Public Property Management: Intersite briefing
Public Works and Infrastructure
22 August 2007
Meeting Summary
A summary of this committee meeting is not yet available.
Meeting report
PUBLIC WORKS
PORTFOLIO COMMITTEE
22 August 2007
PUBLIC PROPERTY MANAGEMENT: INTERSITE BRIEFING
Chairperson: Mr F Bhengu
(ANC)
Documents handed out:
Presentation
by Intersite on Public Property Asset Management
Models
Audio recording of
meeting
SUMMARY
Intersite, a public property asset management
company, briefed the Committee on the models used in other countries,
specifically Finland, Norway, Sweden and Australia for management and governance of public
assets. It was noted that Intersite was a separate
corporate entity that managed
and developed the property portfolio of the South African Rail Commuter
Corporation (SARCC), which included public transport assets. A full
presentation was given on the models used in the four countries named.
Management of assets must support the government strategy, agenda and
objectives. Ownership and management were in most cases separated, with
management being done by a specialist, whilst Government had representatives on
the boards of the managing entities. Full reporting mechanisms and oversight
were in place. Private sector principles applied. Further research would be
done into models in Canada and an Eastern country. A brief description of each
model was given. Emphasis occurred throughout all models on efficiency, accountability, focus on
delivery, business and private sector principles and the introduction of the
user pay policy. Challenges in South Africa included adequate
skills on disclosure and asset recordal.
Members raised questions on the challenges in South Africa, the effectiveness
of models, whether there had been investigation into whether the models could
apply at local government level, the composition of the Boards, and the
necessity for supervision from government. Further discussions related to the
desirability of encouraging a return to rail transport, particularly for
environmental protection, and the need to retain and develop properties near rail
links, to improve security and policing, to build businesses and malls closer
to rail and to encourage energy efficiency. Challenges of non-competitive
salaries and obtaining the right skills must be addressed. It was suggested
that using a pilot concept in smaller towns, coupled with a research Task Team,
would be helpful, that planning must become more integrated, that there should
be convergence of objectives, and that sufficient budgets must be sought. There would be further discussions. The
Committee discussed the recommendations of the Chair of Chairpersons in
relation to report backs by the full House to Committees, and the Chairperson
briefly discussed the oversight visit and said the reports would be tabled for
adoption.
MINUTES
Intersite Public Property Asset Management
Briefing
The Chairperson stated that any new ideas in the maintenance and running of
state assets would be helpful, and this briefing had been arranged to better
understand the management principles around State assets in other countries.
Ms Nonyameko
Mandindi, CEO: Intersite,
gave the background to Intersite, noting that it was
a corporate entity specialising in the management and development of State
owned property portfolios. It had started as a property division of the South
African Rail Commuter Corporation (SARCC), which included public transport
assets, and in 1992 was established as a separate corporate entitle to manage
and develop the property portfolio of the SARCC, including stations and land. Over the years, Intersite had developed a business model which meets the
special needs of the Public sector, while offering the quality and
service-delivery standards synonymous with market-driven businesses.
Ms Mandindi said that in
developing its models Intersite had researched other
models on public property management worldwide. Her presentation included
detailed examples of models used in Finland, Norway, Sweden and Queensland, Australia
(see presentation). In all cases the critical factor was that the assets and
management would support the government agenda, strategy and objectives.
Ownership and management of the properties were often separated. The management
function would be transferred to a specialist in that area and the government
would maintain representation on the board of directors of the property
manager. There would be a full reporting mechanism together with continued
alignment of the objectives and oversight. Specific performance parameters
would be clearly indicated and monitored. The entities would be structured to
operate on private sector principles and the level of control and oversight
that were necessary would be discussed. The dynamics faced were different, but
overall much the same questions were faced in each situation.
Intersite was still intending to conduct an
examination into another model, that of Canada. A related model in the East was
still being sought.
The Finnish model was formulated in 1998 and the objectives were efficiency,
yield on capital, reduction on facilities costs and the increase in the
property value. The real estate was divided into two groups: core and non-core.
Although the assets of the core properties were transferred to a property
manager, the State still held the title deeds so there was no transfer of
ownership. In respect of non core assets, a real estate
investment company that had been appointed to handle the assets on private
sector lines. The asset still appeared on the balance sheets of
government. The assets were in the main classes of universities, office premises, special
premises (which included animal health and research institutes), defence
premises and development premises. The property managers would finalise a lease
agreement, which would allow the asset classes to be released to do their core
functions. Private sector companies would also rent properties from the
government. Some non-core assets had been sold into the private sector.
Norway's model
was then described. In 1992 there was a
reorganization and separation of the commercial property and those “purpose” buildings (infrastructure).
The difference in Norway’s model was that all assets, including title
deeds, were transferred to the property management company. The managers were
responsible to the Ministry of
Modernisation
and all building projects would be financed by the re-investment of the rent
income by the government subsidy. The company would act on behalf of the
government as a consultant and manager in construction and property management,
as well as offering advice around the needs in new or existing buildings.
Annual rental income was used for maintenance.
The model used in Sweden
fragmentised and
specialised its focus and transferred the five entities to specific
areas. The five entities dealt respectively with Universities, Defense, Rail
properties and management of the forests and forts, and foreign affairs. Modernisation of the buildings took place to maintain
compliance. One entity was non-profit but the other entities were all profit
related.
The Australian model, applied in Queensland, was different, and the public
works were in a traditional role. The drive was towards excellence and
efficiency, not profit. A high level of
maintenance and facilities management was being achieved. The fleet was managed
efficiently and there was a policy around technology. Maintenance of the
bridges, roads, dams and infrastructure was achieved this way and all the state
archives systems were electronic. Various different areas were covered and
highly trained individuals were consulted for proposals, after which their
technical expertise would be used to manage the projects. There was a
distribution centre for all office perishables and each division would report
back to the Director General, which worked well from an operational point of view.
The main issues in these models, and in the system applied by Intersite, were efficiency, accountability, focus on
delivery, business and private sector principles within the entity, and the
introduction of the user pay policy, whether market related or a controlled
system. In the South African context adequate skill was needed to disclose the
property separately on the budget and was key in how
the process was taken forward. The property agency concept had been implemented
more than a decade ago in Nordic countries. Public works in the Scandinavian
countries had an overarching mandate over their state property. Capacity
building was done through institutions of higher learning.
Discussion
Dr S Huang (ANC)
commented on the excellent presentation but noted that there were no examples
yet of Eastern countries. Asset maintenance needed to be taken into account. He
asked how it was intended to deal with the public works sector, where it did
not comply with public works structures in South Africa, and what the
challenges would be.
Ms Mandindi replied that the challenges faced in the
South African property landscape were around accommodation. A further challenge
lay in that the debate around this issue was as yet not detailed enough to have
formed a definition position. A further risk was the level of capitalisation that was needed for the entities to enable
proper use. The separation was another
issue. In Australia all properties were still held by the departments, who
assisted with the asset management and treatment of the structures so that
efficiencies were achieved.
Mr Mandindi added that it
was not yet known what assets there were in South Africa. The formulation of an
assert register must be credible. She suggested that there needed to be a pilot
project in one city, to look at the issues on a smaller scale before reaching
up to national level. This was a possible option. She commented that the
Eastern countries were being investigated to see if other models existed to
give a more balanced view.
She added that after the land leases expired, the ownership would revert back
fully to government, or SARCC Intersite.
Mr L Maduma (ANC) commented
that the presentation had really assisted in understanding the issues. The
question was which would be the best model for South Africa. In Queensland the
Department of Public Works was well organised in
delivery of services. He asked how effective the central delivery system would
be in delivery of stationery and other office supplies, and how effective they
would be in the lower structures of management and the regional responsibility.
He added that the introduction of the User Pay Principles was assisting the
Department in assuming the responsibility. There was a challenge since most
state assets resided presently at local government level, yet not much had been
done to check the model’s workability at this level.
Ms Mandindi stated that the efficiency model was a
clear articulation of frameworks and guidelines. In Queensland there were
guidelines dealing with a host of issues and on how Departments could trigger
the asset management process if they did not have the expertise. These guidelines applied at national and
local government level, to guide management and treatment of every public
asset.
Mr Maduma (ANC) queried the
User Pay issue, and asked if the budget was regional or local, and the level
which was used for maintenance.
Ms Mandindi stated that the User Pay System applied
across the board, but that the rates would differ per area. The User was charged
market related prices, and sometimes a proportion of the cost of the property
was charged to the user, depending on the classification of the area. A financial buffer was in place for
maintenance, and the profit was used for the upgrading of the portfolio.
A central delivery would undertake to deliver to all divisions and was poised for that on all levels. Purchases
would be made from within the region, and all would be accounted for and
delivered to a nearby warehouse. The departments were not encouraged to keep
stock themselves, as this could be delivered at any time.
Mr N Gogotya (ANC) enquired
as to how much power the agency boards had in changing those regulations. He
also asked about government representation on those boards.
Ms Mandindi replied that in the case of Sweden the
department was formed under Trade and Industry, and the recruitment of staff in
this division was different from government recruitment. Industry specialists were targeted. If government owned the petro-chemical
board then the representative would be a specialist in that sector. Government
would appoint the chairpersons of some of the boards. The Performance Measures were already
formulated. In the petro-chemical industry, it was
possible to work on returns of 20% to 30%.
As the government was being informed by industry specialists it was
unlikely that the government agenda or specialist agenda would be missed. The
board appointed for oversight would be trustworthy, and government would be involved in
appointments. Either government or the private sector would appoint the
Chairperson. .
Mr Gogotya stated that Transnet rolling stock had been lost on the rail system.
There was no supervision from government in the distribution of the assets like
wood and steel. He questioned whether there could be a system put in place
where a broader picture of the assets would be seen before decisions were made.
Ms Mandindi stated that the quality of the members of
the Boards was a factor, and that all issues needed to be interrogated and
mandates given to the entities. Mandates should cover such issues as whether Transnet could sell as asset of a certain value without
government input. If there was such a mandate, then delegated levels of
authority should be set up, and parliament would need to be informed. This
would restrict the running of the entities but would ensure parliamentary
oversight that would act as a check. Decisions would not necessarily always be
value-based, as assets could also have historic value.
Mr J Blanché (DA)
questioned global warming and its effects on South Africa water and building
efficiency. He also queried why state
property near railways tended to be sold. It bordered the best and most
energy-efficient mass transport system, and should be retained in order to
encourage transport to return to rail. Large shopping malls were built far from
the rail systems. Building businesses close to rail would cut costs. Energy
efficiency was a factor needing urgent attention. Intersite,
in his view, had a role to play in encouraging people back to using rail, and
the railways needed to be extended again to factories. Intersite
must plan for those properties, and also take proper water into account.
Ms Mandindi stated that Intersite
had a major role to play if rail was used as the backbone of the economy.
Issues such as cost of transport, safety and security and housing close to
railways must be addressed. She had written to Sweden about the global warming
research and would put the findings into the design parameters for future
structures. The re-design of Cape Town
Station would take energy efficiency into account, and energy efficiency was to
be included specifically in the design guidelines and used as a long-term goal.
Mr H Cupido (ACDP) stated
that the project services department, being a sub-department, needed to be
effective. He referred to the Queensland
examples, and noted that South Africa had a major problem in retaining skilled
people in government structures due to salary imbalances against the private sector.
Ms Mandindi agreed that salaries were not comparable
and that the HR strategy was a continuous challenge. Retention was not the only issue; there was
also a question of exposing staff to opportunities to develop and expand their
expertise. In Queensland 655 professionals were involved, who were highly
qualified. Government employees had designed government buildings. In South
Africa there needed to be development and a sustained professional capacity at
all levels, with proper forward planning so as one skilled person left a
replacement was available. Continuity was vital and the implementation needed
to start now.
Mr Maduma queried why the
Scandinavian countries, having small populations, were used as models, rather
than France or Germany, and asked if smaller countries were more efficient.
Ms Mandindi stated that models had been chosen
according to maturity of the development. In some instance South Africa had
better solutions. In Brazil the economic profile was very similar, but Intersite preferred to learn from mature markets, adapt the
solutions to the South African context and implement them.
Ms C Ramotsamai (ANC) commented that using a pilot
concept coupled with a Task Team to do research would be helpful. She recommended that the Board members report
to the Department of Public Enterprises and the Auditor General to safeguard
decisions made.
Mr Blanché queried what the
physical planning for structures could do to direct local government, now that
sufficient malls had been developed. He queried
if there could also be malls built in other areas. Rehabilitation of property could require
relatively small investment and it would be helpful to look at potential Intersite properties with a view to
development. Local government
should make use of local buildings.
Ms Mandindi stated that the planning was far too fragmented and
failed therefore to reap the full benefits. The local authorities did not have
competence and transport planning was presently fragmented. The plans for
cities from local government or from Intersite would
differ, and the objectives did not coincide.
Mr Blanché suggested that
there must be new business centers in the rural areas, as many new businesses
were re-zoned far away from the public transport nodes.
Mr M Likotsi (PAC) stated
that further information would certainly assist in making decisions.
Ms Ramotsamai referred to the issue of malls being
situated by the railway stations. This
had been tried at Nyanga in the early 1990s, but
there were problems with security and lack of policing. All sectors had to be
involved when planning. Maintenance of rail was also a factor to be built into
the budget, and integrated transport plans must be developed.
Ms Mandindi was pleased to note that the railways
were becoming safer with increased policing.
Dr Huang stated that the railway situation was difficult if the substations in
rural areas could not be used, and it there was insufficient budget allocated
to railway transport.
Ms Mandindi stated that the assets were divided into
passenger lines run by the SARCC, and cargo lines run by Transnet. The policies needed to be aligned with
government policy and direction, as some lines were under-capitalised.
If rail transport was the backbone of economy then a budget and delivery
expectations must be known.
The Chairperson was glad to have had an interactive flow of discussion. Another meeting would be arranged to discuss
further matters.
Other Committee Business
The Chairperson suggested that the International visit reports and
financial reports be tabled for adoption.
The Chairperson reported that in a meeting with the Chairperson of
Chairpersons, he had recommended that when a recommendation of a Committee was
adopted by the full House, then there should be a report back and follow up by Parliament, to ensure that the authority of
parliament prevailed. He further noted that the budget needed to be tabled
before the beginning of the present session and the criteria for the budget
from Treasury should be made available to the Committees. The Chair of
Chairpersons stated that a report on the People’s Parliament should be tabled
as it had come up with certain recommendations.
The Chairperson reported that in the Northern Cape the oversight debriefing had
not taken place as the MEC was not present, but had now been invited to Cape Town for the
debriefing. Members were requested to further assist the MECs
on Provincial and National competency levels in that province. Key principles
needed to be addressed.
The Chairperson reflected briefly on the oversight visit to Gauteng,
Mpumalanga and Eastern Cape. Draft reports would be
tabled, and key areas would be discussed.
The meeting was adjourned.
Audio
No related
Documents
No related documents
Present
- We don't have attendance info for this committee meeting
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.