By Ndanki Kahiurika | 10 July 2017
THE Roads Contractor Company’s plan to turn the site of its Windhoek head office into an N$800 million business plaza could benefit a few well-connected individuals and entities.
The proposed project, part of a N$5,2 billion plan, that has been hidden from public enterprises minister Leon Jooste is meant to exploit opportunities on the lucrative property market.
Although the proposal for the N$1,2 billion project was conceived in 2012, the board approved it in November last year.
According to documents, the RCC Plaza would be built in the southern industrial area opposite M&Z Motors on the 5,3ha piece of land donated by the government in 2000.
The plan would include widening a stretch of Lazarett Street into four lanes that will connect to where the new Nictus furniture showroom is.
Part of the plan is to privatise a portion of the land for the construction of underground double parking and offices.
The documents do not, however, explain the disadvantages of the plan but said the plaza will be a good deal for RCC.
This development, the documents further show, would be driven by a property Special Purpose Vehicle in which the RCC will have 77,5% ownership while Lithon Project Consultants’s company, Lithon Developers, will own 22,5%.
Later on, the road contractor would sell 45% of its shares to private companies and individuals. RCC will, thus, be left with 32,5%.
The RCC, however, would have two options regarding selling the 45% shares – sell off shares before servicing the land or after.
If the road contractor decides to sell off before servicing, it could make up to N$43,3 million in the next eight months and about N$85,7 million for selling after servicing.
In option one, the RCC’s potential value will be N$390 million while in option two the value goes up to N$475 million.
There are concerns that N$20 million of the N$800 million would be lined up as kickbacks for well-connected individuals once companies put in money for the plaza.
Another concern is that although Lithon Consultants won a contract in 2012 to create the concept of the plaza through public tender, they were roped in as lead project consultants without going to tender.
This was stated in a letter dated 4 November 2016, where former RCC chief executive officer Immanuel!Hanabeb approved Lithon as lead/managers for the implementation of the project.
Lithon is co-owned by Adriaan Grobler, who is the founder and chairman; Tonata Itenge-Emvula, the former economic presidential council adviser and ambassador; and Barnabas Uugwanga, who is the business development director.
Other owners of Lithon are managing director Frikkie Holtzhausen and executive director Gert Maritz and Jannie Grobler.
Sources said by bypassing the public tender process, the RCC management puts the parastatal at a disadvantage.
“To ensure that RCC got maximum benefits from the development; open tender would have yielded better results as RCC would have been able to compare offers as opposed to agreeing to one offer,” an official said.
Since the RCC would be a minority shareholder, the government is likely to get a raw deal with the majority shareholders having a bigger say on how the development should be implemented.
Some RCC officials who declined to be named, said the proposed plaza will benefit some well off individuals.
“RCC should not have entered this deal, as it will become a minority shareholder in its property,” an official familiar with the plan said.
The Namibian understands that assets of the cash-strapped RCC are bonded to Bank Windhoek because of a debt that runs into millions of dollars.
“No development can take place without Bank Windhoek’s consent,” the official said, adding that the RCC will also need permission from the finance ministry to transfer the property into the proposed trust.
“RCC is trying all possible relevant laws to justify its intentions for the property development,” the official said.
Lithon Consultants did not answer to questions sent to them last week.
The Namibian reported two weeks ago that the cash-strapped parastatal had not informed the government about the plans to raise N$5,2 billion for several proposed projects.
One of those projects was the construction of the plaza and a N$900 million waterfront and marina development at Walvis Bay.
The company had told the government that in needed just N$300 million to recapitalise but it turned out that they had another plan to raise funds secretly.
Jooste, however, confirmed last week that he was only informed about the project recently during a meeting with RCC officials although nothing was communicated to his ministry in the entity’s strategic plan.
According to Jooste, the project should have been part of the business plan to allow the shareholder to make informed decisions.
“My concern is also that the RCC was created with the explicit mandate to maintain and construct roads in Namibia and deviating from that primary mandate is not ideal,” he said.
Works ministry spokesperson Julius Ngweda told The Namibian last week that the RCC board informed them about the project.
“RCC will make their necessary plans regarding the location of their headquarters when they embark on the property development initiatives,” Ngweda said.
He also said the ministry is processing their requests after the company made a submission regarding its financial situation.
According to Ngweda, since the RCC has various properties across the country […] “it is appropriate for us to provide the RCC the respect to govern and implement their plans as and where consented and approved by shareholder”.
!Hanabeb told The Namibian when the story broke that they have assets all over the country, which they were utilising.
He also said they are leasing some of the properties to the health ministry.
“We must turn them into revenue centres,” he said.
The current RCC acting chief executive, Seth Herunga, said the plaza project will be self-funding and able to honour its financial obligations to the benefit of the company.
“If we all come to appreciate business finance and project finance methodologies, then RCC does not need a budget on its book for the plaza project, except for the plaza project on its own planning and funding basis,” he said.
According to him all 53 RCC properties are underutilised while they have potential to be used to their full potential.
Giving the example of TransNamib that needs N$20 billion for railway rehabilitation, Herunga said the RCC needs N$300 million, which is a fraction of what TransNamib needs.
*This story was produced by The Namibian’s Investigative Unit. Send us story tips via your secure email to: [email protected]
*This story has been amended