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Monday Aug 13, 2018

Durban property valuations under suspicion

Two senior officials in the ethekwini Municipality's real estate department are at the centre of an investigation linked to the alleged undervaluing of several private hospitals, which has brought the city's valuation roll into disrepute.

An internal investigation is under way into why some buildings owned by certain hospital groups were continuously undervalued, some as far back as 2008.

It's alleged the city's deputy head of real estate and valuations, Clive Munien, and a senior manager in the unit, Rakesh Ramlugaan, were among the main role players in a scheme that has lost the city income.

Municipal spokesperson Mandla Nsele confirmed the valuations of some hospitals were being investigated by the city's integrity and investigation unit (CIIU), assisted by audit firm Ernst & Young.

Allegations of officials tinkering with rates evaluations will incense many Durban ratepayers. Many home owners have accused the city of inflating their property values and objected to the recent municipal valuations. The valuations are used to determine the rates charged. In response to an outcry, the city extended its objections deadline from April to July 31.

Durban residents are already forking out extra on their monthly utility bills to fund the city's controversial revenue management system. This billing system initially cost the city almost R1 billion and it has emerged R1.5 million was needed each month to run it.

In documents seen by the Sunday Tribune, four hospitals owned by the Joint Medical Holdings group and another owned by Lenmed had been red-flagged for rates assessments that were too low.

The hospital of a third group has also come under scrutiny, but the owners defended their position.

Rates bills had risen only marginally for the favoured hospitals. In some instances, parts of their properties were void of assessment or "non-existent" on the valuation roll – despite being in use.

An internal investigator also alleged deputy city manager and treasurer Krish Kumar was being investigated for not picking up the discrepancies in the valuations under his watch. Kumar said he had nothing to do with valuation processes. "The allegations are unfounded. I have never valued a property and am not part of this investigation. I am the chief financial officer, not a valuer."

He said he had not been by Ernst & Young or to their investigation.

A municipal insider claimed it was the responsibility of senior managers to ensure valuations were carried out correctly, even if they did not do them.

"There are elements of collusion. There are clearly relationships between some of the hospital owners and officials under investigation. We've noticed the hospitals in question are the only commercial properties with unchanged values over the last three valuation periods," said the source.

Vishnu Rampartab, group general manager for Joint Medical Holdings (JMH) said their management was unaware of such allegations contacted subjected or of collusion with municipal officials.

"This is the first time that this has been brought to our attention. No queries of this nature have ever been raised with us by the municipality or anyone else.

"Regulatory processes for municipal valuations are prescribed by legislation and rates policies adopted by the municipality. Objections lodged by JMH in the past for the general valuations in 2008, 2012 and 2017 in relation to JMH properties have been dealt with in accordance with the regulatory processes."

Rampartab said he was not aware of any discrepancies in the valuations of their properties.

"JMH complies with its obligation to pay rates according to municipal valuations. JMH management views the allegations very seriously and will co-operate fully with any investigations conducted by the municipality," he said.

Nsele said: "These private hospitals are owned by different groups and to suggest malpractice by the valuer at this stage would be unfounded. Property values are reviewed on an ongoing basis, resulting in supplementary rolls being published."

He said when the general valuations were carried out, the properties in question were valued at market value. "They were done on a mass appraisal basis along with the other 500 000 properties. From time to time, valuations are challenged via an objection or appeal process.

"A valuation appeals board considers such appeals and may decide on corrective measures," said Nsele. Lenmed deputy chief executive Amil Devchand said his group was unaware of any discrepancies and denied collusion on rates assessments for its Shifa hospital.

"Lenmed subscribes to the highest level of corporate governance and will co-operate fully with any investigation in this regard," said Devchand.

Nsele promised that staff involved in deliberately lowering rates assessments would be dealt with accordingly if the investigating team's report proved intent.

He said it had not been established that valuations were incorrect.

"If any of these properties are found to be undervalued, a revised value will be submitted and rates will be calculated on the revised value and subsequently published," said Nsele.

Munien said he was aware of the investigation and had co-operated.

He could not comment further due to municipal protocols, but said he was awaiting the outcome of the Ernst & Young report.

The Sunday Tribune has also established that Munien is facing disciplinary action related to the GO! Durban project. Munien was fingered in a 2015 CIIU report for flouting supply chain management and other policies in the procurement of a lease for the Go! Durban project offices.

He was the acting head of the city's real estate unit and deputy head of valuations and acquisitions at the time of the alleged offence.

The report said he signed off on the lease for offices at R13 236 625 as opposed to the R8 233 861 sum approved by the city's bid adjudication committee.

Nsele confirmed disciplinary action had been instituted against Munien.

Ramlugaan said he was unable to comment due to internal protocols.

Nabeelah Shaikh
Sunday Tribune

 
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