ECDC sells vacant properties

The properties form part of the financier's extensive residential property portfolio. ECDC has 473 residential properties with a balance sheet value of R233 million. ECDC inherited the properties during the amalgamation of the former Transkei and Ciskei development corporations. However, the management of residential properties distracts the institution from fulfilling its development finance role of stimulating economic growth. The disposal of the properties encourages home ownership, empowerment, security of tenure by citizens and tenants.

The disposal of this non-core asset should enable ECDC to focus on its core business of economic development, which includes funding businesses, investing in key growth sectors of the Eastern Cape economy, investing in key strategic infrastructure, attracting foreign direct investments as well as promoting trade and exports. The proceeds from the sale of the properties should help finance the core business.

Tenants offered the first right of refusal

After executive authority and board approval in December 2012, ECDC offered the existing tenants of its 238 standalone houses the first right of refusal to buy the houses they currently occupy. Included in 238 standalone houses were 21 houses that had been vacated by tenants who had been evicted by a court of law for failure to pay rent and meet the terms and conditions of their lease agreements. The 21 free-standing houses have since been disposed of through a transparent and competitive public bidding process.

"The 21 free-standing houses that have been concluded were advertised for disposal in the Daily Dispatch, The Herald (circulated in Port Elizabeth), Eastern Cape Today (circulated in the Eastern Cape free of charge) and the Mthatha Fever (circulated in Mthatha) on 5 April, 2013, as well as on ECDCs website. There was a build-up through a public discourse regarding substantial rental arrears owed, evictions through courts of law prior to the actual advertising and sale.

"Prospective bidders of the 21 vacant houses were given the opportunity to visit the properties from 5 April up to 3 May. The public bidding process closed on 6 May at 10am with no late bids being accepted. There was significant public interest as demonstrated by the receipt of 523 bids worth R284 million for the 21 properties," said chief executive Sitembele Mase.

The 21 winning bidders were notified on 4 July of the award. Of the 217 houses left, offers for 112 of the houses have been accepted and ECDC is processing them on the basis of "first right of refusal". The financier is currently engaging tenants who did not respond to the remaining 105 offers. ECDC will make further announcements on the outcome of the disposal process of tenants' offers.

The market value was set as the reserve price

The market value, excluding VAT of each property, was established by an independent valuation process. The market value was set as the reserve price for each property and it was included on the advertisement.

"Independent auditors were appointed by the ECDC to evaluate the process followed and they concluded 'that the system of internal control is acceptable to mitigate the risks. An adequate control framework is in place, and it is effective'."

Mase stated: "The disposal of 21 vacant houses is at the tail-end and all winning bidders are engaging conveyancers for effective transfer of their properties. The sale was in accordance with the ECDC Act and Public Finance Management Act (PFMA). The ECDC Act section 5(1) (a), further stipulates that "every application and proposal dealt with by it is considered strictly on its economic merits, irrespective of all other considerations whatsoever".