S.Africa Government conned by Private Office Rentals

In his budget speech, finance minister Pravin Gordhan lashed out, asking why the commercial property sector wasn’t honest in negotiating rentals with government.

The department of public works spends over R3bn/year leasing office space in privately owned buildings on behalf of national government departments.

A review of these leases confirms government is being fleeced. Cabinet is outraged but shouldn’t be because irregular leases are the main reason the department’s audit opinions have got steadily worse over eight years and are now in the disclaimer zone.

The Department of Public Works (DPW) and National Treasury won’t give figures on how much government is losing on leases; some officials believe the cost could be cut by 50% with better management.

The lease review flags how government is paying for accommodation that’s unoccupied or that’s occupied by non-governmental organisations. In other cases it’s paying rentals that exceed the going rate per square metre. Leases are also being entered into without adherence to the required procurement system or valid lease agreements.

In his budget speech, finance minister Pravin Gordhan lashed out, asking why the commercial property sector wasn’t honest in negotiating rentals with government.

But the SA Property Owners’ Association (SAPOA) says Gordhan’s comment was unjustified because the real problem is government’s own inefficiency and mismanagement.

Sapoa says this is made worse by public works’ property management strategy, a black economic empowerment job creation and poverty alleviation policy which has limited fair market competition.

It has not helped that the department, which should have strong negotiating power, has been unwilling to engage with listed and institutional property owners.