1. PORTFOLIO COMMITTEE ON PUBLIC WORKS
Date: 28 August 2018
Divisional Head: Mr Samuel Thobakgale
Name of Branch: Small Harbour, State Coastal Property Development and
Special Projects

2. CONTENT
Item
Slide No
1. Small Harbours and State Coastal Properties Business 3
2. Commercial Development and Letting Out Programme 7
3. Challenges and Mitigating Measures 17
4. Improvement on Lease Management and Revenue Generation 19

3. In House Requirements:
1. SMALL HARBOURS AND STATE COASTAL PROPERTIES BUSINESS ENORMITY OF OUR TASK: FUNCTIONS
In House Requirements:
REMS – Letting Out and Contract Management
REIS – Investment Management
REIRS – Immovable Asset Management
KAM – Private Sector and Management of intergovernmental coordination of various Government Departments
CPM – Development of prioritised harbours
FM – Maintenance of marine infrastructure
1. Small Harbours Development and Management
- Management of commercial developmental Projects and Letting out programme
- Administration of backlog investment proposals
- Implementation of the new leasing framework
2. Management of State Utilised Infrastructure
- Construction, operation and maintenance:
- Client accommodation (Departments)
- Marine infrastructure (removal of sunken vessels, dredging, slipway maintenance, shore crane replacements, security apparatus)
3. Operation Phakisa
- Coordination, Monitoring and Evaluation (of sector Department plans)
- Convene the Lab to develop 3- feet plans for the various work streams
- Consolidation of reporting in the implementation of Operation Phakisa (Secretariat)
SHSCPD&SP FUNCTIONS

4. What do you own? – Erf, Lots , Facilities?
1. THE BUSINESS OF SMALL HARBOURS AND STATE COASTAL PROPERTIES The Space Platform –Vanier’s Six (plus one)
What do you own? – Erf, Lots , Facilities?
What is the use – commercial/service delivery?
What is it worth – revenue generation potential?
What is its condition – what is the risk associated?
What is the maintenance deficit (backlog costs 5 times more)?
What is the remaining service/ life?
What do you fix first/What do you invest in first?

5. Revenue generation through letting out of state owned properties
1. THE BUSINESS OF SMALL HARBOURS AND STATE COASTAL PROPERTIES A SUMMARY OF OUR BUSINESS
Management and development (planning, construction and maintenance) Proclaimed Fishing Harbours (WC) and Prioritised harbours NC, EC and KZN (Basic Infrastructure)
Coordination and integration of sector Department plans in Small Harbours (Operation Phakisa)
Revenue generation through letting out of state owned properties

6. 1. THE BUSINESS OF SMALL HARBOURS AND STATE COASTAL PROPERTIES CHALLENGES FACED WITHIN THE HARBOURS
Government
Harbour Users
Harbour Management
Investors
Economies of scales challenges
Harbours require both government and private sector investment
Deteriorated Infrastructure
Inefficient harbour management and operations
Poor harbour performance and lack of interest
Growth bottlenecks
Deprived from economic potential
Non-functional harbours
No Private Sector investment
This model is derived form the PWC study on Strengthening Africa’s gateway to trade

7. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
LETTING OUT PROGRAMME OF THE SMALL HARBOURS AND STATE COASTAL PROPERTIES:
Currently there are a total of 333 state coastal letting out agreements which are disaggregated as follows:
Northern Cape – 16
Eastern Cape – 0
Western Cape – 269
Kwa-Zulu Natal – 48

8. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
LETTING OUT PROGRAMME OF THE SMALL HARBOURS AND STATE COASTAL PROPERTIES:
Key figures emanating from the 333 state coastal property leases nationally:
Annual revenue received: R16,702,251.24
Total number of people employed from DPW leases: Approximately 5,594 Jobs

9. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK INTERVENTION: POLICY, MODEL & SYSTEMS
In order to address the challenges of the current letting-out process, DPW in partnership with National Treasury Office of the Chief Procurement Officer (NT-OCPO) has structured a New Letting-out Framework
This Framework offers a more progressive method of collecting revenue on a percentage of turnover basis
It will allow the department to negotiate existing and expired leases through a transparent process and solicit proposals through an open tender process for new leases/investment proposals

10. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK COMPONENTS:
Current Policies i.e. Disposal Policy
Process incorporated to RFP Pack
Listing system to be developed on DPW Portal
As per Letting-out Toolkit
As per Letting-out Toolkit
As per Letting-out Toolkit
Draft Letting Out Agreement
Municipal Agreement as per Toolkit
Detailed templates, process and systems

11. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK METHODOLOGY IS APPLICABLE TO:
Existing Tenants who wish to apply for the renewal (continuation) of their letting-out agreements;
Interested Investors / Tenants who wish to apply for the leasing and development or re-development of vacant State Owned Coastal Premises;
Entities/Individuals who had previously applied to DPW for letting-out (leasing) of specific coastal premises/ properties (hereafter referred to as the backlog applications); and
State owned coastal properties managed by Municipalities and Estate Agents (on behalf of the Department).

12. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK: RFP PROCESS

13. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK: OUTCOMES
Standardisation of the letting out process;
Renegotiation and regularisation of all existing leases (expired and to expire);
Issuing long term leases appropriate for different types of businesses (for example linking lease terms to fishing quotas); and
Empowerment of black owned and local businesses through radical economic transformation measures and set-asides.

14. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK: IMPLEMENTATION PLAN
Capacity Building Workshops for the implementation of the Letting Out Framework April to October 2018
Identification of Properties to be Let Out for Development
May to Oct 2018
Approval of the ToR and Specifications for the New Letting Out Framework
Sept 2018
Marketing of vacant properties
Sep to Oct 2018
Approval of extension and renewal of existing leases (Expiring)
June to Nov 2018
Appointment of Technical Advisory Services Oct to Nov 2018
Publish RFP
Oct 2018
Closing of Bids
Dec 2018
Evaluation and Adjudication of Received Bids
Jan to Feb 2018
Contracting
Mar 2019
Contract Management and Property Development
TBD

15. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK TENANT/INVESTOR CLASSIFICATION:
Investor / Tenant Classification (Based on Annual Turnover):
Micro Enterprises: Tenant/Investor with an Annual Turnover of Less than R1m;
Very Small Enterprises: Tenant/Investor with an Annual Turn-over of ≥R1m and < R10m;
Small Enterprises: Tenant/Investor with an Annual Turn-over of ≥R10m and < R50m;
Medium & Large Enterprises: Tenant/Investor with an Annual Turn- over of >R50m.
Proposals will be evaluated according to the size of the business to ensure a fair and equitable process

16. 2. COMMERCIAL DEVELOPMENT AND LETTING OUT PROGRAMME
NEW LETTING OUT FRAMEWORK: DEVELOPMENTAL INITIATIVES ON ACHIEVING RADICAL SOCIO-ECONOMIC TRANSFORMATION
An empowerment strategy focussing on creating business opportunities for women, persons with disabilities, youth and employment potential for the disadvantaged local communities
Job creation, demands of localization, use of SMME suppliers and employment of local communities has been included as requirements for all new proposals
There will be specific concessions for the informal businesses, NPO (NSRI), micro enterprises and cooperatives whereby the rental to be charged will be limited to the basic rates and taxes levied on the property by the municipality concerned plus a 20% administration fee

17. 3. CHALLENGES AND MITIGATING MEASURES
The Unit currently faces the following financial challenges:
FUNDING REQUEST 2017/18 FY
ALLOCATED BUDGET 2018/19 FY
Turnaround Budget: R *
Goods and Services Budget: R
TOTAL REQUEST: R
Turnaround Budget: R
Goods and Services Budget: R
TOTAL ALLOCATION: R
*Breakdown of Turnaround budget request:
Convening of the Operation Phakisa Small Harbours Mini-Lab: R18 
Basic Marine Infrastructure Funds: R60 
Implementation of the New Letting Out Framework: R37 
Development of SEDFs / Feasibility Studies: R12 000 000
TOTAL: R

18. 3. CHALLENGES AND MITIGATING MEASURES
The Unit currently faces the following challenges in the implementation of the letting out framework:
CHALLENGE
MITIGATING MEASURES
Lack of technical advisory services within the Department to implement developmental proposals in excess of R1 billion
Terms of Reference drafted for the appointment of a technical team to identify, evaluate and adjudicate developmental proposals
No funding allocation for the appointment of technical advisory services
Internal memo submitted to the Acting Head: PMTE Finance to the value of R20 million for technical advisory services
Additional request submitted on 20 August 2018 as the Department is undertaking its annual budget reallocation process

19. 4. IMPROVEMENT ON LEASE MANAGEMENT AND REVENUE GENERATION
The following steps have been taken to improve lease management and revenue generation within small harbours and state coastal properties:
Development of a new letting out framework in conjunction with National Treasury that will derive maximum benefit in respect of job creation, SMME development, revenue generation and drive radical socio-economic transformation;
Execution plan developed for the implementation of the letting out framework;
All current lease agreements will be reviewed whereby the letting out framework will be applied – there will no longer be nominal rentals in the harbours;
The framework will manage new development proposals and prevent unsolicited bids;
An open, transparent and inclusive process for the evaluation and adjudication of leases and development proposals has been developed;
A minimum rental of rates and taxes + 20% will be applied across all leases; and
All state coastal leases will be renegotiated and regularised.

20. END National Department of Public Works (NDPW)
Head Office: Public Works CGO Building Cnr Bosman and Madiba Pretoria Central Private Bag X65 Pretoria 0001
Website: