Joint Project Facility Property Project

1. Joint Project Facility Property Project Presentation to Public Enterprises Parliamentary Portfolio Committee 30 May 2007

2. Rationale for Property Disposals • Property is a strategic and productive asset, a vehicle for economic development, service delivery & transformation. • Shift in focus amongst SOE to focus on core business which aligns with government’s restructuring process. • Maximises operational efficiencies and return on assets managed. • Generates revenues for reinvestment in public infrastructure in support of national economic growth target. • Promotes developmental mandate and socio-economic benefits. • Provides an important opportunity to contribute to transformation of the property sector and promote B-BBEE.

3. Number and Location of SOE Non-Core Properties

4. Non-Core Property Share by SOE

5. Overview Non-Core Property Portfolio Disposal to Government Housing Development Sale DOE & UFH bilateral. DOH engagement. DPW engagement. Transnet-Servcon transaction. Transnet Housing list. Key Integrated Projects. Engagement with DFI. Local government consultation. Property for disposal on the open market in accordance with B-BBEE Guidelines managed by SOE.

6. Progress • 2005: Decision to dispose of non-core property & property lists. • 2006: • Two Cabinet decisions • Framework for disposals. • Disposal Policy and B-BBEE Guidelines. • Conditional PFMA approval granted for Denel and Transnet subject to: • Government departments issued first right of refusal & B-BBEE implementation. • Preparatory planning work completed for Key Integrated Projects. • Negotiation with government departments started. • 2007: Revision of DPE B-BBEE Guidelines in light of dti’s new Codes of Good Practise. • Full PFMA approval granted to Transnet in February but awaiting Transnet’s disposal plan; packaging options; HR implications; property management plan & request for confirmation of property for development. • Continued negotiations with government departments.

7. Progress • Lengthy and, at times, complex negotiations with government / public agency counterparts have delayed sales to public, but: • Signing of Transnet-Servcon housing transaction imminent. • Denel-ACSA MOU has been signed but subject to PFMA approval. • Delays have created the space for a more integrated and coherent approach to property management and disposal • Partial lifting of the moratorium is likely only once this information has been submitted. • Distribution of revised Disposal Policy and B-BBEE Guidelines to SOE complete.

8. Status of Disposals

9. Implications of revised B-BBEE Codes • No substantive change to B-BBEE Guidelines – targets, thresholds and local benefit criteria remain the same. However, equity targets from the original guidelines have been removed. • Dti change in definitions of enterprise typology has resulted in different scorecards depending on enterprise turnover: • < R5 million(exempted micro enterprises / EME): exempt from B-BBEE compliance, accorded an automatic B-BBEE status level of 4 or 3 if >50% black ownership and >30% women ownership. • R5 million to R35 million: subject to Qualifying Small Enterprises Scorecard - compliance with any 4 out of 7 elements. • >R35 million: subject to Generic Scorecard. • Transitional scorecard provision / narrow-based scorecard until 7 February 2008.

10. Implications andKey Differences • Start-up enterprises are automatically allocated EME status. This is considered problematic since many property purchases are conducted through new companies specifically set up for property purchases. This provision has therefore been removed from the Guidelines. • Dti support for verification: encourages verification by agencies. DPE believes that self-assessment under oath should still be allowed since SANAS has not yet accredited verification agencies. DPE has developed a toolkit for self-assessment which will be made available on the DPE website along with B-BBEE Guidelines for the public.

11. Summary of B-BBEE Disposal Guidelines • Target: A minimum of 70% of all asset disposals by value (other than those for housing or transfer) by each SOE must be to entities with a B-BBEE status of at least Level 4. • Thresholds: No bids will be considered unless an enterprise has at least a minimum BEE Status Level: • Level A: Below R5 m – Level 4 or black individuals recognised as Level 1. • Level B: R5m - R30 m – Level 4 • Level C: R30 m - R100 m – Level 5 • Level D: Above R100 m– Level 6 • If deemed necessary by the SOE, enterprises may be required to meet additional requirements in order to qualify to bid for properties at levels B, C and D.

12. Promoting Local Benefits • DPE considers that local benefit and economic development is a functional criterion against which bids should be measured: • For property sales below R30 m, at least 25% of the economic interest must be held by people from the local area. • For property sales above R30 m at least 25% of the economic interest must be held by people from the province.

13. Reporting on Compliance/Verification • When evidencing BEE compliance, a company may produce either: • A self-assessment; or • A verification certificate issued by a verification agency. • Verification certificate is prima facie evidence of compliance. • A self-assessment can only be relied upon after the recipient has applied reasonable due diligence in ensuring its veracity. • Both verification certificates and self-assessments have a 12 month lifespan.

14. Generic Scorecard

15. QSE Scorecard QSE need only comply with any four out of the seven elements.

16. Scoring Matrix EME that are > 50% black owned or > 30% black women owned are promoted to Level 3. All other EME are level 4.

17. Way Forward • 2007/08: Remainder of non-core property to go to market. • Lifting of moratorium to expedite disposals once all non-core lists and disposal plans have been approved. Possible lifting SOE by SOE. • SOE to report on non-core property disposals and performance in terms of B-BBEE targets as part of Quarterly Reports.