Morkel takes the stand

Posted On Thursday, 13 June 2002 02:00 Published by
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Deals with developer raise questions
For decades, cosy deals intertwining politics and property have tended to sink into the bureaucratic oblivion of the government deeds office. But now technology and more accessible government data are bringing them into the open.

Take, for example, the relationship between developers Cavcor and Rabie Properties - headed by Leslie Viljoen and John Rabie, respectively - and Cape Town mayor Gerald Morkel.

Jürgen Harksen's current testimony aside, Morkel's reputation has been untainted over his 17 years as a Labour Party and National Party cabinet minister in the Western Cape. Rabie is one of the province's most respected and successful developers, and has recently been specialising in high-profile public-private partnerships (PPPs) with government, councils, school boards and sports clubs.

He has made special contributions to PPPs in the Western Cape, which locals boast are models of openness and public participation. The most recent was at Silvermine in the Constantia valley, where residential component Silvertree has been a sell-out success.

Yet the SA Property Transfer Guide, an Internet service, shows that the Morkel family trust bought erf 12677 there on December 11 2001 for R295 000 from Tokai Development Co, which is jointly owned by Rabie, Cavcor, BoE and Wescape. This was the lowest price paid for a single stand at Silvertree, according to the guide, but Rabie says there was one at R290 000.

Twelve days before the sale to Morkel, one of Silvertree's early buyers resold slightly smaller erf 12606 for R505 000. Pam Golding Properties agent Tina Faber says the going price today is at least R650 000 and could be as high as R800 000.

Rabie argues that his policy as developer has always been to sell against a price list and to give the benefit of any price rises to his buyer. 'That is why our developments are so popular with investors,' he says.

He claims Morkel's price is not the bargain it appears: the property has roads on two sides - meaning serious building set-backs - and large trees had to be removed at high cost before a house could be built. 'We sold to two developers at just over R300 000 at the same time, deals on which we paid commission,' says Rabie. 'There was no commission on the Morkel sale so we netted more from it than we did on the higher sales.'

Rabie and Morkel both claim they struck a deal at the launch of Silvertree, 18 months before the formal sale in December. Morkel says this was also when he paid the purchase price.

'Rabie told me I could have a plot for R250 000,' Morkel says. 'But when I was ready to pay him in December, I was told the price had risen to R295 000.'

The gap between the verbal agreement at the launch (which was not binding in law) and the formal sale and payment gave Morkel a 70% gain in market value at no risk. This is unusual in the industry.

Morkel is building a house that looks as though it will have cost more than R1m when it is finished. 'I believe in property,' he says. And, indeed, his property history is that of a cautious investor building up a small portfolio as frugally as a grocer and with minimum debt.

He bought his first home in the Strand in 1981 for R8 950. Thirteen years later, as the new Western Cape MEC for police, he could afford a new property in Retreat, a middle-income, southern-peninsula suburb, at R110 000 (the average Cape Town house price was then about R140 000). He kept the original property, and then bought another property in Retreat in the name of a company.

In 1995, Morkel paid R150 000 for section 24, an 83 m² flat in Golf Beach, a seafront development near the Strand. He bought it from Five Islands Developments, a joint venture between Cavcor, Rabie and Murray & Roberts.

Was this another bargain?

Rabie says it was the market value and that the average price was R146 000 in 1995. But units of the same size around Morkel's - 12, 14, 15, 17, 18, 19, 20, 21, 23, 26 and 27 - sold for an average of R246 000. This is 64% more than Morkel paid. But Rabie says his staff recall that Morkel installed his own kitchen and bedroom cupboards, which would have reduced his price.

In May last year, Morkel's wife, Hazel, bought unit 25 at Golf Beach from a private seller for R300 000. This is unbonded, as are all Morkel's properties.

Morkel shows that he could easily pay for his recent purchases out of his own resources - nearly R700 000 over and above his substantial package as both premier and mayor, which he raised from selling unit trusts and drawing from insurance policies. He also sold his two Retreat properties for R480 000.

DA Western Cape CEO Robin Carlisle points out that Morkel has held high office in the house of representatives and the province for 17 years, five of them as premier. 'It would be surprising if a career politician was not in an honest position to invest that kind of money after so many years of service.'

Morkel has held on to the Rabie properties. And the records do not show any sign of him buying other properties and reselling them in his own name.

Morkel had no formal control over planning or tender decisions as premier and mayor. But he has been the most powerful politician in the province for years and his informal influence was enormous. Was Rabie buying that influence by selling property to Morkel at low prices?

'Absolutely not,' says Rabie. 'There is nothing he has wanted from me or that I have wanted from him.' Both men say they have known each other for at least 15 years, having met through their interest in cricket.

Besides, asks Rabie, what are the rules and where do you draw the line?

Idasa's Richard Calland says discounts are acceptable if they are given to a class of people, such as members of an organisation, or those who have similar positions, such as all provincial legislators. They are not acceptable when given to one person who can influence events for the discounter.

'This case is neither,' he says. 'It is borderline and I think the test is to what extent the beneficiary is aware of the discount and what he has given in return.'

Financial Mail

Publisher: Financial Mail
Source: Financial Mail

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