Proposed legislation could be cure for government’s R148bn property portfolio headache

Valued at R148-billion as of 31 March — up in worth by R9-billion since 2017 — the state’s property portfolio is extensive, but managing these properties has been an almost 30-year-long headache within a red tape-ridden administration.

The state today holds 29,169 so-called land parcels with 80,631 improvements, effectively buildings, it emerged at a Public Works briefing on 7 June 2023, according to the Parliamentary Monitoring Group.

The property headache includes national and provincial state asset registers that are still not fully verified and completed — incorporating ex-Bantustan properties proved taxing — and various initiatives to reclaim state properties, like Operation Bring Back from April 2011, as well as the Sisyphean battle of maintaining properties against repeat budget cuts. 

The proposed National State Enterprises Bill holds a way out.

The legislative proposals allow a national state asset management company to establish subsidiaries — for example, one on property — and then for a subsidiary to enter into agreements “to transfer specified property”, according to section 18(1).

Such transactions would be recorded by the Deeds Office, including details of any bond. And in such transactions, according to section 18(3) of the proposed law, “no levy, tax, transfer duty or any other charge or fee imposed by statute may be charged”.

Were a state property subsidiary established, the 2007 Government Immovable Asset Management Act provides the legislative foundation for, as this law puts it, “a uniform immovable asset management framework to promote accountability and transparency in government”.

A Property Management Trading Entity already exists under Public Works that could be transformed into a state property company — as a subsidiary of the state asset management company under national state enterprises legislation.

Read more in Daily Maverick: What’s the new National State Enterprises Bill about?

It’s not unheard of to transfer properties out from under Public Works. According to PMG, MPs in 2018 were told how from May 1999 Foreign Affairs, as International Relations was known then, got control and ownership of all its properties, including abroad, following the required agreement between the ministers of public works (Jeff Radebe), foreign affairs (Alfred Nzo) and public service and administration (Zola Skweyiya).

Transferring responsibility for state properties from Public Works would effectively shut down the portfolio, particularly as the Expanded Public Works Programmes could easily be accommodated in the Labour and Employment Ministry.

Such a move towards a state property manager as a subsidiary of an umbrella asset management company would be a concrete outcome with beneficial prospects, given that the National State Enterprises Bill is badly drafted and conceptualised.

Schedule A of the Bill, instead of detailing which state-owned enterprises (SOEs) would be transferred to a national state asset manager, is left blank in the version published in the Government Gazette in mid-September. It’s unclear how quality public comment can be expected without detailing the government’s intention on the SOE front.

This omission is curious. SOEs have received significant government attention for more than a decade — from the presidential SOE review that recommended mergers, abolitions and restructuring, to the 2022 presidential SOE council. 

But Public Enterprises Minister Pravin Gordhan’s performance agreement with the President simply says “sort out governance issues at relevant SOEs”, in the section dealing with public value and trust.

In the politicking within the governing ANC, the minister’s hands may well be tied — the troubled Eskom was meant to be transferred to Mineral Resources and Energy, according to an ANC 2022 conference resolution. 

Like Eskom, Transnet is financially troubled and wrapped in governance controversy, as is Armscor and arms manufacturer Denel, which only in August 2022 managed to settle all staff wages that had been outstanding for several years. The Post Office has had to be bailed out repeatedly in the recent past. Public broadcaster SABC is also cash-strapped.

Only the forestry SOE Safcol, the Development Bank of Southern Africa and the Independent Development Corporation have clean records.

Against this, and consecutive Budgets warning of the negative risk SOEs pose to a fragile economy, turning the R148-billion state property portfolio into a standalone SOE is an attractive option.

The National State Enterprises Bill provides for the phasing-in of various provisions, allowing flexibility — even if the President is the sole shareholder of the envisaged state-owned state asset management company.

However, it’s still a long way off.

Government departments take months to process public input into finalised draft Bills, which must then restart the monthslong way through the Cabinet approval pipeline. Only after the Cabinet gives the nod, is a draft Bill tabled in Parliament.

Given that 2024 is an election year, real movement on the National State Enterprises Bill — and its potential for a state property company to shut down Public Works — is set to occur only from the second half of 2024. DM