in the stadium’s annual expenses.
Makwetu replied this week in an emailed letter dated
31/10/2016 that he “viewed your allegations in a serious light, [but] have
decided not to conduct a separate investigation. The matters raised by you in respect of
expenditure incurred on the Cape Town Stadium will be considered as part of the
2015-16 audit cycle [now complete; the audit report is being finalised] in line
with our mandate and scope of work.”
He said the “business plan model falls outside the scope of
the AGSA’s regularity audit, as it is a management prerogative”.
He dryly noted the lack of “communication” between the city
and I. But advised me to pursue it with
city management to “ensure the issues [I] raised are clarified and addressed to
your satisfaction”, which this week I again unsuccessfully tried to do, and was
rebuffed. The AG said if my inquiries remain
unresolved I should consider referring it to the Public Protector.
There’s not much comfort in his letter except to wait for
the annual financial statements and audit report. But he left me with a pearl of an opinion, a
conundrum I’m still ruminating on, among the bland, accountant-speak. (Disclosure: I’m a former accountant, and 10 years
ago was a contractor on AG audits, a fact Jacoby used to obliquely question my bona fides.)
“The City of Cape Town has
classified the stadium [and presumably the park and their precincts] as a
community asset for annual financial statement purposes. The stadium is not expected to make a profit,
but will be utilised for the benefit of the citizens of the city. Thus, in essence, any plan that is proposed to make the use of the stadium more
profitable is not in line with the City of Cape Town’s classification of the
stadium [emphasis added]”
I’ve asked Makwetu if it means what I think it means: commercialisation
of the stadium, Green Point Park and their precincts – “community assets” – is “not
in line” (not permitted) unless the city changes their classification, which
can only be done after the usual processes.
This week I asked the city manager specifically which legislation or
regulation allows for the commercialisation, as the city apparently envisages,
of community assets. I was rebuffed.
Jacoby proudly claims he and the city respects and abides by
all legislation and precepts governing municipalities and institutions,
including auditor-general and public protector. He was not specific, but it would
include constitutional, democratic principles; public participation and
genuine, meaningful consultation, and not citizens being dictated to and obediently
accepting their edicts; access to information, which includes information not
already in the public domain; just administrative action and Batho Pele.
In their hubris as our purported overlords, they do not
understand these principles. Despite
claiming to observe and respect the offices of ombudsman, he rejected with
contempt the AG’s entreaty to me, and indirectly the city, viz, “pursue your
interactions with the city management to ensure the issues raised are clarified
and addressed to your satisfaction”. We have seen similar contempt for
constitutional institutions like the ombudsman from the highest political
office in the land and the governing party.
Particularly under De Lille, the DA-run city, politicians
and many bureaucrats have adopted a combative, ad hominem style in their
dealings with citizens, as I have experienced. So their dissembling over the stadium precinct
is not surprising.
[1] During
a tense and unproductive email exchange this week with Jacoby (as in June), he
accused me of making incorrect assumptions about the integrity of the city, its
management of the stadium and intentions for the precinct. My frank exchanges with them are justified
because after weeks and months during which I requested information, city
officials stalled, were dishonest and obstructive, e.g., the information I
requested was “not available” and had to be specially
compiled for me (finance manager Werner Kuhn), or a multi-department committee
would meet to determine if the information was available and if I was permitted
to have them (stadium manager Lesley de Reuck).
And then there’s Jacoby’s obfuscation and confusing arguments. Any mistakes and incorrect assumptions I made
were done in the absence of withheld information, and made in good faith.
[2] During June this year and again this week I
approached members of the Green Point Ratepayers Association (GPRA) for comment
and information about the stadium and business plan. GPRA is the recognised citizen body for Green
Point, and has had direct and intense involvement with the city about
stadium-related matters, including the so-called public participation for the
business plan. This is no reflection on
them, but they were unable to shed light about the stadium’s operations and
strategic management and business model for the precinct. Their understanding
is the business model is one of those proposed in the Business Plan study
(2011-2012). But in his emails this week
the city’s Kevin Jacoby implied – since
he refused to clarify, I don’t really know what he meant – they are not the
model(s) council ratified. GPRA members
expressed an overall sentiment they have done all they can, having over the
years fought this battle for disclosure and transparency, and that there is something
peculiar about the whole situation.
TJ
9/11/2016
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