Shoddy Oversight Fuels Shady Dealings in SA Government Real Estate
In the wake of the global banking crisis and the concomitant rise in public debt levels, the disposal of government real estate and associated operating cost savings have become a vital means of raising much needed capital. Close to 16 billion of government property was reportedly sold across Europe between 2006 and 2008. This is almost four times the 4 billion worth of sales recorded from 2003 to 2005.
Andile Sokomani, Senior Researcher, Corruption & Governance Programme, Cape Town
In the wake of the global banking crisis and the concomitant rise in public debt levels, the disposal of government real estate and associated operating cost savings have become a vital means of raising much needed capital. Close to ‘16 billion of government property was reportedly sold across Europe between 2006 and 2008. This is almost four times the ‘4 billion worth of sales recorded from 2003 to 2005. Similar efforts at using government real estate as a means of generating public wealth could also prove pivotal to the resolution of South Africa`s chronic economic problems. That will however require a radical shift from understanding government property merely as a public good to conceiving it as a productive asset. Despite promising regulatory instruments such as the Immovable Asset Management Act of 2008, which provides for a uniform framework for the management of immovable assets held or used by national or provincial government departments, there is still an enormous regulatory gap. To begin with, municipalities and local government are known to own or control substantial amounts of real estate. Yet there seems to be very little evidence to suggest that the country`s local and municipal governments view their holdings as a portfolio that might be harnessed to better serve public objectives. Government in general also does not tend to have a very clear conception of the value or magnitude of its own real estate. For instance there is still no accurate register of the amount of immovable assets in the state’s possession. Only 108 000 properties appear on the government asset property register and these are only the properties that belong to the National and Provincial Authorities - incidentally the spheres of government that happen to be managed under the Immovable Asset Management Act. A few months ago the now redeployed Minister of Public Works announced that the government had recently discovered 33 000 buildings that it owned but never knew about. This vague conception of holdings has unfortunately been a persistent problem for which the Department of Public Works, the official custodian of all the state`s real property and other immovable assets, has received qualified audit reports. Reporting on the department’s state of finances for the 2009/2010 financial year, the Auditor General issued a qualified audit opinion on the basis that the department had no complete asset register of all immovable properties belonging to the national government, among other things. All these inefficiencies put government`s real property portfolio at risk of being subject to questionable state property acquisition, disposal and leasing procedures. A case in point was the recent public outcry around the R500m property deal between the South African Police Service and Roux Property Development Africa. This was a lease for new police headquarters in Pretoria, the administrative capital city. The deal had apparently been signed off without public tender, a clear contravention of the Public Finance Management Act and related regulations. The finer details of the transaction are likely to emerge early next month - the anticipated public release date of the findings from the recently concluded Public Protector investigation on the matter. That the newly appointed Public Works Minister, Gwen Nkabinde-Mahlangu, signed off on the deal while law enforcement agents and the Public Protector were investigating it, is regrettable. Such regret however is more to lament the sanctioning of a suspect contract than to suggest that the minister`s well-meaning intent to save the department, and the taxpayer, from potentially devastating litigation consequences should be lost sight of. The subsequent revelation that government had previously terminated a contract with Roux Property Development is also noteworthy. This related to the construction of a R20m police station in the Mpumalanga province. Shoddy workmanship, missing of deadlines and failing to pay suppliers appear to have led to the termination of the contract, according to a Sunday Times report. The report raises the tantalising suggestion that Roux Property Development should have been logged into the Register of Tender Defaulters, and barred from doing business with the state for up to ten years, in line with the provisions of the Register. How the company managed to land the lease contract with state in the first place is, according to this suggestion, the fundamental question. However the Combating of Corrupt Activities Act, from which the Register of Tender Defaulters derives, unfortunately considers only those companies or persons convicted by a court of law for tender or contract crimes. On their own, the previously listed factors leading to the termination of the R20m deal would not have been sufficient to render Roux Property criminally liable in terms of the Act. This however should not detract from asking why government went on to conclude an even bigger contract with Roux Property despite its unsatisfactory performance. That inefficiency should not be rewarded, regardless of whether a company has been convicted or otherwise, is beyond dispute. As the Register of Tender Defaulters may not always be the relevant instrument for this purpose, an alternative mechanism is needed. Such punitive mechanism may achieve better results if complemented by a preventive mechanism such as a highly competent oversight body. In this regard, Public Works may need to take cue from the Estate Agency Affairs Board, whose decisive action on alleged irregularities involving leading estate agency Wendy Machanik Property Holdings saw the entity`s trust accounts placed under curatorship. To gain more out of the country`s public real estate portfolio it is crucial to hold asset managers accountable for the assets in their custody and be assured that these assets are serving their intended purposes and achieving targeted results. This will go a long way in enhancing public financial resources and curbing corruption in the historically corrupt area of government-owned property. If government continues to maintain the current status quo it is not likely to realise the full extent of its real property returns and thus miss out on the opportunity to maximize revenue and better the lives of its citizens. Public real property will instead remain a site of controversial leasing deals and a conduit for illicit wealth to the politically connected.
