The National Department of Public Works aims to save R 3 billion on property expenditure over two years. This comes after the department met with the National Treasury to introduce a revised approach on leasing.
This new approach is aimed at addressing current challenges in the leasing environment. The current leasing process is inefficient and ineffective. Leases are procured on a reactive basis and it can take up to 18 months to conclude procurement of accommodation.
Public Works’ Head of the Property Management Trading Entity, Mr Paul Serote speaking to KwaZulu-Natal landlords said some of the challenges in the leasing portfolio are that rates charged by landlords are expensive and out of line with the market and that they are not related to age and condition of buildings and facilities.
Mr Serote promised that the lack of transformation, fronting, inflated prices, poor maintenance of leased properties and high tenant’s installation costs will be dealt with decisively.
“Savings will be realised through negotiating rental rates on leases that are above market to market related rentals, as well as modernising, optimising and reducing space utilisation by 50% on total portfolio by reducing space utilised per person from an average of 36 metres per square metre to 18 square metres,” said Serote.
Further actions to be taken to reduce expenditure on property includes letting of the unutilised component of the state portfolio to create income for the state through rentals, development and participation in commercial arrangements. The interventions include increasing savings on consumption of water and electricity from 0% to 10% on budget. They also include the standardisation of cost of maintenance on key components to reduce the overall cost of maintenance.
