Update on the Immovable Asset Register: DPWI briefing; with Deputy Minister

Meeting report

The Chairperson said that the Department of Public Works and Infrastructure (DPWI) had been invited to brief the Committee on the Immovable Asset Register. This matter usually arose after the Auditor-General published its audit report – the same issue was raised almost every year. DPWI had previously committed to changing the way it dealt with the register, but little seemed to be done. If the register were up to date, it would be easier to notice when assets were transferred or stolen. The register still could not deliver this function optimally. However, DPWI claimed that it had updated the register.

Most Members had attended the Committee since 2019 and they were familiar with the historical background. The Chairperson therefore requested that DPWI’s briefing should not dwell on background information and should allow more time for substantive engagement.

Opening remarks by the Deputy Minister

Ms Bernice Swarts, Deputy Minister of Public Works and Infrastructure, said that this agenda item was critical. Upon arriving at the Ministry, she requested several presentations on the issue and emphasised that DPWI needed a credible asset register. The register had to record DPWI’s properties, their value, and maintenance. If the register had been upgraded, it was important to have some progress on the work regarding the asset register.

However, in the meantime, she believed that an accountant should be the custodian of the register to consolidate the assets of DPWI. Given the repeated findings by the Auditor-General, DPWI should have made strides by now. DPWI’s objective should be to have a credible register that the Auditor-General could approve of.

The Immovable Asset Register: DPWI briefing

Ms Sasa Subban, Deputy Director-General: Real Estate Investment Services, DPWI, said that the asset register was complex and had to adhere to standards of generally recognised accounting practice. DPWI’s presentation covered subjects including:

• Legacy issues affecting the Immovable Asset Register;

• The establishment of the Real Estate Information and Registry Services division;

• Digitisation of the register and challenges encountered;

• Migration of the register from Excel to Archibus;

• Challenges and proposed solutions; and

• Recovery of state assets and value-chain dependencies within the Property Management and Trading Entity (PMTE).

The current immovable asset portfolio included 29 169 land parcels. Its total value was R148 billion.

Challenges and strategic risks

Challenges identified by DPWI included:

• The audit disclaimer, though DPWI viewed this as a mere “technical” disclaimer;

• Limited capacity to execute the dual role of the Real Estate Information and Registry Services division and to address the different aspects of the Immovable Asset Register;

• Vesting of the land parcels, due to external dependencies and legacy challenges on state land;

• Illegal transfer of state properties at the Deeds Office;

• Fragmented legacy systems and lack of an integrated asset management system, with Archibus not yet fully implemented;

• Limited capacity to maintain the Immovable Asset Register and to provide guidance and support to the provinces, due to over-reliance on consultants and contract workers.

Strategic risks arose from:

• The exclusion of critical posts from the streamlined structure; and

• The imperative to create and maintain the state’s Expropriation Register in line with the new Expropriation Bill.

(See presentation for details.)

Discussion

Mr P Van Staden (FF+) asked whether all state assets were now captured on the system and whether DPWI had identified all state assets, including assets that were owned by the previous government. Were there enough people working on the system?

Mr I Seitlholo (DA) said he would not ask about the register but more general issues affecting DPWI assets. DPWI should be “obsessed” with the challenge of illegal invasion of state-owned properties, the deterioration of those properties, and their use as sites for criminal activity. Because these issues negatively impacted nearby communities, some private residents had asked to lease or purchase such properties from the state – they wanted to agree on how the properties could be handled. In some cases, illegal invasions of DPWI-owned land led to the erection of informal settlements. This was “low-hanging fruit” and required DPWI’s urgent attention. Municipalities have also raised this issue, and DPWI should be working with the municipalities.

Mr T Mashele (ANC) asked whether DPWI had captured all land and buildings in the system.

He noted that slide 25 of the presentation outlined that secondary service providers were appointed for verifications and conditional assessments. Was that still the case? Was DPWI still relying on external service providers for these physical verifications, and had it considered building internal capacity for those functions? Who was the custodian of the Archibus data – was it DPWI or an external service provider?

Ms A Siwisa (EFF) said nobody should undertake a project without proper planning. R53 million was spent on the asset register project. If DPWI had planned well for this project, it would not have needed to outsource the verifications. Thus R53 million had been spent to start a process that DPWI had not planned for properly.

She asked what DPWI meant by compliant and verified assets. There were a lot of state-owned buildings that were still illegally occupied. Properties had become dilapidated and hubs for criminal activities, and DPWI was not doing anything about it. There were houses occupied in Tshwane that were still not verified. What criteria did DPWI use to verify its assets? Moreover, what consequence management was applied if a DPWI official erroneously logged properties that did not belong to DPWI?

She asked what DPWI had done to assist the flood victims who needed parcels of land or could use vacant DPWI-owned properties.

There had to be consequence management and there had to be a backup plan for what would happen if the system failed or crashed. None of the reports or representations indicated any such backup plan, nor was there any mention of consequence management for officials who uploaded erroneous data to the system.

Ms M Hicklin (DA) said she welcomed the presentation “cautiously”. The presentation gave the impression of a utopia, in which the system worked perfectly and Members’ concerns about the register were misguided. It appeared from the presentation that the system worked well, though only three of the eight modules had been implemented.

Nonetheless, she believed that there were problems in the system, which she had raised with DPWI officials, including Ms Subban; they had discussed how to find solutions that could improve the functioning of the system. In her view, the biggest problem was that there was not sufficient expertise within DPWI to solve the issues that Archibus presented or might present. She believed that DPWI officials were making a sincere effort, but she thought there might be a shortage of relevant skills. The Committee had recently heard that DPWI had released Deloitte due to underperformance. She could not understand how such a credible and well-capacitated company could be released due to underperformance.

Mr E Mathebula (ANC) welcomed the appointment of graduates to assist in capturing data in the DPWI system. It was always commendable to create job opportunities.

He was not surprised by the Auditor-General’s findings. Throughout his tenure in Parliament and on the Committee, the asset register had presented challenges. He asked for a detailed breakdown of the DPWI’s immovable assets per province. He struggled to reconcile how 98% of the land belonging to DPWI was recorded as utilised land, but 34% of land remained vacant. Was there any activity on those parcels of land? How did DPWI balance those statistics?

He asked how DPWI assessed the condition of its assets. For example, what motivated the finding that a property was in poor condition?

Ms S Van Schalkwyk (ANC) agreed with Deputy Minister Swarts that the credibility of the register was critical. She welcomed the outsourcing to service providers and new recruitments, but she wanted to know the status of DPWI’s processes to resolve the various issues flagged by the Auditor-General. What should the Committee expect from DPWI’s next audit?

She asked for a breakdown of the jobs created by DPWI. Were these permanent or contract positions?

She asked whether DPWI vetted the officials who had access to the system. Were they subject to lifestyle audits, for example? Who monitored the system’s logs and how frequently? What role did senior management have in monitoring the system?

The Committee had previously heard that some state properties were assigned invalid GPS coordinates in the past. In the current system, were GPS coordinates used, and how? Were coordinates recorded for all properties?

She asked how often DPWI revised its assessment of the condition of its properties. How regularly were they inspected? If a property was found to be in poor condition, was there some kind of maintenance plan that took effect?

How safe was the system from external influences? She was worried that the system might be corrupted. Was there a backup system in place to secure the data?

The Committee had heard that properties were sometimes erroneously transferred to new owners, such as municipalities or provincial governments. Was DPWI aware of such cases? How were transfers handled?

Lastly, there was a proposal to dispose of some properties by selling or leasing them. If done right, this was a great opportunity to generate revenue. That was why it was important to maintain the properties to increase their value and thus increase potential revenues, particularly through leases.

The Chairperson said that government had been trying since 1994 to integrate its assets, for example, by recording those that were formerly owned by the homeland governments. Could DPWI assert with confidence that all government assets had been captured in the system, including, for example, the assets of the former Transkei and Ciskei? At the end of the Fifth Parliament in 2019, the Committee’s legacy report outlined the challenges faced regarding the register. The Auditor-General had raised the issue during its first meeting with the Committee of the Sixth Parliament. Indeed, the Auditor-General raised the issue consistently, because the register was naturally a central issue in any audit. Yet, after 20 years, the problems remained.

The erroneous capture of assets had formerly come to the Committee’s attention during its meeting with DPWI in May about the City of Ekurhuleni matter. Slide 12 of DPWI’s presentation indicated that DPWI had not yet confirmed the completeness of land parcels “beyond any reasonable doubt”. How many land parcels had really been captured? She was from the Eastern Cape, where a traditional leader was selling land – but the land belonged to DPWI. As Mr Seitlholo had mentioned, there were also illegal invasions of DPWI-owned land.

She appreciated DPWI’s explanation of the misstatements. She also appreciated that the presentation corrected an error that had appeared in the written report received by the Committee – slide 39 included the correct graph for condition of buildings, but the categories had been ordered incorrectly in the written report.

Slide 39 also said that 98% of buildings were utilised. What did it mean to say that the buildings were utilised in this context? The Committee knew from its site visits that some buildings were occupied, but not to full occupancy – for example, 50% of the building was utilised. Was such a building, which was only partly utilised, classified as “utilised” in DPWI’s statistics? Was the whole building classified as “utilised” if only one office was filled?

She asked how many employees, in total, worked on the Immovable Asset Register.

What was DPWI’s plan for responding to illegal invasions? In Gauteng, many DPWI-owned buildings were illegally occupied by foreign nationals. During the Committee’s public hearings on the Expropriation Bill, members of the public raised this issue in every town. In some cases, the people who occupied the buildings rented them out to others.  

She agreed with Ms Van Schalkwyk that DPWI had the potential to generate revenue, given its large property portfolio. She did not know why this potential was not being fulfilled, and DPWI should consider how to rectify that.

Finally, she was worried about the estimated cost of repairs. Recently, there have been media reports about DPWI’s spending on maintaining ministerial residences, including a sum of R1.4 million to renovate a kitchen. She was not an expert, but R1.4 million seemed too high. There were very large sums estimated for some repairs, such as at police stations, and she thought they were too large.

Responses

On recent media reports, Ms Nyeleti Makhubele, Acting Director-General, DPWI, said that she thought there had been a failure of communication by DPWI. When DPWI was called to a residence to conduct repairs, it tried to conduct general maintenance and complete all necessary repairs at the same time. Thus the bills had to be itemised. The R1.4 million, for example, had not been spent on kitchen repairs alone – at the same house, there had been other items, such as roof repairs. The media reports also cited incorrect figures for fumigation costs. About ten houses had been fumigated at a cost of about R7,000 each. DPWI should have provided such details from the outset. The detailed information has since been released and it could be submitted to the Committee.

She agreed that DPWI had “huge” potential for revenue generation. DPWI had finalised circular 135 and had identified 300 properties to put on the market in phase one. The properties ranged from normal houses to agricultural land to normal land for commercial use; there were even small airports. If there were organisations or people who were interested in using some particular property, they should be directed to a DPWI regional office. A sub-document of the circular set out a standard procedure for dealing with such requests.

To Mr Van Staden’s question, she replied that DPWI had captured all the state properties it was aware of. There was always a chance that it would still identify further properties. DPWI had acknowledged that the Immovable Asset Register was among its vulnerabilities and had willingly subjected itself to the Auditor-General’s scrutiny. Whenever the Auditor-General made findings about the register, DPWI acted to correct the issue. Ms Hicklin was correct to welcome DPWI’s progress “cautiously”. Maintenance of the register would always be ongoing and the register would continue to grow and change.

She agreed with Mr Seitlholo that illegal occupations were a major issue. DPWI had relationships with the affected municipalities and worked with them. The broader strategy for dealing with the issue depended on Circular 135 and DPWI’s plan to lease more land. DPWI would also grant longer leases so that investors could recoup their expenses.

To Ms Siwisa, she said it was difficult to assess whether DPWI had received value for the money it had spent on the register system. There had been instances where DPWI had been failed by external service providers, but those were “growing pains”. On the whole, she believed that DPWI had received value for money.

On the completeness of the register, Ms Subban added that DPWI, like any property owner, depended on deeds records for verification. Deeds were not a DPWI function. DPWI also considered information from the Chief Surveyor General to provide an additional layer of verification. As Ms Makhubele had said, the register was a living system and would be updated continuously. Vesting was another element of completeness. There were still about 10,000 properties for which vesting was outstanding. That process depended on the Department of Agriculture, Land Reform and Rural Development (DALRRD), which had committees to establish how a given property would be vested – for example, to establish whether the site was subject to provincial or national competencies.

To Mr Van Staden’s question about capacity, she said that DPWI needed more data analysts. There were data capturers, and DPWI also received support from regional property managers, but the project required further personnel.

Regarding land invasions, it was challenging that such vast parcels of land were vacant. Some land parcels were not strategically located and would cost millions of rands to guard them. On the issue that Mr Seitlholo had raised, about the growth of informal settlements, DPWI worked with the Department of Human Settlements –specifically with the Housing Development Agency – to “formalise” those informal settlements. Doing so also helped mitigate the housing backlog. The Housing Development Agency ran programmes to support informal settlements with essential services. DPWI transferred any properties that it could transfer. However, in some cases, challenges arose because the land included buildings erected for service delivery, such as a police station or magistrate’s court. In those cases, further work was required to subdivide the property before a transfer was possible. 

DPWI needed to work with the National Treasury to ring-fence revenue generated through disposals. At present, if DPWI disposed of a building or land parcel, the money went to Treasury, instead of to the PMTE. DPWI would work with Treasury to ensure that PMTE retained the money.

On consequence management, Ms Subban said that DPWI had a capturer, a verifier, and a person responsible for authorisation. If there was proof that an official had deliberately entered false information into the register, consequence management would be governed by the relevant labour laws and policies.

As the Immovable Asset Register improved, the aim was to establish a single repository to include all national, provincial, and municipal land. This was not a small exercise, given the number of municipalities that had to be included. It was also difficult to solicit information from municipalities. DPWI would need the support of the South African Local Government Association and other stakeholders.

On the Chairperson’s question about utilisation, she said that DPWI had “gotten a semblance” of which facilities and land parcels were vacant. However, the land parcels had not yet been thoroughly assessed. There were a lot of land parcels that were not strategically located but that could serve an agricultural purpose. DPWI shared its database with DALRRD, as well as with the Department of Human Settlements.

She said that DPWI used broad classifications but did not conduct detailed assessments of the condition of properties. A detailed assessment was carried out if a building was assessed as being in poor condition. As Members were aware, DPWI had very limited budget for maintenance. It needed about R47 million and currently had only about R7 billion. Classifying the properties according to their condition helped DPWI decide how to prioritise its maintenance activities.

Mr Siboniso Sokhela, Acting Chief Director, DPWI, said that the Asset Register Management unit had not been well-resourced in the past. When he joined the unit, only three permanent officials and a few contract workers were based in the regions. In 2010/2011 and 2011/2012, DPWI received serious disclaimers from the Auditor-General. Thus, when DPWI embarked on rebuilding the asset register, it was necessary for DPWI to appoint a service provider. In parallel, DPWI had also recruited graduates to the project. Currently, there are 72 permanent posts, and about 53 others were hired on contract. DPWI needed more resources to address all the challenges.

He referred Members to the Immovable Asset Register’s operating model, outlined on slide 57 of the presentation. One of the three key elements was compliance. Progress had been made with compliance, apart from the disclaimers. In the other two elements, there was still a lot of work to be done. Many legacy systems remained in place and were fragmented.

On Ms Siwisa’s question about flood victims, Ms Subban said that DPWI had identified about 238 suitable land parcels for use in KwaZulu-Natal within a day of the floods. The Housing Development Agency’s criteria had then been applied and 18 land parcels had been selected.

On the matters flagged by the Auditor-General, Mr Sokhela said that the main issue was the restatement of the opening balance for the prior year. The detailed reconciliation and supporting schedules were submitted in January and were audited. The restatement was reduced from R129 billion to R1.4 billion. This R1.4 billion restatement included R900 million in South African Police Service (SAPS) projects. The matter was resolved with SAPS, because it was assets under construction. DPWI had complied with the Public Finance Management Act and all guidelines regarding the completed projects that were transferred to DPWI. The DPWI met with the Auditor-General yesterday and resolved the SAPS matter. The 2021/2022 disclaimer had been resolved, and the audit for 2022/2023 had begun on 1 June 2023. The problem had always been the opening restatements, and that issue arose from the nature of government business. 

As alluded to on slide 12, there were land parcels that DPWI did not yet recognise. The parcels had erroneously been registered in the name of municipalities. A council resolution was required to rectify that. The buildings were recorded in the asset register, but the underlying land could only be recognised by following a legal process. In addition, some DPWI facilities were built in KwaZulu-Natal on Ingonyama Trust land. DPWI had engaged with the Ingonyama Trust: there was a draft memorandum of agreement, and a meeting was scheduled in the next fortnight to discuss surveying and other issues. Facilities built prior to 24 April 1994 belonged to the state. In the past, vesting was not structured well. When this programme started, the focus was primarily on historical land, but it now also included the various properties that were registered in the name of the provinces. As much as provinces had vested the improved land, they had vested vacant land as well. According to the vesting guidelines, DPWI was the main custodian of land within the former borders of the Republic, but DALRRD was the custodian of land in the former TVBC states. However, DPWI had facilities on such land, and it had to ensure that its facilities were recorded in the Immovable Asset Register, even if it was not the custodian of the land itself.

On the security of the system, the Chief Information Officer, DPWI, said that DPWI owned the data and the system was hosted in DPWI’s data centres and infrastructure. DPWI controlled the data, and the data and system configuration were backed up daily. There was a temporary disaster-recovery site in Johannesburg, where there was a fully-fledged computing infrastructure for disaster recovery. The permanent disaster-recovery site would be located in the Johannesburg regional office and was nearly complete. Disaster-recovery capabilities were located at the State Information Technology Agency, which backed up some of the data.

Thus, should the system fail, DPWI would be able to recover it. An in-house team monitored the daily backups and worked around loadshedding issues. Those administrators also submitted regular reports to management. It was one of the key focus areas for cybersecurity. If there was no consensus with the Archibus company, DPWI had control of the data. DPWI owned the data and had a copy of it. It only paid for the right of use.

The internal security component vetted the system’s administrators on appointment, whether they held permanent posts or were contractors. DPWI also conducted an induction programme, so that recruits knew what was expected from them regarding data security. Employees signed non-disclosure agreements, so DPWI’s intellectual property, and any other relevant government information, was protected. There were in-house policies to manage access control. The users registered in the system were approved by the business unit, and personnel were not registered until they had been trained. An internal deputy director reviewed and monitored the activities of the administrators on a monthly basis.

The system was secured and hosted on DPWI’s network. DPWI controlled the network and protected it with security and firewalls. There was a team that monitored network security 24 hours a day. Software updates had not yet been done, which was one of the critical areas to deal with before the audit. As an additional security measure, various personnel with access to the system had restricted access to different functions. Currently, there are 795 officials registered and active on the system. There were 45 officials registered for the Immovable Asset Register, and 29 users registered for the geographic information system (GIS) solution. The verifiers had a mobile application as well.

To the Chairperson’s question about utilisation, Ms Makhubele said that the Telkom Towers, for example, would be captured as 50% utilised and 50% unutilised. This was captured on the ground and calculated using the building footprint.

Following a discussion between the Chairperson and DPWI officials, DPWI undertook to provide the Committee with further information about how utilisation rates were calculated.

Follow-up questions

Mr Van Staden said the total value of the immovable assets was R148 billion. When was that valuation completed and what had been the value of the portfolio before then? DPWI could submit its answer in writing.

Mr Seitlholo asked to be furnished with the exact date of circular 135 and the list of buildings included in phase one.

Ms Siwisa asked about the 18 land parcels that were identified. She had received a response from the Minister giving a different figure. A list of properties had been requested but had not yet been submitted, even though the deadline for submission had been 31 May 2023.

Response from the Deputy Minister

Deputy Minister Swarts said capturing all of DPWI’s properties was a mammoth task. At some stage, DPWI officials working on the register should develop a better strategy for presenting the register. When asked whether the asset register was complete and credible, the team should say that phase A of the project was complete, but that phase B was not complete – for example, because municipalities were not coming on board to assist in capturing land assets. 

The task required a dedicated accountant to do this work around the clock. This should be a person that could be held accountable directly. Archibus would never work unless it was integrated and talked to the supply-chain-management process. With the AGSA, the Department will always be in the red on this. This was the first thing that the Ministry had raised upon taking office. There had to be an integrated ICT system to cover everything at DPWI. However, people were resistant to change.

DPWI had to be clear on what it had. Its data and numbers had to be clear. It would comply with the submission of the report; the numbers would be revised and correct numbers would be submitted. In real-time, once you pressed on the system, the system had to be able to inform you immediately what DPWI had. Currently, one saw the building and whether it was with DPWI or not. A credible asset register was needed.

Members resolved that the Department should submit a detailed breakdown of all the assets captured on the system, including the total number of assets and their location. Members were extremely doubtful about the total number of properties captured on the system.

Committee minutes and closing remarks

The Committee considered and adopted two sets of minutes.

Ms Siwisa was concerned that DPWI was undermining the Committee. DPWI had not submitted the requested list of properties to the Committee by 31 May 2023 as expected. There had been no apology or acknowledgement from DPWI. The Committee requested more information in writing in the current meeting, but their earlier request remained outstanding. This was becoming a recurrent problem with DPWI and DPWI had to put things in order.

The Chairperson noted her concern and asked the Committee Secretary to write to DPWI to request this information.

The meeting was adjourned.