New Treasury regulations, soon to be published under the Public Finance Management Act, could have major implications both for property developers and human settlements departments vying to gain access to well-located, non-core land owned by state-owned enterprises.

Originally released for public comment in 2012, the regulations have been revised in line with the submissions received since then. The extent of the revision is unknown, but the public will have access to the final form of the regulations when they are published in the Government Gazette in the coming weeks.

State-owned enterprises (SOEs), such as Transnet, own vast tracts of well-located land in close proximity to South Africa’s urban centres. The National Development Plan, government’s plan to eliminate poverty and reduce inequality by 2030, has highlighted how, in some instances, post-1994 policies have reinforced spatial divides by placing low-income housing on the periphery of cities. Despite this, SOEs are currently able to dispose of well-located land to third parties without being required to first offer the land to human settlements departments or to the Housing Development Agency.

Regulation 26 of the original draft regulations did contain provisions which, if carried through to the final form, would affect an SOE’s ability to dispose of its land.  For example, the regulations included a requirement that an SOE’s accounting officer consider a property’s ability to support wider government programmes before deciding on a particular disposal method for that property. However, many felt these provisions did not go far enough as they did not contain an express right of first refusal in favour of state departments.

The ANC indicated in its discussion document on social transformation, drafted  in preparation for the mid-term policy review conference held earlier this month, that it wanted the state to take a lead in getting land from some of the parastatals for free.

It will therefore be interesting to see what, if any, changes will have been made to the draft regulations when the final version is published in the next few weeks.

Written by Sean Dayton, associate, Bowman Gilfillan Africa Group Corporate/M&A Practice.