the Port Elizabeth Property Investorsâ Conference
24 August 2006
Introduction
The country is experiencing positive growth, inflation levels are low and
returns on investment in property are high. South Africa is a good place to be.
The Accelerated and Shared Growth Initiative for South Africa (AsgiSA),
provides even more reason for optimism. This initiative to drive South Africa
to growth levels of at least 6% will see an investment in infrastructure
exceeding R320 billion, presenting both opportunities and challenges for South
African businesses. Government and our State-owned Enterprises (SOEs) are
procuring on a large scale and local businesses have to ensure that they are
geared to meet the demand, both in respect of quality and quantity.
The construction industry, in particular, will be an important contributor
to AsgiSA. The expeditious implementation of major capital expansion projects
needs to be driven by local developers. You have the experience and the skills
to ensure that the standards of service are world-class. It is for this reason
that I have accepted the invitation to address this conference. Excellent
property development, be it industrial, commercial or residential, not only
results in job creation, but is also a symbol of national pride. It shapes
perceptions of residents, tourists and investors and is a pivotal factor in
whether people decide to stay in South Africa or not.
Property disposals
Opportunities for property developers will also arise from our disposal
process. SOEs are divesting themselves of assets and enterprises that are no
longer integral to their business operations, as their activities become more
focused. My department, the Department of Public Enterprises, has established a
Joint Projects Facility to identify optimal ways to dispose of non-core
property and to manage the disposal process.
Non-core properties have been identified by the SOEs and classified as
commercial or non-commercial portfolios. The properties have been further
classified under the following broad categories indicating optimum disposal
options namely, sale, housing, disposal to government departments and
development.
My department is currently engaging with the Department of Housing to
identify properties which have the potential to alleviate the national housing
shortage and a sales agreement will be concluded in due course. The Department
of Education has also expressed interest in the list of properties that have
the potential to be used for public interest purposes and a bilateral
negotiation is imminent. We have also set aside vacant or undeveloped land of a
strategic nature around ports or Convention of Biological Diversity (CBDs) for
public development.
Once the public sector disposals have been concluded, the remainder of
properties will be put out to the market.
The role of the State in property development
In respect of these properties we see government's role as that of a
facilitator - facilitating development in support of urban regeneration and
broader social and economic development. Government recognises that strategic
non-core SOE landholdings in Port Elizabeth and elsewhere around the country
have the potential to play a catalytic role in job creation, tourism
development, urban development and property sector transformation.
Each of these properties for development requires significant investment or
enablement before the property can be taken to market. Enablement includes for
example environmental rehabilitation, resoning, securing of development rights
and substantial infrastructure investment. The SOE do not have the mandate or
appetite to undertake development and we are examining appropriate
institutional mechanisms to facilitate this. This is likely to see the
participation of the private sector.
Urban development in Port Elizabeth harbour is currently constrained by the
location of the manganese ore and oil terminals, which are located on prime
real estate, known as the southern port area, in close proximity to the Port
Elizabeth (PE) CBD.
The relocation of the manganese ore terminal to Ngqura in support of broader
national strategy to relocate dirty industries outside of cities to outlying
industrial ports is a key consideration. Operationalisation of Ngqura would
provide an opportunity for the relocation, catalyse the minerals cluster at
Ngqura and free up land for alternative use in PE harbour. The economic
multipliers of a proposed waterfront development suggest increases in jobs,
Gross Domestic Product (GDP) (for the city and region) and revenue collection.
We believe that the opportunity costs associated with the current location of
these facilities are significant. A cost-benefit analysis is currently being
conducted and we hope to announce our decision on the relocation before this
end of this year.
Properties for sale and Broad-Based Black Economic Empowerment
Prospective purchasers thus need to prepare. Properties for sale will be put
out to an open and competitive tender process that aims to promote
transformation of the property sector.
My department has developed a set of Broad Based Black Economic Empowerment
Guidelines, which will be placed on our website in the near future (http://www.dpe.gov.za). The guidelines are based on
the Department of Trade and Industry (dti) Codes of Good Practice and the
Property Sector Charter. Any enterprise bidding for SOE property will need a
Black Empowerment (BEE) verification certificate from an accredited BEE
verification agency (listed on http://www.abva.co.za). In order to obtain a
certificate, enterprises will be measured against the dtiâs BEE Scorecard and
accordingly allocated a BEE status level.
We have set a minimum target of 70% of all asset disposals by value (other
than those for transfer to government or for housing) by each SOE to entities
with a BEE status of at least Level 4, i.e. entities with scorecard points
equal to and above 65%.
In order to qualify to bid, individuals and enterprises will be subject to
the qualification criteria which have been set according to various value
thresholds of the property for disposal. Black individuals bidding in their
personal capacity will be recognised as level 1 during adjudication:
Level A - up to R5 million. No bids will be considered unless bidders have a
BEE status level of at least 4 or at least 51% of the economic interest is held
by black people.
Level B - between R5 million and R30 million. No bids will be considered
unless bidders have a BEE status level of at least 4 or at least 30% of the
economic interest is held by black people.
Level C - between R30 million and R100 million. No bids will be considered
unless bidders have a BEE status level of at least 5 or at least 25% of the
economic interest is held by black people.
Level D - above R100 million. No bids will be considered unless bidders have
at least a level 6 BEE status or at least 20% of the economic interest is held
by black people.
A series of road shows has been planned to inform the public about possible
opportunities across the provinces. My department will publicise its plans in
this regard closer to the disposals.
Conclusion
Developments around infrastructural projects such as Ngqura mean that my
department and I will always have a keen interest in Port Elizabeth. We are
aware of your concerns, and these concerns, as well as the concerns of other
parties, are receiving serious consideration.
The Nelson Mandela Municipality is amongst the most beautiful in South
Africa. The initiative to revitalise the central business district and inner
city of Port Elizabeth is central to unleashing the economic potential of this
picturesque part of the country. I trust that deliberations at this conference
will result in the acceleration of the revitalisation process and wish you well
in your endeavours.
Enquires:
Ms Gaynor Kast
Ministerial Spokesperson
Cell: 083 271 4350
Issued by: Department of Public Enterprises
24 August 2006
