The Department of Public Works and Infrastructure (DPWI) is taking a strong stance on controlling expenses and obtaining the greatest efficiencies out of the properties it leases for government departments.

Public Works and Infrastructure Minister Patricia de Lille said on Thursday that, in addition to an over-reliance on the private sector for property leases, some of DPWI’s leasing portfolio challenges entail letting-out agreements that run on a month-to-month basis; a large number of rentals not being market-related; and high electricity and water costs.

The department uses a hybrid model using State-owned property as well as leasing-in from the private sector to provide for office accommodation for government departments.

However, there is currently an over-reliance on the private sector for these properties and while the DPWI wants to support and do business with the private sector, it has a duty to optimise use of the many buildings that it owns as the State landlord and as custodian of State-owned properties.

Speaking during the first Landlord’s Conference, where the DPWI engaged with all landlords which it currently leases properties from, De Lille said that month-to-month leases, flagged by the Auditor-General as irregular expenditure, need to be stopped.

Many leases are operating on a month-to-month basis owing to processes not being finalised and agreed to for longer-term leases.

“We have been engaging landlords since last year on the issue of month-to-month leases. This situation has been improving over the past five years, where the department had over 1 700 leases out of 2 000 that were on month-to-month in 2017, to just under 200 out of 2 400 leases on month-to-month to date,” she says.

Further, a study commissioned by the DPWI found that about 56% of the leases sampled had rentals that were, on average, 45% more than market rates.

In the Pretoria region, rental amounts were more than 66% above market rates, while Durban, Port Elizabeth and Johannesburg had over 60% of leases above the market rate and Cape Town was estimated at 50% above the market rate.

This led to the department embarking on a drive to reduce its leasing-in costs by implementing several strategies, including the adoption of the Rhode Report as an independent tool to guide the department on rental rates across the country; capping of the escalation rate at 6% for all lease renewals; identifying landlords with a national footprint and negotiating such leases at a central point; and requesting clients for longer rental period mandates to reduce rental rates.

“With the renegotiating of the leases we have been able to save government R273-million and the process is ongoing,” De Lille adds.

Meanwhile, the DPWI requested the private sector to “do their part” by putting in measures to reduce water and energy demands in the buildings that the DPWI leases from them.

The DPWI property portfolio is a big user of electricity and water and generates a significant amount of waste.

“Recent studies place annual electricity and water consumption at an estimated 4 021 GWh and 39-million kilolitres respectively, with over 822 kilotons of waste generated.

“This equates to an average yearly expenditure on electricity and water of R2.4-billion and R1.8-billion respectively,” she says.

She appealed to the landlords to reduce electricity and water use by 50% within the next year through the implementation of water and energy efficiency measures in their buildings.

“Our duty is to spend public funds wisely and not to make profit or spend more than we are supposed to.”

“Our intention with calling this conference today was to forge a greater understanding and links between the department and private landlords so that we improve our respective processes and operations and work together more seamlessly and more productively.”

The conference, held at the Birchwood Hotel, in Boksburg, was attended by more than 300 delegates, most of them property owners and landlords, as well as representatives from banks and property associations, such as the South African Property Owner’s Association and the Property Sector Charter Council.