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Local News|
Friday, October 27, 2006 - Web posted at 6:30:52 GMT Debt claim hits waterfront Coastal project lurches from one snag to another JOHN GROBLERCONTROL of the company that owns a N$60 million waterfront development project at Swakopmund could pass into the hands of former CEO Brett Jolly, if a legal bid to enforce settlement of a debt of N$2 million the developer owes Jolly is successful. |
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Developer Basil Smit, a construction contractor who made his fortune out of decommissioning old power stations for South Africa electricity parastatal Escom, jointly owns with Festus Naholo's !Naras Investments the rights to the luxury development at Vineta Point, Swakopmund. Summonses served on Smit and !Naras last week reveal that Jolly is seeking to enforce the terms of an agreement between himself and Smit in which Smit pledged his 50 per cent share in Swakopmund Waterfront Holdings (SWH) as surety for a N$2 million debt. Smit and his Desert Child (Pty) Ltd are the first and second respondents, while the Swakopmund Waterfront Company and !Naras are the third and fourth respondents. Jolly, however, makes it clear in the papers that he only intends proceeding against SWC and !Naras if they in any way obstruct his suit against Smit. CASH PROBLEMS Jolly, a financier and property developer, was brought into the deal in early 2005 by !Naras Investments and was appointed CEO of the company to launch the project. At that stage it had stalled because of a reported lack of ready cash or land, according to industry sources. Jolly, on behalf of !Naras and the three operating companies wholly owned by SWH, then negotiated the deal with the Swakopmund Municipality for the sale of 10,9 hectares of land immediately north of Vineta Point for N$2,1 million, according to documentation lodged with their application at the Swakopmund Town Council. Part of the conditions for the sale was that SWH would develop a marina basin as part of the original plan to construct 60 luxury apartments, according to the sales contract signed between SWH and the Swakopmund Town Council. When !Naras did not have the money to pay for the land, Jolly recruited Basil Smit, Etienne Weakley and Sakkie van der Merwe as co-investors in the project that saw strong opposition from the Swakopmund business community. After a 30-day due diligence study, they agreed to buy out 50 per cent of the project, but differences between Smit and Weakley and Van der Merwe saw the latter two later sell their interests to Smit. In an interview late last year, Jolly said he obtained the sole developing and marketing rights to the project as part of his compensation package that included a hefty but mostly unpaid salary of N$90 000 a month. He had also, apart from finding financiers, commissioned architects to design the complex at their own risk, Jolly said at the time. Concerns over the viability of the project - due in part to !Naras's alleged lack of available funds to invest - then seemingly prompted Jolly to sell his sole marketing rights to Smit soon afterwards for N$2 million, according to internal company correspondence. Construction of the Waterfront started on March 14 last year after a sizeable portion of the 60 luxury seafront apartments were sold in advance, but mounting costs saw developers add another 20 apartments to try and cover rising expenses. Complaints of alleged shoddy workmanship and concerns over the safety of building within a metre of the high-water mark also had a negative impact on sales, estate agents familiar with the project said. By October last year, negative press prompted Smit to host a press conference in Windhoek at which he assured investors - mostly people who had bought into the project - that the development would be completed. The main question remained the costly marina basin, which has had to be redesigned by the University of Stellenbosch to prevent it from silting up. The cost of the marina or yacht basin was estimated to be N$45 million for the breakwater and basin, and another N$15 million for the finishing touches. ENTER GIPF At this stage, the Swakopmund Waterfront Company approached the Government Institutions Pension Fund for a N$100 million loan to complete the work. In the ensuing fallout, GIPF chairman Manu Tjihumino, who was also the Accountant General in the Ministry of Finance, was suspended from his job, pending an internal investigation. The outcome of this investigation remains under wraps, and Tjihumino was moved to another position in the Ministry, pending the outcome of his appeal. In December last year, Jolly met with Smit, !Naras's Festus Naholo, lawyer Joos Agenbach and a First National Bank credit official and the bank's law department to try and keep credit lines open. At this meeting, Smit signed an agreement - which Jolly is now seeking to enforce - to pay Jolly N$2 million within 30 days, should FNB (which has lent an estimated N$30 million to SWC) continue financing the project, according to documents attached to Jolly's summonses. The current legal imbroglio places a large question mark over the completion of the yacht basin, which apart from Cape Town's yacht harbour would be the only one of its kind on the African western seaboard. A recent visit to the development showed that a large number of the 80 luxury apartments are still empty or being offered for sale. The Swakopmund property market is currently swamped with some 600 apartments for sale, according to local property agents. The developers have had to deposit a sizeable amount as financial surety against their completion with the Swakopmund Municipality, according to the sales contract they entered into. Failure to complete the development could see the Swakop Municipality retain this money, thought to be about N$20 million. * John Grobler is a freelance journalist; 081 240 1587 |
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