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Transnet CEO's proposal on assets causes concern.

Posted On Wednesday, 02 October 2002 03:01 Published by
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Two processes could trigger contradictions, industry says.
Commercial property professionals fear that fragmentation of the process governing the rationalisation of public property assets could undermine state efforts.

As the custodian of government's property portfolio, worth about R120bn, the public works department has appointed a privatesector consortium to advise it on how best to go about rationalisation. The department may sell off some property and outsource the management of other assets to the commercial sector.

However, Sipho Mashinini, CEO of Transnet property management company Propnet, has sparked concern with a proposal to create yet another entity to house commercial properties that are in the hands of state-owned enterprises. With a mandate from the public enterprise department, Mashinini put the idea to the cabinet's portfolio committee on public enterprise.

With an estimated value of R6,5bn, the portfolio includes commercial properties belonging to Eskom, Telkom, Denel and the SA Post Office. These are properties like the Transnet-owned Carlton Centre in Johannesburg's central business district, which do not fall under the public works department because they are owned by parastatals.

The concern is that the rationalisation of public property assets driven by the public works department is at an advanced stage. It is feared the two processes could trigger contradictions.

Mashinini has dismissed worries that in seeking to consolidate the commercial property of stateowned enterprises, he is championing competition against the state-management company the agent the public works department intends to create to manage its portfolio. He says the two processes are not related and should be treated as such. 'I do not see how they contradict one another.'

It has been suggested that the two processes should be merged to ensure a harmonious rationalisation of state property assets. The separation is seen as a reflection of departmental politics, with each department seeking to claim glory.

Brain Kirchman, executive director of commercial property association Sapoa, says the principles driving these processes are sound, but streamlining is desirable.

The consolidation proposal is born out of a drive by state-owned enterprises to achieve greater efficiency through focus on core business. This calls for them to dispose of noncore assets, including certain property holdings.

Mashinini says the consolidation of commercial properties housed in different state-owned enterprises is intended to create a solid platform to launch black empowerment property entrepreneurs as mainstream commercial property owners. He says very few black people own commercial property in SA and this process will go a long way towards reversing that situation.

Mashinini says several proposals, dealing with how this property can be released to black empowerment projects, are on the table.

One involves packaging properties into small parcels for a number of black empowerment entities; another would create equity opportunities in the one large entity. A mixture of the two is also possible.

The wave of rationalisation is expected to offload many government property holdings and outsource related activities like facility and property management.

The private sector consortium appointed to advise public works on rationalisation is expected to release a report in the first half of next year, forming a framework for public works' future property dealings.

Industry observers say that this public policy framework should be extended to cover property in the hands of state-owned enterprises to harmonise the broader public property asset rationalisation process.

Business Day

Publisher: Business Day
Source: Business Day
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