‘Blacks only get 5% of government leases’

2011-10-08 14:22

The freshly launched black property developers organisation has accused its white and established counterparts of trying to “spook” banks and creating a false perception that blacks are milking the government building lease space.

The Black Association of Commercial Property Owners, launched in Joburg this week, says contrary to “the current foray and sensational journalism around the state property deals”, the reality is that blacks enjoy no more than 5% of state spend on leasing buildings.

The launch of the organisation comes at a time when South Africans await President Jacob Zuma’s response to Public Protector Thuli Madonsela’s report.

In the report, Madonsela slated the procurement of police buildings and also severely criticised Minister of Public Works Gwen Mahlangu-Nkabinde and national police commissioner General Bheki Cele.

Businessman Roux Shabangu stands accused of having acquired the tender to house the new police headquarters.

Mahlangu-Nkabinde has sought to have the agreement favouring Shabangu’s company rescinded, but the property mogul has announced that he would take the matter to the courts.

The organisation says that the police headquarters controversy has unfairly cast a negative light on empowerment players.

“The South African government’s national leased portfolio (excluding provincial and municipal private leases) comprises 3 735 leases costing government an annual lease payment of about R2.4 billion, with an average rental per square metre amounting to R398,” said the organisation’s secretary Bruce Zungu, quoting figures from the public works department.

“Of this leased portfolio, less than 5% (or 186 out of the total 3?735 leases) is currently being leased to previously disadvantage landlords or BEE participants.

“Of the R2.4 billion annual spent by public works on private leases, less than 5% or R120 million is spent on BBBEE landlords as envisioned by the department’s own policy and targets.

So where is the balance of the department’s annual expenditure of R2.4 billion on private leases going to? Who are these beneficiaries?” asked Zungu.

The numbers fly against the state’s professed drive to empower black commercial property entrepreneurs.

The public works department acknowledged this in its last yearly report, which reads: “The commercial property market in South Africa has grown exponentially in the past decade.

“Due to the imbalances in the property sector, however, historically disadvantaged individuals and communities have found themselves unable to benefit from that growth and subsequent returns.
 
Despite the gazetting of the Property Charter in 2007 by the trade and industry department, transformation in the property sector remains low.

“Against this background, and in pursuit of the socioeconomic objectives of government, the National Intergovernmental Forum took a decision to commit its portfolio (land, buildings and other property services) to promote active participation of black people in property economy.

“To that end, the forum approved the strategy on BEE, job creation and poverty alleviation in November 2007. The strategy aims at providing property empowerment opportunities to BEE entities with more emphasis on 100% BEE enterprises.

“It also provides for the establishment of a property incubator programme, which creates an enabling environment for providing opportunities and support to BEE enterprises. This strategy will be implemented during this term.”

The organisation claims that there is a concerted campaign to make government rethink its commitments to the transformation of the property industry.

In so doing, intimidating banks into red-lettering black property owners’ finance applications.

Zungu said: “Without government intervention, the property sector would hardly see any real transformation besides the high-level box ticking currently taking place.

“Far from the noise and sensationalist reporting, one must tackle the real and inconvenient questions around the state of the South African commercial property industry.”

These, according to Zungu, include retail, office, industrial and leisure properties.

Zungu further asked: “The most poignant and intuitive question is this: how has the commercial property industry transformed since 1994?”

The association said it relied on the numbers reflected in the public works department’s yearly report last year to support its belief that the public was being misled into believing that “politically connected” individuals were dominating the commercial property space.

Zungu said: “Given that in over 17 years, black landlords account for less than 5% of the government’s leased portfolio spend, we believe the recent reports are mischievous andill-intended.

“The 5% of the black property investors is a far cry from the ‘easy pickings’ claims.”

The organisation’s chairperson Joe Mathebula said the commercial property space was ideal for real empowerment.

This because it was firstly difficult to front – banks assessed individual credit-worthiness – and secondly, certainty of expected revenue from renting could allow entrepreneurs to venture into other business markets.

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