COMPANY PROFILE
2013
3 CALGRO M
Eradicating
SA’s housing backlog
company report
Eradicating
SA’s housing backlog Editorial – Lauren Grey Production – Hal Hutchison
Property development company, Calgro M3 has been assisting government to help eradicate South Africa’s housing backlog, which is currently at 700,00 units, since 1995. IndustrySA caught up with Business Development Director, Derek Steyn to find out more about the company’s history and how it plans to tackle the problem.
Trade and industry within South Africa continues to develop at a steady rate, bringing both financial stability and foreign investment into the country but one issue that remains a concern for the government however, is the provision of affordable housing and formal housing in general. Between 1994 and June 2011, the government built over three million homes for South Africans, giving shelter to over 13 million people, but investment from the private sector alone is not enough to completely eliminate the housing problem. Property development company, Calgro M3 has been contributing to the development of housing within the country for the past 18 years; helping to slowly – but surely - eliminate the problem.
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Established in 1995 by brothers Derek and Deon Steyn, Calgro M3 immediately set about filling a noticeable gap in the affordable housing market, “our third brother Douw joined the company a year later, we all have backgrounds in quantity surveying so we set about targeting South Africa’s housing problem together,” explains Business Development Director, Derek Steyn. Initially, the company was named Calgro Homes and focussed on project management in low cost housing, but after just one year, Calgro Homes had 60 houses under construction and another 120 in various stages of development. The company’s success allowed it to expand into new markets as Steyn explains, “Around the year 2000 we expanded a little into mid to-high income housing, such
Calgro M3
“There is still a huge market still to be serviced in South Africa … the 40,000 units that we have in our current pipeline are not really making any difference in the providing of housing.”
as your typical cluster type development but after the market fell through in 2008, that’s when the focus shifted back to the lower income/affordable housing.” Steyn says that although Calgro M3’s main focus continues to be affordable housing, a maximum of 20% exposure is still given to mid to-high income developments.
COMPANY MERGER One of the company’s most monumental milestones came in 2001, when Calgro Homes joined with M3 Developments, a company owned by Malherbe brothers Ben Pierre and Brand - also quantity surveyors. “Calgro M3 started as a joint venture between Calgro and M3 Developments,” explains Steyn, “we were both
tendering separately on the Firenza project in Randpark Ridge, a high income cluster development, until we decided to do a joint venture. So we started as a joint venture but then we thought it would be beneficial to everyone involved if we just merged and made it a more formal arrangement.” The newly formed company completed the Firenza project in 2001, which was made up of 71 units as well as infrastructure including roads, water works, sewerage and electrical works; with a project turnover of R53.3 million, which was a significant development for the time. In November 2007, Calgro M3 was listed on the AltX board of the JSE and began development of its first integrated residential project, the 2800 unit Pennyville development, located south west of Johannesburg,
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company report
“Part of our business is to ensure we keep a strong relationship with government, especially with the lower income because all of our projects have got a 30-60% subsidised housing portion in it”
consisting of four different housing options; 1600 fully subsidised RDP houses, 600 Johannesburg Social Housing Company (Joshco) affordable rental units, 200 Joshco social housing units and 800 mid to high income rental units offered by investors and banks. After the project’s completion in 2010, many more were commissioned, including the Jabulani development, the Brandwag social housing project, the Scottsdene project and the Fleurhof Ext 2 integrated project, to name a few.
BEST SOCIAL HOUSING PROJECT 2013 Fleurhof is a long-term project situated south west of Johannesburg next to the existing Fleurhof ext 1 residential township, and is set to be one of the largest integrated housing developments in Gauteng, with 9558 units. The project, which has already won the Govan Mbeki Award 2013 for Best Social Housing Project in Gauteng, comprises various types of residential units and forms of tenure that have specific economic target markets. The development will include infrastructure such as
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roads, water, sewer, reticulation and storm water facilities, extension of Westlake Road - linking Soweto with northern suburbs-, four business centres, seven crèches, five religious sites, one community centre, three schools and between 20-30 parks. Steyn explains that development of the project is well underway and most of the units are already sold, “we are extremely happy with the way this project is going, in fact, I’d say we will be out of Fleurhof in four years; everything will be done, including construction. We are busy servicing 2,500 opportunities as we speak, but most of the units are pre-sold.” Aside from creating thousands of new homes across South Africa, Calgro M3 also make conscious efforts to help reduce the country’s carbon footprint with several green initiatives going into its developments. The project team for Fleurhof is currently investigating various potential green initiatives to assess the viability of certain energy saving technologies such as solar water heaters, heat pumps and improved insulation for
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company report the various types of housing units; residential recycling projects, food gardening and urban greening initiatives are also being looked at. Besides the green component, the added benefit of these measures will also reduce electricity demand by the development and make the township socially and visually more attractive. Steyn says that although the company is conscious of its efforts to reduce the carbon footprint, it can be extremely difficult to implement green initiatives into lower income housing due to costs. “It is very difficult to incorporate any green initiatives for low income developments, purely because of cost; to go green is very expensive. Our higher market units are very green, but we do what we can for the lower income, for example heat pumps which can provide a 60% saving on electricity, which makes your electrical requirement from city power much less” he explains. Aside from heat pumps, gas installation and grey water harvesting are also being incorporated into the Fleurhof project.
FUTURE PLANS Calgro M3 has become the preferred supplier for property development in South Africa, and over the past 18 years it has continued to help governments eradicate the 700,000 unit housing backlog that is rife in the country. “The backlog in low income housing is enormous and the lowest statistics according to ABSA Bank is that in the bonded market, therefore in the market up to R50,000 there is still a 700,000 unit backlog and only about 25,000 units per annum are being delivered” explains Steyn. “Part of our business is to ensure we keep a strong relationship with government, especially with the lower income because all of our projects have got a 30-60% subsidised housing portion in it. The RDP’s, social housing etc. are all government financed so it is crucial that we have a strong relationship with them; both local and national government.” These long-standing relationships have ensured that Calrgo M3 remain the preferred supplier within the property development market, and Steyn says that although the company has received invitations for projects in neighbouring countries, the demand in South Africa is so high that they have no reason to explore new markets just yet. “We are constantly approached by people with projects in the Democratic Republic of Congo, Ghana, Mozambique and Zimbabwe, but we’ve got such a lot of work on our doorstep that our view is if we were really stretched for work, Africa would be a fantastic
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opportunity, but the market is so strong and the demand is so big here we haven’t got a reason to venture into fairly unknown and possibly high-risk markets just outside of South Africa,” explains Steyn. “There is still a huge market still to be serviced in South Africa, the market here is absolutely gigantic, and the 40,000 units that we have in our current pipeline are not really making any difference in the providing of housing.” “In regards to new markets opening up in South Africa, such as the Social Housing market segment, government has committed funds for 80,000 units over the next five years in this market segment and with only approximately 3,500 units being delivered per annum, the market is enormous.”
PERFORMANCE Since its inception in 1995, Calgro M3 has created in excess of 5,000 jobs in line with government’s drive for job creation and established itself as the market leader in the low income and integrated development sector. The company has reported a 55% revenue increase in 2013 from R515m to R798m, and Steyn says that the key its success is ‘hard work, dedication and perseverance’. “We are not concerned about that industry or our position in the market due to various reasons, the only main concern for the company is actually the fact that the number of opportunities is so high,” he says. In 2012, Calgro M3 was listed on the JSE’s main board and now holds the vision of being the housing developer and partner of choice by consistently delivering homes and projects of the highest quality.
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