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NUMBER AND STATUS OF DIRCO MANAGED PROPERTIES IN FOREIGN COUNTRIES

This report covers the number and status of DIRCO-managed properties abroad, challenges, cooperation efforts, and operational strategies. It includes information on property acquisitions, disposals, and the immovable asset register. The purpose is to update the Portfolio Committee on Public Works and Infrastructure.

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NUMBER AND STATUS OF DIRCO MANAGED PROPERTIES IN FOREIGN COUNTRIES

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  1. NUMBER AND STATUS OF DIRCO MANAGED PROPERTIES IN FOREIGN COUNTRIES Report by the Department of International Relations and Cooperation Mr. C Ramashau, Chief Financial Officer Date: 18 September 2019

  2. CONTENTS • Purpose • Background • DIRCO Property Portfolio abroad • Immovable Asset Register • Property Acquisitions, Development and Management • Property Disposals • Foreign Service Bill • DIRCO preparation for full custodianship

  3. PURPOSE The purpose of the presentation is to apprise the Portfolio Committee on Public Works and Infrastructure on – • The number and status of properties managed by DIRCO outside of the RSA; • Achievements, challenges and initiatives to overcome such challenges in the area of foreign property management; and • Cooperation between DIRCO and DPWI in this regard.

  4. BACKGROUND 1. DIRCO’s mission is to formulate, coordinate, implement and manage South Africa’s foreign policy and international relations programmes, promote South Africa’s national interest and values and the African Renaissance (and create a better world for all). 2. In executing this mandate, the Department has a physical footprint of 126 missions in 109 countries, comprising of office and residential accommodation. 3. In 1999, the then Minister of Public Service and Administration, on recommendation from the Public Service Commission and in terms of the Public Service Act, allocated the function to manage and procure properties and accommodation abroad, including all aspects regarding leasing, purchasing, disposal, alterations, maintenance, refurbishment, furniture and facilities to the then Department of Foreign Affairs with effect from 1 May 1999. 4. This allocation implies full financial and operational accountability and final decision-making authority for the function.

  5. DIRCO PROPERTY PORTFOLIO ABROAD • The property portfolio used for the foreign service consist of Chanceries (offices), Official Residences and staff accommodation. 2. The Department currently manages 911 rented properties and 163 state owned properties. 3. A breakdown of the portfolio is as follows: 4. DIRCO policy is that properties are only rented where no state owned properties are available for use.

  6. DIRCO PROPERTY PORTFOLIO ABROAD 5. The payment of foreign leases is one of the cost drivers of the DIRCO operational budget. The following internal control mechanisms are in place to contain expenditure: 5.1 Accommodation norms and standards are set per mission and staff category; 5.2 Procurement prescripts require the testing of the market for all new leases and renewals; 5.3 Accommodation is approved in accordance with approved Delegations of Authority; 5.4 Rentals are fixed for the contract period and contract periods are linked to an official’s term of duty; 5.5 Mission budgets are based on approved norms; 5.6 Legal review of all lease agreements are undertaken to ensure the inclusion of appropriate diplomatic immunities & privileges, landlord responsibility to maintain premises as well as appropriate contract termination regimes. 6. A Lease Register with future financial commitments are included in the DIRCO Annual Financial Statements and audited annually.

  7. DIRCO IMMOVABLE ASSET REGISTER 1. DIRCO maintains an accurate and reliable Immovable Asset Register of all state owned properties used for the foreign service, supported by Title Deeds in the name of the Government of the RSA. 2. The Immovable Asset Register is included in the DIRCO Annual Financial Statements and audited annually by AGSA. 3. DIRCO and DPWI is currently collaborating on an asset enhancement project in order to reconcile the assets transferred by DPWI to DIRCO in 1999 with the current register held by DIRCO.

  8. PROPERTY ACQUISITIONS, DEVELOPMENT & MANAGEMENT • Since the early 1990’s and in line with the Government’s focus on the African Renaissance, DIRCO and DPWI has been collaborating on the acquisition and development of state owned facilities on the continent, including 1.1 Kinshasa, DRC: Chancery, Official Residence and 12 staff houses 1.2 Addis Ababa, Ethiopia: Chancery and Official Residence 1.3 Abuja, Nigeria: Chancery and Official Residence 1.4 Maseru, Lesotho: Chancery and 8 staff houses 1.5 Dar es Salaam, Tanzania: Chancery 1.6 Lilongwe, Malawi: Chancery and 3 staff houses 2. In all of the above projects, DPWI acted as project manager or adviser with DIRCO being financially and operationally accountable and including an element of skills transfer (especially in project management) from DPWI to DIRCO

  9. PROPERTY ACQUISITIONS, DEVELOPMENT & MANAGEMENT • DIRCO furthermore increased the portfolio by strategic property acquisitions in areas such as London (OR Tambo house), Brussels (Chancery), Geneva (Official Residence) and New Delhi (land parcel for development). • The contraction of the RSA economy has resulted in a DIRCO Property Acquisition Strategy, approved in 2017, which aims at reducing its rental expenditure by increasing property ownership via strategic acquisitions and developments and using alternative funding mechanisms such as development partnerships. 5. Three (3) criteria is set for investment decisions namely – 5.1 the strategic importance of the country (Multilateral missions, P5 countries, BRICS partners, anchor states); 5.2 economic factors - current expenditure in the form of rentals, condominium fees etc; 5.3 the availability of land.

  10. PROPERTY ACQUISITIONS, DEVELOPMENT & MANAGEMENT • An assessment of the current property portfolio, segmented into regions, reveal the following: 6.1 The portfolio in Africa is the largest in number (103 properties), newest and present challenges in maintenance due to limited / lack of local service providers; 6.2 The portfolio in Europe is medium in size (37 properties), most valuable in Rand terms, many properties are regarded as heritage assets in terms of local laws, in need of extensive preventative maintenance / renovations, in some cases non-compliant with EU legislation on hazardous materials (asbestos, R 22 gasses); 6.3 Portfolios in Americas (16 properties), Asia and Middle East (7 properties) are small in size, relatively well maintained with service providers readily available. 7. DIRCO commenced with a programme of renovating and modernizing pre 1990’s assets in order to prolong its lifespan, make optimal use of space and improve the overall condition of the asset. In this regard, renovation projects in Ottawa, Washington, Brasilia, Lisbon, Tokyo and Canberra has been completed.

  11. PROPERTY ACQUISITIONS, DEVELOPMENT & MANAGEMENT 8. Facilities management (maintenance) is performed at the asset location, i.e. at the mission. 9. DIRCO aims to maintain an effective balance between practical devolution of functions to missions and effective norm setting and control at Head Office. • Missions perform annual inspections of properties with / without the assistance of local professionals, which informs annual maintenance planning and budgeting. Missions report on maintenance activities and expenditure on a quarterly basis. Requests for unfunded priorities are considered by Head Office depending on budget availability. 11. Missions are supported in maintenance activities by locally recruited maintenance staff on the mission establishment.

  12. PROPERTY ACQUISITIONS, DEVELOPMENT & MANAGEMENT 12. DIRCO is facing a backlog in maintenance activities. This has been occasioned by: 12.1 Maintenance being reactive in nature, with a high reliance on unscheduled activities; 12.2 Reduction in locally recruited maintenance staff at missions, due to pressures to reduce the Compensation of Employee ceiling; 12.3 Lack of a fully fledged and professionally staffed facilities management function at Head Office with a planned maintenance programme for all facilities. • DIRCO is prioritising the development and implementation of a comprehensive maintenance strategy, including scheduled & unscheduled maintenance, use of professionals, predictable costing and ease of reporting. • In developing such document, DIRCO is using the National Infrastructure Maintenance Strategy (NIMS) published by DPWI as well as best practice from countries with extensive diplomatic property portfolios.

  13. PROPERTY DISPOSALS 1. There are 29 unused state properties in the current property portfolio. • Properties are vacant due to – 2.1 The closing of missions / representative offices in Walvis Bay, Bonn, Funchal (Portugal), Zurich, Blantyre, The Gambia; 2.2 Superfluous assets in Paris (parking bay); 2.3 Assets in Brazil (Sao Paulo and Brasilia) located in areas that have deteriorated over time; 2.4 Assets in poor condition in Mbabane and Windhoek. 3. DIRCO is awaiting feedback from the SSA who has expressed interest in using some of the assets. 4. Efforts to rent properties out in order to defray maintenance costs are subject to the Vienna Convention of 1961 which affords diplomatic privileges and immunities to diplomatic properties. ‘Commercialisation’ of the properties will lead to additional cost and risk.

  14. PROPERTY DISPOSALS 5. Despite the transfer of the property portfolio from DPW to DIRCO, DPWI remains mandated to dispose of properties via the State Land Disposal Act. • DIRCO missions remain responsible for the safeguarding and maintenance of the properties in terms of the PFMA. In addition to the cost associated with such safeguarding and maintenance, missions need to appoint caretakers to oversee the properties or incur travel costs due to the lack of presence in the city where the properties are located. 7. DIRCO has identified all unused properties and are engaging with interested parties on potential utilisation. A divestment analysis will be undertaken in order to make informed decisions on disposal or continued use of each asset in preparation for the promulgation of the Foreign Service Bill.

  15. THE FOREIGN SERVICE BILL 1. DIRCO introduced the Foreign Service Bill in Parliament during 2016. 2. Clause 9 of the Bill aims to give legislative effect to the transfer of the property portfolio from DPW to DIRCO in 1999. 3. As part of the consultation process, DPWI engaged the Portfolio Committee on International Relations and Cooperation and supported the bill, provided that custodial functions are executed in line with the Government Wide Immovable Asset Management Act (GIAMA), which changes have been effected.

  16. THE FOREIGN SERVICE BILL 4. The Bill provides as follows: “9(1) Notwithstanding the provisions of section 4(1)(a) of GIAMA, the Minister is the custodian of all immovable assets outside the Republic which was acquired for use by the Foreign Service. 9(2) The Minister must act as caretaker of the immovable assets under his or her custodianship and must acquire and manage such immovable assets as contemplated in section 13(1) and (2) of GIAMA, in accordance with the Public Finance Management Act, 1999 (Act no 1 of 1999), and any other applicable law. 9(3) Notwithstanding the provisions of sections 4(2)(b)(i) and 13(3)(b) of GIAMA, the Minister may dispose of immovable assets under his or her custodianship in accordance with this Act and any other applicable law, after consultation with the Minister of Public Works and the Minister of Finance.

  17. THE FOREIGN SERVICE BILL 9(4) A decision to dispose of any immovable asset must: (a) be in the interest of the effective management of the Foreign Service; (b) be to the benefit of the Republic in order to achieve the best functional, financial, economic and social return or benefit from the disposal of the immovable asset; and (c) take into account the value of the immovable asset.” 5. Status of Bill [Sandea] 6. The Department has commenced with the preparation of regulations to give effect to the Bill.

  18. DIRCO PREPARATIONS FOR FULL CUSTODIANSHIP 1. DIRCO and DPWI has agreed on collaborating and strengthening its relationship in order for DIRCO to be fully ready to implement the Bill. 2. In this regard, the departments agreed on a professional partnership to achieve – 2.1 shared services – deployment of professionals to accelerate project execution, process review, system design and investment analysis 2.2 shared best practices and systems; and 2.3 shared skills, training and development via specialized agencies such as SAPOA, CIDB and CBE 3. The departments are currently negotiating the Memorandum of Understanding to give effect to this agreement.

  19. THE END THANK YOU Department of International Relations and Cooperation Branch: Finance and Asset Management September 2019

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