Transnet Land Disposal Process for Housing Purposes: Department briefing

HOUSING PORTFOLIO COMMITTEE
13 September 2006
TRANSNET LAND DISPOSAL PROCESS FOR HOUSING PURPOSES: DEPARTMENT BRIEFING

Chairperson: Mr L Modisenyane (ANC)

Documents handed out:
Towards the Establishment of the Special Purpose Vehicle for Land

SUMMARY
In order to focus on its core business, state-owned enterprises are disposing of non-core properties. Some of these properties are being offered to the Department of Housing in order to assist with the alleviation of the housing shortage in South Africa. The Department of Housing made a presentation about the ongoing process of creating a Special Purpose Vehicle in the Department for land purchases from the Transnet/Propnet/Spoornet Group for human settlement purposes. The value and pricing of the properties were outlined as well as the ongoing negotiations with Spoornet and Propnet and Transnet’s engagement and involvement.

The Committee asked questions about other Transnet-owned land, a deadline for the acquisition process, the impact on integrated sustainable development and migration from rural areas.

MINUTES
Disposal of Non-core Properties Propnet, Transnet and Spoornet: briefing by Department
Mr Manye Moroka (CEO: Servcon representing Department of Housing) outlined the ministerial engagements and negotiations with these State Owned Enterprises aimed at the donation or acquisition (at book value or at market-related prices) of their non-core properties by the Department of Housing. The disposal of non-core assets was very important in assisting with the alleviation of the housing shortage in South Africa. Those properties being donated to the Department would have zero value because the Department’s Special Purpose Vehicle (SPV) would incur the consumption costs. Of the properties to be acquired, the price would not necessarily be the historic price at the time of acquisition, but the book value price. The location of the property would also be taken into consideration for a market-related price.

A desk-top exercise would include an analysis of the released list of properties and also an identification process. A task team, which was asked to verify the properties, has already verified 6 to 7 properties and some were found suitable for the transfer. The properties have been submitted to the Minister of Housing and have been endorsed. Other lists of land were also submitted to the Minister and have been found suitable for integrated human settlement development. The list has remained confidential because if not, it opens up the risk of land invasion if the public became aware of government interest in the land.

Mr Moroka explained that the total involved area was 8614,3592 ha with a total book value of R928 997 564. They were awaiting legal scrutiny of the draft deed of sale agreement. There are currently 127 properties ready for acquisition by the SPV with a total book value of R132 million. Property evaluations placed the figure at R210 million, leaving a variance of R78 million. The Department would do its own evaluation and compare it to this figure.

With regard to the Propnet land, Mr Moroka stated that it must still indicate the extent of properties to be sold at the market price. It was explained that different categories of pricing existed for land in Central Business Districts (CBDs), land on the periphery of a CBD and land further away from the city centre. Propnet must also still respond to the Department’s request for the book value versus market price figures.

For the process of negotiations, the city centre properties have been re-categorised as core properties for the Department of Public Enterprises (DPE). A majority of the 127 properties are categorised as being on the periphery, even though they are perfect for integrated housing development. The deed of sale has been submitted to the Department and capital funding and motivation would be given to the Department of Land Affairs. Compliance issues would be addressed by the SPV and paid for by the Department of Land Affairs.

The Transnet land and properties list is to be submitted to the Department before the end of September 2006. Spoornet has also been tasked to do the same and after that, verification would take place and negotiations would begin.

Propnet is still busy with incidental processes relating to a first batch of well-located land and landed properties. A second batch has been verified and given to Propnet by the Department. The DPE also has to approve key areas, which allow collaborative development opportunities with the Department.

In conclusion, Mr Moroka noted that the Department’s SPV would be a wholly-owned state entity. Transnet would provide capital for projects for the next five years. What would be essential for both public entities is the sale and subsequent purchase of non-core land assets.

Discussion

Mr G D Schneemann (ANC) said that he wanted clarification of engagement with Transnet about land around railway lines and empty housing that had been vandalised.

Mr Moroka replied that when the negotiations started, any property managed by Transnet would remain with them.

The Department’s Mr W Giana responded that Spoornet owns a lot of land and it is not well defined. There is a process that addresses the mapping of the land. There are also talks between Propnet and Spoornet over who owns the land. He added that this is why a special project is needed to determine who owns the land as it would yield better results.

Mr B G Mosala (ANC) said that the process needs a deadline and that Spoornet and Propnet have deliberately left land areas for invasion so that the value of the land could increase. He wanted to know what the Department was doing about this.

Mr Moroka said that the Minister has asked for a deadline for when Transnet would off-load its none-core assets. He added that when people knew that government has an interest in the land, they tended to invade it.

Mr Schneeman said that one of government’s programmes is integrated sustainable development and part of this is to identify nodes and to stop rural to urban migration. What could be done to prevent rural to urban migration?

Mr A Arendse, Director: Human Settlement Policy and Integration, replied that Transnet was aware of the changing local environment and there has been a demise of many rural towns and settlements in South Africa. It was an interesting phenomenon because some rural towns were beginning to re-invent themselves. There are concerted efforts to revive the town using a different economic base. There were spin-off businesses and infrastructure which is driven by private enterprise. However, the reality was that people still wanted to migrate to the cities because of the perceived opportunities. This will also be discussed at an upcoming rural housing indaba.

Mr Moroka stated that they were asked to make another presentation again soon after Cabinet meets, which might be towards the end of the year, but before March 2007.

The meeting was adjourned.