South African Property Review October 2013

South African Property Review

PROPERTY SOUTH AFRICAN

REVIEW

October 2013

es: i r e a s hly ry c i Afr ont ount e Th our m by-c try focus n cou

Project managers

SANDTON CITY MOVES UP A GEAR Muller mulls over retail offerings

INVESTMENT FUNDING Vunani’s quest for true value

October 2013

Showing off modernity Hertford office park

FACILITIES MANAGEMENT It’s all about integrated service

PROUD SUBSIDIARY OF EPS

2720_JHI_SAPOA Prop Review Add_Oct_FRONT INSIDE COVER_PRINT.indd 1

2013/09/05 11:34 AM

from the CEO

PPP: Forging relationships SAPOA CEO Neil Gopal says partnerships between private sector organisations as well as with the public sector benefit property professionals and society at large

B

y working together we can do more. SAPOA encourages and participates in finding joint resolutions to issues affecting our members and society at large.

The saga at Nelson Mandela Bay Metropolitan Municipality is a case in point. Maladministration and alleged political interference have contributed to a collapse in corporate governance in the area.

As an organisation, SAPOA has signed a memorandum of agreement (MOA) with the Johannesburg Chamber of Commerce and Industry (JCCI), and are in the process of doing so with the Nelson Mandela Bay Business Chamber as well.

The MOA between SAPOA and the JCCI intends to form strategic collaborative relations between the two entities in respect of property ownership, management and development issues of the commercial property/business sector within the area of jurisdiction of the Johannesburg Metropolitan Municipality.

The intention is to complement each other in the pursuit of ensuring that our respective members participate, as business or the private sector, in respect of the city’s integrated development plans in relation to infrastructure development, new transport solutions and transport corridors.

It is our intention to utilise this partnership for the benefit of our members, to strategically engage the office of the respective mayors and their teams to alleviate some of the fundamental operational issues relating to the commercial, retail and industrial property sectors.

There are noble intentions from all parties to ensure that the private and public sector partner together for efficient service delivery, while business continues to be sustainable.

International best practice needs to be adopted by both the private and the public sector in order to make our cities work and prosper. This can only be achieved through partnerships – between industry bodies and with public organisations.

There are real, tangible benefits when both function optimally, and each can play its part in carrying out its mandated objectives.

SAPOA’s mission is to be committed to actively and responsibly represent, protect and advance its members’ commercial property interests within the property industry

Neil Gopal

SOUTH AFRICAN PROPERTY REVIEW

1

contents

October 2013

PROPERTY SOUTH AFRICAN

Abland

REVIEW

South African Property Review Project managers

Abreal

October 2013

REVIEW

es: eri a s ly y fric nth ntr e A o ou Th our m y-c -b try focus n cou

SANDTON CITY MOVES UP A GEAR Muller mulls over retail offerings

INVESTMENT FUNDING Vunani’s quest for true value

October 2013

Oilgro

PROPERTY SOUTH AFRICAN

FACILITIES MANAGEMENT It’s all about integrated service

Showing off modernity Hertford office park

4 12 16 18 20 28 31 34 40 42 52 59 60 64

ON THE COVER The office park evolution: architecture and design is just as important in the commercial space as it is anywhere else – and Hertford Office Park in Midrand is leading the trend

News Education, training and development Legal update An ethical stance Galetti gets Knighted Facilitating forward Specialists in the built environment Sandton City: from feet to ka-ching Africa uncovered Vunani: the quest for value The office park evolution Project managers A holistic approach Statistics at a glance Social pages Off the wall The evolving metropolis

FOR EDITORIAL ENQUIRIES email editorial@sapoa.org.za or managingeditor@sapoa.org.za.

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 e: sales@sapoa.org.za Editor in chief Neil Gopal Editorial advisor Jane Padayachee Managing editor Mark Pettipher Editor Candace King Consulting editor David A Steynberg Copy editor Ania Rokita Sales Riëtte Stevens Finance Susan du Toit Contributors Advocate Portia Matsane, Martin Ferguson, Nicky Manson Photographer Michael Glenister 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.

P R O P E R T Y

2

F U N D

SOUTH AFRICAN PROPERTY REVIEW

Designed, written and produced for SAPOA by MPDPS (PTY) Ltd e: mark@mpdps.com

Printed by Printing Solutions e: info@sedmarketing.co.za

news

Botswana property market on the map

B

ased on the returns across its property market, Botswana is showing stable performance.

According to the IPD Botswana Annual Property Consultative Index, the total return for all property was 17,9% for the year ended December 2012, compared with 20,9% for 2011. The figure represents the un-geared total return to directly held standing property investments from one open market valuation to the next.

The return on Botswana property comprises 11% income return with 6,3% capital growth over the year.

The underlying rental growth of 8,6% outstripped Botswana’s headline inflation rate of 7,4%, underpinning the capital growth and income return.

Industrial property outperformed other sectors with a total return of 28,4%, closely followed by residential at 24,4%. Retail property’s performance was more conservative with a return of 16,6%.

The office return trailed at 15,2% as recent development activity placed pressure on rental levels. The property asset class outperformed bonds and equities, which returned 6,3% and 7,7% respectively during 2012.

“Now the Botswana property sector can provide local and global property markets with the comparative, precise and timely data they increasingly require,” says Stan Garrun, executive director and head of South Africa at IPD. This is the second year that IPD has reported on the Botswana property market, which allows the IPD to track the sector’s performance with a fully -fledged indicator. Botswana is the second African country (in a stable of 30 countries around the world) with an IPD index. +27 (0)11 656 2115, Ipd.com/southafrica

Stan Garrun, executive director and head of South Africa at IPD

Growthpoint converts to best-of-breed REIT capital structure Broll closes Cape Town property deals worth R128,5-million

B

roll recently concluded three large-scale property deals in Cape Town, with a combined value of R128,5-million and spanning 33 700m² of prime commercial property.

The deals include the ABSA Building in N1 City, Omupark in Epping and 3 Rusper Street in Maitland. Acting on behalf of Capital Property Fund, Broll acquired the Omupark warehouse in Elliot Avenue, Epping for R66,5-million from the Old Mutual Triangle Fund.

“Capital Property Fund was attracted to the 20 000m² warehouse park because it meets its investment criteria and is close to its existing Epping properties,” says Sean Berowsky, director at Broll’s investment brokering division. “This creates further synergies for Capital’s existing tenant base in the area and supports its active management of the park.”

In Maitland, Broll facilitated the R50-million sale of the 12 500m² 3 Rusper Street warehouse to the Western Cape Department of Transport and Public Works on behalf of a private seller.

Broll also sold a 1 200m² ABSA Building on behalf of listed Arrowhead Property Fund to Pathcare for R12 million. “This key property was deemed to be non-core for Arrowhead on a longterm basis,” says Berowsky. Pathcare acquired the property for its strategic expansion in the N1 City precinct. +27 (0)11 441 4000, Broll.co.za

4

H

aving acquired REIT status earlier this year, Growthpoint Properties Limited has become the first South African REIT to introduce a new capital structure, converting from complex linked units to the straightforward ordinary share structure.

“Growthpoint’s new capital structure is cleaner and simpler,” says CEO Norbert Sasse. “It has been welcomed by our investors.

Taking this exciting path was a natural step for us in becoming a full REIT. Growthpoint’s change to ordinary shares represents the international best practice for a REIT and, for that matter,

for any publicly traded investment.” The company has advanced from the complicated linked unit capital structure typical of a South African property loan stock company. For Growthpoint, this comprised ordinary shares linked to unsecured, subordinated, variable-rate debentures or loan stock, in a ratio of one ordinary share to 10 debentures. That meant that each share and its debentures could trade on the JSE only as linked units.

The last date to trade in Growthpoint linked units on the JSE was 1 August 2013. To achieve its new, simpler capital structure, Growthpoint has de-linked its linked units and will capitalise its debentures to stated capital, whereafter the debentures will be cancelled.

The company’s ordinary shares, which had a nominal value of 5 cents, have also been converted to shares of on-par value. +27 (0)11 944 6000, Growthpoint.co.za

SOUTH AFRICAN PROPERTY REVIEW

1264

news

> Corporate and Investment Banking

NOTHING BUILDS A STRONGER FOUNDATION THAN A WEALTH OF EXPERIENCE

RESILIENT PROPERTY INCOME FUND

ATTERBURY INVESTMENT HOLDINGS

DIPULA INCOME FUND

ZAR 600 million

ZAR 1.77 billion

ZAR 843 million

Term Finance

Term Finance

Term Finance

ARROWHEAD PROPERTIES LIMITED

COSMOPOLITAN GROUP

NEW AFRICA DEVELOPMENTS

ZAR 700 million

ZAR 450 million

ZAR 540 million

Term Finance

Development Finance

Term Finance

ALICE LANE – PHASE 1

MIDDELBURG MALL

JABULANI PRECINCT

Abland and Pivotal Property Fund

Flanagan and Gerard Investments (Pty) Ltd and Moolman Group

CALGRO M3 Holdings Ltd

ZAR 440 million

ZAR 300 million

ZAR 271 million

Development Finance

Development Finance

Development Finance

Our experience shows how involved we’ve been in building the real estate market. This foundation allows us to provide you with the best possible financial solutions for your real estate needs. www.standardbank.co.za/cib

Authorised financial services and registered credit provider (NCRCP15).

The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). SBSA 126413/RR – 3/13 Moving Forward is a trademark of The Standard Bank of South Africa Limited

126413 R SA Real Estate.indd 1

SOUTH AFRICAN PROPERTY REVIEW

5

2013/07/03 4:41 PM

news

JHI Project Management enters Africa

W

ith an improving and a move to dollarisation, Zimbabwe is proving to be an African country that offers sound business and development opportunities – something that JHI Project Management acknowledges. “With a strong track record and aptitude for new retail development in Africa, the South African based Innscor Retail Africa has identified a few gaps in the Zimbabwean retail market – one of which is the fast-food sector,” says Rudolf Nieman, MD of JHI Project Management, a member of the Excellerate Property Services (EPS) group.

Owning Baker’s Inn, Chicken Inn, Pizza Inn, Creamy Inn and the franchise rights to Nando’s and Steers in Africa, Innscor has made full utilisation of this demand with the rollout of more than 3 300m² of new and refurbished food courts in Zimbabwe over the past year (August 2012 to June 2013), totalling an investment of almost R120million. JHI Project Management, a wholly-owned subsidiary of EPS and a sister company to JHI Properties, was appointed the principal agent managing the development and execution of Innscor’s projects.

As a result, all 13 of the projects were completed to internationalquality standards and within exacting timelines. “The projects were not without complications as the Zimbabwean construction industry presents a variety of challenges to developers, consultants and contractors,” says Nieman. “These include a lack of supply of building materials, which need to be sourced from South Africa and other countries; a lack of skilled and semi-skilled labour; transport and border-clearing issues; exacting requirements from local city councils; and a lack of infrastructure.” Based on the programme’s success, all parties are keen for further expansions in Zimbabwe as well as other African countries. +27 (0)11 911 8000, Jhi.co.za

Nedbank funds new Waterfall retail development

N

edbank Corporate Property Finance recently concluded a R144-million loan agreement with Atterbury for the construction of the Waterfall Corner Retail Centre, an exciting upmarket retail development that is already under way on the corner of Maxwell and Woodmead Drives in Sunninghill, Johannesburg.

“Atterbury has a wellestablished history of successfully developing and managing A-grade properties that generate quality rental incomes and sustainable capital growth for its shareholders,” explains Ken Reynolds, the regional executive for Gauteng

6

at Nedbank Corporate Property Finance. “In addition, the fact that Checkers, Woolworths and Clicks have already signed 10year leases as key anchor tenants for Waterfall Corner strengthens our confidence that this new development will not buck the well-established success trend.”

The 9 132m² Waterfall Corner Retail Centre is set to become a prime neighbourhood retail centre, servicing the fastgrowing, upper-income residential communities and commercial developments in the greater Woodmead area.

It is scheduled for completion in March 2014. +27 (0)11 706 1176, Atterbury.co.za

SOUTH AFRICAN PROPERTY REVIEW

Growthpoint Australia to acquire three prime industrial property developments

G

rowthpoint Properties Australia (ASX:GOZ) recently announced its plan to acquire a portfolio of three prime industrial property developments in Melbourne, Victoria, for a total consideration of AUS$60,2-million (approximately R542-million).

The properties are being developed by, and acquired from, ASX-listed Australand Property Group. Expected completion is December 2013 for a 25 728m² development in the Access Altona Industrial Estate, and February 2014 for two developments in Key Industrial Park, Keysborough, of 12 800m² and 17 834m².

Estienne de Klerk, director of GOZ and its major security holder of 65,8%, South African

listed property company Growthpoint Properties Limited (JSE:GRT), says, “These assets provide an excellent investment opportunity. They enhance GOZ’s property portfolio and further its strategic objectives of increasing its industrial assets, occupancy, average asset age and weighted average lease expiry (WALE).

It also has annual fixed rent reviews for the properties averaging 3,5% per annum.”

Following this acquisition, GOZ’s portfolio value will have more than doubled over the last four years, from 24 properties valued at AUS$662-million (R5,9-billion) in June 2009 to 47 properties AUS$1,73-billion (approximately R15,6-billion).

It also benefits from one of the longest WALEs in the A-REIT sector at 6,8 years.

“This transaction supports continued distribution growth from GOZ,” says De Klerk, noting GOZ is a strategic holding for Growthpoint. “GOZ’s forecast distribution for the 2014 financial year is the highest of its Australian peers at 3,8% and driven by portfolio income growth. Accretive acquisitions, which GOZ is actively pursuing, have the potential to drive this growth above guidance.” +27 (0)11 944 6000, Growthpoint.co.za

R

news

RELOCATING

RENOVATING

RE-FINANCING

COMMERCIAL PROPERTY FINANCE FROM BIDVEST BANK Whatever you have in the pipeline, get the specialist financial solution for commercial properties up to R200 million. And take your business where it needs to be.

Email property@bidvestbank.co.za and your personal consultant will contact you.

Call 0860 11 11 77 or visit www.bidvestbank.co.za Bidvest Bank Limited (Reg No 2000/006478/06) is a licensed financial services and registered credit provider, NCRCP17. BlastBC 123478

SOUTH AFRICAN PROPERTY REVIEW

7

news

Benefits for Dipula investors

D

Strong results and portfolio growth for Synergy

S

ynergy Income Fund reported a strong set of results for its financial year ended on 30 June 2013, delivering on its forecast distribution growth to unit-holders. It announced full-year distributions of 82,66 cents per Synergy A linked unit, up five percent in line with forecasts, while distributions to Synergy B linked unit-holders of 51,38 cents per unit grew a remarkable 78%.

“We’re pleased to report these results for our first full year of operation as a listed company,” says Synergy CEO William Brooks.

“We have met our targets and delivered the distribution growth we promised our investors. Furthermore, we have positioned the company well for future growth in the near term, despite a very challenging operating environment.” Brooks attributes the strong growth in distributions to the positive effect of Synergy’s acquisitions in the prior financial year, with 12 of Synergy’s 14 property assets on its balance sheet for the full financial year.

Synergy’s investment property portfolio increased by 60% during the year. Its property assets totalled R1,9-billion at year-end.

Its revenue also grew by R192-million to R240-million. “Synergy’s net asset value per combined linked unit grew by 15%, indicating good future growth from our properties,” says Brooks. During the year, Synergy successfully completed a unit placement of R376million in equity.

Its market capitalisation doubled to R1,3-billion on 30 June 2013. It also reported a conservative loan-to-value ratio of 30,4% with interest rates hedged on 73% of its total borrowings at a weighted average rate of 9,11%, and a total weighted average cost of borrowings of 8,7%. It reduced vacancies by 28%, from 4,6% to 3,3%. It also improved its national tenant ratio by five percent from 81% to 86%, meeting its strategic target of 85% or higher. Synergy’s leasing team achieved positive rental reversions of 6,9% and a tenant-retention ratio of 88% during the year. Its R334-million acquisition of Atlantis City Shopping Centre, which has a market value of R353,8-million, boosts its property portfolio to 15 assets across South Africa with a combined value of R2,231-billion.

The company forecasts growth in B linked units of between 12% and 16% for its 2014 financial year, with A linked unit distributions growing at the five percent preferential entitlement. +27 (0)21 673 3300, Synergyincomefund.com

8

SOUTH AFRICAN PROPERTY REVIEW

ipula Income Fund has announced that its acquisition drive has improved its rental income streams, with 14 properties valued at R1,4billion transferring into its portfolio in the past 14 months.

“Now that these acquisitions have transferred, Dipula investors can enjoy the advantages of growing income stream,” says Izak Petersen, CEO of Dipula Income Fund, adding that a further R940-million of properties acquired have yet to transfer to Dipula.

“With some of our acquisitions taking longer than expected to transfer, the full benefits of these acquisitions will only come through in Dipula’s 2014 financial year and beyond,” says Petersen. These transfers further the fund’s strategic goal

to grow the average value of its assets to around R50-million within the next five years.

“Dipula will continue acquire sectorally and geographically diverse property assets to enhance our portfolio and grow the quality and sustainability of our income for investors,” says Petersen. +27 (0)11 325 2112, Dipula.co.za

Multinational Metraclark doubles its Growthpoint lease

M

etraclark, one of southern Africa’s biggest refrigeration and air-conditioning wholesalers, is expanding its existing relationship with Growthpoint Properties by increasing its leased premises to 24 400m².

Metraclark renewed its lease for its existing premises based in Mandy Road, Reuven.

This 12 052m² manufacturing plant has extensive access to power and is easily reached by its labour force.

Furthermore, Metraclark signed a new 10 year lease for another property in Astron Street, Denver. It includes 2 900m² of office space and a 9 414m² warehouse for the storage and distribution of its air-conditioning and heating units.

“The Astron Street premises offers great signage potential,” says Jason Reeves of Growthpoint’s industrial division. “Importantly, it’s close to the M2 highway, which is the distribution centre for all of Metraclark’s products.”

Growthpoint’s investment in the project exceeds R7million for both premises, mostly focused on preparing Metraclark’s new building for a 10-year lease.

“Managing the tight timelines and handover created challenges for the project team but Metraclark’s installation was concluded timeously,” says Reeves.

Growthpoint also helped Metraclark purchase the racking and in-rack sprinkling from the previous occupant. +27 (0)11 944 6000, Growthpoint.co.za

news

Growthpoint delivers 7,2% full year distribution growth to investors

G

rowthpoint Properties Limited has reported distribution growth of 7,2% to investors for the year ended 30 June 2013, outperforming its original forecast and delivering on higher performance prospects announced at its half-year.

Norbert Sasse, CEO of Growthpoint Properties Limited, attributes the positive results to the all-round positive performance from Growthpoint’s South African property portfolio.

He also points to growing distributions from Growthpoint Properties Australia (GOZ), in which Growthpoint has a 65,8% holding, heightened by exchange rates moving in Growthpoint’s favour.

The total return to Growthpoint linked unitholders is 21,2% for the year, comprising capital growth of 14,7% and income yield of 6,5%.

Growthpoint’s distributions are based on sustainable rental income. It doesn’t distribute capital profits. Investors can expect similar strong performance from the company in the coming year. “Growthpoint is likely to deliver similar distribution growth for the year ending June 2014 as it did in the 2013 financial year,” says Sasse.

For the first time, Growthpoint’s tangible assets exceeded R60-billion during the year. At year-end, consolidated tangible assets were valued at R62,8-billion. During the year, Growthpoint successfully raised R4-billion in capital – R1,5-billion through two distribution re-investment plan issues and R2,5-billion

through the oversubscribed placement of new linked units.

As a direct result, the company’s loan-to-value ratio, excluding GOZ, reduced substantially from 33,9% to 23,9%. Growthpoint’s South African property portfolio contributed 75% to its distributable income.

Despite continued tough market conditions, particularly in the office sector, vacancies remained largely stable in the South African portfolio at 4,4% overall. Portfolio arrears are the lowest of the past five years, totalling 5,8% of collectables and down from 6,4% last year.

“This is a result of quality clients and exacting arrears management,” says Sasse. Growthpoint also contained its property expense ratio below 25% in the face of increasing cost pressures.

“Net property income from our South African property portfolio increased by 5,7%,” reports Sasse. In South Africa, Growthpoint made five strategic property acquisitions during the year (for R492-million) and disposed of 23 noncore properties for R869million, making a profit of R292-million on cost. It also invested R904-million in value-enhancing developments and redevelopments.

Distributions from Growthpoint’s strategic holding in GOZ grew 10,2% in ZAR on a like-for-like basis, making a strong 14% contribution to its total distributable income.

Distributions from Growthpoint’s 50% stake in the V&A Waterfront increased by 6,5% and contributed 11% to total distributable income.

“We’ll continue to identify and pursue revenue-enhancing opportunities that further Growthpoint’s strategies, and provide sustainable and growing income for Growthpoint’s investors,” says Sasse. “We’ll also continue to innovate to support South African business.” +27 (0)11 944 6000, Growthpoint.co.za

Betts Townsend involved in new Nairobi retail development

C

onstruction project management consultancy Betts Townsend is putting its experience in the East African market to good use as project opportunities continue to open up there. Kenya in particular is undergoing a great deal of development, and Betts Townsend is involved in a number of projects in the country.

One of these is The Hub Karen in Nairobi – a sizeable new retail development with 29 000m² of GLA on two levels of retail. Situated in the fast-growing suburb of Karen, named after Karen Blixen, the author of Out Of Africa, The Hub Karen is situated close to the Karen roundabout and aims to offer local residents a varied mix of shopping, entertainment, restaurants and an office component for medical suites and professional offices.

The retail and office buildings are centred around a 2 000m² open-air piazza, which is designed to host local events and exhibitions while taking advantage of the area’s great climate. As part of the development’s commitment to be green, a water feature, used for water harvesting and water recycling, will offer a natural backdrop for food and beverage outlets, as well as acting as an entertainment feature.

Michael Taylor, executive director at Betts Townsend, says the company has been appointed in the capacity of development manager and project manager, and will also perform a tenant coordination function over the life cycle of the mall. “We are also helping to ‘migrate’ certain South African retailers who wish to establish a presence in Kenya,” he says.

The move is a timely one – the feasibility study for the mall has indicated that the suburb of Karen’s population is projected to grow by at least 30% in the next six years.

“This is an exciting project for Betts Townsend as we have been involved right from project inception,” says Taylor. “We already have a good knowledge of the Kenyan market and have completed several projects around East Africa, but this project will really help us to make our mark as development and project managers of distinction in Kenya.”

The Hub Karen is currently in the advanced stages of design.

Civil works on site commenced in early July. The project will take another 18 months to complete, with the mall expected to open in early 2015. +27 (0)11 656 2440, Bettstownsend.co.za

SOUTH AFRICAN PROPERTY REVIEW

9

news

Broll opens shop in Kenya

Redefine acquires three prime shopping centres in Germany

I

R

n its ongoing strategic effort to expand its African footprint, Broll has opened its new Kenya offices in Nairobi to provide property services to support demand in East Africa, and to serve the growing needs and opportunities in the region.

“Broll has been doing business in Kenya for some time from its South African headquarters with its international partner, CBRE,” says Broll group CEO Malcolm Horne. “As the economic hub of East Africa, and with sound macroeconomic and political policy in place, Kenya is attracting multinational companies. Nairobi is proving increasingly popular for corporate head offices in the region.”

Seasoned South African expatriate and property professional Jonathan Yach has been appointed as MD of Broll Kenya and will bring his 25 years of property

experience in South Africa and, most recently, India, to the business.

“Kenya’s property market is very sophisticated, competitive and full of prospects,” says Yach.

“Its retail property market is growing and the list of new retailers entering the market is deepening. The market here is ripe for growth.”

Yach notes that, while the returns apparent in Africa beckon, investors want to ensure that growth is a sure thing.

Most governments in Africa have learnt that enjoying democracy and applying strong economic principles and fiscal discipline attracts investors. “Where transnational companies go, they support and become part of the local economies,” he says. +27 (0)11 441 4000, Broll.co.za

edefine International (PLC) has announced its acquisition of three prime retail properties in Germany valued at €189-million and offering a blended initial net yield of 5,5%.

The acquisition represents the first of two significant transactions for Redefine International, indicated in its recently released Interim Management Statement.

Investing in offshore listed property can add much-needed balance to South African property investment portfolios, but the key is – as always – making good choices and picking offshore companies with reputable track records and consistent overall returns.

“There are many options to choose from but investors need to check they are making the optimal selection for their risk and return goals,” says Michael Watters, CEO of the Redefine International Group. The retail properties in this acquisition

Upturn for Emira

E

mira Property Fund reported distribution growth of 3,5% for the financial year ended 30 June 2013, achieving a noteworthy positive turnaround from last year’s decline in distributions. Emira’s participatory interest holders received a total return of 26,2% for the year, with a capital return of 17,3% and an income return of 8,9%. The fund’s net asset value increased by 14,9% to 1 325 cents per participatory interest (PI).

James Templeton, CEO of Emira Property Fund, assigns the upsurge in performance to the comprehensive progress made on its turnaround strategy.

This includes improved leasing, rigorous cost controls and portfolio-strengthening acquisitions, disposals and upgrades. “The results of our new strategy now clearly show in the numbers, with every metric improving during the reporting period,” he says. “Driving Emira’s performance, in the past two years we’ve improved the

10

SOUTH AFRICAN PROPERTY REVIEW

quality of our investment portfolio, property occupancy levels and tenant retention, and we’ve built a strong, skilled team. We’re expecting an even better year in 2014.

The headway made in lowering vacancies during the 2013 financial year will continue to flow through and, based on current forecasts, should result in real distribution growth for our inventors in the coming year.”

While Emira improved performance all around this year, its increased occupancy levels tell a significant success story.

Vacancies of 11,5% at 30 June 2011 and 10,5% for 2012 dropped below seven percent for the first time since 2008 earlier this year. Emira’s portfolio vacancies closed the 2013 financial year at a greatly improved 5,6%, a decline of more than 50% in two years. Heightened tenant retention, increasing from 65% to 78% during the year, helped achieve the better occupancy levels.

“For the first time in several years, Emira’s office vacancies are below the SAPOA

include the prime 19 000m² Schloss Shopping Centre in Berlin, the superbly located 15 000m² Bahnhof Altona Shopping Centre in Hamburg and the prominent 10 000m² City Arkaden Shopping Mall in Ingolstadt.

“The three strongly located shopping centres are attractive additions to our portfolio,” says Watters. “They will enhance the overall quality of our assets and provide an opportunity to create both strong income returns and long-term capital growth for our shareholders.”

Through acquisitions such as these, Redefine International provides local investors with access to solid and economically secure First World property markets in northern and western Europe, including Germany, Switzerland and the Netherlands, as well as the fast-growth Australian market. +44 207 811 0100, Redefineinternational.com

benchmark of 11%, at 10,7%, and we expect this to reduce even further,” says Templeton. “Rentals remain under pressure in the present competitive market defined by an increasing supply of office space in most major nodes.”

Emira’s retail and industrial portfolios have vacancy levels well below the national average, at 2,8% and 2,2% respectively. “We are busy with, or plan to start, capital projects of about R1-billion to optimise the potential of our properties,” notes Templeton.

This also includes a growing focus on green building with energy savings and associated costs savings receiving increasing priority.

“We’re pleased to report these positive results and to see the strategic progress we made reflected in our performance for investors,” says Templeton. “We will continue to find sustainable ways to grow income for Emira’s investors and gain further ground in the sector in 2014.” +27 (0)11 028 3118, Emira.co.za

news

Tsogo Sun joins 49M

T

sogo Sun is one of the latest companies in the hospitality industry to pledge its support for the 49M energy-efficiency campaign. At a signing ceremony held recently at Southern Sun Montecasino, Rob Collins, chief marketing officer at Tsogo Sun said the group was excited to be part of the 49M campaign.

The signing symbolises the company’s commitment to energy efficiency. “It’s a privilege for Tsogo Sun to demonstrate our commitment to the environment by pledging ourselves with 49M to a 10% reduction in energy usage,” says Collins. “At Tsogo Sun, we continually revisit our environmental strategy (which is in operation across

all our properties – more than 90 hotels and 14 casinos) to ensure that ongoing progress is made in protecting the environment and preserving it for future generations.”

Tsogo Sun’s environmental strategy ensures that environmental management practices are integrated as part of the group’s operations, with initiatives that reduce the impact the business has on the environment, and which encourage employees and guests to embrace greener behaviour for the benefit of the planet.

To ensure the objectives of its environmental programme are met, Tsogo Sun has been in partnership with Heritage

for the past three years.

Property-specific environmental management systems aimed at energy, water, waste management and responsible procurement have been developed for all its casinos and hotels. Employees are informed of the group’s policies governing these areas and are trained on their responsibilities in this regard.

South African businesses that have adopted appropriate energy-efficiency measures

in order to maximise cost saving and competitiveness include T-Systems, CSIR, Mhlathuze Municipality, Umjindi Municipality, the Medi-Clinic Group, AngloGold Ashanti, Anglo American, Goldfields, Samsung, MTN, MassMart, Pick n Pay and other top companies.

The campaign is also targeting tertiary institutions and ordinary residents.

49m.co.za

Broll welcomes Carrefour’s entry into Africa

B

roll Property Group has welcomed news of French retailer Carrefour’s entry into the African market to meet the growing retail needs on the continent. Broll CEO Malcolm Horne notes that Carrefour’s arrival points to exciting times for the retail market in Africa.

“Carrefour will bring a great alternative offering to the market,” he says. “The trend of retailers entering new markets will continue to accelerate as Africa develops and is demystified. Increasing economic participation in African countries has the potential to springboard further growth and demand to invest in infrastructure.”

Carrefour has partnered with distributor CFAO to open shops in eight African countries by 2015. CFAO, which will own 55% of the venture with Carrefour, aims to generate about €1-billion (R13-billion) in revenue yearly in 10 years from the link-up, and from revenue produced by the shopping malls it plans to construct.

CFAO is controlled by Gucci owner Kering SA, distributing goods mainly in Central and West Africa. Horne believes that Carrefour has chosen the right time to enter the market.

“Importantly, it has chosen a strategic partner with experience in distribution channels and a track record of entering emerging markets in Africa,” he says.

“Carrefour has identified the opportunity that Africa

presents and clearly taken a view to position itself in markets with limited choices and huge shopper needs. ”The first African Carrefour is set to open in 2015 in Abidjan in the Ivory Coast. From there, the retail giant is set to open branches in Nigeria, Ghana, Cameroon, Congo, Democratic Republic of the Congo, Gabon and Senegal.” +27 (0)11 441 4000, Broll.co.za

Emira issues R499-million commercial paper Emira Property Fund successfully settled R400million of three-month unsecured commercial paper (CP) and immediately issued R399-million of six-month unsecured CP and a new issue of R100-million three-month CP. The new paper expires in February 2014 and November 2013 respectively. Rand Merchant Bank arranged the settlement and issues. With the combined issue oversubscribed, appetite for Emira paper saw the interest margin on the three-month paper at the same rate as its settled three-month paper of 21 basis points above the three-month Jibar rate.

The interest margin on the six-month paper was set at 26 points above the six-month Jibar

rate. James Templeton, CEO of Emira, says that in light of current market dynamics, the company gave the market the choice to bid for three-month and six-month paper, with the longer option attracting greater demand.

“The issues bring Emira’s total funding through debt capital markets to approximately R1,45-billion, secured at attractive rates through different types of funding with diverse maturity rates,” says Templeton. In addition, Emira also enjoys funding from different commercial banks and money markets. “Our diversified funding strategy minimises interest costs and reduces the risk to investors.” +27 (0)11 028 3118, Emira.co.za

SOUTH AFRICAN PROPERTY REVIEW

11

education, training and development

New leader, new degrees The Department of Construction Economics at the University of Pretoria has a new programme leader – and new degrees in real estate

T

Martin Ferguson, SAPOA’s HR, education, training and development manager, collaborates with thought leaders in South Africa’s property sector

SAPOA wishes to thank everybody for their support and efforts in making the PDP a success year after year.

The SAPOA HRD manager will draft an extensive report on the three winning projects in the October 2013 issue of the Property Developer.

SAPOA and the Graduate School of Business are proud to have Standard Bank as the main sponsor of the PDP, a programme of the highest quality, which attracts outstanding participants and supports the development of young professionals in the commercial property industry. The experiences shared and friendships formed are the true legacies of the PDP, and the two-week programme has proved invaluable to delegates as they move forward in their careers.

12

he new BSc Real Estate degree that was launched in the Department of Construction Economics at the University of Pretoria in 2010 is already in high demand. Although the University of Pretoria has been offering a very sought-after MSc Real Estate since 1990, there were no undergraduate options specialising in this field.

Candidates who were interested in pursuing a career in real estate – as entrepreneurs in the private sector, or as employees in the private, government or semi-government sector – had to enrol for a degree in commerce or in construction economics (construction management or quantity surveying).

This new programme opens the door to career options that include property investment, property finance, property development, facilities and property management, and professional property valuation. It will also contribute to professionalisation of the career through accreditation by the Council for the Built Environment and the South African Council for the Property Valuers Profession.

The first undergraduate class completed its studies at the end of 2012; the honours programme will be launched in 2014. The Department of Higher Education initially approved this degree as a five-year programme, but subsequent to the other programmes in the Department of Construction Economics at University of Pretoria that was converted to a three-year BSc degree and a two-year honours programme, Senate approved the reinstatement of the programme as a three-year BSc with a oneyear full-time honours programme.

According to Dr Douw Boshoff, the programme coordinator, this programme is based on successes achieved in the existing undergraduate and postgraduate offerings in the Department of Construction Economics, which includes the MSc Real Estate.

Students learn more about property financing, marketing, valuation and management aspects related to property development and investment.

SAPOA career days prove to be a huge success in promoting commercial property

A

s part of its education strategy in 2013, SAPOA participates in industry career promotions at school and at university level on a national basis. The objective of the participation and exhibitions is to promote property careers as the careers of choice to young people, to attract them for the future sustainability of the commercial property industry.

In the past, each of the SAPOA regions identified schools in their respective area every year where presentations were made to Grade 10 to Grade 12 learners, introducing the commercial property industry and various career opportunities in commercial property.

SOUTH AFRICAN PROPERTY REVIEW

This year we partnered with several universities, which transported learners from urban schools and rural areas to their camouses to participate in the promotion of property careers.

SAPOA has developed a “Property Careers” booklet that is handed out at these school career days, outlining various job opportunities for professionals in property managementand property development. Each career listed in the booklet explains its purpose and specific outputs in the commercial property value chain, the minimum requirements for tertiary education, which degree/s can be registered

for that will support the career, and which university offers the degree/s. We also outline the competencies, skills and knowledge required for the career.

SAPOA has also developed a student handbook that is handed out at school career days (to learners) and university career days (to students). This handbook features profiles of people who have made their mark in the property industry as well as profiles of some of the past SAPOA bursary recipients who have successfully launched their careers in the property industry, and their advice to potential students.

education, training and development The programme is structured to have the introductory real estate modules, including property valuation and management in the undergraduate phase, while the more advanced valuation, investment, development and facilities management will follow at honours level.

The programme is specifically aimed at producing well-rounded professionals who can manage and develop real estate assets and contribute to the economic growth of the country.

According to Boshoff, the degree focuses on real estate as both an asset and an investment.

It therefore provides candidates with much more than merely training to become an estate agent or property valuer, although this is not excluded.

During the honours year of study it is also expected of students to work a total of 480 hours during the year in order to gain some practical experience that will assist them in understanding all the theory. This programme appears to be filling a large void in the industry, and it looks as though honours students will be accepted as interns. Job opportunities for these students seem to be abundant, with a number of the recent graduates already accepted for internship positions at companies such as Growthpoint and Redefine.

The handbook further introduces students to the SAPOA Property Students Forum, which endeavours to create an interface between property students and the industry. This allows SAPOA to stay in touch with students at university level who could potentially be future property-industry employees.

Finally, the handbook profiles several of SAPOA’s member companies that offer bursaries, internships and graduate programmes. We believe that the booklets will give students

Boshoff mentions that the programme also fits in with specific research aims of the Department of Construction Economics. Current and recent personal research projects include local and international comparative economic models that impact on the real estate market, investment models, as well as alternative valuation models such as Computer Assisted Mass Appraisal, Automated Valuation Models, using of option pricing theory for the valuation of property, and the use of artificial intelligence such as neural networks for valuation.

The University of Pretoria, through Continuing Education at University of Pretoria, also offers a variety of short courses related to the management of real estate, including valuation courses at various levels, where the staff of organisations involved in property development, investment, financing or management can receive in-service training. l Derek Chittenden, who spends an enormous amount of time sourcing a suitable site and preparing the brief for the development of the site, taking the delegates to the site and prepares the judging criteria for the judges. l Professor Francois Viruly, who is responsible for the academic content of the programme and for general support of the programme.

the opportunity to make an informed decision regarding a career in the commercial property industry.

SAPOA interacted with 7 461 learners and students in 2012 and , to date, with 3 730 learners and students in 2013. Our programme for the year is not yet complete in some regions.

Both learners and teachers showed much interest in careers in the commercial property industry. We sincerely hope to see an improvement in

the registrations for propertyrelated studies at South African universities in the future.

One of the challenges identified is that many students at matric level have not done mathematics or science (or have only done mathematics literacy), which will create a problem for them when enrolling in propertyrelated fields of study in the BCom, BSc or legal faculties.

We believe these career days should target learners from Grade 9, to give them a clearer idea of which subject choices to make for their senior years at school since this will directly affect their future study choices.

Last but not least, SAPOA wishes to thank all our regional secretariats, education and head training employees, and – most of all – our members, for the time and effort they have put in by attending and participating in the career days. Without their help, the programme would not be possible.

Dr Douw Boshoff is a lecturer in Real Estate and is also the programme leader of the BSc and BSc (Hons) degrees in Real Estate at the Department of Construction Economics of the University of Pretoria. His qualifications include a BSc (Construction Management), an MSc (Real Estate), a PhD (Real Estate), Programme in Business Leadership Certificate from UNISA SBL, and PMP certification from PMI in 2000. He is also registered as a professional valuer with the South African Council for the Property Valuers Profession. In addition to his academic career, his experience includes project management with Barrow Projects and Rand Merchant Bank, and private consulting on various large-scale projects and for various companies. For more information, contact him at douw.boshoff@up.ac.za.

SOUTH AFRICAN PROPERTY REVIEW

13

education, training and development

Expert committee to create global property measurement standard

L

eading property professionals from around the world have been appointed to create the first global standard for measuring property. The International Property Measurement Standards Coalition (IPMSC) selected 19 real estate experts from around the world to join its Standards Setting Committee, to develop a global standard for measuring property.

The Standards Setting Committee includes experts with first-hand knowledge in 50 countries, across five continents.

“Property is a global business for international investors, corporate occupiers and their advisers” It will act independently and is tasked with the job of consulting the industry about, then drafting, a global standard measurement methodology.

Currently, the way property assets – such as office, residential, retail and industrial – are measured can vary considerably from country to country.

With so many different methods in use, it is difficult for global investors and occupiers to accurately compare space.

With the implementation of a global property measurement standard, properties

will be consistently measured, creating a more transparent marketplace, greater public trust, stronger investor confidence, and increased market stability. The standard will have a significant impact on the way in which property is measured, leading to improvements in valuation and greater financial reporting consistency across international markets.

Standards Setting Committee members include academics, real estate fund and asset managers, residential professionals, valuers, and specialists in development and construction.

“Property is a global business for international investors, corporate occupiers and their advisers but floor-space measuring practices vary from country to country and even between markets in the same country,” says Max Crofts, chair of the Standards Setting Committee. “Encouraged by our first meeting at the World Bank, we intend to create standards of measurement that will not only complement international financial reporting and valuation standards but also enable the collection and use of reliable data across worldwide markets.”

“The committee has been set the challenging task of drawing together the intelligence that has gone before us across

The International Property Measurement Standards Coalition (IPMSC) was established at a meeting hosted by the World Bank in Washington.

The members of the IPMSC are: l American Society of Farm Managers and Rural Appraisers (ASFMRA) l The Appraisal Foundation (TAF) l Appraisal Institute (AI) l Asia Pacific Real Estate Association (APREA) l Asociacion Professional de Sociedades de Valoracion (ATASA) l ASTM International l Australian Property Institute (API) l Building Owners and Managers Association International (BOMA) l China Institute of Real Estate Appraisers and Agents (CIREA) l Commonwealth Association of Surveying and Land Economy (CASLE) l CoreNet Global l Council of European Geodetic Surveyors (CLGE) l International Consortium of Real Estate Associations (ICREA) l International Federation of Surveyors (FIG) l International Monetary Fund (IMF) l International Real Estate Federation (FIABCI) l Open Standards Consortium for Real Estate (OSCRE) l Property Council of Australia (PCA) l Royal Institution of Chartered Surveyors (RICS) l South African Property Owners Association (SAPOA)

the world over the past few decades, then creating what must be regarded as the world’s best practice for the measurement of buildings,” says Allen Crawford, vice-chair of Standards Setting Committee. “There are many standards in existence across the world but these have been largely uncoordinated.

The committee members are focused on ensuring the Standard is the world’s best practice. We will know that we have succeeded when the new standard is embraced globally by the property industry.”

The Standards Setting Committee will start work on the drafting of the new methodology immediately and aims to have a draft ready for widespread consultation in the early part of 2014.

The independent Standards Setting Committee (SSC) consists of nominated representatives of the IPMSC. The SSC members are: l Alexander Aronsohn, RICS (UK) – Executive secretary to the committee l Will Chen, China Development Bank & GoHigh Capital (China) l Allen Crawford, Australian Property Institute (Australia) – Vice-chair l Max Crofts, Commonwealth Association of Surveying & Land Economy (UK) – Chair l Anthony Gebhardt, South African Property Owners Association (South Africa) l Kent Gibson, Capstone Property Management (USA) l Prof Marc Grief, Society of Property Researchers (Germany) l Liu Hongyu, China Institute of Real Estate Appraisers and Agents (China) l Prof Sr Dr Ting Kien Hwa, Centre for Real Estate Research, University Teknologi MARA (Malaysia) l Luke Mackintosh, Ernst & Young (Australia) l Scott McMillan, International Monetary Fund (USA) l Howard Morley, NZ Realtors LTD (New Zealand) l Frederic Mortier, Council of European Geodetic Surveyors (Belgium) l Sara Stephens, Appraisal Institute (USA) l Peter L Stevenson, Stevenson Systems Inc (USA) l Nicholas Stolatis, TIAA-CREF (USA) l V Suresh, HIRCO Developments (India) l Koji Tanaka, Mitsui Fudosan (Japan) l Dr Piyush Tiwari, RICS School of Built Environment, Amity University (India) and Faculty of Architecture, Building and Planning, University of Melbourne (Australia)

SAPOA is a member of the IPMSC. For further information regarding the initiative, contact Anthony Gebhardt on +27 (0)11 341 0057 or at tony@hamlyngebhardt.co.za.

14

SOUTH AFRICAN PROPERTY REVIEW

education, training and development education, training and development

Upcoming events for the remainder of 2013 POWER HOUR BREAKFAST SESSIONS DATE

EVENT

16 Sep

Energy Efficiency Workshop

19 Sep

Method of Measuring Floor Areas: Gauteng

20 Sep

Intro to Brokers

01 Oct

Method of Measuring Floor Areas: Lowveld

03 Oct

IPD Research Breakfast

04 Oct

Brokers Intermediate

08 Oct

Land Use and Urbanisation Trends

23 Oct

Brokers Economic Update

29 Oct

Business Rescue

13 Nov

PROCSA Workshop

21 Nov

Brokers Legal Update

TRAINING COURSES DATE

EVENT

10 – 13 Sep

Essential Commercial Property Programme (ECPP): East London

29 – 31 Oct Essential Commercial Property Programme (ECPP): KZN Introduction to Commercial Property Programme (ICPP): Midrand Building Construction Technology Programme (BCTP): 11 – 15 Nov Midrand 06 – 08 Nov

11 – 15 Nov Intensive Asset Management Programme (IAMP): Midrand 18 – 22 Nov Facilities Management Programme (FMP): Midrand

SOUTH AFRICAN PROPERTY REVIEW

15

legal update

An ethical stance B

We look at what it means to have multiple responsibilities, and where the question of ethics lies

By Advocate Portia Matsane

usinesses, entities and organisations are regulated by many laws and policies meant to bring good business practices that are aligned to national and/or global standards.

The plethora of these laws regulate actual actions or omissions made by companies, whether they be prescriptive or prohibitive in nature. While such laws may differ from country to country, ethics remain the cornerstone of businesses and organisations.

They are the veiled thread that binds relationships within and between companies.

They unwaveringly contribute towards the integrity, values and ethos of any reputable company. Ethics are generally defined as moral principles that govern a person’s or group’s behaviour.

It is therefore not surprising that the issue of “conflict of interest”, which addresses ethical actions of directors or officers within entities continues to be an issue that dominates discussions pertaining to ethics. Conflict of interest is defined by Gerald N Hill and Kathleen T Hill as a situation in which a person has a duty to more than one person or organisation, but cannot do justice to the actual or potentially adverse interests of both parties. This includes when an individual’s personal interests or concerns are inconsistent with the best for a customer, or when a public official’s personal interests are contrary to his/ her loyalty to public business.

The Companies Act, 2008 The Companies Act (Act No 68 of 2008) reflects and introduces, under Section 2, the principle of “conflict of interest” through the concept of “related and inter-related persons”, and control. In terms of the Act, an individual is related to another individual if they are married or live together in a relationship similar to a marriage, or are separated by no more than two degrees of natural or adopted consanguinity of affinity.

It further provides that an individual is related to a juristic person if the individual directly or indirectly controls the juristic person, as determined by Subsection (2). The principle is applicable also in respect of juristic person as the Act recognises that a juristic person

16

SOUTH AFRICAN PROPERTY REVIEW

is related to another juristic person if either of them directly or indirectly controls the other, or the business of the other, as determined by Subsection (2); or if either is a subsidiary of the other; or a person directly or indirectly controls each other, or the business of each of them, as determined in accordance with Subsection (2).

Subsection (2) of Section 2 of the Companies Act, 2008 clarifies the issue of control by stating that a person controls a juristic person or its business if, in the case of a juristic person that is a company, that juristic person is a subsidiary of that first person. The Act proceeds to outline the principle of control between close corporations, trusts and instances where the first person has the ability to materially influence the policy of the juristic person in a manner comparable to a person who, in the ordinary commercial practice, would be able to exercise an element of control in the circumstances referred to in Subsection (2).

Subsection (3) of Section 2 reinforces the principle of the necessity of person or juristic person to be able to act independently of any related or inter-related person by giving the power to a court, Companies Tribunal or the Panel who have the discretion to exempt any person from the application of the Act that would apply to that person as a result of a relationship referred to in Section 2(1). This is on condition that the person can show that, in respect of a particular matter, there is sufficient evidence to conclude that the person is acting independently of any related or inter-related person.

Public Finance Management Act, 1999 State-owned entities or organs of state are also regulated in respect of issues of conflict of interest in the discharge of their regulatory duties. The Public Finance Management Act, 1999 (Act No 1 of 1999), referred to as the PFMA, is meant to regulate financial management in the national government and provincial governments to ensure that all revenue, expenditure, assets and liabilities of those governments are managed efficiently and effectively. The PFMA further provides for

legal update

Actual or perceived conflict of interest There is a difference of opinion as to whether “conflict of interest” should be actual, potential or perceived. Actual conflict of interest has been defined as any action or any decision or recommendation by a person acting in a capacity as a public official, the effect of which would be to the private pecuniary benefit or detriment of the person or the person’s relative, or any business with which the person or relative of the person is associated.

In his reflection on “perceived conflict of interest”, Simon Longstaff notes the following: “It should be noted that the perception, by others, of a conflict of interest can often be of concern equal to or greater than the actual conflict of interest itself. This is usually because those who perceive a conflict of interest are usually led to conclude that some office or duty is unlikely (or less likely) to be discharged either fairly or impartially.

This is a particular concern when one of the parties to a conflict exercises some kind of public office. In such circumstances, the need to maintain public confidence in the probity of decision-making processes is seen to be of sufficient importance to make the issue of conflicts of interest one of considerable significance. However, it should be noted

that the good of preserving public confidence is itself constantly being balanced against other goods such as the rights of public officials to own property, participate in the political process and so on. In common with other situations, the mere fact of a conflict of interest does not, in itself, give rise to a requirement that the ‘offending’ relationships be severed. Rather, a host of measures ranging from disclosure to divestment are available. These measures may include, in appropriate circumstances, the use of ‘Chinese walls’ and the disclosure of limited information (being sufficient to resolve the conflict). Any decision about how to handle a conflict of interest (including the effects of a perception of a conflict of interest) will ultimately need to be based on a perception of the parties’ own view of how their best interests will be served.”

Case law INNES, CJ, stated in Robinson v Randfontein Est. G.M. Co. Ltd., 1921 AD 168 at p. 177: “Where one man stands to another in a position of confidence involving a duty to protect the interests of that other, he is not allowed to make a secret profit at the other’s expense or place himself in a position where his interests conflict with his duty.

The principle underlies an extensive field of legal relationships. A guardian to his ward, a solicitor to his client, an agent to his principal, affords examples of persons occupying such a position. As was pointed out in The Aberdeen Railway v Blackie Bros.

(1 Macqueen 474), the doctrine is to be found in the Civil Law (Digest 18.1.34.7), and must of necessity form part of every civilised system of jurisprudence.”

“

It should be noted that the perception, by others, of a conflict of interest can often be of concern equal

“

the responsibilities of persons entrusted with financial management in those governments.

The PFMA refers to the Board of Directors as the Accounting Authorities and through Section 50, makes it mandatory for a member of an Accounting Authority to disclose to the Accounting Authority any direct or indirect personal or private business interest that that member or any spouse, partner or close family member may have in any matter before the Accounting Authority.

It further states that such must withdraw from any proceedings of the Accounting Authority when that matter is considered; unless the Accounting Authority decides that the member’s direct or indirect interest in the matter is trivial or irrelevant.

to or greater than the actual

conflict of interest itself. This

is usually because those who perceive a conflict of interest are usually led to conclude that some office or duty

is unlikely (or less likely) to be discharged either fairly or impartially

Conclusion There is a duty to disclose a conflict of interest to those who will or are likely to be affected by any decision or recommendation that you may make in respect of any matter a person may be conflicted about. It is an ethical decision. It is an ethical stance.

SOUTH AFRICAN PROPERTY REVIEW

17

feature

Galetti gets Knighted Knight Frank and Galetti join forces in a new commercial property associated venture

Tony Galetti

G

aletti, one of South Africa’s foremost commercial property consultancies, has secured a formal relationship with the world’s leading independent property group – and also the African continent’s biggest player – Knight Frank. The newly formed Galetti Knight Frank will service its collective clients’ commercial property needs across South Africa.

In a separate announcement, Knight Frank has opted to double its brand scope with another move, this time in the local residential sector, that sees residential partners Knight Frank Anne Porter re-brand solely as Knight Frank in the Western Cape. The coordination and timing of two significant transactions across residential and commercial, with highly successful and longstanding property partners, has sent a clear message to the industry.

Founded in 1896 and headquartered in London, Knight Frank is one of the oldest property groups in the world. It employs more than 13 700 professionals across 370 offices – 68 offices in the UK, 78 offices in Continental Europe, 53 offices in Asia Pacific, 154 offices in the Americas, and 23 offices in Africa and the Middle East.

Now, commercial clients across the Galetti Knight Frank partnership will benefit from a truly international skills set and service offering.

According to Tony Galetti, co-founder of Galetti, the relationship will generate instructions from larger corporate tenants, enabling the consultancy to better serve local landlords. In addition, it will assist in finding unique foreign buyers in order to service Galetti Knight Frank’s local sellers.

Galetti describes the consultancy’s robust national footprint by ranking it among only a handful of national companies in the country – and it’s this

18

SOUTH AFRICAN PROPERTY REVIEW

expansive reach that contributed to the concluding of 250 contracts (including both lease and sale transactions) in the last financial year. Due to the consultancy’s ongoing, rapid expansion, Galetti Knight Frank is recruiting more top industry players to join the dynamic team.

“We are delighted to make public our formal association with Knight Frank and look forward to improving our links to multinational companies,” says Galetti.

We chose Galetti because of their dynamic and passionate approach to helping clients achieve personal and business goals Peter Welborn, Knight Frank partner “We also look forward to offering our clients a service that we can confidently say meets global best practice.”

“We chose Galetti because of its dynamic and passionate approach to helping clients achieve personal and business goals,” says Knight Frank partner Peter Welborn. “We believe this mutually beneficial alliance with Galetti will enable us

feature

to go the extra mile in order to exceed our clients’ expectations – a key motivator in all our business decisions. We can now meet clients’ property requirements both locally and internationally, in terms of commercial, residential, research and valuations. That’s a compelling proposition.”

“The African continent is a key part of our global expansion,” says Alistair Elliott, chairman of Knight Frank LLP. “Teaming up with Galetti gives us a quantum shift to our plan at a time when Africa is at last being taken seriously for both inward and outward investment. I have no doubt that, with an infrastructure of 19 offices and more than 500 people, this puts Knight Frank in a unique position to help occupiers, investors and developers throughout the continent.”

Galetti Knight Frank will be complemented by the Knight Frank Valuations Division represented nationally. “The African property market has long been earmarked as presenting tremendous opportunity,” says Susan Turner, director of Knight Frank Valuations. “Now, with a fully integrated team of highly experienced property professionals, we’re well placed to play a pivotal role within industry.”

Knight Frank’s network of national and global offices enables its Valuations Division to conduct comprehensive market and valuation research virtually anywhere in world, and produce unrivalled data and analysis on global property markets and values, along with the political and economic factors affecting them.

Clients include listed funds, global corporates, private individuals and the public sector. Knight Frank South Africa has valued in excess of R5-billion in assets during the past 12 months and provided advisory services to numerous clients with regards to buying, selling, development planning and rent reviews.

Key to the success of the newly formed extended international team is, according to all parties involved, the shared corporate culture and philosophy.

“We are all fully on board to ensure our united offering remains the number one choice here in South Africa as well as the rest of Africa,” says Galetti.

The extended team, with Knight Frank represented in eight major countries in Africa, is now well poised to capture this market.

A new height of multi-disciplinary collaboration

SOUTH AFRICAN PROPERTY REVIEW

19

feature

Facilitating forward Management guru Peter Drucker once said, “Do what you do best, and outsource the rest”. The Austrianborn US management consultant, educator and author was one of the first to recognise that management is a discipline worthy of deep and formal study.

He contributed extensively to the philosophical and practical foundations of the modern business corporation during the 1950s, and invented the concept of “management by objectives”.

Rowland Gurnell, COO at Broll FM 20

SOUTH AFRICAN PROPERTY REVIEW

feature

With growing recognition and transparency, and education high on the agenda, the South African facilities management industry is on its way up the corporate ladder

By Candace King

F

ast-forward to 2013 and the concept of management is a critical factor in all organisational structures. With modern society’s busy lifestyles set against the backdrop of an increasingly competitive and complex environment, it’s imperative for professionals and organisations alike to operate with maximum efficiency within the confines of a growing mass of legislation. This is according to Broll Facilities Management, a division of the Broll Property Group, which was awarded the Gold Arrow Award in the PMR 2013 Awards in August 2013.

Broll notes that facilities management (FM) in the corporate sector is about delivering a benchmarked level of quality service within a defined budget across an organisation’s total property portfolio. More and more businesses are realising the value of leaving non-core activities to a specialist third-party service provider. Broll FM adds that the outsourcing of activities such as security, cleaning and maintenance is nothing new; however, using a centralised point of control with an overarching responsibility to deliver a mandated level of service is.

The scope of FM is huge and the accompanying required knowledge is even more far-reaching. FM ranges from IT to health and safety, managing budgets, security, spatial planning, personnel management, fleet maintenance, building maintenance, upgrades and renovations, landscaping, and much more. The facilities manager’s job is to create an environment that encourages productivity, is safe, is pleasing to clients and customers, meets all the building and health and safety regulations, and is efficient.

In terms of in-house and outsourced FM, there are pro’s and con’s for each. Whether a company goes in-house or outsources depends entirely on their business model and FM strategy. In-house FM is still more popular for clients but it is changing slowly as clients are starting to see the benefits of the outsourced FM model and the potential savings it can offer.

The local FM industry Over the years, FM in South Africa has evolved significantly and garnered attention, with local businesses and companies slowly embracing the concept of outsourcing FM activities for costeffectiveness and greater efficiency (which are focal drivers for outsourcing). “The industry is growing,” says John Samuel, director at the South African Facilities Management Association (SAFMA). “Last year, Woolworths won a Gold Award in the Global FM awards for excellence; this year, we had two entries into the competition, with Absa going through to the second round.”

Rowland Gurnell, COO at Broll Facilities Management, says the FM industry is performing at a much higher level than it did a few years ago.

He notes that innovative integrated FM systems are being implemented and a huge focus is being placed on green initiatives. “The industry is still small when compared to other more established industries, and a few FM companies dominate the market at the moment,” he says. “That said, the performance of the FM industry is on an upward growth path. The industry is also becoming more professional – it’s becoming a career path where previously people just ended up in it by chance.”

With the South African government’s commitment to nationwide infrastructure upgrades, the growth of public-private partnerships (PPPs) in the country is set to become a reality. According to market research conducted by Frost & Sullivan, the increasing number of PPPs with FM requirements will increase the demand for FM services within the local public sector and accelerate the development of both sectors.

Frost & Sullivan’s research concluded that the high demand for FM services is likely to expedite further formalisation and regulation of the FM market in South Africa. New analysis from Frost & Sullivan on the South African Market for FM indicates that the market earned revenues of US$587,3-million in 2008 and estimates this to reach US$1,1-billion in 2015.

The South African FM market consists of a commercial sector, a public sector and an industrial end-user sector; and it can be said that it is on par with the rest of the world in terms of certain aspects. “The South African FM knowledge and practices are equivalent to the rest of the world and in certain instances lead,” says Samuel. “Our challenge is the overall maturity of the market and depth of skills.”

“We are really not far off from what our counterparts are doing overseas,” says Gurnell.

“At Broll we have an affiliation with CBRE and we have access to the latest trends in FM via this affiliation. We are at the cutting edge of FM best practices and we are seeing the results with our clients. Where we are behind in terms of our international counterparts is that in South Africa, facilities managers are not as recognised as skilled professionals as they are abroad. But this is changing with the great work that SAFMA is doing.”

“The industry is growing.

Last year, Woolworths won a Gold Award in the Global FM awards for excellence; this year, we had two entries into the competition, with Absa going through to the second round” John Samuel, director at the South African Facilities Management Association (SAFMA)

SOUTH AFRICAN PROPERTY REVIEW

21

feature Cost per sector

Source: IPD SA

FM and property In terms of the property industry, FM is very important. “FM provides the workplace experience for users of a property,” explains Samuel. “The effective management of the facilities (properties) must positively impact the user’s ability to perform. In addition, a properly executed and funded maintenance strategy will improve the value of the asset and lengthen the life cycle of the facility. FM may be a non-core activity in support of the core business but it is directly critical in some of its outputs. FM is fundamental to any business and influences both the facilities and its occupants, and so impacts the two biggest items on the profit and loss account.

FM has moved on from focussing purely on the cost saving of fees charged for services provided by functional service providers, such as cleaners.

FM is focusing on enhancing asset value as well as productivity and staff retention, thereby impacting the top line and structural cost savings through strategic re-engineering of the business.”

Gurnell says that FM is critical in ensuring that a property is managed effectively, efficiently and sustainably in terms of operations, personnel, optimising work space and green initiatives to reduce carbon footprint. He adds that FM companies are therefore vital to building owners in that they are able to increase the value of the property by implementing systems and processes that are aligned to the building owner’s strategic plans while looking after the non-core items of the tenant.

“Where property services companies find the tenants to lease a property, collect the rent and negotiate the terms, FM companies are responsible for looking after the management of the facility to 22

SOUTH AFRICAN PROPERTY REVIEW

ensure its value increases over time and runs as efficiently as possible to the benefit of the owner and the tenant,” says Gurnell. “Life-cycle costing of the building and its assets and infrastructure is crucial.”

FM is rapidly emerging as an important factor that can play a major role in boosting the income stream of property assets, and so the outlook and potential for this sector of the property industry is positive, says Sean Liebenberg, new business executive at Excellerate Facilities Management.

“Now more than ever, the integration of effective FM in the commercial property sector has an increasingly relevant role to play, not only in addressing energy saving, waste recycling and minimising the use and pollution of water, but also with regards to green issues during both the construction and use phase of a building,” he says. “By reducing operating costs, landlords have the potential to achieve a higher rental net income while retaining tenants.”

Liebenberg notes that, worldwide, it is accepted that FM has developed faster than almost any other discipline in the property industry. “FM in South Africa is best described as the practice of coordinating the working environment with the people and processes of the organisation,” he says. “It’s a combined approach at all levels in the organisation to plan and implement support facilities in line with prime business objectives. Globally, it is therefore regarded as an integral part of the strategic thrust of an organisation. However, the fact is that generally organisations prefer to focus their expertise on their core business, with non-core activities such as FM managed by entities more suitably structured and resourced, and it’s true this is increasingly the case.

Here in South Africa an integrated approach is adopted to manage facilities in line with prime property management objectives such as leasing, rental collection, tenant liaison and general administration. These are described as ‘hard and soft services’. Hard services are those elements that form physical parts of the building (the structure itself, exterior and interior finishes, plumbing, mechanical and electrical installations, office installations, maintenance and refurbishments).

The soft services focus on issues such as security, cleaning, pest control, hygiene and garden services.

In some instances, FM services can be extended to incorporate additional services such as fleet, mail and cafeteria management.”

FM goes green In terms of the latest trends, the FM industry is moving towards lean integrated FM and green initiatives where one looks at the best approach to move FM processes and improvements forward as quickly as possible in the most cost-effective way.

“With the current challenges that facilities managers are facing, it has become critical for them to use lean tools to create simpler processes, improve equipment and asset up-time, and improve response times and training and scheduling,” says Gurnell. “Green Star ratings for new buildings are becoming more popular with the number of buildings receiving Green Star ratings of five stars and higher increasing each year.

Green initiatives have become critical in our industry in order to support sustainable practices in the built environment. In the next few years companies will be faced with carbon taxes where they will be severely penalised for not complying

feature with legal requirements. The FM industry is thus critical in supporting clients with CO² reduction strategies and green initiatives to save energy and water.”

“Green buildings and sustainability are only one aspect of FM,” says Samuel. “We are working with the Green Building Council on their existing building rating system. The decision to operating an existing building more sustainably is often driven by triple bottom line accounting and a return on investment.”

“FM has embraced the green change,” says Gurnell. “It is vital to adopt sustainable practices not only from an environmental impact but also from a cost-saving perspective. We have already implemented a number of green initiatives, such as solar power, rain-water harvesting, LED lighting and CO² reduction strategies. Solutions exist for any budget and it really depends on how far you want to go to achieve savings. We at Broll Facilities Management have many green initiatives that can be introduced in a facility, which will immediately produce savings. Green Star Ratings are becoming popular at the moment for buildings and methodologies have already been developed for greening an existing building.”

Liebenberg says that the current emphasis where it can add significant value is in helping property owners and tenants to address wasteful and unnecessary practices that have a negative impact on the environment.

“While this presents challenges in regard to a change in mind-set and initial costs at the outset, the returns are well worth it,” says Liebenberg. “Not only does this provide a tremendous opportunity for the astute facilities manager, there are significant costs over the medium to longer term. Today action steps with regard to energy saving, waste recycling and minimising the use and pollution of water are simply no longer efficient. Facilities managers are expected to provide guidance and to implement action steps on the full spectrum of green issues during the construction and occupancy/tenure of a building. The starting point is the acknowledgement that during their life cycles, buildings use a significant amount of natural resources, and the occupation/tenancy of a building’s life cycle accounts for as much as 85% of its total impact on the environment. As a result, facilities managers have the opportunity to implement strategic plans for buildings under management, partnering with landlords to compile appropriate action plans with regards to energy savings, which in turn will affect savings for landlords as well as tenants.”

Green building certainly does make sound business sense. One of the key factors to be considered when changing a business unit or building from traditional to sustainable is to carry out a detailed cost-benefit analysis.

feature

“FM is rapidly emerging as an important factor that can play a major role in boosting the income stream of property assets, and so the outlook and potential for this sector of the property industry is positive” Sean Liebenberg, new business executive at Excellerate Facilities Management

SOUTH AFRICAN PROPERTY REVIEW

23

q&a

Leading the way with prestigious awards Having won the PMR gold award in 2012 and the Diamond Arrow award in 2013 Drake & Scull has been ranked as number one in customer service for the past two years

Q Who is Drake & Scull?

Drake & Scull Facilities Management (DSFM) is a division of Tsebo Outsourcing Group Proprietary Limited, one of the leading hospitality, facilities and cleaning management service provider in southern Africa. The group has a proven track record that spans more than 40 years of existence, while DSFM has been operating in South Africa since 1996. It has a national, regional and a developing continental footprint in Africa and the Middle East, servicing blue-chip organisations throughout these regions.

Our group employs more than 18 000 employees, while DSFM has approximately 1 600 employees.

The Tsebo Group, including DSFM, operates across more than 1 000 client contracts and manages services across approximately 4 000 sites.

Q What are Drake & Scull’s core

services, and main contributions to the FM industry?

DSFM has established itself as the leading provider of integrated facilities management services, delivering operations and maintenance solutions to support clients in a wide variety of sectors, including retail, manufacturing, financial services, health, leisure and government. DSFM enables its clients to focus on their core and grow their business while DSFM takes care of their facilities. DSFM has worked hard to develop processes and future-focused robust IT platforms, and takes pride in developing its people, who form the core of its operation in supporting the clients.

It is our quest to consistently innovate and ensure a continuously improved client-service experience.

Q How is Drake & Scull involved in CSI programmes?

CSI is an integral part of our business. Tsebo established the Tsebo Foundation in 2011 as the best vehicle to effectively support all charitable activity across the group and the communities in which we operate. The Tsebo Foundation is supported by the group and its divisions, and is also available to clients and partners as a transparent outlet for their own CSI spend.

The foundation has numerous ongoing projects, which are regularly audited. The key strategic areas that the foundation is focused on include education, health and youth development.

Q What are Drake & Scull’s plans for the near future?

It is DSFM’s goal to be the number-one player in South Africa by 2014, and the number-one player in Africa by 2019. This goal is best defined by having the largest market share, ranked the best in customer service, ranked number one in terms of return on sales, and recognised as the best company to work for in the industry and as the leader in industry expertise. The company has achieved its goals in South Africa with an estimated market share of 23%, and now holds the largest market share.

Having won the PMR gold award in 2012 and the Diamond Arrow award in 2013, the company has been ranked as number one in customer service for the past two years. In both instances these awards were a first for the industry. From an expertise perspective, DSFM was the only South African facilities management company to be a finalist in the global FM awards held in San Antonio in the US in 2012. DSFM has won numerous awards, Nandi Trindad, new business development establishing it as the leading FM provider. In 2013 director at Drake & Scull it entered the best company to work for awards – the first FM company to enter. Having established We have, to date, supported a number of its position locally, the company is now actively organisations in the regions in which we operate. expanding its presence across the rest of the continent. During 2013, DSFM began the Does Drake & Scull have process of acquiring suitable companies in an African footprint? the rest of Africa. By 1 January 2014 it will have DSFM has been supporting local client operations on-the-ground operations in 12 African countries in Africa for several years, but this has historically (outside of the SADC region, which the company been from South Africa. Over the next 12 months, the company will focus on expanding its operations already services fully). By the end of 2014, the into Africa in line with the group’s growth strategy, company will have a West African regional office in Ghana and an East African office in Kenya. to establish Tsebo as the leading support partner for corporate clients across Africa and the Middle East. We will establish legal entities and physical Where do you see the presence in at least 12 countries. This expansion FM industry in the future? will be driven organically and through acquisitions. There is an urgent need to ensure proper To ensure that we are best positioned to support alignment of the facilities management solution our operations and deliver best-in-class service, to clients’ business strategy. Our clients need to regional offices will be established in East Africa, see the value that FM brings in assisting them with West Africa and the Middle East. realising their business strategy by supporting their operational environments. Technological advancement is consistently becoming a key factor in how we respond to the needs in this fast-changing environment. There is a focus on the environment, so designing sustainable solutions is crucial. Our ability to respond to these changes will determine our competitiveness.

Q

Q

People with whom you can build your future

24

SOUTH AFRICAN PROPERTY REVIEW

T:+27 (0)11 577 8600, www.drake-scull.co.za

feature This is to ensure the investors weigh the costs of doing business the usual way or against the costs of keeping the environment in mind when conducting business. It is imperative to consider the social implications of implementing a sustainability programme into your business and how the organisation will reap future rewards. Previously, sustainability of a business referred to the ongoing continuity of the business; today sustainability may refer to a strategy to save operating costs, thereby making good business sense.

There is a perception that implementing green methodologies costs more and is therefore not suitable for the average property owner. But research has shown that green building has a modest initial cost premium, but that long-term benefits far exceed the incremental capital costs.

In addition, research has proven that if green methodologies are incorporated during the design phase of a project, it is far more costeffective than implementing green initiatives once the building is developed.

The challenges The FM industry is still facing several challenges ranging from transparency, skills and education

to scepticism. “The industry faces challenges due to lack of skills, poor service level agreements, inexperienced advisors and lack of understanding of the importance of FM by business executives,” explains Samuel. “However, SAFMA is working with training providers in expanding training opportunities in FM, as well as instituting a system of accreditation and registration of FM practitioners. We are actively marketing the benefits of FM at board level.”

“There is a shortage of skilled facilities managers in the industry,” says Gurnell. “The challenge is that FM on its own is not recognised as a discipline by Stats SA, for example. No formal qualifications or training programmes were available at university level as FM still remains a fairly new industry in South Africa. This has recently improved thanks to SAFMA who, together with the South African Qualifications Authority, has agreed on professional designations for facilities managers.”

SAFMA also endorses training programmes for improving knowledge and skills with the various institutions listed on its website. Broll has taken up the challenge of knowledge and skills by setting up a property academy in partnership with the University of Pretoria.

In-house vs outsourced FM FM in-house model

FM outsourced model

Inflexible service

Flexible service

Multiple points of contact – indirect point of responsibility or accountability

Single point of contact – direct responsibility and accountability

Client focus not on core business

Client focus on core business

Single vendor base – prices not competitive or market-related

Multiple specialist vendor base – prices competitive and market-related

IT help desk logging non-IT-related calls

Specialist FM help desk in place

Finance department doing reactive cost management on FM issues – limited cost savings

Cost management and containment by FM specialist – realisation of additional cost savings possible

Supplier agreements only in place

All service lines are SLA-based and driven

Risk management uncontained

Risk management in place with: – planned maintenance – proactive/reactive logging of calls

Employment contracts with multiple staff members – no back-fill when staff on leave

Service contract in place, therefore staff/service needs always met

Informal health and safety processes and procedures in place

Formal health and safety processes and procedures in place with specialist consultant

Multiple vendors

Single vendor

Unscheduled supplier reviews

Monthly performance review with suppliers

Annual staff performance assessments

Monthly staff performance assessment based on KRAs

Unstructured cost reporting

Structured cost reporting

Management of building defects

Specialist management of building defects with preparation of client snag list and management of the repair/rectification process

Warranties in place

Management of warranties and negotiation of extension of warranties where applicable, foe example air conditioning and electrical

Operating cost components 2012

Source: IPD Income & Costs Digest 2012

Growth prospects for the South African FM market l Increasing number of PPPs is likely to drive growth of FM. l High demand is predicted to expedite formalisation and regulation of FM market. In 2008, more than 10 concessionary agreements that included FM requirements were in varying stages of approval. l Most end-users are still unaware of benefits of FM, because the FM market is still unrecognised as a formal industry. Only 30% of FM is currently outsourced. l Demand in the public sector is expected to contribute significantly towards the understanding of FM benefits and growth in all sectors. l Acceleration will result in the formation of several innovative businesses and job opportunities.

SOUTH AFRICAN PROPERTY REVIEW

25

feature

To date, Broll has put more than 3 000 people through the academy with formal training.

Broll has also taken in a number of interns, who are typically university graduates in property studies, and give them practical experience by placing them on actual FM sites to fast-track their progress and develop key knowledge and skills. Broll is taking the lead in ensuring that the FM industry becomes more recognised in South Africa and Africa. There are quite a few institutions here and abroad that now offer FM courses.

Gurnell also points out that clients are still sceptical about managing facilities via an outsourced specialist FM company. “Clients are slow to move away from the traditional model of managing in-house as opposed to an outsourced model,” he says. “Green issues have become a challenge in the industry too and clients are looking at solutions to reduce their carbon footprint and save energy. The rising electricity and water costs are challenges but they also present opportunities for the industry to come up with sustainable solutions. Another challenge is that of a deteriorating qualified contractor base, especially when it comes to technical services.”

One of the views is that FM services have a negative impact on profitability and are not part of the core business function. This is merely a perception and not based on facts, says Gurnell.

“We have a track record of showing savings for our clients. The FM services should never form part of a company’s core business unless it is an FM company. Employing an FM service company allows the client to focus on the core business – which is selling services to the client. This also ensures that the facility is managed as cost-effectively as possible. The negative perception also arises when companies decide to outsource due to their own buildings not running efficiently. When they do put out a tender to outsource, they cannot understand why the outsourced model is more expensive than their current expenditure. Once you can show the benefits of the processes and maintenance strategies, their view usually changes.”

The future of FM The FM industry is going to continue to grow as the demand for FM services increases in line with clients needing to show significant cost savings during tough trading conditions for businesses.

“We are already seeing more and more people wanting to enter this industry, and we are very positive that things will move in the right direction,” says Gurnell. “Training and development programmes keep improving, and we will start seeing more formally trained people in this industry.”

Samuel says that FM will be a more professionalised industry with accredited practitioners and service providers offering their skills to properties and infrastructure.

“We are looking for an increased pool of skills with a greater number of training providers,” he says.

“Well-maintained properties are those that will stand out, so it’s crucial that facilities managers ensure that the service providers, from refuse removal to cleaning and security, maintain exemplary standards and keep buildings immaculate,” says Liebenberg.

“If there’s a possibility of vacancies arising, well-kept assets have an advantage. The economic downturn has created an ideal opportunity for growth in the FM industry as a means of creating cost savings and adding value, which is a trend that will become increasingly evident.”

PROUD SUBSIDIARY OF EPS

Prop Review_ 178mm X 134mm_PRINT.indd SOUTH AFRICAN PROPERTY REVIEW 262968_EFM_SAPOA

1

2013/09/05 12:50 PM

The coffee-table book…

E

very year, buildings get smarter and more beautiful.

SAPOA’s primary objective is to define excellence in property and recognise top-quality design and functionality as a benchmark for excellence.

The SAPOA Awards for Innovative Excellence in Property Development are widely respected within the commercial property design industry, illustrating various types of excellence, from the clarity of purpose in the brief to ingenuity of product, clever design solutions and delivery on time and within budget.

1

2 0 1 4 SAP OA awa

Alexander For bes headquart ers

T

he new headquarters for financial services company, 115 West Street, Alexand er Forbes is an iconic building opposite the Gautrain Sandton station.

The design of the building draws its concept from the difficult northwest orientation and the need to adhere to new energy legislatio South Africa. n in

4

rds for exce

llenc e 2014

It is this recognition that owners, developers, architects and property practitioners strive for. A SAPOA award is forever, much like the raw bricks and mortar that make up the timeless beauty of property.

To be part of this amazing opportunity, partner with us by profiling your executives and/or team in our SAPOA Innovative Excellence Awards Coffee-Table Book Volume 1 in 2014. Your double-page advert will become part of the 2014 profile submissions for the excellence awards.

set to becom e an iconic lan dmark

The 2400 staff member building has extensiv e grey water systems, passive heating and cooling systems and high performance glazing with louvres to shade from the afternoon sun. The east and elevations are characte west rised by scalloped profiled zinc sheeting The design required . a flexible building hence the large floor punctuated by two plates, atria to maximise the natural daylight into office and atria spaces. the Modelling software was used extensively to generate the concrete columns and much of the interior fit out and also the 8.4m wide which float above the cones atrium space like giant clouds.

The external areas are xeriscaped with indigenous low water consumption plants.

The work areas are punctua ted with colourful breakout spaces to provide relaxation areas for the staff with re-cycling facilities to assist with the change of mindset regarding sustainable office culture.

in Sandton n head office 5 kswage Vol ng design

the organizi forms directly express These movement based and spacious head office was The interiors are breezy 5500m Volkswagen of the office floor plate. d he contemporary enhance the expresse on a prime principle and smooth textures 2011 and is well located and the light colours completed in October walking distance of within street e design. onto katherin modernism of this ent makes sandton site facing internal spatial arrangem fluent and . direct , ted Gautrain The efficient site hips that reinforce the newly construc stretches across the connected spatial relations building well office and tive storey for construc This prestigious three phase of development. ng of its inhabitants. y and allows for a further larly the well-bei modern south-african for maximum efficienc office is a spectacu to a competitive and the volkswagen head It The building belongs of The architecture of inspired environment. the modulated scale it serves thrive in its poise is evidenced through to its culture, and the people modern design. its users and a solid return working life to all its to ‘float’ across the site. inspired an appears offers which form and its built quality specifications. tive tendering period its striking design & the recently competi through during owners built end was It high timing of building a s advantage in the period. there was enormou this tough financial office project during quality of construction nal articulation of through a layered orthogo ent The envelope is scuplted void. the spatial arrangem patterns of solid and a series of rhythmic n matrix. the efficient circulatio of its planform defines al and vertical layering of horizont the A fluid compositional between ship relation tions, expresses the structural modula SAPOA awards for inside and the outside. excellenc e 2014 the extended horizon, simultaneously seek in The building’s lines provides an intimacy spaces nearby of views has a and the contained procession of forms d. this sequenced the entrance courtyar poetic. recognizable spatial 2

T

SAPOA awards for

Developer: Zenprop Property Holdings Architects: Paragon Architects Project manage rs: Capex Projects Quantity surveyor s: Schoombie Hartmann Civil and structura l engineers: Sotiralis Consulting Other consultants: A Riley, Pure Consulting , Ramsden Consulting Principal contract ors: Tiber Bonvec Constructi on, WBHO

excellenc e 2014

Corporates lea d the way wit h creative me etings

3

2

ents

on Projects & Developm managers: CPD Constructi s: AMA Architects Project engineers: ACAS int Properties Architect rs: PDNA Mechanical Developer: Growthpo and structural enginee s: Davis Langdon Civil ors: Exabuild Quantity surveyor S4E Principal contract Solutions for Elevators Other consultants:

SAPOA awards for

excellenc e 2014

6

D

uring 2010 the Universi ty of Pretoria determin ed the requirement of new lecture halls for the growing demand in tertiary educatio n which has recently gained impetus with government backing.

Urgent upfront thinking was required by the Technical Department at the University and informed the consulta to provide four 600 nts seat lecture halls on a small footprint within years on the Hatfield two Campus.

The selected site on Roper Street is wedged between three building large trees and furtherm s, ore the site is within a high use pedestri area. The heritage impact an of the site was assessed and approval was gained regarding existing trees, buildings and pedestrian routes.

Finally the building projects a quiet air of peace and harmony appropriately fitting , into the environment considering the complex of the requirements. ity

SAPOA awards for

ABOVE Parks e 2014 Tau, Richar excellenc d Grenin SAPOA awards for

ger, Estienne

de Klerk, Lisa

Prats, Peter Merret

t, Jeremy Kelly,

Richard Quest, Peter

Merrett Patrici a de Lille,

igh h e to d and ere u D an th , d demsivity imite ing lu tis al exc only dver le. a b are er of vaila b sa num pace s 7

Developer: University of Pretoria Architect s: Impendulo Design Jeremie Malan Architects Architects, Quantity surveyor s: Del QS Civil and structura l engineers: Civil Concepts, Egmont Furstenburg Associates Mechani & cal engineers: QMech Consulting Engineers Other consulta nts: Delport du Preez and Associates, Marian Landscape Architect, Louw Pro Acoustic Consortiu m Principal contract ors: Boogertman Smit Building

excellenc e 2014

Cost R20 000 excluding VAT (Includes design, photography and production)

Deadline 15 February 2014 Bookings Jane Padayachee, marketing manager, SAPOA T: +27 (011) 883 0679 E: marketingmanager@sapoa.org.za

…an opportunity not to be missed!

SAPOA awards for

excellenc e 2014

feature

Specialists in the built environment

Mention FM to most people and they will probably think of their favourite radio station. But to Lydia Hendricks, director at Afroteq FM Solutions, it means “facilities management” – something she’s very passionate about

C You need expert know-how to unlock the hidden costs and enable best practice that can make or break your triple bottom line

28

SOUTH AFRICAN PROPERTY REVIEW

ompanies become successful when they focus on core revenue-generating activities. But they can become even more successful by minimising the costs of non-core activities. Managing these functions efficiently to maximise profits requires specialist intervention and know-how.

As a director at Afroteq FM Solutions, a company specialising in full turnkey facilities management solutions, Lydia Hendricks has been active in the industry for close to 20 years and is determined to see an increase in its professional recognition in South Africa. She claims that currently the facilities management function is often perceived as an “in-the-basement” function when it should be brought in at senior executive level. Facilities management is a key integrator and enabler of core business strategy and, if ignored, could have a significant impact on cost and business effectiveness.

Facilities management is still undervalued in South Africa. Hendricks explains that facilities management services include approximately 80 different services and, if put under one umbrella, contribute to one of the highest operational spends for most businesses – in most cases hidden and in some cases replicated, because the services often reside in each respective department to serve their specific need or because the management of the essential services is passed on to departments such as human resources who are not experts in these areas of service.

“The most critical and risky services are generally executed by blue-collar people and hence the natural assumption is that facilities management belongs in the basement, and is engaged only when needed,” Hendricks says.

This often leads to costs being expended only when systems fail, or to damage control being applied due to lack of communication and planning. In most cases this approach ends up costing the business more than it should – it’s “penny-wise and pound-foolish”.

“Astute businesses outsource their facilities management to allow them to focus on their core business,” says Hendricks. “This provides the business with effective service support that can be measured financially and operationally.

Non-facilities management staff that may have the support of procurement, finance or legal departments of the business cannot leverage

spend as well as FM companies can because they cannot offer the economies of scale. Another benefit of engaging FM specialists is that it allows staff to grow in their chosen careers, as those services are the FM specialist’s core business.”

An enabler of sustainable enterprise performance The South African Facilities Management Association defines facilities management as “an enabler of sustainable enterprise performance through the whole life management of productive workplaces and effective business support services”.

Read that again slowly and absorb it as you do. FM should “enable” and support the enterprise.

From this philosophy it becomes clear that FM is a strategic function that requires high-level thought; it is as vital to the lifeblood of the enterprise as the procurement plan, marketing plan or business plan.

An integrated facilities management strategy and plan will ensure the following benefits for business: l Space optimisation – space costs money; l Reliable service delivery, and pleasant and effective work environment – retention of key personnel is vital for any business; l Improved company image – service and business environment leaves an indelible impression on prospective staff and clients; l Reliability of building systems – a business cannot function without core services such as electricity, air conditioning, lifts in a highrise building.

Remove these elements, and the enterprise will not reach its full potential and may even collapse.

“You need expert know-how to unlock the hidden costs and enable best practice that can make or break your triple bottom line,” says Hendricks. “We need only look at the current situation of state facilities to understand the consequences of not having a strategic plan for facilities management. The same rings true for most enterprises simply because they don’t fully understand the concept and value of FM.” An interesting story lies behind the success of this dynamic industry leader. In 2009, Afroteq and FM Solutions merged, offering multidisciplinary professional services to the built environment. FM Solutions, specialists in providing engineering project and programme management services, added their engineering expertise to Afroteq’s

feature

success in the facilities soft services industry, Academy, and space planning and design, and resulted in what Hendricks calls a “good marriage”.

Both companies collectively have 20 years of experience and reside within Arcus Facilities Management Solutions, their holding company.

“Through the merger we are making great inroads into new markets and have grown our national footprint,” says Hendricks. “The company has expanded exponentially from a small entity to a buoyant, medium-sized company that is well positioned to offer clients, both large and small, a personal, professional and value-driven service.”

FM Solutions was originally started as a small new venture in a sister company to one of the largest engineering companies in South Africa.

The intention was to supplement the engineering

enterprise strategic functioning, which in turn means that potential opportunities can be better harnessed for growth by ‘freeing’ previously encumbered resources. It really is all about rendering a facility ‘fit for purpose and enabling the business to operate optimally.”

This is key philosophy and the cornerstone of a successful FM strategy. “Facilities management is essentially about applying processes that enable people to function at their best within the workplace,” says Hendricks. “Apart from applying expert insight to add value to enterprise functioning, the team goes one step further by addressing the lack of skills within an enterprise. Through the Afroteq Academy division, clients who manage their own facilities can benefit from tailored training solutions to better manage their facilities.”

business with diversification of services through acquisition and development of the FM business.

Today, it is a stand-alone business and, through the merger with Afroteq, it has significantly improved its footprint, expertise and customer base. As a consequence, FM Solutions and Afroteq now have four core offerings and services through the two brands: FM Solutions for programme and project management and facilities management, and Afroteq for space planning and interior design as well as the training academy, Afroteq Academy.

A key example is Afroteq FM’s maintenance solution for the Department of Health’s clinics and hospitals in the Makana, Cambedoo, Kouga and Nelson Mandela Bay districts, under the control of the Coega Development Corporation, as an implementing agent for the Department of Health.

Turnkey services “We are very proud of the fact that we can offer companies a turnkey facilities management solution encompassing a range of specialised and general services,” says Hendricks. “We have a unique advantage over competitors – we train what we practice and we manage what we design, so we really listen to our clients and tailor a solution to meet their needs and their budgets to yield beneficial results. Afroteq FM Solutions strives to act as an enabler for clients by taking the burden of risk and turning it into a value-adding construct instead. We do this by identifying the high risk within facilities’ operational areas, then manage it according to the level of risk. By shifting risk and non-core functions to FM specialists, an enterprise’s core processes are brought to the fore. This in essence allows greater clarity within

Instrumental in BBEE and SMME business development “We have been implementing maintenance solutions for the department’s health facilities for just over a year, and have been instrumental in BBEE and SMME enterprise development through job creation while addressing the dire need at facilities where maintenance needed improvement,” says Hendricks.

“Through customised training and exposure to maintenance solutions we are confident that the site managers will become better equipped to implement processes that ensure better control and best practice for their sites.”

She compliments the Department of Health on its strategy and structured approach in getting to the root of the health-service delivery challenges and tackling them head on. In doing this, the process carries integrity and sustainability, demonstrating that cost-effective service delivery is indeed taking place and will continue in that vein. But this strategy also forms part of a bigger picture.

“When FM was at its infancy in this country, we realised that we needed to draw people into the industry to build capacity. We realised that an academy was needed,” says Hendricks. “Through Afroteq Academy, we continue to build capacity in organisations and smaller support companies – in other words, our contractors – to create a greater resource pool for our industry, because we believe that the more competent the available resources, the more we can leverage pricing and the bigger pool we have to choose from. In this way, we increase the opportunity for a competitive edge – not just price-wise but also in terms of quality.”

The company has no shortage of key projects: in April, it acquired a five-year contract to operate all the bus stations for the City of Cape Town’s MyCiti Bus Rapid Transport system. Afroteq FM Solutions is responsible for the cleaning, security, maintenance and cash management at all the stations, as well as the basic validation of tickets.

With the breadth and depth of its service offering and its years of experience and know-how, the company was the perfect choice to undertake a project of this nature. Currently running 22 stations, its remit will grow as the system is expanded into more areas within Cape Town.

Providing safe, reliable public transport “Using a tap-in card system similar to the one on the Gautrain in Johannesburg, the MyCiti – which rolled out in 2011 – provides reliable and safe public transport for the locals,” says Hendricks. “It also offers tourists a safe and cost-effective route straight from the airport into the CBD, with feeder routes within the city and parts of the West Coast. We are very proud to be associated with a contract that is such a great boost for the local economy.”

In taking on the management of the contract, Afroteq FM Solutions inherited a large staff component from the City of Cape Town.

“We have recently embarked on a widescale training plan to upskill all the resources, ensuring high-quality service delivery to the public.

The client-public interface is critical to the overall value perception of the MyCiti system, and the company wants to ensure that it is rated as a world-class service by its users,” says Hendricks, adding that this necessitates continuous training, and quality management strategies must be applied.

With a network of specialists, a full-time multidisciplinary team that includes highly skilled professionals (in the fields of architecture and project management) and in-house draughting and QS departments that complement a highly technical facilities management team, Afroteq FM Solutions is perfectly poised to continue on its path to success.

SOUTH AFRICAN PROPERTY REVIEW

29

It’s new, it’s clearer and it’s easier to use

SAPOA’s mission is to be committed to actively and responsibly represent, protect and advance its members’ commercial property interests within the property industry.

Paddock View, Hunt’s End Office Park, 36 Wierda Road West, Wierda Valley, Sandton; t: +27 (0)11 883 0679 f: +27 (0)11 883 0684

interview

Sandton City:

from feet to ka-ching The Sandton City precinct is shifting up a gear in its evolution.

We speak to Pareto’s Marius Muller about the node, the retail offering and the coming competition

By David A Steynberg

S

More than a year and a half ago, Sandton City underwent a redevelopment, where 6 000m² of existing space was reconfigured and 23 000m² of new floor space was added. New international brands were brought in and, with them, even more footfall

andton is the wealthiest CBD on the continent. This is according to Marius Muller, CEO of Pareto, which owns 25% of its gem, Sandton City.

“Sandton is completely unique,” he says.

“You have a regional shopping centre, a worldclass product, in the middle of a vibrant and expanding CBD, with the wealthiest suburbs around it. During the day you have a captive audience with the number of offices in the area – and that’s growing, which is evident by the number of cranes in the skyline. It’s becoming more dense and, during the day, it has well-heeled, well-salaried office workers frequenting Sandton City and spending their money there. And when they go home, there are a lot of other people who take their place: leisure and business visitors consisting not only of South Africans but also those from around Africa and the rest of the world.

Then, on weekends, all the locals and the rest of greater Gauteng come to visit.”

Muller attributes this loyal, captive audience partly to the Gautrain, which he says has added to the popularity of the node. “If you visit the centre on a weekend, you’ll encounter an ever-increasing number of people from as far afield as Pretoria and Kempton Park. It’s completely unique,” he says. “I can’t think of any other centre that has all these contributors working well together.”

Tyger Valley, which is in an established office node, is not quite as dense but it is also currently experiencing significant development activity, according to Muller.

Menlyn may get there as well, because SOUTH AFRICAN PROPERTY REVIEW

31

interview

SANDTON CITY FACT SHEET

source Liberty Properties

Average Annual foot traffic

24 million for 2012

Average monthly foot traffic

1,8 million to 2,1 million visitors

Total Gross Lettable Area

143 690m²

Total Area of complex

215 000m² including hotel and office component

Number of stores

330

Number of major stores

4 – Woolworths, Stuttafords, Checkers Hyper and Edgars

Number of specialty stores

9 – Tiger Wheel & Tyre, JJ Cale Tobacconists, Chefs n Icers, Kitchen Passion, Le Creuset, Nespresso, Sandton Pet Boutique, Sharp Edge Sharp Shooter, Sandton Stamps and Coins

Year centre developed in

1973

Year of last refurbishment / development to the centre

2011 – opening of Protea Court, with 70 additional stores February 2013 – construction work began on Atrium on 5th (the renovation of the Twin Towers) and the Office Tower

Who is the centre owned by and % split?

Liberty Properties 75%, Pareto 25%

Liberty Properties commenced management of the centre when?

1973

Number of parking bays (and number of covered and uncovered)

4 492 customer bays; 1 659 reserved/tenant bays (including Europcar and hotel); 42 disabled bays; 28 motorbike bays; 31 mother and child bays; 17 4x4 bays = 6 269 parking bays. 5 197 bays under cover; 1 072 open bays.

Number of levels within the shopping centre

8 levels – Parking on 8 levels and shops on 5 levels

Shopper catchment area size (eg: 200 000 people) (from annual research)

100 000 households in the primary trade area, very strong office component with 70 000 workers in the node, and 4 500 hotel rooms with high occupancy

Average shopper age (from 36 years (50% of shoppers are younger than 35 years) annual research - largest group) Most prominent language used by shoppers

English – followed by Zulu, Afrikaans, Tswana and Sotho

Gender split of shoppers

72% female, 28% male

Race split

45% black, 42% white, 10% Asian, 3% coloured

Socio economic status of shoppers (from annual research)

LSM 5-10+

there is a lot of mooted activity in the area. “There are institutional investors doing spec developments in the Menlyn precinct but they are not being let according to initial expectations,” Muller says. “But Sandton is also seeing a lot of spec development, as well as custom builds for corporates.”

The challenge for the office market, he says, is that it’s not new tenants taking up the space, but rather existing tenants playing musical chairs.

32

SOUTH AFRICAN PROPERTY REVIEW

Rosebank is beginning to experience a significant drain. Sasol is the largest tenant among those who are leaving. “You can get some really good deals there,” Muller says.

But, in time, Rosebank is bound to get strong again, since the Gautrain station has contributed to the structural integrity of the node and will continue to do so.

“Melrose has a different profile but it will never be as commercially dense as Sandton because of the relatively expensive residential market surrounding it.”

Developments: old and new Pareto, together with the Liberty Group (which owns the other 75% of the Sandton City precinct), is currently increasing its investment in both the twin towers and Sandton Tower.

“Sandton Tower is undergoing planned maintenance and will be getting a new facade in the process,” Muller says. “The next big thing for that tower is that it is finally going to get a street address. You will soon be able to come off the street and get into Sandton City, making it more pedestrian-friendly and integrated with the Gautrain station.”

The Twin Towers, to be relaunched as The Atrium on Fifth, is well under way and is taking shape, according to Muller.

“Right now you have two hexagonal buildings next to each other with a link in between,” he says. “What we’re doing is re-cladding the building and also creating a 10-storey grand reception atrium.”

More than a year and a half ago, Sandton City underwent a redevelopment, where 6 000m² of existing space was reconfigured and 23 000m² of new floor space was added.

New international brands were brought in and, with them, even more footfall.

“Sandton is a phenomenal centre,” Muller says. “Retailers are doing exceptionally well and this is characterised by them achieving high turnovers. We’ve had some struggling retailers – but it’s not because of the centre but rather the result of the retailer adjusting their offering to the needs of the shoppers. On average, we’re getting twomillion people per month into the centre – the second-highest footfall in the country after the V&A Waterfront. So in terms of

interview

Marius Muller, CEO of Pareto

trade optimally. It also contains the flagship stores for many retailers so they bring their best staff in and the service levels are good.

The whole shopping experience is better.”

Let us entertain you tenant success, you’ve got two-million opportunities every month to make a sale.

The question is how successful are retailers at converting the feet going past their door into feet going into their stores – and how many of those entering the store they are transacting with.”

Muller says the focus at Pareto’s malls has shifted from how to grow the footfall to how to improve the retailer offering and, therefore, turnover.

“The feet don’t bring in the rental at the end of the day – it’s transactions at the till that do,” he says. “Since the revamp and extension, this has exceeded expectations.

But there are still opportunities to improve the Sandton City precinct and its vast offerings, and we’re not far off announcing some additional work that’s going to take place. It’s going to be very exciting – a first-of-its-kind offering in Africa.”

Pressed to provide more clues, Muller says Sandton City is poised to introduce an upmarket offering: great international brands that people aspire to and are familiar with. “It’s something we need to finish off our offering at Sandton,” he says, adding that, besides the number of brands, Sandton offers significantly larger stores with a greater range of merchandise than its competitors.

“It’s one of the benefits of Sandton: we can get the tenants to the size where they can

Successful entertainment in shopping malls is mostly characterised by food courts and cinemas. Some have ice rinks, bowling and games arcades, while others feature skate parks and putt-putt courses. But, according to Muller, the food court is the only staple that has stood the test of time. This is where Sandton City is focusing much of its efforts.

“We’re looking at the food court and whether it has been maximised,” he says.

“There may be some changes coming.

Internationally, food courts are big – both in size and popularity. And they’re starting to differentiate between fast-food courts and upmarket food courts. By way of illustration, let’s imagine a food court at the V&A Waterfront: nice tables, white linen; you can go to one of the grill houses and order a rack of ribs while your wife goes to the adjoining seafood restaurant for sushi.

A waiter then brings your meal to your table, which is located in this communal but very upmarket ‘food court’. It’s essentially fast-food outlets for upmarket restaurants but in a finedining food-court environment. This is big internationally. It’s a different experience.”

A new monster on the hill The massive Mall of Africa, to be developed by Atterbury in Midrand has not gone unnoticed by the owners of Sandton City. Muller says that, in terms of its size, it’s inevitably going to have an impact on Sandton.

“It has a great location and good developers who know what they’re doing – they’re going to create a good product,” he says. “But I think the impact on Sandton will be minimal. The biggest loser to the new development will be the Boulders Shopping Centre, the Midrand CBD and, to a lesser extent, Greenstone Shopping Centre. Where we will compete with them is for the shoppers from Woodmead and Sunninghill. That will be the greatest leakage we’ll have. People living in Woodmead or Sunninghill will be equidistant between the two – so there’ll be a tussle between us for those clients.”

Muller acknowledges that Sandton cannot sit back and think it’s so big that it is untouchable. “The reality is we will be affected but I don’t think to the extent that some people fear,” he says.

“The issue with the Mall of Africa is that there is not a lot of densification around it – yet. If you look at aerial photos you’ll see a lot of housing stands but not too many houses. There are some office parks but it’s not a great office node in itself. But, no doubt over time, as the area becomes denser, it will do well.

However, in the beginning retailers will be struggling from a cost of occupation point of view. They will be battling with high rent-to-turnover costs. I think, to fill the space, the developer will battle to get the rentals it wants, and early tenant casualties are to be expected.

But I’m confident the centre will do well. It’s in a growth area where it will eventually have its own loyal client base.

We are responding to what’s happening but we do wish them well.”

SOUTH AFRICAN PROPERTY REVIEW

33

eye on africa

The continent remains rich in natural resources – Nigeria and Angola are among the top 20 oil producers, with South Africa, Tanzania and Ghana being top gold producers, and Zambia and the Congo dominating the copper-producing list.

34

SOUTH AFRICAN PROPERTY REVIEW

eye on africa

s: e i ser ly a ic th ntry r f A on ou e Th our m by-c y- cus r t n fo u o c

Africa uncovered Like an awakening giant, Africa is rising from its dormant “hopeless” slumber to take its rightful place among the world’s economies, offering opportunity, investment and development in its wake

By Candace King

F

or far too long, Africa has been dubiously dubbed the ugly duckling, the black sheep, the rebel without a cause and, most famously, the hopeless continent. For many years multinational companies have lacked investment confidence in Africa, shying away from dipping their toes of financial commitment into the continent’s stream of uncertainty.

With civil war and political unrest coupled with corruption, poverty and disease, it’s no wonder the investors have been reluctant.

This decade, however, has proved that Africa no longer exists in the dark ages but is experiencing a period of enlightenment. With a population in excess of one billion and a combined gross domestic product (GDP) of US$173-billion in 2010, Africa is fast becoming a target for investment from global businesses.

Companies around the world are now flocking to claim their fair share of Africa’s new-found fruitfulness. With attractive macroeconomic fundamentals and the prospect of 20% returns on foreign direct investment (FDI) projects, several countries on the continent present a plethora of opportunities for companies seeking to reduce cost, increase revenue or improve supply-chain efficiencies within the region.

SOUTH AFRICAN PROPERTY REVIEW

35

eye on africa Eleven of the world’s projected 20 fastest-growing countries are in sub-Saharan Africa:

Source: IHS Global Insight, August 2013

Since the 1990s, FDI into Africa has grown substantially, reaching US$42,7billion by 2011 and representing 2,8% of global FDI flows – more than four times the level in 2000. The initial wave of the modern scramble for Africa started with the oil conglomerates that targeted the continent’s natural-resource hubs in Angola, Nigeria, Algeria and Democratic Republic of Congo. The year 2012 marked a watershed in Africa’s development as the first year in which service sector FDI outstripped investment into natural resources (by US$4-billion).

Africa demystified Africa is now deemed as an emerging investment destination and a crucial growth market. As the world’s second-largest continental mass covering 54 countries, outnumbering any other continent, Africa has the third-biggest concentration of people outside of China and India. Africa’s economy is diversifying and attractive returns are being realised in the sectors of retail, infrastructure, business and financial services, pharmaceuticals, consumer products and technology.

36

SOUTH AFRICAN PROPERTY REVIEW

After averaging growth of less than three percent per annum during the 1980s and 1990s, Africa’s GDP has risen by more than five percent per annum, on average, since 2000, outpacing most other global regions. Countries such as Nigeria, Angola and Equatorial Guinea have been among the fastest-growing economies in the world, each expanding by more than eight percent per annum.

The World Bank now classifies 27 of Africa’s 54 nations as either mid- or highincome countries, 12 more than was the case in 2000. Zambia and Ghana were both upgraded to mid-income status in 2011.

Several factors are contributing towards Africa’s short walk to stardom. These include an increased population growth, consisting of a rapidly emerging middle class and increasingly tech-savvy society; increasing urbanisation and rising literacy levels; rising commodity prices; rapidly growing consumer markets and increased consumer income levels and expenditure; favourable infrastructure projects; improved political and economic stability; widespread democratisation; reduced trade barriers; and a surge in property development.

The United Nations estimates that, by 2050, Africa’s urban population will

eye on africa

increase from the current 440-million people to more than 1,2-billion, with total population forecast to reach approximately two billion people in the same period. It further estimates that the urban population will increase to 56% by 2050 from the current 36% of urban population. Africa also boasts the youngest age profile of any continent, with more than half the population being under the age of 25.

According to UN-Habitat data, the proportion of Africans living in urban areas grew from 32% in 1990 to 40% in 2010, and is expected to rise to 47% by 2025.

Many of the largest cities in Africa are growing rapidly; Nairobi, Kinshasa and Dar es Salaam, for example, are expected to see population growth of more than 70% by 2025.

According to Wireless Intelligence data, the number of cellular connections in Africa has risen from just 17-million in 2000 to more than 700-million in 2012. In the space of 12 years, the mobile penetration rate has jumped from two percent to around 70%. Africa is now the world’s fastest-growing mobile market, and has more cellular connections than Western Europe, North America or Latin America.

These various booms are largely contributing to the demand for property development across the continent, with demand far outstripping supply in key property markets. In Luanda and Lagos, for example, the strength of demand combined with a severe lack of high-quality office space has created some of the highest office rentals in the world. Prime office rentals in Luanda are currently US$150/m² per month – higher than in London, Hong Kong or New York – while prime rentals in Lagos are US$85/m² per month.

Apart from the South African market, property investment in Africa still remains small and opaque. According to Real Capital Analytics data, more than US$800-million of commercial property transactions were completed during 2012 in South Africa. Domestic funds dominate the South African market, with investors such as Dipula and Vukile being among the most active buyers in 2012. However, investment in property is set to grow, with several property funds and property development companies already showing a keen interest in the African property market outside of South Africa. This interest has stimulated a healthy property development domino effect, with retail running ahead of the race. Several attractive shopping centres have mushroomed across the continent, including Accra Mall in Accra, Ghana; The Junction Shopping Centre in Nairobi, Kenya; and The Palms Mall in Lagos, Nigeria.

Urban housing development has also sprung up in the form of new modern satellite cities such as Tatu City, outside Nairobi, Kenya (designed to house 70 000 people) and Appolonia – City of Light, in Accra, Ghana (planned to accommodate 88 000 residents). Others include the Eko Atlantic project on Victoria Island in Lagos, Nigeria, and La Cité du Fleuve in Kinshasa, Democratic Republic of Congo.

What must African real estate companies and investment managers do to attract capital? l Develop quality assets that meet strong tenant demand l Sell assets to recycle and return capital l Develop strong younger African team members – training outside of Africa may help l Prioritise quality and transparent financial reporting l Avoid any perceived conflicts of interest – Western capital will not tolerate it l Adopt strict KYC and anti-money-laundering procedures to protect reputational risk l Consistently market Africa and its opportunities to African and non-African investors What do investors look for in a fund? l Consistent investment performance over a cycle l Experienced team in the relevant investment area l Strong corporate governance – professional business practices and no conflicts of interest l Transparent, thorough and timely financial reporting l Trust l Incentive structures aligned with investors’ interests l Clear and compelling investment opportunity l Parameters to ensure there is no mission creep

Source: Africa Property Investment summit

SOUTH AFRICAN PROPERTY REVIEW

37

eye on africa AFRICA BUILDING COST RATE COMPARISION (USD) Angola Luanda

Botswana Gaborone

Ghana Accra

Kenya Nairobi

Mozambique Maputo

Nigeria Abuja

Rwanda Kigali

Senegal Dakar

S Africa Jo’burg

Average multi-unit high-rise

1 370

870

850

850

830

1 400

890

920

1 050

Luxury unit high-rise

2 230

1 230

1 350

1 370

1 340

2 200

1 440

1 440

1 500

Individual prestige houses (Detached houses and bungalows)

3 830

1 850

2 150

2 160

2 130

3 900

2 240

2 200

1 500

Average standard offices high-rise

1 500

920

900

900

880

1 490

920

940

1 140

Prestige offices high-rise

2 580

1 540

1 460

2 590

1 440

2 610

1 530

1 530

1 470

Major shopping centre (CBD)

2 170

1 280

1 170

1 200

1 150

2 190

1 230

1 230

1 070

Light-duty factory

1 390

820

800

820

770

1,390

850

840

440

Heavy-duty factory

2 270

1 260

1 310

1 330

1 260

2 280

1 380

1 350

600

Budget

133 900

101 200

81 000

82 500

78 900

133 300

84 100

84 100

100 000

Luxury (incl. spa)

556 100

322 900

328 000

338 300

317 800

552 500

343 400

343 400

325 000

Resort-style (incl. spa)

645 800

363 900

394 600

410 000

358 000

697 000

445 900

425 400

-

1 280

640

720

740

710

1 270

750

790

420

Building type Residential (rate/m2)

Commercial/Retail (rate/m2)

Industrial (rate/m2)

Hotel (rate/key)

Other (rate/m2) Multi-storey car park Source: Davis Langdon construction handbook, 2013

REGIONAL SUMMARY East Africa

Regional GDP growth

Population of regions (est.)

Av build costs above UK (est.)

Approximate initial yields

4,8 %

154-million

+15%

10%

Exciting prospects Tanzania, Kenya

West Africa

6,5%

329-million

+60-80%

10-13%

Nigeria, Cote d’Ivoire, DRC

Francophone Africa

6,1 %

355-million

+40%

10-12%

Senegal, Cote d’Ivoire, Cameroon

SADC region

4,7 %

255-million

+20-60%

8-10%

Mozambique, Angola

Source: Africa Property Investment summit

Africa: the next five years

D

espite the challenges and loopholes, Africa is still a good place to be. The continent is illustrating much opportunity for investors and developers across the board, and it’s showing signs of further growth in the years to come – the long-term growth outlook for Africa appears bright. Africa’s economic growth and emerging consumer markets are expected to continue to attract rising numbers of investors to the continent, although the appeal of African countries to investors will vary. Demand for high-quality office, retail and residential space in Africa’s key cities should continue to rise as its economies grow and diversify.

38

The International Monetary Fund expects Africa’s growth story to continue, forecasting annual GDP growth of five to six percent over the next five years.

The following opportunities will drive GDP growth in Africa in the next five years: Revenue opportunities: improving socioeconomic conditions, population growth, better levels of education, rising middle classes and pace of urbanisation. A rapidly urbanising middle class is estimated to number 313-million, equivalent to India’s or China’s. In Ethiopia there are now 32 universities; only 20 years ago there were two.

Margin opportunities: low labour costs, especially

SOUTH AFRICAN PROPERTY REVIEW

s th’ n mo : t ex ssue frica n i A s In uth cu So in fo

eye on africa

eye on africa

China has become Africa’s biggest trade partner, with bilateral trade growing from US$10,6-billion in 2000 to US$166-billion in 2011.

Africa’s challenges As most of us know, everything in life is uncertain and not without its challenges.

The same can be said about Africa. Unlike China, India and Brazil, Africa should not be classified as a homogeneous continent because it boasts several sovereign states, each with different policies on a number of key fundamental aspects.

Development levels and investment attraction offerings differ markedly between – and even within – countries. Several countries are still plagued by political unrest and instability, poverty and unemployment, crime and corruption, as well as various trade barriers.

A large number of African nations are ranked towards the bottom of the World Bank’s Doing Business ranking, which scores the regulatory environment in 185 global economies. Only three African countries – Mauritius, South Africa and Tunisia – make it into the World Bank’s global top 50. While significant regulatory improvements have been made in many countries, tasks including starting a business and registering property remain difficult and time-consuming in several countries. According to Broll, doing business in Africa requires investors to identify partners and service providers who are experienced and understand the characteristics of each individual and different market.

Investors and companies need to understand the commercial environment of each individual country in Africa in which they do business, paying special attention to local knowledge, which is particularly important to property developers, whose projects need to be well located, and designed and scaled appropriately to suit market demand. Amid the challenges, there is the promise of high returns and growth potential to those who do their homework on Africa.

in manufacturing; declining logistics costs arising from closer proximity to customer bases. Along with revenue growth, multinationals should view strategically placed hubs in Africa as critical to improving margin opportunities.

Efficiency opportunities: increasing attractiveness of localised supply chains; improvements to infrastructure and connectivity. The O3b Networks is a continentwide project to roll out a US$1-billion satellite network that combines the reach of satellite with the speed of fiber, providing

an internet backbone for people in Africa and other emerging markets with limited access to broadband.

Declining complexity: less conflict; better governance and economic management; improving business climate conditions.

Rwanda’s business climate is ranked fourth-best in Africa and 52nd-best globally based on a synthesis of factors such as starting a business, dealing with permits, accessing electricity, registering property, gaining credit, investor protection, paying taxes, trading across borders and resolving insolvency.

Is UTILITY MANAGEMENT draining your time and energy resources?

Let us take you to the next level with

UTILITY MANAGEMENT 2.0 Our partnership with the LEADING GLOBAL SMART

METERING SYSTEM and our unique locally developed systems and applications will mitigate your UTILITY RISKS; empower you with RELEVANT CONSUMPTION INFORMATION; provide you with a FUTURE PROOF SOLUTION that will enable you to

FOCUS 100% ON YOUR CORE BUSINESS pretoria | sandton | durban | cape town 012 001 3600

sales@remotemetering.net

www.remotemetering.net

SOUTH AFRICAN PROPERTY REVIEW

39

interview

Vunani:

the quest for value

Vunani Property Investment Fund’s Rob Kane talks about 19,7% distribution growth, property prudence and measurable material savings for tenants

By David A Steynberg

Results at a glance l Cash distributions up 19,7% to 77,25 cents per linked unit declared l 21,8% increase in linked unit price to 1005 cents l Total compound growth of 31,2% – significantly higher than the market average of 24% l Revenue increased by 14.,1% to R229,8-million l Net property income increased by 35,9% to R154,9-million year-on-year

40

SOUTH AFRICAN PROPERTY REVIEW

V

unani Property Investment Fund reported an excellent 19,7% distribution growth for the year ended 30 June 2013, while capital growth came in at 21,8%.

As we catch up with CEO Rob Kane after the fund’s results presentation at the end of August, he explains that the only area in which the fund did not meet its targets was that of asset growth. He explains why growth in acquisitions has been disappointing.

“With the large amount of capital that flowed into the sector in the last year, it’s very tempting to either go out and buy inferior assets to kick up your distribution or, alternatively, to overpay for assets and dilute your distribution. However, we’ve been disciplined in our approach in the past 12 months,” he says. “We’ve found that most assets on the market have been overpriced. This has been driven by listed funds hunting for growth, resulting in sellers sitting on their assets with huge numbers in their minds. The last 12 months have been unrealistic, with a lack of focus on the fundamentals.”

Is the property bubble about to burst?

Kane explains that this may have already happened. “The re-rating in May/June in the bond market has been a bit of a wake-up call for us all. And I don’t think that’s really a bad thing. The shift up in the long-bond market must filter through into property yields.”

But how exactly did Vunani achieve the nearly double-digit growth in the past year with only R84-million worth of asset growth?

“It’s really in three areas,” says Kane. “In the first, our existing portfolio performed well and all of our leases were renewed at – or close to – our budgeted rentals.

“The second is in the last reporting period.

We stated we’d done a lot of development and refurbishment work. We said at that point that, for every rand we spent on the refurbishments, we received R3 back on fair-value adjustments. This is obviously a reflection of additional income in some form.

This was achieved by increased lettable area, higher rentals or reducing vacancies. A lot of refurbishment benefit comes in the next reporting period.

“The third area is acquisitions. We made a limited number in this reporting period but in the previous period they were all good acquisitions. That rental income has now started filtering through. We have a very stable tenant base. In the next reporting period we’ll be in double-digit distribution growth, and we’ve given guidance of 84c to 86c per unit.”

Where it began Vunani Property Investment Fund was launched back in 2006, and with R960million worth of assets it listed in August 2011. Needing to raise R360-million, Vunani got R622-million from the market, which was then used to pay down its debt materially, and to acquire a range of assets.

Today, Vunani offers investors an eightyear track record and has just completed its second capital raise of R455-million, increasing its assets from 28 to 38 buildings and valuing the fund at R1,8-billion.

“We did a rights issue, so all current unit holders were given the option of following their rights,” says Kane. “And what’s encouraging is that, even in a very turbulent market, 96,4% of them chose to follow their rights. For us, that’s fantastic.

We did have an underwriter in there for 25% of the units and we only gave them 3,6% – so we raised the full R455-million.

With that we paid down some debt and we bought some very attractive assets.”

Going forward, Kane says, the capital raise gives the fund buying power of about R750-million, enabling it to do quick, decent deals, and to buy value. Value, however, has become harder to find and afford.

“The entry of new property funds has really pushed property prices up, which makes it difficult to buy value.

That’s why we stayed out the market,” he says, adding that one of Vunani’s strategies is to diversify its tenant risk.

Currently, Standard Bank occupies 14% of its portfolio, while government sits at 34%.

“We’ve got a lot of government tenants.

We’ve been in that market for a long time so we are comfortable with government and work well with them,” says Kane.

interview

“But we’re also worried about concentration risk. If you have all your income coming in from one tenant, and if that tenant decides that he doesn’t like you, then you have a problem.

“We do want to grow in the coming year and we do have the capital to deploy and the resources to effect the transactions.

But what’s critical for us is buying and diversifying our risk. To buy another R750-million of government tenanted buildings… I’m not sure that’s prudent for us at this moment in time.”

Jumping on the green train Kane explains that, as a landlord, Vunani is as concerned about its tenants’ bottom lines as it is about its own. One area where it is effecting savings is through retro-fitting its assets using green principles.

“Funnily enough, people still view this as a marketing tool as opposed to a harsh reality,” he says. “We’ve been working on this since 2009; the first building we did was 14 Loop Street, which won the Energy Efficiency Forum Award 2012. We’ve shown the tenant that they save 66% of their electricity bill and I think around 95% of their water bill just by being in our building. Those are material savings.”

Building new may be easier and sexier but Kane has a different outlook. “To some extent it’s much easier to build a new building but the joke of it is that it’s so ‘ungreen’ to build a new building,” he says.

“Your carbon footprint, if you consider the cement manufacturer, stone and steel that is required for new build, dwarfs any energy savings achieved in a new building. If you look at making an existing building green,

as opposed to building new, you’ll see it’s crazy to build new if you want to be green. You should actually be refurbishing.”

Kane explains that Vunani is working with Eskom and the city council in the Cape Town CBD to promote refurbishing existing stock instead of building new. “The city centre has about 800 000m² of offices, and if they just save 10% of the power in every single one of those buildings, the savings would dwarf any savings they’d make in new buildings.”

Looking ahead, Kane says Vunani sees a lot of visibility, and the re-rating in the sector will make sellers a little more realistic about what their properties are worth. This, he believes, is good for the sector. “We’re seeing good prospects and we’ll be buying at sensible yields and good value. And that’s really where we want to be.”

SOUTH AFRICAN PROPERTY REVIEW

41

on show

The office park evolution

42

SOUTH AFRICAN PROPERTY REVIEW

on show Gone are the days where grey concrete buildings with limited views and no visual appeal stand in dull parking lots of an office park. Architecture and design is just as important in the commercial space as it is anywhere else – and Hertford Office Park in Midrand is leading the trend

D

eveloped by Abland and Sable Holdings development, Hertford Office Park is a beautiful and modern space, which offers stateof-the-art security and telecoms systems, high-quality finishes and unsurpassed accessibility. Design-wise, the building is feast of colour, texture, materials and shapes. Created by MWLF Architects, the structure uses a mix of concrete, glass, stone and face-brick, challenging its stand and its surrounds; a unique fixture to the often-generic officepark genre. “The architecture is a contemporary design of juxtaposing facade planes, of opposing colours and textures,” explains Jeremy Williams of MWLF. “The Berg-en-dal light brickwork element is the dominant element, defining the entrances. The colours are chosen to be in a natural palette, and low-maintenance.”

The firm’s brief was for an efficient, cost-effective, contemporary architecture that was earthy and South African but also clean-cut, defined and timeless, not bowing to gimmick or fashion that would date the office park. “The design is meant to be able to adapt and evolve in each building but still have a theme,” says Williams.

SOUTH AFRICAN PROPERTY REVIEW

43

on show Hertford is being built in various phases, with three buildings already having been completed and fully occupied.

It is estimated that the next phase will be completed and available to lease by June 2014. As demand requires, another 28 000m² of offices will be added to the park, including two iconic tower buildings in the southern corners, which will boast a four-star green rating.

In keeping with Abland and Sable Holdings development’s green focus on environmental longevity and protection, Hertford will also feature large, green parklike areas containing dams and benches where tenants can take a stroll during a break or have their lunch in peace. This provides the green lung to the project, a favourite element of the architects.

Other sustainable building initiatives include the buildings being designed to limit expansive glass facades to the east and west and extensive use of sunscreens to limit solar penetration, thus minimising electricity consumption. The office park will also offer a corporate coffee shop on site, as well as shower facilities and bicycle racks for those tenants who like to fit in their exercise regimens on the way to and from work, reducing the area’s carbon footprint significantly. Tenants will be provided with ample parking, as five parking bays will be provided for every 100m² of offices on the property.

The parking structure will include basement space as well as open and shaded parking bays at ground level.

Herford’s position also makes it special because it’s so centrally located. Situated on the corner of Allandale and Bekker Roads in Midrand, it features excellent accessibility from the newly upgraded Allandale interchange as well as the Midrand Gautrain station and is just around the corner from the 120 000m² Mall of Africa.

To accommodate their client’s growing workforce, an openplan environment was essential, as well as a cellular office environment

44

SOUTH AFRICAN PROPERTY REVIEW

on show

Jomi Project Management specialises in steelworks for commercial and industrial installations and deployment. Contact Johan Griesel at Jomi Project Management, PO Box 1539, Rayton 1001; t: +27 (0)83 457 7900 e: johan@jomisteel.co.za

SOUTH AFRICAN PROPERTY REVIEW

45

on show NAPD Holdings is responsible for the office park’s interior design, and interior architecture via Nap Design, its design and space-planning division. The brief was to showcase its clients’ involvement in the industries/ markets in which they operate . To accommodate its clients’ growing workforce, an open-plan environment was essential, as was a cellular office environment. Equally important was the creation of front-of-house areas that support opportunities to communicate and make employees feel more productive.

The reception area is the first interaction with the external world for any company, while breakaway areas are more internal to the company’s employees. NAPD aimed to

Colours are cheekily revealed in sporadic bursts such as red couches, chairs and pot-plant holders, while earthy tones are introduced via lounge furniture and stone walls

46

SOUTH AFRICAN PROPERTY REVIEW

on show

SOUTH AFRICAN PROPERTY REVIEW

47

on show utilise collaborative areas where employees can get together to discuss ideas and projects, and private spaces where confidential conversations can take place.

Visually the interiors are clean and light, thanks to double-volume ceilings and the use of carefully positioned down lights. White interiors with glass walls and staircases help create a large, open and airy space. Colours are cheekily revealed in sporadic bursts such as red couches, chairs and pot-plant holders, while earthy tones are introduced via lounge furniture and stone walls. Designer frostedglass walls create a visual effect yet also create a barrier between spaces, allowing privacy when needed.

Meet the team Developer Abland and Sable Holdings www.abland.co.za Architect MWLF Architects www.mwlf.co.za Contractor GD Irons Construction Interior design NAP Design www.napd.co.za Steel staircases Jomi Project Management

48

SOUTH AFRICAN PROPERTY REVIEW

on show

Visually the interiors are clean and light, thanks to doublevolume ceilings and the use of carefully positioned down lights

SOUTH AFRICAN PROPERTY REVIEW

49

on show

NAPD Holdings (Pty) Ltd is a black-owned diversified property and investment holding company that invests in, develops and manages premier business properties in the commercial and industrial sectors, with a particular focus towards corporate office development and refurbishment.

Eleven years of success in the property business O

riginally established in 2002 as a Corporate Interior Architectural practice with a focus on providing Space Planning, Interior

Design, Tenant Installation and Project Management services, the NAPD Group is best known for its flagship, and founding arm NAP Designs. The group focuses on the seamless relocation of businesses by building and designing quality workspaces with uncompromised efficiency, consistent quality and superior service delivery.

Building on a solid track record for on-time delivery of quality workspaces, through re-development and refurbishment projects, NAPD Holdings is focused on its goal to become a major player in the property industry, and continues this journey towards building its resources

around

property

investment,

development,

and

management. The NAPD Group is fast becoming a leading, independent property specialist in the commercial office market, through investing and developing workspaces for a variety of different clients in both the Private and Public sector.

“To celebrate more than a decade in business is an important milestone for our company and we are very proud to have reached this pinnacle with the support of our clients. Our most recent projects include the relocation of the Sebata Group of Companies to Hertford Park, as well as the refurbishment of the Head Office for the POPCRU Group of Companies in Pretoria, and the relocation of TOTAL (SA) Head Office in Sandton.

Our value-add lies in delivering property advisory services and workspace strategies that consistently provide optimal space utilisation, outstanding design and high quality finishes, to satisfy a

11 YEARS

n Property Investment

wide range of client needs. Our aim is to achieve improved efficiency, reduced cost of occupancy whilst ensuring enhanced corporate image and employee productivity.

The early days were challenging to say the least. “stated Ntaba Phili, Managing Director, NAPD Holdings, and the Founder of NAP Designs.

In our eleven years involved in the property business we’ve seen the growth in the sector that has created new challenges/opportunities brought on by the shift towards efficient space utilisation. In that time the NAPD Group has grown organically by constantly evolving, and by going above and beyond our initial founding mandate to provide our clients with integrated property solutions and services.

Our company structure and strategic partnerships ensures that we have the competencies, and experience to assist our clients in

n Property Development

handling their entire relocation process and drive a co-ordinated

n Property Management

and available resources.

n Architecture & Interiors

business associates who have entrusted NAPD Holdings with their

T: +27 (0)11 326 4632 F: +27 (0)11 326 4642 260 Kent Avenue, Ferndale PO BOX 700 JHB 2068

strategy, to deliver workspace solutions with the best use of space, “We are most thankful to our wonderful clients and trusted business goals, and thus became part of our growth in the past eleven years, and we look forward to their continued support in the next eleven years”. says Ntaba Phili Here’s to eleven years of making property a success!

w w w . n a p d . c o . z a 50

SOUTH AFRICAN PROPERTY REVIEW

L

I

M

I

T

E

D

project managers

A holistic approach

Standing tall and leading from the front

By Nicky Manson

PMSA’s strength lies in its proven ability and expertise to:

H

ans Michael Dlamini is the principal and director at Project Management Solutions Africa (PMSA (Pty) Ltd), a specialist professional development and construction project management company that services both private and public sector institutions in southern Africa. His professional experience is extensive, and his qualifications include a BSc (Hons) in construction management and a diploma in quantity surveying. He practises as a professional construction project manager (PrCPM) on all projects, and is the principal agent reporting directly to the client.

Dlamini served on various professional institutions and is a valued member of the South African Council for Project and Construction Management Professionals, the Association of

Construction Project Managers, the Association of South African Quantity Surveyors, the Project Management Institute of South Africa, and the Chartered Institute of Building in the UK. Having recently attended the SAPOA Property Development Programme, Dlamini encourages the furthering of knowledge and skill sets through networking, hard work and commitment. He was also an active shareholder and served for three years on the JSE-listed Sanyati Construction Holdings’ board, and chaired the human-resources subcommittee.

He resigned in March 2010 to pursue other property development interests.

PMSA (Pty) Ltd was established in 2002, and today is a priority business enterprise with

s Conceptualise appropriate methodologies; s Establish implementation processes, plans and strategies; s Assemble the required resources; and s Effectively manage the project through to delivery within the bounds of predetermined cost, time, quality, social parameters and sustainability.

majority black-owned shareholding and a Level 1 contributor in terms of the broadbased Black Economic Empowerment Act of 2003. The company recently celebrated 11 years of success and professionalism and has been rewarded with high-end clientele that includes Liberty Properties, Old Mutual Properties, The Red Carnation Hotel Group, Standard Bank, Durban Country Club, South African National Parks, PRASA and all government departments. PMSA (Pty) Ltd also boasts several international and national project-management and design-award-winning projects, including ICC Durban, Freedom Park in Pretoria and Nelson Mandela Bay Stadium in Port Elizabeth.

PMSA (Pty) Ltd applies a holistic, comprehensive approach to attaining development goals and objectives for its clients, to ensure that the final product is relevant, sustainable and environmentally conscious. The company offers a professional service from conception to completion.

+27 (0)11 884 0931 / +27 (0)31 304 9718 info@pmsolutions.co.za www.pmsolutions.co.za SOUTH AFRICAN PROPERTY REVIEW

51

project managers

“We’ve learnt to understand our clients’ needs and to add value to each project by delivering projects across the entire spectrum of developments – retail, tourism, industrial and commercial” Nigel Holley, Coffey Projects (Africa) (Pty) Ltd

Nigel Holley Coffey Projects (Africa) (Pty) Ltd Nigel Holley, general manager of Coffey’s project management team in Africa, says that Nigeria’s economy is expanding, and will possibly overtake South Africa’s. “We’re seeing a rising demand for commercial offices and shopping centres in the region,” he says. “We have followed our loyal South African client base into this market. It’s the complex nature of working in a fast-developing economy that our clients have had challenges with. To overcome this, we have steadily tackled the problems we encountered and, in the process, have built a knowledge base and reputation that other developers are being attracted to.

“South Africa is an exciting market. We’ve learnt to understand our clients’ needs and to add value to each project by delivering projects across the entire spectrum of developments – retail, tourism, industrial and commercial.

“Coffey has an ISO9001 accredited quality management system and subscribes to the Green Star Building Council aims and objectives. We are fully supportive of all HSSE initiatives to enable our clients, consultants and contractors as well as our people to work in a safe, injury-free environment.”

Some of the iconic projects that have resulted in Coffey’s project management expertise being recognised throughout Africa include: l Nedbank Corporate Head Office, Sandton, Johannesburg l Montecasino Entertainment Complex, Fourways, Johannesburg l Mahe Resort, Seychelles l Ikeja City Mall, Lagos, Nigeria l Accra Mall, Ghana l Radisson Hotel, Maputo Holley has a background in quantity surveying, both in the professional office and with contractors, and has spent more than 40 years in the construction industry working on all types of projects across South Africa and the islands of the Indian Ocean.

+27 (0)10 593 2520 Nigel.Holley@coffey.com www.coffey.com

52

SOUTH AFRICAN PROPERTY REVIEW

Andreas Letnik Coffey Projects (Africa) (Pty) Ltd Coffey Projects is one of the few project management companies with real experience in delivering investment-grade completed projects on the African continent. Its first major retail development – The Palms in Lagos – was followed by Accra Mall in Ghana and the recently completed Ikeja City Mall in Lagos.

Andreas Letnik heads up the Africa team and is currently busy with prime retail and commercial projects for major institutional investors in Nigeria and Ghana, which are currently under construction.

He has worked in the Nigerian development arena over a 10-year period, which makes his experience invaluable. His background and training is as an architect, and he was part of the multinational team that completed the landmark Tinapa retail park in Cross River State, Nigeria, which was – and still is – the largest retail development built in West Africa.

Until recently, Letnik was part of the investment banking Real Estate Africa team at Standard Bank, responsible for major real estate equity investments across the African continent, before joining Coffey to spearhead its growth into the African continent.

What sets Letnik and his team apart is the multifaceted experience of both technical understanding of client projects and a thorough understanding of the entire development management process applicable in the broad African context (especially when it comes to project funding, development risk and exit strategy). Although there is no currently no shortage of potential real-estate funding (both private equity and institutional debt funding), challenges facing most West and East African clients and sponsors revolve around development feasibility and creating a “bankable” development project. Letnik and his team therefore go beyond pure construction project management, providing development management assistance for our clients that ticks the boxes for the real estate investment community.

+27 (0)10 593 2520 Andreas.Letnik@coffey.com www.coffey.com

project managers

PROPERTY SOUTH AFRICAN

REVIEW

Getting your brand in front of South Africa’s leading decision-makers Vaughan Davies Coffey Projects (Africa) (Pty) Ltd

South Afric an Prop

AN

SOUT

H AF RI

CAN

erty Revi ew

REVIE

W

July 2013

Heritage , wh the hea ere rt is

WALKI NG BROKEN ON Women GLASS sh the ceili atter ng

VUKILE ’s WUNDE NEW RKIND Why Dr Mos made th eneke e move

erty

Property Exhibition

PROPERTY September 2013

South African Property Review

Architects in focus

RICA EAST AF mise?

Land of pro PROPERTY EYE CANDY Excellence winners announced

2013

EW

Women in prop

REVIEW

SA REITs URBAN The dream NERATION REGE t becomes profits ou in, al pit a Ca reality

R THE REITs FO D SECTOR UNLISTE A’s k to SAPO We spea t presiden ing incom

August

REVI

th SAPOA to the 45 Welcome ention nal Conv Internatio Sty bition O U Ex er T Hhi A F R I C A N and Prop South African Property Review

ention and nal Conv

A Internatio 45th SAPO

August 2013

May/June

RICAN SOUTH AF

REVIEW

SASOL’s SANDTO Alchem y brings N HQ the mag ic

THE TALENTED MR NOMVETE Delta’s rise and rise

2013

ARROWHEAD et Always on targ

SHINE ON, SAPOA Our Convention report back

Attorneys in focuos

July 2013

Online and in hand, the South African Property Review is the official voice of the South African Property Owners Association

ET ALL-STAR ASS erty in the lead

SA listed prop

EFFECT THE PRECINCT rise The rise and es of trendy nod

September 2013

+27 (0)10 593 2520 Vaughan.Davies@coffey.com www.coffey.com

w rty Revie

an Prope South Afric

Vaughan Davies is a project director at Coffey Projects (Africa) (Pty) Ltd. He has experience in retail, commercial and hospitality projects, which spans the areas of project management, programme coordination, project feasibility and master planning studies, procurement of contracts, contract administration, and design team coordination.

Prior to working with Coffey, Vaughan worked for three years in Lagos Nigeria as the project manager for the 20 000m² shopping centre, The Palms.

Coffey continues to be a project management firm that delivers solutions to clients’ complex needs. In South Africa, much of the work involves refurbishment or expansion of existing infrastructure, be it shopping centres, hotels, office blocks or data centres. This invariably involves keeping an ongoing business functioning while the construction work happens behind the scenes. Added to this, most clients are now looking at more energy-efficient solutions to keep operating costs under control, requiring mechanical and electrical equipment to be swapped out without affecting their operations. From a project management perspective this requires detailed planning and management of relationships with developers, operators, facility managers, service providers, tenants, contractors, subcontractors, suppliers and the professional team. B-BBEE is also attracting more attention from developers as legislation becomes more prescriptive, and as government gears up with its development strategy.

This creates opportunities for new alliances and for developing skills within the business. The construction industry is never a boring place, and while things do occasionally “slow down”, there is always a remarkable amount energy being spent on looking ahead and trying to make schemes work – and often that input pays off. So while the future is uncertain, and some resources may be in short supply, the opportunities are definitely there.

Y PROPER PROPERT TY PROPERTY e 2013

May/Jun

AFRIC SOUTH

vative Inspired, innoen nd t and indepeinar ices y property serv scipl

Broll’s multi-di

SAPOA members control the bulk of South Africa’s private-sector commercial land and building stock, and manage the majority of property funds listed on the JSE. Each member is a leading player and decision-maker in the commercial property arena – and they use the South African Property Review as an extension of the SAPOA website and information platforms.

These members –company chairmen, CEOs and MDs – often control massive companies and their associated budgets. As true decisionmakers, some of the brightest and most-talented people in the sector occupy senior roles in the SAPOA member organisations.

For advertising opportunities and rates contact Riëtte Stevens t: +27 (0)71 877 5520 e: sales@sapoa.org.za SOUTH AFRICAN PROPERTY REVIEW

53

project managers “With the recession, there has been a tendency to question the need for a dedicated project management service, and to absorb the role into other disciplines.

This, however, loses the independence, objectivity and cohesion that a good project management team can provide. Independence provides the focus to understand project deliverables, integrate the project team and optimise the project variables to deliver a successful end product” Jedd Grimbeek, Mitchell Du Plessis Associates (MDA)

54

SOUTH AFRICAN PROPERTY REVIEW

Jedd Grimbeek Mitchell Du Plessis Associates (MDA)

Johan Slabber Mitchell Du Plessis Associates (MDA)

“With the recession, there has been a tendency to question the need for a dedicated project management service, and absorb the role into other disciplines,” says Jedd Grimbeek, a director who started with MDA on the CTICC in 2001. “This, however, loses the independence, objectivity and cohesion that a good project management team can provide. Independence provides the focus to understand project deliverables, integrate the project team and optimise the project variables to deliver a successful end product.

“At MDA we pride ourselves in providing a truly dedicated, professional project management service ‘from cradle to grave’. Our vast and varied experience, together with internal protocols, structured systems, dedication and passion, provide the perfect framework for success.”

His experience includes having worked in Hong Kong and Taiwan on a number of prestigious projects, including the Shangri-La Hotel in Taipei, HSBC residential development and The Landmark Retail.

He is currently, and has been for the past couple of years, “driving the bus” on the Cape Town MyCiTi integrated rapid transport project. This has involved working closely with the city to keep the wheels turning, despite the legal, political and bureaucratic hurdles that a ground-breaking project of this nature attracts. However, it provides an opportunity for the whole of Cape Town to develop and grow in a more sustainable manner.

Grimbeek looks forward to the future rollout of the MyCiTi project across Cape Town, emphasising that professional project management holds the key to its success.

It has always been the aim of Mitchell Du Plessis Associates to provide a flexible, professional and efficient development framework to its clients. The company’s experience and ability to simplify complex, multidisciplined projects provide its clients with the clarity and peace of mind to make successful decisions.

This is according to associate Johan Slabber, who has worked for the company since 2008, after gaining experience by doing developments of his own and, prior to that, working for NMC (Pty) Ltd. Slabber believes that a project manager requires a set of skills and tools to enable him/her to plot the future with a fair amount of accuracy, while finding innovative and practical solutions for current and future challenges. “To take most of the ‘educated guessing’ out of the equation, we developed a riskanalysis model, specifically for developments and construction in South Africa,” he says.

Projects will continue to increase in size and complexity, and the need for niche specialisation will intensify, he says. “Project managers need to rise to the challenge with hard work, innovation and determination to produce a quality product.”

Slabber manages the master programme and projected cash flows required to successfully plan and implement the IRT (MyCiti) project, with great success. In addition, he manages the risk assessment of the project, utilising the risk-analysis model developed by MDA. He is also involved in managing the substantial improvements and upgrades to the V&A Waterfront’s Victoria Wharf shopping centre.

In addition, he manages a number of industrial developments, both upgrades and extensions.

+27 (0)21 419 7733 / +27 (0)83 234 7549 jedd@mdaprojects.co.za www.mdaprojects.co.za

+27 (0)21 419 7733 / +27 (0)82 295 0750 johan@mdaprojects.co.za www.mdaprojects.co.za

project managers

Ian Taylor Mitchell Du Plessis Associates (MDA) MDA offers clients a comprehensive array of project management skills that serve to assist clients in managing their projects well. The all-embracing nature of this service, together with the personal passion of MDA’s directors, associates and staff, and backed by more than 30 years in the business, makes for a pretty risk-free experience.

This is the view of Ian Taylor, managing director at MDA, who has been an integral part of the firm for more than 30 years. Next to founding director (now chairman) Bev Mitchell, Taylor is the longestserving member of the firm.

He has had significant involvement in most of MDA’s large and visible projects, including the V&A Waterfront, the CTICC and the Cape Town soccer stadium.

His view is that project management has developed impressively as a formal discipline in the built environment, and the results achieved have proven beneficial not only to clients, but also to the other professionals involved, and the contractors.

Everyone benefits from a well-organised and wellrun project that meets the client’s objectives.

Looking ahead, Taylor sees the project management environment expanding to embrace green initiatives, leading to better focus on life-cycle costing, sustainability and energy optimisation.

This will apply not only to new developments but also increasingly to the retrofit field, and project managers will need to focus on the triple bottom line (economic, social and environmental).

MDA’s membership and experience of the Green Building Council has been valuable.

+27 (0)21 419 7733 / +27 (0)82 569 3565 ian@mdaprojects.co.za www.mdaprojects.co.za

Ernst Viljoen Mitchell Du Plessis Associates (MDA)

Peter Wortmann Mitchell Du Plessis Associates (MDA)

Project management today requires individuals with strong leadership skills, hands-on knowledge of the built environment and strong awareness of all economic aspects driving the industry. They must be in touch with information technology developments in the field and be able to use them to any project’s advantage to delivery on time, quality and budget.

“The project manager is there to harmonise all aspects that make up a project, and to lead by example,” says Ernst Viljoen, who joined MDA five years ago after spending time working on large-scale construction projects with leading main contractors, both in South Africa and in the UK. “My main focus since inception here has been the delivery of the MyCiTi bus system infrastructure, and industrial warehousing for Macsteel. As a small, dynamic, results-driven practice, with extensive knowledge of the local Cape Town industrial environment, MDA has been perfectly placed to exceed its clients’ expectations on all aspects of these projects. We achieve this by tailoring projects to client demands and are flexible enough to meet changing client deliverables. By recognising and incorporating innovative ‘green’ design, our clients also benefit financially by reducing building running costs.”

Viljoen is currently working on the extension of the Two Oceans Aquarium, a project with uniquely different client needs and expectations, from sourcing acrylics from suppliers across the globe to managing the live marine animals. As a responsive, innovative project management firm, MDA shall rise to meet this special project’s unique demands, and deliver a tailor-made solution to exceed all expectations.

Working for an independent firm that has managed to continuously fill its order book almost solely in the Western Cape region for 34 years, and has its name associated with many iconic projects in the Cape Town skyline, is a prestigious opportunity for any project manager.

MDA’s project management service, while comprehensive, has also had to evolve due to the changing construction climate. Items such as increased project sizes, yet reduced time frames, changing legislation, environmental sustainability concerns, and a larger supply of resources (contractors, consultants and products) with varied skills/quality levels all pricing to win tenders at any cost, have to be taken into account. This has resulted in a priceas opposed to quality-driven market with a new set of demands on project managers.

“One of the keys to a successful project, particularly for state, provincial and local authority projects, is the need for the project manager to manage the client’s internal teams and product end users,” says MDA’s Peter Wortmann. “This became critical on the MyCiti IRT bus depot projects and with the selection of politically sensitive operators.”

Wortmann is also involved, as part of a project management joint venture, in the Galleria Development, one of Cape Town’s largest mixeduse developments, currently in the planning and rezoning stages. This highlights the benefits of the client involving the project manager prior to getting a project to design and construction stage, given the complexities that developers face.

+27 (0)21 419 7733 / +27 (0)76 393 1156 ernst@mdaprojects.co.za www.mdaprojects.co.za

+27 (0)21 419 7733 / +27 (0)83 575 7305 peter@mdaprojects.co.za www.mdaprojects.co.za SOUTH AFRICAN PROPERTY REVIEW

55

project managers “Good interpersonal communication is critical for the success of any project. It is vital that we retain our skills in being able to listen to other people, and to be able to talk through issues and challenges that arise on a day-to-day basis” Bruce Duncan, SIP Project Managers (Pty) Ltd

56

SOUTH AFRICAN PROPERTY REVIEW

Bruce Duncan SIP Project Managers (Pty) Ltd

Luigi Marrai SIP Project Managers (Pty) Ltd

Bruce Duncan graduated from Wits with a BSc degree in building in 1982. He was fortunate to have been granted a bursary from SM Goldstein. In his 30-year working life in the building industry, he has worked for building contractors, architects and project managers.

“I would recommend to all youngsters entering this profession to seek experience on both sides of the fence,” he says. “The knowledge gained from both is invaluable in understanding and appreciating the challenges faced by contractors and consultants.

“Having started working when the only tools of communication were the telephone and telefax machine (and a good old fashioned site meeting), I believe that good interpersonal communication is critical for the success of any project. It is vital that we retain our skills in being able to listen to other people, and to be able to talk through issues and challenges that arise on a day-to-day basis.

“The above was driven home all the more after a two-year stint spent in Vietnam as part of a team that built the first casino resort in that country.

It ended up being a very successful project for all parties concerned which, in spite of the language challenge, was undertaken in the spirit of respect and keen cooperation. The Vietnamese culture is one of talking about all and any issues, and open and constant talking among the role players proved to be most beneficial. It was a wonderful and very educational experience that I will never forget.”

Now based at the head office in Johannesburg, Duncan is working on a new shopping mall in Mthatha. Work has just recently commenced on site with the site handover to the main contractor, and a tight schedule requires that the centre be completed and trading in April 2015.

Luigi Marrai was born in Johannesburg and obtained his BSc degree in building science at Wits University.

His experience in the industry is extensive and varied, encompassing entertainment centres, hotels, casinos, residential, commercial offices, corporate headquarters, retail shopping centres and golf estates.

His formative years in the industry were as the contractor’s site agent, constructing prefabricated schools and hostel buildings; thereafter, he took up the post of project manager at SIP. “To date, my two most interesting projects undertaken comprise high-rise buildings – the Johannesburg Sun and Towers Hotel project in the mid-’80s and the Portside Office Tower project presently under construction in Cape Town. The Johannesburg Sun and Towers Hotel had many challenges due to its innovative design of a single large concrete foundation for the high-rise tower, the cantilever transfer structure, the flush glazed curtain wall system, and extensive shop-fitting interior works and high-end finishes. The project management skills applied to the Portside Office Tower project borrowed on the knowledge gained from that.

“Other significant projects that I was pleased to have being involved in and delivered successfully included the Sun City Entertainment Centre extension and refurbishment as part of the Lost City project, the Table Bay Hotel at the V&A Waterfront and Grand West Casino in Cape Town.”

Following his relocation to Cape Town to set up a new branch office, Marrai’s experience broadened to include challenges relating to heritage, environmental, urban design, marine and seismic considerations.

SIP’s focus is to deliver a project that all involved can look back on and say, “That was a success – let’s look forward to the next project!”

+27 (0)11 233 6800 bruce@sippm.co.za www.sippm.co.za

+27 (0)21 511 3040 luigim@sippm.co.za www.sippm.co.za

project managers

Nico Rivetti SIP Project Managers (Pty) Ltd After graduating from Wits with a BSc in building in 1994, Nico Rivetti Joined SIP in 1995. SIP was well known and respected at the time, already established as an industry leader in the field of construction project management. The firm follows a hands-on approach, treating every problem as its own and thereby “taking ownership” of the project processes. The project is bigger than the individual personalities on the team, and therefore a mind-set of team work and a “can do” attitude is instilled and cultivated, embracing SIP’s commitment to go beyond the call of duty to deliver a project on time, within budget and to the desired standard of quality.

The industry has got tougher over the years as a result of a lack of skills in the consulting and contracting fields of construction. There has also been a change in attitude among the different role payers, which has definitely created challenges and increased risk in successfully achieving all three pillars of a project.

“I have been privileged to be associated with many diverse, challenging and successful projects at SIP, most notably the projects I was involved with in Dubai,” says Rivetti. “Although the scale and complexity of those projects were significantly different, we operated in a similar manner, which distinguished and set us apart from other international project management firms in the region. We led a project team and continuously cultivated and lived a ‘teamwork’ attitude, which resulted in raising the bar on all the projects we were involved in by adding a new and important dimension to a resort hotel or hotel projects success – by creating an experience beyond the product.

SIP culture and operating strength will continue to ensure its success and mark the firm as an industry leader in the field of construction project management.

Lorenzo Vimercati SIP Project Managers (Pty) Ltd Cape Town-based Lorenzo Vimercati obtained a BSc Building Science degree at Wits University. Soon after starting his career as a contractor he switched to project management, which has enabled him to work in several countries in Asia and central and western Africa.

“I remember my first off-shore project – the redevelopment of the One&Only Le Saint Géran hotel in Mauritius, which for a relatively inexperienced project manager felt like a daunting prospect,” he says.

One of his most memorable projects was the One&Only Reethi Rah Hotel in the Maldives, where meticulous planning and integration into the local contracting practices were paramount to the success of the project. “It’s also the most challenging, creative and picturesque project I’ve been involved with.”

What sets SIP apart from its competitors, he says, is the company’s passion towards delivering its own unique style of project management. “It’s not about applying a textbook approach to project management but rather about anticipating and meeting the project team’s objectives and expectations,” says Vimercati.

Some of the significant projects he’s been involved with include the Leopard Creek Golf Estate, Long Beach Hotel (Mauritius), Cape Town Film Studios and four One&Only hotel projects: St Géran, Le Touessrok, Reethi Rah and Cape Town.

In recent years, Vimercati has focused on entering the vast and sometimes treacherous African market, where he has been involved in hospitality and defence projects. “It’s really tough to deliver there, and now I can vouch for the saying that Africa is not for sissies.

Business in Africa has a unique way of manoeuvring and I’ve challenged myself to understand and, hopefully, to master what it takes to operate successfully within that environment.”

Don’t miss your opportunity to be in the December South African Property Review’s industry focus:

Corporate Social Investment

For details contact Riëtte Stevens

+27 (0)11 233 6800 / +27 (0)83 627 8360 nico@sippm.co.za www.sippm.co.za

+27 (0)21 511 3040 lorenzo@sippm.co.za www.sippm.co.za

t: +27 (0)71 877 5520 e: sales@sapoa.org.za SOUTH AFRICAN PROPERTY REVIEW

57

Sponsorship opportunities Increase your visibility and gain unparalleled access to the industry’s decision-makers.

WHY PARTNER WITH SAPOA? Whether your goal is to increase brand recognition or spend quality time with top decision-makers in commercial real estate, you will find what you need to meet it with SAPOA’s strategically designed sponsorship offerings at every level.

WHY SPONSOR? u P osition your brand among other industry leaders u Expose your corporate brand throughout the year’s event-marketing cycle to give your business the competitive edge u Get direct access to unique, face-toface networking opportunities with key decision-makers within the core market sectors of the property industry u Get the opportunity to make and nurture meaningful relationships

Jane Padayachee Marketing manager t: +27 (0)11 883 0679 f: +27 (0)11 883 0684 e: marketingmanager@sapoa.org.za www.sapoa.org.za

Reinforce your brand by partnering with us in one of our sponsorship opportunities!

The world needs fewer engineering companies.

Rebranded as Royal HaskoningDHV, SSI Engineers & Environmental Consultants believes in being more than an engineering company.

Our rebranding to Royal HaskoningDHV ushers in a new class of engineers and consultants, offering solutions for the sustainable interaction between people and their environment, ultimately enhancing society together.

www.rhdhv.co.za www.royalhaskoningdhv.com

statistics

SA corporate occupiers still have a way to go Source: IPD SA Corporate Occupiers Benchmarking Studies

W

ith the first index published in 1997, IPD is now in its 15th year of reporting on the South African commercial property market. At the end of 2011, the total value of the IPD SA Databank included more than 2Â 000 investments with a total value of R205-billion.

IPD SA is well known for investment property benchmarking; what is not as well known is the Corporate Occupiers Benchmarking Studies, which focuses on properties used to fulfil business functions such as offices.

This study commenced in 2007 and focuses on costs, space and environment indicators.

The results shared in this article reflect South African combined results until 2011, in anticipation of 2012 results to be released next month.

Important to note is that these costs include soft and hard services, rent, insurance, security, catering, electricity, water and utilities. FM employee costs are excluded at this point.

The results and empirical data tell us that South African companies have been slow to respond to international best practices, especially in respect of space, which accounts for two-thirds of the cost savings. It is also important that future studies include cost of FM employees to reflect all costs.

The results and empirical data also tell us that, while there has been a slight improvement, South African companies are encouraged to learn about and implement the 21st-century space concept, which brings about more efficient and collaborative space. It must be remembered that the benchmark here is still more than 60% above the international benchmark and that 75% of potential cost savings come from space optimisation.

Environmental benchmarking is not included in the combined results because the data consistency was lacking.

This will be included in the 2012 study being released next month.

Total operating costs per employee

Space per employee

If you have enquiries, contact David Khasebe, founder and principal consultant of DKMC, and project manager for FM Benchmarking at IPD SA. +27 (0)11 656 2115, david@dkmc.co.za

SOUTH AFRICAN PROPERTY REVIEW

59

social networking

Outlook over breakfast Hot topics were served up at a recent SAPOA breakfast presentation, sponsored by Absa Commercial Asset Finance

By Anne Schauffer

M

embers filed into the conference room in great numbers for the KwaZulu-Natal SAPOA networking breakfast at Coastlands on the Ridge on 25 July 2013. The keynote speaker was Barclays macroeconomist Kgotso Radira, whose respected views and work – as per his introduction by Absa’s Pregan Naicker – are widely used across many departments at Absa. Introducing Radira was SAPOA’s Edwin van Niekerk, who welcomed his topic of “The Outlook for South Africa for 2013”, and stressed that, living as we do in “interesting times”, the business community needs to stay positive, and look at the opportunities and seize them.

Radira outlined how he sees trends playing out, and the effect of these on everybody in their work spaces. He described most sectors of the economic landscape as challenging, and very likely to remain so into next year.

He sees inflation peaking in the third quarter of the year at around 6,7% but is of the opinion that the Reserve Bank won’t raise the interest rate now.

He also outlined solid reasons why South Africa needs to trade with emerging markets over established ones, and why key elements such as fuel and energy price hikes since 2009 (100% and 93% respectively) have played a major contributory role in reduced consumer spending, which equates to lowered consumer confidence.

Only private-sector investment can assist with reducing unemployment, he said – which isn’t happening because of weak business confidence.

Consumers have more debt now than pre-2009, so there’s little money for durable goods, a trend that’s likely to continue.

From a property perspective, demand for residential is down and there’s an oversupply of commercial, but industrial space was a sector able to adjust well in 2009, and is the stronger for it. Radira signed off by stating that “For a business to succeed, it needs to diversify.”

The high energy at the event was tangible, not only in response to the informed opinions of the keynote speaker, but also the social element of sharing a first-class breakfast, views and business cards with a host of colleagues, new and old. Two happy members walked off with Absa’s lucky-draw prizes, and all members left with iPad pens and, thanks to Absa Commercial Asset Finance’s sponsorship, a very clear vision of the global and local situation – past, present and into the future.

60

SOUTH AFRICAN PROPERTY REVIEW

1

3

4

5

2

social networking

6

7

9

8

11

10 13

12

15

14 1 Pregan Naicker 2 Keynote speaker Kgotso Radira 3 David Harris, Shvir Haripersad, Caressa Peromal, Lorentha Covenden, Dave Ramsay 4 William Smith, Ross Butcher, Lea Hollinsead, Tom Smith 5 Dave Fly, Sam Stuart, Ashok Hirjee, Anand Joseph 6 Ruth Wegener, Heather Farrah, Cheryl van Niekerk, Shanon Havemann 7 Ryan Berry, Sonja Williams, Brad Rayson 8 Beverly-Anne Fink, Roxanne Smith, Laura Radford 9  Vuka Mseleku, Simphiwe Maphumulo, Sifiso Msomi 10 Aletta de Lange, Sue Hudson, Pedro Viera 11 Ken Versfeld, Peter Hudson, Garth Sims 12 Pregan Naicker, Kgotso Radira, Edwin van Niekerk 13 Josh Walton, Keith Wilson, Morgan Bird 14 Paul Izzard, Cassandra Hailstone, David Schaefer 15 Michael Twine, Gareth Bowman, Sam Clark SOUTH AFRICAN PROPERTY REVIEW

61

social – east london

62

SOUTH AFRICAN PROPERTY REVIEW

social – east london

The winners 1st: Investec Specialist Bank (from left) Grant Wheatley (Chairman), Anton Toich, Ettienne van Niekerk, Luka Toich, James Whitaker, Robin Knott 2nd: Nedbank Corporate Property Finance (from left) Alfred Nyamana, John Kairuz, Mike Palframan, Rob Hood 3rd: IDZ (from left) Mr Dyantjies, Zolile Tini, Ben Jonas, Freddy Magugu

1st

2nd

3rd SOUTH AFRICAN PROPERTY REVIEW

63

off the wall

The evolving metropolis Dubai is home to some of the world’s most innovative and eccentric urban developments.

A new one may emerge from the landscape in the not-too-distant future

By David A Steynberg

I

t’s a case of history inspiring the future. In 2008, Timelinks – a pool of urban planners, scientists and architectural designers – designed and patented a structure called a Ziggurat.

Named after the temple towers of the ancient Mesopotamian valley, it has been suggested that it will function as an enclosed metropolis. Covering an area of 2,3km² and reportedly able to accommodate up to one-million people, it is seen as a possible solution to alleviating the pressures caused by the world’s growing human population. If it ever does become a reality, it will surely be one of the most efficient dwellings both in terms of service provision to its residents and environmental impacts. It will draw its power from natural sources such as wind and solar, and offer a public-transport system that will run both

64

SOUTH AFRICAN PROPERTY REVIEW

horizontally and vertically, keeping any commute to work to within 15 minutes from anywhere in the structure.

Far from resembling the cities of the future common in science fiction, the city will feature artificial lakes, parks and water channels as well as support urban farming projects.

“Ziggurat communities can be almost totally selfsufficient energy-wise,” Timelinks MD Ridas Matonis has been quoted as saying. “Apart from using steam power in the building, we will also employ wind-turbine technology to harness natural energy resources. Whole cities can be accommodated in complexes that take up less than 10% of the original land surface. Public and private landscaping will be used for leisure pursuits – or irrigated as agricultural land.”

All accounted for Every time

Financial Viability

Value Management

Procurement Documentation

Acknowledgement: SAOTA – Stefan Antoni Olmesdahl Truen Architects

Building and Property Economics is our Speciality Pro-active. Innovative. Maximising returns DelQS remains one of the most established and respected names in the industry. Through highly developed and specialised expertise we are continuously delivering creative solutions to maximise returns for our clients. And when you consider our remarkable track record in South Africa, Africa and the Middle East, there should be no doubt with DelQS at your side, all will be accounted for. Every time QUANTITY SURVEYING

DISPUTE RESOLUTION

PROPERTY VALUATION

www.delqs.com | JHB +27 (11) 642 8751 | PTA +27 (12) 460 3304 Associated offices: GHANA | KENYA | MAURITIUS | NAMIBIA | NIGERIA | TANZANIA | UGANDA 14414 012 460 8545

LEGAL UPDATE REPORT TO SAPOA MEMBERS

The information contained in this document is for information purposes and outlines some of the processes, interventions and projects that are being or have been done by the Legal Services Department of SAPOA. SAPOA cannot guarantee the accuracy, reliability and completeness thereof, and it is of general application and does not take into account the particular circumstances or needs of any person or company or organisation or entity whose employees, agents, directors or shareholders may read it. Such persons or entities are encouraged to seek independent professional advice from suitably qualified professionals prior to making any decision in reliance on the contents of this document. SAPOA is not liable and accepts no responsibility for any claim, loss or damage of whatever nature suffered by any person, entity or corporation who relies or seeks to rely on any information, advice or opinion contained in this document or otherwise given by the author, whether or not such person or entity is a member of SAPOA.

INDEX

ITEM

PAGE

1.

2.

2.1.

2.2.

2.3.

2.4.

2.5.

2.6.

2.7.

2.8.

2.9.

2.10.

2.11.

2.12.

2.13.

2.14.

2.15.

2.16.

2.17.

2.18.

2.19.

2.20.

2.21.

2.22.

2.23.

2.24.

EXECUTIVE SUMMARY 5 LEGAL ADVOCACY 7 Spatial Planning Land Use Management Bill, 2011 8 Expropriation Bill, 2013 12 Infrastructure Development Bill, 2013 16 Gauteng Planning and Development Bill, 2013 19 Mpumalanga Planning and Development Bill, 2013 22 Western Province Spatial Planning Land Use Management Bill, 2013 23 Property Practitioners Bill 25 The Sub-Division of Agricultural Land Act 28 Consumer Protection Act No. 68 of 2008 33 Ethekwini Development Surcharge Policy 36 Ethekwini Transport Development Levy Policy 37 Green Paper on Rural and Land Reform 38 Property Valuations Bill, 2013 39 The Housing Consumers Protection Measures Amendment Bill 41 The Deeds Registries Amendment Bill 44 The Property Sector Transformation Charter 45 Special Economic Zones Bill 46 The Municipal Systems Act, 2000 47 Tobacco Products Control Act No. 83 of 1993 48 SANS 1-1: 2012 Standard for Standards Part 1 51 Environmental Impact Assessment Regulations 52 City of Johannesburg Valuation Roll 53 Nelson Mandela Metropolitan Municipality Public System 54 Carbon Tax Policy 56

3.

3.1.

3.2.

LITIGATION 59 SAPOA versus Johannesburg Metropolitan Municipality (Rates Increase) 60 Johannesburg Consolidated Town Planning Scheme (Appeal) 62

4.

4.1.

4.2.

4.3.

4.4.

LEGAL ADVISORY Exclusivity Agreements Mergers & Acquisitions Right of Landlord to Terminate Electricity Proposed Property Transactions: New Thresholds

5.

5.1.

5.2.

5.3.

5.4.

STRATEGIC COLLABORATIVE RELATIONS 73 South African Cities Network 74 Chamber of Commerce and Industry – Johannesburg 75 Polokwane Municipality 76 Tax Court: Recommendation of a Member of SAPOA 77

6.

6.1.

6.2.

6.3.

6.4.

6.5.

6.6.

6.7.

MISCELLANEOUS 78 Comparative Study of Costs of Municipal Services 78 The Impact of the Property Sector on the Economy of South Africa 78 Standard Sale and Lease Agreements 78 Financial Intelligence Centre Guidelines 78 Memorandum of Incorporation: Registration 78 Registration of New Board Members 78 Submission of the Annual Return 78

65 66 67 68 69

SAPOA LEGAL UPDATE – report to members 3

4 SAPOA LEGAL UPDATE – report to members

EXECUTIVE SUMMARY The Legal Services Department supports the vision and mandate of SAPOA by ensuring that legal risks that are prevalent in the commercial property industry are mitigated for the protection of the mutual interests of SAPOA members. SAPOA is cognisant of the vibrant and evolving nature of the property market which, to a larger extent, is regulated through various pieces of legislation.

The Department is responsible for legal advocacy, which is fundamental in ensuring that SAPOA actively participates in policy formulation and enactment of laws affecting the property sector in South  Africa. Monitoring, analysing and submitting of formal comments on published relevant and pertinent Acts of Parliament, Green and White Papers, Municipal Ordinances and Policies having an impact on the property industry is one of the strategic focuses.

Strategic and collaborative relationships are initiated and/or cemented, where relevant and pragmatic, with other stakeholders in the property industry, which includes engagement with government departments, state-owned entities, organs of the state and municipalities.

Litigation remains the ultimate and last legal mechanism that is being used for the mutual protection of members, and SAPOA values the constitutionally and legally sound processes and fundamentals of the South African Judiciary system. SAPOA resorts to litigation as an alternative strategic objective that is supported by the rules and provisions regulating SAPOA’s Legal Advocacy Fund.

Research is a fundamental tool that SAPOA recognises and utilises to investigate a multitude of issues with the intention of increasing the institutional and sectoral knowledge relating to the industry, formulating and determining best practice and guidelines for the use of the members, and also as a negotiating tool to be used in positively influencing and changing the commercial property landscape, practices and direction thereof for the attainment of global best practice. Our researches are cognisant of the need for ensuring the growth, sustainability and profitability of the commercial property sector within a less protracted public sector environment.

Legal Advisory services are provided to internal departments and further to members of SAPOA. Compliance remains key in ensuring SAPOA complies with the legal prescripts of various legislation.

SAPOA LEGAL UPDATE – report to members 5

6 SAPOA LEGAL UPDATE – report to members

Legal advocacy

SAPOA LEGAL UPDATE – report to members 7

LEGAL ADVOCACY BILL

APPLICABLE TO

1. SPATIAL PLANNING LAND USE MANAGEMENT BILL PROPERTY OWNERS AND PROPERTY DEVELOPERS NATIONAL DEPARTMENT OF RURAL DEVELOPMENT AND LAND REFORM SUBMISSION DATE OF SAPOA COMMENTS BACKGROUND 1. The Spatial Planning Land Use Management Bill is a Bill provided for by the provisions of section 76 of the Constitution in that it is one that affects provinces such as those dealing with welfare services, childcare facilities or trade etc.

2. SAPOA submitted formal comments on the Bill on 8 August 2013.

3. The Bill is meant:

• to provide a framework for spatial planning and land use management in the Republic;

• to specify the relationship between the spatial planning and the land use management system and other kinds of planning;

• to provide for the inclusive, developmental, equitable and efficient spatial planning at the different spheres of government;

• to provide a framework for the monitoring, coordination and review of the spatial planning and land use management system;

• to provide a framework for policies, principles, norms and standards for spatial development planning and land use management;

• to address past spatial and regulatory imbalances;

• to promote greater consistency and uniformity in the application procedures and decisionmaking by authorities responsible for land use decisions and development applications;

• to provide for the establishment, functions and operations of Municipal Planning Tribunals;

• to provide for the facilitation and enforcement of land use and development measures.

4. Parliament issued a Notice in July 2012 inviting comments in respect of the Spatial Planning Land Use Management Bill, with the closing date being 10 August 2012. SAPOA duly submitted its formal comments on 8 August 2012 and requested to be invited to the parliamentary hearings scheduled for 21 and 22 August 2012. Advocate Matsane attended on behalf of SAPOA. 5. The following is the record of all organisations or entities that attended the aforesaid Parliamentary Hearings, i.e.:

a. b. c. d. e. f.

Gauteng Provincial Department of Economic Development South African Property Owners Association City of Tshwane City of Johannesburg South African Local Government Association Ethekwini Municipality

8 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY

g. Saldanha Bay Municipality h. Chamber of Mines of South Africa i. Cogta Free State j. Crosby AGRI-SA k. Western Cape Government – WCGEADP l. KZN Cogta m. Community Law Centre n. South African Geomatics Institute o. Eskom p. South African Council of Planners q. Isandla Institute r. Planact s. Socio-Economic Rights of South Africa t. AFESIS u. Royal Bafokeng Nation v. Cogta Mpumalanga w. Legal Resource Centre x. Deon Barry Poortmann

A.

SUMMARY OF COMMENTS SUBMITTED IN PARLIAMENT

The following are the overall but summarised formal comments made in respect of the SPLUMB, i.e.: 1.

The Municipal Planning Tribunal is given the power to approve the subdivision of land in clause 41(2) (b) of SPLUMB. This is a power that currently rests with the Department of Agriculture, Forestry and Fisheries. It was submitted that it is in the national interest not to subdivide prime or unique agricultural land, without the considered and knowledgeable input of the officials of the Department of Agriculture, Forestry and Fisheries, who have the required scientific background to properly evaluate such applications.

2.

The impact on the providers of bulk “engineering services”, such as Eskom, as defined in the SPLUMB must be considered and clarified. It is not clear whether such providers would, in addition to all other approvals to be obtained, and bearing in mind that it is already a regulated entity by NERSA in terms of prevailing energy legislation, be required to make further application to a Municipal Planning Tribunal. In addition, Eskom’s electrification plan is carried out in areas approved by the Department of Energy, and it was recommended that before the Bill can be enacted, there has to be consultation with that department, and also with the Department of Public Enterprises.

3.

Within government there is no programme that specifically makes reference to the concept of land being made available prior to need and allowing people to develop this land in an incremental manner. The Upgrading of Informal Settlements Programme within the Department of Human Settlements comes close but it tends to emphasise the upgrading of areas where people already are living in an in-situ manner. It was proposed that SPLUMB makes specific reference to both

SAPOA LEGAL UPDATE – report to members 9

LEGAL ADVOCACY the upgrading of informal settlements programme (to cover upgrading from an in-situ base), as well as Managed Land Settlement (to cover upgrading from a Greenfield base).

4.

The municipality should be the centre of land use planning; however, intergovernmental cooperation and support (including capacity building at this level) is important. All land use planning should be integrated at the municipal level to focus on settlement planning in relation to transport, communication, infrastructure needs, livelihoods/job opportunities at a strategic level. But the development of SDFs and IDPs as indicated needs to be better linked to ensure effective alignment of plans. It was submitted that it was important to bear in mind and effectively manage the potential risks related to municipal centrality, particularly in light of the perverse incentive of increasing revenue through private sector development approvals that work against the goals of a developmental pro-poor agenda. Meaningful community participation at more localised levels (through improved community-based planning approaches) should be considered, including the development of SDFs and prioritisation at this level to be negotiated in relation to broader municipal and provincial area needs through the development of integrated, coordinated plans at these levels.

5.

SPLUMB insists on five-year review cycles for Provincial Spatial Development Frameworks, Municipal Spatial Development Frameworks and land use schemes. The time period was found to be too short, with 10 years being recommended.

6.

Mineral operations should be expressly recognised as being in the national interest so as to render all land developments subject to referral to the Minister of Rural Development and Land Reform.

7.

There is a need for SPLUMB to formally acknowledge all downstream plans sitting below the SDF but before the detailed land use management plans or Schemes (i.e. Spatial Development Plans, Local Area Plans, Precinct Plans, etc). These are policy plans, which form closer interpretations of the SDF while still not assigning specific development rights.

8.

It was clear that the composition of the appeal tribunal was a matter of concern for most in that external parties should not consider appeals made against decisions made by municipalities as that will defeat the purpose of the DFA Con Court ruling, which was clear in that municipal planning and land use was the prerogative of municipalities.

STATUS AND WAY FORWARD 1.

SAPOA submitted formal comments to the Bill and had extensive engagement with the National Department of Rural Department and Land Reform in respect thereof. Presently provinces are relying on provincial legislation or ordinances in as far as planning and development of properties are concerned.

10 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY 2.

The Bill was sent in February 2013 to National Council of Provinces Committee (NCOP), which received a briefing on the Bill so that the NCOP members could advise their respective provincial legislatures about the Bill. It was then considered by each of the nine provincial legislatures, and the NCOP members will go back to their provinces.

3.

Each provincial legislature was expected to refer the Bill to a Committee for consideration thereof and further for the holding of provincial public hearings on the Bill.

4.

In June 2013, the NCOP Committee considered the Bill and negotiation took place among the nine provincial delegations.

5.

The Committee received final mandates from eight provinces on the Spatial Planning and Land Use Management Bill. The Eastern Cape Provincial Legislature failed to submit its mandate.

The Bill was approved as seven provinces supported it, with the Western Cape Provincial Legislature being the only exception which voted against it.

6.

The Bill was assented into law by the President on 5 August 2013.

SAPOA LEGAL UPDATE – report to members 11

LEGAL ADVOCACY BILL

APPLICABLE TO

2. EXPROPRIATION BILL PROPERTY OWNERS AND PROPERTY DEVELOPERS NATIONAL DEPARTMENT OF PUBLIC WORKS BACKGROUND 1. The Bill was released for public comment in March 2013.

2.

SAPOA submitted comments on the Bill on 30 April 2013.

3.

The Bill provides for expropriation of property for a public purpose or in the public interest subject to compensation that is just and equitable, and reflects an equitable balance between the public interest and the interests of those affected; and in respect of the rights of everyone, including the rights to equality and to administrative action that is lawful, reasonable and procedurally fair.

4.

The Bill is founded around the provisions of section 25 of the Constitution of South Africa which provides that no-one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property. It provides that a property may be expropriated only in terms of law of general application for a public purpose or in the public interest; and subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.

5.

There has been a debate around the issue of the abandonment of the “willing buyer willing seller” principle which, it was stated, is not referred to in the Constitution but has for years been inferred as a result of the provision that states that the amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including: a. the current use of the property; b.

the history of the acquisition and use of the property;

c.

the market value of the property;

d.

the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and

e.

the purpose of the expropriation.

12 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY 6.

It is important to note that the Bill introduces, among other important provisions, the term “in the public interests” as envisioned by the Constitution. “Public interests” is defined as including the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources and other related reforms in order to redress the results of past racial discriminatory laws or practices.

7.

The Expropriation Act and Bill currently only refer to “public purpose”.

SOME LEGAL CONSIDERATIONS “Expropriation before determination of Compensation” 1.

The Constitutional Court has already been dealing with the issue of interpretation of certain critical clauses relating to expropriation, and Haffejee No and Others versus Ethekwini Metropolitan Municipality CCT 110/10 (2011) ZACC 28 is a case in point. The matter raised the question when compensation for expropriation of property in terms of section 25(2) of the Constitution is to be determined. In terms of section 25(2)(b) property may only be expropriated “subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected, or decided or approved by a court”.

2.

The Constitutional Court in this matter stated that the starting point for constitutional analysis, when considering any challenge under section 25 for the infringement of property rights, must be section 25(1) in that: a.

The interpretation of the section must promote the values that underlie an open and democratic society based on human dignity, equality and freedom.

b.

International law must be considered and foreign law may be considered.

c.

Pre-constitutional expropriation law must be approached circumspectly.

d.

Protection for the holding of property is implicit in section 25. Section 25(1) must be construed in the context of the other provisions of section 25 and in the context of the Constitution as a whole.

e.

Sections 25(4) to (9) underline the need for redress and transformation of the legacy of grossly unequal distribution of land in this country. The historical context in which the property clause came into existence should be remembered. These provisions emphasise that under the Constitution the protection of property as an individual right is not absolute but subject to societal considerations.

f.

The purpose of section 25 is to protect existing private property rights and to serve the public interest, mainly in the sphere of land reform but not limited thereto. Its purpose is also to strike “a proportionate balance between these two functions”.

SAPOA LEGAL UPDATE – report to members 13

LEGAL ADVOCACY g.

3.

The text of section 25 does not exclude an interpretation that compensation must precede expropriation. The language of the clause is compatible with compensation being a condition precedent to a valid expropriation, but the opposite is equally plausible.

The Court accordingly found that section 25(2)(b) of the Constitution does not require that the amount of compensation and the time and manner of its payment must always be determined before expropriation. Determination of compensation before expropriation will generally be just and equitable, but in those cases where it must be determined after expropriation, it must be done as soon as is reasonably possible. Eviction following expropriation may not take place unless agreed upon by the parties or, in the absence of agreement, under court supervision. In disputed cases of eviction the courts must ensure just and equitable outcomes in accordance with the property clause and section 26 of the Constitution, which protects the right of access to housing.

Definition of “Property” 1.

Other than the above-mentioned ConCourt matter, the difficulty with the present Bill is the definition given to property. The Bill defines “Property” as follows: “property is not limited to land and includes a right in or to such property”.

2.

This is an alarming deviation from the definition that is presently contained in the Expropriation Act No. 63 of 1975. The Act defines “property” as meaning both movable and immovable property.

3.

The Constitution states that property is not limited to land. It seems that the drafters of the Expropriation Bill preferred to give “property” a wider interpretation than the one intended by the framers of the Constitution.

CURRENT STATUS AND WAY FORWARD 1.

SAPOA submitted comments in respect of the Bill. The public participation period closed. The Bill is currently being debated before NEDLAC, where SAPOA is represented through its BUSA representation and through having a representative on the BUSA Expropriation Task Team.

2.

The Bill, which has incorporated some of the public comments, was distributed through NEDLAC on 11 July 2013 and with the intention that agreement thereon would have been reached by September 2013.

3.

Government, duly represented thereon by the Deputy Minister of Public Works and his team, has made it clear that every effort should be made to ensure that the Bill is law before the end of the year or, alternatively stated, prior to next year’s elections.

4.

Annexure A shows indications of the proposed dates and schedule relating to the Bill through the NEDLAC processes.

14 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY 5.

The BUSA Expropriation Team will meet to discuss and deliberate on the new version of the Bill.

6.

SAPOA did not appoint an attorney in this regard to make comments relating to Bill due to the legal avenue available to influence the format and content of submissions on behalf of business within the BUSA and NEDLAC structures.

7.

Comments from various associations or organisations are always read and considered to ensure informed, considered contributions within the BUSA and NEDLAC structures.

8.

SAPOA is represented by Advocate Matsane both on the BUSA and the NEDLAC Structures.

NATIONAL ECONOMIC DEVELOPMENT AND LABOUR COUNCIL PO BOX 1775, SAXONWOLD 2132 – 14A JELLICOE AVENUE, ROSEBANK 2196 TELEPHONE +27(0) 11 328 4200 FAX +27 (0) 11 447 6053/2089

_________________________________________________________

ANNEXURE A: DRAFT SCHEDULE OF DATES FOR THE EXPROPRIATION BILL TASK TEAM

EXPROPRIATION BILL TASK TEAM MEETINGS Meeting 1

10:00 – 13:00, Friday, 19 July 2013

Meeting 2

10:00 – 13:00, Friday, 2 August 2013

Meeting 3

10:00 – 13:00, Friday, 16 August 2013

Meeting 4

10:00 – 13:00, Friday, 30 August 2013

Note: The above draft schedule of dates had been drawn up with the following envisaged dates of sign-off in mind: • • • •

Sign-off on the NEDLAC Report by the Development Chamber: 4 September 2013; Sign-off on the NEDLAC Report by the Trade & Industry Chamber: 5 September 2013; Sign-off on the NEDLAC Report by the Overall Conveners: 18 September 2013; and/or Sign-off on the NEDLAC Report by MANCO on 26 September 2013.

SAPOA LEGAL UPDATE – report to members 15

LEGAL ADVOCACY BILL

APPLICABLE TO

3. INFRASTRUCTURE DEVELOPMENT BILL NO. 99 OF 2013

PROPERTY OWNERS AND PROPERTY DEVELOPERS

NATIONAL DEPARTMENT OF ECONOMIC DEVELOPMENT BACKGROUND 1.

The Bill was published for public comment in March 2013.

2.

SAPOA did not submit formal comments to the National Department of Economic Development.

3.

The Bill seeks to: a. b. c. d.

e. f. g.

Provide for facilitation and coordination of infrastructure development, which is of significant economic impact or social importance to the Republic; Ensure that infrastructure development in the Republic is given priority in planning, approval and implementation; and Ensure the development goals of the State are promoted through the development of the infrastructure.

The Draft Bill empowers the Commission to determine and develop infrastructure priorities, designate strategic infrastructure projects (SIPs) and ensure that infrastructure development in respect of any SIPs is given priority in planning, approval and implementation.

Once a project qualifies as a SIP, the Minister designates the project as such by publishing a notice in the government gazette.

It is the duty of the Commission to determine whether the project should be implemented by an organ of state or whether the project must be put out to tender.

The Bill provides that where a SIP has been designated for implementation or where such project is provided for in any national infrastructure development plan, any stateowned entity or other organs of state must ensure that its planning or implementation of infrastructure or its spatial planning and land use are not in conflict with any SIP implemented in terms of the Bill. Any conflict should be resolved through the Intergovernmental Relations Framework.

4.

The Bill further confirms the continued existence of Commissions, which consist of the President, Deputy President, Ministers designated by the President, Premiers of Provinces, and the Chairperson of SALGA.

5.

SAPOA did not make formal submissions to the Bill as an association but attended a meeting at BUSA for discussion of the Bill.

16 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY POLICY CONSIDERATIONS 1.

According to a presentation that was done on the SIPs, and according to the spatial analysis of the country needs, 17 SIPs have been identified.

2.

The SIPs cover a range of economic and social infrastructure. All nine provinces are covered, with emphasis on poorer provinces. The work is now being aligned with human settlement planning and skills development as key cross-cutting areas.

3.

In order to implement the SIPs, the Commission (PICC) reviewed critical enablers for the infrastructure programme. This included assessing the supply lines for construction inputs such as wood, cement, steel and bitumen as well as carefully reviewing issues that impact the cost of infrastructure, such as port charges and water pricing. In the case of transport, the expansion of rail lines has now been accompanied by an increased number of trains to fully utilise the infrastructure. In the health sector, the PICC supported the establishment of a pharmaceutical manufacturing plant to complement the expansion of clinic and hospital infrastructure.

4.

In addition to assessing key constraints, issues such as delayed access to land, skills constraints in the country and the affordability of the cost of the SIPs were reportedly reviewed.

5.

The initial costing of all 17 SIPSs has been done – these are being reviewed, stress-tested and refined.

6.

The Commission reports that funding strategies will take account of: a. Off-balance-sheet mechanisms to attract private sector equity, debt and participation; b. The assessment of the capacity of domestic and international financial markets to fund the amount required; c. The assessment of the capacity of Government to provide the guarantees, loans or equity in support of infrastructure build where tariff income is insufficient to support the SOEs balance sheets; d. The consideration of the ability of SA and SOEs to attract foreign debt and equity funding (country limits, return versus risk, country risk).

THE CURRENT SIPs 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

SIP 1: Unlocking the Northern Mineral Belt with Waterberg as the catalyst; SIP 2: Durban-Free State-Gauteng Logistics and Industrial Corridor; SIP 3: South Eastern node and corridor development; SIP 4: Unlocking the economic opportunities in North West Province; SIP 5: Saldanha-Northern Cape Development Corridor; SIP 6: Integrated Municipal Infrastructure Project; SIP 7: Integrated Urban Space and Public Transport Programme; SIP 8: Green Energy in support of the South African economy; SIP 9: Electricity Generation to support socioeconomic development; SIP 10: Electricity Transmission and Distribution for all;

SAPOA LEGAL UPDATE – report to members 17

LEGAL ADVOCACY 11.

12.

13.

14.

15.

16.

17.

SIP 11: Agri-logistics and rural infrastructure; SIP 12: Revitalisation of public hospitals and other health facilities; SIP 13: National school build programme; SIP 14: Higher Education Infrastructure; SIP 15: Expanding access to communication technology; SIP 16: SKA and Meerkat; and SIP 17: Regional Integration for African cooperation and development.

CURRENT STATUS AND WAY FORWARD 1.

2.

SAPOA makes contribution to drafts presented by BUSA for comments. SAPOA, represented

by Advocate Matsane, attended the meeting organised by BUSA in respect of the Bill.

SAPOA will monitor developments relating to the Bill.

18 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY BILL

APPLICABLE TO

4. GAUTENG PLANNING AND DEVELOPMENT MOSTLY PROPERTY OWNERS AND PROPERTY DEVELOPERS BACKGROUND 1.

The Gauteng Planning and Development was published again for public comment.

2.

SAPOA submitted formal comments on 1 April 2013.

3.

The following are the broad legislative objectives of the Bill, i.e.: • to provide for the planning and development of land use in the Province; • to provide for provincial planning and the coordination of national, provincial and municipal land use and development policies; • to provide for the land use planning functions of the Province and the process of provincial planning; • to provide for land use schemes in the management of land use by municipalities; • to provide for the regulation of municipal land use and the establishment of a municipal appeal tribunal; • to provide for the process of land development, and to facilitate and expedite development procedures including the upgrading and formalisation of settlements; • to provide for appeals and the procedures of the appeal tribunal; • to provide for the provision of engineering services in land development; • to provide for the control and enforcement of land use; and • to provide for related matters.

SAPOA COMMENTS (Extract) 1.

SAPOA duly submitted comments to the draft Bill and the following is only an extract of some of the pertinent issues that SAPOA raised. a.

As a general comment, the Bill should be of benefit to the property industry, provided adequate regulations are passed and the municipalities continue to implement their existing development frameworks and do not start afresh with the process. No regulations have yet been proposed for the Bill and many items in the Bill are left open for items to be prescribed by regulation. Those regulations will provide the detail to the operation of the Bill.

b.

The Bill will replace a number of pieces of legislation, in particular the whole of the Town Planning and Townships Ordinance 15 of 1986, which regulated town planning within the old Transvaal. Members of SAPOA will be used to having operated within the framework of that ordinance, and it is regretted that new terms and definitions are used in the Bill.

SAPOA LEGAL UPDATE – report to members 19

LEGAL ADVOCACY c.

The definition of “parastatal body” is broad and not easy to apply, to the extent that it excludes bodies which are organs of state. The definition of organ of state, contained in section 239 of the Constitution, provides, inter alia, that “organ of state means any functionary or institution exercising a public power or performing a public function in terms of any legislation.” A parastatal body is defined in the Bill as “an organisation, other than an organ of state, established by law to perform a function or provide a service on behalf of national, provincial or municipal government.” A body contemplated in the definition of “parastatal body” (namely, a body established by law to perform a function on behalf of government), would appear to fall squarely within the constitutional definition of “organ of state”. In this respect of the definition is ambiguous and should be clarified.

d.

The Bill presents provincial spatial development frameworks (“SDFs”) as guidelines and not as binding documents. This entails that, in the event of inconsistency between a provincial and a municipal SDF, the municipal SDF prevails (in guiding and informing decisions of the municipality). This may give rise to uncertainty and inconsistency in the manner in which municipalities determine applications, and it would be preferable if the two spheres of government were instead under an obligation to ensure that their SDFs are aligned, or at least not inconsistent.

e.

In terms of clause 20(1), municipalities are required to review the provisions of their land use schemes every five years. It is questionable whether the municipalities may practically comply with this limitation, and a longer period should be considered.

f.

The continual review of the land use scheme and the ability of the municipal council to amend the scheme will create great uncertainty for the property industry. The scheme should remain unless amended by way of application from land owners. Any change by the municipal council must only be done if it is in the interest of the general public and harmonious development of the area.

g.

The Constitution confers some planning powers on all spheres of government, by allocating legislative authority for “regional planning and development” and “urban and rural development” concurrently to the national and provincial spheres; legislative and executive authority for “provincial planning” exclusively to the provincial sphere; and executive authority over “municipal planning” exclusively to the municipal sphere.

For purposes of working out where each sphere of government’s authority starts and ends, it is self-evidently important to be able to delineate the parameters of each of those concepts (regional planning and development; urban and rural development; provincial planning; municipal planning).

h.

The national government has the power to make and execute laws on the functional areas listed in Part A of Schedule 4. This includes “regional planning and development” and “urban and rural development”. Legislative authority over matters listed in Part B of Schedule 5 (which includes “provincial planning”) vests in the provincial sphere exclusively.

20 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY The national government is also empowered to regulate the exercise of municipal powers and the administration of municipal affairs, subject to section 44 of the Constitution. The national sphere cannot, by legislation, give itself the power to exercise executive municipal or provincial executive powers, or the right to administer municipal or provincial affairs. i.

A difficult issue arising in relation to the limitations of national and provincial versus municipal executive responsibility, is in respect of land use decisions that may overlap with matters within the executive authority of the national or provincial spheres, such as housing, agriculture and the environment. These are all functional areas, listed in Part A of Schedule 4 to the Constitution, that are relevant to land use planning and that would ordinarily require decision-making in respect of land areas that fall within the area of jurisdiction of a particular municipality. National or provincial government (depending on the allocation of responsibility between them in terms of national legislation) has full authority over these matters, and may legislate, implement and administer in these functional areas without the limitations that apply to provincial involvement in matters set out in Part B of Schedules 4 and 5. It is inevitable that the exercise of those powers by national or provincial government will limit municipalities’ power over land use, and it is important for rational distinctions to be drawn between categories of decisions that should be made by national or provincial government, and those that should be made by municipal government.

j.

As far as we are aware, there is no useful case law in which the concepts of “regional planning and development” and “urban and rural development” have been given meaning by courts, relative to concepts of provincial and municipal planning.

CURRENT STATUS AND WAY FORWARD The final approved Bill is being waited.

SAPOA LEGAL UPDATE – report to members 21

LEGAL ADVOCACY BILL

APPLICABLE TO

5. MPUMALANGA PLANNING AND DEVELOPMENT BILL PROPERTY OWNERS AND PROPERTY DEVELOPERS

BACKGROUND The Mpumalanga Planning and Development Bill was published for public comment during April 2013. Its legislative objective mirrors the objectives of the Gauteng Planning and Development Bill, which must all be aligned to the SPLUMB. SAPOA COMMENTS (extracts) 1.

SAPOA submitted its comments on 11 May 2013, and the following is only an extract of the material comments that were made. a.

In our view, the Act fails to delineate circumstances in which the Mpumalanga Provincial Government (the “Province”) would be required to decide on development and land use applications, in accordance with its constitutional mandate. In particular, the Act fails to make provision for categories of land use applications that may affect an entire extra-municipal region, and as such require the involvement of the Province.

b.

Moreover, the Act fails to deal with the necessity for the intervention of the Province in relation to land use and development applications which impact upon those functional areas listed in Part A of Schedule 4 to the Constitution, that are relevant to land use planning and that fall within the exclusive competence of the Province (such as housing, agriculture, tourism and the environment).

c.

Thus, the manner in which the Act regulates the provincial planning function is inadequate, in that it fails to establish a framework for cooperative governance in instances where land use applications fall outside of the municipal planning function (based on, inter alia, the size and scale of a development); and in instances where land use applications materially impact upon an exclusive Provincial function.

STATUS AND WAY FORWARD SAPOA requested an invitation to Parliament when hearings are held in that respect.

22 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY BILL

APPLICABLE TO

6. WESTERN CAPE LAND USE PLANNING BILL PROPERTY BROKERS, PROPERTY FACILITIES MANAGERS AND PROPERTY MANAGERS BACKGROUND 1.

SAPOA submitted formal comments on the Bill on 18 March 2013.

2.

The Bill intends to establish a system for provincial spatial planning and development management in the Western Cape Province, and further to consolidate legislation in the Province pertaining to provincial planning, regional planning and development, and urban and rural development.

3. The Bill further intends to establish and enforce legal measures essential to orderly coordinated spatial planning and development management while also promoting integrated social and economic development.

4. Key also is for the Bill to provide for binding spatial development frameworks in the Province.

5.

The drafters of the Bill opted to be more detailed by stating that the Bill must provide for implementation of provincial environmental, housing, nature conservation, tourism, agricultural, transport and economic development policy and measures.

SAPOA COMMENTS (extract) 1.

The Bill is quite complex and it appears to attempt to address some issues but not others which are considered to be addressed in other legislation, e.g. public participation in the Municipal Systems Act. While this may be correct in law, it is, of course, very unhelpful for practitioners who have to refer to multiple pieces of legislation when preparing a single application. It is also limited by the fact that it is a provincial law interceding in aspects of planning that are considered to fall under the provincial sphere of government while other aspects are covered by national legislation.

2. The national legal issue is further complicated in that the Municipal Systems Act is administered by Cooperative Governance and Traditional Affairs, and the Spatial Planning Land Use Management Bill will be administered by the Department of Rural Development and Land Reform. The Land Use Planning Act (LUPA) is trying to fill in the gaps and insert provincial concerns between and under both of them. There are also other Acts that influence this terrain, including National Environment Management Act (NEMA), administered by the Department of Environmental Affairs, while Heritage is administered by the Department of Arts and Culture via the SA National Heritage Resource Agency.

SAPOA LEGAL UPDATE – report to members 23

LEGAL ADVOCACY 3. There are sensitive issues in that DEADP is trying to carve out areas of provincial competency, such as provincial and regional planning (projects/applications that cross municipal boundaries/rezoning of agricultural land), but municipalities are able to do their own spatial planning and get it approved via the national legislation with Province only being a commenting authority whose recommendations the local municipality has the powers to ignore.

4.

LUPA’s admirable proposal is to try to make Removal of Restrictions decisions a municipal rather than provincial competency and, on the other hand, to make consolidation of properties a planning as well as land surveying process. While this is logical with regards to the need for a process to assess the implications of such an action, it will lead to more bureaucracy.

STATUS AND WAY FORWARD The industry waits for the enacted Bill.

24 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY BILL

APPLICABLE TO

7. PROPERTY PRACTITIONERS BILL PROPERTY BROKERS, PROPERTY FACILITIES MANAGERS AND PROPERTY MANAGERS NATIONAL DEPARTMENT OF HUMAN SETTLEMENTS BACKGROUND 1.

This Bill is not yet published for public comments but has been provided to SAPOA, at SAPOA’s request, to ensure that it can be studied internally and initial comments provided to the Department. The Legal Task Team of SAPOA is responsible for such comments and no submission timelines have been given to SAPOA.

2.

The objectives of this Bill are to: a. Assist in providing a just and equitable legal framework for the marketing, managing, financing, letting, renting, sale and purchase of property; b.

Ensure fairness and efficiency in the property market; c.

Assist in protecting and promoting the interests of consumers; d.

Provide a framework for the licensing of property practitioners; e.

Regulate the conduct of persons involved in the financing, marketing, managing, letting, hiring, sale and purchase of property not regulated in other law; f.

Regulate the education, training and development of property practitioners; g.

Assist in providing mechanisms to settle disputes in respect of the financing, marketing, managing, letting, hiring, sale and purchase of property; h. Promote meaningful participation of historically disadvantaged individuals and small, micro and medium enterprises in the property sector; i.

Assist in the transformation of the property sector; and j.

Assist in building functioning communities and responding to national dynamics and challenges.

3.

The Estate Agency Affairs Act of 1976 is the current legal framework for estate agents, and the industry is being regulated. The Act, which is under the Minister of National Department of Human Settlements, is in the process of being reviewed or repealed.

4.

On 7 May 2013, SAPOA attended the EAAB Stakeholders Imbizo where an announcement was made that the repeal Bill was ready and would be published in due course for public comment. Subsequent to the meeting, SAPOA addressed a written request to the National Department of Human Settlements that SAPOA, as an important and relevant stakeholder, be provided with the draft Bill prior to the formal public comment period, for our perusal, consideration and comments. The Bill has been made available to SAPOA.

SAPOA LEGAL UPDATE – report to members 25

LEGAL ADVOCACY 5.

In preparation of such comments to the Bill, SAPOA organised a workshop for its members for the purposes of determining the relevance of the commercial property sector to still be under the regulatory authority of the Estate Agency Affairs Board (EAAB). The workshop was duly held on 25 June 2013 in Sandton, at the SAPOA offices.

WORKSHOP DELIBERATIONS 1.

The present mandate of the EAAB is on the regulation of the conduct of estate agents and the creation of a Fidelity Fund.

2.

There was an understanding that a change in policy and the law is driven by factors such as: a. b. c. d. e. f. g. h. i. j. k.

economic and industrial development; public needs and aspirations; party political dynamics; views of interest and pressure groups; research and investigations by commissions and committees; personal views of public officials and political role players; circumstances, which include the total environment, as determined by time and place; technological developments; population increase and effect of urbanisation; natural disasters; and International relations and trends, as well as the effects of globalisation.

3.

It was agreed that there is a definite need for the establishment a new Board that would specifically accommodate the functions of the commercial property sector. It was found that the Act was, in fact, intended for an estate agent in the residential property sector and therefore a gap exists that makes the regulation of the commercial agents in accordance with the Act irrelevant.

4.

It was agreed that the property industry has matured since the Act was passed in 1976 and that the increase of value of commercial property is phenomenally different from that of the residential space.

5.

It was indicated that the Fidelity Fund does not have sufficient funds to meet a commercial claim, should one arise.

6.

Furthermore, a residential transaction involves fewer key players, namely a seller, a buyer and an agent, while a commercial transaction involves a buyer, a property manager, a seller, an agent and property developers. The transaction is more involved and would require a different set of skills.

26 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY 7.

A residential property sector transaction is most likely to have protection under the Consumer Protection Act No. 68 of 2008 (CPA) as the transaction would qualify the buyer and seller as consumers. Most transactions in the commercial sector involve juristic persons who are above the threshold of R2-million provided by the CPA.

8.

It would be very important to look at what the focus of the regulatory protection should be and the statistics over the years in terms of how many commercial transaction claims have been lodged against the EAAB Fidelity Fund in order to determine the need for regulation.

STATUS AND WAY FORWARD The outcomes of the workshop are to be finalised with the Legal Committee prior to recommendations being given to the Board. This will have factored also the provisions of the current Bill.

SAPOA LEGAL UPDATE – report to members 27

LEGAL ADVOCACY ACT

APPLICABLE TO

8. THE SUBDIVISION OF AGRICULTURAL LAND AMENDMENT REPEAL ACT

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NATIONAL DEPARTMENT OF AGRICULTURE BACKGROUND 1.

The Subdivision of Agricultural Land Act (SALA), 1970 (Act No. 70 of 1970) was introduced in Parliament for repeal and not for amendment under the Subdivision of Agricultural Land Act Repeal Bill, 1997. The Bill was later passed as law under the Subdivision of Agricultural Land Act Repeal Act, 1997 (Act No. 64 of 1997).

2.

The original aim of Act No. 70 of 1970 was to prevent the subdivision of agricultural land to the extent where the new portions created are so small that farming will no longer be economically viable. As a legislative measure to determine and maintain farm size, Act 70 of 1970 was no longer deemed appropriate. It was no longer necessary to control the subdivision of agricultural land or for Government to determine what constitutes an appropriate land size.

It was recommended that land users and the market should be determinant of the land size.

It was further recommended that appropriate zoning measures are considered sufficient for the protection of high-potential agricultural land. Alternative land protection measures are also possible under the Conversation of Agricultural Resources Act, 1983 (Act No. 67 of 1995) and local government legislation.

STATUS AND WAY FORWARD The Act was assented to by the Acting President in 1998 but it appears not to have been proclaimed for implementation by the President in the government gazette. In that case, Act No. 70 of 1970 is still applicable and in force. In the interim, Government has published the Preservation and Development of Agricultural Land Policy.

PRESERVATION AND DEVELOPMENT OF AGRICULTURAL LAND POLICY 1.

Government in this policy reports that South Africa consists of 122-million hectares of land, of which only approximately 13% is potentially arable (land capability classes I, II and III).

Approximately 100-million hectares (82,3% of land in South Africa) is classified as “farm land”, with around 12,75-million hectares currently being used for arable agricultural purposes. The following table gives an overview of the distribution of agricultural land capability classes I – VIII in South Africa. Studies have indicated that since 1900, South Africa has lost 25% of its top soil. The ratio of agricultural land to person has decreased from 0,86 hectares in 1970 to 0,5 hectares in 1980. It is estimated that this will further decrease to 0,2 hectares by 2020.

2.

Further, historical data on the number of farms in South Africa reveal that, in 1930, there were 96 640 farms, which increased to 116 848 in 1950, and decreased to 64 810 in 1986.

28 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY Act No. 64 of 1997 repealed the following laws: Number and year of law

Short title

Extent of repeal

Act No. 70 of 1970

Subdivision of Agricultural Land Act, 1970

The whole

Act No. 55 of 1972

Subdivision of Agricultural Land Amendment Act, 1972

The whole

Act No. 19 of 1974

Subdivision of Agricultural Land Amendment Act, 1974

The whole

Act No. 18 of 1977

Subdivision of Agricultural Land Amendment Act, 1977

The whole

Act No. 12 of 1979

Subdivision of Agricultural Land Amendment Act, 1979

The whole

Act No. 18 of 1981

Subdivision of Agricultural Land Amendment Act, 1981

The whole

Act No. 33 of 1984

Subdivision of Agricultural Land Amendment Act, 1984

The whole

Proclamation No. 116 of 1994

The whole

Act No. 49 of 1996

The Schedule insofar as it amends sections 1, 2, 4 and 13 of the Subdivision of Agricultural Land Act, 1970, and repeals section 14 of the Subdivision of Agricultural Land Act, 1970

General Law Amendment Act, 1996

2.

The three major drivers for the decrease in the number of farms were the enactment of the Subdivision of Agricultural Land Act (Act No. 70 of 1970), which prevented the further fragmentation of farms into non-viable units, changes in land use from agriculture to other purposes (mainly urban and commercial) and economic pressures.

3.

In addition, the policy states that there has been a decline in the overall contribution of the agricultural sector to the GDP (7,1% in 1965 to three percent in 2009), as well as the overall area under food production (a 30% decline in the period between 1994/95 and 2008/09).

According to a report by the Institute for Poverty, Land and Agrarian Studies, it is estimated that six-million people in South Africa depend on agriculture for their livelihoods.

4.

Critically, the policy states that the fragmentation (subdivision) of agricultural land into unsustainable and non-economical units (including the fragmentation of ownership tenure [i.e. registration of long-term leases, sectional titles, undivided shares or share block schemes, etc.]) results in the reduced production and potential productivity from agricultural land, with many small farming units not being economically viable and production not sustainable.

Subdivision of rural lots may lead to the loss of high-value agricultural opportunities and the SAPOA LEGAL UPDATE – report to members 29

LEGAL ADVOCACY “economies of scale” that sustain some forms of agricultural production (e.g. sugar cane).

In addition, agricultural land lost to residential and the majority of other non-agricultural developments cannot be restored.

5.

As a result, the policy states that the land reform process, in its current form, is dividing many large farms into smaller, less viable and less efficient units to meet land claims, and thus reduces agricultural output and poses a challenge to the availability of food. It also reduces the significance of the emerging agricultural sector, which is then characterised by low productivity and a lack of access to markets due to inadequate infrastructure. In addition, the failure of a number of land reform projects due to insufficient knowledge, mentorship and support or without the aptitude to farm, is leading to increased land degradation and continued food insecurity and poverty and, as such, there is a need to ensure that land reform land is agriculturally sustainable and viable. New owners (land reform beneficiaries) of agricultural land need to be aware of the regulations and limitations regarding such land, and the role of agriculture in conserving agricultural land and water, as well as biodiversity, must be highlighted.

Internationally, land consolidation and other readjustment approaches are recommended.

6.

Agenda 21, adopted in 1992, calls on governments to develop multisectoral plans, programmes and policies to enhance sustainable food production and food security. Within this framework it advocates the implementation of policies that recognise ecosystem and enterprise-based minimum sizes of land holdings required to maintain and increase food production, and to limit further fragmentation.

POLICY PROBLEMS WITH THE SUBDIVISION OF AGRICULTURAL LAND ACT Government reports that SALA is not a suitable mechanism to effectively protect agricultural land from other forms of development and/or fragmentation as a result of the following: a. SALA does not provide for the allocation of legislative and executive powers between national and provincial government; b.

It does not address intergovernmental relations or cooperative government principles; c. SALA is only applicable to private land, and not to national, provincial or local state land,; irrespective of whether the said land is used for agricultural purposes; d. Any organ of state (including state departments and public enterprises) that acquires agricultural land can subdivide the land and/or change the land use without consent; e. The areas of the former homelands and TBVC States are excluded from SALA’s mandate; f. Certain other legislative instruments override SALA (e.g. the Development Facilitation Act 67 of 1995); g. Certain government departments are of the opinion that they are not bound by the

30 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY provisions of SALA, to such an extent that this has now become administrative practice (e.g. the Department of Mineral Resources); i. Municipalities increasingly consent to development on and subdivision of agricultural land without approval at national government level; and j. The effectiveness of SALA is limited by recent policies and legislation related to land reform, land use.

AIMS OF THE DRAFT POLICY a. Ensure sustained long-term national and household food security (in terms of both production and access); Ensure the sustainable development of the agricultural sector; b. c.

Maintain and increase rural employment and income; d.

Ensure a reduction in poverty levels and a sustained improvement in quality of life; e.

Increase agricultural production and the contribution of agriculture to the GDP; f. Promote the potential of affected areas for further development (and ensure the economic development potential of these areas); g. Ensure that agricultural land remains available for agricultural production and development; h.

Ensure that agricultural land is actively used to its optimal potential for long-term food security; i. Promote and encourage the maintenance of the economic value of agricultural land so as to ensure the sustainable and continued agricultural production and/or utilisation of land parcels; and j. Promote and ensure the maintenance, upgrading and development of agricultural infrastructure and services POLICY BRIEFING: SAPOA’S ATTENDANCE 1.

SAPOA and a representative of one of its members (Tongaat Developments), represented by Advocate Matsane and Mr Wilkinson respectively, attended the briefing session on 1 November 2012. Hereunder are comments that Tongaat Developments made in respect of the policy. a.

While the agricultural sector is not directly included in the property industry, SAPOA recognises its fundamental role in the country and the importance to ensure its sustainability and the creation and facilitation of successful rural communities.

b.

The existing lack of an integrated agricultural policy in the country is acknowledged, and SAPOA therefore supports the need for the replacement of the affected existing pieces of legislation and the introduction of a new holistic, integrated policy.

c.

It is however submitted that the proposed new framework is inappropriate and untenable and will result in dire consequences for the economy and functioning of the country.

d.

The draft discussion paper is focused totally and solely on agriculture, to the total exclusion of all else. This is unrealistic and unworkable. There has to be a

SAPOA LEGAL UPDATE – report to members 31

LEGAL ADVOCACY balanced approach to this strategic issue, one that recognises the actual objectives of the government. Government’s objectives are focused around poverty alleviation, employment creation and reducing inequality. e.

Agriculture and rural development is certainly a part of this and can fulfil a significant need in rural areas of the country. However, in order to enable the country to continue to grow and to be able to provide for the needs of its residents, there has to be appropriate and adequate provision for the urban development and economic growth that comes with such development.

f.

The discussion document totally ignores the reality of urbanisation – not only in South Africa, but globally. It therefore fails to recognise the fact that cities are becoming increasingly important in terms of having to provide for housing, jobs, and economic and social infrastructure and facilities.

g.

A new policy framework must therefore enable and provide for the managed growth and development of cities – especially the large and metropolitan cities in the country, as these will be South Africa’s solution to the triple scourge of poverty, unemployment and inequality.

h.

Where these growth and development areas are must be identified upfront in municipal spatial frameworks in accordance with provincial planning policies. It is critical that there be an element of certainty provided in order to create an appropriate environment that will attract and facilitate new investment and development. These areas must however, clearly be within the primary growth and development corridors of the province – i.e. the areas to which investment will be naturally attracted given factors such as infrastructure, accessibility, land availability, etc.

i.

The net effect of the above identification would be confirmation of the “rural” areas where agriculture should be supported and promoted. This does, of course, ignore the issue of mining, which also requires proactive and upfront identification and provision given that this is a national competitive advantage.

j.

Three further issues that the discussion document totally ignores are: i. the fact that feeding the poor is actually more to do with access to food and the cost of food rather than how much land is under agriculture; ii. the fact that increasing productivity alone can do a great deal; and iii. the fact that increasing volumes of food are being produced in more intensive ways, including in green/glasshouses, which can be developed on any land.

STATUS AND WAY FORWARD SAPOA awaits the outcome of the consultation process on the policy.

32 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY ACT

APPLICABLE TO

9. THE CONSUMER PROTECTION ACT, 2008 PROPERTY DEVELOPERS, PROPERTY MANAGERS, BROKERS, PROFESSIONALS AND PROPERTY OWNERS NATIONAL DEPARTMENT OF TRADE AND INDUSTRY BACKGROUND 1.

The Consumer Protection Act No. 68 of 2008 seeks to protect consumers of goods and services from unscrupulous service providers and unfair market practices. The Act has posed significant challenges for the property industry in respect of its unintended consequences of some of its statutory provisions. As a point of reference and example, Section 14 requires that fixed term agreements should not be longer than 24 months unless a benefit can be demonstrated in favour of the consumers.

2.

Presently, the Estate Agents Affairs Act, 1977 does not have any provisions providing for the policy imperatives within the Consumer Protection Act (CPA). The property industry would want to see such incorporated within the Property Practitioners Bill and for exclusion or conditions to be provided for the commercial property sector within the Bill bearing in mind the following issues: a.

The provisions of section 14 of CPA state that the section does not apply to transactions between juristic persons regardless of their annual turnover or asset value. b.

The reason that leases are deemed by SAPOA not to be protected under the Consumer Protection Act is that “services” is defined to include a right of occupancy of any land or other immovable property “other than in terms of a rental”. A “rental” means an agreement “in terms of which the temporary possession of any premises or other property is delivered to the consumer for consideration”. That exactly describes a lease of property, including immovable property.

c.

SAPOA submits that the exclusion is rational. South Africa cannot have a letting market in which consumers of housing and business premises can sign an agreement for a period of 24 months or more and then cancel such in the first month, as that will lead to chaos in the banking and property market.

d.

SAPOA also acknowledges further reports contained in the aforesaid report that the property sector includes numerous activities such as the construction of buildings, capital spending by property-related sectors, spending on salaries and wages on people employed in the sector, operational spending on maintenance and upgrading, and the financing, buying and selling, marketing, registration, transfer and leasing or renting of properties.

SAPOA LEGAL UPDATE – report to members 33

LEGAL ADVOCACY e.

SAPOA submits that application of the CPA to leasing of commercial property will badly affect commercial leases, where shop fitting and other costs are incurred before the tenant moves in. The loan funding to build premises is dependent on the cash flows generated by stable and long-term leases. The ability to raise and secure funds from the banking sector to build residential and commercial premises would be severally prejudiced if the CPA applies to leases of immovable properties.

f.

In addition, landlords will be encouraged to let premises on a month-to-month basis, which gives no security of tenure for a business or the security of tenancy for the tenants. SAPOA members cannot establish new or sustain existing businesses without some security of tenure.

3.

Consultations were held in 2011 with key stakeholders on the matter. Meetings between the Banking Association of SA and SAPOA have taken place. A questionnaire was finalised and circulated in 2011 to SAPOA members in order to determine the extent to which Sections 5 and 14 are applicable to them. The responses that were received indicated that members of SAPOA transacted mostly with legal entities.

4.

In October 2011 a meeting was initiated by SAPOA with the EAAB, which resulted in an agreement that a workshop be held with key stakeholders in respect of the CPA for the purpose of identifying issues to be submitted to the Honourable Minister of Human Settlements for exemption purposes. A workshop with stakeholders was held on 24 November 2011 to prepare for the application to honourable Minister Rob Davies.

5.

The recommendations from the workshop were that a submission be made to the Board of the EAAB at its meeting held on 5 December 2011 that an exemption application in respect of certain sections of the CPA be made or alternatively, that an application for accreditation of property industry codes be made. SAPOA was advised that the Board of the EAAB approved that property industry codes be formulated and that an application be made to the Minister of Trade and Industry.

6.

Patrick Bracher, an attorney from Norton Rose Inc, was instructed on 6 February 2012 that he would have to advise SAPOA in respect of the two alternatives, i.e. exemption and industry codes.

7.

SAPOA in collaboration with the EAAB organised and held a meeting with representative bodies of property stakeholders. The meeting was held on 14 February 2014. The options are exemption (Property Transaction Bill), practice notes or industry codes.

8.

It was agreed that all organisation should identify sections in the CPA that are problematic for their subsector in the property industry. The issues should have been received by the EAAB by 29 February 2012.

34 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY 9.

On 23 February 2012, SAPOA consulted with Rosalind Lake, a director at Norton Rose Inc, for further clarification and advice in respect of the three options, i.e. exemption, industry codes and practice notes.

10.

Correspondence was sent to the EAAB early in April 2012 requesting that a follow-up stakeholder meeting be arranged. No response has been received. SAPOA proceeded with instructions to Norton Rose Inc to have a draft Industry Code formulated. The first draft was received from Norton Rose Inc in March 2013 for discussion and deliberation.

11.

In May 2013 the Property Practitioner Bill was announced by the EAAB.

STATUS AND WAY FORWARD 1.

SAPOA hosted a workshop on 25 June 2013 with its members to discuss the practical challenges and concerns that the industry might have in respect of the present applicable Estate Agency Affairs Act to the extent that they may influence policy change. The workshop was also held to determine whether the commercial property sector should be under the regulatory mandate of the EAAB.

2.

The National Department of Human Settlements has further provided SAPOA with a copy of the Bill for comments prior to the publication of the White Paper. The Bill is, however, not yet up for discussion with members of SAPOA but will be considered internally only for formal comments to the Department.

3.

The commercial property would prefer to be excluded from the ambit of any legislation under the Estate Agency Affairs Act as reported. If no exclusion is allowed in terms of policy, then an option is to ensure that there are provisions, in view of the provisions of the CPA that would deal, within the Bill, with what the industry codes intend to correct or regulate. If exclusion is allowed, then the industry codes will be submitted to the DTI. The project relating to the industry codes will await the enactment of the Bill once all pertinent submissions have been received and considered by the Department.

SAPOA LEGAL UPDATE – report to members 35

LEGAL ADVOCACY POLICY

APPLICABLE TO

10. THE ETHEKWINI DEVELOPMENT SURCHARGE POLICY

PROPERTY DEVELOPERS AND PROPERTY OWNERS

ETHEKWINI METROPOLITAN MUNICIPALITY BACKGROUND 1.

In the 2010/2011 Table of Tariffs, the Ethekwini Municipality imposed what it termed the “development surcharge” on multiple unit residential developments at the rate of R12 000 per unit. In the proposed 2011/2012 Table of Tariffs, effective 1 July 2011, there was a “development surcharge” to commercial developments, at the rate of R16 500 per 100m² of net lettable area (“NLA”). The tariff on multi-unit developments was increased to R14 227 per unit. The purpose of the surcharge, which was stated in the previous tariff to be for “required infrastructure”, was then stated to be “for impact on infrastructure”.

2.

SAPOA objected formally to the Municipality and through media statements that it was extremely concerned that the existing charge was having a significant negative impact on the cost of development and, additionally, that the proposed new development charges would create even more of an investor-unfriendly environment in Durban.

3.

A legal opinion was then sourced by SAPOA as to whether the levy was surcharge, and if not, whether the Municipality was entitled to charge it. The Municipal Fiscal Powers and Functions Act, 2007 is intended to regulate the manner in which municipalities can develop and apply a comprehensive revenue system in accordance with the provisions of Section 229 of the Constitution.

4.

That Act defines a municipal surcharge as a charge in excess of the municipal base tariff that a municipality may impose on fees for a municipal service provided by or on behalf of a municipality in terms of section 229(1)(a) of the Constitution. It groups the taxes, levies and duties mentioned in s 229(1)(b) of the Constitution as municipal taxes. It defines municipal base tariff as the fees necessary to cover the actual cost associated with rendering a municipal service, and includes bulk purchasing costs in respect of water and electricity reticulation services and other municipal services, overhead, operation and maintenance costs, capital costs and a reasonable rate of return, if authorised by a regulator of, or the Minister responsible for that municipal service.

5.

It defines a municipal service as all of the matters falling under Parts B of Schedules 4 and 5 of the Constitution, and matters assigned to municipalities under Sections 9 and 10 of the Municipal Systems Act.

STATUS AND WAY FORWARD The Policy was withdrawn and it was not introduced again in the 2012/2013 or 2013/2014 budgets.

36 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY POLICY

APPLICABLE TO

11. THE ETHEKWINI TRANSPORT DEVELOPMENT POLICY

PROPERTY DEVELOPERS AND PROPERTY OWNERS

ETHEKWINI METROPOLITAN MUNICIPALITY BACKGROUND 1.

SAPOA was advised that the city has, in May 2012, effective from 1 July 2012, imposed a transportation development levy/tariff for any development that generates vehicle traffic demand on the transport system. There had been no consultation or formal public notification that could be found or provided. This “tariff” was not included in the Tariff of Fees for 2012/13.

The amount is the same as was proposed in the Development Levy process, i.e. R43 673,96/ peak hour passenger car, which adds the following costs to a new development.

2.

In terms of section 74(1) of the Municipal Systems Act No. 32 of 2000, a municipal council must adopt and implement a tariff policy on the levying of fees for municipal services provided by the municipality itself or by way of service-delivery agreements, and which complies with the provisions of the Act and with any applicable legislation.

3.

In terms of section 74(3) thereof, tariff policy may differentiate between different categories of users, debtors, service providers, services, service standards, geographical areas and other matters as long as the differentiation does not amount to unfair discrimination.

4.

Paragraph 2.2 of the Ethekwini Municipality’s tariff and surcharge policy deals with surcharges and developments. It will be important to determine whether the transport mobility systems charges, when advertised, conform to the provisions of paragraph 2.2 of the policy.

5.

The amendment of Section 75 through Section 75A of the Act refers to general power to levy and recover fess, charges and tariffs. It states that: “A municipality may levy and recover fess, charges or tariffs in respect of any function or service of the municipality and recover collection charges and interest on any outstanding amount. The fees, charges or tariffs referred to in Subsection (1) are levied by a municipality by resolution passed by the municipal council with a supporting vote or a majority of its members. After a resolution has been passed, the municipal manager must, without delay, conspicuously display a copy of the resolution for a period of at least 30 days at the main administrative office of the municipality and at such other places within the municipality to which the public has access as the municipal manager may determine.”

STATUS AND WAY FORWARD The Policy was only an internal document of the municipality. SAPOA intends to challenge the policy once it is published or implemented. We were advised that the Municipality has since withdrawn the policy. We shall however continue to monitor any decision that the Municipality may take in this regard.

SAPOA LEGAL UPDATE – report to members 37

LEGAL ADVOCACY POLICY

APPLICABLE TO

12. GREEN PAPER ON RURAL AND LAND REFORM POLICY

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NATIONAL DEPARTMENT OF RURAL DEVELOPMENT AND LAND REFORM BACKGROUND 1.

The Green Paper on Land Reform was published in 2011 for public comments and it stated the following as its vision: a.

A reconfigured single, coherent four-tier system of land tenure, which ensures that all South Africans, particularly rural blacks, have a reasonable access to land with secure rights, in order to fulfil their basic needs for housing and productive livelihoods. b.

Clearly defined property rights, sustained by a fair, equitable and accountable land administration system within an effective judicial and “governance” system.

Secure forms of long-term land tenure for resident non-citizens engaged in c. appropriate investments that enhance food sovereignty and livelihood security, and improved agro-industrial development.

Effective land use planning and regulatory systems that promote optimal land d. utilisation in all areas and sectors; and Effectively administered rural and urban lands, and sustainable rural production systems. e.

SAPOA issued a media statement in respect of the Green Paper on Rural and Land 2.

Reform. Draft comments were done in respect of the Green Paper with the focus being on constitutional law, private law, administrative law and the independence of the judiciary. A formal submission was made to the Department before 30 November 2011.

STATUS AND WAY FORWARD 1.

In May 2013, the Minister of Rural Development and Land Reforms published the Restitution of Land Rights Amendment Bill, 2013 which, among other things, intends to amend the cutoff date for lodging a claim for restitution and to further regulate the appointment, tenure of office, remuneration and the terms and conditions of service of judges of the Land Claims Court. The Amendment Bill was found not to be prejudicial to the property sector as it increased the lodgement date for claims from 2008 to 2018.

2.

In May 2013, the Minister for Rural Development and Land Reform published the Property Valuation Bill. The objectives thereof are, among others, to give effect to the provisions of the Constitution which provide for land reform and the facilitation of land reform through the valuation of property in order to determine the purchase price for, or payment in respect of, property; to provide for the establishment of the Office of the Valuer General; and to provide a valuation service to departments, organs of state and municipalities.

38 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY BILL

APPLICABLE TO

13. PROPERTY VALUATIONS BILL PROPERTY DEVELOPERS AND PROPERTY OWNERS NATIONAL DEPARTMENT OF PUBLIC WORKS BACKGROUND The Property Valuations Bill is one of the Bills that emanates from the Green Paper on Land Rural Development and Land Reform. Accompanying it, in its policy endeavours, is the Restitution of Land Rights Amendment Bill, 2013.

The Property Valuation Bill seeks to achieve the following objectives: a.

b. c. d.

14.

to give effect to the provisions of the Constitution which provide for land reform and the facilitation of land reform through the valuation of property in order to determine the purchase price for, or payment in respect of, property; to provide for the establishment of the Office of the Valuer General; to provide a valuation service to departments, organs of state and municipalities; to provide for a review mechanism.

SAPOA submitted formal comments on 23 June 2013.

SAPOA COMMENTS (Extract) 1.

The Office of the Valuer General is one that has been greatly emphasised in the Property Valuation Bill (the “Bill”). The Valuer General is given great responsibility in accordance with the Bill. He is ultimately responsible for the valuation of the department and is accountable directly to the Minister. According to Section 4(1)(a), the Office of the Valuer General is the only institution responsible for the valuation of property where a department, a municipality or an organ of state is a party or has an interest, including cases of expropriation or acquisition of property for the purposes of land reform. This role is clearly one that needs a great amount of competence and cannot be taken lightly.

2.

The Valuer General has extensive duties under the Act which require him/her to value property identified for purposes of land reform or expropriation, which must reflect an equitable balance between the public interest and those affected by the acquisition.

3.

The Valuer General may further, in accordance with Section 10(1) of the Bill, authorise one or more persons to conduct or to assist in the performance of a valuation in Section 12. The aforementioned people include a Professional Valuer or Professional Associated Valuer, in terms of the Property Valuers Profession Act, with extensive experience in the valuation of property; a Candidate Valuer in terms of the Property Valuers Profession Act; and a Private Practitioner who is registered as a professional Valuer in terms of the Property SAPOA LEGAL UPDATE – report to members 39

LEGAL ADVOCACY Valuers Profession Act to assist in the conduct of a valuation by a person with non-valuation qualifications, experience and competence.

4.

Section 8(2) states that the Deputy Valuer General must be registered in terms of the Property Valuers Profession Act. The Bill does not state that the Valuer General must be registered in terms of the Property Valuers Profession Act but states that his deputy and staff must be registered. Given the fact that the Bill does not exclude the Deputy Valuer General from stepping into the shoes of the Valuer General in the case of absenteeism or when the Valuer General is unable to perform his duties should be a matter for consideration. There must be a set standard with regards to professional formal recognition by a regulating authority.

There must be no doubt in South African citizens’ minds with regards to the “recognition” of the Valuer General as this could then lead to administrative chaos, with people objecting to valuation reports as a result of a lack of faith in the Valuer General and a lack of uniformity in his office.

STATUS AND WAY FORWARD The Bill will follow the legislative process and, if invited to attend parliamentary hearings, SAPOA will do so.

40 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY BILL

APPLICABLE TO

14. THE HOUSING CONSUMERS PROTECTION MEASURES AMENDMENT BILL

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NATIONAL DEPARTMENT OF HUMAN SETTLEMENTS BACKGROUND 1.

The proposed Draft Bill of the Housing Consumers Protection Measures Act No. 95 of 1998 was finalised by the National Home Builders Registration Council (NHBRC) in August 2011 and was due for the Ministerial legislative process with the National Department of Human Settlements. A copy of the first draft was provided to SAPOA members who represented SAPOA on the NHBRC’s Industry Advisory Committee. We requested a meeting with the NHBRC in view thereof, and of other issues of concern that some of the SAPOA members have with regards to the service and operation of the NHBRC to property developers.

2.

Two meetings were held on 19 September and 1 November 2011 at the NHBRC offices and it was agreed that a stakeholder workshop would be held on 21 and 22 November 2011.

SAPOA made a formal submission to the draft Bill.

SAPOA SUBMISSION (extract)

1.

Enrolment of new homes SAPOA recognises the need for homes to be enrolled in terms of Section 14 of the Housing Consumers Protection Measures Act, 1998 (Act No. 95 of 1998) hereinafter referred to as the “Act”. SAPOA submits that, with the presence of a regulatory authority such as the NHBRC for a period of more than 10 years in the home building industry, there must be some differentiation in the policy imperatives founding the Act.

2.

The protection of housing consumers’ rights has over recent years been broadened through various legal instruments of the law, such as the Consumers Protection Act, 2008 (Act No. 68 of 2008), hereinafter referred to as “CPA”. SAPOA recognises that the inability of a housing consumer to understand and comprehend the technicalities involved in the construction of what is recognised as a “home” in terms of the Act may be prejudicial to him/her.

3.

SAPOA supports the statutory objectives of the CPA but furthermore embraces the recognition by the honourable Minister of Trade and Industry and the National Department of Trade and Industry that consumers cannot all be treated in the same way, as this depends on the “economic” maturity of a certain class of consumers. This is pertinently clear in respect of the threshold that the CPA introduces in terms of Section 5 and exclusions found in sections such as Section 14.

4.

Section 5 of the CPA excludes from application of the Act, among others, consumers who are juristic persons whose annual turnover or net asset value at the time of the transaction SAPOA LEGAL UPDATE – report to members 41

LEGAL ADVOCACY is equal to or more than R2-million. Section 14 of the CPA further excludes from the application of Section 14 transactions concluded between juristic persons. SAPOA thus applauds the legal drafters and subsequent approval by the honourable President for the recognition that certain consumers within a certain threshold, provided that they are juristic persons, would have the professional expertise, whether it be their own or that of procured professionals, required to conclude and comprehend the material consequences of transactions or agreements.

5.

Being cognisant of and being fully supportive of the fair and legal discriminatory differentiation that is expressly provided for by the CPA, SAPOA respectfully submits that enrolment of homes must not be compulsory in all instances where homes are to be constructed, or alternatively, where in view of the “developmental” state in which South Africa as a country still finds itself, that a fair nominal enrolment fee be charged for certain homes.

6.

In view of the above, SAPOA respectfully recommends that where a professional team is involved, such as an architect and an engineer, that such home be excluded from payment of an enrolment fee. It is deemed fit that the NHBRC, against a payment of a nominal administration fee, should keep a record of the details of the construction of such home/s and the names and details of the professional team. It is SAPOA’s submission that in those instances, the performance guarantees, professional indemnity insurances and contractual terms and conditions should adequately protect an actual or potential consumer or housing consumer.

7.

SAPOA further recommends to the NHBRC that thresholds be created in line or similar to the ingenuity found within the provisions of the CPA. It is recommended that homes above a “threshold”, still to be determined by the honourable Minister of Human Settlements, be excluded from the application of the Act. Whether or not such exclusions should follow that of the CPA, which applies only between juristic persons, is a principle to be debated between the NHBRC and all key stakeholders.

8.

SAPOA respectfully recommends that if thresholds are created, that a nominal payable fee must still be prescribed to ensure that the NHBRC keeps a record of such homes and can, on an annual basis, report to the honourable Minister of Human Settlements of such details that would inform him/her of trends and concerns in respect of such category/categories of homes.

9.

SAPOA further recommends that a nominal administrative fee be paid and that a normal enrolment fee be excluded where a building with more than three floor levels is to be constructed as a professional team of technical experts will be involved.

1.

Commencement of warranty cover SAPOA is concerned that, while an enrolment fee is payable prior to construction, warranty cover only commences after completion and occupation of a home. SAPOA submits that the NHBRC has a statutory duty to ensure that it inspects homes to ensure that home builders meet and achieve satisfactory technical standards in the home-building industry.

42 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY 2.

SAPOA submits that the NHBRC’s primary duty is to offer warranty cover against failure by the home builder to achieve satisfactory technical standards in the home-building industry that leads or is likely to lead to a major structural defect within a period of five years from date of occupation of such home by a housing consumer.

3.

SAPOA submits that while it is aware of the prescript of the provisions relating to warranty cover within the Act, it recommends that the Act be amended to provide cover from date of commencement of issuing of an enrolment certificate and not from date of occupation. It is recommended that the implications of the recommendation be fully debated with industry players prior to rejection by the NHBRC.

1.

Bank financial guarantee SAPOA understands the deterrent principle informing the bank financial guarantee is required as a punitive and deterrent measure for late enrolment of homes by home builders.

However, SAPOA finds the value of such bank financial guarantee as being exorbitant in this recessed housing market and in general; especially as it is being held for a period of the warranty cover.

2.

SAPOA is most concerned that there seems to be a blanket implementation of the bank financial guarantee regulatory provisions without the NHBRC consulting with the engineer on site; examining the designs to determine compliance and further without examining the construction records.

3.

SAPOA recommends that the bank financial guarantee model be reviewed after due consultation with the industry.

STATUS AND WAY FORWARD The industry will wait for the publication of the White Paper, which will afford SAPOA an opportunity to review and make comments.

SAPOA LEGAL UPDATE – report to members 43

LEGAL ADVOCACY BILL

APPLICABLE TO

15. THE DEEDS REGISTRIES AMENDMENT BILL, 2013 PROPERTY DEVELOPERS AND PROPERTY OWNERS NATIONAL DEPARTMENT OF RURAL DEVELOPMENT AND LAND REFORM BACKGROUND 1.

The Deeds Registries Amendment Bill is meant to provide for Promotion of Administrative Justice Act (PAJA) principles.

2.

PAJA recognises an act or failure to act by an organ of state as an administrative action. It further requires that any administrative action taken must be transparent, reasonable, just and equitable.

3.

The Bill provides that rectification of title is required in respect of any one piece of land in consequence of a survey or re-survey of such land or of the correction of any error in the diagram thereof under the Land Survey Act, [1927] 1997, the registrar may, on written application by the owner of the land accompanied by the title deed and the new or the corrected diagram thereof, any bond thereon and any registered deed of lease or other registered deed whereby any real right therein is held by any other person and the written consent of the holder of such bond, lease or right, endorse on the aforesaid deed a description of the land according to the new or corrected diagram, which description shall supersede the description already appearing in the aforesaid deeds.

STATUS AND WAY FORWARD The Deeds Registries Amendment Bill was published on 15 May 2013 for public comment. It provides for discretion in respect of the rectification of errors in the name of a person or the description of property mentioned in the deeds and other documents. The Bill was studied and none of the provisions were found to be objectionable. Consequently, no formal comments were necessary.

44 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY CHARTER

APPLICABLE TO

16. THE PROPERTY SECTOR TRANSFORMATION CHARTER

PROPERTY DEVELOPERS, BROKERS, PROPERTY MANAGERS AND PROPERTY OWNERS

DEPARTMENT OF TRADE AND INDUSTRY BACKGROUND 1.

The Property Sector Transformation Charter was gazetted on 1 June 2012 under Government Gazette No. 35400. Its objectives are to constitute a framework and establish the principles upon which B-BBEE will be implemented in the property sector. It further establishes targets and qualitative undertakings in respect of each element of the B-BBEE.

2.

The sector code applies to all privately owned and public enterprises within the property sector. It is further binding to all organs of state and public entities, organised labour and communities involved with or interested in the property sector. The code is applicable but not limited to commercial activities of the industries in respect of community schemes, land zoned for development, commercial property industry which includes office property industry, industrial property industry, leisure property industry, and retail property industry. It is further applicable to property ownership, property letting, property management, property sales and property valuations.

STATUS AND WAY FORWARD SAPOA is represented on BUSA Committee by board member Mr Musa Ngcobo.

SAPOA LEGAL UPDATE – report to members 45

LEGAL ADVOCACY BILL

APPLICABLE TO

17. THE SPECIAL ECONOMIC ZONES PROPERTY DEVELOPERS AND PROPERTY OWNERS DEPARTMENT OF TRADE AND INDUSTRY BACKGROUND 1.

The Special Economic Zones Bill is an improvement on the industrial development zone (IDZ) programme, initiated in 2000. Four IDZs were established to boost investment, growth, employment and skills development. Each needed access to an international port or airport and the potential for export-orientated production. They were in Coega in Port Elizabeth, East London, Richards Bay and OR Tambo International Airport. The benefits of the establishment were quality infrastructure, expedited customs procedures and duty-free operations.

2.

The zones reportedly attracted 40 investors bringing R11,8-billion and creating more than 33 000 jobs. They reportedly offered tax incentives that beat most comparable initiatives in Africa and recorded a number of successes. But with a budget of R4,8-billion allocated to the programme in the eight years to 2011, the Department of Trade and Industry thought more should have been achieved.

3.

A review highlighted its limits and offered changes implemented in the new Bill. The qualifying criteria excluded other potential growth areas and the government had focused support narrowly on the provision of infrastructure. Poor planning, lack of coordination among different levels of Government and financing uncertainty sacrificed the quality of long-term planning and investment targets. The department was advised to provide incentives outside quality infrastructure and open the opportunities up to other areas of comparable advantage.

4.

The Department of Trade and Industry then issued Policy Notice No. 34968 under Government Gazette No. 10505, which relates to Special Economic Zones intended to continue to foster Government’s efforts to create employment and economic growth by establishing a strong industrial base in South Africa. Special Economic Zone (SEZ) is defined as “geographically designated areas of a country set aside for specifically targeted economic activities, which are then supported through special arrangements (which may include laws) and support systems promote industrial development.

5.

The Policy further recognises SEZ’s programme as a critical instrument that can be used to advance Government’s strategic objectives of industrialisation, regional development and job creation. The programme further aims to assist in improving the attractiveness of South Africa as a destination for foreign direct investments and export of value-added commodities.

STATUS AND WAY FORWARD The Policy is before the National Assembly Committee. SAPOA submitted its comments through BUSA on 29 August 2012.

46 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY ACT

APPLICABLE TO

18. THE MUNICIPAL SYSTEMS ACT, 2000 PROPERTY DEVELOPERS AND PROPERTY OWNERS DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS BACKGROUND 1.

In terms of Section 118 of the Municipal Systems Act, 2000, prior to transferring a property the outstanding rates and taxes have to be paid. However section 118(2) allows for a property to be transferred provided the preceding 24 months’ arrears rates and taxes have been paid.

This concession is increasingly proving to be problematic for mortgagees and new property owners alike as there are numerous and widespread examples where:

2.

Municipalities allow a property owner’s account to be in arrears for periods longer than two years. When conveyancers approach municipalities in order to determine the arrears rates and taxes, they are not provided with the full extent of the arrears, but merely the arrears for the preceding 24 months. Once these arrears have been settled, municipalities provide the conveyancer with a Rates Clearance Certificate and the property is then transferred into the purchaser’s name.

3.

A practice has however started to develop whereby municipalities demand that the new owner repay the balance of the outstanding rates and taxes. It therefore comes as a shock to the new owner that there is still a substantive rates and taxes arrears account that the municipality is demanding to have settled, failing which they will proceed with legal action against the new owner; or

4.

Mortgagees are increasingly receiving unsubstantiated demands to settle arrears rates and taxes that were not disclosed at the time they were forced to purchase a property at a sale in execution; or

5.

Municipalities are demanding that potential sellers repay outstanding rates and taxes owned by a previous owner (arrears rates and taxes that were outstanding at the time of transfer into the seller’s name), failing which they are not prepared to provide the seller with a Rates Clearance Certificate.

STATUS AND WAY FORWARD All the involved stakeholders are waiting to see whether the Department will initiate amendments to Section 118.

SAPOA LEGAL UPDATE – report to members 47

LEGAL ADVOCACY REGULATIONS

APPLICABLE TO

19. THE TOBACCO PRODUCTS CONTROL ACT, 1993 – REGULATIONS

PROPERTY DEVELOPERS, PROPERTY MANAGERS AND PROPERTY OWNERS

DEPARTMENT OF HEALTH BACKGROUND 1.

The Minister of Health issued the regulations on 30 March 2012 and called for public comment.

The regulations were made in terms of Sections 2 and (4) of the Tobacco Products Control Act No. 83 of 1993.

2.

The Preamble of the Tobacco Products Control Act acknowledges that tobacco use is extremely injurious to the health of smokers and non-smokers, and considers that the extent of the harmful effects of the use of tobacco products on health calls for strong action to deter people from using tobacco products, and to protect non-smokers from exposure to tobacco smoke and to encourage existing users of tobacco products to quit. Further, it resolves to align the health system with democratic values of the Constitution and the World Health Organization’s Framework Convention on Tobacco Control (Convention), to which South Africa is a party and a signatory.

3.

The principles of the Convention dictate that effective measures should be applied to provide protection from exposure to tobacco smoke as there is no safe level of exposure. All people should be protected from exposure, all indoor workplaces and indoor public places should be smoke-free, and legislation is necessary to protect people from exposure to tobacco smoke.

It states further that no objections are justified on the basis of health or law arguments and that there is no trade-off between health and economics.

SAPOA COMMENTS (extract) 1.

A definition for “indoor” or “enclosed”, as proposed in the guidelines to Article 8 of the Convention, should be inserted and may be defined to include “any space covered by a roof or enclosed by one or more walls or sides, regardless of the type of material used for the roof, walls or sides, and regardless of whether the structure is permanent or temporary”.

2.

The definition of workplace in the Act is noted, however. Vehicles used in the course of work are workplaces and should be specifically identified as such, and the regulations should perhaps allow for this inclusion by extending the definition of workplace.

3.

Consideration must also be given to individual homes or dwelling places that are also used as workplaces, and it should accordingly be specified by extending the definition of workplace as well through the Regulations.

48 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY 4.

Regulation 2(1) stipulates that no person may smoke in any public place. The definition of “public place” is noted in the Act and is restricted to indoor, enclosed and partially enclosed areas. Regulation 2(2) provides a list of outdoor public places in which smoking is prohibited.

It is not readily decipherable if smoking on streets and sidewalks is permitted, as it does not appear under this list and neither is it included in the definition of public places. However, it may generally be considered as a public place. It is included under the definition of “outdoor eating and drinking areas” but is restricted to streets and sidewalks where the consumption of food occurs. If there was no intention to completely prohibit smoking on streets and sidewalks then this comment may be ignored. If, in fact, there was an intention do so, then in order to give effect to the creation of simple and clear legislation as recommended by the Convention guidelines, it is recommended that streets and sidewalks should be included in the list under Regulation 2(2) or that it should specifically and expressly be stated that smoking in such places is not prohibited.

5.

No person may smoke any tobacco product within a 10-metre distance of a window of, ventilation inlet of, doorway to or entrance into a public place. This prohibition does not apply to a person who is temporarily within the area while actively passing by. Caution must be taken that this provision is not relied upon and used by offenders wrongfully in order to escape liability. Offenders once caught smoking in a prohibited area could easily claim to have been passing by in circumstances where this may not have actually been the case.

6.

The owner of, or a person in control of, a public place, or employer in respect of a workplace shall ensure that no person smokes in violation of the provisions of these regulations.

According to the guidelines on Article 8 of the FCTC, legislation should clearly identify the actions required to be taken by the owner, manager or person in charge of the premises.

This provision imposes a legal duty on the relevant person to ensure compliance; however, it is silent in respect of the action to be taken by the person in the event of non-compliance.

It should stipulate steps that should be taken by the person.

7.

It is recommended that a paragraph 3. (1)(a) be inserted and read along the lines of: “In the event of the owner of or a person in control of a public place, or employer in respect of a workplace becoming aware of non-compliance with the provisions of these regulations, he may take one or more of the following steps: • ask the offender not to smoke; • discontinue service; • ask the person to leave the premises; and • contact a law-enforcement agency or authority.”

8.

Further, there is no provision regarding any penalty that the persons responsible for ensuring compliance may face, should they not carry out this responsibility placed on themselves. In accordance with the guidelines, legislation should also provide for larger monetary penalties that apply to business establishments. It is recommended that a paragraph 3. (1)(b) be inserted and read along the lines of:

SAPOA LEGAL UPDATE – report to members 49

LEGAL ADVOCACY

“In the event of the owner of, or a person in control of, a public place, or employer in respect of a workplace becoming aware of non-compliance with the provisions of these regulations, and failing to act in terms of the responsibility placed upon him in Regulation 3(1), he shall be liable to a fine.”

STATUS AND WAY FORWARD The Policy is before the National Assembly Committee. SAPOA submitted comments in 2012.

50 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY REGULATIONS

APPLICABLE TO

20. THE SANS STANDARDS PROPERTY DEVELOPERS AND PROPERTY OWNERS DEPARTMENT OF PUBLIC WORKS BACKGROUND 1.

SANS 1-1:2012 Standard for Standards Part 1: The development of South African national standards and other normative documents, with form AZ96.10, had been published for comments from 22 May 2012 until 29 July 2012. The South African Bureau of Standards (SABS) is responsible for the development, maintenance and promotion of standards in South Africa. SANS 1-1:2012 Standard for Standards Part 1 is the norm that has been developed by the SABS in order to set out the process for the development and amendment of South African national standards.

2.

The Standards are of a technical nature hence we requested the NHBRC to assist in training SAPOA members.

STATUS AND WAY FORWARD Training on the SANS 204 and 10400XA will be provided this year.

SAPOA LEGAL UPDATE – report to members 51

LEGAL ADVOCACY REGULATIONS

APPLICABLE TO

21. THE ENVIRONMENTAL IMPACT ASSESSMENT REGULATIONS

PROPERTY DEVELOPERS AND PROPERTY OWNERS

DEPARTMENT OF ENVIRONMENTAL AFFAIRS AND TOURISM BACKGROUND 1.

A notice was issued in May 2013 for comments to be submitted on the efficacy of South Africa’s environmental impact assessment regime as a call for responses to Government’s legislative and policy framework to strengthen environmental governance and the sustainability of our development growth path.

2.

SAPOA submitted comments during May 2013.

SAPOA COMMENTS (extract) SAPOA recommends that the Department must: 1. Develop faster, more rational and more cost-effective processes for achieving the goals of the EIA process; 2. Remove as many unnecessary types of EIA from the process (e.g. petrol stations). This is bipartisan: environmental groups at the meetings are also wanting lesser EIAs for small developments; 3. Remove EIAs from situations where standards can replace EIAs when the risks and mitigating procedures are well known; 4. Make the process less burdensome in cases where EIA are needed but the environmental risks are relatively minor; 5. Identify spatial zones where previous EIAs or possibly SEAs and EMFs have revealed that the environmental risks are small or large and require EIAs, partial EIAs or no EIAs based on this information; and 6. Devote the resources of the Department to the smaller number of cases where the risks are significant.

STATUS AND WAY FORWARD SAPOA submitted its comments and we attended the parliamentary hearings on 31 July 2013.

52 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY POLICY

APPLICABLE TO

22. THE CITY OF JOHANNESBURG – SUPPLEMENTARY VALUATION ROLL

PROPERTY DEVELOPERS AND PROPERTY OWNERS

JOHANNESBURG METROPOLITAN MUNICIPALITY BACKGROUND The City of Johannesburg published on its website the supplementary valuation roll of properties within its jurisdiction. Property owners are allowed to object to the valuation values of their properties and such objections must be sent to the City of Johannesburg on or before 29 July 2012. SAPOA members were advised to lodge their objections with the City where they did not agree with a valuation.

The Local Government Municipal Property Rates Act No. 6 of 2004 gives a duty on a municipality to regularly, at least once a year; update its valuation roll by causing a supplementary valuation roll to be prepared. It is, however, only bound to undertake a supplementary valuation of a rateable property: a. b. c. d. e. f. g.

Incorrectly omitted from the valuation roll; Included in a municipality after the last general valuation; Subdivided or consolidated after the last general valuation; Of which the market value has substantially increased or decreased for any reason after the last general valuation; Substantially incorrectly valued during the last general valuation.

That must be re-valued for any other exceptional reason; or Of which the category has changed.

STATUS AND WAY FORWARD The process was finalised last year and members of SAPOA were given an opportunity to attend a workshop for the purpose of understanding the valuation process. The City has undertaken the General Valuation Roll, which will be published during the first week of April 2013 for public comment.

A workshop relating thereto has been organised to further inform members of SAPOA in respect of procedural and material objections that can validly be made.

SAPOA LEGAL UPDATE – report to members 53

LEGAL ADVOCACY ACT

APPLICABLE TO

23. THE NELSON MANDELA METROPOLITAN TRANSPORT SYSTEM

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NELSON MANDELA METROPOLITAN MUNICIPALITY BACKGROUND 1.

The long-term development proposals for the public transport system for the Nelson Mandela Metropolitan Municipality (NMB) are based on the results from an analysis of several possible scenarios. The conclusions from the scenario analysis are that an integrated public transport system with scheduled services, based on trunk bus routes with complementary feeder and main route systems will, in the next 10 years, best serve the communities of NMB. The public transport system will have the Khulani Corridor (Motherwell-Njoli-Korsten-CBD) as the backbone onto which the other services will be built. An expanded railway system will not attract enough passengers in the next 10 years to justify the large investments required.

2.

The long-term public transport system will be characterised by some important qualities.

The system will consist of integrated and regulated public transport, which will be modern and attractive, offering seamless travelling with an integrated and scheduled service. The operators will be contracted and through ticketing will enable true integration. The public transport corridors will encourage high-density development through quality, high frequency and scheduled public transport services, which in turn will attract more people to use the public transport system.

3.

A trunk bus network will be developed in the defined public transport corridors. Certain of these routes will have dedicated bus lanes and will ultimately be operated on Bus Rapid Transit (BRT) principles with new modern and possibly articulated buses. These will cater for people with special needs, such as persons in wheelchairs, and the system will aid general mobility by incorporating the concept of universal accessibility. The trunk routes will be supplemented by express, main, feeder and special services with an extensive network operated by normal buses, midibuses and minibuses. It is also intended that a number of these vehicles will be adapted to provide facilities for special-needs passengers.

4.

The trunk bus and feeder operations will intersect at attractive interchanges where passenger transfers can be made in a safe and secure environment. The interchanges will also be important nodes of commercial attraction and will be located close to suburban business activities and in the city centre. These interchanges will stimulate further economic development in their immediate surrounds.

5.

The IPTS’s 1 July 2012 pilot phase start was delayed to September 2012. This delay is the latest in a series of setbacks that have bedevilled the system from the start and caused major frustration and inconvenience to business and commuters. SAPOA is a member of a

54 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY

6.

7.

task team that has as one its members the Business Chamber, which aims to liaise with the municipality to ensure an effective IPTS. While there is certainty that the city needs an improved public transport system that is safe, efficient and affordable, the task team is deeply concerned at the delays in implementation and the negative impact on the city as a whole.

We have persisted in our efforts to represent the interests of our members and the broader business community.

STATUS AND WAY FORWARD The Regional Council of SAPOA in Nelson Mandela is dealing with the matter in conjunction with the municipality.

SAPOA LEGAL UPDATE – report to members 55

LEGAL ADVOCACY ACT

APPLICABLE TO

24. CARBON TAX POLICY PROPERTY DEVELOPERS AND PROPERTY OWNERS BACKGROUND 1.

According to the Carbon Tax Policy, the primary objective of implementing carbon taxes is to change future behaviour, rather than to raise revenue. It therefore starts with a relatively low carbon price, and then progressively rises significantly after five to 10 years and beyond. This approach reportedly provides industry and other major emitters sufficient time to innovate and invest in greener technologies for the future. There are at least three ways in which a carbon tax will work to drive changes in producer and consumer behaviour and therefore address climate change: a. First, carbon pricing will encourage a shift in production and consumption patterns towards low carbon and more energy-efficient technologies by altering the relative prices of goods and services based on their emissions intensity, and encouraging the uptake of cost-effective, low-carbon alternatives. Pricing carbon emissions addresses the problem of negative externalities, as polluters should pay for their emissions. b. Second, carbon-intensive factors of production, products and services are likely to be replaced with low-carbon-emitting alternatives. To achieve the extent of emission reductions committed to in Copenhagen, the production technologies will need to become less carbon-intensive and/or the consumption of certain carbon-intensive products such as cement, steel and aluminium will need to be reduced. Given that these industries are important with respect to the country’s proposed infrastructure build programme, appropriate policies are required to ensure mitigation and adaptation strategies are taken into account in investment decisions that have long term lock-in effects. c. Third, a carbon price will create dynamic incentives for research, development and technology innovation in low-carbon alternatives. It will help to reduce the price gap between conventional carbon-intensive technologies and new low-carbon ones.

THE TAX BASE The carbon tax will be based on emissions derived from emission factors linked to the fuel inputs used. It will cover emissions from all stationary sources, including process emissions.

THE KEY DESIGN FEATURES The key design features of the carbon tax are: a. A phased approach to the implementation of the carbon tax. The first phase (introductory) will be for five years, effective from 1 January 2015 to 31 December 2019, followed by Phase 2 of another five years, from 2020 to 2025. Follow-up phases can be explored later.

56 SAPOA LEGAL UPDATE – report to members

LEGAL ADVOCACY b. An across-the-board basic 60% tax-free threshold of actual emissions below which the tax will not be payable. c. Additional 10% relief for certain sectors to allow for technical or structural limitations to reduce emissions (process emissions). d. Up to an additional 10% relief for emissions intensive and trade intensive sectors, e.g. iron and steel, cement, glass, etc. to take into account the risk of carbon leakage and competitiveness concerns. e. Offsets could be used by firms to reduce their carbon tax liability up to limits of five or 10%, depending on the sector. f. Emissions from the agricultural and waste sectors will be exempt during the first phase.

This complete exemption will be reviewed during the second phase. g. The electricity sector will qualify for a tax-free threshold of up to 70%, and some sectors will be able to qualify for a tax-free threshold of up to 90% during the first phase.

THE TAX RATE A carbon tax rate of R120 per ton of CO² emissions increasing at 10% per annum will be implemented during the first phase. When the tax-free threshold and additional relief are taken into account, the effective tax rate will range between R12 and R48 per ton of CO² emissions (and zero for Agriculture and Waste).

STATUS AND WAY FORWARD The Policy was circulated to members of SAPOA for comment and it was discussed at the SAPOA Sustainability Committee meeting scheduled for 17 July 2013. A request was made for an extension date for submission of comments to 30 August 2013, which was duly granted. SAPOA, in anticipation of its comments, requested a presentation on the Carbon Tax Policy by a representative of the office of National Treasury for the purpose of clarification of its intentions and implications. The meeting was scheduled for 15 August 2013.

SAPOA LEGAL UPDATE – report to members 57

58 SAPOA LEGAL UPDATE – report to members

Litigation

SAPOA LEGAL UPDATE – report to members 59

LITIGATION 1. SAPOA V CITY OF JOHANNESBURG & OTHERS (SUPREME COURT OF APPEAL) BACKGROUND 1.

The appeal concerned with the levying of property rates of 1,54 cents in the rand in terms of the Local Government: Municipal Property Rates Act No. 6 of 2004 (the “Rates Act”) on business, commercial and industrial properties (collectively referred to as “business properties”) by the Council of the City of Johannesburg Metropolitan Municipality (the “Council”) for the 2009/2010 financial year.

2.

At the heart of the dispute is the Council’s decision, on 21 May 2009, to increase the property rates on business properties by an additional 18% (after it had resolved, on 26 March 2009, to increase the rates generally by 10% and advertised these rates with the proposed budget for public comment) so that, instead of increasing from 1,20 cents in the rand to 1,32 cents in the rand, the rates increased from 1,20 to 1,54 cents in the rand.

3.

SAPOA applied to the South Gauteng High Court to review and set aside or, alternatively, declare null and void, the City of Johannesburg Metropolitan Municipality’s (the “City”) budget for 2009/2010 or, alternatively, the rate of 1,54 cents in the rand on business properties.

4.

SAPOA sought this relief on these grounds: a. First, that the levying of the rate contravened section 19(1)(b) of the Rates Act because the ratio of the rate levied on business properties (1,54 cents in the rand) to the rate levied on residential properties (0,44 cents in the rand) exceeded the ratio which is permissible under section 19(1)(b) of the Rates Act read with the regulations; b. Second, that the levying of property rates is an integral part of the budget process in terms of the Rates Act, the Local Government: Municipal Finance Management Act No. 56 of 2003 (the “Finance Act”) and the Local Government: Municipal Systems Act No. 32 of 2000 (the “Systems Act”), and the decision to increase the rates on business properties by an additional 18% required community participation, which did not occur; and, c. Third, the rates imposed on business properties contravened the Rates Act because they unfairly discriminated against the owners of such properties.

5.

On 8 November 2012 the Supreme Court of Appeal ruled in SAPOA’s favour. SAPOA’s appeal against the City of Johannesburg in respect of the additional 18% commercial property rate was upheld with costs.

60 SAPOA LEGAL UPDATE – report to members

LITIGATION 6.

SAPOA released a statement to members about the implications of the judgment in respect of their rights to claim a refund relating to the additional commercial property rates already paid to the City. Few enquiries were subsequently received by SAPOA in respect thereof.

7.

In November 2012, judgement was passed in favour of SAPOA and SAPOA was further awarded a cost order in the Supreme Court of Appeal matter against the Johannesburg Metropolitan Municipality. The cost order was a party and party cost order.

STATUS AND WAY FORWARD 1.

2.

3.

he draft Bill of Costs was drawn, signed, served and filed with the Taxation Master of the T High Court.

The amount on the draft Bill of Cost is R997Â 039,41.

We await finalisation of the taxation of the Bill.

SAPOA LEGAL UPDATE – report to members 61

LITIGATION 2. APPEAL: THE JOHANNESBURG CONSOLIDATED TOWN PLANNING SCHEME, 2011 BACKGROUND 1.

In 2011, the City of Johannesburg published the draft Consolidated Town Planning Scheme for public comment.

2.

The draft Town Planning Scheme intends to apply in substitution of the following Town Planning Schemes previously in operation in the areas below, insofar as it relates to the area of jurisdiction of the City of Johannesburg, i.e.: a. Johannesburg Town Planning Scheme, 1979; b. Halfway House and Clayville Town Planning Scheme, 1976; c. Sandton Town Planning Scheme, 1980; d. Roodepoort Town Planning Scheme, 1987; e. Randburg Town Planning Scheme, 1976; f. Lenasia South East Town Planning Scheme, 1998; g. Modderfontein Town Planning Scheme, 1994; h. Peri-urban Areas Town Planning Scheme, 1975; i. Southern Johannesburg Region Town Planning Scheme, 1979; j. Walkerville Town Planning Scheme, 1994; k. Lethabong Town Planning Scheme, 1998; l. Westonaria Town Planning Scheme; and m. Alberton Town Planning Scheme.

3.

Some of the objects of the draft Scheme are stated as follows: a. Management of land use, in order to enable and facilitate efficient, effective and compatible urban development that is desirable and also accommodates the identified socioeconomic needs of the City; b. The coordination of urban growth, which includes land use change, new development and subdivisions, with the availability of infrastructure and social amenities; c. An accessible, responsive environment that is integrated with the transportation network and promotes public transportation; and d. The upgrading and rejuvenation of certain areas in the City through innovative developmental scenarios.

4.

SAPOA and other 3 (three) parties separately lodged an appeal against the draft scheme in December 2011, which have not been heard as there has not been appointment of the Appeal Tribunal Members.

5.

SAPOA’s main appeal was, among other objections, in respect of consent use rights provisions that are stated as follows in the draft, i.e.:

62 SAPOA LEGAL UPDATE – report to members

LITIGATION “Any consent granted or approved in terms of a Town Planning Scheme in force or other applicable land use legislation for the erection/use of buildings or for the use of land or any rights legally exercised in terms of such scheme or legislation prior to the commencement of this scheme, shall be deemed to be a consent or approval of this scheme: provided that any such consent or approval shall lapse unless exercised within 24 months from the date that such consent was granted or approved.”

STATUS AND WAY FORWARD 1.

Various meetings were held with the City of Johannesburg over the period of approximately 18 months since the appeals were lodged. The most recent one was on 3 July 2013, in an effort to come to a mutual understanding and concessions relating to the grounds of appeal.

2.

It is SAPOA’s considered view that the period of 24 months should be negotiated to a period of between three to five years, which will result in the appeal, in the interests of the overall objectives of the draft scheme, being withdrawn. We await a formal response thereto.

SAPOA LEGAL UPDATE – report to members 63

64 SAPOA LEGAL UPDATE – report to members

Legal advisory

SAPOA LEGAL UPDATE – report to members 65

LEGAL ADVISORY 1. LEGAL OPINION: EXCLUSIVITY AGREEMENTS 1.

The Legal Opinion is to determine whether an exclusive letting arrangement between landlord and a tenant falls foul of the Competition Act of 1998.

2.

The thrust of the exclusivity clause is that, for as long as the lease between the landlord and the anchor tenant endures, the landlord may not enter into a lease with another supermarket or an entity that sells some of the classes of goods that the supermarket tenant sells.

3.

The competition principle is that the competitor who delivers the best performance must be the victor in the competition. If one competitor undermines another in an unfair manner, the competition principle is breached and the breach may be actionable. It is a fundamental principle of common law of contract that every person is free to decide with whom he or she wants to enter into economic relationships.

4.

The type of arrangement in this legal opinion is what is referred to as the “solus” agreement or an exclusive dealing agreement. This creates purely contractual right between the parties thereto and is not binding to would-be competitors.

5.

Solus agreements are generally considered to be enforceable agreements in restraint of trade and the supermarket can enforce an exclusive letting agreement against the landlord. The question, though, is whether the Competition Act affects the legality of a solus agreement – and if does, whether the agreement may not be enforceable at the insistence of the supermarket against the landlord.

6.

There is a distinguishing feature in this agreement that is less likely to be susceptible to a finding of anti-competitive consequence: i.e. the lessor, as an independent entity, is fully entitled not to enter into an agreement of lease with anyone, and therefore there can be no obligation on a lessor to assist a competitor in setting up shop. There may be circumstances where it may have such a consequence. Then the rule of reason must be to determine whether there is justification for the anti-competitive conduct.

7.

Landlords are not precluded by common law or the Competition Act to enter into solus agreements with anchor tenants. They will be anti-competitive where it can be shown that the motive of the parties is not to protect their own goodwill or to have power to attract customers but merely to prejudice the attractive power of another concerned.

8.

The Legal Opinion is still being studied internally for other legal implication prior to a decision being made of advising property managers and asset managers accordingly.

66 SAPOA LEGAL UPDATE – report to members

LEGAL ADVISORY 2. LEGAL OPINION: MERGERS & ACQUISITIONS 1. The prima facie view is that the disposal by a property fund of properties falling within its portfolio does in fact constitute a “merger” in terms of the definition contained in the Act. Specifically, it falls within the ambit of the definition of “....part of the business”.

2.

The opinion is that property transactions where letting enterprises are an issue in businesses for purposes of the Competition Act, are reportable.

3.

Senior Counsel is, however, of the view that, despite falling within the definitions of a “merger”, such transactions can still not be seen to be anti-competitive. He has not found a single instance where the Competition Commission has refused its consent to a property transaction. He is further of the view that the property industry should challenge the thresholds prescribed in the Act as they are completely unrealistic.

4.

Small mergers are notifiable.

5.

The question is why should transfer of what is, in essence, only stock in trade or an asset in overall property letting business be dealt with as though it is a merger. Taking into account that property sale transactions that are notified are invariably approved and that the only consequence of notification is the payment of a filing fee and that this amounts to taxation, Counsel is of the opinion that a strong case could be made that the thresholds set by the Minister constitute irrational administrative action, and that these could be reviewable; or that due to nature of the property letting industry, a case could be made that the whole industry should be exempt from the Act.

6.

Senior Counsel further contends that the thresholds for property notifications in a rational legislative scheme should be higher so that routine transactions do not have to be notified, i.e. they should be regarded as small mergers.

7.

The Legal Committee Task Team of SAPOA recommended that SAPOA should apply for the increase of the thresholds. A submission to that effect was made.

SAPOA LEGAL UPDATE – report to members 67

LEGAL ADVISORY 3. LEGAL OPINION: RIGHT OF THE LANDLORD TO TERMINATE ELECTRICITY 1.

The legal opinion is whether a landlord could sever the electricity supply to a defaulting tenant.

2.

A lease consists of various sets of rights and obligations, and deals with a variety of ancillary topics, including the supply of electricity. Difficult questions arise where these rights intersect.

Landlords who have severed the electricity supply to their tenants have been met with spoliation applications.

3.

It is dogmatically unsound and legally incorrect to conclude that electricity can be possessed, and therefore a spoliation order should not be made merely to restore electricity flow where it has been cut.

4.

Distinguishable contractual obligations burdening a landlord (e.g. to provide possession of leased premises and to provide electricity) should be kept apart.

5.

Lease agreements provide for occupation of the property and right to access to and supply of utilities (water, electricity, ablution services). Payment of rental gives a tenant the right to lawful and undisturbed occupation of the property, while payment for utilities grants a tenant the right to receive the supply of such services.

6.

Where the landlord cuts the electricity supply because of non-payment of electricity and not to informally evict the tenant, the mandament van spolie principle (putting a person in the position that he was in prior to dispossession in spite of the fact that the person was in lawful or unlawful occupation of the property) cannot be applied.

7.

The landlord in an electricity case simply refuses to carry on providing electricity because the tenant did not pay for previous electricity supplied by the landlord. If the purpose is not to evict but to stop the supply of a commodity because of non-payment, the tenant cannot claim dispossession because he/she in fact remains in possession of the property.

8.

It is Senior Counsel’s view that landlords adopting a unified position in respect of breaches of contract cannot be seen as being anti-competitive, more particularly as this does not reduce competition.

9.

It must be abundantly clear that non-payment of electricity is a clear breach of contract where the landlord supplies it. As is the case with any breach of contract, it is actionable by cancellation of the contract by following due legal process of commencing eviction proceedings.

10.

An article in respect of this legal opinion was placed in the May issue of the Property Review, advising members on the implications of the legal opinion.

68 SAPOA LEGAL UPDATE – report to members

LEGAL ADVISORY 4. PROPOSED PROPERTY TRANSACTIONS – NEW THRESHOLDS BACKGROUND 1.

a)

In terms of the Competition Act, the current designated financial thresholds are as follows: 1.1.

Small merger – Combined annual turnover or assets (acquiring firm and target firm) are below R560-million, and target firm’s turnover or assets are below R80-million;

1.2.

Intermediate merger – Combined annual turnover or assets (acquiring firm and target firm) are at or above R560-million but below R6,6-billion, and the target firm’s turnover or assets are at or above R80-million but less than R190-million; and

1.3.

Large merger – Combined annual turnover or assets (acquiring firm and target firm) are at or above R6,6-billion, and the target firm’s turnover or assets are at or above R190-million. (Referred to collectively as the “current designated thresholds”.)

PROPOSAL TO AMEND THRESHOLDS

Based on the adverse impact that designated thresholds have on the letting business, it is recommended that the thresholds be amended as follows: a.

Intermediate merger – Combined annual turnover or assets (acquiring firm and target firm) will increase from R560-million to R800-million, and the target firm’s value of assets or turnover will increase from R80-million to R300-million; and

b.

Large merger – Combined annual turnover or assets (acquiring firm and target firm) will increase from R6,6-billion to R15-billion, and the target firm’s value of assets or turnover will increase from R190-million to R600-million.

SAPOA LEGAL UPDATE – report to members 69

LEGAL ADVISORY

b)

CONCERNS BY MEMBERS OF SAPOA

a.

SAPOA respectfully submits that there are various concerns that arise out of the current designated thresholds. Concerns experienced by participants in the property industry include, but are not limited to, the following issues listed below: i. In reality, property transactions do not have an anti-competitive effect on the market.

Tenants in the property industry exercise very strong countervailing and bargaining power, which constrains the ability of competitors to increase prices beyond market-related prices. Due to the abundance of space available in all sectors of rentable commercial space, any attempt to unduly increase prices or engage in any other form of abuse of dominance by a competitor can very quickly be disciplined by a tenant switching to an alternative provider. It must also be noted that commercial rentable property is not a finite resource. Thus in the event that competitors seek higher rentals than market parameters allow for, developers would simply produce more commercial rentable property for occupation on market-related terms. Accordingly, the property sector must and should be differentiated from other sectors of the economy. Therefore sector-specific thresholds must be introduced for the property industry insofar as merger notification is concerned. ii. Currently every property transaction, whether it involves the sale of an entire property portfolio or a single property is subject to notification if the current designated thresholds are met. Since the current designated thresholds are already very low, the majority of transactions engaged in by competitors are notifiable on the basis of such financial thresholds being triggered. In effect, the purchase of a single property letting enterprise results in the entire ambit of the competition legislation applying to the parties. The provisions of Section 12 of the Competition Act are designed to apply to conventional mergers in order to assess the effect on concentration in the market, and 99% of property transactions notified have no effect on competition. Based on the current designated thresholds of a target firm, a sale of commercial property of approximately R80-million (which, by property standards, comprises a very low value) can hardly ever be said to

70 SAPOA LEGAL UPDATE – report to members

LEGAL ADVISORY be anti-competitive, irrespective of location or any other factor utilised in competition analysis. It is seldom that listed entities buy or sell properties of low value resulting in anti-competitive behaviour, and hence a transaction below R100-million would almost never constitute any more than a “small” transaction by property standards. iii. Since the Competition Act does not permit pre-implementation of a transaction prior to unconditional merger clearance by the Competition Authorities, the time periods applicable to a property merger are often very disruptive and have high cost implications.

Such costs include the statutory filing fees and legal costs, which can sometimes deter parties from transacting on a deal due to the high overall transaction costs. Since the current designated thresholds (and the Proposal to Amend Thresholds) are low, this additional regulatory hurdle does not contribute to an environment where commercial property deals can be expediently concluded. iv. SAPOA strongly proposes that the determination of financial thresholds should take into account the type of transaction being notified. In the property sector, a higher financial threshold should be set than that set out in DTI’s Proposal to Amend Thresholds. It must be borne in mind that the parties to a property transaction are property firms, which usually have disproportionately large assets relative to many other industries. Having the same financial standard applying to all transactions, as long as they fall within the ambit of Section 12 of the Competition Act, places property firms at a disadvantage. The effect of a “one size fits all” approach in applying the same thresholds to all transactions creates a distortion and places an unnecessarily high burden on property firms.

STATUS AND WAY FORWARD A submission for the increase of the property transaction was made.

SAPOA LEGAL UPDATE – report to members 71

72 SAPOA LEGAL UPDATE – report to members

Strategic collaborative relations

SAPOA LEGAL UPDATE – report to members 73

STRATEGIC COLLABORATIVE RELATIONS 1. SOUTH AFRICAN CITIES NETWORK (SACN) BACKGROUND In the first quarter of 2013, SAPOA signed a Memorandum of Understanding between the two entities for the purpose of collaboration in ensuring successful cities and municipalities by focusing on transport, transport corridors, infrastructure, climate change, human settlements and joint researches.

SAPOA was invited to the Tshwane Strategic Conversation session, held in March 2013, which focused on the increasing and unstoppable process of global urbanisation.

It was reported that there were trends within the BRICS countries and other developing countries that suggested that urbanisation was generating significant opportunities for growth, poverty alleviation and environmental sustainability.

Furthermore, it was highlighted that urban development is often misconstrued as an alternative to rural development, without realising that strong urban economic growth and effective urban poverty reduction generate and release the public resources that fund rural development programmes.

STATUS AND WAY FORWARD 1.

SACN has been instrumental in organising, at their cost, a workshop that was held on 30 April 2013, with representatives of 18 municipalities that are part of the research study into the cost of municipal cost services. SAPOA was represented by Past President Dr Sedise Moseneke, chairperson of the Property Developers Forum Mr Lionel Kirsten and Advocate Portia Matsane.

2.

A meeting was held on 10 July 2013 to ensure that there is materialisation of some of the objectives of the MOU.

3.

It has been agreed that, in principle, a concept document be developed for all collaborative areas other than research, which is an easily attainable objective.

4.

There was an understanding in principle that, while the research of municipal services will be indicative of which municipality has the lowest or affordable municipal services costs, what should be determined in an effort to support the municipalities and to assist the commercial property sector to grow and be sustainable is the municipalities whose economies are growing, the industries supporting such, and the key projects that can be of benefit for the commercial business sector within such municipalities.

5.

It was agreed that what is important for business is the determination of incentives and costs within the municipalities. SACN will draft concept documents in support of the other objectives to ensure that private-public partnerships become a reality.

74 SAPOA LEGAL UPDATE – report to members

STRATEGIC COLLABORATIVE RELATIONS 2. CHAMBER OF COMMERCE AND INDUSTRY: JOHANNESBURG BACKGROUND SAPOA is represented by Advocate Portia Matsane on the Chamber of Commerce and Industry: Johannesburg. On 8 July 2013, the JCCI breakfast showcased a presentation by the CEO of the Johannesburg Development Agency, and the following points were highlighted: 1. In 2007, the Inner City Regeneration Charter was signed by stakeholders in the inner city as a joint commitment to a shared vision of a productive and equitable inner city.

2.

The City of Johannesburg made a commitment to a five-year public environment upgrade programme that prioritised certain inner city areas for investment over the five years of the Charter.

3.

From 2007 to 2012, the City of Johannesburg spent R1,86-billion on public environment upgrading, Rea Vaya BRT busways and stations, and other aspects of precinct development, including the refurbishment of municipal properties (to provide social facilities such as libraries, community centres and museums), and the construction of transitional and social housing stock.

4.

The budget framework for a 10-year implementation period is expected to include stable annual allocations. In the budget planning for the 2013/14 MTEF, the inner city was identified as a priority implementation programme and is expected to receive a capital investment of R450-million from the City of Johannesburg in 2013/14. Almost R90-million of this is for precinct developments.

STATUS AND WAY FORWARD The Johannesburg Development Agency calls on business to invest in the regeneration of the inner city.

SAPOA LEGAL UPDATE – report to members 75

STRATEGIC COLLABORATIVE RELATIONS 3. POLOKWANE MUNICIPALITY: ILLEGAL LAND USE BACKGROUND 1.

SAPOA lodged with the municipality of Polokwane about “illegal land use” within the city.

The matter was first reported to the city early last year and when no response was received

by SAPOA, it was then reported to the local office of the Public Protector.

2.

This resulted in the investigation by the Public Protector’s office that forwarded the complaint to the municipality still in 2011. While there was really no progress or any intervention on the city’s part in respect of the incidences reported in the complaint, SAPOA opted this year to escalate the matter to the office of Advocate Thuli Madonsela at the National Office.

3.

However, in view of cementing good corporate relations with the city, SAPOA opted to first contact the office of the Mayor of Polokwane, as a courtesy that SAPOA deemed it fit that the matter be addressed by his office and his municipality prior to the escalation of the complaint. SAPOA is glad that the Mayor prioritised the matter by arranging to meet with SAPOA on 28 June 2013.

4.

In the interim, the office of the Public Protector forwarded us an e-mail from the office of the Chief Planner, details of which are self-explanatory and are most welcomed by SAPOA. We have attached a copy of the court order that will be used to ensure that the City deals with some of the issues addressed in the court order and also in our letter of complaint.

STATUS AND WAY FORWARD 1.

On 28 July 2013, representatives of SAPOA met with the Municipal Manager (MM) of City of Polokwane and her executive team. The outcome was as follows:

1.1.

SAPOA will be part of targeted strategic meetings being convened by the City in an effort to ensure greater understanding and identification of solutions to deal with challenges facing the City and property development.

SAPOA, the Municipality, the South African Police Service and the other relevant Government departments will be part of the cleaning up campaign that will be driven by the city to ensure that SAPOA’s complaint is attended to.

Education awareness programmes and campaigns will be embarked upon to ensure that the informal traders and the public understand the bylaws of the City.

The Mall of the North is one of the top 10 projects that the Municipal Manager is personally responsible, ensuring that services are not interfered with at the retail centre. The chairperson of SAPOA’s Limpopo Regional Council, who was present at the meeting, has been assured of a more open, closer relationship with the MM’s office to ensure service delivery at the mall.

SAPOA has been advised to register as a stakeholder with the municipality. On 10 July 2013, the MM contacted SAPOA’s head office, advising that an advertisement calling for registration as a stakeholder with the municipality would be issued on 11 July 2013.

1.2.

1.3.

1.4.

1.5.

76 SAPOA LEGAL UPDATE – report to members

STRATEGIC COLLABORATIVE RELATIONS 4. TAX COURT: RECOMMENDATION OF A MEMBER OF SAPOA BACKGROUND 1.

Section 83(4) of the Income Tax Act, 1962, provides that a Tax Court consists of a Judge, an accountant and a representative of the commercial community, who must be of good standing and have appropriate experience. Depending on the nature of the appeal to be heard, the commercial member may, if the president of the Tax Court, the commissioner or the appellant so desires, be a qualified mining engineer or a person who is carrying on business as a sworn appraiser, where the appeal relates to mining or the valuation of property, as the case may be.

2.

The members of the Tax Court are appointed by the President. The terms of the members of the Tax Court are prescribed at five years from the date of a proclamation with a provision for re-appointment for such period or periods as the President may see fit.

3.

The Tax Court has its sittings in the ordinary High Courts of South Africa, which are currently in Pretoria, Johannesburg, Cape Town, Port Elizabeth, Durban, Bloemfontein and Kimberley.

4.

On 21 May 2013, SAPOA was requested by the office of the Registrar, Tax Court of South Africa, to make a nomination of a person for appointment to serve in the Tax Court.

5.

It was requested that a meeting be organised between the recommended candidate and the Chief Registrar Marisa McKenzie for further discussion of the responsibilities and expectations.

STATUS AND WAY FORWARD 1.

2.

3.

Mr Erwin Rode, a property valuer based in Cape Town and a member of SAPOA, was recommended by the CEO of SAPOA. Mr Rode accepted the nomination and the meeting with the Chief Registrar occurred.

We await being advised whether Mr Rode was appointed.

SAPOA LEGAL UPDATE – report to members 77

MISCELLANEOUS RESEARCH AND COMPLIANCE 1.1. Comparative study of costs of municipal services

Research is to be released with data for 2012/2013 but updated also with data for 2013/2014. SACN will obtain the data from the municipalities.

1.2. The impact of the property sector on the economy of South Africa

Research is ongoing. A meeting was scheduled for August 2013 for a progress report.

1.3. Standard sale and lease agreements

The Standards Contracts are ready.

SAPOA awaits understanding with Contracts on Demand, a supplier preferred by industries such as PROCSA, as to how e-sale can be done.

1.4. Financial intelligence centre guidelines

First draft of the FIC guidelines is ready.

1.5. Memorandum of incorporation: Registration

MOI has been submitted to CIPC – awaiting registration.

1.6. Registration of new board members

Registration of two new board members has been submitted to CIPC – awaiting confirmation.

1.7. Submission of the annual return

Annual return was submitted but was returned by the CIPC – their system has been changed to accept such against the anniversary date of first (September) incorporation of the entity.

78 SAPOA LEGAL UPDATE – report to members

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