Eastern Cape government sued for R138m after departments cancel building lease

The Bisho High Court has ordered that Premier Oscar Mabuyane and the Departments of Social Development, Tourism, Economic Development and Environmental Affairs be joined in a R138-million lawsuit brought against the Eastern Cape Department of Public Works for the cancellation of a lease agreement.

Summonses in the case were issued on 26 April, 2023, by the Delta Property Fund.

In papers before the court, Delta alleges that the Eastern Cape Department of Public Works was in arrears on rent for the building, the Beacon Hill Office Park. The office precinct is a public-private partnership.

The government departments wanted to move to another building after complaints about the state of the premises.

The court case triggered an internal dispute in the provincial government. 

The Department of Public Works applied to court to have both the Department of Social Development and the Department of Tourism, Economic Development and Environmental Affairs joined as defendants in the court case for being the beneficiaries or occupants standing to benefit from the lease agreement.

In their court papers, these two departments described the efforts by Public Works to drag them into the court case as “rather mischievous”, and “unfounded and unsubstantiated”.

But in a recent judgment, acting judge Brin Brody said the departments were, however, still occupying part of the building with boxes and furniture.

Brody ordered that Premier Oscar Mabuyane and the two departments be joined as parties to the case.

The Democratic Alliance’s spokesperson on public works in the province, Malcolm Figg, said they were deeply concerned about Delta’s R138-million claim. The Eastern Cape Department of Public Works has R198-million in contingent liabilities, according to its annual report.

“This claim represents a significant financial liability for the provincial government and highlights ongoing concerns regarding the mismanagement of lease agreements,” said Figg.

“The property in question, Beacon Hill Office Park, is the same property that, as far back as 2011/12, was identified as a concern, when former MEC Nonkosi Mvana stated that the building was occupied without a signed lease and that she and senior officials had been ‘forced’ to move into the unfinished building.

“It is also the same building that the Department of Social Development was forced to evacuate in 2019 due to a gas leak.

“The court action points to a broader pattern of irregular lease agreements within the Department of Public Works. In the 2021/22 financial year, various lease agreements were flagged as irregular, leading to the department seeking condonement from the Provincial Treasury.

“Premier Oscar Mabuyane must keep his word and ensure that the Bhisho Office Precinct Public-Private Partnership (PPP) development – meant to address these issues, is completed during this term,” Figg said.

A spokesperson for the Eastern Cape Department of Public Works, Siyabonga Mdodi, has not yet provided comment on the issue.

But in the department’s annual report for 2022/2023, the following was stated: “The DPWI for a period of three financial years concluded new expense lease agreements with current landlords based on the delegations from the Premier to the Member of the Executive Council responsible for Public Works and Infrastructure. In the 2021/22 financial year, the process was found to be irregular, and the DPWI applied for the condonement of the irregular expenditure to the Provincial Treasury.

“In August 2022, DPWI applied to the Provincial Treasury to conclude new lease agreements with current landlords based on the District Development Programme, where the current expense lease is linked to planned construction and completion of a state-owned office precinct. A key development in this regard is the Bhisho Office Precinct.” DM