South Africa\u2019s Public Works Minister Dean Macpherson says he plans to create a state-owned company that will manage the government\u2019s real estate portfolio and entice private investment into infrastructure projects. <\/p>\n\n\n\n
The state is the country\u2019s biggest real estate owner<\/a> with about 88,000 buildings and 5 million hectares of land that together are estimated to be worth R155 billion. Macpherson\u2019s department will also blacklist companies that don\u2019t honor commitments. <\/p>\n\n\n\n Years of neglect and graft have led to buildings \u2014 many in the center of major cities \u2014 being taken over by squatters who are extorted by armed gangs, or abandoned.<\/p>\n\n\n\n The minister\u2019s long-term plan is to put the government\u2019s holdings together in a vehicle that sets the foundation for the creation of a state-owned company.<\/p>\n\n\n\n \u201cWe really have to stop seeing public works as a department of bad buildings and we have to see ourselves as an economic delivery unit,\u201d Macpherson said in an interview. <\/p>\n\n\n\n \u201cWe\u2019re going to create an asset book that is worth hundreds of billions of rand that could possibly be traded, could possibly be sold for equity or can raise debt for social infrastructure.\u201d<\/p>\n\n\n\n The department of public works and infrastructure is seeking advice from development finance institutions on how to set up an entity with strong governance structures and generate revenue and profit from the assets, he said. <\/p>\n\n\n\n Still, the proposal will add to the list of more than 120 companies run by the government. Most of which are unprofitable. <\/p>\n\n\n\n A government call in November for private companies to help it revive 16 dilapidated buildings<\/a> in eThekwini \u2014 the municipality that includes the port city of Durban \u2014 has now been extended to include 31 sites nationwide. <\/p>\n\n\n\n The plan is being seen as a trial run in turning around and generating an income from state assets, Macpherson said.<\/p>\n\n\n\n More than 650 companies have expressed interest in reviving the buildings, which together are estimated to be worth R1.4 billion, the minister said. <\/p>\n\n\n\n The department expects private firms to invest about R10 billion in the project and garner annual revenue – in the form of rent or a profit share – of at least R200 million, he said. <\/p>\n\n\n\n Macpherson, who belongs to the Democratic Alliance \u2014 the nation\u2019s second-largest party \u2014 was appointed to his post in June when a government of national unity took office after the May 29 elections failed to produce an outright winner. <\/p>\n\n\n\n The minister, if given a full five-year term in the position, expects the department to look \u201cvery different\u201d by the next national election. <\/p>\n\n\n\n While President Cyril Ramaphosa, a member of the African National Congress, has called for the country to be turned into a construction site to bolster an economy that\u2019s expanded by an average of less than 1% a year for more than a decade, progress is being stymied, in part, by a lack of project development and execution expertise in municipalities. <\/p>\n\n\n\n \u201cThe real crisis in infrastructure is in local government,\u201d Macpherson said. He cited instances where municipalities return money earmarked for infrastructure to the government as they lack the ability to carry out the works.<\/p>\n\n\n\n Some local governments spent below 40% of their allocated infrastructure grants in the three months to December, according National Treasury\u00a0data<\/a>. \u00a0\u00a0<\/p>\n\n\n\n To tackle these issues, the department is piloting an \u2018adopt-a-municipality\u2019 initiative with four local governments run by different political parties across the country. <\/p>\n\n\n\n Under the arrangement, public works officials will effectively take over running projects to ensure they\u2019re delivered effectively and efficiently, he said. <\/p>\n\n\n\n \u201cI would like to see us transition so that there is a single point of entry and execution on infrastructure. So you don\u2019t have these sort of mixed bag of results,\u201d he said.<\/p>\n\n\n\n