Government lashes at property landlords for double standards, malfunctions

Posted On Monday, 29 February 2016 18:56 Published by
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Taxpayers splurge a hefty R4 billion on property leases per year.

Thulas Nxesi Public Works Minister

“That is just for one sphere of government – the national government,” says senior civil servant Dhaya Govender.  A further R3.5 billion goes towards leases for provincial and local government property space while R3 billion is budgeted for maintenance, heard industry players attending a seminar at a swanky Fairlawns Hotel in Johannesburg’s Morningside Manor on Monday.

It’s in service delivery that the private sector, as landlords and property practitioners, lags, comments Govender, divisional head of real estate at the Public Management Trading Entity (PMTE). Despite claiming circa R7.5 billion, annually, from the state, private firms fare shabbily, he argues. Government neither gets “peace of mind” nor derives “maximum value” from these taxpayers’ billions.

“In many instances we don’t get the peace of mind,” moans PMTE’s real estate head, noting that it’s SMMEs that deliver satisfactory service – sometimes at prices below market-related levels. Further, SMMEs do better in terms of broad-based empowerment than their bigger, JSE-listed, cousins. PMTE boss Paul Serote says his entity is yet to quantify the size of the procurement budget claimed by SMMEs (of all races), black firms, and female-owned businesses. At last count, Public Works spent no more than 5% of its fat budget on black entities.

For Vuyiswa Mutshekwane, CEO at the South African Institute of Black Property Practitioners, such numbers – and the inexplicable nay gnawing dearth of women in property boardrooms among other top posts – are bad news for the transformation project.

Meanwhile, some larger, unnamed, landlords are said to take the Department of Public Works for a ride. “If (you behave) like that to Standard Bank, they’ll leave. The (same goes for) Checkers. We are not asking for marble floors,” pleads Govender, accusing the industry of showing minimal interest when it comes to delivery at government-leased properties. Malfunctioning aircons and lifts come to mind. Owing to issues of concentration the state has no alternatives, sometimes, he concedes, in response to a question from the floor. “The private sector has to rise to the occasion.”

The seminar – hosted by the PMTE, the South African Property Owners’ Association (Sapoa), and the Property Sector Charter Council (PSCC) – earlier heard, from Public Works Minister Thulas Nxesi, government’s plan to “contain costs (and) cut waste”. Graft is as vexing an issue, he says. That private sector giants fail in the realm of service delivery, to quote Govender, can be interpreted as a game of dare for the state to look elsewhere.

Government’s property portfolio spans 100 000 buildings on 35 000 land parcels, explains Nxesi, adding that values will be assigned to all Public Affairs-managed assets “by the end of this financial year” – that’s in five weeks’ time. Serote’s team has been hectic mining such data while ensuring that the state use its chequebook as a lever. Just last week Finance Minister Pravin Gordhan singled government leases. Where poor service is an issue, landlords and other service providers over reliant on government business can barely afford to sit still.

“We need to remind ourselves that the Minister of Finance... directs all spheres of government to ‘renegotiate all leases’. This includes all goods leased in and leased out,” says Nxesi. His ministerial budget speech is expected to address some of the concerns raised by stakeholders’ seminar including shedding light on issues such as a switch from short-term leases – a “stop gap measure”, as Sapoa’s former president Sedise Moseneke puts it.

“[With] the immovable asset register and the PMTE in place, we now have the tools to leverage the state’s massive property portfolio for economic development, job creation and empowerment,” Nxesi says, insisting that in addition to ownership – a shift from  apartheid-era profile – broad-based BEE extends to generational and gender diversity, still negligible in post-1994 South Africa, and skills development. “We want to see black people at operational levels too, not just management.”

This resonates with Mutshekwane and Portia Tau-Sekati, her PSCC counterpart, transformation agents. Mvua Property Partners executive chairman Hatla Ntene, a panellist, nods. But he observes, disappointedly, how tough it has become to do business since “banks have gone into a coma”. He reckons they now behave like “tortoises”, shying away from financing projects. That’s yet another accusation that banks defer, if not deter, transformation.

Last modified on Tuesday, 01 March 2016 15:14

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