13 minute read
Opinion Asset management of government properties
Asset management of government properties: Time for a reboot?
The purpose of this article is to delve deeper into the nature of asset management of government’s vast fixed property portfolio. The aim is to clarify, predominantly for the private-sector reader, where government asset management finds its genesis, and how effective asset management in government could form a central solution to some of the pertinent issues facing us today, such as the continued need for housing and spatial redress
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Shaheen Adams, Managing Director at Wingapo Property Group
GIAMA: A big step in the right direction The Government Immovable Asset Management Act (GIAMA) was promulgated in 2007 by the national government (Act No. 19 of 2007), and was made applicable to national government and provinces. Local authorities, in anticipation, also followed its guidelines and prescripts to a large degree. The purpose of GIAMA was, in part, to “provide for a uniform framework for the management of an immovable asset that is held or used by a national or provincial department; to ensure the coordination of the use of an immovable asset within the service delivery objectives of a national or provincial government…”.
GIAMA was intended as an act that could lever the vast government-owned property portfolio to the benefit of society, and this was an admirable and powerful intention. It was meant to herald a complete change in how government managed its property assets. GIAMA was an acknowledgement that it owned tremendous quantities of land and property assets throughout all three spheres of government, and that it had a responsibility to the public to implement effective asset management practices. Prior to the promulgation of GIAMA, each province already had its own provincial land administration legislation, but these acts mostly set out the authorisations and administrative procedures within each province for the buying and selling of property, and did not venture into the realm of asset management.
Why is it, then, that nearly 13 years after the promulgation of GIAMA, government still struggles to find meaningful ways to bring vast amounts of unused or underutilised property into service for the benefit of the people? To dive into this, we must evaluate what custodianship and usership looks like within government.
Custodians and users GIAMA defines the relevant National Minister, and the Premier at provincial level, as the custodians of government property within those respective spheres of government. Practically, this custodial role is delegated to either the Minister/MEC or the Director General/HOD of the Department of Public Works of both the national government and provincial governments. Public Works therefore fulfils the function of Custodian. A User Department (User) is broadly defined as any department that utilises property for the execution of its duties. Users are required to compile and submit annually a User Asset Management Plan (UAMP) to both the Treasury and the Custodian, and custodians are meant to compile and collate these UAMPs and provide strategic direction through a Custodial Asset Management Plan (CAMP), annually to their respective Treasury.
In effect, Users request the use of government property from the Custodian, who allocates that property to the use of the User. It is required by GIAMA that both the User and the Custodian ensure that the properties under their use or control are utilised effectively and efficiently.
On a practical level, the quality of the process of UAMP and CAMP compilation and submission has been improving steadily over the past decade. However, to what extent is this exercise in legislative compliance with GIAMA really achieving meaningful and effective government asset management of immovable assets? To provide guidance, we can briefly turn to the mandates of the different spheres of government.
Government mandates The three spheres of government derive their mandates from Schedules 4 and 5 of the Constitution of the Republic of South Africa (1996).
When the government is faced with property decisions falling neatly into an existing, established mandate, things generally work well. As an example, provincial governments have as part of their mandated responsibility the building and construction of schools and hospitals. Therefore, school and hospital sites are routinely acquired, zoned and built without much issue (further than usual prudence, as can be expected from government supply chain management processes) by the provincial government. The same example could be extended to national government in terms of a defence facility, for instance, or to local government in terms of a recreational community park.
However, it is when properties do not clearly fit a mandated purpose where most problems start to arise. Some of the main scenarios are listed below: ● The property having never been allocated to a User (for example, a vacant piece of government land); ● The property having been allocated but being under-utilised by the User (for example, what was once a thriving clinic in a community is now barely visited, because residents visit a more modern government clinic in the adjacent town, or have switched to private clinics); ● The property having been allocated to a User, but the Custodian (or the public) disagrees with the appropriateness of its use (for example, a bowling club may have a lease on city land that is in a prime position for inclusionary housing. The city department feels it’s fulfilling its User responsibility, and the club has a valid legal lease, yet the public sentiment is that the use is inappropriate in terms of current service-delivery priorities. This is the same argument that can be related to the ongoing debate around Cape Town’s numerous golf clubs leasing city land in prime locations suitable to affordable/inclusionary housing); ● The property having been relinquished from the User back to the Custodian because it is no longer needed (for example, Conradie Hospital, GF Jooste Hospital or Athlone Power Station); or ● The Custodian deeming an unallocated property, or a relinquished property, fit for disposal (for example, in light of an infrastructure budget deficit, the Custodian may decide to dispose of surplus property to realise capital to cross-subsidise capital shortfalls elsewhere).
The scenarios above raise challenging process questions, such as: ● How does the transition of the property from User to Custodian occur in the event that the property is relinquished by the User back to the Custodian?
● Once the property is relinquished, what process is followed in order to deem the property surplus? ● Once a property is deemed surplus, who makes the decision around the disposal criteria. Do they have the authority to do so, and do they have the political will to see it through? For example, should the property be sold outright or leased out – and if so, what conditions (if any) should be placed on the property’s disposal to market?
If you’ve ever driven by government land laying fallow, or a derelict or disused government site, it is likely indicative of the government having been unable to answer one or more of these questions. Alternatively, it could be the result of internal disagreement within government about what is in the common good. Sadly, this disagreement about what is of best use often leads to the perverse outcome of government land and buildings laying vacant and exposed for too long, and becoming scourges of social ills in the communities in which they are situated.
GIAMA is an important piece of legislation – one that provides a foundation from which the various spheres of government can answer these questions. However, it is imperative that detailed procedures that are fair and objective, and measured against the most urgent social requirements to determine the allocation and disposal of land, are put into use and consistently applied. In the absence of GIAMA Regulations, however, the spheres of government need to build their own standardised processes to deal with issues of asset allocation, relinquishment, reallocations and disposals of surplus properties. It is in the quality and implementation of these processes that the difference lies.
Concluding thoughts Since the promulgation of GIAMA in 2007, two major housing-related legislative developments have taken place: the Social Housing Act in 2008, and the Spatial Planning and Land Use Management Act (SPLUMA) in 2013.
In my view, the Social Housing Framework is currently government’s best chance of delivering decent housing at scale in well-located areas. I’ve expressed my view of the social housing legislative framework being the most viable secondary market system for rental housing at present (refer to page 14 of the February/March issue of Property Review). GIAMA (in Section 5(1)(f)(iii)) speaks to the consideration of land reform in any intention to dispose of state land. This interpretation of land reform around the time of GIAMA’s promulgation had a narrow definition centred around land restitution. I believe that when GIAMA is looked at in conjunction with SPLUMA and the Social Housing Act, the “reformation” of land needs to take a broader definition, inclusive of the provision of affordable inclusionary housing.
Spatial redress through social housing therefore has the unique opportunity of becoming a central feature of government asset management, a feature hitherto not adequately connected in legislation as it should be. In this respect, the time for GIAMA 2.0 has come.
Shaheen Adams is the former Chief Director for Immovable Asset Management at Western Cape government, and the former General Manager for Rental Property Management at Communicare NPC. He now consults privately in the fields of asset management, property management and property development. wingapo.co.za
Dube TradePort mini factories: A boon for SMMEs
Dube TradePort Corporation is poised to introduce to the Durban property market a R90-million mini factory complex, providing the ideal platform for SMMEs that require small manufacturing and office space
The development of the mini factory complex, comprising 18 units, has sparked keen investor interest, due in no small measure to its prime location just 500 metres from Dube Cargo Terminal, at the heart of Dube TradePort Special Economic Zone and emergent Durban Aerotropolis, itself perfectly positioned between two of Africa’s busiest seaports, Durban and Richards Bay. In addition to their proximity to King Shaka International Airport, these units afford easy access to the provincial road network, inclusive of the N2 north and south, with links to Durban harbour and the vital N3 corridor to the country’s hinterland, as well as the M4 and R102 arterial roads. Commenting on the mini factory concept ahead of its launch, Dube TradePort Corporation Chief Executive Officer Hamish Erskine said, “While Dube TradePort Special Economic Zone predominantly attracts big business investors, we also identified a need to ensure the inclusion in the precinct of access to small and medium-sized enterprises. Our mini factory units, therefore, present an extremely exciting investment prospect for the burgeoning SMME sector.
“These units offer the best location for the start-up and operation of small to medium-sized businesses, with
unrivalled opportunities to apply for and employ a wide range of Special Economic Zone incentives,” he said.
“Dube TradePort Special Economic Zone has shown rapid development, attracting outstanding private-sector investor interest and conversion to the value of more than R3.2-billion. It’s emerged as one of South Africa’s top 10 investment destinations, and an important global manufacturing and air logistics platform within southern Africa. All of this augurs well for SMMEs aiming to establish their enterprises here.
“The priority sectors for which we cater in Dube TradeZone 1 – which is located immediately adjacent to the mini factory complex – include medical and pharmaceutical, electronics, clothing and textiles, aerospace and aviation, automotive, and logistics and distribution. Once operational, Dube TradeZone 2 will focus on a range of industry-types, inclusive of the development of a pharmaceuticals cluster – which will revolve around production and distribution – as well as the supply of common utilities and services for key industries, together with enterprises that are active in high-value manufacturing environments.”
The diversity of business here stands SMMEs establishing in the organisation’s mini factory units in good stead, while simultaneously enabling them to take advantage of the available globally integrated logistics and manufacturing infrastructure to develop keen enterprise efficiencies.
“Both Dube TradeZone 1, inclusive of the mini factory complex development, and Dube TradeZone 2 are positioned to enable business enterprises that are located there to grow their global competitiveness,” says Erskine. “Of special importance to SMMEs is the fact that location within Dube TradePort Special Economic Zone brings to the fore access to a range of available incentives, affording small and medium-sized companies an appreciable competitive edge. Indeed, many of our existing tenants cite the attractive bouquet of incentives available in both a Special Economic Zone and Customs Controlled Area as clinching their location decision-making process.”
Incentive benefits available to prospective SMME investors include: ● Reduced corporate income tax (12R): 15% corporate income tax for qualifying companies; ● Building allowance (12S): Accelerated depreciation allowance on capital structures (buildings, 10% per annum over 10 years). The special rate of capital (depreciation) allowances in lieu of normal allowances will be available for erecting or improving buildings and other fixed structures; ● Employment tax incentives: Available to any business located within a Special Economic Zone, with employees earning less than R60 000 per annum; ● Customs controlled area: VAT and customs relief, import duty rebate and VAT exemption on imports with the aim of exporting the finished products; ● 12I tax allowance: For “greenfield” and “brownfield” industrial projects. This incentive supports capital investment and training; and ● High-end infrastructure: Funded through the provincial government and Special Economic Zone Fund. that govern Special Economic Zones necessitate the implementation and maintenance of especially high standards. This makes Dube TradeZone 1 an extremely secure business environment in which to conduct business.
Measures include the use of access cards to control movement in and out of the area, a full-time security presence and armed patrols, guard-houses, state-of-the-art CCTV inclusive of licence plate recognition technology, and the presence of security officers with specialist training in aviation security, national key points, dangerous goods and health and safety, such as fire-fighting, first aid and OHS.
All of this means that small-scale operators will be able to keep their business operations open 24 hours a day in a safe and secure environment.
“We believe the imminent release of our mini factory complex to the market will attract additional new investors and tenants who will be active in our targeted sectors and aligned to our strategic BBBEE goals, are export or import replacement-orientated and committed to localisation, as well as new technology and equipment-focused and dedicated to developing value chains.”
Dube TradePort Special Economic Zone – a recent winner of both the coveted United Nations Award for Excellence in Promoting Sustainable Investment in Special Economic Zones and the 2019 FEMOZA (World Free & Special Economic Zones Federation) award for Best Practice in Free & Special Economic Zones – signals its growing reputation as a truly world-class industrial and commercial precinct, strategically positioned at the intersection of both local and global intermodal transport routes. This provides the investors and newcomer small-scale manufacturers locating here with great supply chain efficiencies and fantastic access to markets, and the competitive advantages associated with business agility and speed to market.
The organisation’s 17 mini factory units are all 249.63m 2 and include warehouse, reception, storeroom, kitchen and toilet space, as well as mezzanine office and open-plan areas. Five dedicated parking bays and one shared paraplegic bay (per two units) are provided, and included in the rental. The complex also provides for easy truck access, enhanced by dedicated loading/delivery bays and a large shared loading/ delivery bay, also included in rental costs.
Dube TradePort applies services levies for the cleaning of roads and verges, road and infrastructure maintenance, landscaping, security and generator maintenance. Exacting attention is paid to security issues, as legislative requirements dubetradeport.co.za
