No penalty waiver for strandhotel

The Swakopmund Town Council will not waive the obligatory penalty imposed on Ohlthaver&List Leisure due to the late completion of the development of the Strandhotel. O&L Leisure had requested Council to write-off the penalty to the value of N$2 141 250 in part due to “cash-flow difficulties.”

The request to waive the penalty is outlined in a letter sent by O&L Leisure to Town Council in June this year. The letter is signed by O&L Leisure Managing Director Terence Makari and Executive Chairman Sven Thieme. In the letter it states that the investment of the Strandhotel was more than N$350 million and it is regarded as one of the biggest in the Namibian tourism industry.
According to the Agenda the development of the Strandhotel was initially meant to commence in 2007 and should be completed in 2009. Due to various delays Council granted extensions of the due date until finally deciding that the development must be completed by 15 March 2014. If this deadline is not met, the developer is entitled to pay Council a penalty fee of N$10 000 per day until completion.
The development was delayed though and in June 2015 the total penalty amount was calculated at N$4 510 000. This amount was reduced after the developer applied to Council to pay N$5 000 per day instead of N$10 000. The current balance payable as of July this year is N$2 141 250. As from April until July the developer has been paying a monthly instalment of N$107 062.50.
“The developer is now experiencing difficulties in their cash flow and thus cannot afford to pay off the outstanding balance of the penalty as well as paying the monthly rates and taxes to Council. They need Council to write off the penalty in full,” it states in the Agenda. Currently the monthly rates and taxes amount to almost N$30 000.
In the letter O&L Leisure argues that the development was very complex and some delays in the construction process were beyond their control.
Some delays were attributed to the strikes of the metal workers union in South Africa during the construction process as well as piling and earthworks difficulties due to historical concrete work on the site.
While discussing the above application Council considered a similar application. The Lighthouse Property Investment Trust is also liable to pay a penalty for not completing their development on Erf 4747 (old swimming pool).
The current outstanding amount is N$ 1 144 915.11. “Kinghorn Associates is (in the process of) drafting a formal notice of non-performance in terms of this development agreement,” it states.
Due to the above Council decided at the recent meeting not to write-off the penalty of O&L Leisure and that O&L pays the balance.

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