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Nxesi shares his woes with property sector

In the first meeting of its kind since the dawn of democracy, the Department of Public Works and property owners gathered for breakfast at the Park Hyatt in Johannesburg to discuss issues of mutual interest.

The department, which is a custodian of state assets and signs leases on behalf of government departments, has never held a meeting with property stakeholders, even though its protracted difficulties are well documented.

The long-overdue meeting was also the launch of the Property Sector Charter Council's executive property owners' breakfast, which it hopes to make an annual event.

Eager to engage with the department, property sector representative bodies were in strong attendance.

Stakeholders included the newly established South African Real Estate Investment Association representing listed property companies, the South African Property Owners Association, the Black Association of Commercial Property Owners, the South African Institute of Black Property Practitioners and the South African Council of Shopping Centres. The event was also attended by Banking Association of SA representing financial institutions.

Public Works Minister Thulas Nxesi, the keynote speaker at the meeting, pointed to unstable political leadership as an obstacle for the department, which has had three ministers in three years and countless directors-general. He said racially skewed property ownership patterns needed to be addressed.

Scandals and corruption

"You will no doubt remember that when I was appointed as minister some 18 months ago, it was against a backdrop of scandal and negative media around the department. The department's past performance has been characterised by corruption and mismanagement, as evidenced by eight years of qualified audits, and disclaimers in the past two financial years," Nxesi said.

He said the root causes of the department's deteriorating situation could be attributed to a lack of controls in supply chain management, poor lease management, a lack of accountability among the regional offices, a lack of an appropriate accounting platform for the property management trading entity as well as the non-existence of a reliable immovable asset register.

"Compounding these challenges is the fact that, all too often, there is a misalignment between the mandate and the structure of the department," he said.

A case in point is that despite the fact that the department's property portfolio represents the majority of the business of the Department of Public Works (70%), the department has no property management branch and employs no property management professionals.

"Let me give you a sense of the magnitude of the challenge. In a diagnosis of the department, which I initiated immediately after my appointment, one important finding was that the estimated size of the property portfolio of public works was seven times the size of the largest private sector property portfolio namely, Growthpoint Properties.

"However, while the return on Growthpoint's portfolio averaged 16% a year, the return on the department's portfolio was estimated at barely 1%," he said. 

(Source: Business Day via I-Net Bridge)


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