Some good, some bad, says SAIBPP

BONNY FOURIE bronwyn.fourie@inl.co.za

PICTURE: SIGMUND

THE SA Institute of Black Property Practitioners (SAIBPP) is encouraged by some aspects of the 2021 Budget but says not all of it can be celebrated.

Some of the positives include the reduction of the corporate income tax rate to 27%, the increase of the personal tax thresholds,and the two-year extension of tax breaks for property developers in city centres.

“This will go a long way in building confidence for corporate sector to invest in the economy.”

The SAIBPP is, however, disappointed by the decision to kill Section 12J tax breaks for venture capital companies, says chief executive Vuyiswa Mutshekwane.

“The idea behind the Section 12J tax breaks was to encourage investments in small businesses and riskier ventures that would help to create jobs and drive economic growth. In a country struggling with jobs, and where support for small business is non-existent, this was one glimmer of hope for those small businesses that could not find support through financial institutions or found it difficult to break through the bureaucracy of government requirements for small business development.

“A number of companies have benefited from this scheme, particularly the many companies that offered property investment opportunities which have grown emerging developers and real estate investors. We acknowledge and understand the shortcomings in the 12J scheme not achieving its full intent but believe it would have been preferable to restructure the design of the tax scheme instead of scrapping it altogether.”

Furthermore, the Institute was expecting feedback on allocations made in the Budget speech. These include the R144 billion for Infrastructure and Industrialisation, more than R97bn for human settlement-related interventions and programmes, and R10bn for facilities management.

“This expenditure, if allocated accordingly, was due to have significant impact on the property sector and, as a result, we were expectant that the minister would give feedback on how these allocations have been accounted for.”

In terms of the Nedbank Capital Expenditure Project Listing – an annual report that tracks fixed investment spending on physical assets in the national economy – and the data from Stats SA which provides details of total gross fixed capital formation for SA, she says few new projects announcements, totalling less than R100bn, were observed and set aside in the government sector for infrastructure investments.

“This is evidently way below the more than R200bn commitment made by the government.”

Although the overall planned infrastructure spend has been increased for 2021, Mutshekwane says budget compromises have come at the expense of human settlements infrastructure expenditure. And, in the wake of the Covid-19 crisis, it became “glaringly obvious” that inadequate access to decent housing results in “both a public health crisis and an assault on basic human dignity”. It is therefore “unfortunate” that the expenditure to this area has been decreased.

“It is disappointing that, over the years, the Budget speech by the minister of finance has been reduced to making a public announcement, without using this also as an opportunity to give account and feedback on how the monies have been spent.

“In this speech, and the State of the Nation Address, very little attention was dedicated to updating the citizens how their taxes are being used by the government and on accounting to citizens about government performance and progress.”

BONNY FOURIE bronwyn.fourie@inl.co.za

PROPERTY experts believe there was room in the 2021 Budget to offer across-the-board transfer duty relief on residential property, and that it is unfortunate this did not occur.

And while they do commend the strides taken by Finance Minister Tito Mboweni to beat Covid-19 and stimulate the economy, they say more needed to be considered.

In fact, through the initiatives outlined in his 2021 Budget speech this week, he “barely touched the surface” of the daily housing realities that many people battle daily, says Gugu Sithole-Ngobese, founding director and chairwoman of Women in Planning SA (WiPSA).

From the efforts made to stimulate the economy through entrepreneurship and employment initiatives, to providing additional grants to South Africans who have been hit the hardest by the pandemic, the organisation acknowledges the efforts Mboweni is making. But it is still “acutely aware” that the pandemic has “greatly illustrated the devastating impact of the lack of housing and access to adequate basic services that plagues South Africa”.

“We also note that with land currently being a contentious issue in our country, Minister Mboweni only touched on land restitution twice during his speech,” Sithole-Ngobese says.

Tony Clarke, managing director of the Rawson Property Group, says it is a pity that transfer duty was left unchanged, especially in the higher bracket where it was increased about three years ago.

“I think the transfer duty threshold should have been increased across the board.”

He did not praise the 1% lowering of the corporate tax rate either, saying that the relief “falls far short” of meeting the objective of helping companies and entrepreneurs and stimulating the economy.

“This corporate tax relief does not do much for business at all.”

However, Clarke did acknowledge that Mboweni has a “very tough budget to balance”, especially as the country is recovering from years of corruption and overspend by the government and it also has a bloated public sector.

Echoing Clarke’s sentiments on the transfer duty, Brian Sango, sales manager at Property Inspect, was also hoping to hear that the threshold would be changed.

“A change here could have encouraged more property sales in some market segments.”

Herschel Jawitz, chief executive of Jawitz Properties, also believes there was room to offer increased transfer duty relief on residential properties.

“Income from property taxes was expected to be flat from last year but it is expected to grow by R1.4 billion to R16.8bn in the 2021/22 year. The numbers relative to the overall budget are small and perhaps more residential transfer duty relief would be more than offset by increases in home ownership.”

While the speech did not touch on anything that affects the property market directly, Sango says it goes without saying that the property market is indirectly impacted by the performance of the economy. And one “big take home” for him was the fact that job creation is still a task for the country.

“Perhaps we, as the property sector, need to play our part fully in seeing how we could open up either employment or entrepreneurial opportunities.”

As an example, he says: “In the past two years, we have certainly seen an increase in stand-alone inspection companies and I am sure that, like other countries across the globe, this will soon become a stand-alone industry.

“Perhaps this presents the ideal opportunity for those looking to break into the property industry, without only focusing on either trying to be part of the selling or renting. All property associations and organisations should really work together to see how best to position this as we could open up some much needed opportunities in the real estate sector.”

Sango adds it was “indeed an absolute relief” that, instead of tax hikes, the Treasury will be providing some form of tax relief on personal income tax. This will mean less of a pinch for low to middle-income earners.

“In the past year, the affordable housing market below R1 million proved to be resilient, even throughout the pandemic, as some agencies even experienced higher sales than in 2019... We also saw an increased interest from foreign buyers into this market.

“The fact that we will not see immediate income tax hikes could, therefore, encourage even the local market to continue actively playing the field in this lower-end market and perhaps even the middle-end market.”

Sithole-Ngobese reiterated WiPSA’s belief that there should have been a focus on establishing a “green economy”, as well as a “circular economy”, as this would both stimulate the economy and address the rising dangers of climate change.

“We must remember that the consequences of climate change affect low-income communities the most, thus a green economy would benefit us all.”

She hopes the border upgrades proposed by Mboweni lead to efficiencies in cross-border trade and investment with neighbouring countries “so that we may continue to grow and support the African cause”.

Property players have also welcomed the establishment of a Tourism Equity Fund to help support the recovery of the tourism sector. This sector, says Andrew Golding, chief executive of the Pam Golding Property group, is a significant contributor to GDP and has, together with the hospitality industry in general, borne the brunt of the sustained Covid-19 lockdown.

“We also look forward to seeing the stabilisation of government debt and acceleration in the implementation of longoverdue structural reforms aimed at boosting investment in the economy to lift growth and create jobs, which is essentially the only sustainable long-term solution.”

Of particular importance is investment in infrastructural improvements – a factor which, in turn, has a direct impact on housing market sentiment, he says. It is therefore hoped that the R791.2bn allocated to infrastructure investment will be “swiftly put to good use, not only in terms of roads, bridges and dams but, in particular, the pressing need to get our country’s rail operation network repaired and fully up and running once more”.