The role of the PMTE in transforming the property sector

02 November 2016

HEAD:PMTE – MR PAUL SEROTE

2

P M T E

Purpose

• To implement National Government’s Immovable Asset Management Strategy and provide accommodation and built environment services to user departments

Vision• Convenient Access to

dignified public services

Mission

• To effectively manage the State’s immovable assets whilst contributing towards economic and social development in the country and transformation of the built environment

PROPERTY MANAGEMENT

TRADING ENTITY

(PMTE)

PMTEin a nutshell

3

P M T E

STABILISATIONEFFICIENCY

ENHANCEMENTSUSTAINABILITY &

GROWTH

TRANSFORMATION AND CHANGE MANAGEMENT

2012 2014 20192016/17

CHANGE MANAGEMENT

TURNAROUND

STRATEGY

Stabilisation of DPW

due to historical

poor performance

and lack of

adequate management and

financial controls

PMTEin the context of DPW recovery

NDP – THE IMPROVED FUTURE STATE

SECTION A

NDP in a nutshell

THE PLAN 2030prosperity & equity

PROBLEM TODAYpoverty, inequality & unemployment

OUR RESPONSIBILITY – to plan the journey to 2030

6

P M T E

ECONOMYThe economy will be

3Xthe size it is now

To get there we had to grow by

5.4% per annum since 2013

2030

NDPthe South Africa of tomorrow

now

What will South Africa look like in 2030? – If we plan and work together

UNEMPLOYMENTwill have fallen from:

Each South African will on

average earn more than 2X

what they earn now

26% 6%

7

P M T E

90

ENERGYElectricity will be reliable and

more than

90%will have access

Installed generating capacity =

73,275 MW

NDPthe South Africa of tomorrow

What will South Africa look like in 2030? – If we plan and work together

RURAL ECONOMY

Increase absorption rate in rural areas from 29% to 40%

1-million new jobs (of total 11-million new jobs)

created through enterprise development in rural areas

and availing agricultural land

500,000 hectares

availed

1.5-million

2-million

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P M T E

THE FUTURE IS OUR CHOICE

NDP creates an ever greater

challenge and opportunity to:

FUTURE STATEour responsibility

Poverty alleviation and

inequality reduction

Redefine service delivery

Map course for future

development

OUR CHALLENGE?

changing environment and doing more for less ($)

FOCUS ON SOCIETY’S NEEDS

• Focus on what society wants and needs, whilst seismic global changes are taking place (technology, environment, economy etc.)

DELIVER AFFORDABLE SERVICES

• Deal with uncertainty while delivering services that are affordable, in context of deficit reducing budget cuts.

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P M T E

OBLIGATIONS Deliver i.t.o. national goals & objectives:

o Provide accommodation to Government (Mandate:

GIAMA)

o Transformation - Black and female empowerment

o Address spatial imbalances of the past => small & rural

towns / harbours / provision of land => human settlement &

land reform

o Contribute toward national developmental agenda

o Leverage the State’s property portfolio to contribute

towards skills development

o Leverage the State’s property portfolio to create

employment

o Ensure water & electricity supply security through sound

investment decisions that meets conservation and

renewable energy targets

REQUIREMENTBetter managing, maintaining and utilising State property portfolio

to build value and bring savings to the State

WHY WE EXISTour obligations

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P M T E

KEY MANDATE (GIAMA): custodian & manager of State’s immovable assets

(under Minister of PW)

CONSTITUTIONAL OBLIGATION: (Chapter 10: Public Administration)

o High standard of professional ethics must be promoted and

maintained

o Efficient, economic and effective use of resources

o Development-oriented

o Services be provided impartially, fairly, equitably and

without bias

o People’s needs must be responded to

o Must be accountable

o Transparency => timely, accessible and accurate

information

o Representative of SA people

WHY WE EXISTour obligations

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P M T E

CONSTITUTIONAL OBLIGATION: (Chapter 13 - Section 217: Procurement)

o When an organ of state contracts for goods or services, it must do so in accordance with a

system which is:

fair

equitable

transparent

competitive

cost-effective

o But must not prevent the organs of state from implementing a procurement policy providing

for:

a) categories of preference in the allocation of contracts; and

b) the protection or advancement of persons, or categories of persons, disadvantaged by

unfair discrimination

o National legislation must prescribe a framework within which the policy referred to in

subsection (2) may be implemented (New Procurement Bill)

WHY WE EXISTour obligations

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P M T E

How do we measure our effectiveness?

… considering our impact on service delivery as the PMTE

Service Delivery Improvement Plan

• It is the engine room and provides the thrust for incremental improvement in service delivery

• SDIP flows from the Strategic Planning process and must be aligned to the PMTE’s vision

BATHO PELE & SERVICE DELIVERYour responsibility

improve the nature or

quality of the actual service

to improve the manner in which the

service is delivered

ENABLERPMTE pivotal roleenables Government

to deliver

(accommodation

provision)

e.g. security,

social,

health

TWO SIDES to a SDIP:

So, how far are

we from the NDP

objectives?

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P M T E

• 0.62% growth y/y (2016Q2)

• Growth of 0.3% ytd, the NDP

target to achieve the

envisioned economy in 2030 is

5,4% per annum

• Sector contribution to GDP

• Primary: 10%

• Secondary: 18%

• Tertiary: 63%

• Taxes less subsidies: 9%

• Highlights

• Low commodity prices

• Drought

• Weakening global demand

• Electricity supply

• Business Confidence

• Rising Interest Rates

SA ECONOMIC OUTLOOKGDP

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P M T E

SA ECONOMIC OUTLOOKconsolidation

• The GDP number is as meaningful as the

significance it has on its citizens

• Poverty alleviation; creation of employment;

economic inclusion of citizens

• To measure:

o GDP per capita

o Gini co-efficient

o Unemployment rates

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P M T E

• Per capita income increased from R50 000 in 2010 to

R55 000 in 2016

• This is below NDP target set at R120 000

• The per capita income is slightly above the food

poverty line

• Fourth most unequal country out of 138 countries

measured by the UN with a gini coefficient 0.63 (NDP

target is 0.60)

• According the World Bank the richest 10% account for

over 58% of the country’s income while the bottom

10% account for about 0.5%.

• There is still a significant gap between the rich and the

poor

• This further emphasizes the need for economic

empowerment

• Some of the challenges identified as hindrances to

economic empowerment are being addressed:

o Fronting criminalized

o Public procurement policies being changed:

PPPFA will be repealed by the Public Procurement

Act

o National Empowerment fund established

o Changes in various sector charter codes

SA SOCIAL TRENDSinequality

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P M T E

• Total number of people employed as at end of 2016Q2 is 15.5 million, the NDP target for

2030 is 24 million

• The construction sector contributes 9% of the employed population

SA SOCIAL TRENDSemployment

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P M T E

• Country still has significant gap between rich and poor

• Need for policies to address this

• Extent of transformation to date has been at a lower

rate than anticipated across all industries within our

economy

• With PMTE being a major player in the property sector,

we recognise the role that we can play in

accelerating transformation in this sector given the

size of our state owned and leasehold portfolios.

SA SOCIAL TRENDSso what?

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P M T E

STATE OF GOVERNMENT ESTATE

STATE OF THE ESTATEfreehold

39%

7%

54%

Accommodation Type

Residential

Offices

Specialised

Assets

0%

10%

20%

30%

40%

50%

60%

70%

80%

VERY POOR POOR FAIR GOOD EXCELLENT

Building Condition

Average portfolio condition

Land Parcels: 31310

Buildings: 92593

Value: R112 billion 65%

35%

Land Parcels

occupied

vacant

4%

96%

Building Occupancy

vacant

occupied

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P M T E

State of

Leasehold

Portfolio

Leasehold portfolio

status as at end of

15/16 FY:

Total number of Leases: 2,617Annual Expenditure: R 3,8 billion

MTEF BUDGET:

2016/17 FY: R 4 billion2017/18 FY: R 4,4 billion2017/18 FY: R 4,8 billion

STATE OF THE ESTATEleasehold

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P M T E

EXTENT OF TRANSFORMATION WITHIN THE LEASEHOLD PORTFOLIO

• To understand our contribution to transformation within the sector, an analysis of our leasehold

portfolio was conducted.

• This was based on scorecards of our main landlords in terms of expenditure

• A general trend of point-targeting was identified through the positive correlation between the

level of compliance and the weights of the various elements of the scorecard.

• This trend was observed both in components within each element as well as the elements

themselves.

• There seems to be emphasis on ownership to an extent that it is the only element whose targets

and achieved scores were closest.

STATE OF THE ESTATEleasehold

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P M T E

0%

5%

10%

15%

20%

25%

Ownership Management

Control

Employment

Equity

Skills

Development

Preferential

Procurement

Enterprise

Development

Socio-Economic

Development

Achieved score against Target score

Benchmark Actual Performance

STATE OF THE ESTATEleasehold

RESULTS

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P M T E

INSIGHTS:

• Key findings from this study are aligned with industry

studies concerning transformation in the property

sector.

• Employment Equity, Management Control and Skills

Development were areas of significant concern

• PMTE used BEE scorecards to measure BEE extent within

the portfolio as this is developed by the industry.

• As PMTE , we acknowledge the need to accelerate

transformation within the sector, however, this needs to

be a joint effort between Government and the Property

Industry.

STATE OF THE ESTATEleasehold

THE PMTE AND TRANSFORMATION – OUR ROLE

SECTION B

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P M T E

HIGHLIGHTING OUR IMPERATIVES! • The basis from which we operate

• The role we play

• The context in which we play this role

All our programmers need to contribute towards undoing the challenges we face (NDP)

ROLEAs the implementing arm of the Department, the PMTE has a responsibility to ensure that

the Departments’ empowerment objectives are achieved.

Amongst other reforms, our Empowerment policy is currently being reviewed.

The policy is governed by:

o Constitution

o Regulations

o Mandate

o Compliance

o NDP

It is important to note that although there is a need to accelerate transformation within

the sector, it needs to be done within the law

TRANSFORMATION our role

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P M T E

OUR BLACK ECONOMIC EMPOWERMENT POLICY

Our Policy is under review

Implementation of current policy has not been successful for a number of reasons:

o weak internal controls

o certain behaviours in the transaction or business environment that have prevented the

successful implementation of the policy = fronting practices / fair value / cashing out

The key policy focus will be:o Education, Skills Development and Training

o Small Business Support through Enterprise Development

o Access to Markets and Finance

o Market Development and Economic Empowerment

o Policy Development Advocacy and Recognition

o Enforcement, Monitoring and Evaluation

TRANSFORMATION our policy

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P M T E

TRANSFORMING OUR BUSINESS

Transformation cannot happen when the fundamentals and the basics are not in place.

o Transformation journey starts with transformation of the organization itself =>

Turnaround & Operationalization of PMTE

o Efficiency Enhancement Phase - implementation of fundamental reforms from

which we are building issues of transformation.

Constitution (Section 217) three elements:

o enterprise development;

o skills development; and

o job creation.

– run across all business programmes

TRANSFORMATION our business

PMTE

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P M T E

CHALLENGES:o User departments determine needs, location and

preferences

o procurement processes => tender - not most efficient

mechanism when it comes to, for instance, processing 2617

leases

Procurement reforms:

Different approach => immediate efficiency

o Structuring proper programmes - starts with understanding

the market

o Linked to Treasury’s development of procurement

framework for the leasing environment - apply to all

government institutions. - in line with best practice

NB - we are dealing with an environment that is not a commodity.

TRANSFORMATION procurement reforms

Business

SCM

Empowerment

TRA

NSFO

RM

ATIO

N

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P M T E

SITUATIONAL ANALYSIS• The need to improve efficiency and effectiveness of procuring goods and services within SCM

• Implementation of systems to improve controls and combat fraud and corruption

• Concerns on value for money

• Develop policies for procuring serviced for Infrastructure projects and leases

• Implementation of panels to facilitate operational requirements

• Ineffective mechanism for prices and delivery

• The process reinvented with each and every procurement

Initiatives:

TRANSFORMATION procurement reforms

Appointment of Term contracts for Professional Consultants

Centralised Supplier Database

Contract Management system

E tender System

Panel of Lessors to be appointed

SCM Infrastructure Reform

The reforms are aligned to the Public Procurement Bill

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P M T E

Public Procurement Bill

AIM:

o Consolidate all procurement sectors into one government-wide integrated supply chain

management framework

o One legal frame of reference that governs and evaluates all procurement

o Consolidate statutes on procurement activities into one public procurement law

o Consolidate various preferential procurement statutes into bill

BACKGROUND

Landscape of Public Sector SCM is undergoing changeo NT made known their intention to reform & transform Public Sector SCM environment

o Feb 2015 – NT published review that indicated SCM areas identified for change

Progress:o Central Supplier Database – finalised

o Release of Standards for Infrastructure Procurement & Delivery management

o Collecting all SCM legislation into a single Public Procurement Law:

PUBLIC PROCUREMENT BILLNT & OCPO

-2021 b

ill will m

ee

t Co

nstitu

tion

al g

oa

ls

-2030 b

ill co

mp

ly w

ith N

DP

CHALLENGES

PUBLIC

PROCUREMENT BILL

Unified public

procurement law aligned

to international

modernization standards

on procurement

governance and

administration

Provide for flexible

preferential

empowerment strategies

to assist implementing

critical government

social-economic policy

objectives

REMEDY FUTURE

PUBLIC PROCUREMENT AUTHORITY

(PPA)

MODERNISED SYSTEM OF

PROCUREMENT

GOVERNANCE & MECHANISM OF

TRANSPARENCY

PROFFESSIONALIZATION

SERVICE DELIVERY ORIENTATED

CUSTOMER FOCUSED

PUBLIC & PRIVATE

PUBLIC PROCUREMENT STRATEGY

COHERENCY

SUPPORTS TRANSFORMATION AND

DEVELOPMENT

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PREFERENTIAL PROCUREMENT: The Bill introduces more flexible legislation for preferential procurement

strategies in support of government socio-economic objectives and other related policy initiatives

PROCUREMENT HARMONISATION: The Bill introduces a comprehensive legislative framework for all

procurement practices in government by repealing and amending all procurement related laws and

integrating all laws on procurement into one public procurement law.

PROCUREMENT OVERSIGHT: The Bill introduces the establishment of a procurement authority to regulate

and promote the Constitution’s Section 217 throughout government!

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P M T E

CHAPTER 3: PREFERENTIAL PROCUREMENT POLICY(In line with Chapter 13 - Section 217 (3))

The ‘Authority’ will determine the categories of persons and enterprises, the combinations of categories of persons and enterprises, and the category of

persons or enterprises owned or operated, partially or wholly, by persons

disadvantaged by unfair discrimination on the basis of race, gender or

disability.

Procuring organs of state, must:• use population stats of local communities, to identify the population target

groups, that need to be empowered, for categories of persons, such as

gender, disability, age and race;

• use economic stats of local public procurement markets, to identify

categories of contracts in their different commodity markets, to be set-

aside, to contribute to job creation and market innovation;

• develop supplier development programmes, based on the identified categories of persons, that need to be accommodated in set-aside

categories of contracts, for the different categories of enterprises such as

local enterprises, SMMEs, township & rural enterprises;

PUBLIC PROCUREMENT BILLNT & OCPO

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P M T E

CHAPTER 3: PREFERENTIAL PROCUREMENT POLICY(In line with Chapter 13 - Section 217 (3))

Procuring organs of state, must:• develop a contract costing framework, based on price referencing, to establish

reasonable pricing, for the different preferential commodity markets;

• develop preferential procurement goals in procurement plans and commodity

specifications, based on:

o Preferential BBBEE Status Level Targets (Categories of Persons & Enterprises)

o Preferential Commodity Targets (localization & sustainable development

products)

o Preferential Commodity Cost Pricing Targets (market related pricing)

The new evaluation & awarding criteria for preferential procurement will be competitively evaluated against comparative achievements on predetermined:

o Preferential persons & enterprises assessment criteria;

o Preferential commodity specifications & functionality criteria;

o Preferential commodity market price benchmarks

PUBLIC PROCUREMENT BILLNT & OCPO

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P M T E

WHAT DOES THIS MEAN FOR US?

• The proposed changes to the procurement bill will change the way

we do business

• Programmes targeting certain preferential persons will be possible

with the proposed changes providing a platform to develop

programmes aimed at accelerating transformation

PUBLIC PROCUREMENT BILLNT & OCPO

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P M T E

FACILITATING PROGRAMMES TO ENABLE TRANSFORMATION

As PMTE, we recognise that a major limitation to transformation is access to funding.

• The PMTE is developing a programme aimed at addressing funding challenges and also

aimed at improving access to the Property Sector for previously disadvantaged persons.

• Our role as the PMTE is to facilitate the programme, however, collaboration of different

stakeholders from banks, developmental funding institutions. to property owners is crucial.

TRANSFORMATION going forward

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P M T E

IN CONCLUSION

• We acknowledge the gaps, but there is progress to address these gaps

• Joint effort from all is needed to achieve our goals

• This is not a Government challenge, but a sector challenge.

TRANSFORMATION going forward

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P M T E

• National Department of Public Works (NDPW)

• Head Office: Public WorksCGO BuildingCnr Bosman and MadibaPretoria CentralPrivate Bag X65Pretoria0001

• Website: http://www.publicworks.gov.za

THANK YOU

End