Minister meets with property owners

IN THE first meeting of its kind since the dawn of democracy, the Department of Public Works and property owners gathered at the Park Hyatt in Johannesburg recently to discuss issues of mutual interest.

The department, which is a custodian of state assets and signs leases on behalf of government departments, has never held a meeting with property stakeholders, even though its protracted challenges are well documented.

The long-overdue meeting was also the launch of the Property Sector Charter Council’s executive property owners’ breakfast, which it hopes to make an annual event.

Eager to engage with the department, property sector representative bodies were in strong attendance.

Stakeholders included the newly established South African Real Estate Investment Association representing listed property companies, the South African Property Owners Association, the Black Association of Commercial Property Owners, the South African Institute of Black Property Practitioners and the South African Council of Shopping Centres. The event was also attended by Banking Association of SA representing financial institutions.

Public Works Minister Thulas Nxesi, the keynote speaker at the meeting, pointed to unstable political leadership as an obstacle for the department, which has had three ministers in three years and countless director generals. He said racially skewed property ownership patterns needed to be addressed.

Mr Nxesi said that on the property policy side, the Property Sector Charter Code was gazetted in June last year, “a journey which started I am told in 2003”.

“You will no doubt remember that when I was appointed as minister some 18 months ago, it was against a backdrop of scandal and negative media around the department. The department’s past performance has been characterised by corruption and mismanagement, as evidenced by eight years of qualified audits, and disclaimers in the past two financial years,” Mr Nxesi said.

He said the root causes of the department’s deteriorating situation could be attributed to a lack of controls in supply chain management practices, poor lease management, lack of accountability of the regional offices, lack of an appropriate accounting platform for the property management trading entity as well as the nonexistence of a reliable immovable asset register.

“Compounding these challenges is the fact that, all too often, there is a misalignment between the mandate and the structure of the department,” he said.

A case in point is that despite the fact that the department’s property portfolio represents the majority of the business of the Department of Public Works (70%), the department has no property management branch and employs no property management professionals.

“Let me give you a sense of the magnitude of the challenge. In a diagnostic of the department, which I initiated immediately after my appointment, one important finding was that the estimated size of the property portfolio of public works was seven times the size of the largest private sector property portfolio — Growthpoint Properties.

“However, whilst the return on the Growthpoint portfolio averaged 16% per annum, the return on the department’s portfolio was estimated at barely 1%,” he said.

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