DEPARTMENT: PUBLIC ENTERPRISES
REPUBLIC OF SOUTH AFRICA
NATIONAL ASSEMBLY
QUESTION FOR WRITTEN REPLY
QUESTION NO.: 1086
DATE OF PUBLICATION: 01 April 2011
1086. Dr S M van Dyk (DA) to ask the Minister of Public Enterprises:
(1)(a) Why did Transnet (i) sell and (ii) subsequently move from Umjantshi
House in Johannesburg, (b) who approved (i) the sale of Umjantshi House and
(ii) the four Inyanda Housesâ lease agreements and (c) how is the (i) sale
of the building and (ii) cost to his department as a result of the
subsequent move to other offices justified;
(2) Whether a cost/benefit analysis has been done with regard to the (a)
sale of the building and (b) relocation to other offices; if not, why not;
if so, what are the (i) main (aa) findings and (bb) recommendations of this
analysis and (ii) further relevant details;
(3) Wwhat are the details of the lease agreement in respect of each of the
new premises with regard to (a) tenant installation allowances, (b) the
lease rate in rands for each square meter and (c) the annual escalation
rates? NW1208E
Reply:
1(a)(i) Umjantshi House was sold because Transnet Freight Rail's (TFR)
office accommodation was widely spread across multiple buildings within the
City of Johannesburg, which led to loss of productive time due to employees
travelling between multiple buildings for meetings, and made it difficult
to communicate effectively. It was also difficult to provide effective
security for employees walking or travelling between multiple buildings and
to provide and control parking. Based on these factors, it became necessary
to bring together employees at Head Office in close proximity to the
building housing the National Command Centre in Parktown.
The quality of accommodation at Umjantshi House was no longer conducive for
office use and could not be converted into a modernised office space due to
its outdated and inefficient floor plates, the air conditioning limitations
and insufficient electrical capacity.
1(a)(ii) Transnet embarked on a strategic cost saving initiative named
Vulindlela and the reduction of accommodation costs was identified as one
of the key saving areas. The relocation of TFR from Umjantshi House to
Parktown was therefore premised on the following key asset management
objectives:
⢠To improve workspace productivity and efficiency by
consolidating seven satellite buildings located in different
parts of Johannesburg Central Business District into one
precinct comprising four buildings. This equated to the
reduction of office space needed from 77100m² to 21611m², a
saving of 55489m².
⢠Space optimisation through the implementation of the new
workspace standard and the redesigning of offices to an open
plan environment. The objective was to reduce space utilised by
each employee by 47% whilst maintaining productivity at all
levels.
⢠To respond to a call by government for State Owned Enterprises
to reduce energy consumption by 10% as a contribution to the
energy savings. This could not be optimally achieved in the
various satellite buildings previously occupied by TFR without
investing substantial capital due to their age and condition.
1(b)(i) The sale of Umjantshi House to PRASA was approved by the former
Acting Transnet Group Chief Executive. The required PFMA approval was
subsequently granted by the former Minister of Public Enterprises.
1(b)(ii) The four Inyanda Housesâ lease agreements were approved by the
former Acting Group Executive in line with the Delegations of Authority
Framework.
1(c)(i) The sale of Umjantshi House is justified in view of Transnetâs
aim to relocate and consolidate TFR Head Offices in Parktown. The
consolidation of the Head Office rendered Umjantshi House redundant in
terms of Transnetâs current and future strategic requirements.
1(c)(ii) The space utilised has been optimised with the following results:
⢠Space utilised reduced by 47%, i.e. space used per employee
reduced from an average of 37.82m² to 20m².
⢠Accommodation costs were reduced by a net of R27.6 million per
annum.
⢠Energy consumption was substantially reduced. An audit perfomed
on Inyanda House 2's energy consumption versus a similar sized
building where energy efficiency had not been implemented
indicated a saving of approximately 170KWh per annum which
resulted in a current saving of approximately R998,400.00 per
annum. Extrapolated to the approximate 56,000 m² previously
occupied, it amounts to an approximate saving of 1120KWh or R4,2
million per annum.
⢠Costs and time associated with movements by staff between
multiple offices significantly reduced, parking challenges were
addressed and security improved.
2(a)&(b) Yes, a cost/ benefit analysis was part of the business case
development in respect of the relocation of offices and the subsequent sale
of Umjantshi House.
2(b)(i) (aa) Three options reflected below were considered with regard to
the relocation to Inyanda House with the following findings:
| | | |
|Alternatives |Present Value|Number of staff |
| |Calculation | |
| |(PVC) (Rm) | |
|As-is scenario â Remain in Umjantshi | | |
|House without consolidation |R 269.623 |2318 |
|Alternative 1 â Consolidate Head Office| | |
|shared services in Umjantshi House |R 79.261 |600 |
|Alternative 2 â Consolidate Head Office| | |
|shared services in Carlton Centre |R 100.730 |600 |
|Alternative 3 â Consolidate Head Office| | |
|shared services in Parktown, in modern |R 109.853 |600 |
|private buildings | | |
2(b)(i-ii)(bb) Having considered the above cost/benefit analysis and the
advantages and disadvantages of each alternative as reflected below,
Alternative 3 which entailed the relocation to Parktown was recommended.
The benefits of the recommended alternative were as follows:
Location:
⢠The buildings would be refurbished to an open plan
environment which would improve space utilisation and the
office environment.
⢠The office park environment would generate a positive
image.
⢠Staff members would be close to amenities such as branches
of all major banks, fast food outlets, doctorsâ rooms,
general health and educational institutions as well as the
freeway.
Vulindlela (cost saving initiative) alignment:
⢠Space optimisation (47% reduction in m² per person).
⢠Consolidation would result in the reduction of
accommodation costs.
⢠Reduced energy consumption by installing energy efficient
air conditioning and lighting.
⢠Improved asset utilisation and productivity.
An opportunity to implement open air campaign improving communication and
image by implementing consistent application of TFR corporate image.
Financial:
⢠Although Alternative 3 had the highest PVC of R109.853
million, it would result in savings of R 159.770 million
(NPC) measured against the then as-is scenario as it
existed.
3(a) The table below indicates the tenant installation allowances.
| | | | |
|Premises |Inyanda House |Inyanda 2 |Inyanda 3 & 4* |
| |1 | | |
|Tenant | | | |
|Installation |R2,000,000 |R12,625,485 |R18,699,450 |
|Allowance | | | |
3(b) The table below indicates the lease rate in rands for each square
meter.
| | | | |
|Premises |Inyanda House |Inyanda 2 |Inyanda 3 & 4* |
| |1 | | |
|Rental/m2 | | | |
|(Current) |R96.38m²/pm |R89.11m²/pm |R96.50m²/pm |
3(c) The table below indicates the annual escalation rates.
| | | | |
|Premises |Inyanda House |Inyanda 2 |Inyanda 3 & 4* |
| |1 | | |
|Annual | | | |
|escalation rate |8% |9% |9% |
* Note â One lease agreement was signed for Inyanda House 3 and 4
Remarks: Reply: Approved / Not
Approved
Tshediso Matona Malusi Gigaba, MP
Director-General Minister of Public
Enterprises
Date: Date: