Public Works Minister Thulas Nxesi on Thursday held a meeting with client departments, private landlords and other stakeholders to expedite finding a resolution to expired leases and the signing of long-term leases, including the so-called “9.11 leases” that are valid for nine years and eleven months.
During the meeting, the Minister reiterated that government is now ready to do business with the property sector and to bring certainty to the market, based on market-related pricing, improved value and service to government.
The expedited lease renewal process aims to ensure a lack of overpricing and corruption when government leases properties from the private sector, while also dealing with the state of dilapidated buildings.
“We want to collect from these properties that are not being properly used, but we also do not want to pay exorbitant amounts of money for a building that is dilapidated because of an irresponsible previous owner.”
Meanwhile, the Minister emphasised that government’s property portfolio cannot be managed by general persons, and that it needs to be the responsibility of a specially skilled person who will be able to bring about the responsibilities and proper revenue for the property.
The property portfolio will therefore be managed by the Property Management Trading Entity (PMTE), which comprises four divisions – real estate, facilities management, investment and construction.
Nxesi further highlighted that used properties with a deemed value of about R7.9-billion have been identified for disposal or letting out. Such properties will be advertised in an open tender, culminating in a National Property Marketing and Investment Conference being held by the end of November.
The Department of Public Works (DPW) will also approach the finance sector to discuss how disadvantaged groups can be empowered and helped by both the government and the finance sector to use these properties.
Land and properties continue to be identified for land reform and social housing, including student accommodation. Thirty-five thousand hectares are to be released to the Department of Human Settlements, while about 22 000 ha have been identified for restitution and land reform.
The work of the PMTE will be guided by the recently adopted Property Management Empowerment Policy to empower formerly disadvantaged and designated groups.
Currently, 34% of leases are sitting with empowered landlords, which represent about 62% of the total value of R3.6-billion spent by government on leasing-in.
Further, the targeted use of these properties is to stimulate local economies, while creating job opportunities, increasing tax spend for municipalities, as well as to generate an increasing contribution to gross domestic product (GDP).
As an example of the planned economic benefit from these properties, the Minister noted that currently, about 333 leases contribute about 0.6% to the local GDP, with a generated revenue of about R20-million.
The expedited lease renewal process further aims to encourage understanding from landlords surrounding the process’ methodology, while outlining the roles and responsibilities of government, property owners and landlords, when entering into a transaction together.
As part of the DPW’s empowerment policy, Nxesi stated that the expedited lease renewal process will “open the space for the disadvantaged to be able to compete in the property sector, which is internationally recognised”.
“We are trying to give surety that our processes are going to be robust and that the agreement is both clean from corruption, and properly done. These agreements will be concluded in partnership with the National Treasury and the Special Investigations Unit (SIU),” the Minister added.
A representative from the National Treasury’s chief procurement office on Thursday committed to achieving its undertakings by the end of December, with a focus on finalising lease renewals, as well as for all client departments to have “habitable, functional and refurbished accommodation by 2019”.
Additionally, the chief procurement office noted that it would continue to implement the government’s empowerment policy, while ensuring that lease agreements have followed all legal prescripts.
SIU advocate Andy Mothibi stated that the SIU, as a partner to the DPW, is “glad to form part of the good start in the property space”.
The SIU further recommended that the expedited lease renewal process include the inspection and measurement of buildings prior to the conclusion of lease agreements, as well as a certificate from the South African Property Owners Association (Sapoa) stating that the space is leased.
Further, Mothibi noted that tax clearance certificates need to be verified by the DPW prior to the lease’s transaction being concluded, while terminology in the lease agreements are aligned to that recommended by Sapoa.
The DPW’s payment system, in addition, will need to be configured in order to correctly factor in escalations and amortisations.