.
Durban – In a move that flies in the face of the government’s call for austerity, the Department of Labour has committed itself to a 10-year deal for office space in Durban’s Royal Hotel which will cost the taxpayer R90 million for the duration of the lease.
Property experts said the department was paying “about double” for the upmarket office space, which it has already occupied for two years, even though there were far better deals to be had.
The Royal has been split, with some floors now offering office space and others remaining part of the hotel. The Labour Department occupies 10 floors.
The Royal Office Suites have been bought by Durban businessman Dumisani Goodwill Tembe who has had legal problems with property deals before.
In 2011 a planned move by Durban’s Labour Court into the MTN building in the city hit a glitch when it emerged that Tembe, who was buying the building and had leased it to the Labour Court, had not paid for it.
MTN, which owned the property, asked the Durban High Court to stop the Labour Court from moving in.
Ownership of the building reverted to MTN which then entered into a new deal with the Labour Court for the office space.
The Department of Labour occupies the AAA-graded offices at the Royal, described in the marketing brochure as being of “international standard, upmarket and secure”.
A spokesman for the Public Works Department – which is responsible for procuring offices for government departments – Thami Mchunu, said taxpayers were paying R157.18, (VAT included) a square metre each month and R751.78 (VAT included) a month for each parking bay.
Mchunu said that for the 487 634m2 this translated into R767 000 a month for offices and R35 000 for monthly parking. This meant that taxpayers were paying R9.1 million a year for office space and R420 000 for parking.
Mchunu said the lease, with an annual increase of 9.5 percent, would run for nine years and 11 months.
Durban property expert Anthon van Weers said the average rental for office space ranged from R20 to R80 a square metre.
“A-grade office space in the city starts from R75 a square metre with top offices such as the Embassy and Marine buildings going between R75 and R80 a square metre,” said Van Weers.
Another property expert said the highest a tenant should pay for top office space was R100 a square metre.
DA spokesman Johann Krog said the rate paid by the Department of Labour was double the rate of elsewhere in Durban.
“There is something not right here,” he said.
IFP spokesman Roman Liptak said the first port of call for any government department seeking office accommodation should be KZN’s Department of Public Works, which administered the province’s rental stock.
“With so much unused state property, which incurs municipal rates, and against the backdrop of KZN’s reduced equitable share which is further crowding out service delivery, it is unacceptable for any government department to seek out commercial office rentals,” said Liptak.
Mchunu defended the move, saying Public Works and the Labour Department had checked the availability of properties.
“The Royal was found to be suitable for the client, also taking into account the challenges regarding parking,” he said.
Tembe, the owner of the Royal Office Suites, could not be reached for comment.
sipho.khumalo@inl.co.za
The Mercury
