Bouncing rates scam

At last – major clean-up looms in Joburg administration.

An elaborate property rates scam operating out of the City of Johannesburg’s rates department has allowed  the rich and connected not only to avoid having to pay municipal rates on their high-value properties, but even to milk the system for cash refunds to which they are not entitled. These frauds effectively leave the owners of lower-value properties to carry the city’s tax burden.

The discovery could finally result in a major clean-up in the city’s administration.

Besides allegedly rigging property valuations and rates assessments, the frauds are alleged to have extended to manipulating bills, illegally transferring properties and an “insider system” whereby ratepayers were allegedly required to pay staff – from low-level messengers to managers – “costs” to accelerate a “billing correction” that would make a rates debt “go away” or, better still, generate a generous refund to the ratepayer.

The gritty facts are detailed in a 52-page forensic report that shows how a sample of 22 high-value Johannesburg properties (together worth R885.26 million) were revalued downwards by an average of 58% of their real value by means of forged signatures and fake documents. All were handled by one city valuer, Mbali Maclare. She has since resigned.

Maclare managed to shave  R499.78m off the formal valuation figures, causing the loss of R35.6m to the city’s coffers over a four-year period. It is unclear whether she worked alone but the culture of corruption within the city makes this unlikely.

The forensic report provides confirmation of similar charges made by amateur valuer Dr Robert McLaren in Noseweek in August last year (nose202). He said the city appears to pander to its wealthy, connected ratepayers, rewarding them with lower rates where a system of patronage, nods and winks seems to have become the previous ANC administration’s preferred manner of doing business. 

Properties listed in Noseweek’s earlier report included those of the Oppenheimers, the Guptas and Tokyo Sexwale. The latest report includes the names of several more prominent business people. 

The report, titled “Allegations of fraud within the Property Valuation Services Unit”, undertaken by SM Xulu Consulting, was hidden from public scrutiny by the city’s valuation department until November 2016 when it was leaked to TV programme Carte Blanche and made available to Noseweek.

Carte Blanche reported that only once they brought the report to the attention of the city’s new mayor Herman Mashaba were criminal charges laid at the Johannesburg Central Police Station.

The forensic report was commissioned in May 2014, apparently after rumours were heard of officials soliciting bribes from customers in exchange for “unauthorised and possible fraudulent adjustments of the properties values”. Inter alia it was rumoured that Maclare forged the signature of the deputy director of valuations Louis Taderera, to push through her dodgy deals.

Valuations unit head Sihle More, according to the city, commissioned the initial investigation and passed on the findings in the report to her superiors in the city. The city said rumours that More was involved were false.

By October 2015, SM Xulu’s findings were handed to the valuation unit. The report concluded that former candidate valuer Maclare, now operating her own valuation service, tampered with property values. Maclare used the city’s resources, its database and city time apparently to run her own (de)valuation business on the side, called KwaZimbali Pty Ltd.

Dodgy valuer Mbali Maclare

Those responsible for oversight, it found, failed in their task and should face “corrective action”.

The city says the report was acted upon. Noseweek has ascertained that none of the allegations against staff has yet been pursued but that most of the owners of the 22 properties have had their rates adjusted, piecemeal, within the past year – back to pre-Maclare’s changes. 

None of the owners, the report states, had lodged an objection on these 22 properties. Instead Maclare created her own objection letters. She then used a legally filed objection from another property and owner entirely, changing the details to suit her client. A second method included simply making the whole thing up from scratch. In both instances she would manually load the fake “approved” objection letters onto the city’s computer system – using a back door in the system, which was left open in 2008 when a new computerised billing system was introduced. 

It is still unclear how the property owners were linked to Maclare or each other. All those Noseweek spoke to denied ever having been contacted by city officials. They also all denied knowing Maclare – or anyone purporting to be a consultant or city official who could help them out for a fee. Some claimed to have no knowledge of any changes of valuation on their properties.

KZN businessman Ahmed Kazi, a self-confessed slumlord, had the rateable value of his Marshalltown property reduced from R25.8m to a paltry R800,000 by Maclare.

“I knew we were getting charged a low rate. But I never enlisted the help of anyone. I went to the valuation department myself and asked for my rates to be reduced. They gave me a set of things to do which I did and they reduced the rate. When I saw the new rate I thought ‘Lekka man!’ A year later they came back to me and said they didn’t know my property had more than one dwelling. I am now having to pay back about R400,000 in unpaid rates. I was not asked for a bribe. If I was, I would have blown the whistle. Anyway I am not getting any benefit,” said Kazi.

In June 2011 Kazi was arrested by eThekwini Metro enforcement officers for running an “inner city slum”. He was charged and then paid an admission of guilt fine of R5,000. Noseweek has since learnt from a Durban city official that he has “cleaned up his act”.

ACY Property Development owns the China Cash and Carry on 64 Renaissance Drive in Crown City, Maclare reduced the value from R46.9m to R12m. Its directors include well-known Chinese/South African businessmen  Li Xinzhu and Baojin Chen.

Xinzhu is the chairman of All Africa Association for Peaceful Reunification of China, proprietor of the Chinese language newspaper African Times, and was pivotal in the launch of the Chinese Community Police Forum (CPF), based in Cyrildene, Johannesburg.  Xinzhu, who has mining, export and import interests, also has access to the country’s political leadership and in 2014 openly campaigned for the ANC in the national elections. He has also campaigned against the Dalai Lama visiting South Africa.

When Xinzhu was called by Noseweek, he said he didn’t know about the investigative magazine and hung-up without answering any questions. He simply muttered “no, no, no”. He was SMSed questions but did not respond.

One of his partners, Baojin Chen, became involved in March 2015 when he bought a property in Bedfordview for R30m. He has since developed the plot, known as Infinité, into a 10-storey, 200-unit sectional title apartment building with prices ranging from R890,000 to  R4.4m for the penthouse suites. The company Chen used to build the property is called Fatasy (not Fantasy) Properties. His assistant Annie Lan took down Noseweek’s query but failed to revert to us.

The Moola family, owners of CCE Holdings which imports a variety of Chinese cars into South Africa such as the China Motor Corporation vehicles, also had the value of their Linden property reduced by Maclare from R9.4m to R4m. The property is owned by several Moola relatives and family associates. One of the owners, Rehana Akoon, said she is “not too sure why” they featured in the city’s report because as far as she knew, the rates had never been reduced. She said she would have someone phone Noseweek. No one did.

At one stage the family was planning to construct a US$1 billion manufacturing plant to produce CMC vehicles in Harrismith. The project was eventually called off. 

In 2012 family patriarch Yacoob Moola, 80, took his three sons, Imran, Mohamed and Nazeer, to court as they had apparently tried to unseat him as the sole owner of CCE Motors Holdings. The matter dragged in the family lawyer, accountant and a nephew. Moola Snr eventually stepped aside, according to company records.

Essco Foods CC owns a R39.1m property in Industria. Maclare’s magic had this property’s value reduced to R20m. Essco Foods belongs to

Mohamed Essack, owner of African Star Grain and Milling. Essack’s state-of-the-art milling facility was commissioned in January 2016 and received a large grant from the Department of Trade and Industry. He was described in 2016 by law firm Norton Rose Fulbright as the “leading commercial black miller in South Africa”, a position, the firm noted, that  Essack intends to maintain.

But Essack feels he is being dragged unfairly into the alleged rates scandal.

Chinese-South African business leader Li Xinzhu

“I bought this property about three years ago for R30m. It was valued at R39.1m. I immediately objected to the rating. After much to-and-fro my property valuation was reduced to R20m. This took about 12 months. I was happy thinking my objection had been accepted. But then 12 months later it shot up again. I was told I owed the city back-pay in rates of R1m. I then learnt that my original objection had never been dealt with at all. The city wanted to cut my electricity on the property. I have had to work out a payment plan of R36,000 a month over and above the other monthly costs, just to keep the lights on. I don’t know why this happened. No one tried to solicit a bribe or purported to be a ‘service provider’ able to bring down my valuation. Maybe someone thought they could act first then ask but I never received any such call,” said Essack.

A downtown property selling sewing machines had its value reduced from R3.01m to R900,000. The owner of the shop and property is Bian deQuian whose company website for Asia Sewing Machines swears he will never “exaggerate the functionality of our products in order to achieve sales”. DeQuian, a Chinese national, is also a member of the African Chinese Charity Foundation, the South Africa-China Cooperation Forum and a member of the SA-China People’s Friendship Association (SACPFA). He is a promoter of SA-China bilateral exchanges in economics, trade and culture.

Sharon Xu, speaking for DeQuian, said they were aware of the property having been revalued to R900,000 but that this had been done under a “previous manager”.

“I am not sure of the details but this property is not worth R3m,” she said.

Xu said they had never been contacted by anyone in the city to help with the valuation.

Bloemfontein property developer Nic Georgiou (nose187) was the owner of the Bruma Lifestyle Centre until late 2014. The property’s value was reduced from R34m to R17m. Maclare did the paperwork.

Georgiou is known for his failed Highveld Syndication property schemes (his company, PickVest, collapsed in 2010/11). He is currently facing multiple lawsuits from some of the 18,000 investors –  mainly pensioners – who lost out in the deal.

Georgiou, who lives on Signal Hill in the Free State capital, Bloemfontein, told Noseweek he had once owned the property but no longer. “Maybe the new owners run it differently which has devalued the property,” he said. He asked for questions to be SMSed to him but did not respond further.

A man linked to one of the biggest transactions in South African history, the purchase of SABMiller by Anheuser-Busch InBev, as well as two of his associates, also made the list of property devaluations handled by Maclare. The two properties are in Hillbrow and Yeoville. The former was devalued from R16.8m to R7.5m and the latter, from R6.6m to R1.8m. 

The owners are dealmaker Fradreck Shoko and Charles Adu Boahen and Cameroonian entrepreneur Acha Leke. Leke is only involved in the Hillbrow property. 

Shoko said this was the first he had heard about any rates issue when Noseweek contacted him. “I didn’t even know if our property was devalued and then revalued. Our managing agents who handle the property have not informed us about any changes,” said Shoko.

He said he would ask the managing agents to phone Noseweek but no call was received. 

One of the biggest discounts was for Dunrose Investments 224 (Pty) Ltd – the owners of Oriental City on 15 Ninth Avenue in Rivonia. The company owns five Oriental City plazas in Gauteng.

Dunrose directors Feng Yin and Changhua “Jonathan” Qin bought the site for R115m in 2012.  The city valued the property at R202m – until Maclare reduced it to R140m. 

Simon Ho, Dunrose’s general manager for the past two-and-a-half years, said that at no point was he personally contacted by anyone at the city to have their property valuation reduced. He said the reduction took place before he started working at Dunrose.

“We were surprised when our valuation shot back up to R202m without any notice. We are currently appealing to the city to have it revalued again, as we are of the opinion that the property is only worth R120m,” said Ho.

The company raised the ire of Bruma Lake residents in 2012 (nose158) when they began excavating to build another R400m mall. The topsoil was then being dumped at a nearby park and waterway. When Noseweek brought this to the city’s attention, the excavation was stopped within 24 hours of our questions being sent to them.

The biggest company to find its way into this operation was the JSE-listed Rebosis Property Fund. They had four properties with a combined value of R384.5m, reduced to just R116m. This included a Braamfontein property reduced from R152m to R64m, another from R20.6m to R3m, one from R79m to R19m and finally a Marshallstown property from R132.1m to R30m.

In a statement released via a SENS announcement shortly after the Carte Blanche broadcast, the company said they utilise “consultants with good credentials” who are required to “sign an indemnity whereby they undertake and warrant not to bribe nor solicit undue favour from any council officials”.

Rebosis said that in 2013 that, following “significant and unrealistic increases in property valuations from the City of Johannesburg”, the fund had appointed Hirsuflo Trading as an independent valuations consultant.

Rebosis said they would be taking this matter up “with the Mayor of Johannesburg”. They also said they “reserved their rights” after the coverage they were given on Carte Blanche.

The city has since enlisted the help of former Gauteng Hawks boss Shadrack Sibiya to head the city’s Internal Investigations Unit, with his top priority being the investigation into the report’s findings.

“Mr Sibiya and the SAPS are working closely together on this matter to gather further evidence and ensure that a solid case is built before further criminal charges are laid and implicated individuals are arrested.

“The initial audit covered a very small portion of properties in the city and their investigation is being extended further. The public will be updated on developments in due course and we expect arrests to be made in 2017,” mayoral spokesman Tony Taverna-Turisan told Noseweek.

Maclare could not be reached by Noseweek, but interviewed on Carte Blanche, she denied any impropriety and said she knew nothing about the alleged valuation irregularities.

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