Fixed Asset Management Framewor: briefing

Meeting report

PUBLIC WORKS PORTFOLIO COMMITTEE
13 November 2002
FIXED ASSET MANAGEMENT FRAMEWOR: BRIEFING

Chairperson: Mr M Chikane (Acting)

Documents handed out:
Formulation of a Government-wide Fixed Asset Management Framework
Committee Annual Report

SUMMARY
The Department of Public Works briefed the Committee on the Fixed Asset Management Framework, which aims to provide a comprehensive and consolidated guideline for the disposal of the State's immovable assets and be a good governance initiative. The Department hopes that the Framework will become an Act by the middle of next year. It was agreed that there would be further debate on the Framework, because although it seemed to alleviate some problems it did not centralise power in the Public Works Department or to National Government and thus did not contribute to the purpose of managing government assets.

Presentation on Fixed Asset Management Framework
Ms L Bici: Deputy Director General, Department of Public Works, briefed the Committee on the Fixed Asset Management Framework. This Framework aims to provide a comprehensive and consolidated guideline for the disposal of the State's immovable assets. It is meant to be a good governance initiative like the PFMA and Public Service Act. It is hoped that the Framework will become an Act by the middle of next year. (Please refer to the full presentation attached)

Discussion
Mr S Opperman (DP) asked what was being used in the interim without the guidance of a framework.

Ms Bici explained that currently there was no framework in place so the different Departments went about it in different ways, hence the need for a framework that standardised the way Government managed fixed assets. She also said that the ownership of most state assets vested in the Public Works Department.

Mr Opperman (DP) referred to the slide presentation and asked why there was a slump in the utilisation and maintenance area.

Ms Bici explained that under normal circumstances they invested a great deal of money in assets because quite a number were not usable due to their state of disrepair and also for maintenance. Functionality was said to be another key factor, and she explained that sometimes they invested quite a bit of money to prepare an asset for disposal and for the disposal process, which had cost implications.

Mr J Schippers (NNP) asked to what extent, and why, the State leased property from the private sector.

Ms Bici explained that, firstly, the government did not have enough assets, and that sometimes it was cost effective to lease property rather than to acquire or develop another asset. The decision is mainly cost related.

Ms G Mazibuko: Chief Director of Public Works, further explained that the decision to lease property was informed in the main by the length of the period that the State needed the property for. The most appropriate and common time is when the period is short term and when it is urgent, as leasing was generally quite expensive. She stated that the size of the leasing portfolio was in the region of R 780 million while the construction portfolio, in contrast, was about R 2 billion.

Mr N Masithela (ANC) asked what the actual objective of the Framework was.

Ms Bici explained that it was to align management of fixed assets to make it more effective and also to promote good governance.

Mr Masithela thought that the matter warranted some debate because although the Framework seemed to alleviate some problems it did not centralise power in the Public Works Department or to National Government and thus did not contribute to the purpose of managing government assets. He asked whether the Committee could get the full document of the Framework, so that they could input into it.

The Chairperson concurred with Mr Masithela's position and said that he would convene a joint Committee meeting with the Agriculture and Land Affairs Portfolio Committee for them to discuss the Framework and the land issue.

Ms Bici thought that it would be a good idea for them to organise a workshop where they could engage with all the issues and discuss the Framework extensively.

Mr Moonsamy (ANC) asked what the rationale was behind the disposal of immovable assets (both land and buildings) by the State.

Ms Bici said that she would address this in the presentation.

Mr Moonsamy asked to what extent the land in South Africa was owned privately for commercial use.

Ms Mazibuko said that the exact amount was not qualified because Public Works did not play a role in tracking private ownership but it was possible to get figures from the local authorities that levy individual property ownership.

Mr Moonsamy also asked why the government sold so-called superfluous land. He did not think that such land should be sold but that it should rather be leased. He further mentioned that it was not unusual for the State to lease land that had in fact been sold. He concluded that this was therefore not a viable exercise financially speaking.

Ms Bici said that most of the land that was disposed of was old disused military bases. Ms Mazibuko said that in most cases the state entered into long term leases with the longest being 65 years. The factors that are taken into account before disposing of land were firstly, its potential future use and secondly the importance of its strategic location.

Mr Blanche (FA) referred to the presentation, where it outlined the processes for the Government wide Immoveable Asset Management Framework, and asked why the Portfolio Committee did not a play a role. He asked whether their oversight function did not allow them to be involved.

Ms Bici said that they only had a duty to inform the Committee on a regular basis to make sure that they were aware of disposals made by the Department but not to involve them at the planning stage.

Mr Moonsamy wanted to know to what extent land had been sold to foreigners and whether this was desirable in a constitutional democracy that is trying to deal with land reform issues.

Mr Opperman asked if there was any disposal of fixed property in foreign countries.

Ms Bici explained that this was under the management and affairs of the Foreign Affairs Department and that the Department of Public Works was trying to get the portfolio back.

Mr Masithela felt that the factors included in the sale of land between one hectare and twenty five hectares, which are meant to improve black economic empowerment, paid lip service to this issue as there were no clear monitoring mechanisms. The government had to tighten up its policies on empowerment. He also pointed out that the criteria set out for land of more than twenty five hectares was exclusionary in effect as it excluded black people who would have the requisite experience necessary to qualify.

Ms Bici acknowledged that the Department and the Government could always do more when it comes to black empowerment issues. Ms Mazibuko said that one of the factors that should be considered was black empowerment when land over twenty five hectares was sold. She added that the statistics on black empowerment transactions were quite good, as they constituted 67% of all land under twenty five hectares sold for commercial purposes.

The meeting was adjourned.