Tender and insensitive

Posted On Friday, 05 March 2004 02:00 Published by
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Big Bay deal shows why a property charter is needed to offload SA's public properties fairly

Ian Neilson


If, in tendering for a public property, a developer with a good track record puts in a much higher offer price than the opposition, while more than meeting SA's minimum empowerment requirements, you'd think closing the deal would be close to automatic. 

That didn't happen in the sale of a prime beachfront property at Big Bay on Cape Town's Atlantic coast.

The local tender adjudication panel recommended acceptance of a R147m bid by Irish developer Earthquake.

But the mayoral committee rejected this and instead awarded the property to a R115m local bid from Newport Property Group.  Earthquake was in theory a dream bidder : its R147m bid showed depth of understanding of the sensitive site at Big Bay in Bloubergstrand, as well as of property development, said the panel.

It has money in the bank and is committed to black economic empowerment ownership (30%) and procurement (40%-50%).

It has also met past tender promises.

Earthquake chairman Niall Mellon has an upliftment record in SA, having spent R10m on housing for squatters in Hout Bay and given R1,1m to the Nelson Mandela Foundation. 

SA company Newport, a mixed-use developer, was the fourth-highest bidder at R115m.

The adjudication panel said Newport was vague about how it would pay for the land, and it has still not developed the old parliamentary club in Cape Town's Fernwood, won on tender eight years ago. 

But Newport's advantage seems to be that it has black groups as full bid partners, with over 50%.

These partners include an organisation representing 2 700 Umkhonto we Sizwe veterans, locals such as Ravensmead Community Trust and the Belhar and Uitsig business forums, and Cape ANC bigwig Chris Nissen. 

Named Jonga Entabeni ("look at the mountain"), the Newport consortium has committed itself to developing social housing near Big Bay, bringing poor people nearer to their workplaces and encouraging integration of churches, schools and other institutions. It told the panel it would invest another R30m on these initiatives. 

Cape Town's mayoral committee supported Newport's bid and awarded Big Bay's 14 ha of commercial and residential development to the group, assuring future profits of well over R50m to the local black groups.  Ian Neilson, the Democratic Alliance councillor for the Big Bay area, points out that the National Procurement Act sets the minimum requirements for such deals, awarding 90% of the points by price and 10% by black empowerment. 

Guided by these rules, the all-white adjudication panel - five from Big Bay project managers Rabcav and three council officials - made price, concept, empowerment and financial strength its criteria.

They found that Earthquake was the natural winner - but in the process seem not to have taken full account of the historical and political sensitivities around the ownership and development of property in SA.  The mayoral committee, on the other hand, gave empowerment an emphasis that did not seem to be warranted by the rules. By doing this the committee risks alienating international developers. 

"The word is spreading through Europe that SA is a banana republic like the rest of Africa," says one developer operating locally. "We may as well pack up and go home." 

If the panel and the committee had both acted with greater sensitivity, they might have come to the same decision: to persuade Earthquake and Newport to join forces. That may still be the obvious solution, but it is up to the two to negotiate.  Newport executive directors Geoff and (his son) Anton Chait are keeping out of sight until they have complied with all the terms of the tender. But they could certainly do with Earthquake's muscle. 

The deal highlights the need for a comprehensive property charter to create a set of objective and understandable rules and guidelines for sales of public property. 

Central government's R120bn portfolio and the smaller municipal and provincial holdings are the key to building property wealth for millions of South Africans deprived of it for close on 50 years by the Group Areas Act. 

International developers have the money and expertise to help.

Their will to do so may be undermined by the perception that SA is hostile to them.  The writer was a partner in Newport until 1997. 

Last modified on Saturday, 08 March 2014 13:39

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