TENDER 34: OBJECTIONS TO THE ALIENATION

10 November 2009
The Municipal Manager (Mr I B R Kenned)
The Speaker (Clr Pheiffer)
The Executive Mayor (Aldr Swarts)
The Executive Deputy Mayor (Clr Mcako)
All Chief Whips
Stellenbosch Municipality
P O Box 17
STELLENBOSCH
7599

Dear Sir/Alderman/Councillor

TENDER 34: OBJECTIONS TO THE ALIENATION OF SEVEN MUNICIPAL PROPERTIES IN TERMS OF SECTION 124 OF THE MUNICIPAL ORDINANCE FOR FINAL CONSIDERATION BY THE COUNCIL

1. On 9 October 2009 Judge Desai:
   1. Dismissed an application by the Stellenbosch Municipality and the Stellenbosch Ratepayers Association (SRA) to set aside the Tender 34 process;
   2. Conceded that the Stellenbosch Council has yet to decide (finally) on whether to accept or reject the objections received (concerning the proposed alienation of seven Municipal properties) in terms of section 124(2)(a) of the Municipal Ordinance No. 20 of 1974; and
   3. Dismissed with costs a counter application by the Respondents to direct the Municipality to finally approve the alienation of the properties.
   4. Concerning these decisions it needs to be stressed that Judge Desai did not consider the possible misconduct by officials (identified in the forensic reports) and he also did not rule on the validity or otherwise of the objections in terms of section 124 of the Municipal Ordinance. By doing this Judge Desai has effectively assigned responsibility to the Council and left it up to Councillors to decide on this important issue.
2. In the opinion of the SRA the Council now has a duty to accept and uphold the objections submitted in terms of section 124 of the Municipal Ordinance for the following reasons:
   1. All of the successful tenderers failed, to a greater or lesser degree, to comply with the conditions stipulated in the tender documents. In essence, the nature and extent of the proposed developments do not meet the requirements;
   2. The developments as proposed by the successful tenderers are not capable of meeting the objectives on which the calls for proposals were based;
   3. The proposed developments, if approved, will also have negative consequences from a traffic and environmental point of view. These negative consequences cannot be addressed within the framework of “negotiations in good faith” as provided for in the deeds of sale that have been entered into; and
   4. There is every indication that, in certain cases, the successful tenderers were identified before the various bids were evaluated. In the Transvalia and Van der Stel proposals, the prices offered for the land were far in excess of the market value and the developments proposed greatly exceed what was called for. Developers are by nature very much aware of market values and would not offer tens of millions more, unless they expect to get substantial returns.
3. Independent forensic investigations were carried out at different intervals by both the DA and ANC.
   1. Following each investigation and based on legal advice, the Council resolved that the disposal of the seven parcels of land should not be proceeded with;
   2. These reports also indicated that certain senior officials involved in the tender process had undisclosed conflicts of interest in respect of the outcome of the tender process and stood to benefit indirectly from the process;
   3. The issue of possible misconduct by officials has not yet been investigated by the police and no charges have thus far been laid. This issue needs to be pursued by the Municipal Manager;
   4. The acceptance of the objections in terms of section 124 of the Municipal Ordinance will bring an end to a process that has been fraught with difficulties; and
   5. It will then be possible for the Municipality to embark on a new process of alienation. Based on the experience gained from the Tender 34 procedure, this process should be preceded by the necessary Environmental and Traffic Impact Assessments and the rezoning of the properties in question, prior to their alienation.
4. In summary, the following main discrepancies exist in respect of tenders awarded in relation to the official calls for proposals.
   1. Erf 194 (opposite Van der Stel Sportsgrounds):
      • The proposal call document emphasises that the main objective for this site is the development of accommodation for medium-income households.
      • In terms of the deed of sale, signed by the Municipality, more than half of the proposed project is earmarked for office, retail and related commercial development. The proposed project also envisages a 7 storey building, which is totally out of one line with the existing Stellenbosch Scheme Regulations. The tender document categorically states that the proposal has to comply with the town planning scheme and the recommendations contained in the Kruger-Roos (architectural) Report. In terms of the Kruger-Roos guidelines any building higher than three storeys would not be permissible.
      • The site is zoned for Local Authority purposes and is an important central open space of historical significance which has been used by successive generations of the broader community for recreation purposes. As pointed out in the objections, it is also increasingly needed by residents of the adjoining residential area, which is rapidly being redeveloped at much higher densities. The loss of this valuable park to the broader community will endanger the health of many existing and future residents and this issue cannot be addressed by negotiations.
   2. Erf 1123, 1125, 1126, 1129 1130 1133 1134, 1142 & 1160 (Transvalia, at the intersection of Dorp and Piet Retief Streets):
      • The proposal call document provides for the construction of parking bays and the upgrading of the historic buildings as tourist facilities (a village hotel) only.
      • In terms of the deed of sale, signed by the Municipality, the proposed project includes 1250sqm of retail and commercial space and 40 additional dwelling units in addition to providing 300 parking bays.
      • It needs to be stressed that the proposed additional development will in itself require nearly half of the 300 parking bays. Municipal Officials estimate that only 30-50 additional bays will be provided rather than the ±500 called for.
      • The proposed development, if approved, can accordingly be expected to aggravate rather than to relieve the traffic congestion in the centre of Stellenbosch. This negative traffic impact cannot be addressed by negotiations.
   3. Erf 5652 (sw corner at the intersection of Van Rheede Street and the R44 including the Public Open Space between Rhodes and Formosa Avenues):
      • The proposal call document provides for the alienation of only ± 2,0ha of this property in order to provide suitable accommodation and ownership for the middle income groups.
      • All three valuations for this property were done for 2,0ha. In terms of the deed of sale, signed by the Municipality, the whole of this 4,6ha Public Open Space site is to be sold to a developer for high income housing at a price that was determined for only 2,0ha.
      • The larger portion of this park is required to meet the minimum level of recreation required by the residents of the neighbourhood. The loss of the greater portion of this park will accordingly endanger the health of the surrounding residents. The objection to the unacceptable increase in traffic that will be generated by the proposal, if approved, is also an issue that cannot be resolved by negotiations.
   4. Erf 7001 (Soekmekaar, Cloetesville):
      • In terms of the proposal call document the objective is to provide affordable accommodation and ownership for the middle income group of the previously disadvantaged group of the Stellenbosch Community on this 6,6ha Public Open Space.
      • The tender was, however, awarded for single residential and group housing for a higher income group (with the price of dwelling units in the R800 000,00 to R1,5million range). The tenderer has also made the agreement conditional on 75% of the units being pre-sold, before the project will commence.
      • Part of the site is needed to meet the minimum recreation requirements of the residents of the neighbourhood. The proposal also does not comply with the objective of providing affordable housing. These shortcomings cannot be resolved by negotiations.
   5. Erven 1962, 1968, 1976, 1979, 1954, 1958, 6402, 6489 & 6636 (Town Hall Parking):
      • In terms of the proposal call document a parking garage and mixed use development is envisaged for this key precinct. Key objectives in developing the site include the improvement of pedestrian and cyclist access between the town and the university. The provision of public squares to enhance the sense of place in the historic core is a further objective.
      • The design concept submitted by the successful tenderer does not meet these objectives. More importantly, however, the increase in traffic generated by the proposal indicates that the development will not be viable. Furthermore, half of the parking to be provided will be required by the proposed development. This means that the increase in the number of parking bays provided, relative to the increased demand for parking, will be negligible.
      • Because of the magnitude of the traffic impact and the sensitivity required in designing appropriate development for this site, it will be very difficult to deal with the alienation of this property in a proposal call process. If such a process is to be used it will need to be preceded by the production of a detailed design envelope prepared by expert urban designers. It will also need to be preceded by a full traffic impact assessment.
      • It needs to be stressed that the scorecard and the way it was used to evaluate the proposals for this site was so subjective as to be a meaningless exercise. The problems that will be caused by this proposal, if approved, impact on a large part of the historic core and cannot be resolved by negotiation.
   6. Erf 13420 (Technopark):
      • In terms of the proposal call document the development proposed for this site is aimed at the research and development sector. This is defined in detail in the proposal call document.
      • The tender was, however, awarded for a diamond cutting works, which is not related to this sector. Traffic congestion and the shortage of parking are reaching critical proportions in the Technopark.
      • The alienation of this site for a diamond cutting works will only aggravate the situation and the resulting problems cannot be resolved by negotiation.
   7. Farm 739 Paarl (Klapmuts)
      • In terms of the proposal call document, development on this 22.1ha farm portion must focus on the creation of employment opportunities for the benefit of the local community. The proposal should accordingly focus on established and emerging entrepreneurs. It should also cater for single residential products of 300-400sqm and for higher density group housing of 25du/ha, for sale under sectional title.
      • The tender was, however, awarded to an obscure company which has corporate links with government officials and employees of the Stellenbosch Municipality (see forensic reports). This company has very limited capital reserves and its proposal was entirely non-responsive.
      • The proposal offered no tender price, no business plan and no development concept. On the contrary, such information as was provided only revealed an absence of the relevant experience. These issues expose the Municipality to unacceptable levels of risk
      • As in the case of the other proposals it will not be possible to resolve these shortcomings lawfully within the framework of the tender process.

5. Based on the above-mentioned reasoning, which is supported to a large degree in the report by the then Director of Corporate Services and which was considered by Mayco on 6 September 2006, the Council would be ill-advised not to accept and uphold the objections to the alienation of the properties. By not upholding the objections, the Council would be acting contrary to the decisions it has already taken to terminate a process that has been and is fundamentally flawed in many respects.

   1. It should be noted that certain of the comments by the then Director of Economic Facilitation contained in this report are disturbing to say the least. For example, in response to objections to a tender being awarded to a group that was not broadly based BEE representative, the comments were “good for the few,” (p42 of the report). Other comments relative to the objections were, “opinionated”, “no comment”, “traffic will increase in any case”, “speculative”, “address during LUPO”, or “what is affordable housing?” (p49 of the report). The insensitive nature of the last remark in relation to a process, primarily aimed at addressing skewed ownership patterns, is not only unacceptable but indicative of the arrogant manner in which the process has been dealt with.
   2. It needs to be stressed that the majority of shortcomings in the proposals are of a fundamental nature and cannot be addressed by way of negotiations with the successful tenderers. In most cases this would also be prejudicial to the objectors and other tenderers.
   3. As indicated, Judge Desai has dismissed with costs a counter application by the Respondents to direct the Municipality to finally approve the alienation of the properties. The acceptance of the objections will accordingly bring an end to the Tender 34 process. The Council will then be able to begin anew taking into account the lessons learnt.

Yours sincerely

Andre van der Walt
Chairperson, Stellenbosch Ratepayers Association