Telkom Towers part of R4.5bn Pretoria CBD revival plan

The Department of Public Works and Infrastructure (DPWI) plans to redevelop the vandalised Telkom Towers precinct and two other government buildings in Pretoria’s central business district (CBD) at a cost of R4.56 billion.

The project is expected to create more than 12 700 construction jobs and unlock 212 000m² of gross leasable area for the DPWI to generate income for the state.

However, Minister of Public Works and Infrastructure Dean Macpherson stressed on Thursday that government will not be investing this amount in the planned project, which will be delivered through a public-private partnership (PPP).

“Effectively this is an opportunity for the private sector to invest in government-owned infrastructure, to operate it, develop it, manage it and then return it after a period of time,” he said.

“They will make their money over time from lease payments that government will make for those departments that occupy this area.

“Of course, there will be costs that government has to bear, but those costs will be worked out as the process unfolds.”

Reviving Pretoria’s inner city

Macpherson said the Telkom Towers precinct buildings will be redeveloped at a cost of about R1.8 billion to R2.2 billion through a planned rehabilitate-operate-transfer PPP model that will create 5 300 construction jobs.

He said the department will be finalising a Memorandum of Understanding with the Infrastructure Finance and Implementation Support Agency (Ifisa) in the coming days.

It will then formally approach the private sector to participate in the project by publishing a request for information (RFI) next week.

Macpherson said the RFI would also test a broader precinct-scale approach, with the Telkom Towers precinct serving as the base project and adjacent government-owned assets potentially being incorporated into the feasibility study.

He said this will ensure integrated planning and urban revitalisation in line with the Tshwane Inner City Regeneration Programme.

Macpherson said this will specifically involve Public Works House (PWH), an entire city block that houses the DPWI’s head office, and the Central Government Offices (CGO) building.

The refurbishment of the 63 768m² of gross leasable area at PWH is expected to cost about R2.2 billion and create about 5 700 construction jobs. The CGO project is expected to cost R560 million to refurbish 41 739m² of gross leasable area and create about 1 600 construction jobs, he said.

Bringing government back to the CBD

“When we combine these figures with the Telkom Towers base project, we see an extraordinary impact on the Pretoria CBD,” said Macpherson.

“The department will actively play its role in driving inner-city rejuvenation and ensuring that government departments return to the centre of Pretoria and are located in government buildings.

“This will ensure that we cut down on costly private sector leases and return that money to departments to be used for service delivery.

“The Department of Public Works will, as a result of the strategic steps we are taking today in the redevelopment project, be able to create more than 12 700 jobs in construction and unlock a total of 212 000m² of gross leasable area for us to use to generate income for the state.”

Macpherson said the DPWI had a duty and responsibility to bring government departments back into the City of Tshwane.

“That is a cabinet resolution that has been outstanding for the longest time but of course they have got to have somewhere to go,” he said.

‘Immense’ private-sector appetite

Macpherson said private-sector interest in the DPWI’s plans for the Telkom Towers precinct, which it has been outlining for some time, “is immense”.

“There is a huge appetite in the private sector to rejuvenate and operate these large precincts.

“It’s very rare that the private sector gets an opportunity to involve itself in such large leasable precincts like this.

“A lot of our buildings are already operated and managed by private-sector companies.

“We are now taking that one step further to say we will effectively guarantee 20 or 25 years’ worth of business on the basis that you renovate and rejuvenate these buildings.

“This is something that we have tested with them and they are interested in, and the RFI will then be able to start to formalise that process with them going forward.”

PPP process takes shape

DPWI Director-General Sifiso Mdakane said the PPP model will be administered through Ifisa, with the department already working with National Treasury on the RFI to ensure private investors can participate in advancing the project.

Minister of Finance Enoch Godongwana officially launched the Ifisa programme office at the South Africa Investment Conference in March this year.

It was established through a partnership between National Treasury, the Government Technical Advisory Centre and the Development Bank of Southern Africa.

Ifisa is mandated to mobilise private finance and technical expertise at scale to accelerate infrastructure delivery across the country.

Macpherson said that once the RFI is issued to the market, the DPWI will ask respondents to:

• Assess technical approaches to refurbishing and upgrading the asset to meet regulatory requirements and government accommodation standards;
• Evaluate PPP delivery models, including contract structuring, packaging and lifecycle approaches;
• Test commercial viability and bankability, including funding assumptions and conditions for private-sector participation;
• Inform risk allocation, affordability and value-for-money (VfM) assessments; and
• Explore operations, maintenance and capacity-transfer models to ensure sustainable, long-term asset performance.

Macpherson added that once the RFI process is concluded, the DPWI will use the responses to design the request for qualification (RFQ) stage. This will identify companies with the technical and financial capacity to undertake the complex work.

He said those that qualify will then be invited to respond to a request for proposals (RFP) to rehabilitate, operate and, in time, transfer the facility back to the state.

Macpherson declined to provide specific timelines for the completion of the project.

He stressed the RFI first phase process is to understand the scope of the project, which will then guide the DPWI on the way forward.

Turning a troubled asset around

Macpherson said the problems at the Telkom Towers precinct had bedevilled previous administrations and given rise to serious allegations of malfeasance and a lack of consequence management.

He said the DPWI commissioned a forensic report into how the department reached the point where Telkom Towers is now empty, despite about R1.4 billion having been spent on acquiring, renovating and maintaining the complex. A further R776 million in financial losses was directly attributed to the historical mismanagement of the property.

Macpherson said that when he received the forensic report, he was unhappy with the lack of accountability and the report was not satisfactory.

“We are working to get that corrected because I can’t accept that no one is held accountable or that there is no consequence management.

“It is a bit of a litigious issue that we are dealing with, but I am determined to get to the bottom of why this was allowed to get to the position it is in.”

Macpherson said that, because the Telkom Towers complex was not being used for its intended purpose, it had fallen victim to extensive vandalism, theft and occupation by criminal elements.

“It has taken exorbitant spending on security to ensure that Telkom Towers is not hijacked and stripped completely, and is a costly reminder as to what happens when project management fails in the public sector.”

This article was republished from Moneyweb. Read the original here.