Commercial property sector has bone to pick with Gordhan

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The commercial property sector is not happy with Finance Minister Pravin Gordhan and the Treasury at the moment. The SA Property Owners Association (Sapoa) was dismayed by comments Gordhan made in his Budget speech last month, when he questioned why the commercial property sector was dishonest in deals it concluded with the government.

A new directive issued by the Treasury limiting the terms of renewals on expiring leases for the Public Works Department, which was prompted by the high rentals charged on leases by unscrupulous landlords, has only added fuel to the fire.

Neil Gopal, Sapoa’s chief executive, said Gordhan’s comments were an unwarranted and unfortunate attack on the entire property industry. Many of the issues raised stemmed from the government’s own inefficiency and mismanagement.

Strict conditions – a maximum lease term of three years and the capping of rental escalations at a maximum of 5.5 percent a year – would have unintended and negative consequences.

Gopal and Sapoa have a point because the Public Works Department should have been in control of and able to prevent bad lease agreements

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Gopal said the department’s property management strategy, aimed at achieving black economic empowerment, job creation and poverty alleviation, had limited fair market competition.

The policy had resulted in unwillingness by the department to engage with large listed and institutional property owners, leading to the department having a more limited choice of office accommodation.

Sanral

Whenever the SA National Roads Agency Limited (Sanral) is mentioned lately, the first thing that springs to people’s minds is e-tolls. But how many people know that of the agency’s 19 704km road network, only 1 832km is tolled?

And did you know that South Africa’s total road network of 750 000km is the 10th longest in the world with an estimated value of around R2 trillion? But 593 259km consists of gravel roads, of which 140 000km has unknown owners, which means that no one is responsible for upgrading it.

Sanral is investing R3.2 billion on 32 projects to upgrade the western region’s roads. To upgrade a road from a single carriageway to a double carriageway, as Sanral has planned for the N7 between Melkbosstrand in Cape Town and Malmesbury, costs the agency between R25 million and R35m per kilometre.

Breaking maintenance costs down, Sanral says sealing road cracks, cleaning drainage structures and cutting grass along highways costs R6.50 a square metre.

But if routine maintenance is delayed because there is no budget, it costs Sanral between R30 and R48 a square metre to reseal the whole cracked surface and R200 to R400 a square metre to repair any potholes. If the agency delays repairing a road for five to eight years, its cost is increased 18 times.

So the logical thing would be to do the maintenance timeously, but if it means the roads have to maintain themselves through the collection of toll revenues, which can we afford to do or not to do?

Edited by Peter DeIonno. With contributions from Roy Cokayne and Londiwe Buthelezi.


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