Programme Director
Acting (Transitional) Head of PMTE and management
Colleagues
This workshop that you are attending represents a critical landmark event in the Turnaround of the Department of Public Works (DPW). We have said that the operationalisation of Property Management Trading Entity (PMTE) is at the heart of the Turnaround Strategy in order to:
- Deliver on the mandate of Public Works to provide accommodation to government and to act as custodian for the state’s immovable assets; and
- Address negative audit findings.
Incidentally, yesterday I met with the Auditor General’s (AG) Office. There is good news:
- On the Main Vote, DPW moved from qualified to unqualified opinion;
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On the PMTE Account, we moved from a disclaimer to a qualified opinion. The bad news was that there were serious qualifications on the PMTE Account in a number of
areas: irregular expenditure, leases and accruals and the AG made it very clear that adequate controls and systems are still not in place. You will have to work closely with the AG’s Office to address the audit findings and the PMTE business model you develop must take account of these concerns. I have also said that operationalizing the PMTE is one of my five priorities for the period of this Administration (2014-2019).
One of my other priorities is to make good on the Public Works mandate to transform the Built Environment including both construction and property sectors. Whilst this involves other branches, a key site of delivery will be the PMTE.
Background
Let us remind ourselves of the background to the PMTE:
- In 1999, Cabinet approved, in principle, the creation of a State Property Agency. 2006 National Treasury approved the business case for a separate PMTE to manage state properties. This was not implemented leading to major audit queries over the last 8 years.
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Government Immovable Assets Management Act (GIAMA) gives DPW the mandate to manage state assets (including establish an Immovable Assets Register), real estate and facilities management. This was not implemented resulting in:
- Numerous audit queries;
- major problems with leases (media scandals) often sub-standard government facilities;
- no planned maintenance, stripping out value from state assets;
- inadequate controls and security leading to vandalism, hijacking and illegal occupation;
- massive under-utilisation of state properties; and
- major costs to the state in terms of leasing-in and failure to collect all rentals. - The PMTE Account constitutes 75 percent of the work and budget of Public Works. It is the largest property portfolio in South Africa (seven times the size of GrowthPoint– SA’s largest private property fund). But it has been run like a spaza shop with no real business model, weak management systems and the near absence of the requisite skills in asset management, property development, real estate and facilities management.
The Turnaround 2012-2014
As part of the turnaround plan, gains include:
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Establishing a comprehensive Immovable Assets Register- 95% physically verified (this is a first in the history of the South African state). We now know much more about what properties we own. Some findings:
- 107,000 state properties on approx. 30,000 land parcels (73,000 used by government
departments; 1,800 leased out to private sector; some 30,000 are not utilised currently). More recent estimate is 112,000 buildings which includes those on unregistered land.
- Instead of using our own accommodation, the trend has been towards leasing-in for government accommodation (currently 2,700 properties at a cost of R3.2 billion per annum to the fiscus; also provides opportunities for corruption.)
- We have identified properties which may have been illegally transferred from the state. These will be forensically investigated and action taken as part of our ‘Bring Back Campaign’. -
We conducted an audit of the 2,700 leases (with National Treasury), and introduction of an interim dispensation from Treasury to facilitate rapid re-signing of leases to prevent clients being evicted. As a result of the audit and the re-signing campaign:
- Renegotiated leases downward in 50% of cases (with a saving of R32 million per annum).
- Treasury dispensation places a 5.5% ceiling on escalation of leases (i.e. below inflation) with further savings to the state.
- The Audit also highlighted leases where fraud and collusion is suspected (e.g. empty buildings we are paying for) for forensic investigation. - With National Treasury’s Technical Advisory Unit (TAU, now renamed GTAC), we developed the Business Case for the establishment of PMTE as a Government Component. This has been presented to the Cabinet Committee and thoroughly debated and amended for presentation to the full Cabinet next week. Let me say that the quality of the debate in the Executive reflected the quality of work that had gone into the preparation of the submission. I need to thank all those involved led by Dhaya.
So that is where we are now as DPW and the PMTE. The task now is to drill down into the detail of what must be done to take forward the vision of PMTE and to implement the mission and purpose.
Let me refer you to what I said in my Five Year Policy Statement and Vision for 2014-2019 (20 June 2014). In regard to PMTE, I said:
“I need to see the PMTE formalised and fully operationalised with the sub-units clear about where they are reporting. PMTE must be appropriately staffed, with the necessary skills. This is the time for a fundamental review of functions, structures, governance, operations, reporting lines, strategic plans and required resourced and skills.”
That is partly why you are meeting here today.
We have made real progress on leases and the Immovable Asset Register, providing a solid basis for developing the business but a number of elements still need to be finalised. I need to know when the following business plans and models will be in place:
- an overall Asset Investment Management Framework;
- a Property Management framework; and
- a Facilities Management framework including a Maintenance Plan.
What is happening to take forward the National Infrastructure Maintenance Strategy (NIMS) project–we cannot wait indefinitely?
When will we have a report on the condition of properties?
What is the backlog, and what is our plan to address this?
I need to emphasise this point. I understand that the Department in the Presidency for Performance Monitoring and Evaluation has prepared a report to on the state of government buildings indicating the challenges around lease management, dilapidated structures and poor maintenance, all of which hinder service delivery by other line departments. You are going to have to give me a clear plan on how these challenges are being tackled.
I have said that the starting point for developing a business model must be to establish and project demand over the planning period. In simple terms: to ask our clients what they want.
DPW is failing on this front:
- User Departments have not coped with User-Asset Management Plans (AMPs);
- DPW/KAM in the past adopted a hands-off approach, blaming the client for non-performance;
- The Joint Teams proposed in the Turnaround were never fully implemented.
