DIRCO’s takeover of custodianship of state owned properties abroad:: DIRCO & DPWI briefing

Meeting report

The Acting Chairperson said the Chairperson was unfortunately still unwell. She would be present in the meeting, but would not participate.

Rev K Meshoe (ACDP) asked if an item, which was related to the suspension of Director-General Kgabo Mahoai, could be added to the agenda.

The Acting Chairperson said the issue of the suspended DG was a serious matter, since the Department of International Relations and Cooperation (DIRCO) had not yet briefed the Committee on it. However, this matter was being handled by the Chairperson and the Minister, and DIRCO would brief the Committee on it soon. The Committee would also receive a full report on consequence management. The two Departments had met and crafted a joint response to the Committee. The Department of Public Works and Infrastructure (DPWI) would continue to work with DIRCO to ensure capacity exists.

Opening Remarks

The granting of observer status to the state of Israel by the Chairperson of the African Union was indeed a great irony considering the several international efforts to hold Israel accountable for its human rights abuses against the Palestinian people. The Portfolio Committee fully supported South Africa’s stance that member states of the continental body must be accorded an explanation on how this decision was reached.  It was a matter of great concern to the Committee that such a delicate political matter could be left to unilateral decision by office bearers without consulting with member states.

The Committee was also mindful of, and concerned at, the developments happening in Afghanistan, and urges DIRCO to do everything possible to ensure South Africans were safe in this country and provide help as needed.  It supports the call from the South African government that parties involved in the Afghanistan conflict should search for a solution through dialogue.

The Committee would continue to monitor the situation in Afghanistan including the security situation in Mozambique. It was pleased by the June summit held by the Southern African Development Community (SADC), which approved a standby mission to be deployed in Northern Mozambique, although it was concerned about the involvement of troops that fell outside the SADC region. It hope it would receive clarity on this situation as it unfolds.

The situation in Eswatini had not gone unnoticed. The Committee was concerned about the loss of life and reported abuses by the security forces. It hoped for an all-inclusive dialogue in this country.

Elections had taken place in a number of countries on the continent. Zambians recently went to the polls, and Committee applauds Zambia for a peaceful transition.

The Committee expected a positive outcome from today’s meeting, which would address the collaboration between DIRCO and the DPWI. Its oversight interest was to ensure the Foreign Service Act of 2019 was fully implemented. It had recently concluded an innovative virtual oversight of state-owned land and properties, and it had been concluded that both DIRCO and DPWI had not responded effectively to the concerns raised by missions. Both Departments were expected to play their role, but with the Foreign Service Act now in place, the Committee expected DIRCO to take full custodianship of all its properties abroad, It was mindful, however, that DIRCO did not possess the necessary capacity to manage its property portfolio.

The Committee was eager to hear about the collaboration between the Departments. It expected a clear answer on why so many buildings were dilapidated, where the Departments currently were, what challenges were expected during the transition, and what measures would be taken to safeguard these buildings from further damage.

Ms Noxolo Kiviet, Deputy Minister, DPWI, said that during this time of fiscal constraints and dealing with the COVID-19 pandemic, it was encouraging that the Committee had asked to see how DPWI managed its property investment.

DIRCO’s takeover of custodianship of state-owned properties abroad

Since the presentation was compiled jointly, Ms Hlengiwe Bhengu, Acting Chief Financial Officer (CFO), DIRCO, would lead the presentation for both Departments.

The function to manage and procure properties and accommodation abroad had been allocated to DIRCO by the then Minister of Public Service and Administration on 1 May 1999, on the recommendation of the Public Service Commission in terms of section 3(3)(a) of the Public Service Act, 1994. This was due to the fact that DIRCO had an advantageous position to better manage the foreign property portfolio given its closer proximity to the assets, as well as its direct knowledge of local conditions, legislation and property processes abroad.

The scope of the function transferred to the Department included all aspects relating to leasing, purchasing, alterations, maintenance, refurbishment, furniture and facilities. However, the Department was not mandated to dispose of state-owned immovable assets under its custodianship abroad, as the State Land Disposal Act made no provision to this effect.

Referring to the current status of DIRCO’s foreign properties, Ms Bhengu said the Department continued to face a backlog in maintenance and renovation activities. This was caused by maintenance being reactive in nature, with a high reliance on unscheduled/urgent activities, and the lack of a fully-fledged and professionally staffed property management portfolio unit at Head Office, as well as in the missions abroad.

To date the Department had:

• Revised its organisational structure to accommodate the relocation of the Properties and Facilities Management unit to the Office of the Chief Operating Officer (COO);
• Advertised and shortlisted for the post of Chief Director: Properties and Facilities Management, for which the interview had been planned for 11 August;
• Advertised the post of Director: State-Owned Property Management
• Conducted a physical verification assessment through its missions of all recorded state-owned immovable properties abroad, to ascertain the physical condition of the properties;
• Identified that most of its properties need maintenance, resulting from slow or no maintenance performed, as well as legacy properties that need extensive preventive maintenance and/or renovations;
• 34 properties had been identified and funded for maintenance in 2021/22 financial year. The work, which ranges from condition assessment to major maintenance works, had commenced.

Progress made to date with the disposal of unused properties was as follows:

• Identification and physical assessment by missions of 17 properties for disposal had been finalised, and a concurrence letter had been received from the Minister of Public Works and Infrastructure, with officials nominated from the DPWI to be part of the process.
• A disposal policy had been finalised, and the standard operating procedure (SOP) for the disposal of immovable assets had also been finalised.
• Establishment of an interdepartmental task team had been finalised, with representatives from the National Treasury (NT), the DPWI, DIRCO and non-governmental entities. Terms of reference (TOR) for the task team had been drafted, and a self-financing mechanism was being explored with National Treasury.

Discussion

Ms M Hicklin (DA) said there had to be a smooth transition of resources between DIRCO and the DPWI. The public service industry was known for its inaction, and this must not become a stumbling block to the implementation of this transition. The renting of properties by DIRCO was quite concerning, as it spends a tremendous amount on rentals and owns property in some of these places. She said 34 properties had been identified for maintenance at a cost of R82 million, of which14 were official residences and seven were staff residences. Referring to the properties that were maliciously damaged, she asked how much of that loss would be recovered from the perpetrators, and what steps had been taken or would be taken against the people who had damaged properties. Cases had to be opened against people responsible for maliciously damaging property.

The DPWI did not have a digital immovable asset register inside South Africa, but spoke about a skills transfer worldwide. If it failed to have an immovable asset register in South Africa, how would they be able to do that worldwide? She said the DPWI would not be able to train staff overseas, and that needed to be addressed in South Africa before the DPWI and DIRCO try to address these issues overseas. This was a policy issue, and there had to be an Act that strengthens the mandate and enables the DPWI to work hand in hand with DIRCO.

Mr D Bergman (DA) said the Committee went on a joint oversight visit with the DPWI to Namibia, and on that trip the same issues were highlighted. There was no functional property register, DIRCO was not even sure which of the properties they owned in Namibia, and this was because they were not in communication with the DPWI. The Namibian authorities had had to tell the Committee which properties were owned by South Africa.  Namibia was a very clean country, and it was sad to notice that the dirtiest parts of Namibia involved South Africa, as all South African properties in Namibia were run down, dilapidated and had graffiti on them. What the Committee saw from the DPWI perspective, was a Department unable to function properly, not only in South Africa but also abroad.

There was also a problem of ambassadors living on properties that had been vandalised by previous ambassadors, and there had been no action from DIRCO or the DPWI. The partnership between the DPWI and DIRCO was not working, and this needed to change. He challenged the Committee to go on oversights in Namibia to see how bad the situation was

Mr B Nkosi (ANC) said that at least steps would be taken to mitigate the situation between DIRCO and the DPWI. The maintenance strategy so far had been to address maintenance issues when they occurred, and this was not necessarily a good strategy. There needed to be a preventative approach, maintenance had to be done throughout the lifespan of a property in the form of light, medium and heavy maintenance. It was not acceptable to be only reactive when it came to maintenance. It was a good thing that some of these properties would be sold. He asked for a list of properties that would be retained and how the DPWI planned to maintain them. It may be beneficial for DIRCO not to rush and fill vacancies in the property unit, as they first needed to understand the kind of capacity they would require to adequately address these property issues.

Ms S van Schalkwyk (ANC) said there were legacy properties in Bonn, and they were considered prime real estate. Instead of selling these properties, the DPWI and DIRCO should look at the possibility of using these properties for income generation. A task team between the DIRCO, DPWI and National Treasury should look at this possibility and learn from other countries. For example, France used some of its old properties, renovated them into apartments, and rented them out. This could result in substantial revenue instead of a once-off payment. There had to be a serious focus on maintenance, as properties lose their value if not maintained, and looking at some of these properties, they could have been sold for a higher price but because of the state they were in, the Department was making a loss.

Rev K Meshoe (ACDP) said the state had a serious problem with maintenance -- even the parliamentary villages were dilapidated. One of the reason for this poor maintenance within the state was because there was no consequence management. It was embarrassing to hear that properties that had been rented abroad were vandalised by officials, and nothing had been done about it. He asked what would be done about this. Bringing these people to book would send a clear message and might stop it from happening again. How many properties that were earmarked for maintenance were being utilised, and was there a consideration to dispose of them? He asked for clear timeframes on when property would be sold.

Ms B Swarts (ANC) said DIRCO would never understand what the Committee expected from them. The Committee was just moving in circles with DIRCO. Information requested from DIRCO about its properties was never received by the Committee.  There had been a simple request from the Committee for a milestone report on properties from DIRCO. This report was going to inform the Committee how far the process was of listing buildings for renting and disposal, and to date it had never received such a report. She asked how the Department determined which properties to dispose of, and if there was a strategy in place. The Committee had continuously said the property division in DIRCO must not be part of the finance unit. The Acting CFO was the one spearheading everything around the property division, and legally this was incorrect. DIRCO had also decided to transfer all its responsibilities to the DPWI, while it sits with a property unit that does not have capacity or qualified people in the built environment. She asked how the DPWI and DIRCO would ensure the transition was completed smoothly.

Mr W Faber (DA) said the Minister of Public Works and Infrastructure had not attended today’s meeting because she was ashamed at the failure of her Department.  The properties in Bonn would potentially be sold for R55 million rand. These were three official residences, and this amounted to €3.5 million. He asked who had done the valuation for these properties. There needed to be a good discussion on these properties and a revaluation of the prices. DIRCO could not get into another scandal of undervaluing property -- there needed to be an investigation on these properties. It was important that the disposal of properties needed to happen through a transparent process to avoid the New York situation from happening again, and unfortunately the process so far had not been transparent. In one of the discussions the Portfolio Committee had, it was informed that DIRCO had received a higher offer than the asking price for one of the properties, but had decided not to go forward with the sale.

Mr M Chetty (DA) asked how the Department had arrived at the decision on which properties they would dispose of, and what criteria were used to finalise these properties. A lot of people who were involved with the New York pilot project were still dealing with property within DIRCO. People had been suspended, but the Committee was still waiting for heads to roll. The Minister had given a disappointing response when asked about the property management problems within DIRCO, and had simply replied that she did not know much about property. The Department did not have South Africa’s best interests at heart, and that was why he did not support this report. He asked that this matter be further discussed in the Portfolio Committee.

Departments' responses

Mr Imtiaz Fazel, Acting Director-General, DPWI, said the DPWI would defer the question around disposal to DIRCO. The devolution to sell property had happened in 1999, and DIRCO had since had the power to dispose of its own property. It was true historically that the DPWI did not have an immovable asset registry, but over the past few years, extreme effort had gone in compiling an asset registry. The Department had started to digitise its asset registry.

Ms Bhengu, DIRCO's CFO, said the issue of recovering losses from officials who had damaged property was currently with the chief law state advisor. A process was under way which would ensure officials paid for the damaged suffered. DIRCO had also strengthened the indemnity form which officials sign when occupying a state property. This form would allow DIRCO to hold officials responsible should any property be damaged while they were the occupants. Officials would also sign a register which would indicate the state the property in when an official started occupying it. A visual inspection would also be carried out to indicate the condition of the property. DIRCO would also do a bi-annual physical inspection of all properties to ensure officials were not damaging them.

She said DIRCO’s current relationship with DPWI was based on a shared skills exchange. DIRCO uses DPWI’s database of professionals when an infrastructure problem occurs, and if there is a property management issue, it forms an intergovernmental task team consisting of these professionals from the DPWI and DIRCO. The DPWI’s database was used for contracting engineers and other built environment professionals.

DIRCO did have problems in Namibia, and most of the properties were dilapidated. Of the 17 properties DIRCO was looking to dispose of, eight were in Namibia -- four in Walvis Bay and four in Windhoek. These buildings were classified as being redundant by the mission in Namibia, and that was why they would be sold. There was a plan in place to deal with the other properties, and that plan had been shared with the Portfolio Committee. Repairs were currently under way at those properties. When the Committee visits Namibia again, it would notice and see the work that was currently under way. DIRCO’s work had been informed by the reports received from the Portfolio Committee.

She agreed that DIRCO could not have a reactive property maintenance strategy, which was why the Department had found itself in a situation where most of its properties were dilapidated and in need of repair. A new strategy was being finalised which would be looked at by the inter-departmental task team. In the meantime, a maintenance plan had been adopted which would be implemented by the DPWI and DIRCO while the team finalised a bigger strategy.

The Department had 174 properties abroad, and 17 would be disposed of. 34 properties were classified as needing urgent repair work, and these would undergo repairs in this financial year. More properties would undergo maintenance in the coming financial years.

On the issue of using the property in Bonn as potential rental units and a source of income, this idea was being looked at and investigated. The properties in Bonn were in a very prime area and if due diligence was carried out, then income could be generated. The process of disposing property was still at a very early stage, where DIRCO had to identify the properties which could be disposed of.

The next stage of this process would involve analysis, and would inform DIRCO what type of disposal would happen to properties. This could mean disposal by selling, or by renovating buildings into rental units. The assessment of these properties would be done by a professional. The properties in Europe were being evaluated in two ways -- one through the municipalities in those countries, and also through hiring a private service provider within those countries to evaluate the properties. This was the standard process in all the countries.

Regarding the issue of the milestone report, this had been noted and a discussion would be held with the Acting DG. The decision to dispose had been informed by reports received from the missions abroad. They had indicated where they had properties which were not used by the mission, and this could be because of various reasons. In some instances, the capital city in those countries had moved, which had forced the mission to also move and leave these properties vacant. Properties that were sitting vacant were those in Walvis bay, Windhoek, Gambia, Malawi, Bonn, Zurich, Portugal, a parking bay in Paris and a property in Uruguay.  The main criteria used for disposal was whether or not the property was redundant. The matter of disposal would be a discussed after DIRCO received an assessment report from the professionals. The property management unit within DIRCO would be moved from the CFO’s office to the Chief Operating Officer (COO). This process was awaiting approval from the DPSA and National Treasury.

The transition between DIRCO and DPWI would be smooth. As indicated before, the DPWI had transferred DIRCO’s property registry to the Department in 1999. The transition had been happening over years, and skills and services had been shared between the two Departments. DIRCO had lost capacity over the years and needed to start from scratch in building a capable property management portfolio, and DPWI would assist the DIRCO in this endeavor. 

DIRCO would re-establish its bid-adjudication committee, and would include officials from DPWI. DIRCO had received a letter from Minister De Lille of the DPWI, and this letter had indicated which officials would be on the bid evaluation committee and bid-adjudication committee. This would further strengthen DIRCO’s procurement processes.

DIRCO had approached a university professor and would recruit two students within the built environment to form part of a task team that would lay the ground for up-skilling the property management unit. Interviews were under way to staff the unit fully. Most people in this unit would be replaced over a period of time, because there needed to be a proper handover between the old and the new team.

Closing comments

The Acting Chairperson said this was just the beginning, and there would be further discussions. The Committee had asked for this preliminary information. This was a huge exercise DIRCO was embarking on, and the Portfolio Committee would have to monitor the situation closely. There would be further presentations on this matter, and the Committee expected the DIRCO to give them comprehensive answers. The Committee would ask DIRCO to compile a clear turnaround strategy with timelines on how this process would unfold. This must be concluded before the Portfolio Committee’s current term ends. It was the Committee’s mandate to make sure that DIRCO achieved its objectives.

The meeting was adjourned.