Tubatse, R108m daylight theft for land deal

Limpopo COGHSTA pays developer R116m for land in Tubatse worth R8.14m

MOGAU PHALA and RUSSEL MOLEFE

THE Limpopo Department of Cooperative Governance, Human Settlements and Traditional Affairs (Coghsta) paid R108 million more for a piece of land and tried to hide the doggy deal by apparently falsifying supporting documents submitted to the Auditor General’s (AG) office.

According to the AG’s finding, the department had forked out R116, 5m for a piece of land valued at R8, 14 million in the Greater Tubatse Municipality on October 20, 2015.

The inflated payment was detected by the AG’s office during their audit for the 2015/2016 financial year.

The AG subsequently instituted an investigation which confirmed in a report released in June this year that the money the department paid for the portion of land had been “inflated”.

According to a detailed audit finding dated May 26, 2017 and seen by African Times, the department had spent R116 500 000.00 on portion 10 of farm Mooifontein 313KT – Tubatse Township ext 54, 58, 71 and 72 in Burgersfort, Sekhukhune district.

“On evaluation of the supporting documents the suspicions arose that the department paid more for the land than what it was worth. The audit team did not have the knowledge to conduct a valuation of the property and engaged the services of an independent valuator to value the property,” read part of the audit finding.

“On 12 November 2016 the independent valuator submitted his valuation report and valued the property at R8 140 000.00. Due to huge difference in the valuation amount and purchase price the valuator was asked to compare his valuation report with the valuation reports which the department obtained prior to the purchase of the property. The report dated 06 March 2017 was subsequently completed and submitted by the valuator [Spectrum Valuations and Asset Solutions].”

The Spectrum Valuations and Asset Solutions report further revealed that basic procedures were ignored especially in the purchase of land between “a willing seller and willing buyer”.

Before the questionable deal went through, the piece of land had exchanged hands amongst two private developers and MEC Makoma Makhurupetje’s department within 24 hours.

Currently registered under the Greater Tubatse Municipality, the land was acquired on 20 October 2015. It was noted that the same land was sold by Proline Trading 60 (Pty) Ltd to the seller Blue Horizon Inv 10 (Pty) Ltd for R18 368 348 on the same date at it was sold to the Greater Tubatse Municipality.

According to the title deed, there are no registered water rights, and after an inspection, no residential, commercial, industrial or agricultural activities were identified on the land. The property was lying dormant.

A Mr LJ Molepo, the manager of development planning at Greater Tubatse Municipality, was also visited and according to the report, he confirmed that:

l There were no bulk services available for the development of the four townships at the time the land was purchased on 20 October 2015

l The land was purchased with the view of abolishing the existing township development plans for the Spekboom River Estate to be substituted by a high density low cost housing scheme. The costs of the existing planning therefore did not form part of the consideration when the land was bought by the current owners.

The “Final 2016-17 Integrated Development Plan” for the municipality was also acquired to ascertain whether or not the planned low costs housing scheme formed part of the IDP.

“We could not find any reference to such planning but instead noticed that reference is made to acquiring land on the Farm Appiesdoordraai 296KT which is also adjacent to the existing town. It thus appears as though the acquisition of the subject properties is not part of the recently approved IDP and the status of the land has to be considered to remain vacant agricultural land,” the report stated.

The report was clear that the department did not receive value for the money it had spent.

“It could thus be argued that the buyer considered ‘unrealised’ potential when the subject property was bought, yet the price should not include any costs yet to be incurred to realise the unrealised potential.

“With our subject property the potential to develop a township was a realistic potential yet the costs of aspects such as providing bulk services, subdividing the townships into sellable stands and the costs of marketing does not form part of the ‘potential’ intrinsic to the property at time of sale.”

It was found that management did not ensure that the department received value for money, and guidance from national human settlements and the provincial Treasury was not implemented.

Coghsta was asked to explain why the difference between the amount of the valuation report (R8 140 000.00) and the actual price (R116 500 000.00), which amounts to R108 360 000.00, “should not be regarded as fruitless and wasteful expenditure”.

The AG further demanded an explanation as to why the “total purchase price plus cost incurred” amounting to R133 million “should not be regarded and disclosed as irregular expenditure”.

In response to the AG’s findings into the doggy deal, Makhurupetje wrote to Treasury MEC Rob Tooley informing him that she had demanded another probe.

“I have therefore requested the AG to conduct a full-on forensic investigation. This is in view of the fact that the scope of the initial investigation may have been limited and therefore certain crucial rudiments omitted on the report. The letter to the AG is attached hereto,” Makhurupetje said.

She also sent the same letter to Premier Stan Mathabatha on the same day.

Coghsta spokesperson Evans Selomo this week denied any wrong doing by the department and claimed they voluntarily disclosed the doggy transaction.

“The issue of land purchase in Tubatse was never kept a secret by government, as it was the department itself that ensured that the matter is officially disclosed in the audit report. In so far as we are concerned, the matter is in the hands of the National Auditor-General who still has to make a determination whether there is prima facie evidence warranting forensic investigation or whether to refer the matter to the Special Investigation Unit (SIU),” Selomo said.

 

COMPARABLE SALES

SPECTRUM Valuations and Asset Solutions identified 70 sales of agricultural land smaller than 150ha but larger than 2ha which were transacted between October 2013 and October 2015. Here are some of the comparable sales.

Comparable sales of stands with similar size and location to subject properties

Portion 8 of the farm Leeuwvallei 297KT

(i) Extent – 46 6386ha

(ii) Purchase price – R4 600 000

(iii) Date of sale – 25 November 2013

(iv) Fixed assets – None

(v) Value fixed assets – R0

(vi) Distance from town – 2km

Portion 4 of the farm Fraaiutzicht 302KT

(i) Extent – 2,96ha

(ii) Purchase price – R499 000

(iii) Date of sale – 15 September 2014

(iv) Fixed assets – None

(v) Value fixed assets – R0

(vi) Distance from subject property – 3km

Comparable sales of agricultural land further away from the subject property but with similar features

Portion 25 and 26 of the farm Doornhoek 551KT

(i) Extent – 155, 3446ha

(ii) Purchase price – R11 400 000

(iii) Date of sale – 21 September 2013

(iv) Fixed assets – Farm house and outbuildings

(v) Value fixed assets – R1 000 000

(vi) Distance from subject property – 40km

Portion 8 of the farm Chester 385KT

(i) Extent – 49,0136ha

(ii) Purchase price – R3 500 000

(iii) Date of sale – 4 September 2015

(iv) Fixed assets – None

(v) Value fixed assets – R0

(vi) Distance from subject property – 55km

Portion 46 of the farm Chester 235KT

(i) Extent – 4, 9794ha

(ii) Purchase price – R1 500 000

(iii) Date of sale – 9 May 2015

(iv) Fixed assets – Thatched roof house

(v) Value fixed assets – R900 000

(vi) Distance from subject property – 55km

Summary of market evidence: The average of prices for the properties in the 70 sales that were considered amouts to R67 620/ha. This price includes structural improvements in many cases. The comparable sales do however give a fair clear indication of land values of properties similar to the subject properties.

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