Presentation to the Portfolio Committee on Public Works

Immovable Asset Disposals for 2011/12 and 2012/13

28 August 2012

To provide a report to DPW Portfolio Committee with regard to the disposal of properties within the country for land reform, human settlement, other socio-economic development imperatives and servitudes (“commercial purposes”) for 2011/2012 and 2012/2013 financial years.

To brief the DPW Portfolio Committee on the properties disposed abroad during the 2011/2012 and 2012/2013 financial years.

To update the committee on progress made with regard to the Immovable Asset Disposal Policy.

Purpose

Background

One of the key strategic objectives of DPW is to participate in building a developmental state through comprehensive rural development framework and State assets. This is done through:

the effective release of land for – land reform purposes; human settlement; agricultural purposes; and rural office precincts.

the disposal of properties for socio-economic development programs and servitudes (infrastructure development).

Properties released for 2011/2012 Financial year

No Province Property description

Extent Purpose Beneficiary

Human Settlement1. Free State Remainder of Portion

145 of Farm Dorps Gronden van Kroonstad 460

1.6722 ha Construction of integrated social housing

Moqhaka Local Municipality

Socio-economic purposes2 Gauteng Portions of Portion 9

and Portion 32 of Farm Waterpan 292 IQ

Registration of existing servitudes

Rand Water Board

3 Western Cape Erf 15279, Paarl 7.6625 ha Grave site Drakenstein Municipality

4 Kwazulu-Natal Remainder of Erf 6017, Vryheid HT

2.4287 ha Long term lease for development of a Hospital

Abaqulusi Hospital

Properties released for 2011/2012 Financial yearContinues

No Province Property description

Extent Purpose Beneficiary

5 Free State Erf 2064, Bethlehem Extension 24

0,1568 ha Construction of official residential accommodation (official quarters)

South African Weather Services

Total: 11.9202 ha

Properties released for 2012/2013 Financial year

No Province Property description Extent Purpose Beneficiary

Socio-economic purposes

1 Western Cape

Portion 15 (portion of Portion 11) of Farm Elgin Forest Reserve 295

6.0000 ha Construction of a Secondary School

Western Cape Provincial Government

2 Western Cape

Remainder of Farm 236, Milnerton, Cape Town (known as Potsdam)

3.4261 ha Construction of a community health care centre

Western Cape Provincial Government

Foreign Disposals The Department of International Relations & Cooperation

(DIRCO) acquires and manages RSA properties in foreign countries.

DIRCO also identifies properties no longer required for their purposes and then requests DPW to dispose of such properties.

Such properties are then subjected to an investment analysis, including a professional valuation, to inform the method of disposal - e.g. tender/auction/property broker/direct disposal.

No foreign disposals have been effected by DPW during 2011/12 and 2012/13 (to date).

In the 2010/11 financial year DIRCO requested the disposal of 13 Namibian residential properties and subsequently 6 properties were disposed using the tender methodology. Seven (7) Namibian properties are pending disposal.

Immovable Asset Disposal Policy

DPW is currently finalising a comprehensive policy framework to – clearly set out its vision for the disposal of immovable assets

under its custodianship; and address the critical questions of why, what, when and how

such immovable assets should be disposed of.

The proposed “Immovable Asset Disposal Policy” is based on DPW’s various existing directives [such as the Property Management Manual, 1994; the Principles of Immovable Asset Management in GIAMA, 2007 and the Property Management Business Processes, 2007] and the applicable Treasury Regulations. However, it is deemed essential that a single comprehensive disposal policy be adopted.

Guiding Principles of draft Disposal Policy

Immovable assets that no longer support Government’s service delivery objectives should be considered for disposal;

The disposal of immovable assets must primarily contribute to the promotion of Government’s socio-economic objectives;

The disposal of immovable assets to other organs of State, particularly to further Government’s socio-economic objectives, must take priority over disposals for purely commercial purposes;

Immovable assets that are no longer cost-effective to manage and maintain should be considered for disposal. However, care should be taken with environmentally sensitive and culturally or historically significant assets;

Custodians of immovable assets must implement deliberate measures to increase historically disadvantaged individuals’ participation in and benefit from the disposal of surplus assets and the use of professional services related to such disposals;

Guiding Principles of draft Disposal Policy (Continued)

Where immovable assets are disposed of (a) below market value; or (b) directly to specific entities without competition, consideration should be given to suitable restrictions regarding the development, utilisation & future disposal of such assets;

Where assets are disposed of via the invitation of “development proposals”, timeframes and specifications within which such proposed developments should be completed, must be negotiated, agreed upon and clearly documented in agreements of lease/sale.

Compliance with such conditions/restrictions must be actively monitored. Should the lessee/buyer/donee fail to meet the stipulated requirements within the agreed time-frames, consideration must be given to the - cancellation of the agreement of lease/sale/donation; and resumption of ownership of the property (in cases where

transfer has been effected).

Forms of Disposal

Any one or a combination of the following methods of disposal may be employed by a custodian to obtain the “best value for money” to government from the disposal of an immovable asset –

sale; donation; letting; exchange or public-private partnership.

[‘‘best value for money means the optimisation of the return on investment in respect of an immovable asset in relation to functional, financial, economic and social return, wherever possible” – Section 1 of GIAMA, 2007]

DPW is of the opinion that (where practical) preference should be given to the letting of immovable assets, rather than the sale thereof, as this allows Government upon termination of such leases to consider the allocation of those assets to user departments, the continued letting thereof or the disposal thereof by other means.

Disposal Process

The disposal of an immovable asset is a three (3) step process –

Identification: For an immovable asset to be considered surplus, any one or more of the following conditions must be present – Asset is not required for service delivery; Asset is not suitable for service delivery; Asset has become too costly to maintain or use; or Asset is required for development purposes, whereby the benefits

from disposal outweigh the benefits from the current utilisation.

Disposal Process (Continued)

Assessment: This step establishes the desirability, advantages and disadvantages of a proposed disposal.

Not all surplus immovable assets should necessarily be disposed of (e.g. an asset may be of such cultural, historical or environmental importance that it will be retained and declared a heritage or conservation site).

Similarly, not only immovable assets deemed surplus will be disposed of (e.g. a fully functional asset may be disposed of in order to address black economic empowerment).

Physical disposal: In this step a decision must be made as to the form (sale, letting, donation, exchange, PPP or transfer between spheres of government) and method of disposal (e.g. direct disposal, open or closed tender/auction)

[In disposing of immovable assets, a custodian may employ any or a combination of any appropriate form and method of disposal]

Approval and roll-out of the Immovable Asset Disposal Policy

GIAMA (Section 19) empowers the Minister of Public Works to determine immovable asset management guidelines and minimum requirements that will provide a framework for the management of immovable assets throughout their life-cycle (encompassing planning, acquisition, maintenance & management and disposal).

Should the DPW Immovable Asset Disposal Policy be approved, the Minister of Public Works may issue this policy as a best practice guideline in terms of GIAMA (following the stipulated consultation with national and provincial custodian departments, as well as National Treasury and Provincial Treasuries).

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