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

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 SOE PFMA Status of Disposals Transnet √ Propnet
X Spoornet
Housing: 118 properties – closure imminent.
Sale: Remainder of property to go to market.
Development: Proposed transaction with PIC. DPE
golden share to ensure appropriate development.
Denel √
Bonaero Park (all transfers nearly complete).
ACSA-Denel transaction signed, PFMA in progress.
Disposal of 5 properties underway – B-BBEE pilot.
Eskom
Partial (Roshprop only)
Transnet declined right of first refusal for Rosherville.
Important to ensure close collaboration between
Transnet & Eskom teams to ensure complementary
development given proximity to inland port.
SAA X
Disposal of Air Chefs Building at CT Int airport to ACSA.
Other similar disposals imminent.

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 and Key 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 Element Weighting Code series reference Ownership
20 points
100
Management Control
10 points
200
Employment Equity
15 points
300
Skills Development
400
Preferential Procurement
500
Enterprise Development
600
Socio-economic Development
5 points
700

15. QSE need only comply with any four out of the seven elements.
QSE Scorecard
Element
Weighting
Ownership
25 points
Management Control
Employment Equity
Skills Development
Preferential Procurement
Enterprise Development
Socio-economic development
QSE need only comply with any four out of the seven elements.

16. Scoring Matrix Level One Contributor
BEE Status
Qualification
BEE recognition level
Level One Contributor
≥100 points on the Generic Scorecard
135%
Level Two Contributor
≥85 but <100 points on the Generic Scorecard
125%
Level Three Contributor
≥75 but <85 on the Generic Scorecard
110%
Level Four Contributor
≥65 but <75 on the Generic Scorecard
100%
Level Five Contributor
≥55 but <65 on the Generic Scorecard
80%
Level Six Contributor
≥45 but <55 on the Generic Scorecard
60%
Level Seven Contributor
≥40 but <45 on the Generic Scorecard
50%
Level Eight Contributor
≥30 but <40 on the Generic Scorecard
10%
Non-Compliant Contributor
<30 on the Generic Scorecard 0%
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.