Gaborone City Councilors are suggesting fraud in the way former council leadership issued a surety mortgage bond to a citizen developer.
The developer, Market Development Company (MADCO) has been caught in the corporate governance crossfire between the former and the current council leadership.
At the centre of the controversy is a P7 million surety mortgage bond in favour of Stanbic Bank, securing a loan advanced in 2004 to MADCO, to develop the Gaborone Station Plaza.
Things came to a head recently when Gaborone councilors resolved to cancel the bond following legal advice by Principal State Counsel, Linchwe Tlhowe, that “it appears that the bond was fraudulently obtained”.
Tlhowe warned councilors that in the event MADCO failed to service its loan to Stanbic, the bank had the right to sell Gaborone City Council (GCC) land which has been lodged as surety.
MADCO managing Director, Isang Gabegwe on the other hand explained that his application went through all the due procedures and was subjected to a transparent process.
“If anything went wrong, it would have been on the side of the city council and its staff and we cannot be held accountable for decisions made by the city council and its staff.”
Councillors were also informed that although the city council has leased only one plot to MADCO, the surety mortgage bond covers three other plots from which the council does to levy rental.
It further emerged that no formal application was made to lease the three other plots, suggesting that they may have been improperly allocated, closing out other developers who may have been interested in leasing them.
Councillors were briefed that, on 25th and 28th October 2004, the Finance Committee agreed to apply for a consolidation of all four plots.
“It is important to note that the consolidation of the plots has not been done. Furthermore, the plots have been informally consolidated and developed as if they were consolidated. Rental is being received from MADCO for only one plot,” Tlhowe told councilors.
Councilors agreed to review the lease agreement with MADCO to address the issue of three other plots from which the company is charging tenants rentals but is not paying the city council any rental for them.
Gabegwe, on the other hand, told Sunday Standard that the council legal advisor misled the councilors: “the fact of the matter is that we inherited the city council market structure.
Subsequently, we engaged a cadastral surveyor who found that the market encroached beyond Plot 11 into Portions of plot 12, 13 and 14. The survey results were passed to the city council and were further confirmed by the council’s town planning department. Hence the resolution that was passed by the council to consolidate the plots. That the city council has not consolidated the plot and amended the lease is an indictment on them. That cannot be used to nullify the resolution passed by the previous council.
It emerged during the meeting that MADCO has in response offered to have the bond cancelled and that the council should instead allow them to register the lease with the Registrar of Deeds to enable then to secure a loan with the lease.
Gabegwe explained that “we did that in good faith and at that stage there were no suggestions of fraud or anything untoward. We also agreed to have the bond cancelled on condition that our lease with the council is registered. There is no way we can cancel the bond without giving the bank an alternative form of security.”
In a curious turn of events, a day after City Clerk Agnes Seragi and the council legal advisor briefed councilors, the post for city council clerk was offered to Mr Wadza Tema.
The Sunday Standard has in its possession an offer letter to Tema signed by Permanent Secretary in the Ministry of Local Government, Thato Raphaka, dated September 8th.
Another letter passed to Sunday Standard reveals that Raphaka informed the City Clerk of plans to transfer her to Molepolole two days after offering Tema the post of Gaborone City Clerk.
In a subsequent letter dated September 16th to the city clerk, Raphaka states: “Reference is made to the subject matter, in particular our meeting held on Friday 10 September 2010 regarding the same matter.
“I have carefully considered all facts you presented before me and have nonetheless decided to transfer you to Kweneng District Council as Council Secretary on your present salary scale and notch.”