While the recent announcement of a State Property Company to manage roughly 88,000 public buildings and five million hectares of state land has generated considerable interest, it is not a new policy initiative.
The concept was first proposed more than 20 years earlier through the Draft State Property Management Company Bill, published for comment in Government Gazette No. 23191 on 28 February 2002 (Notice 301 of 2002), which envisaged a public company, wholly owned by the state, responsible for the strategic and operational management of the state’s fixed asset portfolio.
This is according to a LinkedIn post titled “The Constitutional Court’s Tafelberg Judgment and Why South Africa’s State Property Company Is Not a New Idea”, written by Thapelo E. Mmusinyane, the head of real estate at eThekwini Municipality.
In February this year, President Cyril Ramaphosa announced, during the State of the Nation Address (Sona), plans to establish a new state company to be responsible for the administration of public buildings and land.
“This year, we will begin the work to establish a professional State Property Company to transform the 88,000 buildings and five million hectares of land owned by the state into professionally managed engines of growth and development,” Ramaphosa said then.
Constitutional jurisprudence had not yet developed
Notably, the 2002 Bill already provided that the company’s objectives were to manage fixed assets efficiently and cost effectively to ensure optimum functional, social and financial returns for the state (clause 5(1)), a genuinely progressive formulation for its time.
“But the Bill offered no further content for what “social returns” meant in practice, and the surrounding constitutional jurisprudence had not yet developed to give that phrase teeth,” Mmusinyane says.
Adonisi now supplies part of that missing content
The head says Adonisi now supplies part of that missing content.
He adds that whatever a state property company’s governing legislation eventually says, the custodian obligations Adonisi confirms as peremptory under the Government Immovable Asset Management Act (GIAMA), considering alternative users, social development initiatives, and socio-economic objectives before disposal, would presumably attach to any entity stepping into a custodian role.
“The President’s announcement is better understood as reviving a long-standing institutional reform than introducing an entirely new concept; what has changed is not the idea, but the constitutional and statutory environment such an entity would now operate within,” Mmusinyane says.
Last week, the Constitutional Court ruled that the 2015 sale of the Tafelberg property by the City of Cape Town was unlawful, thereby believed to be setting a precedent.
In a unanimous judgment, the court not only set aside the sale but also ordered the City of Cape Town and the Western Cape Government to submit plans within three months outlining how affordable housing will be addressed on the site.
According to Mmusinyane, the Constitutional Court handed down its unanimous judgment in Adonisi and Others v Minister for Transport and Public Works, Western Cape and Others; Minister of Human Settlements and Another v Minister for Transport and Public Works, Western Cape.
He says the judgment reshapes how organs of state bound by the Government Immovable Asset Management Act (GIAMA) must approach the disposal of public land, and, through its constitutional reasoning rather than its GIAMA holding, carries real weight for organs of state operating under different legislation too.
State-owned land is not merely an administrative asset or a commercial commodity
He says the apex court confirmed something practitioners in public asset management have argued for years: state-owned land is not merely an administrative asset or a commercial commodity.
“Its value cannot be assessed on market price or revenue potential alone; location and the constitutional objectives a property is capable of advancing are relevant factors in law, not just policy preferences (Adonisi at para 48),” he says.
In February, DPWI Minister Dean Macpherson said the President’s announcement would change how this country manages its public assets: the establishment of a property investment vehicle. It is the most significant change in the management of state property since 1994 and a clear break from the past, he said then.
“The South African property investment vehicle changes that logic entirely and flips the script on unrealised property asset values, maintenance and investment. Work on this reform began more than a year ago, learning from best practices both domestically and internationally to create an asset book that generates wealth for the public for generations to come.”
This vehicle is a ring-fenced, professionally governed investment platform that consolidates income-generating and strategically located assets into a single structure with one mandate: to unlock value for reinvestment.
It introduces the best in asset management, development finance and property development, Macpherson said then.
