Asset Registration, Property Act & Economic Empowerment in Disposal of State Property: briefing

PUBLIC WORKS PORTFOLIO COMMITTEE
5 April 2000
ASSET REGISTRATION, PROPERTY ACT, ECONOMIC EMPOWERMENT IN THE DISPOSAL OF STATE PROPERTY

Documents handed out:
State Property Holdings and Asset Management (See Appendix 1)

SUMMARY
The briefing by the State Property Holdings and Asset Management Branch of the Department of Public Works covered three main issues: the national and international tracing of state immovable property and registration thereof; the attempts by this Department and Justice Department to formulate an overarching Property Act; the means to make the acquisition and disposal of state property benefit the previously disadvantaged communities.

MINUTES
The Director General stated that the department has three main functions – construction of state and public buildings and other entities, development of rural infrastructure, and management of state property. The sub-function of the department is to look after state property and provide leadership/guidance to the provinces in their handling of government property. He specified that the presentation will concentrate on the three areas mentioned in the summary. He voiced concern that some provinces are disposing of state property despite lack of nation-wide uniformity on how this is to be done. He then called upon the Chief Director , Miss Gugu Mazibuko, to continue with the presentation.

Assets Registration
The Chief Director stated that in 1995 the Cabinet mandated the department to compile a National Register of State-owned Fixed Property. Four levels of information were gathered to carry out this task – list of property; inventory; asset register; facilities management. The task was divided into three phases: Phase 1 – compilation of a list of all known fixed property and land parcels used by the departments: Phase 2 – verification and reconciliation of the records of property leased from the private sector for purposes of accommodation.

The country was divided into 41 work packages based on magisterial districts. The type of information gathered included the following: property cadastral description; area where situated; types of improvement; user; zoning of land; photographs from different elevations; footprint sketch of the site and improvements; size and extent; current user; floor space; grading; potential use of land; global positioning co-ordinates of sites.

The exercise yielded the following benefits – comprehensive records are now stored in an electronic database; information about expenditure against property is now easily accessible by staff; information containing sketch plans enables assessment of the level of utilisation of land parcels. With regard to future development, she said the department will gather information in the current year for the Register of Foreign Fixed and Maintainable Assets.

Discussion
Mr Chikane wanted to know why the register containing provincial state assets is not available at present, and what had happened to property such as graders that were managed by former homelands.

She replied that the provinces are currently reluctant to release such a list as it may be used against them, should it be found not to be in order. The question regarding graders refers to movable property and does not fall under her department’s jurisdiction.

Ms Borman asked what was the cost the department incurred in compiling the list, and how the tender process was handled.

The department spent R57 million and justified the expense by stating that over R200 billion worth of national and international property was recovered in the process. The tender process was handled entirely on the bases of set requirements with which all private companies to comply, that is, the company must design a programme for job creation, the majority of the staff must be from disadvantaged communities. Thirty two companies were involved.

Mr Radebe (ANC) asked why the department does not place a moratorium on disposal of state property by provinces, pursuant to lack of uniform legislation and national government’s temporary inability to keep track of such disposals. He also asked for the monetary value of state unused property.

The department said it cannot place such a moratorium because the Constitution of South Africa gives provinces the power to dispose of state property as they deem fit. Monetary value of unused or unoccupied property has not as yet been verified.

Mr Mpehle (ANC) sought more clarity on the lack of uniformity by provinces in their disposal of state property, and the department explained that the major cause can be attributed to some provinces having no legislation at all governing this matter, while others such as the Western Cape, Free Sate, and Gauteng do.

Ms Borman raised concern about the lack of maintenance of state property and she cited and example of one police station known to her which had to raise funds by itself to afford buying paint for interior walls. She further asked
how much the department spends on maintenance alone per annum.

The department said it spends about R6 million on maintenance, but this may not be dead accurate since it is an ongoing process. The department itself is not satisfied with the manner in which this is currently being dealt with, hence its proposal that there ought to be a new position created, that of a caretaker from the department, who will be assigned duties of collecting maintenance money from the department that will be using that particular property. Then this department can be held accountable for failing to maintain such property as paid for by the relevant department.

Mr Baloyi (UCDP) wished to know what is to be done with vandalised government property such as the former Bophuthatswana parliament buildings. How can they be used and what is their monetary value?

The department replied that such property is to be sold since holding on to them is costly. Their monetary value is still to be verified.

Mr Mpehle asked whether there has been land that had been secretly acquired by individuals during the reign of the previous government that the department has traced. What is the department’s stand regarding government officials who have retired and still reside in state property.

The department advised that the process to recover property and land secretly acquired by state funds will begin midyear – adverts will be placed, informing people to come forward with any information regarding the matter, tracing agents will be utilised to trace nationally and internationally, they will be paid on a success basis only. The department is presently in consultation with the Justice Department to assess whether measures like those used by the Assert Forfeiture Unit can be employed to facilitate effective recovery of the said property. The officials occupying government property as their permanent residence are engaged in illegal occupation and will have to be ejected from the property.

Regarding state property scattered all over the world and the attempt by the department to recover such, Ms Borman asked whether Foreign Affairs was involved.

The department said this was the case, then went on to explain that a letter has been sent to the Foreign Affairs office for them to take ownership of such property but the matter is being delayed by complex legal constrains.

Formulation of the Overarching Property Act
The Chief Director She stated that this legislation is extremely necessary because of inefficiency, duplication, inconsistencies in the acquisition, management, and disposal of state fixed property.

The first phase is research on international best practice regarding key aspects of the Property Act. She mentioned America and Canada as examples. The medium term target would be the adoption of the Act by Parliament by November 2000. The long term target is the application of uniform legislation by different spheres of government, which will eliminate the problems stated above.

The Chairperson asked whether there were countries other than America and Canada that have such legislation in operation. The presenter said there are other countries with Property Acts, but not an overarching Property Act. The department had conducted studies of Africa, Asia, North America, and Europe. The department noted that there was no draft document of the Act as yet.

Economic empowerment in acquisition, management and disposal of state immovable property
The Chief Director stated that the previously disadvantaged groups were still excluded from ownership of fixed property and participation in matters pertinent to this issue. The department has embarked on an empowerment programme to redress the imbalance. The first phase will be consultation with the purpose of formulating an appropriate Economic Empowerment Policy. The medium term target is the implementation of the project which the department claims will benefit at least 20% of previously disadvantaged groups and individuals, and the long term target is to increase this percentage to 35%. The department will continue with proactive donation of state fixed property to support land reform by Department of Land Affairs, and delivery of housing and community facilities by various Provinces and Local Authorities.

Discussion
Mr Radebe said the 35% was too conservative, it ought to be increased to 50%. The department conceded that 35% may not be enough, however it is a progressive figure, given that disadvantaged communities have many constraints working against them such as obtaining loans from banks.

Mr Lucas was concerned that the previously disadvantaged may not be able to benefit from the exercise, given the constraint stated by the department, and therefore the department ought to devise means to address this problem.

The department stated that there is already a 20% discount for persons from disadvantaged communities who intend to acquire property.

The Chairperson thanked the department for the presentation. The meeting
was adjourned.

Appendix 1
STATE PROPERTY HOLDINGS AND ASSET MANAGEMENT BRANCH
DATE: 05 APRIL 2000

1. FORMULATION OF AN OVERARCHING PROPERTY ACT TO ENSURE UNIFORM APPROACH TO THE ACQUISITION, MANAGEMENT AND DISPOSAL OF THE STATE’S FIXED ASSETS
Currently there is duplication, inconsistencies and inefficiencies in the acquisition, management and disposal of the State's fixed assets by different organs of the State.

In order to provide leadership and direction on various aspects of fixed property, the National Department of Public Works as the key custodian of the State's fixed assets is formulating a Property Act.
The first phase of this initiative is the research on international best practice regarding the key aspects of the Property Act.
The medium term target pertaining to this initiative, will be the adoption of the Property Act by Parliament by November 2000.

The long term target for this initiative Is the application of uniform legislation in acquisition, management and disposal of the State's fixed assets by different spheres of government which will eliminate duplication of effort, inconsistencies and inefficiencies that are currently being experienced.

2. ECONOMIC EMPOWERMENT IN ACQUISITION, MANAGEMENT AND DISPOSAL OF THE STATE'S FIXED ASSETS
Skewed property ownership of fixed property and lack of participation in the property industry by previously disadvantaged groups in South Africa, still persists as was the case during apartheid days.

The Department of Public Works has embarked on an empowerment programme to address these and has put forward ambitious targets to achieve this.

The first phase of the economic empowerment project within the fixed property sector entails undertaking of various consultations on the policy that will address uneven property ownership patterns and general lack of meaningful participation by previously disadvantaged people, in the fixed property industry. These inputs will amongst other factors, inform the formulation of an appropriate Economic Empowerment Policy relating to the Acquisition, Management and Disposal of the State’s fixed property.
(A copy of the invitation in various media, requesting input In this regard is attached).
In addition to this, various firms and organisations within the fixed property sector, have been invited in writing, to provide their views on this matter.

The medium term targets of the empowerment project is the implementation
phase. The Department aims to have 20% of Acquisition, Management and
Disposal of the State's fixed property, and related services benefiting
Previously Disadvantaged Groups and individuals.

The long term targets are to have at least 35% of Acquisition, Management and Disposal of the State's fixed property, and related services, benefiting Previously Disadvantaged Groups and individuals and continued proactive donation of State’s fixed property to support land reform by the Department of Land Affairs and delivery of housing and community facilities by various Provinces and Local Authorities.

ECONOMIC EMPOWERMENT POLICY
PROGRAMME

PROPERTY BILL FORMULATION
PROGRAMME

REGISTER OF STATE-OWNED FIXED ASSETS

BACKGROUND
Cabinet mandated the Department of Public Works in November 1995 to compile a National Register of State-owned Fixed Properties, including national and provincial properties. The Department of Land Affairs is a most valuable partner in the exercise as they gathered from various in-house sources (Deeds Office, Land Surveyor and Surveying and Mapping) information on land to be down loaded onto the database used for the Register.

METHODOLOGY
Firstly, it had to be decided what type of information on fixed assets would be gathered. Four levels of information were identified i.e. (1) List of properties: (2) An lnventory; (3) Asset Register and (4) Facilities Management. The decision was to gather information to the Asset Register level excluding market values but including municipal valuations of assets within the jurisdiction of Local Authorities. Part of the decision was to divide the task in three phases.

PHASE 1: ADDRESS LIST
The starting point for the compilation of the Register was to compile an address list of all known fixed assets utilised by the various government departments. National and provincial Departments were requested to provide the addresses of all functional and residential accommodation they use including a description of vacant land parcels under their control.

This information was captured on the database used by Public Works.

PHASE 2: VERIFICATION AND RECONCILIATION OF LEASED RECORDS
While phase 1 was in progress it was decided to proceed with Phase 2 i.e. the verification and reconciliation of the records of accommodation leased from the private sector.

This is a very important part of the fixed asset portfolio of Government and needs proper management. Vast expenditure is generated by this type of accommodation need that has its existence due to a lack of State-owned accommodation.

This exercise was only performed for the National Department of Public Works as the Provincial Departments was at the time of the opinion that their records are correct.

PHASE 3: GATHERING OF INVENTORY LEVEL OF INFORMATION
Based on the Phase 1 address list, it was decided to gather information only from functional accommodation. This was based on the fact that land information would be verified by the Department of Land Affairs, as mentioned above. Whilst visiting functional complexes, such as a Police Training College or Agricultural Research Stations, residential accommodation that is part of that complex the gathering of certain basic information were included.

From this phase the following types of accommodation / structures / properties were excluded, except for a very small representative sample for the purpose of verifying the information received from other sources such as: -

Hospitals and clinics (information received from Council for Scientific and industrial
Research appointed by the Department of Health);
Schools (Information received from Human Sciences Research Council appointed by the Department of Education);
Vacant land (information to be downloaded from the Department of Land Affairs);
Land acquired and utilised for roads;
Dams and forest stations and the land covered by it;
Military basis (information provided by SANOF considered comprehensive);
Correctional Services (information received considered sufficient);
Official housing; and
Social housing

The country was divided into 41 work packages based on the grouping of magisterial districts and the number of sites and functional structures per district to create job opportunities.

The type of information gathered includes the following:

Property cadastral description
Area where situated
Type of improvement
User
Zoning of land
Photographs from different elevations
A footprint sketch of the site and improvements
Size or extent
Current usage
Floor space
Grading
Potential use of land
Global positioning co-ordinates of sites

The following table indicates the number of fixed assets gathered since the start of the exercise in May 1996.

NUMBER OF LAND,FUNCTIONAL STRUCTURES AND HOUSING

BENEFITS FROM THE EXERCISE
The previous scattered and incomplete records in various formats are replaced with comprehensive information on National and Provincial fixed assets in a single electronic database.

Access by staff to the information enhances the ability to allocate expenditure against a property.

The information with sketch plans of sites enables an assessment of the level of utilisation of land parcels.

An assessment of properties that have no strategic value can be identified and after proper investigation decisions on the disposal thereof are now possible.

FUTURE DEVELOPMENT
The gathering of information for the Register of Foreign Fixed and Maintainable Assets is planned for execution during 2000. The exercise will entail a bit more detailed collection and update of information.

The assistance of the Department of Justice is currently canvassed with the possibility to invite the public to inform on fixed assets that were acquired clandestinely.

MAINTENANCE OF INFORMATION
The staff within the National Department of Public Works has the information that was gathered available on a property management system and K is part of their daily task to maintain the data.

Basic information on fixed assets utilised by Provincial Government Departments was provided by the Minister of Public Works to the relevant counter parts of Members Of Executive Councils of Provinces with the request to have it verified and to report back during May 2000. One of the serious problems that affect many of the Provinces is the luck of a computerised system with suitable programmes and applications to manage their information.