South African Property Review July 2018 by SAPOA

PROPERTY SOUTH AFRICAN PROPERTY REVIEW - LogoTreatment.pdf

July 2018

2016/08/25

11:31 AM

REVIEW

PETER LEVETT

2017/2018 SAPOA Presidential overview

Breaking Convention

Alternative capital partnerships

Waterfall

An emerging city

Looking to the future Realising the possibilities

One on one RICS turns 150

SOUTH AFRICAN PROPERTY REVIEW

from the CEO

Local government is everybody’s business if we are to create a different future for all Local government is an important sphere of government because it is closest to the people. It is where our people live, work and play. The municipalities also have a key role to play in nation-building and social cohesion. They must lead in the reversal of apartheid spatial planning and coordinate an integrated response of all stakeholders to give local communities a voice and respond to their service-delivery needs

uring his budget vote speech in Parliament in May, the Minister of Cooperative Governance and Traditional Affairs (CoGTA) Dr Zweli Mkhize painted a blunt picture of the number of municipalities that require urgent aid. The key message that we can take from Mkhize told MPs in the Old Assembly

chamber that his department’s various and R7,4-billion for water. The top 10 reports have shown that only seven percent indebted municipalities owe 70% of the of the country’s municipalities are classified total debt to Eskom. This was confirmed by the Auditor as well-functioning, about 31% of the municipalities are reasonably functional, General Consolidated General Report 31% percent are almost dysfunctional, on the Local Government Audit and the remaining 31% are dysfunctional Outcomes 2016-2017, which revealed that accountability continues to fail in or distressed. According to the Minister, the major local government. The report lists the concern right now are the distressed following main indicators of these or dysfunctional municipalities, including accountability failures, particularly in the those that are regressing in audit areas of financial health of municipalities outcomes. Some municipalities have and the delivery and maintenance of been performing well with good reviews, municipal infrastructure: but which are now eroding their ●● The audit outcomes showed that 45 municipalities regressed revenue base and eating into their while only 16 improved, and that reserves or diverting conditional grants irregular expenditure increased by for operational expenditure. 75%. Only 33 municipalities managed In addition, he also highlighted to produce quality financial statements the problematic issue of defaulting and performance reports, and to comply municipalities that are failing to pay their with key legislation, thereby receiving bills to utilities such as Eskom and water a clean audit. boards. As at 31 December 2017, the total bulk services owed by municipalities was ●● Eighty-six percent of municipalities the results of the 2016-17 audits is that accountability continues to fail in local were non-compliant with key legislation. R23,6-billion – R16,2-billion for electricity

THREE INDICATORS OF ACCOUNTABILITY FAILURES

government. There are three main indicators of these accountability failures, as detailed below.

Source: MFMA 2016-2017 Consolidated General Report on the Local Government Audit Outcomes

AUDIT OUTCOMES REGRESSED, AND INDICATOR 1: AUDIT OUTCOMES REGRESSED AND IRREGULAR EXPENDITURE INCREASED IRREGULAR EXPENDITURE INCREASED

Clean audits: 13% (2015-16: 20%)

Quality financial statements: 61% (2015-16: 68%)

Quality performance report: 37% (2015-16: 48%)

No findings on compliance with legislation: 14% (2015-16: 21%)

Irregular expenditure: R28 376 m (2015-16: R16 212 m)

SOUTH AFRICAN PROPERTY REVIEW

from the CEO

Source: MFMA 2016-2017 Consolidated General Report on the Local Government Audit Outcomes

In dire situations where municipalities fail, provincial government will intervene by invoking of Section 139 of the Constitution. These municipalities will be monitored with a view to ensuring they improve and get out of Section 139 within 12 months. CoGTA has signed a memorandum of understanding with National Treasury to support the financially dysfunctional municipalities, and has created a joint technical intervention team.

We call for the following measures:

●● This is the highest percentage of non-compliance since 2012-2013. ●● Despite recommendations by the Auditor General to improve audit outcomes and accountability, decrease wasteful expenditure and increase consequences on transgressors, there has been little improvement in the accountability cycle. This included attention not being paid to audit action plans, poor performance planning and budgeting (resulting in unauthorised expenditure of R12,6-billion), and regressions of varying degree in the status of internal control and the assurance provided by the different role-players in local government. ●● The audit environment became more hostile, creating an increasingly difficult environment for auditing. Across the nine major metros, only Cape Town and Tshwane had an operating profit (R3,36-billion and R730-million respectively), while the rest had a combined operating loss of R5,14-billion. Ratings Afrika has published its latest Municipal Financial Sustainability Index, revealing the best and worst municipalities in South Africa. The ratings agency‘s report assesses the financial positions of the country’s 100 largest municipalities, and rates them according to their respective financial performance in the last financial year. 2

SOUTH AFRICAN PROPERTY REVIEW

Provincially, the Western Cape has maintained its leading position for the second year in a row, after taking the top spot from KwaZulu-Natal in 2016/2017. KZN was the only other province to score above 50. The Free State was the worst performer – a position it has held since 2013/2014. CoGTA has put in place several remedial programmes to assist distressed municipalities, but one can’t help but question why this action took so long. To assist distressed municipalities with financial and revenue management, CoGTA will also be rolling out the implementation of the Municipal Specific Revenue Plan in selected municipalities nationwide, aimed at improving revenue management, reducing municipal consumer debtors, and protecting and augmenting municipal revenue collection.

Province

●● Instil a culture of discipline when executing budgets; 29●● Deal decisively with bad 29 revenue collection; ●● Decisive political leadership; ●● Root out and deal harshly with corruption; ●● Address the culture of non-payment for services; ●● Start appointing managers and staff with the right skills and experience; ●● Terminate employment of those not willing to work in the best interest of our communities or who are found to be corrupt; ●● Implement policies that are geared towards growth, and stop the overregulation of the business environment. As the voice of commercial property, SAPOA values initiatives that increase transparency, strengthen civic oversight and promote accountability. Best regards, Neil Gopal, CEO

Operating profit

Operating loss

Liquidity surplus

Liquidity deficit

1 092

341

830

Free State

3 094

7 747

Gauteng

1 952

2 585

113

1 757

1 492

244

Limpopo

1 644

551

619

Mpumalanga

2 998

653

6 215

Northern Cape

153

299

359

345

2 262

435

3 640

644

227

3 094

136

1 032

15 325

7 014

22 362

Eastern Cape

KwaZulu-Natal

North West Western Cape Total

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from the Editor’s desk

What an array – what a future? eThekwini – from itheku, meaning “bay/lagoon”, and Durban to our international guests – is the largest city in the South African province of KwaZulu-Natal, and the third-most-populous in South Africa after Johannesburg and Cape Town. eThekwini plays host to this year’s Annual SAPOA Convention & Property Exhibition

n the build-up to 19 June (and in our previous editions) we have lauded the quality and array of our speaker line-up. While there are ongoing issues of governance and political infighting in South Africa, I believe that this country that I call home has a bright future. Sadly, the sentiment is beginning to change. Looking at the South African economy’s fundamentals, it appears that the “Ramaphoria” is beginning to wane. Earlier this month – around the time of going to press – the rand fell by almost 1,1% and was trading at R12,6725 to the US dollar. Bloomberg reported that an index of banking stocks fell by as much as 3,2%, while shares in general retailers dropped by 2,8%. The benchmark stocks gauge pared losses to be 0,5% lower, supported by gains in so-called rand hedge stocks that benefit from weakness in the currency because of revenue earned abroad. GDP is not looking so bright: output expanded 0,8% year-on-year in the first quarter, below the economists’ estimate of 1,5% and way short of the central bank’s full year forecast of 1,7%. If you’re reading this, you’ve already opened up your Convention goodie bag and found the magazine (which we’ve brought out just in time for Convention). In this issue, you will find SAPOA CEO

SOUTH AFRICAN PROPERTY REVIEW

Neil Gopal’s deep concerns over the sorry state of many of the municipalities in South Africa. A positive and relevant reflection of SAPOA’s activities in the past year is highlighted through our outgoing President’s message. SAPOA continues to carry the advocacy and education torches while encouraging friendships and relationship-building through its many networking events. I don’t want to focus too much on the Convention, because that would be upstaging David Green, SAPOA’s Convention Committee Chairman. I was privileged to, once again, take up some of his valuable time to be able to bring you his overview of the Convention programme, and put it into context with what is happening today in the commercial property industry. In this issue, we have four one-onones. After a year in her role as Attacq’s COO, we speak to Jackie van Niekerk, who also introduces to us Giles Pendleton, Attacq’s recently appointed Head of Development. RICS is now 150 years old, and held its Africa Summit in Sandton this year. I had the pleasure of interviewing its President John Hughes, who was attending the summit from Canada. Taking up the black youth employment banner is YES CEO Tashmia Ismail-Saville. And last but not least, we’re featuring an exciting discussion with former SAPOA President Ben Kodisang, who is launching ALT Capital Partners. I won’t spoil it – turn to page 51 to find out more. A note of thanks to all the sponsors – in particular Principal Sponsor GladAfrica – for making the SAPOA Convention possible. I wish all participants and delegates a great three days. Enjoy the read! Mark Pettipher, Editor and Publisher

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contents

July 2018

PROPERTY SOUTH AFRICAN

REVIEW

South African Property Review

PROPERTY SOUTH AFRICAN PROPERTY REVIEW - LogoTreatment.pdf

July 2018

2016/08/25

11:31 AM

REVIEW

Outgoing SAPOA President Peter Levett reflects on the organisation’s 2017-2018 activities. Cover photograph by Mark Pettipher

Annual SAPOA International Convention & Property Exhibition

PETER LEVETT

2017/2018 SAPOA Presidential overview

Breaking Convention

Looking to the future Realising the possibilities

One on one RICS turns 150

Alternative capital partnerships July 2018

Waterfall

An emerging city

1 4 10 20 24 26 28 30 36 38 40 48 51 54 56 63 64 66 76 78 84

From the CEO From the Editor’s desk President’s message Relevant and fast-paced continuity From the Convention chair South Africa: the jewel of Africa Speaker profile Land reform: the burning question Big data Imagining the future: data analysis a decision-maker Education Legal update Legal chat Big data in the legal environment PSCC SAPOA signs Memorandum of Understanding with the Property Sector Charter Council KZN overview Why Durban? One on one Waterfall: a world-class South African city One on one Alternative capital partnerships under way One on one A tonne and a half of influence One on One It’s YES to youth employment Retirement South African property doyen Jeff Zidel to step down as Fortress Deputy Chairman after announcing retirement Member profile MetroWatch Keeping an eye on Municipal spending Howmuch.net Countries that have the largest stashes of foreign currency in the world Social Off the wall Embedding microchips under your skin

FOR EDITORIAL ENQUIRIES, email mark@mpdps.com Published by SAPOA, Paddock View, Hunt’s End Office Park, 36 Wierda Road West, Wierda Valley, Sandton PO Box 78544, Sandton 2146 t: +27 (0)11 883 0679 f: +27 (0)11 883 0684 Editor in Chief Neil Gopal Editorial Adviser Jane Padayachee Managing Editor Mark Pettipher Copy Editor Ania Rokita Public Relations Officer Maud Nale Production Manager Dalene van Niekerk Designer Eugene Jonck Sales Nkepile Setshedi: sales@sapoa.org.za, Pieter Schoeman: pieter@mpdps.com Finance Susan du Toit Contributors Anne Schauffer, Johan Coetzee, Maud Nale, Raul Amoros Photography Mark Pettipher DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods or services advertised within this edition. Copyright South African Property Owners’ Association (SAPOA). All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from SAPOA. The publishers are not responsible for any unsolicited material. Printed by Designed, written and produced for SAPOA by MPDPS (PTY) Ltd e: mark@mpdps.com

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Presidentâ&#x20AC;&#x2122;s message

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President’s message

Relevant and fast-paced continuity Outgoing SAPOA President Peter Levett reflects on his year’s tenure

year ago, I was afforded the opportunity of being at the forefront of SAPOA as its President in the 51st year of its existence. I would like to thank CEO Neil Gopal for his continued assistance during my tenure, and for his leadership in captaining a formidable and capable team. It has been a fast-paced year, filled with many events. Just like the tenure of SAPOA Presidents before me, mine kicked off immediately with a visit to the annual BOMA Conference in Nashville, Tennessee with Neil. It was refreshing to see how SAPOA has maintained its global connections to ensure that it has its finger on the pulse of the international property market. We made continued progress in many areas during the year, including education, advocacy, transformation and research.

Education a key priority In terms of education, it is always great to see experienced property people enhancing their skills and knowledge through the programmes we offer. I was honoured to attend the graduation ceremony of the Property Development Programme class of 2017 at the UCT Graduate School of Business in July 2017. We will continue to offer this flagship programme, which turns 49 years old this year. SAPOA was approached by the Department of Public Works (DPW) in 2016 to train 400 of its employees in the various courses offered via in-house training. Some of the courses include the Certificate for Commercial Property Programme, Property Management, Facilities Management and Property

FROM LEFT Henry Chamberlain, Lisa Chamberlain, SAPOA CEO Neil Gopal, Hannelie van der Merwe, Lisa Prats and SAPOA President Peter Levett

Development Programme. In the past year, 111 of those employees were trained, and we will continue to train staff throughout 2018. It was gratifying to attend certification ceremonies for the Property Management Programme at Wits University in February, as well as the Certificate for Commercial Property Programme at the University of Pretoria in April. DPW students achieved the top three positions in both courses. SAPOA is very committed to our partnership with the DPW.

SAPOA has worked closely with the University of Johannesburg to develop a new course targeted at the public sector – the Public Sector Property Programme. We have also created a new Property Management course, offered as a one-year part-time course with UJ.

Strengthening Bursary relationships SAPOA has continued with its Bursary Fund, and we have continued to strengthen our relationship with the Services SETA.

SAPOA President Peter Levett with Mark and Scott Kelly, NASA Shuttle Pilots, Nashville

SOUTH AFRICAN PROPERTY REVIEW

President’s message We welcome financial support from our members as well as from non-member companies to ensure that the Fund can assist more students. Last year, 38 students were funded through the Services SETA Bursary Scheme, which is administered by SAPOA. This year, third-year students will be added to the programme, in line with the agreement timelines. The contract with the Services SETA ends in December 2019 – but we are currently working on securing additional funding for the continuation of the project.

“As part of our advocacy initiatives, SAPOA establishes important links with the mayors of various municipalities. Since last year’s municipal elections, there has been a shake-up of political power in a few of the key municipalities, making it a challenge to maintain new relationships with the respective mayors” The SAPOA Bursary Fund supported 27 students last year. Ten of the students have graduated, and eight have already secured employment opportunities. The students’ overall pass rate increased to 88% (from 79% in the previous year). The reason for this positive increase in results is largely driven by our mentorship programme, which focuses not only on academic support but also on personal development, time management and improving student demeanour. Students get to attend workshops that cover a range of topics including study techniques, personal finance and financial planning. Assistance is also provided in the creation of professionally designed CVs and LinkedIn profiles, and improving business acumen. We will continue to build and solidify the relationships with the various universities in which SAPOA students are based, to ensure that the remaining Bursary Fund students receive adequate academic support. 12

SOUTH AFRICAN PROPERTY REVIEW

SAPOA supports transformation On the topic of transformation, there was an address by Dr Sedise Moseneke and Portia Tau-Sekati during the REIT conference in March on the way in which legislation has adjusted with regards to transformation ratings of companies within the property industry. The key objective of the new Property Sector Charter scorecard is to increase the speed of ownership distribution of property and land to the benefit of previously disadvantaged South Africans. SAPOA continues to be a major supporter of various transformation initiatives in the industry; to date, we are the largest contributor to the Property Sector Charter Council (PSCC), contributing about R2,5-million towards its running expenses. SAPOA participates in PSCC structures, and is represented by various members who collectively drive transformation in the industry.

Advocacy plays a pivotal role Advocacy provides targeted participation in any legislative development that will affect SAPOA members directly. Advocacy also provides SAPOA with an authoritative voice that participates in matters relating to the laws that govern South Africa’s built environment. As part of our advocacy initiatives, SAPOA establishes important links with the mayors of the various municipalities. Since last year’s municipal elections, there has been a shake-up of political power in a few of the key municipalities, making it a challenge to maintain new relationships with the respective mayors.

It is imperative that SAPOA continues to be visible in the big metros, and that the property owners’ interests are not only attended to, but also prioritised. In this way, we have successfully managed to have a significant impact on the various metros. From time to time, members have asked for SAPOA’s assistance in resolving pertinent matters at their respective municipalities; through our interventions, the matters have been resolved satisfactorily. The SAPOA Legal Committee works tirelessly to represent the industry, offer opinion on the Bills that are in Parliament, and decode the many laws that affect the industry and members’ business interests. SAPOA’s legal department has dealt with several matters and pieces of legislation that affect our members. The following matters have taken centre stage over the past 12 months:

1 Land expropriation without compensation In February, the National Assembly proposed a motion to amend the Constitution in order to allow for land expropriation without compensation. SAPOA has raised concerns, particularly in relation to food security, agricultural production and the economy. We believe that while the historical background of land ownership needs to be addressed, it is critically important that South Africa navigates through the sensitivities with a greater vision – one of ensuring that the imbalance is dealt with and that economic stability continues to be reinforced. SAPOA supports a land expropriation process where the rights of present and future landowners are balanced with the need to ensure stability and economic growth.

2 Rates increases at municipal level There has been an outcry from property owners about some of their properties facing increases of up to 1 000% in the City of Johannesburg. Also of concern to SAPOA is not only the revaluation of properties but also the high rates tariffs in certain municipalities compared to others.

President’s message In such municipalities, the increased property valuations will result in the rates payable being higher than the neighbouring counterparts. SAPOA has, in the past, been vocal in challenging the legality of increased municipal rates charged to its members. Not only is this unsustainable, but property owners also pass these increases down to tenants, which has a material impact on the health of businesses in the economy. SAPOA acknowledges that rates are necessary to fund municipal service delivery and outputs – but these must be levied correctly. An ever-increasing rates environment kills investment and has negative consequences when it comes to job creation. Our team of consultants at Rates Watch will continue to monitor this on behalf of members.

3 City of Jo’burg’s General Valuation Process for objections and appeals SAPOA is concerned about the lack of feedback from the City of Johannesburg on the latest General Valuation Process. In correspondence to the City Manager, SAPOA highlighted the legal position on the three key factors that affect the valuation roll: ●● Rate-payers are not liable to pay disputed rates pending the outcome of objections or appeals. ●● The city is not entitled to cut off services such as electricity if rate-payers fail to pay the portion of their rates that they are disputing, nor may it threaten to do so. ●● The city is not entitled to claim interest on any shortfall on rates payable by rate-payers on finalisation of objections or appeals. Although the new values and tariffs will be introduced from 1 July 2018, the city has commented that rate-payers will not pay the disputed rate subject to the outcome of the objection process being finalised.

4 City of Johannesburg’s Draft Inclusionary Housing Policy The draft policy by the city, which was out for public comment, did not address

FROM LEFT Professor Samuel Azasu, Neil Gopal, Fredah Maseko (DPW), Nomvula Magagula (DPW) and Peter Levett

the many complex matters associated with the question of affordable housing and inclusionary housing, including residential market realities, or what the financial and social consequences may be for introducing such a policy. SAPOA believes that the proposed mandatory 20% inclusionary housing requirement may influence the feasibility of residential developments and is potentially burdensome to private developers experiencing a decline in returns and profit margins. Inclusionary requirements inflexible to underlying economic conditions and health of the residential property market may have a detrimental impact on housing delivery. On incentivising the developer, SAPOA believes limiting of incentives to merely the inclusionary units has little cost-reducing effect for the developer. To incentivise the developer, one would expect the inclusionary units to be either entirely free or largely free from any contributions. SAPOA proposed the following recommendations to the City of Johannesburg, which it believes are essential to the inclusionary housing policy envisioned by the property industry: ●● Increased emphasis on negotiationbased approach to inclusionary housing provision and incentives, rather than mandatory, blanket approach to implementation.

●● Requirements should be limited to selected large housing developments, the scale of which supports the feasible inclusion of housing units for low-income households. ●● The inclusionary housing requirements must thus be flexible based on the underlying economic and residential property market conditions. ●● To increase the feasibility of inclusionary projects, the target affordability threshold must be location flexible and incorporate a broader income range. This will ensure smaller income differences between affordable and market units, mitigating potential private developer revenue loss. SAPOA does not believe that the draft policy is a workable solution and may, in its current form, possibly deter the private sector from developing residential units.

5 City of Johannesburg draft outdoor advertising by-laws omissions The City of Johannesburg published its outdoor advertising by-laws for comment in June 2017. However, SAPOA is concerned over fundamental omissions in the City of Johannesburg’s proposed outdoor advertising by-laws. SOUTH AFRICAN PROPERTY REVIEW

President’s message Upon considering a comparison of the initially proposed by-laws published in 2017 for public participation and comment and the new by-laws that will come into effect at the end of May, although certain amendments had been made, none of the fundamental submissions made by SAPOA and other important industry role-players were included in the report or the proposed by-laws at the time of submission to Council for consideration and adoption. SAPOA, in conjunction with OHMSA, Abland and Jinja 2 Outdoor Advertising issued urgent court papers challenging the City’s adoption of the By-laws. Deputy Judge President Mojapelo ordered the enforcement of the By-laws to be suspended until such time as judgment is handed down. The matter will be heard on 15 and 16 October 2018. In the application before the court it is contended that: ●● The City failed to implement and follow proper public participation processes as it ignored important comments and objections raised by various industry members. ●● Certain provisions of the By-laws are unconstitutional as it infringes certain rights contained in the Bill of Right enshrined in the Constitution. ●● The City failed to obtain approval from the Minister of Trade and Industry, as required by the National Building Regulations, prior to promulgation of the By-laws

IDPs SAPOA, in line with its mission statement, participated in the 2017/ 2018 Integrated Development Plan (IDP) process at a regional level, with planning consultants appointed to assist in Polokwane Municipality, City of Johannesburg Municipality, eThekwini Municipality, Buffalo City Municipality and Nelson Mandela Bay Municipality. SAPOA Western Cape (with specific focus on City of Cape Town Municipality) and Mpumalanga (with specific focus on the Mbombela Municipality) regional offices participated in this process through their respective committee representatives. The key municipal 14

SOUTH AFRICAN PROPERTY REVIEW

performance areas targeted by the IDP are spatial analysis, service delivery, local economic development, municipal transformation and organisational development, municipal financial viability, good governance and public participation. All of these are important to the property sector. The IDP is a five-year plan (aligned with the municipal elections period), and is reviewed on an annual basis, after a 10-month process. The current IDP process was initiated around September 2016; once approved, it will be implemented from 1 July 2017 to 30 June 2018.

Polokwane Municipality Bus Rapid Transport Service Project SAPOA raised concerns with the Municipal Manager in November regarding the survey conducted by Great North Transports. An article published in The Observer newspaper on 2 November 2017, headed “Market survey to advise city’s bus project”, states that the market survey results were signed off. SAPOA Limpopo Council Members were invited to various meetings to discuss the planning and implementation of the BRT project. At each meeting there were numerous requests from participants to receive feedback. We have not received any feedback from the city, and have taken up the matter with National Treasury.

Rates and taxes SAPOA re-appointed the specialist consultants Rates Watch on a five-year contract to monitor rates policies. Rates

Watch’s mandate from SAPOA was to focus on unearthing municipal budget information on key property-related costs – such as rates and taxes, electricity or water – in South Africa’s 11 largest municipalities. They focused on City of Cape Town, Nelson Mandela Bay Metro, Buffalo City, Mangaung, eThekwini, Msunduzi, Ekurhuleni, City of Johannesburg, City of Tshwane, Polokwane and Mbombela. They will be responsible for identifying, analysing and collecting information on relevant municipal policies and legislation, as well as the municipalities’ medium-term revenue and expenditure frameworks, at 11 of the largest metropolitan municipalities throughout South Africa. While some of our comments have implemented by the municipalities, we are finding that some municipalities do not adhere to legislation. For example: 1. The draft tariffs are not published on their websites as prescribed by legislation; 2. Some of the categories in the tariff determination differ from the rates policy wording. There is general consensus that municipalities are performing better with residential properties than commercial properties. When it comes to commercial properties, there is little consistency and accuracy with regard to the municipal values. In our view, the fault does not lie with the Act as such. We believe that the main weaknesses can rather be attributed to:

FROM LEFT SAPOA Mpumalanga Regional Chairman James Aling, GM for City Planning & Development: City of Mbombela Dumisani Mabuza, SAPOA President Peter Levett, Thulani Nobela, SAPOA CEO Neil Gopal, GM: Properties & Infrastructure at MEGA Themba Camane, and Desiree Ntshingila

President’s message ●● Inexperienced valuers being appointed to perform valuations; ●● Municipalities not grasping the vital relationship between a complete and accurate valuation roll and tariff setting, i.e. the assessment rates budget; ●● The complete lack of property information that would enable the municipal valuer to perform accurate and consistent valuations. The MPRA allows for a process of objections and appeals to correct certain specified errors in a valuation roll. However, with the current inefficiencies at municipalities, these objections and appeals processes take too long to be finalised and implemented, resulting in the property owner having to face the financial burdens in the interim, which is clearly undesirable. It is particularly difficult for commercial property owners who have to adjust and/or pass on rates and taxes to their tenants. We will be addressing our concerns with the respective City Managers and with the Department of Corporate Governance and Traditional Affairs.

SAPOA’s comments on CIDs There is a call from the eThekwini Municipality for the private sector to organise itself and present a meaningful point of engagement. A strategic partnership between SAPOA, the Durban Chamber of Commerce and the Growth Coalition and some yet-to-be-identified NGOs needed to be established. This

Peter Levett, Councillor Brett Herron, Lesley Lombard, Mandisa Shandu and Khalied Jacobs

took the form of a nonprofit organisation to be co-funded by the government and the private sector. SAPOA has been identified as the right organisation to drive this process because it represents the asset base in terms of property. One of the first projects would be to establish managed precincts consisting of UIPs, SRAs, management associations and the like across the city to clean the city up and add value to the asset base, which benefits the private sector and the public sector in terms of rates generated. SAPOA and the eThekwini Municipality have held two workshops to deal with several issues. One pertinent matter is the establishment of the NPO whose objectives are to: ●● Promote public/private partnership in the management of urban spaces;

SAPOA President Peter Levett and CEO Neil Gopal host the Gauteng media at the annual Meet the Media lunch

●● Facilitate the establishment of such partnerships for this purpose; ●● Promote the economic growth of eThekwini and its strategic urban nodes. SAPOA is also currently partnering with National Treasury and the Department of Corporate Governance and Traditional Affairs on the SA Precinct Management Initiative, to draft legislation and policy to govern Central Improvement Districts.

Day Zero The most current piece of legislation is to do with the water crisis gripping parts of the country, with a drought charge proposed by the City of Cape Town. The city called for comments in December last year. According to a statement released, it is not receiving the necessary income. To overcome this problem, the city wanted to impose a monthly drought levy of between 10% and 11% of the rates portion of the municipal account. We are uncertain as to how the city determined this calculation. SAPOA submitted comments and strongly objected to the proposed drought charge. The current status is that the City of Cape Town will not be proceeding with the intended drought charge but will be imposing heavy penalties on excess water usage. The city also called for comments on the Draft Water Amendment By-Law, which it believes will enhance Cape SOUTH AFRICAN PROPERTY REVIEW

President’s message Town’s ability to become a more watersensitive and resilient city in the future.

Data reports and analysis In its commitment to actively advance commercial property interests within the property industry, SAPOA commissioned the services of Urban-Econ Development Economists to embark on an analysis of the commercial private property industry in Mpumalanga, with specific reference to the City of Mbombela Local Municipality. The analysis of the commercial private property sector in the City of Mbombela forms part of a series of comparable reports formerly published by SAPOA, and I was honoured to have been in attendance for that occasion. The research was aimed at: ●● Highlighting the economic value of the sector within Mpumalanga, with specific reference to the City of Mbombela Local Municipality; ●● Investigating if and why there are certain misconceptions in relation to the application process; ●● Interrogating the Ordinances against SPLUMA; ●● Emphasising the responsibilities of all stakeholders with regards to private property development; ●● Identifying any shortcomings in the application process. Based on the analysis of the economic value of the commercial property sector in the City of Mbombela, it is evident the contribution made by the sector is growing. But when developments are delayed, the impact and multiplier effect on the economy will also be delayed. This amounts to economic losses equal to the injection that would have been added by the development. SAPOA and the City of Mbombela have agreed to set up a joint forum with the intention of finding resolutions to some of the impediments.

Positive Board oversights Working with the SAPOA Board and making sure financial matters were being dealt with satisfactorily was an all-round positive experience. The Board 16

SOUTH AFRICAN PROPERTY REVIEW

exercises an oversight on how the finances have been spent, and these matters have worked out quite well. Something I have been fascinated to observe at Board meetings and at National Council meetings during the year is the sheer volume of work that goes on behind the scenes of the powerful SAPOA machine. I realise now that it would be impossible to manage without being able to rely on SAPOA when it comes to monitoring legislation that affects the industry, the town planning issues, educational efforts, marketing and research, and generally representing all of us in this industry. I have a great admiration for the people who volunteer their time and share their knowledge and expertise for the benefit of the greater industry through the SAPOA committees. It has been enriching to work with National Council members, and I want to extend a very special thank you to all the committee members for their generous contribution and the time you spend on furthering this industry that we all love and care about.

Networking The networking opportunities at the SAPOA Convention are vast, and the interesting people you meet provide a lot of insight. I invite you to enjoy the next two days of the 2018 SAPOA Convention under the theme “The Future we Create. Imagine the Possibilities. During tough economic times, many companies are tightening their belts and cutting back on the numbers of staff that attend the SAPOA conferences. We greatly appreciate the support that we continue to see, and the value that our members find in attending this Convention.

Gratitude In closing, I would like to mention that I am truly very grateful to Old Mutual Property, a company that has been incredibly understanding and generous to me, and that has enabled me to spend the time that was required to participate in SAPOA’s various initiatives. Old Mutual accommodated me not

just at an executive level: it is also my team members who have been tremendously loyal and hard-working enabling us to forge on with our company’s objectives despite my tenure as SAPOA President. It would have been impossible to achieve what I have achieved this year without the support of my colleagues, friends and family whose love is unconditional and treasured. Building on its solid foundation of 52 years, SAPOA has a strong vision for the future. My aspirations for SAPOA are that it strives: ●● To continue to be recognised as an authority in specialised fields; ●● To be a trusted source of information and research in property; ●● To constantly evolve as a dynamic and innovative organisation; ●● To promote and enable the transformation of the property industry; and ●● To always unwaveringly serve its members. It has been an absolute pleasure to have served you this year.

“In closing, I would like to mention that I am truly very grateful to Old Mutual Property, a company that has been incredibly understanding and generous to me, and that has enabled me to spend the time that was required to participate in SAPOA’s various initiatives”

SOUTH AFRICAN PROPERTY REVIEW

PRASA The Passenger Rail Agency of South Africa (PRASA) is leading Government efforts to transform public transport, providing better mobility and accessibility in pursuit of a better life for all.

• Warehouse • Event Venues • Advertising Platforms

PRASA Cres (Corporate Real Estate Solutions) PRASA Cres is a division of PRASA tasked with managing PRASA’s property portfolio. Its #1 Priority is to Efficiently and Effectively manage the Rail Property Portfolio so as to enhance Customer Experience.

Everything we do is about making the passenger experience more pleasurable as we take care of the following core services: • Real Estate Asset Management • Facilities Management • Strategic Portfolio Projects Management

The Portfolio has the following key property categories; • Stations • Depots • Office Buildings • Land

As we strive to improve the travelling experience, we’re also working to increase the revenue generated by PRASA’s extensive property portfolio and help PRASA run more efficiently and effectively. This will assist the organisation to be less dependent on Government’s subsidy.

MORE THAN JUST A TRAIN STATION 1. We have office space to let 2. We have warehouse space to let

3. We have Event Venues and Advertising Platforms 4. We have retail space to let

Is your business at the Station?

More retailers have started to appreciate that they have a captive audience in very high footfall locations like PRASA train stations. The high volume of people translates into significant sales and this means that no discerning retailer can afford to be left behind. The train station offer tremendous commercial opportunities to potential Tenants. PRASA CRES has made train stations more attractive, pleasant and efficient for Commuters and Station Users.

HEAD OFFICE: PRASA CRES Tel: 011 013 1700 E-mail: receptionist@intersite.co.za

REGIONAL OFFICES:

SOUTHERN GAUTENG REGION Tel: 011 013 1736 Email: RMalungana@prasa.com

NORTHERN GAUTENG REGION Tel: 012 748 7590 Email: faith.mlotywa@prasa.com

WESTERN CAPE REGION: Tel: 021 449 6430 / 021 449 6530 Email: vtyakume@prasa.com

KWA-ZULU NATAL REGION Tel: 031 813 0481 Email: Slindile.Dube@metrorail.co.za

PARK STATION Tel: 011 013 1716 Email: snortjie@prasa.com

EASTERN CAPE Tel: 043 700 2324 Email: mmabona@prasa.com

from the Convention chair

South Africa: the jewel of Africa Is the future looking brighter? That was the opening question of our conversation with SAPOA’s Convention & Property Exhibition Chairman David Green, CEO of ProAfrica Property Services By Mark Pettipher

David Green, CEO of ProAfrica Property Services

avid Green believes that South Africa’s future is considerably brighter than it was a year ago, when we last spoke to him as we entered the 50th year of SAPOA’s existence. Last year’s Convention was all about disruption, and the ways in which the property industry was being affected by dysfunctional elements within the government. SAPOA must have had a “crystal ball”, because at the end of the Convention it was announced that the theme for this year’s 51st Convention would be “The future we create. Imagine the possibilities”. “The Convention inevitably deals with the topics of the day,” says Green. 20

SOUTH AFRICAN PROPERTY REVIEW

“At SAPOA, we want to stimulate the kind of thought leadership that challenges the environment in which we live, work and play. We want our delegates to leave Durban this year having considered what the best alternatives are and which of them, when adopted, will be the best way forward. “The speaker line-up is topically very interesting. The subject matter is a blend of contemporary issues delivered to examine ideas, changes and adoptions others have achieved internationally – and ways in which they can be applied domestically. Added to the speaker programme, we have an exhibition that will definitely reflect the trends of the

day – this includes water purification plants, power supply systems and a variety of service industries that offer sustainable applications to the commercial property sector.” All this is set against a background of warming sentiment towards our (still fairly newly elected) President Cyril Ramaphosa. “It appears that our emissaries, lead by President Ramaphosa, are making all the right ‘noises’ on the international stage,” Green says. “There is a lot that needs to happen to prove that we are on the right track, and I can’t help thinking that it’s going to take quite some time to work its way through the system. “Risk remains, and the sentiment can change rapidly – especially as our international investors are skittish over the land reform debate. The question hangs over the land expropriation without compensation (LEWC) narrative, which is a topic that will be discussed by the Deputy Minister of Public Works, Jeremy Cronin. “Questions on clarity will be asked – such as what land will be expropriated. Will it be peri-urban, urban, agricultural – or the land on which bonded private property is built? It is almost certain that expropriated bonded property and development properties in which banks are involved will upset the economic equilibrium that we have at the moment. “The subject of LEWC is highly complex, economically and practically, and emotionally charged. This – and many other related subjects, I’m sure – will definitely be discussed during our networking sessions.

“We will be talking about the issues that we are all facing in South Africa. Our biggest challenge lies at the municipal and local government levels. Developers are struggling to get approvals for their projects to get under way – rezoning faces unnecessarily long delays, as do infrastructure approvals and implementation. “The challenges that developers face are exacerbated by municipalities having huge sums of money owed to them. In many cases, the municipalities are in arrears when it comes to paying their suppliers as a result. It’s difficult to get out of an entrenched culture of nonpayment. These are serious challenges – but the government is making inroads and is committed to finding solutions. We are getting back on track. “The challenge of collecting revenue, redistributing held fiscal capital and setting the country on the road to recovery is contingent on everyone working towards a common goal. “Growth and economic policy will be in open conversation with Eusebius McKaiser, our returning Master of Ceremonies, who will be facilitating the discussion between economists Mike Schussler, Isaac Matshego, Dawie Roodt and Mohammed Nalla. Iman Rappetti will also be interviewing notable experts Daniel Silke, Sithembile Mbete, Ranjeni Munusamy and Lukhona Mnguni on stage.” Pre-empting the subject matter, Green gives his view of the commercial property sector: “Growth cycles have changed. We are definitely in a long growth mode – you can see it in the office vacancy rates, as well as in the retail space. We are in a shrinking economy, largely as a result of oversupply. “The top-end residential sector is also suffering from oversupply, especially in continued new builds – but that is a good thing because, as a sector, the property industry employs more than 10% of the labour market. Our greatest wish is that the real estate industry continues to grow. “The issues with town planning and municipalities, a slow economy and an oversupply across all sectors, possibly

excluding industrial, means that we are going to see very slow growth in property. “Consolidation of corporates into larger custom-built properties will further increase the office vacancy rates – and better quality office buildings will likely fill up at the expense of the older, poorer-quality, lower-grade buildings with low parking ratios and small floor plates, and those that are in decentralised areas. “Technology will play a greater part in flexible working practices, and we’ll see more off-site working and a more mobile workforce in the future. This is a subject that we’ll be exploring to see whether we are ready for the emerging technologies. Lisa Stanley, one of our many international speakers, will be addressing the subject with Michael Stannard and Dale Sinclair. “We are seeing an emphasis on flexihours and hot-desking as well as a proliferation of serviced offices. Employees want to be flexible and need to have the ‘freedom’ of plugging in wherever they land. “The property stream topic of ‘How to maximise value in your assets and organisations’ will go some way towards offering real solutions to sustainable working practices. The Convention’s panel of experts – John Salustri, Lisa Stanley, Willem van der Post and Anthony Orelowitz – will explore the physical, technological and operational attributes of a truly productive work environment. It is a discussion that will cover everything from design and planning to workable technology and the implementation of standards to enhance data quality, transparency and data governance. “Looking to the future, a key point is for South Africa to stem the financial erosion of our economy by tackling the corruption question. Those bigger issues of SAA, Eskom and other parastatals cannot be swept under the carpet. “We also need to address education as a matter of urgency. Our work force needs to be better equipped and prepared so they can be employed.

Isaac Matshego, economist at Nedbank

Sithembile Mbete, lecturer in the Department of Political Sciences at the University of Pretoria

Mohammed Nalla, Lead: Economic Research Division at the Public Investment Corporation

SOUTH AFRICAN PROPERTY REVIEW

To this end, many of SAPOA’s members are getting involved with post-secondary school initiatives through internships and bursaries. “Incubator hubs are also one of the most productive ways to encourage and expose driven individuals to ways of getting better skills and more opportunities in the job market. Organisations such as the Youth Employment Services are making a concerted effort to get organisations involved in sponsoring facilities and mentoring potential candidates. As technology continues to drive all aspects of our lives, IT and data analysis will become ever more important. The Internet of Things, smart cities and other catchphrases keep coming up at conventions such as this one – and as a result, Phil Barttram will be taking a look at the ‘Future of Real Estate’. Many SAPOA members and delegates will know Phil for producing

20 Years

Nesi Chetty, Head of Listed Property at Momentum

those analytical and data-rich reports that we all receive from time to time. He will be facilitating the discussion on the future of the industry with Mohammed Nalla, Nesi Chetty, Rudolf Pienaar and Izak Petersen.

innovation with excellence

SOUTH AFRICAN PROPERTY REVIEW

“We as SAPOA hope that you will enjoy the fruits of our association. SAPOA is a member-driven network of professionals, and as such it entrusts the team – within the organisation’s head office and the regional secretariat – with its continued push towards advocacy and regulation in the property industry. SAPOA also encourages healthy levels of debate and dialogue with the authorities.” In conclusion, Green says that “It is important for people to hear opinions of participants with whom they might not necessarily agree. Last year – the year of disruption – we had Julius Malema as a keynote speaker. This year we have Mmusi Maimane – and it will certainly be interesting to hear his perspective on South Africa. “In the meantime, let us all work together towards a common purpose, and rebuild our country as the true jewel of Africa.”

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SOUTH AFRICAN PROPERTY REVIEW

speaker profile

Land reform: the burning question Section 25 of the South African Constitution states that no-one can have their property taken away from them unless this is done according to a law (for example, by legally expropriating private property). It also states the government must make laws and take other steps to help people or communities to get land to live on, and to claim back land if they lost it after 1913 as a result of an apartheid law. Up to December 1998, such cases enabled people to claim the land back – or claim compensation for the land Compiled from various online news sources by Mark Pettipher

Jeremy Cronin, Deputy Minister of Public Works and former Deputy Minister of Transport

eremy Cronin, Deputy Minister of Public Works and former Deputy Minister of Transport, is a member of the South African Communist Party (SACP) and an African National Congress (ANC) National Executive Committee member. Mining the internet for information, we find that Cronin’s work in the propaganda unit of the SACP attracted the attention of the South African Bureau of State Security. He was arrested on charges under the Terrorism and Internal Security Acts, and tried in the Cape Town Supreme Court in September 1976. The charges included conspiring with members of the ANC and the SACP. He was sentenced to seven years in prison (1976 to 1983) as a result. Following his release from prison, Cronin began working with the United Democratic Front (UDF), where he was the editor of the journal Isizwe (The Nation). He was also involved in various kinds of popular education – but in the late 1980s, increased harassment from the security forces caused him and his wife to leave South Africa and move first to London, then to Lusaka in Zambia, where he worked closely with Joe Slovo for the ANC/SACP alliance. 24

SOUTH AFRICAN PROPERTY REVIEW

News24 reported in March this year that “Cronin is part of a task team established by President Cyril Ramaphosa to clear the existing ‘confusion’ on the party’s intentions on land reform” that suggested it shared the same stance as the Economic Freedom Fighters (EFF) while also trying to please investors. The article further reported Cronin as saying it was not a matter of course that the Joint Constitutional Review Committee would emerge with a decision that the Constitution must be amended. He said the ANC was pushing for the Expropriation Bill to allow for expropriation of land without compensation under definitive conditions, including instances where land is abandoned, where labour tenants have occupied the land and are working it in the absence of the owner, or where owners are using the land purely for speculation. “Yes, we need to accommodate what is now an official ANC resolution that there needs to be the possibility of expropriation without compensation, but that possibility does not require changing the Constitution,” says Cronin. “It can be done via a statute, via legislative process invoking the limitation clause inside of the property clause itself, in referring to the broader limitations in the Bill of Rights,. It is possible (and preferable) not to amend the Bill of Rights, but to introduce a brief limitation clause into the Expropriation Bill that has been returned to Parliament.” Politicsweb.co.za reports that Cronin accused the EFF of being hypocrites, rattling white farmers with expropriation without compensation, then quickly softening them with promises that their cattle pens and homes wouldn’t

be taken away, and that they would continue to farm. Cronin claims the EFF later promised farmers compensation for improvements they have made on the land. He said this equated to promising “compensation via the back door”. “Anyone who knows anything about land, particularly agrarian land, knows that it is not the ground that has value but the improvements that have been conducted. So when they say ‘we’ll compensate you for improvements’, what they are saying is that what is said in the Constitution is not a hindrance to effective land reform,” he said. Times Live has Cronin stating that while the EFF had called for all land to be redistributed without compensation‚ this was not the stance of the ANC. He highlights that if the EFF’s approach were to be considered‚ even poor communities stood to be negatively impacted by land expropriation. Some community members would be moved because government might need that land for water or even to erect infrastructure as property was not limited to land but to natural resources and shares. The Financial Mail outlines the committee intentions: when it crisscrosses the country in the coming weeks, it wants to hear the views of ordinary South Africans on whether or not to amend the Constitution. However, it will also welcome input from legal and agricultural experts, as well as the former justices who are of the opinion that just and equitable land reform can be achieved without amending the Constitution. The committee will then put together a report, which will be submitted to Parliament by August.

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SOUTH AFRICAN PROPERTY REVIEW

big data

Imagining the future: data analysis a decision-maker As the property industry becomes a highly tech- and data-driven business, big data and its interpretation are becoming increasingly critical to decision-making processes. Phil Barttram, Executive Director at MSCI, speaker and facilitator at this year’s Annual Convention, talks to Property Review editor Mark Pettipher, about the importance of data and its interpretation

What kind of service do you provide? ‘We provide a business-to-business service but distribute the high-level insights through industry bodies such as SAPOA.’

Tell us about industry-specific insights. ‘The insights provided within the industry reports may look simple on the surface, but they are far from it. The trends and insights we provide are based on big data that goes as far back as 1994. The real value of the dataset lies in its integrity, its consistency, its duration and the fact that it is accessible through our Global Intel platform – essential elements for any big data.’

How accurate are your insights? ‘Because our data is used to inform portfolio investment analysis, it is collected at a granular level and subject to a robust verification process from our own team and from the property owners. We apply a consistent methodology and data standard in more than 30 countries, which enables us to issue both globally and domestically appropriate analysis on the back of the dataset.’

How does this relate to South Africa? ‘In South Africa, we’re fortunate to deal with multiple sources of real estate data that underpin two independent sets of “big data”. The first is MSCI’s owner-verified and achieved performance metrics, which inform MSCI’s proprietary analytics and research. The second is SAPOA’s opinion-based data provided by recognised experts who support SAPOA surveys. This data is highly current.’

How protected is your data? ‘Our rigorous governance and controls prevent us from mixing the two “big data” sets in order to preserve the integrity of the MSCI-achieved data. However, there is little doubt that a rich perspective of the market can be derived from having access to both. This perspective becomes even more powerful when viewed alongside other big data such as that underlying economic cycles and/or demographic trends, particularly when it comes to assessing property growth and development cycles.’

Tell us about historical data in the South African context. ‘Putting this into a South African context, it’s essential to recognise 26

SOUTH AFRICAN PROPERTY REVIEW

South African GDP growth and direct real estate total returns 35

Nedbank forecast

Growth

2,4 1,8 1,9

Supply overhang

0,6

0.0

5 4

10,9

2 1 -1

Demand Shock

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Source: SARB, MSCI, Nedbank

Real GDP growth

‘Examining the depth of the reports produced by MSCI is critical to our clients’ decision-making process. Just as important are the industry reports that encapsulate the collective data }on various sectors. The reports we generate are, in many cases, proprietorial.’

the relationship between real estate and the broader economic cycle. If we take a fairly simplistic macro-view, that of economic growth, and compare it with total returns on direct property, we see two distinct cycles with three phases per cycle. Comparing the previous real estate cycle – the 1998 demand shock phase, the subsequent recovery (supply overhang) phase between 1999 and 2003, and the phenomenal growth phase seen between 2004 and 2008 – and the current cycle (i.e. the demand shock of 2008 and the prevailing supply hangover phase), we can see a clear example of how big data graphically and simply illustrates trend relationships and thereby informs decisions.’

Direct property – Total return

How important is big data to your clients?

Total return

-2

Real GDP growth

What phase is South Africa in now? ‘We believe we are currently in the “hangover phase” – a stage of recovery during which we have limited economic growth. As such, there is low demand and restrained pricing power during rental negotiations. Owners are competing for market share and, unless we see a marked pick-up in economic growth, we can expect this to continue in the medium term.’

How do you see the property market? ‘The maturation and growing sophistication of real estate investment within the multi-asset spectrum is a global theme. Increasing allocations by asset owners to alternatives, of which real estate is a major component, is shining a light on how the asset performs relative to the traditional equity and fixed income asset classes. Improved transparency and the development of big data platforms are contributing to improved analysis. In addition, real estate now has its own GICS industry classification on global exchanges, and it is becoming a material sector within listed investments. With this move, it is evident that big data analysis and interpretation of trends is becoming more critical to decision-making within the property industry.’

When Public-Private Partnerships Work! Property Point and The Department of Small Businesses have joined forces to support 16 entrepreneurs in the property sector. In a landmark partnership for collective economic growth in South Africa, the Department of Small Business Development (DSBD) has joined forces with Property Point, a Growthpoint Properties initiative, to develop more small businesses for South Africa’s property sector. DSBD has allocated a R5 million grant to Property Point for a one-year small business development programme as part of its Enterprise Incubation Programme (EIP). This breakthrough initiative is the first public-private partnership of its kind in the property sector. It will develop 16 small businesses in the property sector of which twothirds are youth- and woman-owned. Shawn Theunissen, head of Property Point and head of Corporate Social Responsibility for Growthpoint Properties, says: “Property Point’s objective has always been to contribute to South Africa’s economic growth. Using a best practice model, we have delivered positive results in the property sector for the last decade. Now, our new partnership with government will escalate our impact on transforming the economy at a crucial time when South Africa is dealing with high unemployment and low economic growth.” Director General, Edith Vries, with Shawn Theunissen, Head of CSR at Growthpoint and Head of Property Point

After their participation in the programme, the beneficiaries have created 59 direct and 47 indirect jobs and have accessed R21,9 million in contracts. Upon meeting the 16 business owners at a networking function in March 2018, Edith Vries, the Director General of the DSBD highlighted that this partnership will help to cultivate more small businesses, breathing life into the economy and giving young people the opportunity to grow their own enterprises. She praised the market-focused initiative for adding to the steady, but significant positive momentum South Africa is achieving in making its small business sector a key player in the economy.

Director General, Edith Vries, interacts with the businesses

Property Point has been a driver of transformation and small business growth within the South African property industry in the 10 years since it was founded by Growthpoint in 2008. Already, it has created 2066 jobs and R842 million in procurement opportunities for the 130 SMEs that have participated in its two-year development programmes. These small businesses have reported 43% growth in revenue. The partnership with government leverages Property Point’s deeprooted success in growing competitive small businesses in the property sector over the last 10 years and expands it for bigger impacts on small enterprise development, job creation, economic growth and a more inclusive economy for South Africa. For this unique 16-business intake, Property Point’s programme is powerfully market driven. It will raise the profile of the entrepreneurs and strengthen their competitiveness, with a deep focus on market integration. The programme aims to create market linkages for these small businesses that will see them included in procurement opportunities in the broader property sector, as well as Growthpoint. It is expected to set new benchmarks for small business integration into private sector supply chains. Estienne de Klerk, CEO of Growthpoint South Africa, says: “We believe in the principles of social and economic transformation and empowerment on all levels, and we are committed to achieving this. As a hands-on property owner, we own and manage our buildings – we recognise our unique position to develop small businesses to increase their access to market opportunities. We are proud to contribute to this pioneering public-private partnership designed to deliver on South transformation, business, economic growth and job AFRICANsmall PROPERTY REVIEW 4Africa’s SOUTH creation objectives.”

Programme beneficiaries and Property Point stakeholders

The programme beneficiaries are: Richard Chauke, Value Waste Recycling; Thabiso Makgoka, Mokibelo Investments; Flavia Tau, Tumagole Trading Enterprises; Malusi Ndebele, VM Refrigeration; Mandla Ndlovu, G and Sons Construction; Thabang Tauatswala, Ecco Environmental Waste Recycling; Sibusiso Ngwane, E-Security; Luanda Wagener, JJSL Vukuzakhe Construction; Tshepo Lekoloane, Leruo Baueng Trading Enterprise; Moyana Ntimane, Rumocco Eco Cleaning; Senzeni Masitenyane and Zoleka Ngema, Senzee Trading; Sibulele Kweyama, Sophistique; Remi Tshikororo, Tshiko Electrical; Teko Motlhabi, Techmo Prop; Sibongile Shikwambana, Sandwind Coatings. For more information on the Property Point ESD Programme or to contact us please email info@propertypoint.org.za or call 011-833-0340

education & training

Contributing to skills development in property management SAPOA and University of Johannesburg host Property Management course

Delegates a mixture of staff from the Department of Public Works and member companies.

APOA, in partnership with the University of Johannesburg (UJ), hosted another successful Property Management (PM) two-week block Course, comprising of twenty seven modules presented by six lecturers. The delegates were a mixture of staff from the Department of Public Works (DPW) and member companies. SAPOA Education Officer, Mafonti Morobi, stressed the importance of transformation and education as key strategic pillars for SAPOA. “One of the key value forces of SAPOA is to contribute to the advancement of our member’s interests in commercial property. As a professional association, our education efforts at SAPOA are

SAPOA Education Officer, Mafonti Morobi

SOUTH AFRICAN PROPERTY REVIEW

aimed at increasing knowledge and skills for the property industry amongst employees and the industry, ensuring that the content of our programmes and workshops and other educational interventions are aligned with industry needs and raising the employability and competency of the practitioners and professionals in the industry, and thus transforming the industry.” About the relationship with DPW, she says, “SAPOA is very committed to our partnership with DPW in training 400 of their staff over a 2-year period.” According to Course facilitator, Marno Booysens, the property management program will be of great benefit of any person who operates in the property management sphere. “We address a large array of topics that range from finance and accounting aspect for the property manager to health and safety and environmental issues to managing the relationship between tenant and owner and manager. The course exposes the delegates to a fast variety of topics and concepts that aim to assist them in the workplace and assist them in fields that

Course facilitator, Marno Booysens

they may not specialise in but will now have sound knowledge of. The course also uses a case study approach to apply all the topics to. This helps the delegate to see how it might work in practise and that it is not all just theoretical and, in a classroom,” he says. The Property Management course falls within the newly formed Johannesburg Business School (JBS) at UJ, in the College of Business and Economics (CBE) and is aligned with the university’s objective of creating learning opportunities for people in the workforce.

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here are, for obvious reasons, various qualification types; people have different career requirements, aptitudes are different and reality dictates that any nation requires a diversity of skills which satisfy all the diverse needs in a country. From a structural perspective the National Qualification Frame-work (NQF) provides a useful framework for qualification types, the table below being applicable to tertiary/higher education being discussed in this article, and highlighted below: Level Qualification 5 Higher Certificate 6 National Diploma/ Advanced Certificate 7 Bachelor’s Degree/ Advanced Diploma Higher Certificates are usually skills focussed, in order to enhance performance in a specific chosen field. This is usually offered as a one year full-time, or two years part-time qualification. National Diplomas/Advanced Certificates focus on careercentric or vocational training, with the emphases on career practice over a three year full-time study period. Degrees/Advanced Diplomas require critical thinking, comprehensive subject knowledge and application, with three or more years full-time study. Each prospective candidate ap-proaches the above

oppor-tunities from an own perspective. Important factors are: time and cost implications, and very importantly how the investment in education and training will impact the career prospects of the individual. Working adults, already on a career path, have constraints that school leavers may not have. Career Excel Academy (CEA) has a specific focus on working adults (not excluding anybody else) to enhance/excel career development. CEA is in the process of entering the market with specific built environment disciplines Higher Certificates. The private sector adult education ‘market’ is becoming more vibrant con-tinuously with CEA being unique in focussing strongly on the built environment, rather than more generic options. It is crucial for prospective candidates to distinguish between learning opportunities only, and earning a qualification. It is prudent, particularly when entering learning programmes that may require studying for a year or longer, to ensure that it is a qualification, awarded by an institution which is registered with the Higher Education Quality Council (HEQC). The HEQC is a permanent sub-committee of the Council on Higher Education (CHE). A typical Higher Certificate requires at least 120 credits, which translate to 1200 learning hours. Candidates should therefore ensure that the institution they choose provides an accredited qualification.

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legal update

High Court confirms the role and duties (and future) of conveyancers T

he process of conveyancing was once referred to as “the mysterious procedures, known only to conveyancers and officers in the Deeds Office”. Conveyancing as a profession in South Africa is based on many years of longestablished custom and practice. It is commonly known that South Africa has one of the best land registration systems in the world, and the conveyancing profession can be seen as one of the cornerstones of this system. This has been confirmed in a recent judgment handed down by a full bench in the Gauteng Division of the High Court in the matter of Proxi Smart Services (Pty) Ltd (“Applicant”) v The Law Society of South Africa and 13 others (“Respondents”), Case No: 74313/16, handed down on 16 May 2018 by Judges KE Matojane, CJ van der Westhuizen and JJ Strijdom, all concurring, where the following was said: ‘The highest standard of professionalism and honesty are fundamental to conveyancing transactions, which involve large sums of money represented by undertakings exchanged in trust. The public derives comfort from the fact that attorneys and conveyancers are regulated by statutory law societies, the Fund and a Code of Conduct that prescribes high ethical standards, which they must adhere to ensure that the public is protected.’ The Applicant in the matter applied for a declaratory order, that its business model for performing certain services pertaining to property transactions will not contravene or otherwise fall foul of provisions in the Attorneys Act No. 53 of 1979 (“Attorneys Act”), Legal Practice Act No. 28 of 2014 (“LPA”), the Deeds Registries Act No. 47 of 1937 (“DRA”) and regulations promulgated in terms of the DRA (“DRA Regulations”). The application was dismissed with costs.

Summary of issues The Applicant’s case was essentially that, a “typical transfer” consists of work termed as “administrative and related services” (also 30

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called“non-reserved work”by the Applicant) and worked reserved for conveyancers (also called “reserved work” by the Applicant). Non-reserved work is inclusive of, but not limited to, reviewing and implementing the provisions in a deed of sale, collating and capturing information of parties, dealing with payments to SARS, making rates and levy payments, doing investments, fulfilling FICA obligations, and attending to the financial arrangements of a property transfer (such as collecting and payment of purchase prices). In terms of the Applicant’s business model, it intended to do all the nonreserved work (jointly with its own panel of estate agents), and would supply all information obtained to its own panel of conveyancers, who would only do the reserved work (at a capped rate). The Court held that the distinction between reserved and non-reserved work was of the Applicant’s own making, as the subject legislation does not divide the functions performed by a conveyancer as such. Regarding the Applicant’s reference to the so-called “typical transfer”, the Court remarked, “This ignores the fundamental reality that every property transaction is unique and not typical.” The Respondents contended that all work of whatever nature associated with immovable property transactions and transfers indivisibly and inseparably forms part of conveyancing practice, which has, by usage, custom and practice over centuries, become work that is performed, and ought to be performed, exclusively by conveyancers.

Reasons for the judgment The reasons for dismissing the application were, among others, that the relief sought was incompetent (there was ambiguity, non-specificity and a lack of clarity in the requested order), and impermissible (the Applicant failed to prove that it has any direct and substantial interest in the subject matter).

The purpose of this article is not to consider the merits of the Applicant’s case, or to deal with all aspects raised in the judgment. The aim is to highlight some of the aspects dealt with in the judgment, confirming the unique role and duties of conveyancers.

The statutory duties of a conveyancer In its decision, the Court referred to some of the statutory provisions that govern the duties and role of conveyancers. A conveyancer is a specialist attorney who qualified as a conveyancer after successfully completing an examination and admission as such at the High Court. The following provisions confirm, among others, the onerous duties placed on a conveyancer, all of which lead to accountability and resultant protection of the public at large. ●● Section 20 of the DRA provides that deeds of transfer must be prepared in the forms prescribed by law or by regulation, and shall be executed in the presence of the registrar by the owner of the land described therein, or by a conveyancer authorised by power of attorney to act on behalf of the owner, and shall be attested by the registrar. ●● Section 15 of the DRA provides that the registrar of deeds will only attest, execute or register a deed of transfer, mortgage bond or certificate of title or registration of whatever nature if it has been prepared by a conveyancer. ●● To “prepare” a deed, Section 15A requires that a conveyancer must sign a prescribed certificate on such deed. In signing such a certificate, a conveyancer accepts the responsibility for the accuracy of those facts mentioned in such deed. This means, for example, that a conveyancer must authenticate the identity of a person, and ensure that the person signing a deed is authorised to do so and entitled to do so in terms of a trust deed or other statutory document. ●● Section 83(8)(a)(i) of the Attorneys Act prescribes documents that may only be

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legal update ●● prepared by an attorney, which include “any agreement, deed or writing relating to the immovable property or right in or to immovable property…”. In this regard, the Court held that this restriction includes both the “preparing” and “drawing up” of such reserved documents. This includes that a conveyancer or his subordinates must obtain, check and verify all the information contained in such reserved documents.

Protection of the public With respect to the protection of the public, the Applicant argued that it would be registered as an authorised financial services provider, and take out comprehensive insurance cover in the form of professional indemnity cover and director’s liability cover. The Court found in this regard that there is no statutory scheme and no regulator that will ensure that the guarantees the Applicant undertakes to put in place to protect client funds are in fact maintained. Compared thereto, the following provisions and protections apply to attorneys and conveyancers: ●● Section 25 of the Attorneys Act establishes the Fidelity Fund, the purpose of which is to reimburse persons who suffer pecuniary loss as a result of misappropriation of trust monies by a practitioner or his subordinates. ●● Section 78 of the Attorneys Act effectively ensures that buyers and sellers can deposit their funds risk-free in a separate trust account. (In terms of Section 78(7), funds in an attorney’s trust account are excluded from the insolvent estate of a conveyancer.) ●● The Attorneys Act and professional rules further contain numerous provisions dealing with and placing strict obligations on attorneys to keep and maintain accounting records, and to implement and maintain internal control measures. All these provisions ensure that the public at large would be protected when there is non-compliance with requirements or unprofessional conduct by the conveyancer. 32

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Ethical framework Some of the fundamental principles of being a professional person are that such person is bound to ethical rules issued by a regulatory body, and must be able to exercise his or her duties independently, professionally and free from any conflicts of interest. In the instance of attorneys and conveyancers, these rules are, among others, found in the Consolidated Rules for the Attorneys Profession . The most important finding regarding these rules pertaining to the Applicant was that “Self-evidently, the model depends solely on estate agents to market the applicant and the conveyancers on the applicant’s panel, in exchange for which the agency receives payment from the applicant.” The Court found that this contravenes Paragraph 49.17 of the Consolidated Rules, which prevents, among others, an attorney to directly or indirectly participate in an arrangement “securing professional work solicited by a third party”. It is interesting in this regard that the Court referred in its judgment thereto that the First Respondent did not prevent the Applicant or the estate agents and conveyancers from implementing the model. The First Respondent merely advised that the business model cannot be supported, and the relevant law societies have cautioned their members that if conveyancers participate therein, disciplinary proceedings against such members would follow, as they would be acting in contravention of the Attorneys Act as well as the Consolidated Rules.

Trust as a fundamental principle Trust between conveyancers has always been one of the fundamental principles of the current conveyancing process. On a daily basis, most conveyancers have to rely on the integrity and trust of all other conveyancers who are part of the process. In this regard the judgment was critical of the Applicant’s model that a conveyancer would not be personally involved in managing the finances involved in a transaction and “will rely to his peril on the Applicant to ensure that he or she does not pass transfer of

the property to the seller until the applicant has secured payment of the purchase price”. The Court continued to refer to a practical issue with a typical transfer, where bond attorneys issue guarantees and prepare bond documents delivered to them by the transferring attorneys. Transferring attorneys are expected to certify that the price recorded in the flysheet is the actual price being paid by the purchaser. Would any bond attorney be willing to cooperate with (and trust) a third party who is not an attorney and a conveyancer?

The future of conveyancing There should be no argument against any advancement of conveyancing to improve and streamline the process. In this regard, new technology should be embraced and welcomed by conveyancers and all other players in the conveyancing process. Technological advancements in the process have been dramatic over the last few years. They include: ●● The use of SARS’s eFiling system to pay transfer duty (which is notably dependent on the actual signing and declaration by a conveyancer); ●● Online applications for rates clearance figures and clearance certificates; ●● The availability of online title deeds and information in the relevant deeds offices; and ●● The electronic tracking system when deeds have been lodged at a deeds office. It is notable that the proposed Electronic Deeds Registration Bill still refers to and includes the obligations of a conveyancer and a notary public in terms of the DRA. Based on the judgment and the aspects raised in this article, it remains of paramount importance that any future system should not affect any of the roles, duties or accountability of a conveyancer. Johan Coetzee Partner and Head of the Real Estate Team at Fasken Attorneys e: jcoetzee@fasken.com t: +27 (0)11 586 6000 Sandton

legal update

Grocery Retail Market Inquiry expected to clarify exclusive lease agreements The Grocery Retail Market Inquiry (Retail Inquiry) commenced with its investigations towards the end of 2015. The Retail Inquiry concluded its investigations towards November 2017, and a revised timetable was published recently, indicating that a provisional report will be published by 29 June 2018, and a final report and recommendations will be published by 28 September 2018.

he objectives that had to be assessed by the Retail Inquiry were wide-ranging, with a general focus on the informal grocery retail market in townships, peri-urban areas and rural areas. They included, among others, the impact of supermarket chains on small retailers, competition between local and foreign national small and independent retailers, the impact of regulatory restrictions on entering a market, buyer groups and certain identified value chains. Long-term exclusive lease agreements have always been quite controversial, and over the past few years they have often led to costly legal action between landlords and supermarkets. It is therefore not surprising that this was also included as one of the objectives of the Retail Inquiry. It is expected that the Retail Inquiry will bring muchanticipated clarity and guidance on the ongoing problems with long-term exclusive lease agreement provisions between landlords and supermarkets.

Background to exclusive lease agreements An exclusive lease agreement is generally a long-term lease agreement between a landlord and a tenant, which grants the tenant exclusive rights to operate in a specific shopping mall. The tenant is usually one of the big four national retail supermarket chains, and obtains “exclusivity” in a particular shopping mall. The exclusive provision could also include, for example, that no other supermarket, bakery, chemist or butchery may do business in the shopping mall. While excluding any possible competition for the retailer, an exclusive lease agreement also ensures the shopping mall’s financial viability and sustainability. This aspect was also acknowledged by the Retail Inquiry as a positive benefit in that it may lead to protection of an investment and a potentially optimal tenant mix in the shopping mall, which may also benefit the consumer and the small businesses in the shopping mall. The legal basis to argue that an exclusive provision will fall foul of the provisions of the Competition Act is that it could be seen as a prohibited practice. In this regard, Section 5(1) of the Competition Act prohibits an agreement

between parties in a vertical relationship if it has the effect of “substantially preventing or lessening competition in a market”. In the instance of an exclusive lease agreement, there is a vertical relationship between the landlord and the tenant, and the market could be the supply of retail space to tenants in the shopping mall. If it can be proved by a complainant (for example a competitor) that this arrangement will substantially “prevent or lessen” competition in that market,

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legal update

it could well constitute a contravention of Section 5 of the Competition Act. The Retail Inquiry’s current investigation into exclusive lease agreements is the second one of its nature. It follows from, among others, complaints made by SAPOA to the Competition Commission (the Commission), after some of its members needed clarity and guidance following the findings of the Commission’s previous investigation. Fasken acted on behalf of SAPOA in this matter. When the Retail Inquiry commenced its work towards the middle of 2016, the SAPOA complaint was placed on hold, as exclusive leases also formed part of the matters being investigated by the Retail Inquiry. The Commission’s first investigation into the four major supermarkets was concluded in 2011, when no evidence of anti-competitive behaviour or price-fixing was found. At the time, the Commission had concerns about long-term exclusive leases and indicated that these may possibly contravene the Competition Act, particularly where supermarkets have market power. After the Commission’s first investigation, a number of landlords thought there was an understanding that longterm exclusive lease agreements would not be enforced because they may not be legal. This led some retailers to turn to the courts to enforce their contractual rights aggressively and successfully. In addition thereto, these concerns have been addressed in that the Competition Tribunal imposed a condition on the merger approval of parties in property-related mergers where exclusivity clauses in leases exist, that they must negotiate in good faith to seek an end to the relevant exclusivity clauses upon termination of the lease agreement. In most of these cases the retailer did not agree to the cancellation of the clause, or the lease agreement would only terminate after a long period, which led to the perpetuation of this restrictive practice.

Highlights of submissions made to and public hearings at the Retail Inquiry Numerous submissions were made by stakeholders, including confidential written submissions by individual SAPOA members (a process facilitated by Fasken on instruction from SAPOA). The Retail Inquiry concluded its investigations when it invited specific interested parties to make submissions as part of public hearings. Transcripts of these public hearings and proceedings are available on the Competition Commission website. The interested parties who took part in the public hearings included four property groups as owners of 34

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shopping malls, the major supermarket retailer groups and two financial institutions. Some of the submissions made during the public hearings were made confidentially. The following trends emerged from the publicly available information: ●● Most property groups opposed the use of exclusive lease agreements and indicated that they do not insist on including any exclusive provisions in their lease agreements. ●● The financial institutions opposed the use of exclusive lease agreements in principle, but noted their importance where development funding may require them. ●● Only one major retailer made an open submission, noting that the larger shopping malls now built avoid exclusive lease agreements as their size justifies more than one supermarket. This retailer has adopted a more expansive approach and has excluded smaller traders operating in the same malls from its exclusivity provisions. Even though there were several submissions, there was no clarity as to whether exclusive lease agreements should be allowed, prohibited, or allowed under strict guidelines. Some of the following aspects could perhaps be considered as guidelines to an eventual finding: ●● Each case should be assessed on its own merits as to whether a retailer would require exclusivity to justify its investment, while establishing how long the developer or owner of the shopping mall would need a lease agreement to be to secure sufficient rental income to justify the building of the mall. ●● The duration of exclusive leases should be limited to a maximum period, perhaps emulating Australia and the EU, where the duration of an exclusive lease is limited to a maximum of five years. ●● Provisions should be put in place on how to deal with any current exclusive lease agreements should the legalities change, providing whether existing agreements must be re-negotiated, and if so, within what time periods this should occur. It is therefore still not the end of the road for the use of exclusive lease agreements in the retail sector. The outcome and findings of the Retail Inquiry should hopefully bring clarity to this ongoing matter.

Johan Coetzee Partner and Head of the Real Estate Team at Fasken Attorneys e: jcoetzee@fasken.com t: +27 (0)11 586 6000 Sandton

SOUTH AFRICAN PROPERTY REVIEW

legal chat

Big data in the legal environment The work environment is under constant bombardment to become more efficient, more tech-focused and more automated. We talk to Cliffe Dekker Hofmeyr’s National Head of Practice: Real Estate John Webber about his views on technology in the legal profession By Mark Pettipher

John Webber, Cliffe Dekker Hofmeyr’s National Head of Practice: Real Estate

t: +27 (0)11 562 1444 john.webber@cdhlegal.com www.cliffedekkerhofmeyr.com 36

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ebber starts off the conversation by saying that you need to put “big data” in the legal profession into context. The majority of the information collected by lawyers is protected data in terms of the POPI Act; as such, mining of that data is limited and restricted to use within the confidentiality of a law firm. He does not dismiss the use of data, pointing out that there’s a lot of information in the public domain, and there is great scope to use that data more intelligently, especially when it comes to giving notice. For example, in town planning, each land parcel has an LPI code that identifies where the land is. “Imagine if an app could be developed to trigger a response via your phone as you pass that piece of land,” says Webber. “The app could be giving notice of rezoning, intent to build, or status of the development’s applications.” Law firms receive large amounts of data from a variety of sources in respect of a diverse spread of matters and matter types on a daily basis. The source may be from a bank, a planning department, a deeds registry, parties to a transaction, a regulatory body – or simply the result of the due diligence process. “The ideal is that we should become more efficient when we’re dealing with information and data,” says Webber. “To answer your question about whether blockchain is the way to store our confidential data, in my mind it works on a double-entry principle. It is checked across decentralised systems and may not be appropriate for a law firm. “Blockchain could be best utilised in public departments such as the Deeds Registry, where the government needs to maintain records across various local authorities. Government bodies tend to be very proprietorial about information, and I see that a complication may arise with regards to information custodianship.

Then there is the question of the quality of data being input, because it may not be complete or tagged according to a standard convention. As technology develops, it is finding its way into law firms. A number of them, including CDH, are now using artificial intelligence (AI) to streamline documentation. Law firms are drowning in documents to the extent that no one lawyer or team is able to read them all. Sophisticated machine learning systems, however, are incredibly good at digesting data, and drawing out significant patterns and correlations at near-instant speed. Luminance, a software that has been designed with law firms in mind, helps lawyers categorise, review and analyse thousands of documents at speeds no human can match. With AI taking the burden of low-level cognitive tasks – such as those common in due diligence, compliance, insurance or in-house contract management – lawyers can optimise their practice, working smarter, faster and more effectively. CDH is also making use of web-service technology Fileflow.net – a platform that, according to Webber, allows tasks to be automated once a particular job function has been initiated. It is template-driven, and can be applied and initiated by putting in a request to collect documents relating to a specific topic from a user. FileFlow collects documents on behalf of the initiator, sending follow-up reminders automatically where documents are still outstanding. It also triggers diarised events to all parties involved, alleviating much of the mundane manual processes in the practice. “With this automation, we are able to free up people’s time,” says Webber. “They are able to do much more, which then translates into better service delivery for our clients. Habits are being tested – but we are getting great results.”

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PSCC

SAPOA signs Memorandum of Understanding with the

Property Sector Charter Council

SAPOA signed a Memorandum of Understanding (MoU) with the Property Sector Charter Council (PSCC) to continue funding the PSCC to the tune of about R250 000 a year for an additional three-year period

SAPOA CEO Neil Gopal with PSCC CEO Portia Tau-Sekati

he intention of this ongoing strategic partnership is to collaborate in fostering a common goal and vision, which is to address the issue of – and promote – transformation within the property industry. The Property Sector Charter Council (PSCC) is an association that commits itself to the implementation of a Transformation Charter. It commits to strive for transformed property relations in South Africa, and to promote a vibrant and growing property sector that reflects South Africa as a whole, contributing towards the development and establishment of an equitable society. Both SAPOA and PSCC highlighted the importance of transformation in the property industry. 38

SOUTH AFRICAN PROPERTY REVIEW

SAPOA Chief Executive Officer Neil Gopal acknowledged the importance of this partnership with PSCC. “One of the strategic pillars that SAPOA has identified is the need to drive transformation in the industry,” he said. “The initiation in 2004 of the charter process and signing of this recent MoU signifies our commitment towards transformation. It is important for us as an organisation to ensure that the PSCC is well-funded, that it runs effectively and efficiently, and that the issue of transformation is top of the agenda always. Having a long-term funding commitment gives us both a bit of certainty as to where issues of transformation are going at least three years in advance.”

PSCC Chief Executive Officer Portia Tau-Sekati echoed the sentiment. “We’ve always worked well with SAPOA,” she said. “The significance of this MoU is that we are able to drive transformation together, and have some structure in terms of how that can be done and achieved. There are many entities doing their bit in driving transformation – but together we can achieve way more than the individual components of a whole.” SAPOA has signed several such MoUs with various organisations. These working relationships, according to Gopal, are important within the property industry, because they not only benefit SAPOA members but also enable combined strategy and the pooling of resources.

SOUTH AFRICAN PROPERTY REVIEW

KZN overview

Why Durban? South Africa’s other major cities may have louder voices – but in Durban, the substantial and consistent growth in infrastructure, private and public partnerships, and tourism initiatives is leading the way. Currently, there are more tower cranes across the greater Durban area than there have been in the past 20 years… By Anne Schauffer

bird’s eye view of Durban shows the economic arterial layout: the massive N2 along the coastline, from north to south; and the N3, the T of the T-bone, heading west to Gauteng. But look closely, and you’ll see a fleshing out of the T: the C3 phase of Go!Durban, the city’s R20-billion Integrated Rapid Public Transport System – one which will ease congested routes, significantly alter transport patterns in eThekwini, and provide long-awaited efficient public

SOUTH AFRICAN PROPERTY REVIEW

transport. Once completed, Go!Durban will see nine main routes linked by various modes of transport – bus, rail, taxis, cycling and walking. The C3 Go!Durban route opens this year, and will have between seven and nine investment nodes on it. The city’s Invest Durban unit has confirmed that investors are planning significant developments on the Pinetown end, the Bridge City end, and on the six or seven nodes in between.

KZN overview

Russell Curtis heads up Invest Durban, a unit of eThekwini municipality. He discussed the journey to the positive point that has been reached: “National Treasury has been running the City Support Programme (CSP) for about four years, largely focused on investment,” he says. “It’s working directly with the eight metros because we are effectively the engines of job creation, revenue creation and growth for the entire country. International investment experts were brought in, who initially focused on public sector investment. It resulted in the Built Environment Performance Plan (BEPP) – a great one that’s helping to synergise public sector investment plans, so that housing is in synergy with roads, and so on. “In the past couple of years, the focus has been on private sector investment. The World Bank Head of Investment Promotion was brought in from Washington DC, and worked with us as Invest Durban. We’ve pulled in the Durban business and city leadership, and that’s resulted in a much greater focus on attracting and facilitating investment. The outcome is the catalytic projects team where, on my particular dashboard (Durban Investment), we have

about 75 projects, on average each greater than R100-million (many of them substantially so). That brings an investment pipeline of about R750-billion to Durban. “The city top-sliced 25 of the projects, named them catalytic projects, and allocated them to a catalytic projects team. Those senior managers are there to help the mainly private sector projects. Many of them are known – The Point, Dube Tradeport, etc – while others are less known (for example, the Durban iconic tower or the Arch development in Umhlanga Ridge, Ridgeside). “The other key outcome was to make a change in how the city promotes itself as an investment location – how it identifies, attracts and facilitates new investment. That’s Invest Durban. We’ve been super-sized, with a budget and staffing complement to match, so that the city can be a great deal more proactive in promoting itself in a business sense. “For a couple of years now, the city’s been doing a good job of promoting the tourism side of things. Now it’s about promoting business and investment.” SOUTH AFRICAN PROPERTY REVIEW

KZN overview

Team Durban: business and investment “We are now more intentionally proactive in targeting specific sectors, in partnership with business leadership. We’ve formed a structure called Team Durban, which includes significant business leaders to help advise – and partner with – the city when it comes to attracting new investment. “Team Durban’s first activity is a UK investment mission this month – we’re going as both Durban’s city leadership and business leadership. We’re having a Durban/London investment day where we’re taking a handful of the catalytic projects for pre-set business-to-business meetings with institutional investors, private investors, and high-net-worth individuals in the UK. Companies accompanying the city officials include the Durban Point Waterfront, Tongaat Hulett, Dube Tradeport, Videovision Entertainment, SAPOA and others – all of them self-funded. “So the city of Durban is getting much more serious about its own public and private sector investment, and that public sector investment is being done in a much closer partnership with business. “Another outcome is that the City Manager is driving more ‘customer-centricity’ into how the city engages with its most important business customers. He has launched a customer relationship management programme: he’s attaching an executive to each of the 20 or 30 big players or big organisations in Durban, then driving that customer-key client relationship management exercise into the whole organisation at eThekwini Municipality. We have held workshops and agreed on areas for collaboration, translating them into work streams (jointly populated by SAPOA members and eThekwini municipal senior managers), so we can work on these areas for collaboration going forward. Every quarter, the team convenes with the SAPOA CEO, the City Manager and various others to assess progress on specific tasks.

The port of Durban Durban is home to Africa’s busiest sea port and the southern hemisphere’s biggest and best-equipped container terminal, and is strategically positioned on the world’s shipping lanes. Warwick Lord is SAPOA’s Chairman of the National Developers Forum. He’s also the CEO of Cato Ridge Logistics Hub Consortium (Pty) Ltd, developers of Transnet’s inland port 42

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or “back of port expansion” at Cato Ridge on the all-important road corridor between Durban and Gauteng. This, the N3 freeway, forms part of South Africa’s strategic integrated project – one of the government’s national priority projects. “Durban has by far the biggest, busiest and most efficient port in Africa,” says Lord. “In order to catapult itself nationally as well as internationally, Durban needs to work hard at this competitive advantage – the port and the logistics stream. There has been an emphasis provincially and nationally to get this logistics stream or process working more efficiently. The city suffers from a lack of quality logistics/industrial space because of the constraints of the sea on one side, and Durban city on the other. All of the studies conducted point at Cato Ridge as one of the ideal locations because of the convergence of rail, road and pipeline. There’s also a tank farm coming for mass fuel storage. “Here, with SANRAL’s proposed new Cato Ridge interchange on the N3, you will have a convergence of three forms of transport (intermodal). It’s not just rail/ truck in and rail/truck out; it’s convergence between rail, road and pipeline.” In a nutshell, when the containers or bulk products land at the port, Transnet rails them to Cato Ridge; from there, they’re stored and/or disseminated. Cato Ridge is the perfect location for a truck stop and staging facility from Gauteng, because the trucks can do the return journey in a day. The project is, like all catalytic projects, expected to create substantial employment, upskilling the local AmaXimba community, which has close to 60% unemployment. “Our view is that we are seeing a change in the way retail operates with the advent of online retail,” says Lord. “Not only do you need a warehouse as your ‘store’, you also need a returns warehouse – the ability to return goods is a key factor in buying online and leads to double the amount of warehousing required. “So the Cato Ridge Inland Port Development – or back of port expansion – as billed by Transnet, has a big aim of improving this logistic stream for the whole of South Africa, and for the entire SADC region. “It’s a 20-to-25-year project, full build out. Ideally, all things being equal, we’re looking to start construction this year or in the first quarter of next year.”

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KZN overview

Other catalytic projects spring-boarding off logistics and the role of the port include the revitalisation of Hammarsdale west of Durban with the Keystone Logistics and Business Hub. The complex is situated next to the Hammarsdale Industrial node, and Mr Price has injected R1-billion into its new home there. South of Durban, the site of the old Clairwood Racecourse will become the Clairwood Logistics Park.

The aerotropolis Just as the port plays a major catalytic role, so too do King Shaka International Airport, Dube Tradeport and the emerging Durban Aerotropolis. Dube Tradeport – a special economic zone – and the airport are at the heart of the first purpose-planned aerotropolis in Africa. Strategically located between the sea ports of Durban and Richards Bay, the Durban Aerotropolis is intended to become the premier business and trade hub in sub-Saharan Africa – South Africa’s business gateway to the world. Based on a 60-year master plan, the Durban Aerotropolis is being purpose-built within a radius of 7,5km around Dube Tradeport. It’s one of only a few such developments worldwide with the luxury of a largely greenfield environment on which to plan and attract new investment. It’s a freight-orientated development with world-class cargo facilities, managed by a single handler and considered the most secure in Africa.

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This zone has extensive public and private sector investment and interest. As Curtis says, “Private sector successes in Dube Tradeport include Samsung, Yangtze Optical (in a South African JV) – the world’s largest fibreoptic manufacturing company – and, more recently, Mahindra bakkie and light commercial vehicle assembly facility. It’s a clear signal of foreign investment interest in Durban as a platform not only to supply southern Africa but all of Africa.”

Tongaat Hulett With strategic land-holdings located in and around the aerotropolis, Tongaat Hulett is confident that Durban and the aerotropolis have a massive advantage – because, unlike other cities, Durban isn’t a retrofit but a blank canvas. Tongaat Hulett considers this a great opportunity to co-create a new urban landscape, and facilitate the shaping of an environment that responds to the growing needs of an inclusive South African society. Tongaat Hulett’s 20-year history of property development in KwaZulu-Natal – in particular along the North Coast – has seen the completion of numerous highly successful nodes of commercial, industrial, residential and mixed-use projects. In fact, Tongaat Hulett could rightfully be said to have changed the face of eThekwini’s North Coast. And there is much, much more to come. “We have been working tirelessly with partners in the city, Invest Durban, Trade and Investment KZN, EDTEA and others,

Think about your next big investment because when you need it done, you need it done right At Commercial Exchange we realise that committing to a property is not a decision taken lightly and that when you make a purchase, you need it done right. Thatâ&#x20AC;&#x2122;s why we keep a sharp eye on the deal while making the process friendly and easy. We also like to look at the bigger picture of your investment; we share your vision and see an office park as an income stream or an empty space as a bustling business. Itâ&#x20AC;&#x2122;s your contribution to our country and its economy that will bring prosperity. This makes us bold in the present and excited about our future because we know that property reflects the pulse of the nation.

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KZN overview Coastal Precinct, the western expansion of the Umhlanga Ridge Town Centre into Cornubia and, in the very near future, Ntshongweni along the N3 SIP2 Corridor and (to the north) Tinley, – both of which will see new market opportunities being presented.”

Durban’s assets

to position Durban as an investment destination for large office occupiers,” says Chris du Toit, Commercial Head for Tongaat Hulett Developments. “We are working towards aggressively marketing Durban as a highly attractive place for large multinational companies, BPO operators, tourism operators and others, rather than just having large occupiers moving from other parts of Durban.” “North of Durban is an area that’s providing well-located, good-quality office buildings,” says Xoli Shabalala, Market Solution Head at Tongaat Hulett. “We’ve sold out 90% of our commercial stock – the first precincts in Ridgeside are almost complete, and all sold real estate is either under construction or about to get under way. We’re focusing further on Sibaya

Edwin van Niekerk, Executive Director at Maxprop Holdings (Pty) Ltd, and a member of SAPOA KZN’s Board, believes Durban’s most underutilised asset is “liveability”. “The liveability of Durban surpasses anything else in South Africa,” he says. The 20th Mercer’s Quality of Living report released in March this year once again voted Durban the most liveable city in South Africa. Van Niekerk is part of collaborative SAPOA and city nonprofit company known as Strategic Urban Management, which acts as the link between precinct management and the city. He’s very vocal about the value of urban improvement precincts (UIPs), a concept that works globally, extensively in Cape Town, and clearly in Umhlanga. “When you get precinct management right, your public space is looked after – it’s clean, it’s neat, it’s green, it’s secure; people start coming back, the quality of your tenants goes up as do your rentals, and your property value escalates,” he says. He points out Florida Road, and the rise in its investment potential. “Urban Lime bought up property in Florida Road, and put a UIP in place. Go there now, compared to a year or two ago, and you’ll see that it’s a different place.” Clearly, areas where precinct management is in its infancy are a great place to invest. Van Niekerk envisages a city where “We have a network of world-class precincts”, and where strategic urban management is focused on creating an effective, functional version of this that benefits all, from residents to property owners and investors.

Tourism

YOUR PROPERTY DEVELOPMENT PARTNER

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R39-billion’s worth of developments are in the pipeline for KZN, the largest slice of the pie being the Durban Point precinct development. The project is already under way with a R300million promenade development, and the final product will include everything from hotels and office parks to retail and residential – and a new cruise-ship terminal worth R215-million. Announced at the recent Durban Indaba, the list of tourism projects is as impressive as it is long, from the extension to the Tsogo Sun Suncoast Hotel & Casino and a R375-million Ferris wheel – the Durban Eye – to the 5 000m2 Durban cruise terminal to be completed by 2020. Durban is alive and well, with substantially more awards – national and international – than any other city in South Africa. With a goal of being the most caring and liveable city by 2030, Durban is right on track. “We’re encouraging more businesses to build the city and build the nation together,” says Curtis. “It’s not someone else’s job, and we cannot just leave it to, say, the public sector. Members of the private sector need to partner with each other and with the public sector to fan this tourism, trade and investment flame into a powerful blaze.”

ATTACQ WELCOMES

GILES PENDLETON HEAD OF DEVELOPMENT AT WATERFALL Giles Pendleton is an accomplished property developer with 22 years of global experience in Africa, Australia, Asia, Europe and the Middle East. Giles joined Attacq as a member of Exco in March 2018. His skills encompass a wide range of disciplines including general management, commercial property development, operational administration and engineering across roles in both public and private sector property development. Prior to being appointed by Attacq as the Head of Development for Waterfall, Pendleton was the Development Director for the Dubai International Financial Centreâ&#x20AC;&#x2122;s (DIFC) 225 000m2, mixeduse complex that includes the 60 storey Rosewood Hotel. He has also worked as the Vice President of Property Development and Head of Master Planning for the Dubai International Financial Centre Authority (DIFCA), a $25 billion, leading international financial hub

ATT House, 2nd Floor, Maxwell Office Park 37 Magwa Crescent, Waterfall City T +27 10 596 8892 | T +27 87 845 1136 F +27 86 242 9247 reception@attacq.co.za www.attacq.co.za

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for the Middle East, Africa and South Asia (MEASA) region. Pendleton started his career in South Africa working for a number of well-known property sector companies in multiple roles. This included working as Head of Property Development at Vukile Property Fund, a $1.5 Billion retailcentric, listed REIT. At Vukile, he led the creation of alternative asset classes focused on developing hospitals and medical facilities, student accommodation and highrise residential buildings. Pendleton also served as the Managing Director of Development at Liberty Properties, which is considered one of the largest real estate developers in Africa. Here, he focused on new retail, mixed-use high-rise developments and the greening of existing assets. Furthermore, at Liberty, he was not only responsible for managing the $400 million of new development work in South Africa, but Pendleton also oversaw the $3 billion Liberty Property Portfolio.

In his current role as the Head of Development at Waterfall, Pendleton is responsible for Waterfallâ&#x20AC;&#x2122;s Development pipeline. His contribution to making Waterfall a sustainable development using world-class smart technology and urban design is invaluable. Giles is also an eminent member of the Royal Institute of Chartered Surveyors (RICS) and is one of only eight South Africans to have become a Fellow of the Royal institute of Chartered Surveyors (FRICS).

one on one

Waterfall:

a world-class South African city Following on from last year’s Property Review interview with Attacq, this year we took the opportunity to talk to Jackie van Niekerk, Chief Operating Officer and to newly appointed Head of Development, Giles Pendleton. They shared with us insights on company performance in the past year, developmental plans in the works and insight into how Attacq stays on trend in such a dynamic sector http://www.attacq.co.za/development

http://www.attacq.co.za/portfolio

By Mark Pettipher

Head of Development Giles Pendleton with Chief Operating Officer Jackie van Niekerk

year into her appointment as Chief Operating Officer, Jackie van Niekerk outlines Attacq’s four key value drivers: its South African portfolio, which includes the Waterfall City and Logistics Hub developments; Attacq’s retail and mixeduse assets; the 22,7% stake in MAS Real Estate Inc; and investments in various malls throughout the rest of Africa. “As a key stakeholder, we have a strong affinity to MAS Real Estate Inc, where Morne Wilken has taken up the reins as CEO,” she says. “The 22,7% stake in MAS affords us a continued international presence, while at the same providing a hedge against South Africa’s economy. “By sharpening our focus on the four value drivers, we are able to concentrate on securing longevity within our asset groups, while not detracting from our regional malls and precincts – including Brooklyn Mall, Lynnwood Bridge Retail 48

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and Glenfair Boulevard in Pretoria; Newton Junction in Johannesburg; Eikestad Precinct in Stellenbosch; the Garden Route Mall in George and the Mooirivier Mall in Potchefstroom. “The above aside, our greatest developments are within Waterfall City and the Waterfall Logistics Hub. Waterfall City – with about a million square metres of bulk – is the most significant feature in our portfolio. It offers us the greatest scope for growth, and to bring to fruition what was once only a dream. “The master plan is now 10 years old, and we are about halfway through our projected time frame, which is a huge milestone for us. The year has presented us with the opportunity to review what has worked thus far, and to identify what needs to be improved going forward. “The Mall of Africa – now two years old – has seen 11% growth year-on-year.

We are already seeing an improvement in turnover, an increase in traffic and, after two years of trading, an accelerated ‘bedding down’ of the mall. Usually an asset such as this one would take three to five years to offer significant returns. “Since the completion of the PwC offices, the mall is enjoying a greater footfall, with tremendous growth in sales in the first quarter of this year.” Giles Pendleton, appointed as Head of Development in March says that “Waterfall City is starting to establish its own identity and framework, driven by the mall and the completion of the PwC head office as well as the existing buildings on the western side of the development along Allandale Road and Waterfall Drive. “The next big development in Waterfall City will be the highly visible Deloitte head office, which goes to our philosophy of finishing the core of the CBD in a methodical and sustainable manner. “We are continuing to look at the infill sites that were earmarked for residential development. Two have been activated and will comprise urban, high-density residential offerings. To date, residential development in the area has concentrated on single stands or town-houses. “This densification will cement the ‘live, work, play’ aspect of the city. We are also excited to be releasing more corporate parcels of land.” By regularly revisiting the city’s master plan, Attacq is re-evaluating how the city will be managed. Design thinking and work patterns have changed over the past 10 years and, until quite recently, the idea of a “smart city” didn’t exist. There is a demand for more sustainable

infrastructure, and as technology-linked management systems are becoming more prevalent, they need to be incorporated into current and future builds. In line with this new thinking comes an opportunity to re-imagine how the company designs work and public spaces. Attacq is closely examining how the Mall of Africa works within a corporate office environment – in particular, how people use and gain entrance to the mall. It is also looking at ways to “pedestrianise” the mall and the surrounding office precincts, by developing walkways, “green lungs” and plazas to complement the city’s tiered landscaping. Understanding Waterfall City’s value proposition, being centrally located between the CBDs of Johannesburg and Pretoria and being close to the sub-CBDs of Sandton and Menlyn, explains why corporates such as Deloitte and PwC chose to consolidate their offices there. Added to the positives of being centrally located between business hubs is the short 20- to 30-minute journey time to Oliver Tambo International Airport. The city is also attracting tenants who don’t necessarily need the centrality aspect of the location, but are attracted to the precinct’s ease of access and transport infrastructure. The original master plan allowed for multiple layers of residential offerings and mixed-use facilities, complimented by the dedicated Gautrain bus that links Waterfall to the Midrand Gautrain Station – and the close proximity to Gauteng’s network of main motorways and highways. “Respecting the principles of the master plan, technology forms a key focus of a large city development such as Waterfall,” explains Pendleton. “There is a modern mix of architectural styles, which goes a long way towards achieving a city that is growing and evolving as it develops. Most buildings are Green-rated, either

through the Green Building Council of South Africa certification or the US Green Building Council’s Leadership in Energy and Environmental Design.” Technologically, the city development is keeping on trend, and the industrial developments, retail buildings and office complexes are connected to a fibre backbone network. This network enables all the buildings at Waterfall City to progressively move towards becoming a “smart city”, allowing for collection of big data to be harnessed through building management systems (BMS). This enables facility managers to plot patterns and plan capital replacement of plant and equipment, as well as to follow preventative maintenance and upkeep of the city’s assets. “We are working within a futureproofing smart city strategy,” says van Niekerk. “Our BMS systems are integrated with the mall and office security protocols. We can monitor mobility, utilities as well as cost of operation data, thereby being able to mitigate costs and bring better returns to our stakeholders.

“We view technology as an enabler that allows us to quickly process data, so that our skilled team can review and interpret the findings. It is a tool we can use to add value for our tenants and our shoppers. “Keeping relevant is very important to us. That means that our shopping centres and the city must be fresh. They must understand the needs and expectations of the customers, from the demanding three-year-old to the older shopper or a single person. ‘Shoppertainment’ is a catchphrase that comes to mind: it is just as important for us to attract the right tenant mix and product offering as it is to develop modern and sustainable workplace environments. “Our mall – and the city, for that matter – must be engaging and social. We aim to develop a sense of community spirit. By hosting events such as the Waterfall Parkrun (which started in May this year) and an urban farmers’ market – events aimed at quality family time and social engagements – we are focusing on creating a welcoming environment for all at Waterfall.”

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Amrod Waterfall Logistcs Hub

BMW Waterfall Logistcs Hub

ATT House, 2nd Floor, Maxwell Office Park 37 Magwa Crescent, Waterfall City T +27 10 596 8892 | T +27 87 845 1136 F +27 86 242 9247 reception@attacq.co.za www.attacq.co.za

Gateway West

PwC

Waterfall City

Attacq-SAPOA Half Page Advert-178x134mm trim.indd 1

2018/06/06 12:32

rmscor, as the acquisition agency for the Department of Defence and other organs of State, has over the years developed technical expertise and experience in providing turnkey defence solutions effectively and efficiently to its clients globally â&#x20AC;&#x201C; solutions which include government to government contracting, research and development, testing and evaluation, industrial participation, quality assurance, product support, defence materiel disposal and specialized logistics. In 2015 Armscor embarked on a Turnaround Strategy that gave rise to the establishing of the Property Management and Leveraging (PML) division. The PML division plays a strategic role as a developer and repository of the standards, processes, and administration of projects determined by Armscor and leveraging of land assets. Our current PML service offerings include: ll Property Development and Project Management. ll Engineering, Procurement and Construction Management (Turnkey solutions). ll Facilities Management.

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SAPOA AFRICAN AD 178X134MM.indd 1 PROPERTY REVIEW 50 ArmscorSOUTH

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one on one

Alternative capital partnerships under way Ben Kodisang, founder and CEO of ALT Capital Partners, is anything but the new kid on the block. He talks to Property Review about utilising his knowledge, expertise and energy to “find new ways of defining conviction and defying convention, which effectively is disruptive to normal working methods”. In layman’s terms? He tells us about his new venture and the exciting opportunities that await By Mark Pettipher

“I

am inspired by the opportunity to create and build up an alternative investment business that aspires to attract foreign and local investment partners who are actively seeking to participate in the ‘Africa rising’ narrative,” says Kodisang. His LinkedIn profile describes ALT Capital Partners as a company with“a deep purpose that seeks to exceed the investment expectations of our investors while catalysing growth and development in the African economies we operate in. We believe that success comes from forging strong partnerships, having local and deep knowledge in our chosen field and always thinking globally.” ALT Capital Partners is a specialist investment business that focuses only on private markets. Its focus is on credit, property investment, agri-investment, infrastructure, housing, healthcare, private equity and venture capital. Simply put, the business lends money to corporates, joins forces with specialist funds and developers, finds investment partners and invests in assets that will deliver returns to stakeholders. “ALT Capital’s strategy is to look at three investment risk activities: low risk, which will offer up to three percent return on investment; moderate risk, offering up to five percent; and high risk, with seven percent and upwards,” says Kodisang. “Within each risk activity are different investment partners. In the low risk column,

Ben Kodisang, founder and CEO of ALT Capital Partners

we have private credit – what I call ‘nearly cash’. In the middle or moderate risk column is where most of our investments lie – including real estate, infrastructure, private equity and agriinvestment. In the third, high-risk column, you’ll find venture capital. “Each fund or asset that we create and invest in is set up and governed as a separate legal entity. The fund mandates the management company, ALT Capital Partners, which in turn employs the team of experts required to run and manage the assets. “On the whole, each company is funded by receiving fees up to a carry bar of a nine percent hurdle. Thereafter we share 20% of the investment return.”

Investment risk activity Return Real estate Infrastructure

US$ Private credit

Venture capital

Private equity Agri-investment

Risk 0%

Low risk

Moderate risk

High risk

7+%

To illustrate, Kodisang elaborates: “In the majority, we are dealing with institutional investors – and they know what they want. Take working with a pension fund as an example: they will employ a consultant who understands the ins and outs of the fund, what the demographics are, and the age of the beneficiaries. The fund will be clearly governed. Whether it’s a defined contribution or a defined benefit, the fund has defined liabilities – and, once it is established what those liabilities are, an investment policy statement is agreed upon and set up. Thereafter, once the affairs of the fund are known, an expectation of income return is set. “We then talk to that manager and understand the fund’s requirements, and direct the funds to one (or all three) of our investment categories.” ALT Capital is a custodian of other people’s money. It’s licensed to attract money and invest it accordingly. “Having broken down my vision into three categories, let me unpack them,” says Kodisang. “In terms of real estate, as far as South Africa is concerned, we are undergoing a correction. Wherever you look, the listed sector (as a lead indicator) shows a downward trend of 20% (this year). On a three-year cycle, it is down by four percent. On the physical market, a lot of office capacity has been created. As a result, office vacancies are tracking upwards. Retail was stable, but we are experiencing an over-subscription; malls and retail spaces are increasingly coming under pressure. To put it bluntly, South Africa is full. “As a private credit provider, ALT Capital Partners – registered in Mauritius is a USdollar fund – doesn’t have the same requirements as a bank. We raise money from investors. There is a cost involved and a mandated expectation of return on capital, so we find businesses to give credit to. Most developers have issues SOUTH AFRICAN PROPERTY REVIEW

one on one in raising capital for their projects; we examine the issues and solve the problem. We invest. “Our funding concentrates on being a US-dollar fund with a focus on Africa (but excluding South Africa). Our objective is commercial property, consisting of retail, offices and specialised industrial such as logistics. “We’re not developers, but we will partner with developers. ALT Capital is an investment fund. We’re an unlisted real estate investment trust (REIT); as such, we will outsource bought property assets to management companies such as Broll or JHI. “Because we are investors, we don’t get involved with the day-to-day management of the properties. We leave that up to the appropriate management company or specific mancos who are good at what they do. The ethos here is that we do what we’re good at: finding and raising capital, and creating portfolios to achieve returns from across the three risk categories by investing in developing African states.” The ALT Capital infrastructure partnership is fairly well established. Kodisang has entered into agreements with Bayakha Investment Partners. Bayakha Investment Partners is an authorised, black-owned specialist infrastructure fund manager licensed by the Financial Services Board as a Category II financial services provider. Established in 2015, Bayakha was created as a direct response to the growing need for fund management firms with the capabilities to identify and deliver financial and impactreturning infrastructure investments. Like ALT Capital, Bayakha combines alternative asset-class management capabilities with a focus on addressing the specific funding challenges of black-African market participants, to ensure that its investments transform both the structure of the economy and the dynamics of infrastructure access. Jointly, their mission of playing a catalytic role in the development of the African continent by solving capitalintensive developments is a clean fit with ALT Capital Partners. Through Bayakha, ALT Capital has a strategic relationship with Pele Energy Group, a diversified group focused on delivering structural transformation. This is delivered through Knowledge Pele 52

SOUTH AFRICAN PROPERTY REVIEW

(a research, advisory and development implementation firm), Pele Green Energy (an independent power-producing company that specialises in renewable energy), and Pele Natural Energy (an independent power-producing company specialising in conventional energy). On the social infrastructure side, ALT Capital is developing a partnership with Marang Capital, who is establishing a pipeline of urban and peri-urban healthcare facilities. Under infrastructure investments, ALT Capital is conceptually working to develop integrated housing aimed at the entry-level urban residential market, which involves taking office stock and converting it to costeffective residential units.

A corporate investor that has funds set aside for social CSI or other enterprise developments can take advantage of the government’s S12J Income Tax Act The fund is also looking to cater to a middle-income market in townships. The concept would be to restore dignity to people by providing rental stock that is highdensity and good quality, that looks good and that is affordably priced. By working in collaboration with the communities, it is envisaged that these precinct units would be of a standardised modular design that could be applicable to infrastructure demands from Cape Town to Cairo. Moving to private equity, ALT Capital has also partnered with Adinah Capital Partners. Adinah partners with entrepreneurs with a view to making long term unlisted market investments. The private company, start-up venture and tactical opportunities funds have enabled Adinah to invest in companies at various stages of their growth cycles, as well as in a range of sectors and under varying market conditions. The private equity portfolio includes established businesses in the manufacturing and service space with the intent of providing a business with sufficient patient capital for management teams to create new business initiatives, launch new products, enter new

markets, acquire other businesses and become market leaders in their niches. Adinah has identified the shortage of risk capital in the start-up sector of the market in South Africa. Through its S12J VCC fund and with select investors, Adinah makes early stage venture-capital investments focussed on South African technology start-ups with continental and global growth potential. More importantly, Adinah assists in the mentoring of start-up founders and CEO’s, and assists in the incubation, administration and commercialisation of concepts and new business ideas. “In unique cases, a corporate investor that has funds set aside for social CSI or other enterprise developments can take advantage of the government’s S12J Income Tax Act by investing with us through private equity or venture capital,” says Kodisang. “Investors are entitled to deduct the full amount of their investment from their income in the applicable tax year. This tax relief mitigates investment risk and significantly enhances potential returns. “True partnership to me is utilising what we know about companies. It goes beyond just taking an equity cheque. There needs to be value-adding. We need to thoroughly understand the business and adapt our expertise to the business. By total immersion in it, we will help it grow and yield returns. “We understand that economic growth is dependent on the stimulation and growth of small to medium enterprises. Private equity is there to help. “Last but not least, ALT Capital is looking for ways to help stimulate agri-investment. Farming is largely in the hands of familyowned concerns or co-operative societies. Here we see an opportunity to establish institutionalised and sustainable farming. As an agri-fund, we would look to partner with agricultural universities and identify the farmers of the future. A farming institution would have the same manco structure as any of our other investments. It is treated as any other business. “By creating institutionalised farms, we would be able to protect the food chain. We would be able to take what might be subsistent farming to the next level, and develop sustainable large foodsource farms.”

SOUTH AFRICAN PROPERTY REVIEW

one on one

A tonne and a half of influence Property Review spoke to John Hughes, the incumbent Global President of RICS for the period 2017 to 2018, while he was in Johannesburg for the RICS Summit Africa, where the spotlight was on smart urbanism and sustainability By Mark Pettipher

he website of the Royal Institution of Chartered Surveyors boldly claims, “We’re the global professional body promoting and enforcing the highest international standards in the valuation, management and development of land, real estate, construction and infrastructure.” Taking up the torch of its leadership from Amanda Clack, John Hughes was inaugurated as RICS Global President in November last year in his home city of Toronto, Canada. “Amanda is still very active within the society,” says Hughes in acknowledgment. “She is still influential is pushing our core values of city infrastructure and inclusion and diversity, while at the same time encouraging advancement of women in the industry. “RICS recognises that our industry is very much male-dominated, and while Amanda was the real champion, we continue to work towards largerscale inclusion. “Infrastructure plays a large part in my daily work. Many of the activities in my private capacity have to do with cities and managing their growth. Infrastructure development is crucial in the discussion of managing and growing cities.” Turning to Africa, Hughes believes that infrastructure development is fundamentally important and that RICS as a governing body is pushing global standards, as well as regulating and setting those standards. “We ensure that the members who carry the RICS designation are competent and work within the boundaries of the ethics that are embodied in being a member,” he says. “As part of the African convention, we are celebrating 150 years of operation – and I am privileged to carry the flag for RICS globally. To celebrate the milestone, we ran a competition called ‘The Cities for our Future Challenge’, which was an international competition run by the institution in partnership with 54

SOUTH AFRICAN PROPERTY REVIEW

John Hughes, RICS’ Incumbent Global President for the period 2017 to 2018

The United Nations has predicted that there will be 6,3-billion people living in cities by 2050. As we progressed from largely rural, isolated communities to inter-dependent networks in less than 200 years, the Royal Institution of Chartered Surveyors has been there every step of the way UNESCO UKNC and the Association of Commonwealth Universities.” In January, RICS issued a challenge around the world to imaginative, problemsolving young professionals, start-ups and students who are involved in surveying, urban design, architecture or engineering. The challenge was simple: share your transformative ideas for projects and policies that solve some of the defining issues of our time: those of rapid urbanisation, climate change and resource scarcity. The competition is now closed, and RICS’ regional and global judges are deciding who will make the short list and

stand the chance of winning £50 000 (about R850 000). “The winner will be announced in November, and there will be an opportunity to develop the best idea through a mentorship programme,” says Hughes. “There were more than 400 entries into the competition, of which 60 came from African countries. “What is interesting is that many ideas will come from developed cities – but I believe the bolder ideas will come from developing countries. Imagine how life-changing putting infrastructure into the rural, remote areas of Africa can be.” Hughes has much to say about technology and the modern era. “RICS came into being at the beginning of the First Industrial Revolution; now we find ourselves on the cusp of the Fourth Industrial Revolution. RICS is very conscious that technology is advancing at a rapid rate. Technology will affect the nature of our work and the way firms work, so we need to keep abreast of how the world is changing and how this affects our members. “Technology has an enormous role to play. It is our responsibility to help equip the surveyors of the future, to harness and apply the changing technology to the benefit of their clients and society, and to live our key value of working in the public interest. “We understand that analytics is becoming more and more important, especially when it comes to building analysis and the connectivity of the ‘greater’ city. RICS is increasingly getting involved in facilities management: we see it as a growth area that connects the improved life and maintenance of the modern building. “Before, we operated at the development stage of land surveying, construction of a building and completion of a property. Now we are covering its complete life span.”

one on one

RICS signs MoU with GBCSA at RICS Summit Africa

Looking back at the first half of his tenure, Hughes lists as one of his highlights a trip to India, where RICS has established the RICS School of Built Environment with Amity University in Noida and Mumbai. The university trains and graduates about 400 students a year, and expects to be rolling out other campuses in India in the near future. “My biggest revelation to date is the importance of networking,” says Hughes. “While RICS may be one of the largest professional bodies in the property industry, we realise that we are just one part of an important connected association of building professionals and organisations. Attending events and meeting other institutions plays a very important role in fellowship and garnering great relationships in the industry.” Hughes’s high point of this year so far has been his attendance of the World Built Environment Forum Summit in London, where the city welcomed more than 1 000 industry professionals from 40 different countries at an event that attracted the very best minds in a sector looking to constantly adapt, lead and grow. The forum is a place in which everyone in the built environment can come together and discuss issues from around the world. The forum is ongoing online at https://ww2.rics/en-za/wbef, and it lives up to its mantra of facilitating industry-leading discussions and harnessing the enormous potential of the people and places of the 21st century. What is next for Hughes? Over the next five months he will continue to concentrate on Big City Planning – and the “Cities of the Future” is a big part of that. He will be returning to London for RICS’ 150th anniversary celebrations, followed by a tour of the UK and Ireland and a number of countries in Europe before he heads to Hong Kong in November to relinquish his title and role to President Elect Chris Brooke.

he Royal Institution of Chartered Surveyors (RICS) signed a landmark Memorandum of Understanding (MoU) with the Green Building Council of South Africa (GBCSA) at the start of the RICS Summit Africa 2018, held in Sandton. “It is great to sign this MoU with the GBCSA as it represents yet another important partnership for RICS on the continent,” says TC Chetty, South Africa Country Manager for RICS. “Green building and sustainability have become an important part of the built environment sector globally. Both RICS and the GBCSA are important players in this space, so working together makes sense.” “Signing this MoU with RICS is of significance to the GBCSA as we see sustainability in the built environment sector as a joint initiative,” says Dorah Modise, Chief Executive of the GBCSA. “RICS is a global industry organisation, and collaboration is crucial if we want to achieve greater strides in sustainability.” GBCSA was also a key participant and sponsor of the RICS Summit Africa 2018. Major commercial sponsors of the summit included Broll Property Group, Cushman & Wakefield Excellerate, Colliers International and Attacq Limited. The International Facilities Management Association was again a supporter of the summit this year. This was the fourth edition of RICS Summit Africa, which brought together leading speakers and professionals in the built environment sphere from business, government, academia and the NGO sector. The two-day annual event attracted more than 220 delegates this year. Speaking at the opening gala dinner of RICS Summit Africa, RICS President John Hughes said that Africa was a continent of huge opportunities, boosted by its young population and immense natural resources. However, he said that rapid urbanisation in Africa and climate change presented major challenges. “RICS can contribute to addressing some of these challenges,” he said. “Collaboration is key, as we partner with organisations in Africa to contribute to the development of the built environment sector, and to smarter cities and sustainability. We signed a collaboration agreement with the GBCSA at the RICS Summit, which is part of our commitment to Africa.”

Signing a landmark Memorandum of Understanding between the Royal Institution of Chartered Surveyors (RICS) and the Green Building Council South Africa (GBCSA) at the RICS Summit Africa: RICS President John Hughes and GBCSA’s Non-Executive Deputy Chair Nkosinathi Manzana

SOUTH AFRICAN PROPERTY REVIEW

One on one

It’s YES to youth employment Property Review talks to Tashmia Ismail-Saville about an exciting initiative to encourage and uplift communities through providing opportunities to get unemployed youth onto the first step of the job ladder. YES is one of the first social compacts between government, business and labour, created to give one-million youth one-million opportunities to succeed, while securing South Africa’s economic prosperity By Mark Pettipher

Tashmia Ismail-Saville, CEO of Youth Employment Services (YES)

efore talking to Tashmia Ismail-Saville, Chief Executive Officer of Youth Employment Services (YES), I had a look at what the organisation is about on its website, Yes4youth.co.za. To quote, “The government has introduced a new Youth Employment B-BBEE recognition initiative, allowing a business that meets YES targets and complies with registration criteria to move up a level on its current B-BBEE scorecard. In addition, to encourage demand-side job creation, companies that employ black youth between 18 and 29 years of age will qualify for an employment tax incentive.” “Our President Cyril Ramaphosa is firmly behind YES,” says Ismail-Saville, “YES initially came out of the CEO initiative from several years ago. The government has identified issues in the country to catalyse growth, and is creating a national strategy that is required to build employment creation in South Africa.” 56

SOUTH AFRICAN PROPERTY REVIEW

The CEO initiative was spearheaded by the Finance Minister, but with the various changes in that position, it had stalled. What was clear to Stephen Koseff and Colin Coleman, co-conveners of YES, was that the initiative needed to come to life. Ismail-Saville was brought on in March last year with the mandate to make YES happen. YES was first “rolled out” in Diepsloot in March 2018, with President Ramaphosa endorsing the initiative. In a press release about the launch, YES is described as “a business-led partnership with government, labour and civil society that aims to empower one-million young South Africans by offering paid quality work experiences over the next three years”. YES was established to complement the efforts of the government, labour and business to create inclusive growth that benefits all who live in South Africa. A key contributor to this goal is increasing job creation and ensuring that youth are included in the economic growth story in a sustainable manner.

The programme has three channels for youth employment opportunities: ●● Corporate work experience: businesses that participate in the programme create oneyear paid positions for youth aged between 18 and 35, in addition to these organisations’ current employment numbers; ●● SMME host placements: businesses that do not have the capacity to place more people in their organisations have the option of sponsoring the salary and support costs for a one-year placement in small/medium enterprises; and

●● SMME development: young people are empowered to start and grow their own businesses, with support from YES in the form of training, seed funding and value-chain integration. Businesses are being asked to create new paid one-year positions for unemployed black youth over and above current employment numbers. Where a company doesn’t have the capacity to host young people, it’s encouraged to sponsor a salary for a one-year starter position at an SMME that lies close to where the young person lives, building SMME capacity and competitiveness. “YES aims to give that portion of our youth who are largely overlooked by the country’s current employment models a crucial first chance to gain paid work experience of decent quality,” Ismail-Saville said after the launch. “This significantly increases their chances of securing permanent employment after the year.” Research has shown that one year of work experience, together with a CV and a reference letter, makes a young person three times more likely to find employment. “In essence, this proven experience de-risks a young person and makes employers more likely to appoint new hires. The effect is amplified for women,” said Ismail-Saville. In April, the Department of Trade and Industry (DTI) called on companies to support YES, announcing that a skillsdevelopment expenditure target of 2,5% for bursaries for black students at higher education institutions that had been gazetted on 29 March 2018 will not be a precondition to obtain BEE recognition as a YES-participating entity.

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Certainly having more pe may was It trans cts SAPOA Barnard pan e. e priva ca. s op the op nd one’s influential the pepositions, . Afri ribut cha m com mm n in as Part tat lly up nt to s st os nge gra g o ’s our s es ch Wi co such ker as that pa portfolio manager women in our industry will impact ,” says ti mu more t our on en get e mo and broader lson.pro ment engin lylise iswit as to h role inof res informa al of andtoSha rd, releva er to sign “Each ns op allfect and ex per nisa ke thr awa comple at OMIGSA,ear point ch of Asset environment ty mayor Yea her go inent. Listed Property isatio industry in ma that focused on his or ally ch and Head Head equa oftha the nt to ment eineag a positive way. he nity orga nrr apof has proper organ n to her ow nt dition ntinue to ma erty. report the t soanweSAwer e upon entio nt, ortu an organisation in the Management n lf the cor Wo s being hs, le in t at the tra me and alre ideasas prioritie itse in prop atenv Barnard’s PO ago, iron adyProperty, he int active role 12 mont in thbes Pionee opp th will co sitionsbui peop and A’srolemas chairperson of the unlisted REITs Rep ltwoortOldrksareMutual s, and in pla nex the A year OA’s po independent ustryintoip the ple For lieves ilt y tononexecutive the stated ing SAP of y.Pangbourne, sector has meant emshe’ this has that d had to deal witha the for lat rsh huge infl play an s bu be rtunitare opertysuch asdirector peo Byrd She be operty ind lea d tion de mu , to ha po rs the y ina n sti w , op ard . s uence es nom pr relevanBarnard is theOffi i. of National Treasury, where she is advocating Bo a po pa chairperson no rtunit anRedefine. cehar ed d the EmiraAfand hieve the pr d ha on a t and plathe that jectiv ricoth a t becaus seMk and Ind nning. to k Marn,” say uthted nd exntly accept of the op In a vibran SAPOA’s ob mbers, an ents, of re women ac ful to have ha dot line ers),res the SAPOA We nee city’s arece intheseeing unlisted should have the same tax benefits earanchd involved y are to the ustry reportsector greecommittee awareas themen in Sotyestablishment d to be mo ate ve try. stry houses A ev s o DeSAP ard me died of tho OArvi’sofcemes)legislation very gr lazing wo indus7/2018 for unlisted ecti and are REITs,not andproduc theed listed sector.for the embo . fellow Bo cant SAPO pe Town. se per er Tw ty Se indu st change mbPaers She is diff nce has aimed sonnel er than 30teyears by erspsident Elect 201 Ca trailb (CEO of Lib with s and with in. the commercial property signifi she spe gov unevenere s pPre dia such “It’s an extremely e Propmore On Lille. ner in playings

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These dyn the ole, experience brings invaluable relati I –she SAPOA to SAPOA. of Exce sector, Mayo almost impossible an unlisted REIT,” she amic of the ve austoe create met ccessf ated (CEO as Am of JH is not t the e to paorgani a city you get differences have r’s su Barnard (CEO a resthe r Walt particip the “Mee about ntinu ’s ides orts tocontinuessattoionbe ed to for moment, corep Mayo earch explains. “At the a newfor a decisionmay com a outexcited examp we are waiting van de o Radebe who all sources ing ivileg the str house t the e abo inssaying head of property tituludens it’s an amazing includ she felt pr thecareer am Pretorindustry, abou ut y, and ntre and A), whose onle, a piece of legislation known reqTreasury d inc tiothat researchto come from town ia, Urb tssuc uirement Nomz hear er Cit SAPO ys interpret ce aheaanplanning get into. and marke ty. totha you nt of can ar “While work hfor asan the institution, s rd. 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In dit spirit many a need – the pap er theSector tocamatch r working for yourself saysit,Wi advo nition .” ers wh entrepreneurial Financial and “It ha d seeing t simply rdersant tosimour y are Conduct Authority.” for ilar me of he recog lson. “Re try memb rica’the s bom an part cities if at trends inplanned on. don’t get many mb can are being incredibly rewarding. e d the the indus por ts are Af Looking Board g as Barnard the pla the industry,We off the velop decision-m ers because ce sh m, an couldobserves vellin South for repde thin ns saw orts “Our a numWe all that retailWiis suffering industry is ake havthat all about networking. of tra eresting pla ar to e really the tea tion has wi “The nee.do Africa. predicts lson is in Souththe ber of lightShe need ount majority ye my sisters of tothebesame rs in the ind untries great int n her t a of am isa co o day a r las work with an an information. pro us p analyti perthe Many ust p .” they years t there duc maying be closures on rio org fechorizon, ry. ago, ,u tionist although cal as es a faiand abou ess tri the country Our reports. the va POA rd do ago wh well Development I attended SAPOA’s two-week Property in busin the asked daughters Central A By r hav en r as won’t ic be as bad She as in S the US as and the en UK. he e a flow it com e fac l. insists that, onom d wh alled es to A yea tha Programme. The exposure that I received has tua d ec states been andHaving said, tha to th e rec . SheRepublic e that,t eac shopping job, an d, shAfrican centrest all arerep going tha ict an don’t h report of th know invaluable Th ort ent ite voire confl d her part – ande not ry sta“destinations” just in terms of how property to have tot eve final mustowntelright.s must become had vis in Côte d’I their tement in their eater they litical formi ointm ent in state l a sto ng made e po rights, an estm can’t development works. The bonds the gr so app ost thatofI aformed yrd ry, mu Abidj they m th over of inv to bring persowith Apart from just being a place to shop, st are em be going es fro occurred them. qualifie a lack But rd, B some team members in my group mean I’m stilln’sin chara sh e th to have ed in emerg y thatdefend w a ru we who ctertolieinclude facilities such as ice-skating rinks, d. Boa mak lay h result ere is no ilit s in thevariety contact with them today. p to hic tab cinemas, a greater th of restaurants (w n and ins , more to ir our rights can help years know ntio operty) “It is important to have a holistic view of our innovative entertainment.own hand nity s - Ann past 20 ts and pr inte ortu e Fra the assethem. We must always help industry, and it is equally as important to have an opp Online shopping will also have an effect on nk our fixed le in the

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10 12

understanding of economics, financing and accounting. The diverse nature of our industry requires that we have a greater overview of what is involved before specialising in one field. “My advice to young women coming into this industry is to work hard, persevere and look creatively for solutions to the challenges you will be faced with. SAPOA women in property

centres, as more retailers may take smaller space in strategic locations, and place greater emphasis on bigger and more accessible warehousing. On a positive note, Barnard says, “We have seen down cycles before. As a property owner, you can repurpose buildings as and when they become vacant. We’ve seen inner-city rejuvenation, and we’ve seen older

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Editorial Booking deadline - 3 July 2018 Display Advertising Booking deadline - 5 July 2018 Material deadline - 10 July 2018 To book your space, contact Nkepile Setshedi e: sales@sapoa.org.za

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One on one “The impact of this announcement has been incredibly positive,” says IsmailSaville. “It has provided much-needed clarity and confirmation for companies wishing to engage and sign up with YES. A fresh wave of discussions has started as companies are now coming back to us. “Apart from an improved BEE status, companies can also benefit from a tax incentive. If a company employs a black youth between the ages of 18 and 29 on a salary of between R3 500 and R6 000 per month, it can claim back R1 000 per month from SARS.” Townships are home to about 60% of unemployed South Africans – and they are getting denser, with more people coming into the townships and urban centres. This is exacerbated by the fact that more than 60% of the youth in the townships don’t even have a matric. “We understand that the current education system is failing our youth,” says Ismail-Saville. “At YES we take into account the legacy of apartheid and of Bantu education. We have to think differently, and gear our exposure to cater for the industrial concentration as well as for the fact that South Africa is a services-led economy. “We ask how we can get closer to the communities and companies that have job requirements. Can we place those jobs into SMMEs that are within

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the communities, and where entry-level job salaries will not be spent on getting to work? “Job comprehension can be better unearthed if we can target local SMMEs that are willing to take on employees where cultural barriers and language do not inhibit progress.” This model also takes money back into the community. When a community becomes more prosperous, it can be seen as a return on investment in our country. YES aims to develop a value chain to utilise existing infrastructure to establish hubs, and is asking businesses to sponsor training facilities and commercial spaces that will bring skills and opportunities to local communities. With the advent of the fourth industrial revolution, it is critical for job recipients to receive technical skills in coding and technology applications, enabling them to be able to understand and compete with artificial intelligence. They need to learn data analysis, be upgraded and upskilled, and be exposed to basic work skills and further training for a year. It is important that, during that year, recipients build on a series of short courses in a modular way and learn about subjects they may not ordinarily have been exposed to. They will have access to training development and become a vector in taking those skills

back to the SMME, which in turn allows for a CV, a good reference letter and access to a digital network, de-risking the candidate’s entry into the job market. “Our aim is to get one-million young people into employment over a three year period,” says Ismail-Saville. “Our first year will be used to create a foundation map, build up a system that works and expand on our original strategy of creating employment and developing opportunities through an exposure to workplace experiences. The hubs that we aim to roll out throughout the provinces will offer the tools needed, and in turn will synthesise what they do.” YES’s first hub will be in Thembisa. The organisation is in the process of signing MOUs with Gauteng, Limpopo and the Western Cape. “We are using a series of matrices to weigh and identify each region’s needs,” explains Ismail-Saville. “The hubs need to work in nodes where knowledge reserves can be utilised to develop opportunities in areas that are not just limited to agritech, tourism and hospitality. We need opportunities in other artisanal and technical sectors. “We are exploring new territories, trying new things for the first time, integrating existing best programmes – and all the time learning what works and discarding what doesn’t.”

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advertorial

Shoppertainment realises all the possibilities of an imagined retail future South African retail has shifted significantly in the last decade, with dramatic and disruptive changes in the landscape. Accelerate Property Fund has closely watched the recent evolution of retail in the country. With its sights firmly fixed on the future with the multibillion-rand investment in redeveloping Fourways Mall and supporting developments in the broader Fourways node, it is responding to the changing needs of mall visitors of all ages By Andrew Costa, Chief Operating Officer: Accelerate Property Fund

ccording to a South African e-commerce insights report commissioned by eShopWorld, nearly one-third of shoppers use e-commerce, and another 6,5-million users are expected to be shopping online by 2021. What can malls and their tenants do to keep credit cards swiping in store, rather than online? South African retail has undergone significant changes. Town centres have been superseded by suburban malls with big-brand tenants, and regional and super-regional malls have had to adapt to maintain relevance where they can no longer compete on convenience. While online shopping has been identified as a threat to the brick-andmortar experience, Business Tech notes that half of the top 10 online purchases of South Africans are in categories not conventionally purchased in a mall: event and travel tickets, hotel reservations, software and holiday packages. Online shopping is also a more commoditised experience, rather than a sensory one. ShopperTrak believes that store-based retailing remains more profitable for big

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brands, as in-store sales do not incur the high cost of “free” (to the customer, but not to the retailer) shipping and the returns associated with online sales. McKinsey research highlights that successful malls of the future will differentiate their offerings with a focus on experience and convenience. They will leverage technology and multichannel strategies, and they will explore new formats – and the malls that will keep the people coming will be offering multi-sensory experiences. And that’s where shoppertainment comes in: a combination of shopping and entertainment that takes the drudge of shopping and spices it up with a variety of entertainment options that appeal to the whole family. For example, Fourways Mall, located in the heart of one of the most rapidly growing areas in the country, offers a vast array of retail options – but it also offers entertainment for the whole family with a flagship 4 500m2 Bounce facility, the 1 350m2 Fun Company, and Adventure Golf.

The internationally renowned KidZania – an 8 400m2 children’s edutainment offering – is on track to open in December 2018, and is likely to become popular with families and school groups across Gauteng, significantly expanding the mall’s natural catchment area. Anchor tenants who draw foot traffic are still key, but the move towards experiential shopping implies the need for a far broader tenant mix, including luxury brands where shoppers want to have a sensory experience before they buy, and novel independent stores that cannot be experienced anywhere else. For example, Adidas globally is testing pop-up stores that use body scanners and 3D knitting machines to customdesign clothing while shoppers wait. The result? People stay in the store longer than they would if they were just going to buy shoes or clothing – and so they are likely to buy more. With the expected anchor tenants already secured, Fourways Mall will also welcome lifestyle brands such as Lindt, Sorbet Man, Hamleys, Cotton On, Nike,

advertorial G-Star Raw, Starbucks and Superdry, while many existing tenants, including MRP, the Foschini Group, Woolworths and Edcon, are expanding their footprint. In addition to more permanent shoppertainment venues, successful malls will also have spaces for temporary or “pop-up” installations that will keep their offering fresh and seasonally relevant. These could include the timehonoured “take a photo with Santa” opportunities that have been popular for as long as we can remember, as well as more daring and interactive ideas such as temporary climbing walls, try-beforeyou-buy displays, or even sports clinics. Retailers who include digital touchpoints throughout any retail experience are likely to boost consumer loyalty too, with the only challenge being that those offering a deeply interactive in-store experience inspired by shoppertainment need to maintain that ethos with their online presence. Failing to do so could see consumers doubt their integrity –

particularly if they’re window-shopping for a sensory experience, then shopping online for convenience. In keeping with its long-term vision for the Fourways node, Accelerate Property Fund has not just focused its attention on Fourways Mall, but is implementing a far-reaching strategy for the entire Fourways node to raise its status to being the comprehensive retail and entertainment offering in the country. It’s with this in mind that the tenant mix at Cedar Square has been strategically managed, with the centre now housing a Virgin Active gym, a luxurious Woolworths food market and other convenience-led lifestyle tenants. New restaurants have recently opened, including the family-friendly Smoke Daddy’s (a Papachino’s brand), tapas bar Escondido, Portuguese flavours from Laurentina and the ever-popular Tiger’s Milk. These all expand the Square’s appeal to couples and families,

and firmly establish it as a daytime and evening entertainment destination. Similarly, nearby Fourways View is also undergoing redevelopment, offering the convenience of banking facilities, a Food Lover’s market and a large West Pack Lifestyle store. Tenants in the redeveloped Fourways Mall will be at the heart of one of the most rapidly growing areas in South Africa, with more than 40 000 residential units planned for the area north of Fourways (including Dainfern and Diepsloot). Steyn City will add approximately 10 000 affluent households to the market in the next five to 10 years. More and more families are moving to the area and will be seeking in-city destinations where they can do all their regular shopping – but where they can have fun together too. This focus on creating a holistic lifestyle destination rather than a purely retail facility is sure to future-proof the Fourways node in an increasingly digital world.

COFFEE CAPSULES A GALAXY OF FLAVOURS

Introducing our range of premium blends, showcasing two continents.

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PREVENTING SEXUAL HARASSMENT IN THE WORKPLACE

This product was developed as an easy to use, plug and play, E-Learner Program which can simply be accessed via your Intranet, Training Facility PC or Training Centre programs for maximum exposure and learning pleasure. The E-Learning Training program is formulated to target all employees including management.

OBJECTIVES ● To identify sexual harassment ● To empower individuals to effectively deal with sexual harassment in the workplace ● To create an awareness towards zero tolerance against sexual harassment ● To eliminate sexual harassment

AT THE END OF THIS COURSE THE LEARNER SHOULD BE ABLE TO ● Identify sexual harassment in the workplace ● Understand what procedures to follow if sexual harassment occurs in the workplace ● Preventing sexual harassment in the workplace ● Understand why sexual harassment an issue in the workplace ● Communicate the organisation workplace rules to employees

R450 per/ E-learner

Andre Nel Salijee Govender Van der Merwe Inc. 011 726 7752 info@sgvattorneys.co.za In Association with:

retirement

South African property doyen Jeff Zidel to step down as Fortress Deputy Chairman after announcing retirement

ne of South Africa’s most recognised and highly regarded property developers and investors Jeff Zidel is set to retire this month after a distinguished 47-year career in the industry. As result of his retirement, Zidel (67) will relinquish his role as Deputy Chairman of JSE-listed REIT Fortress (JSE code: FFB). One of the doyens of South African listed property, Zidel Jeff Zidel, Fortress Deputy Chairman was appointed President of the South African Council of Shopping Centres in 2016, is a three-time Past President of the Roodepoort Chamber of Commerce and was the winner of the 2010 Absa Jewish Achiever of the Year award, among his many other accolades. “Jeff has basically seen it all when it comes to property and retail development,” says Fortress Chief Executive Officer Mark Stevens. “For instance, he was one of the early visionaries in the expansion of the highly successful Nando’s chain, a leading light in the development of strip malls in Lesotho, and a driving force behind the growth of the listed property sector in South Africa in the early 2000s. His vision and astute leadership will be missed. However, it is also important to say that a new crop of property professionals – who learnt so much under Jeff’s stewardship – will ensure that his visionary outlook and fortitude are not lost to the sector.” Fortress Chairman Iraj Abedian thanked Zidel for his sterling contribution as a board member over the years. “The property sector is certainly faced with a number of challenges at the moment, and it is thanks to leaders of Jeff’s calibre that we have been able to weather the storm and chart a new course for an exciting future,” says Abedian. Among his many roles, Zidel was a trustee on the world board of the International Council of Shopping Centres, a Director at SAPOA and a non-executive director of New Europe Property Investments plc. As a result of Zidel’s departure, Fortress will be seeking a new non-executive independent director. “The board is in discussions with suitable candidates and an announcement will be made once the new non-executive independent director has been appointed,” says Stevens.

Who we are Azzaro Quantity Surveyors (Pty) Ltd is a majority black female-controlled and managed Professional Quantity Surveying Service Practice-based in Bryanston, Johannesburg.

Key Offerings • • • • • • • • • • • • • • •

Principal Agency Quantity Surveying Insurance valuation Risk Management Expert witness Arbitration Value engineering Cost control Life cycle costing Property Development Construction Cost Management Advice on contract and procurement Construction projects auditing Contract documentation Tendering and contractual agreements

Our Sectors • • • • • • • • • •

Retail Residential Healthcare Offices Energy Mixed Use Sport Hotels and Leisure Academic Institutions Infrastructure (Civil and Mining)

Africa Property & Construction

Cost Guide 2018 is out now.

For digital or hard copies please email dikeledi.mahlangu@aecom.com. aecom.com

@aecom

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member profile

Fine tuning customer service Paintsmiths Group is an owner-managed paint store established in the late eighties, which opened it’s doors for trade in Bloemfontein in February 2012. Newly named, Paintsmiths personifies the core values of Midas’ innovative solution-based products and service distinction as well as Earthcote’s range of luxury finishes.

aintsmiths are a long-standing paint merchant, with a lifetime of collective knowledge from the leading paint experts Midas, Earthcote and Kansai Plascon, with deep roots in trade and customer experience. Together Midas and Earthcote have been able to fine-tune customer service excellence and focus on new product development. Paintsmiths now builds on this deep experience and history of proven product innovation and customer service to both the trade and retail customer. They are excited about delivering the highest quality, most versatile offering in an accessible, userfriendly retail environment underpinned by two leading paint brands. “Treat our new retail space as a place for the local community to find practical, trusted and affordable home solutions,” says Ernest Mohlahla, Paintsmiths Owner and Manaing Director, ”Paintsmiths challenges the norm of your typical paint and hardware outlet on every level. Our point of departure is a trusted communal space that stocks less of everything but more of a higher quality something. Aspirational affordability offered with a sincere service initiative wrapped in a fresh and light physical environment complementing our new product offering.”

corporate governance citizenship. ●● Client Focus ●● Quality Paints ●● Integrity ●● Team Work ●● Health and Safety

and

Ownership, management and control

Ernest Mohlahlo, Owner and Managing Director of Paintsmiths

Vision To be clients first choice paint store in the Free State Province.

Mission To deliver excellent services and quality paints in the Free State and Northern Cape, and investing more resources in research for paint mixing and service improvement.

Values Paintsmiths’ values are based on good

●● The company is registered with CIPC as close corporation owner managed, with Mr. Ernest Mohlahlo as the only member. Mr. Mohlahlo manages and controls the company together with two experienced pros who have been in similar business for number of years ●● Paintsmiths Bloemfontein has a level one BEE status.

Brands of paints A variety brands of paint are available to clients in and around the Free State Province. Paintsmiths are stockist of Envirolite Midas, Earthcote, Plascon, Paintsmiths, Powafix and Dekster brands and other brands.

Services Based on various client requirements, Paintsmiths also perform the following services:

Products Wall paints (Internal / External)

Painting Trims

Weatherproofing /Waterproofing

Textured Decorative coatings

Treating Natural wood

• Water-based primers

• Pre-cleaners

• Fibreforce

Specialist Coatings

• Oil-based treatment

• Oil-based primers

• Fillers and primers

• Midaflex

• Steracon

• Solvent Based Treatment

• Matt finishing coats

• Finishing coats

• Cemproof

• Arogon

• Water-based Varnishes

• Dampsolv

• Triplon 2000

• Hydrout

• Pristine

• Sheen finishing coats • Textured coatings for masking plaster

Roof paints

imperfections externally

• Acrylic roof paint

• Flexicryl

• Midaroof

• Screed and concrete strainers • Pigmented floor coating • Atelier

•.Road marking paints

• Bituminous Aluminum

Floors

Store Manager: Dennis Oberholster Sales Person: Daniel Sehlitha, t: 051 444 5777 - c: 082 775 0168 Shop G18 College Square, 193 Nelson Mandela Drive, Bloemfontein, 9300 e: bloem@paintsmiths.co.za - w: www.paintsmiths.co.za

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good

member profile

●● Professional specification services. The store is experienced in providing detailed specifications for any painting procedure and it is included in the price of the product that you purchase from the store. ●● Ongoing Maintenance Schedules. ●● On-site consultation. A professional audit/assessment on paint job requirements - including colour consultation. ●● 3rd Party Quality Assurers. The products are independently audited by external quality assurers during application and during the lifespan of the coating. ●● Skilled applicator recommendations. Through Paintsmiths’ network of associate companies they recommend skilled applicator teams for their products.

Customers ●● Sol Plaatjie University, Kimberley; Pelonomi Hospital, Maternity ward, Bloemfontein; Botshabelo Shopping Centre, Botshabelo; Lochlogan Waterfront; Braam Fisher Hotel; Tsogo Sun Hotels Group; Braam Fisher International Air Port; Georgoiu Group and Michel Family Trust Lillyvale Estate; Ruwacon: Silver Dark City residential accommodation, Alto Boschetto Woodland Hills Estate and other Sectional Title Schemes.

Social responsibility ●● Due to the impact of paint, Paintsmiths promote as part of health for the citizen the eco-wize coatings Green Filter, clearly indicating VOC (Volatile Organic Compounds) and other chemical content for their clients to stay healthy even after renovating their homes. ●● Paintsmiths Bloemfontein is involved in a number of community and youth development projects. To this end it has donated paints and accessories to various schools, crèches, NGO’s and hospitals.

Positive contribution to the built environment HLTC PTY LTD is one of South Africa’s construction industry’s emerging players. It is committed towards making a positive contribution to the nation’s construction sector

LTC was founded in 2012 by Lucky Tharaga, a qualified civil engineer, as his second start up company. The formation of this company is attributed to the zeal and commitment that Tharaga has to providing quality service delivery to disadvantaged communities and at the same time improving their lives through access to well built and functional infrastructure. The company has a large, competent and multi-skilled workforce that allows flexibility in the selection of contracts and an ability to easily adjust to the changing needs of the markets. Lucky Tharaga CEO of HLTC (Pty) Ltd Lucky Tharaga, CEO, HLTC tells us, “Our construction comprises civil works, building and electrical works. HLTC’s civil works offers a range of engineering and contracting services that include civil earthworks, roadworks, storm water drainage, bulk pipelines and reservoirs.” “The building work is multi-faceted and ranges from single to multi-story building infrastructure which includes structural concrete work,” says Tharaga. ”We are particularly pleased to report that the machine tools supply department has grown exponentially since its inception in 2016, and has established a reliable supply network with national and offshore machine tools manufactures.” “Our transportation and plant hire division services small to large construction companies and hires out plant such as excavators, TLB’s, tipper trucks, compactors, water carts as well as a comprehensive range of construction tools,” said Tharaga. A newly created Special Project Development (SPD) division has been set up to identify short term and larger projects. It works across all the businesses within HLTC to provide marketing, tendering and engineering design skills. The SPD is made up of civil engineers and technologists, who amongst them, carry a vast experience in tendering, procurement, alternative designs and construction management. Site staff are equally qualified with deep knowledge of the construction industry in various sectors. HLTC is committed to the principles of employment equity, equal opportunity and empowerment, regardless of gender, race, colour or creed. Empowerment projects are based on meaningful participation and genuine advancement. The company recognizes the need for all employees to work in a safe and healthy environment that is aligned to the OHS Act, and is committed to providing this on all its sites. HLTC PTY LTD operates mainly in Limpopo, Mpumalanga, Gauteng, North West and has throughout South Africa. HLTC specializes in infrastructure construction projects, transportation and plant hire services as well as machine tools supply. For more information about HLTC services, please visit http://www.hltcgroup.co.za/. E-mail info@hltcgroup.co.za or contact 015 291 1020.

SOUTH AFRICAN PROPERTY REVIEW

MetroWatch

Keeping an eye on municipal spending

Property Review continues to bring you extracts from the https://municipalmoney.gov.za website, we believe that we should know how our taxes are being spent and have a say how money is spent. The website is designed to present key municipal financial information to a general audience, who do not necessarily have any financial background or knowledge. All municipalities are required to regularly submit their financial information to National Treasury, who in partnership with Code for South Africa is making it available to the public through the API, in a machine-friendly format. What is a financial quarter and why is some of the data presented quarterly (rather than annually)? A “quarter” is a 3-month period in a financial year and is often expressed as q1, q2, q3 or q4. A quarter is usually accompanied by the year it relates to. For example, “2016 q1” refers to the first quarter of the 2016 financial year (2015-2016). Since the municipal financial year begins in July of one year and ends in June of the following year, the period being referred to here is July-Sep 2015. While most of the financial data provided to National Treasury by the

SOUTH AFRICAN PROPERTY REVIEW

municipalities is submitted annually, some data is refreshed and submitted on a quarterly basis. Quarterly updates are important for planning and monitoring purposes and acts as an early warning system. For example, quarterly figures could show that the municipality was not collecting nearly enough of the money owed to it in order to cover its debts. Rather than waiting for annual financial figures to reveal this, the quarterly information allows the municipality to identify a problem and take corrective action sooner.

Mbombela

Metro municipality in Mpumalanga Population

588 794

5 394.4

square kilometres

109.1 people per square kilometre

MetroWatch FINANCIAL PERFORMANCE Audit outcomes 2015 Unqualified - Emphasis of Matter items

2014 Unqualified - Emphasis of Matter items

2013 Unqualified - Emphasis of Matter items

Did You Know? There are 5 types of audit outcomes.

SOURCE: Municipal Audit Reports

Unqualified Opinion

No Findings

Emphasis of Matter Items

Qualified Opinion

Adverse Opinion

Disclaimer of Opinion

The Auditor-General expresses This is expressed when the The Auditor-General does not reservations about the fair auditor concludes that the have all of the underlying The Auditor-General can state, Same as an Unqualified documentation needed to without reservation, that the Opinion with no findings, but presentation of the financial annual financial statements do not present the determine an opinion. For financial statements of the the Auditor-General wants to statements. There is some municipality’s financial example, the lack of municipality fairly represent bring something particular to departure from the Generally Recognised Accounting position, results of operations underlying documentation the financial position of the the attention of the reader. Practices (GRAP) but is not and cash flows in line with and the amounts in question municipality and are in line sufficiently serious as to Generally Recognised may be so great so that with Generally Recognised warrant an adverse opinion or Accounting Practices (GRAP). it is impossible to give Accounting Practices (GRAP) disclaimer of opinion. any opinion on all.

Did You Know? A municipality’s cash balance refers to the money it has in the bank that it can access easily. If a municipality’s bank account is in overdraft it has a negative cash balance. Negative cash balances are a sign of serious financial management problems. A municipality should have enough cash on hand from month to month so that it can pay salaries, suppliers and so on.

Cash Balance July 2016 - June 2017 Not available

Cash balance at the end of the financial year. More than 1.5 times the cash balance for similar municipalities in Mpumalanga: R 56 620 223 About two-fifths of the cash balance for similar municipalities nationally: R 219 290 393

good

Positive Balance

bad

Negative Balance

An Outstanding Opinion Means that the Auditor General raised queries with the municipality and therefore has not submitted another opinion.

Reference: State of Local Government Finances Formula: Cash available at year end = Cash Flow item code 4200, Audited Actual What does it mean when something is listed as ‘Not Available’ or a bar is missing from the chart?

When something is listed as ‘Not Available’, one or more of the things needed to show the indicator for that date was missing from National Treasury’s local government database. This usually happens when the relevant municipality has not submitted the data to the National Treasury in an acceptable form in time. It might have been submitted late and will be available in the next quarter. It might also be available directly from the municipality but without the vetting done by National Treasury before inclusion in their local government database.

Did You Know? Cash coverage measures the length of time, in months, that a municipality could manage to pay for its day-to-day expenses using just its cash reserves. So, if a municipality had to rely on its cash reserves to pay all short-term bills, how long could it last? Ideally, a municipality should have at least three months’ of cash cover.

Cash Coverage July 2016 - June 2017 Not available Months of operating expenses can be paid for with the cash available. More than 1.5 times the coverage for similar municipalities in Mpumalanga: 9 days About one-third of the coverage for similar municipalities nationally: 1.5 months

good average bad

More than 3 months Between 1 and 3 months Less than 1 month

Reference: State of Local Government Finances Formula: = Cash available at year end / Operating Expenditure per month = Cash Flow item code 4200, Audited Actual / (Income & Expenditure item code 4600, Annual Audited Actual / 12) If Cash available at year end is negative, we say Cash Coverage is zero months. SOUTH AFRICAN PROPERTY REVIEW

MetroWatch Did You Know? This indicator is about how much more a municipalty spent on its operating expenses, than was planned and budgeted for. It is important that a municipality controls its day-to-day expenses in order to avoid cash shortages. If a municipality sigificantly overspends its operating budget this is a sign of poor operating controls or something more sinister. Overspending by up to 5 percent is usually condoned; overspending in excess of 15 percent is a sign of high risk.

Spending of Operating Budget July 2016 - June 2017 Not available Difference between budgeted operating expenditure and what was actually spent. About 80 percent of the underspending or overspending for similar municipalities in Mpumalanga: 8.75% More than 1.5 times the underspending or overspending for similar municipalities nationally: 4.1%

good

Up to 5%

average bad

Between 5% and 15% More than 15%

Reference: Over and under spending reports to parliament Formula: = (Actual Operating Expenditure - Budget Operating Expenditure) / Budgeted Operating Expenditure = (Income & Expenditure item code 4600, Audited Actual - Income & Expenditure item code 4600, Adjusted Budget ) / Income & Expenditure item code 4600, Adjusted Budget

Did You Know? Capital spending includes spending on infrastructure projects like new water pipes or building a library. Underspending on a capital budget can lead to an under-delivery of basic services. This indicator looks at the percentage by which actual spending falls short of the budget for capital expenses. Persistent underspending may be due to under-resourced municipalities which cannot manage large projects on time. Municipalities should aim to spend at least 95 percent of their capital budgets. Failure to spend even 85 percent is a clear warning sign.

Spending of Capital Budget July 2016 - June 2017 Not available Difference between budgeted capital expenditure and what was actually spent. A little higher than similar municipalities in Mpumalanga: -25.975% About 1.3 times the underspending or overspending for similar municipalities nationally: -20.36%

good

Up to 5%

average bad

Between 5% and 15% More than 15%

Reference: Over and under spending reports to parliament Formula: = (Actual Capital Expenditure - Budgeted Capital Expenditure) / Budgeted Capital Expenditure = (Capital item code 4100, Total Assets, Audited Actual - Capital item code 4100, Total Assets, Adjusted Budget ) / Capital item code 4100, Total Assets, Adjusted Budget

Did You Know? Infrastructure must be maintained so that service delivery is not affected. This indicator looks at how much money was budgeted for repairs and maintenance, as a percentage of total fixed assets (property, plant and equipment). For every R10 spent on building/replacing infrastructure, R0.80 should be spent every year on repairs and maintenance. This translates into a Repairs and Maintenance budget that should be 8 percent of the value of property, plant and equipment.

Spending on Repairs and Maintenance July 2016 - June 2017 Not available Spending on Repairs and Maintenance as a percentage of Property, Plant and Equipment. About 20 percent higher than similar municipalities in Mpumalanga: 1.935% About 1.4 times the spending for similar municipalities nationally: 1.65%

good

More than 8%

bad

Less than 8%

Reference: Circular 71 Formula: = Repairs and maintenance expenditure / (Property, Plant and Equipment + Investment Property) = Capital Acquisition item code 4100, Audited Actual / (Balance Sheet item code 1300, Audited Actual + Balance Sheet item code 1401, Audited Actual )

SOUTH AFRICAN PROPERTY REVIEW

MPG attains new FM standard, SANS 1752 â&#x20AC;&#x201C; Strategic Facilities Management compliance in May 2018.

As the Motseng Investment Holdings (MIH) group celebrates its 20-year anniversary, we are proud to launch the diversified Motseng Property Group (MPG) entering the Integrated Facilities Management (IFM) sector. MPG is taking on the IFM sector by bringing together subsidiary companies such as Motseng Facilities Management, Motseng Property Services, Motseng Concessions, Motseng Property Developments, Motseng Selmec, Motseng Selmec Lesotho and Comserv Selmec Mozambique. The integration of competencies and processes will increase its capacity while achieving efficiencies for its clients.

www.motseng.co.za South Africa: +27 11 267 8000 Mozambique: +258 2131 6661 Lesotho: +266 5379 3713

MPG ACCREDITATION

SOUTH AFRICAN PROPERTY REVIEW

Level 1 B-BBEE Status

MetroWatch Did You Know? Unauthorised expenditure means any spending that was not budgeted for or that is unrelated to the municpal department’s function. An example is using municipal funds to pay for unbudgeted projects. Irregular expenditure is spending that goes against the relevant legislation, municipal policies or by-laws. An example is awarding a contract that did not go through tender procedures. Fruitless and wasteful expenditure concerns spending which was made in vain and would have been avoided had reasonable care been exercised. An example of such expenditure would include paying a deposit for a venue and not using it and losing the deposit.

Fruitless and Wasteful Expenditure July 2014 - June 2015 10.48% Unauthorised, Irregular, Fruitless and Wasteful Expenditure as a percentage of operating expenditure. About 1.4 times the expenditure for similar municipalities in Mpumalanga: 7.5600000000000005% Nearly double the expenditure for similar municipalities nationally: 5.56%

good bad

0% More than 0%

Reference: Circular 71 Formula: = Unauthorised, Irregular, Fruitless and Wasteful Expenditure / Actual Operating Expenditure = Unauthorised, Irregular, Fruitless and Wasteful Expenditure item codes irregular, fruitless, unauthorised / Income & Expenditure item code 4600, Audited Actual Note Since calling expenditures unauthorised, fruitless and wasteful or irregular can involve quite a lot of debate, the numbers used are the restated audited amounts 18 months after the financial year end - part of the Medium Term Revenue and Expenditure Framework.

Did You Know? The current ratio compares the value of a municipality’s short-term assets (cash, bank deposits, etc) compared with its short-term liabilities (creditors, loans due and so on). The higher the ratio, the better. The normal range of the current ratio is 1.5 to 2 (the municipality has assets more than 1.5 to 2 times its current debts). Anything less than that and the municipality may struggle to keep up with its payments.

Current Ratio July 2015 - June 2016 Quarter 4 0.3

The value of a municipality’s short-term assets as a multiple of its short-term liabilities. About one-quarter of the ratio for similar municipalities nationally: 1.15

good average bad

More than 1.5 Between 1 and 1.5 Less than 1

Reference: Circular 71 Formula: = Current Assets / Current Liabilities = Balance Sheet item code 2150, Monthly Actual / Balance Sheet item code 1600, Monthly Actual Note The quarterly summary looks at the state at the end of each quarter. If the monthly data is missing for the last month in the quarter, the previous month in that quarter. If all months are missing, that quarter is shown as blank. Did You Know? Liquidity ratios show the ability of a municipality to pay its current liabilities (monies it owes immediately such as rent and salaries) as they become due, and their long-term liabilities (such as loans) as they become current. These ratios also show the level of cash the municipality has and / or the ability it has to turn other assets into cash to pay off liabilities and other current obligations. Note The quarterly summary looks at the state at the end of each quarter. If the monthly data is missing for the last month in the quarter, the previous month in that quarter. If all months are missing, that quarter is shown as blank. 70

Liquidity Ratio July 2015 - June 2016 Quarter 4 0.07

The municipality’s immediate ability to pay its current liabilities About one-third of the ratio for similar municipalities nationally: 0.22

good

More than 1

bad

Less than 1

Reference: Municipal Budget and Reporting Regulations Formula: = (Cash + Call Investment Deposits) / Current Liabilities = Balance Sheet item codes 1800, 2200, Monthly Actual / Balance Sheet item code 1600, Monthly Actual

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Quality. Style qsproducts.co.za

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MetroWatch Did You Know? Municipalities donâ&#x20AC;&#x2122;t manage to collect all of the money they earn through rates and service charges. This measure looks at the percentage of new revenue that a municipality collects. It is also referred to as the Current Debtors Collection Ratio.

Current Debtors Collection Rate July 2015 - June 2016 Quarter 4 115.92% The percentage of new revenue (generated within the financial year) that a municipality actually collects About 10 percent higher than similar municipalities nationally: 106.68%

good Note The quarterly summary looks at the state at the end of each quarter. If the monthly data is missing for the last month in the quarter, the previous month in that quarter. If all months are missing, that quarter is shown as blank.

bad

95% or more Less than 95%

Reference: Municipal Budget and Reporting Regulations Formula: = Collected Revenue / Billed Revenue = Cash Flow item codes 3010, 3020, 3030, 3040, 3050, 3060, 3070, 3100 , Monthly Actual / Income and Expenditure item code 0200, 0300, 0400, 1000, Monthly Actual

INCOME Where does City of Cape Town get its money from? Did You Know? The more a municipality is able to generate its own income, the more self-sufficient it is. Municipalities should not be too reliant on transfers and grants from other spheres of government.

1. Money Generated Locally

2. Money from National Government

Not available

From residents paying for water & electricity,rates, licenses & fines, and from interest and investments.

From the Equitable Share of taxes, and Grants from National Government.

July 2016 - June 2017

Reference: Local Government Equitable Share Source: Income & Expenditure Audited Actual Did You Know? This shows how much of a municipalityâ&#x20AC;&#x2122;s income it is able to generate itself (through property rates, service charges, etc), compared with how much it receives as transfers and grants from national government. The more a municipality is able to generate its own income, the more self-sufficient it is.

Where money comes from

Source: Income & Expenditure Audited Actual and Original Budget 72

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MetroWatch SPENDING - How money is spent Did You Know? Employee-related costs are typically the largest portion of operating expenditure, but they should not grow so large that they threaten the sustainability of the operating budget. The normal range for this indicator is between 25% - 40% of total operating expenditure. Municipalities must guard against spending too much on staff while also making sure they have the people they need to deliver services effectively.

Staff Wages and Salaries July 2016 - June 2017 Not available Staff salaries and wages as a percentage of operating expenditure.

within norms 25% to 40% outside norms less than 25% or more than 40% Formula: = Wages & Salaries + Social Contributions / Actual Operating Expenditure = Income & Expenditure item codes 3000, 3100, Audited Actual / Income & Expenditure item code 4600, Audited Actual

Did You Know? Private contractors are sometimes needed for certain work, but they are usually more expensive than municipal staff. This should be kept to a minimum and efforts should be made to provide services in-house, where possible. This measure is normally between 2 percent and 5 percent of total operating expenditure.

Contractor Services July 2016 - June 2017 Not available Costs of contractor services as a percentage of operating expenditure.

within norms up to 5% outside norms more than 5% Formula: = Contracted Services / Actual Operating Expenditure = Income & Expenditure item code 4200, Audited Actual / Income & Expenditure item code 4600, Audited Actual

Did You Know? Municipalities spend money on providing services and maintaining facilities for their residents.

What is Money Spent On?

Services Electricity Protection Governance Administration Health Planning and Housing Development

Management Water

Source: Income & Expenditure Audited Actual and Original Budget 74

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20318

OUR FINANCING OF THE REAL ESTATE SECTOR CHANGES THE LONG-TERM ECONOMIC VIEW. As the leaders in commercial property finance, we look beyond the bricks and buildings and see the growth in communities, regions and our country. When you look at commercial property finance differently, you can change the world for good. cib@nedbank.co.za

see money differently

20318 NEDBANK_SAPOA Print 178X134_Rev1.indd 1

Nedbank Corporate and Investment Banking is a division of Nedbank Ltd Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).

SOUTH AFRICAN PROPERTY REVIEW 75 2018/06/08 5:39 PM

howmuch.net

Countries that have the largest stashes of foreign currency in the world Maintaining the image of your mall is an ongoing exercise.

A good reputation is priceless.

The user experience with lifts and escalators is paramount in this regard. This amounts to managing risk. Many facets come together to build your reputation…

How does this all fit together?

Legal: Compliance to regulations Technical: Defining specific requirements Contractual: Conformance with SLA conditions Cost: Management of project and life-cycle costs See link for lift and escalator regulations summary. http://www.s4e.co.za/lift_regulations.html

Foreign exchange (or forex) reserves are a key indicator of economic health. They provide policymakers with a tool to control inflation, ensure the continual flow of imported goods into the country, and generally provide a sense of security in an uncertain economic climate. With the US national debt recently topping an eye-popping US$21-trillion, we started thinking about how the US stacks up against the rest of the world in forex reserves

By Raul Amoros https://howmuch.net/articles/countries-with-the-biggest-forex-reserves

e got our data from the International Monetary Fund (IMF) for Q1 2018. (The latest numbers for a handful of countries, such as Saudi Arabia, are from 2017.) We first colour-coded each country by continent, then adjusted the size of the

Top 10 countries with the biggest forex reserves 1. China: US$3 162-billion 2. Japan: US$1 205-billion 3. Switzerland:

Contact

Solutions for Elevating for advice on your lift, escalator and hoist portfolio e: sales@s4e.co.za t: +27 (0)861 222 556

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US$785,7-billion 4. Saudi Arabia: US$486,6-billion 5. Hong Kong: US$437,5-billion 6. India: US$397,2-billion 7. South Korea: US$385,3-billion 8. Brazil: US$358,3-billion 9. Russia: US$356,5-billion 10. Singapore: US$279,8-billion

country by its reserves, excluding those places with less than US$5-billion in reserves. This approach provides a unique snapshot of the world economy in one easy-to-understand and colourful map. The first and most obvious trend on our map is the uneven distribution of forex reserves around the world. China leads by a long shot with US$3 162billion – almost three times as much as second-placed Japan at US$1 205-billion. It is difficult to imagine just how much money China has stashed away – it’s enough to power the entire US$2 651-billion economy of the UK for an entire year and then some (royal weddings included). Switzerland stands out in third place with US$785,7-

R $ howmuch.net

billion as the only European country in the top 10. Part of the explanation is that the Swiss opted out of the European Union, making the Swiss franc a safe haven for European investors. Our ranking becomes tighter further down the list, with less separation between the countries; but suffice it to say forex reserves are top-heavy. You can see the same top-heavy trend when looking at which continents have the highest reserves. Asia clearly leads the way on the right side of the map, second to the green countries from Europe (thanks only to Switzerland). Every other continent is tiny in comparison.

Take a look at North and South America compared to Asia. It’s not even close. And where is the entire continent of Africa in our visualisation? Since we excluded countries with less than US$5-billion in reserves, only four orange countries made it onto the map. What does this say about the world’s economies? Countries that have a lot of exports tend to stockpile the most forex reserves. Think about all the goods that flow out of China, the consumer electronics from Japan, and the oil from Saudi Arabia. These places dominate in particular industries or sectors, making them a magnet for forex reserves.

Having a large stash of foreign currency means that countries such as China and Japan can better handle unexpected economic surprises. The US only has US$44-billion in forex reserves. That’s not necessarily cause for alarm because many exportdependent countries rely on the US to purchase their goods. That’s how they ended up with such large caches in the first place. Here’s hoping that current trends continue long into the future.

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social

SAPOA Port Elizabeth Breakfast Session and Annual General Meeting

FROM LEFT John Loos, Lucille Essop, Charl De Coning, Ronel Gouws, Lance Deysel, David De La Harpe, Unathi Billie, Mark Bakker, Andre van den Berg and Dean Pillay

APOA Regional Council hosted a breakfast session on 18 May 2018, entitled “The State of Real Estate Amid Ramaphoria in 2018”. The guest speaker for the morning was FNB economist John Loos. FNB was also the event sponsor. The session was followed by Port Elizabeth’s Annual General Meeting, where the regional council members for 2018-2020 were elected. Anelle Bailey with Japie Strydom

Leandre Meyer

Breakfast session sponsored by:

FROM LEFT David Boyd, Velda Derrocks, Graham Boyd, Rob Edelson, Adrian Bleske, Angela Parker, Marissa Mulder and Michelle Maguire

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MAURITIUS

ABU DHABI

DUBAI

MONTENEGRO

DURBAN

JOHANNESBURG

CAPE TOWN

PRETORIA

BOTSWANA

SWAZILAND

BBBEE

LEVEL

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Western Cape Breakfast Session

FROM LEFT Peter Levett, Councillor Brett Herron, Lesley Lombard, Mandisa Shandu and Khalied Jacobs

Craig Armstrong

Miguel Rodrigues with Tim Hughes

APOA Western Cape Regional Council held a breakfast session entitled, “Towards Creating an Affordable Housing Policy for Cape Town” on 24 May 2018. Speakers on the day included Councillor Brett Herron of the City of Cape Town, Mandisa Shandu of Ndifuna Ukhwazi and Lesley Lombard of Nedbank Finance. The session was facilitated by SAPOA Western Cape Regional Council Member Khalied Jacobs.

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Mark Rountree with Brett Herron

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Erwin Rode with Carola Koblitz

Nqobani Mkhwanazi with Mida Kirova

Hanno Coetzee

FROM LEFT Gemma Moore, Kate Kilian and Candy Williams-Jones

Ben Lutumba

FROM LEFT Mida Kirova, Nigel Burls and Steve Sutcliffe

Raafiek Adams

Breakfast session sponsored by

FROM LEFT Colin Green, Paul Ciden, Andre Frieslaar and Jedd Grimbeek

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East London Breakfast Session and Annual General Meeting SAPOA East London Regional Council hosted a breakfast session at the Blue Lagoon Hotel in Beacon Bay on 24 May 2018

FROM LEFT Johan Burger, Barry Canning, Norman Agnew and Andrew Murray

Barry Canning

uest speakers for the breakfast session included Andrew Murray of Buffalo City Metropolitan Municipality, Barry Canning of MBDA Developments and Norman Agnew of WSU new Campuses (East London and Queenstown). The session was followed by the Annual General Meeting, where the regional council members for 20182020 were elected.

Breakfast session sponsored by

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FROM LEFT Emile Mouton, Mike Jeacocks and Johan Burger

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off the wall

Embedding microchips under your skin Wallets are such a bother. They flop around your pocket or purse, swelling as they munch on rarely used loyalty cards and superfluous receipts. But we’re living in the future now. Why do we still have to lug around several different credit cards, or keys for irritating doors to the car and the office, when technology has surpassed the need for any of them? By Victor Tangermann First published on futurism.com on 14 May 2018

any people are moving to store these sorts of things in their smartphones, of course, using services such as Apple Pay and smart locks. But phones can be lost and hacked. So a growing number of people – including, for whatever reason, about 3 000 Swedes – are opting for something even more invasive, although arguably practical: a surgically inserted microchip, according to the Associated French Press. The chip itself acts as a digital keychain. Near-field communication (NFC) is a way of sending information wirelessly from a passive chip to a reader, but only when they are about four centimetres apart. (You may have heard of radio frequency identification, or RFID – NFC is a more sophisticated form of it.) A chip in the hand can help people do things such as sign into the gym, unlock doors to cars and offices, and make credit-card payments. Over time, as the technology progresses, the implant will be able to do even more. The technology itself is not new. In fact, Swedes (and others) have been using microchips this way since at least 2015. Even before then, groups of people have been meeting at “implant parties”, often organised by larger companies, to hook themselves up. And the chips are similar to the ones veterinarians implant in dogs and cats so that their owners can find them in case they run away. Now, people who get the implant aren’t counter-culture biohackers – they’re the everyman. This is especially true in Sweden, where these microchips are so

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mainstream that, since June 2017, people have been able to buy train tickets with them. More bodies equipped with microchips doesn’t necessary sound like good news to everybody. NFC chips right below the skin give corporations a fair amount of control over you – they could track where you are, how much time you spend on lunch every day, or how many times you went to the bathroom (if the chip were scanned by a reader). Since most chips are offered through big companies, it’s just a matter of time until this happens – and opting out of this kind of data collection is a lot more convoluted when you’ve got a chip implanted in your bodily tissues. If you want to go off the grid in even the smallest way, you can leave your wallet at home – but removing a microchip requires bit more effort.

Then there are the obvious data security concerns. No internet-connected data, no matter how secure it may seem, is safe – even NFC can be hacked with the use of a specialised reader and coding skills. Smartphones have tackled this security problem by combining NFC technology with biometric readings, such as your fingerprint. But microchips such as these don’t have this security, which could make your personal info more vulnerable to hacking. So we get it, Sweden – you’re populated by futuristic cyberpunk badasses while most of us are still stuck with humdrum brass keys and overstuffed wallets that bulge like a recently fed snake. But without additional safeguards and guarantees of online privacy, the microchipping fad could quickly become a digital security nightmare.

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