South African Property Review October 2018 by SAPOA

PROPERTY SOUTH AFRICAN

October 2018

REVIEW

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Education Focus Leading industry players at the forefront of learning

Sandton City 45 years on

Port Elizabeth

Development overview

MetroWatch

Nelson Mandela Bay

2016/08/25

11:31 AM

SOUTH AFRICAN PROPERTY REVIEW

from the CEO

Is Buffalo City becoming investor-unfriendly? SAPOA submitted comments on the draft budget to the Buffalo City Municipality (BCM) earlier this year for consideration. However, comments of a technical nature were disregarded

his is in response to a draft 2018/2019 budget tabled by the Buffalo City Metropolitan Municipality, indicating a 26,8% increase in income from property rates – more than four times that of inflation. Some property owners have had increases of more than 100%. It is a shockingly depressing state of affairs when a municipality ignores comments from the public, fails to control its expenses and, furthermore, fails to fathom the impact on the livelihood of its citizens. This does not bode well for attracting further property investment into Buffalo City, and it has created a businessunfriendly environment. In terms of the tariff increase, although it is indicated in the draft budget that no increase is proposed, since the value of properties has increased from the previous valuation roll to the new valuation roll, the tariff should have reduced. If the revenue is considered, revenue increased from R1 121 175 to R1 421 961, indicating a 26,8% increase in property rates. This tariff should be reconsidered. The tougher trading environment is making it increasingly challenging for landlords to deal with the additional tax burden. Not only is this unsustainable, but property owners pass these increases through to tenants, which has a material impact on the health of businesses in the economy. This, in turn, results in businesses closing down, and relates to reduced revenues for the city. On 3 September 2018, a meeting was held between BCMM Municipal Manager Andile Sihlahla, various municipal officials, SAPOA Buffalo City Regional Chairman Johan Burger and Rates Watch, SAPOA’s appointed team of consultants to monitor property rates charges.

3. National Treasury guidelines on increases SAPOA highlighted to the municipality that, according to circulars 89 and 91 of the MFMA, municipalities are required to justify all increases that are more than the projected CPI. The city’s increase in the income from property rates of 26,8% is far above the CPI and must be justified. We could not find any justification in the draft budget documents, and believe that the ratepayers of Buffalo City have a right to be informed.

4. Breakdown of property rates per property category SAPOA indicated that it had made a formal submission to the BCMM, which had simply been ignored.

Some of the contentious issues posed by SAPOA to the municipality included: 1. Tariff increases for 2019/2020 and 2020/2021 Although it was indicated that it is required to include the proposed increases in the budget, SAPOA believes that the increases should be reviewed, since the City has budgeted for an abnormal increase of 26,8% in the 2018/2019 financial year.

2. Approved budget documents SAPOA has noted that the complete set of approved budget documents is not available on the BCMM website, and has requested that, in the interest of transparency, this be done urgently.

SAPOA, representing the commercial property sector, was criticised for quoting property rates figures for all the properties in Buffalo City. The information per property category is not available in the budget documents; however, Leon van Wyk, Acting General Manager for Finance at BCMM Finance Department, indicated that it will be provided to us.

5. Growing of the rates base SAPOA appreciates the effort made to reduce the cost of doing business in the city, and welcomes the focus on the removal of red tape and bureaucracy to streamline processes. Investing in property and the development of new buildings will increase the rates base instead of increasing property rates tariffs in a vicious cycle to increase revenue. We support the focus on “investment is the name of the game”, which is amplified by the 10-point plan Continues on page 2 SOUTH AFRICAN PROPERTY REVIEW

contents

from the CEO CEO Message continued

PROPERTY SOUTH AFRICAN

REVIEW

South African Property Review

1. of strategic objectives to achieve service delivery in the 2018/2019 IDP. However, we do believe it is crucial that the effect of property rates in this sector must be investigated by comparing rates for the 2017/2018 and 2018/2019 financial years.

PROPERTY SOUTH AFRICAN

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Leading industry players

Conclusion

SOUTH AFRICAN PROPERTY REVIEW

2016/08/25

11:31 AM

ON THE COVER Education is the key to transformation and employment opportunities – and it is the trend for a number of property owners in the South African commercial property sector.

Sandton City 45 years on

Port Elizabeth

Development overview

MetroWatch

Nelson Mandela Bay October 2018

at the forefront of learning

Education, retail and research

Best regards, Neil Gopal, CEO

October 2018

REVIEW

Education Focus

Since the sustainability of the property sector is a key focus for SAPOA, we have been vocal in challenging the legality and consistency of increased municipal rates charged to our members. We acknowledge the fact that rates are necessary to fund municipal service delivery and outputs – but our Constitution and laws are clear that these must be levied in a just and equitable way by determining the value of properties accurately. We are committed to ensuring that this takes place, and that our members are not overcharged. We believe that this is essential to further an enabling environment for business and the commercial property sector in South Africa, and to help ensure the sustainability of our economy. SAPOA met with the Deputy Minister of COGTA Andre Nel on 13 September 2018 to discuss the issue at BCMM, and tabled its concerns around the uncontrolled expenses at municipal level, which are resulting in the everincreasing rate increases to make up for the income streams. This vicious cycle will no doubt lead to property development activity being curtailed in Buffalo City in favour of cities that are more conducive to property investment. Such is the paradox. We appeal to the BCMM to reconsider its tariff increases for 2019/2020 and 2020/2021. To kill the goose that lays the golden egg is short-sighted. We have briefed a team of attorneys, and will keep our members updated on the progress, as we are keeping all options open at this stage.

October 2018

1 From the CEO 4 From the Editor’s desk 6 Legal update Key amendments to the Competition Act that will affect property merger notifications 9 Education and training SAPOA launches inaugural Public Sector Property Programme 12 SAPOA Education Committee – one on one Collaboration key to education development 14 Education – one on one Engineering education initiatives, building lives and creating hope 16 Education The Property Foundation: facilitator of local community skills development 19 Education – one on one On point with initiating education 24 Education – one on one Vision for City of Cape Town to become a “walking” city 26 Retail – one on one Sandton City: still going strong 28 Research – retail The impact of price hikes on retail spend 30 Retail Technology is pushing retail boundaries 31 SAPOA retail trends report First positive growth in four quarters 32 Retail - one on one From Mthatha to the top of the property ladder 35 Retail initiative Delivering value to local communities and investors 36 Opinion Rethinking the value of infrastructure in South Africa 37 Port Elizabeth development overview Coega IDZ at forefront of attracting foreign investment 40 Proptech RMS pioneering data-driven utilities systems 42 Research Big data critical to the decision-making process 44 MetroWatch Your right to know: Eastern Cape Metro, Nelson Mandela Bay in figures 50 Howmuch.net The real cost of relocation around the world 52 Social 56 Off the wall Cape Town farmer builds R30-million village for 150 workers

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

e: philip@rsalitho.co.za

from the Editor's desk

Driving change through education and collaboration This month, Property Review was privileged to talk to several SAPOA members about their contribution towards upliftment of communities and individuals through education and enterprise development. Clearly there is transformation beginning at grassroots

hange in the property sector is happening – although it could be happening faster. After speaking to property practitioners about education and transformation in the commercial property space, Property Review is happy to report that some seriously innovative initiatives are being undertaken. In an organisational context, transformation is a process of profound and radical change that orients an organisation in a new direction, and takes it to an entirely different level of effectiveness. Unlike “turnaround” (which implies incremental progress on the same plane), transformation implies a change of character, and little or no resemblance to the past configuration or structure. Clearly there is a huge skills shortage in South Africa, ranging from artisans through to white collar management – but that is not all doom and gloom. It’s an opportunity, and industry leaders such as Growthpoint, Abcon and GladAfrica are raising and spending millions of rand to make a difference and to improve employment opportunities. Nearly all of the “big guns” have some kind of initiative – and our education focus this month has identified a few. SAPOA has its education programmes and its Bursary Fund, and is leading the discussion with South Africa’s tertiary institutions and implementing new programmes. Going forward, Property Review is looking for these kinds of stories: stories that show what the industry is doing. This edition is just a taster. I’m looking forward to coming back to you with our December/January edition with more success stories. While that edition will again focus on development and corporate social initiatives, we will angle the articles towards CSIs with specific education and internship content.

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Once again, this month’s Property Review has a number of one-on-one interviews. Our aim is to continue to talk personally to SAPOA’s members, and to find out about their companies, their positions and how they are making a success of their business. SAPOA is a member-driven organisation, so your stories are important to us. Part of the networking opportunity available to you is that we write a story about your activities. So no matter how big or small your company is, talk to us – we will write all about it after an open discussion! By supporting the magazine with advertising, you are helping maintain this communication platform, and also gaining phenomenal exposure among your industry peers. The magazine reaches about 8 000 hard-copy readers, and is distributed directly to key decisionmakers within the property industry. Remember: 90% of commercial property owners are SAPOA members. Then there is the online, interactive HTML5 version. For a niche industry online publication, our rising popularity means that we are getting upwards of 15 000 hits a month. Our readers are taking time on our pages (10 to 12 minutes), which means our content is relevant. Thanks to Google Analytics, we’re easily able to

monitor which pages are being read, as well as when and for how long. Being interactive and able to carry rich media, we can run a video interview with you – or if you have a development, we can embed your “walk-through”. Looking forward to our penultimate edition for the year, the November issue of Property Review promises to be “green”. Like last year, we will be attending the Green Building Council South Africa’s annual convention. I’m looking forward to meeting up with people I’ve spoken to over the past few months – and, of course, to reporting back on some of the convention’s hot topics. From off-grid solar energy to full-on water reticulation, we’ve already spoken to SAPOA members whose buildings are Green Star-rated, and look forward to sharing their stories with you. Thanks to Property Point (a Growthpoint Properties initiative), we have also identified two young female entrepreneurs who operate in the “green” space. Their youth, determination and spirit are energising! Enjoy this education edition of Property Review: hopefully it will inspire you to work with (or through) SAPOA to help lead transformation. The property sector is ever-changing and dynamic, and it is full of opportunities, career options and possibilities. Let’s continue to work together to make a difference. For editorial opportunities, contact me at mark@mpdps.com or Jane Padayachee – SAPOA’s Marketing Manager – at marketingmanager@sapoa.org.za. For the 2019 advertising opportunities and rates, contact Pieter Schoeman at pieter@mpdps.com

Enjoy the read. Mark Pettipher, Editor and Publisher

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legal update

Key amendments to the Competition Act that will affect property merger notifications 1

Much has been written over the past year with regards to the proposed amendments to the Competition Act No. 89 of 1998 (the Act). The Competition Amendment Bill 23 of 2018 (the Bill) was first published in December 2017 and was followed by a revised Bill, which was introduced to Parliament during July 2018 By Fasken Attorneys Competition Law team: Neil MacKenzie, Johan Coetzee and Stuart Strachan

1 BCX Head Office. Architects: SVA International 2 Management Team 3 Menlyn Learning Hub. Architects: Boogertman + Partners 4 West Hills Mall in Ghana. Architects: ARC Architects

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he main objectives of the proposed amendments have, among other things, been stated to “…address two persistent structural constraints on the South African economy, namely the high levels of economic concentration in the economy and the skewed ownership profile of the economy”. From the perspective of the property sector, where numerous property-related mergers are notified to the Competition Commission (the Commission) and heard by the Competition Tribunal (the Tribunal) on an almost weekly basis, the proposed amendments to the merger provisions are probably the most noteworthy. The aim of this note is to give an overview of key proposed amendments to the merger provisions contained in Chapter 3 of the Act, then a high-level overview of other significant proposed amendments to the Act that may be relevant to the property sector.

Proposed amendments to merger provisions The Bill proposes additional factors to Section 12A of the Act, to assist with the determination of whether a merger will substantially prevent or lessen competition. It is also proposed that additional factors be included when a merger is assessed by the Commission. The aim of these proposed changes is to target concerns regarding creeping concentration and the maintenance of strategic barriers to entry. The additional factors include: ●● The extent of ownership (for example shareholding) by a party to the merger in another firm or other firms in related markets;

●● The extent to which a party is related (for example, common shareholders or directors) to another firm in related markets; and ●● Any other mergers engaged in by a party for such period as may be stipulated by the Commission. The Bill further proposes additions to the public interest considerations under Section 12(3) of the Act to include: ●● The ability of small and medium business, or firms controlled or owned by historically disadvantaged person, to “effectively enter into, participate in and expand within the market”; and ●● The promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons and workers in the firms in the market. The Bill also proposes amendments to Sections 15 and 16 of the Act, which will empower the Commission or the Tribunal to make any appropriate decision relating to a merger.

Intervention in merger proceedings involving foreign acquiring firm The Bill proposes the introduction of a new Section 18A of the Act, which provides the President with powers to constitute a committee comprised of ministers and officials, with powers to intervene in merger proceedings where the acquiring firm is a foreign acquiring firm “which may have an adverse effect on the national security interests of the Republic”.

legal update A foreign acquiring firm is defined as an acquiring firm – ●● that was incorporated, established or formed under the laws of a country other than the Republic; or ●● whose place of effective management is outside the Republic. The President must identify and publish a list of national security interests, including markets, industries, goods or services, sectors or regions in which a merger must be notified to the committee. To determine what may constitute “national security interests”, the proposed Section 18A(4) mentions that all relevant information must be considered, including the potential impact of a merger on some broad and undefined factors, such as: ●● The security of infrastructure, including processes, systems, facilities, technologies, networks, assets and services essential to the health, safety, security or economic wellbeing of citizens and the effective functioning of government; ●● The supply of important goods and services to citizens, or the supply of goods or services to government; ●● The Republic’s international interests, including foreign relationships; and ●● The economic and social stability of the Republic. A merger that is affected by the provisions of Section 18A must then be considered by the committee within certain timelines and following certain prescribed provisions. It is noteworthy that the appointed committee will be entitled to: ●● Either prohibit the merger; or ●● Permit notification to the Commission with or without conditions; and ●● Submit the committee’s report and decision to the National Assembly. Although the proposed Section 18A is contentious, this provision is common in a number of countries.

Exemptions The Bill proposes that Section 10 of the Act be amplified to include: ●● Additional grounds for the Commission to grant an exemption, including competitiveness and efficiency gains that promote employment or industrial expansion; and ●● A new provision that empowers the Minister to issue regulations exempting an agreement or practice or a category of agreements or practices from the application of the Act.

Ministerial powers In addition to the amplified provisions relating to exemptions, the Minister’s powers have also been amplified, and are as follows: ●● The Minister will have the ability to appoint one or more full-time or part-time Deputy Commissioners who will be responsible for conducting market inquiries (in terms of Section 23 of the Act), and one or more persons acting as parttime members of the Tribunal (in terms of Section 26 of the Act). ●● The Minister may require that the Commission conducts a market inquiry in terms of the proposed amendments to Section 43B of Act. ●● The Minister will also have in terms of the proposed amendment to Section 45 of the Act, the right to access confidential information. In addition, any other relevant Minister and any regulatory authority may have access to a firm’s confidential information, unless the Tribunal determines otherwise.

Market inquiries The Bill also proposes that the current Section 43A of the Act, which deals with market inquiries, be enhanced in the following ways, so that: ●● Its outcomes will include measures to address concentration of ownership;

●● Market inquiries will have to be completed within an 18-month period; ●● The Commission’s potential findings and actions following completion of a market inquiry will be binding, unless challenged in the Tribunal; ●● A duty will be placed on the Commission to remedy structural features identified as having an adverse effect on competition on a market, including the use of divestiture orders; and ●● Given the far-reaching nature of a divestiture order, it is proposed that this remedy may only be competently imposed by the Tribunal on the recommendation of the Commission.

The way forward Public hearings were held on 28 and 29 August 2018, and comprehensive submissions were made by various stakeholders such as Business Unity South Africa, the Law Society of South Africa, COSATU and the Black Business Council. At this stage it seems very likely that a revised version of the Bill may be promulgated as legislation in early 2019. While several of the Bill’s objectives are laudable, and particular revisions it suggests to the present law are very likely to be beneficial, it is hoped that Parliament adopts a pragmatic approach to curtailing those areas of the Bill that run the risk of chilling investment sentiment in South Africa, and clarifying aspects of the Bill that introduce uncertainty before it is even made effective.

Neil MacKenzie (Head: Competition) e: nmackenzie@fasken.com Johan Coetzee (Partner, Real Estate Head and member of the Competition team) e: jcoetzee@fasken.com Stuart Strachan (Associate: Competition) e: sstrachan@fasken.com Fasken t: +27 (0)11 586 6000 SOUTH AFRICAN PROPERTY REVIEW

Even when competition gets tough, we get the deal done! At Fasken, our lawyers have the legal know-how in Real Estate, providing practical solutions to meet changing demands.

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education and training

SAPOA launches inaugural Public Sector Property Programme For the very first time, SAPOA – in partnership with the University of Johannesburg – offered the Public Sector Property Programme (PSPP), which ran from 20 to 31 August. The first batch of delegates to complete the programme are all employed by the Department of Public Works Compiled by Maud Nale In week two of the programme, the delegates were divided into four groups and taken for a site visit to JBS Towers in preparation for their project. At the end of the project, each group submitted a report and did a presentation on the project outcomes.

Projects were judged against the following elements:

Team members from Group 4 were the overall winners

his two-week programme has been tailor-made for delegates already working in property management in the public sector. The objective of the programme is to develop knowledge and skills in the public property management sectors in South Africa by providing an understanding of the key theories and concepts in property management, finance, legislation and marketing, as well as technology aids in property management and how they are applied in practical scenarios.

Some of the property-related modules included: ●● Property Valuations ●● Property Management ●● Utilities Management

●● Property Finance & Investments ●● Green & Environmental Aspects ●● Property Development ●● Property Charter ●● Property Economics & Legislation The programme took the form of formal lectures and interactive case studies in the first week, as well as individual and group projects in the second week, which allowed team learning. The lecturing team included industry-based professionals and two full-time University of Johannesburg (UJ) lecturers Andre Kruger and Marno Booysens, both from UJ’s Department of Finance and Investment Management, Property Valuation and Management.

●● Client identification and needs analysis ●● Market analysis ●● Legal aspects ●● Rental forecast and discount rate ●● Feasibility and environment conversation ●● Value opinion and overall report ●● Presentation Group 4 emerged as the overall winner based on the average scores allocated by the judges. The feedback from the Department of Public Works delegates was that the course was insightful and that the facilitators demonstrated in-depth knowledge of the subject matter. As the first batch of delegates to successfully complete the programme, SAPOA is committed to improving it so more organisations in the public sector can benefit.

Employees of the Department of Public Works were the very first batch of delegates to successfully complete the Public Sector Property Programme

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education and training

KwaZulu-Natal Introduction to Real Estate course 16 delegates attended the five-day Introduction to Real Estate Course that took place from 20 to 24 August at the Durban Country Club

he course was aimed at introducing delegates to real estate as an asset, a bundle of rights and an industry. It also introduced the delegates to the institutions that make up the sector and whose activities affect the real estate environment. The topics covered included Real Estate Basics, Real Estate Markets (and their drivers), and Real Estate Business Processes and Analytical Tools. The course was facilitated by Professor Samuel Azasu, who is the Associate Professor and Coordinator of Executive Programmes in Real Estate at the University of the Witwatersrand.

Delegates who attended the five-day Introduction to Real Estate course: BACK ROW, FROM LEFT Thubelihle Buthelezi, Nothando Khuzwayo, Gugu Radebe, Mxolisi Mushi, Fiona Hodge, Mandisa Poswa, Ilona Govender, Dale Williams and Lindokuhle Hlatswayo FRONT ROW, FROM LEFT Sandile Buthelezi, Nonhlanhla Ndaba, Princess Mdlalose, Sthembile Khumalo, Professor Samuel Azasu, Theunis Roux, Nangamso Mniki, Akhil Ganesh

Limpopo Tenant Arrears in

Commercial Property Workshop Limpopo Regional Council held a Tenant Arrears in Commercial Property Workshop at the Park Inn Hotel in Polokwane on 29 August

he intense half-day workshop was held with the aim to assist delegates in cultivating a broader understanding of the various courses of action available to commercial landlords – and managing

agents – to address tenants who default on their lease obligations. In particular, the workshop covered issues such as rental collections, remedies available for breach of lease, court procedures,

A total of 11 delegates (from Knottrox Property Trust, the Moolman Group, Broll SA, Broll – Mall of the North, EduPark, Las Manos Investments 103 (Pty) Ltd and Red Fox Holdings) attended the Tenant Arrears in Commercial Property Workshop, which was held in Polokwane and facilitated by Marlon Shevelew

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the landlord’s hypothec and other forms of security (including suretyships and collateral security such as notarial bonds), the legislation applicable to the rental property arena (such as the Companies Act, the Consumer Protection Act and the Conventional Penalties Act), and the impact of liquidations and business-rescue proceedings on leases. The workshop also offered valuable insight into recent case law that impacts directly on the industry. All of this information was conveyed in a logical, easy-to-understand and expert manner. The course was facilitated by Marlon Shevelew, a practising specialist rental property litigation attorney and Director of Marlon Shevelew and Associates Inc.

education and training

KwaZulu-Natal Facilities Management Course KwaZulu-Natal Regional Council held a Facilities Management Course at the Coastlands Hotel in Musgrave from 3 to 7 September

he intensive five-day course, which was facilitated by UK professor Brian Atkins, aimed to enable delegates to develop an understanding of the theory of facilities management as well as the principles and practice of facilities management by showing how it should be performed to support core business functions of client organisations (primarily business owners). Companies in attendance included Eris Property Group, Transnet, Redefine, Trade & Industry KZN and Delta Property Fund.

BACK ROW, FROM LEFT Dipesh Jaga, Conrad van Wyk, Ellary Ganasen, Kevin Naidoo, Lindeka Ngubane, Patricia Bothman, Mondile Mahlasela and Njabulo Sikhakhane FRONT ROW, FROM LEFT Thoba Tumisi, Cindy Fynn, Mxolisi Mthukushe, Nompilo Sabela and Brian Atkin

When private-public partnership works! Meet the entrepreneurs who benefit. The Department of Small Business Development (DSBD) and Property Point have joined forces to take 16 small to medium-sized, black-owned businesses through a life-changing enterprise development programme. This programme will provide bespoke business interventions and facilitate access to markets in order to catalyse business growth and sustainability. Luanda Wagener is the Managing Director of JJSL Vukuzakhe Construction which focuses on tenant installations and maintenance services. This family business started in 2008 after Luanda was exposed to the world of property development and construction, ‘’I always had a dream to provide rental or buy to-let affordable accommodation. As I was doing research I found myself enjoying construction works and that is what made me start my own business in this industry’’ She explains. Luanda and her Husband and partner Shelton, have gone through their fair share of growing pains in the business, but they pressed on Luanda Wagener, Managing Director of JJSL Vukuzakhele Construction

and became more resourceful in the times of struggle. ‘’We had to decide at some point on whether it was worth pursuing the construction sector or to close our business and get back into the corporate sector. We persisted even in these difficult times and managed to do construction project management consulting whilst we were submitting proposals for construction works

Today Luanda is proud of the progress that has been made over the past 10 years, ‘’our business surely has grown over the years. From zero profits to being a profitable business and we look forward to it being a more sustainable business’’.Luanda lives by the motto ‘’Kannie groei in die veld. Jy Kan en jy Sal” which she learned from her late mom ‘’ I can and I will, nothing is impossible!'' Property Point is a Growthpoint Properties initiative which provides entrepreneurs with the skills and personal development support they need to develop their businesses into fully independent companies. For more information on JJSL contact Luanda on info@jjsl.co.za

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SAPOA Education Committee – one on one

Collaboration key to education development Londiwe Mthembu, Managing Director of the Abcon Foundation, wears two “hats”: she is also SAPOA’s Education Committee Chairperson. She talks to Property Review about the Committee’s mandate as well as some of the initiatives she is driving at Abcon Londiwe Mthembu, Managing Director of Abcon Foundation

“We need to transform the industry by getting more involved with learners at a younger age. The property industry has a vast array of opportunities, and a broad church of disciplines. I’m amazed at how few learners and students actually know about property and its value chain as career options”

SOUTH AFRICAN PROPERTY REVIEW

By Mark Pettipher

any of the qualifications that are required by the various disciplines within the property industry need to be accredited by the Estate Agency Affairs Board (EAAB). Organisations such as the Property Sector Charter Council as well as SAPOA member organisations rely on close collaboration with the EAAB to maintain an understanding of the changing legislation within the commercial property industry. In order to closely align accreditation requirements with real-time industry realities and skills shortages, the SAPOA Education Committee constantly discusses and drives facilitation with the EAAB to unlock bottlenecks within the EAAB itself. The Committee also discusses the future education, training and development needs for the industry with representatives of member organisations, and works closely with a number of South Africa’s leading universities that offer property courses. Added to these responsibilities is the requirement for the Committee to represent the industry at – and in discussion with – Services SETA. A critical aspect of the work that Londiwe Mthembu does is to determine the skills gap in the property sector. This also includes driving awareness of job opportunities through career

days at schools, TVET colleges as well as universities, in close partnership with SAPOA and the Property Sector Charter Council. “We need to transform the industry by getting more involved with learners at a younger age,” says Mthembu. “The property industry has a vast array of opportunities, and a broad church of disciplines. I’m amazed at how few learners and students actually know about property and its value chain as career options. “Most of the SAPOA member organisations are committed to utilising six percent of their income for skills development or transformation and education purposes. Imagine what could be achieved if that capital was centrally pooled? The property sector is purported to be a R5,8-trillion industry!

“Opportunities that are spread across industry players through collaboration will trigger sustainable solutions in skills development. In the long term, this will help with the transformation of the property sector”

SAPOA Education Committee â&#x20AC;&#x201C; one on one â&#x20AC;&#x153;If we could develop better leadership skills as part of the current SAPOA-driven property sector courses, Iâ&#x20AC;&#x2122;m certain that we would see a greater propensity towards transformation â&#x20AC;&#x201C; and we would have a greater ability to steer change within our industryâ&#x20AC;? â&#x20AC;&#x153;Take the South African Institute of Chartered Accountants model of development as an example. You will find that the Instituteâ&#x20AC;&#x2122;s programmes include the basic requirements of the CA discipline, together with a large emphasis on leadership. If we could develop better leadership skills as part of the current SAPOA-driven property sector courses, Iâ&#x20AC;&#x2122;m certain that we would see a greater propensity towards transformation â&#x20AC;&#x201C; and we would have a greater ability to steer change within our industry. â&#x20AC;&#x153;Who knows: perhaps by working with the Property Sector Charter Council, which is driving for a more pooled resource of funds, we could initiate a â&#x20AC;&#x2DC;SAPOA Institute of Education. In any event, we should be developing curriculums that address the more in-depth aspects of the value chains that we find across the disciplines within our industry.â&#x20AC;? Mthembu revisits SAPOAâ&#x20AC;&#x2122;s education mission, which indicates a commitment to actively and responsibly represent, promote and protect the interests of SAPOA membersâ&#x20AC;&#x2122; commercial activities. SAPOA is further committed to finding and supporting the most talented people who will add value to the industry by providing tertiary educational support through the SAPOA Bursary Fund and through the contributed Services SETA Bursary Fund. Speaking from a position of knowledge â&#x20AC;&#x201C; and from what she is doing as the Managing Director of the Abcon Foundation (AGF) â&#x20AC;&#x201C; Mthembu says that within the Abcon Group, â&#x20AC;&#x153;The AGF has

the ability to raise money through the Abcon Groupâ&#x20AC;&#x2122;s BEE spending allocation. The strategic partners of the Abcon Group, directly and indirectly, support the AGF. The AGF has been set up to drive the transformation strategy of the Group by providing B-BBEE advisory services and the facilitation of opportunities to invest in skills development and training, enterprise and supplier development and socioeconomic development. These services are not limited to the Abcon Group but are available to our strategic partners as well. â&#x20AC;&#x153;The funds allow us to have a greater impact in the section of industry in which we are involved. Because we are collaborating with our partners, we are able to offer internships and to swap internship positions in areas in which we perhaps donâ&#x20AC;&#x2122;t have a vacancy.â&#x20AC;? This experience and industry insight is something that Mthembu is aiming to encourage and utilise as part of her role as the Chairperson of SAPOAâ&#x20AC;&#x2122;s Education Committee. One issue that forms a common thread in both SAPOAâ&#x20AC;&#x2122;s and Abconâ&#x20AC;&#x2122;s objectives is the rationalisation of the educational journey that is required within the industry. By exploring the needs more deeply, the ability to deliver bursary schemes, learnerships, training, apprenticeships and various internships is multiplied. This further affords underprivileged individuals the opportunity to gain quality education, and at the same time enhances the commercial property industryâ&#x20AC;&#x2122;s talent pool. â&#x20AC;&#x153;Opportunities that are spread across industry players through collaboration will trigger sustainable solutions to improvement in skills development,â&#x20AC;? says Mthembu. â&#x20AC;&#x153;In the long term, this will help with the transformation of the property sector.â&#x20AC;?

> SAPOA

SAPOA Bursary Students

Priscilla Menoe

Londiwe Mthembu t: +27 (0)11 510 9999 +27 (0)11 510 9973 e: londiwe.mthembu@abland.co.za w: www.abland.co.za

Nomcebo Nxumalo

SOUTH AFRICAN PROPERTY REVIEW

education – one on one

Engineering education initiatives, building lives and creating hope Many members will know GladAfrica as the sponsor of the SAPOA Annual Convention & Property Exhibition – but probably not for the work it does through the GladAfrica Foundation for the sustainable upliftment of communities in Limpopo and Mpumalanga By Mark Pettipher “The message we want to convey is that your situation today does not determine tomorrow; that leaders come from a diversity of backgrounds; and that if you can dream and hope and have someone who supports your dream, you too can have a bright future – and help make the future bright for others.” Ntwanano Mashaba, Trustee

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twanano Mashaba is passionate about the GladAfrica Foundation. Last-born of three children, she hails from northern Limpopo and is a qualified Chartered Accountant. Her name means “unity” – a person who brings people together. The Foundation is the dream of her husband, Noel, who is the Executive Chairman of engineering firm GladAfrica Group, a SAPOA Board Member as well as the Chairperson of SAPOA’s Ethics Committee. He wanted to create a platform to give back to the community (he himself comes from a village in Mpumalanga), and asked his wife to join him in co-chairing the Foundation. And so their journey began in 2013. As is the case with many fledgling institutions, there were initial challenges to overcome. There were even failures in the early stages – but from those failures came the identification of key areas of focus, including education and career development, social development and health research. “One of the ways in which to alleviate poverty is by educating communities,” says Mashaba. “It is a key area, where children are exposed to education opportunities from an early age. By building awareness of further education, we can empower them, and in so doing break the cycle of poverty.” The Foundation’s website sums it up as follows: “We believe that every child, no matter how destitute the environment in which they live, should have the opportunity to dream, the freedom to hope and a belief in

education – one on one the possibility to become a leader and help improve the livelihoods of the poor.” As such the one of the Foundation’s focus areas is to identify learners for mentorship and study support. This is done through partnering with schools and exposing learners to opportunities through career days. The Foundation is targeting learners in Grade 8 through to 11, instructing them on requirements of pass grades and subjects required to gain entrance into engineering courses at leading universities such as the University of Johannesburg. Having identified and earmarked potential candidates, the Foundation provides bursary support, which includes everything from paying the tuition fees and accommodation as well as paying for the required course literature. Once part of the engineering course, GladAfrica has also introduced a two-fold mentorship programme for students. The first part (through the university) is designed to boost students’ confidence by improving communication skills and helping them overcome the feeling of being overwhelmed and find themselves in the Jo’burg environment. In the second part, students are exposed to real-life work situations through vocational placement within the Group, guided by a mentor who is on hand to provide one-on-one advice on the challenges within the work environment. After being equipped with the necessary qualifications and work-environment skills, the long-term vision for each student is to work for a year within the GladAfrica Group, gaining further workrelated skills. “Coming into our work space allows the students to build their loyalty to GladAfrica,” says Mashaba. “It also helps them to see that there is a career path. “Awareness of employment is not the only objective of the career days. We also take the opportunity to add health education into the mix – we have a doctor on hand to explain the downside of sexual promiscuity and teenage pregnancy. “Millions of South Africans who live in communities where health education is sparse and poverty is a way of life,

are adversely affected by unfamiliar and misunderstood health conditions. Such ignorance creates myths, infuses social stigma and leads to discrimination against those affected. Knowledge and awareness can – and do – mitigate the debilitating effects of certain health conditions, and improve the ability of those afflicted to deal with their illnesses. “Epilepsy is one such condition – and one that has affected the life of a founder of the Foundation. In its first health-research project, the Foundation is partnering with a research organisation to raise awareness about and assist with the management of epilepsy in black communities. The ultimate aim is to contribute to community understanding and acceptance of stigmatised illnesses and provide individuals with the ability to better cope with their conditions.” Part of developing sustainability within communities is GladAfrica’s social development programme. “We need to look at the social ills brought about by poverty within our communities,” says Mashaba. “We have identified a crèche, and we have built amenities such as toilets and a kitchen. We believe that early childhood development is key to upliftment. The Foundation is also helping to train teachers and to equip them with the necessary specific skills to be able to understand early child development.” Healthcare awareness and education go hand in hand with social development. The Foundation seeks out charities to partner with, to champion their causes by providing needs-based support such as sanitation and care for the destitute as well as assisting with feeding schemes. “Each activity is analysed, and models and goals are developed and built to deliver what is required to benefit the whole community,” Mashaba says. Each deliverable, both long- and shortterm, is sustained by ensuring that each project has measurable objectives. “We have also partnered with the David Makura Charity Fund. Through an annual sponsored golf day, we are able to make contact with members of society to raise funds for GladAfrica

Foundation’s objectives. “We welcome partners who have a vision that’s similar to ours – because partnerships are integral to the success of the Foundation. The aim of partnering with us is to make a sustainable difference in our society. “The Foundation is hands-on, and anyone who partners with us will receive certificates of donation that align with B-BBEE requirements as well as SARS Section 18A of the Income Tax Act. “In addition to running the Bursary Fund, the career guidance programme and the health awareness objectives, we also run two annual campaign-driven charity initiatives. In June we run a ‘donate a blanket for the needy’ initiative, while in December we do a ‘Christmas food hamper’ drive. “The two donation initiatives, while not a sustainable objective, aim to at least make a difference in that moment in time – to bring a smile to a face and to fill a stomach and a heart with cheer, however short-lived.”

Student Testimonials

Ndumiso Manzi

Mukela Mabunda

Emarantia Ngomane

Ntwanano Mashaba www.gladafricafoundation.com GladAfrica Group Building Hertford Office Park, 90 Bekker Rd, Vorna Valley, Midrand, 1686 +27 (0)11 312 2537 +27 (0)11 312 2584 enquiries@gladafricafoundation.com www.gladafrica.com SOUTH AFRICAN PROPERTY REVIEW

education

The Property Foundation – facilitator of local community skills development The Property Foundation was established by Gary Fisher in 2009 as a non-profit company designed to meet physical infrastructure needs of public benefit organisations in disadvantaged communities By Marika Truter With property being my background, I established TPF with the mandate to build for public benefit by helping these agencies as they focus on serving people in great need. It is a fact that, almost without exception, these agencies require some physical premises from which to serve their communities. It is equally a fact that, almost without exception, these agencies lack the commercial, technical and financial expertise required to secure (whether by acquisition, lease or development) suitable premises for their operations.” Gary Fisher, Director

“A

s South Africa’s socio-economic landscape has developed post1994, some things are, as yet, unchanged; among these is the reality that many communities still live in abject poverty,” says Fisher, providing background to the impetus for establishing The Property Foundation (TPF). “Against this backdrop, there are numerous well-intentioned agencies, some in the public and some in the private sector, serving these communities by helping to meet basic needs ranging from healthcare and education (both child and adult) to refuge for vulnerable women and children, orphan care and many other initiatives designed to benefit those most in need of help. “In the early 2000s, I wanted to establish something in the non-profit sector. 16

SOUTH AFRICAN PROPERTY REVIEW

Local community skills “TPF comes alongside these agencies to provide project management services in this regard – including assistance with the securing of project funding – and as far as possible aims to facilitate local community skills development by including local tradesmen and professionals in the development process. In addition, we focus on environmentally responsible construction methods and materials, and will take into account carbon footprint when possible. “At that time, the property sector itself was trying to find its way in terms of social investment. The Charter hadn’t been signed yet, and everyone was pulling in different directions, so I wanted to create a vehicle for the sector to buy into as a collective, where they could download their CSI dollars into a common base that would then go out and build for other NGOs

that required accommodation. It could be a community centre, it could be an education facility. That remains the idea behind the TPF.”

Project planning “Each project goes through a thorough project assessment stage, where the applicant organisation, the proposed project and the risk factors are fully investigated,” says Fisher. “These include looking at intended beneficiaries, local stakeholder analysis, measurable performance indicators and physical development feasibility and budget, as well as concept, design, capacity, governance, sustainability and external risks. An agreement includes that the premises will, for a certain period of time after construction, be used for its intended purpose, and that it will be adequately maintained.”

education During the following stage of project management, TPF manages the appointment and ongoing services of the professional development team, including: ●● architects ●● engineers ●● construction contractors ●● environmental consultants.

commitments are upheld and that the property use is in accordance with the original agreement.

“TPF also acts as the liaison with the relevant town planning consultants and municipal and/or regional authorities where required,” says Fisher. “Through relationships with major banks and other sources of finance, we have the ability to help successful applicant organisations to raise the capital that’s required for completion of the project, as some lack the skills or resources to do so.”

Intellectual capital “Additionally, the company’s skill and vast experience in the structuring of financial arrangements (gained from almost 20 years in both listed and private property investment management) are not typically found in charitable organisations. This intellectual capital is employed to the benefit of successful applicant organisations.” TPF monitors completed projects (and the organisations that benefit from them) to ensure that they follow through on the commitments they made during the application stage. Monitoring continues for a pre-determined period of time to ensure that maintenance

“TPF aims to facilitate local community skills development by including local tradesmen and professionals in the development process. In addition, we focus on environmentally responsible construction methods and materials, and will take into account carbon footprint when possible”

Some TPF highlights include: ●● Baphumelele – Fountain of Hope: Acquisition and development of a property in Schaapkraal, Phillipi for use as an orphanage and support facility. Rosie Mashale’s inspirational dream has pioneered this exciting project. ●● Thembalitsha – School of Hope: TPF is assisting in locating and acquiring suitable premises in Athlone, Cape Town for a school that provides hope through education for Youth at Risk. ●● Mfuleni Community Park: Acquisition and development of a property in Mfuleni to support the community. This included a multi-purpose hall, childhood development centre and library. ●● QuadPara Association of Western Cape: Development and refurbishment of a property in Durbanville, which will serve as QAWC regional office and will provide service facilities for people living with a disability. “Our work is not about BEE transformation, but rather about focusing on being good citizens and trying to do good,” says Fisher. “The beneficiaries are disadvantaged people. Our vision remains the creation of an enduring and visible legacy of participation by the property sector in the growth and development of South African society.”

SOUTH AFRICAN PROPERTY REVIEW

education – one on one

On point

with initiating education

As South Africa’s largest listed property company, Growthpoint is known for its more than R100-billion portfolio. But how many of us know about its education and entrepreneurial initiatives, which are contributing to South Africa’s growth and the upliftment of the less fortunate? By Mark Pettipher

f you talk to anyone at Growthpoint about education and entrepreneurial initiative, you’ll be directed to Shawn Theunissen, who is the Head of Corporate Social Responsibility. He is a member of Growthpoint’s Executive Committee and reports to CEO Estienne de Klerk. If you look at Theunissen’s LinkedIn profile, you’ll see that his primary role at Growthpoint “as a member of ExCo is to drive business growth for the future of the organisation”. He is the executive sponsor for developing Growthpoint’s internal strategic planning capability. His role as the Head of Corporate Social Responsibility encompasses transformation (diversity and inclusion), enterprise development, corporate social investment, and the social and ethics function. “We look at an all-encompassing value chain, from ‘cradle to success’, so to speak,” says Theunissen. “We focus on improving the quality of education, and we have partnered with the government to improve our existing education system. “We realised that, in order to make an impact, we needed to start making a difference at the early childhood development (ECD) stage, and follow that through to primary and secondary education, and further into tertiary education and skills development. “We have a long-term philosophy, and our approach is to monitor and measure the entire education value chain. In so doing, we are able to realise the impact that our support is having on individual lives – and, beyond, on the economy.”

Shawn Theunissen, Head of Corporate Social Responsibility at Growthpoint

“We have identified that there is a gap in the ECD practitioner side, so we have focused some of our support on funding organisations that train ECD practitioners. One such organisation is the Thandulwazi Maths and Science Academy, which was initiated by the St Stithians Foundation in 2005. The Academy was created to address the critical issues in the teaching – and learning – of mathematics and science in South Africa.” Growthpoint also works with the Loaves and Fishes Network in the Eastern Cape, whose vision is “to achieve effective, sustainable and holistic childcare training and development in disadvantaged communities in the Eastern Cape”. A third organisation to benefit from Growthpoint’s teacher training development is Scatterlings, a relatively new player in the South African ECD sector.

Scatterlings’ goal is to provide practical and ongoing teacher training, together with the provision of daily curriculums and teaching materials. Theunissen believes that if you train the practitioner and give them space to thrive, the learning that takes place will happen in an effective way. “In addition to providing funding and bursaries for teachers, we have also assisted in building classrooms,” he says. While Growthpoint is at the forefront of aiding education initiatives through various partnerships, Theunissen is particularly proud of the company’s own Growsmart – a leading education initiative in collaboration with the Western and Eastern Cape Departments of Education. Growsmart is a fun, competitive and exciting resource that is curriculumbased and helps educators and learners to master their required syllabus work. In February this year, Growsmart launched its ninth annual programme focused on boosting the literacy, numeracy and science performance of primary school children. “The collaborative approach harnesses the resources of Growthpoint’s shopping centres in the two provinces, and creates a meaningful way for us to make a real, positive contribution in our communities,” explains Jewel Harris, who heads up the Growsmart initiative for Growthpoint. The programme started out nine years ago as a humble English spelling competition to help boost literacy. Since then, it has helped thousands of children and hundreds of teachers, and has been expanded to include literacy, writing, maths and science. SOUTH AFRICAN PROPERTY REVIEW

education – one on one

Norbert Sasse, Group CEO of Growthpoint Properties

As a measure of its success, Growsmart’s story-writing initiative has already produced 80 published authors under the age of 13, whose books are now being used in the school system. Growsmart continually strives to find more ways to extend its reach within the schools that need the most help, and aims to foster quality education in an increasingly holistic way. This year, debating has been introduced as part of the programme. Debating is a natural extension of Growsmart, says Harris. “It harnesses newly gained literacy and knowledge, and gives children the opportunity to use their growing vocabulary and eloquence to put forward logical arguments. This helps to boost their confidence, critical thinking and publicspeaking skills, which are all essential in today’s world, whatever a child aspires to be.” “For Growthpoint, Growsmart helps to give primary school learners access to quality education,” says Theunissen. “Growthpoint isn’t only invested in our property assets in the Western and Eastern Cape: we are also invested in the communities. Growsmart is an effective way of creating social capital for our business and stakeholders alike.” Growsmart works with 160 schools across the Western Cape and 60 in the Eastern Cape. Schools are chosen by the Department of Education on the basis 20

SOUTH AFRICAN PROPERTY REVIEW

of showing poor literacy performance. Growsmart targets Grades 4, 5 and 6, which is where the department has identified its potential to have the biggest possible impact. Through competitions, spelling bees, maths olympiads, a science competition, story writing and debating, the winning learners are given the opportunity to apply for bursaries at Growsmart’s three bursary partners – Saili, Christel House, and Leisure Education Trust. Friends of Growsmart include Grant Thornton, Pearson, Via Africa, Christel House South Africa, Intergro Technologies, Novus Holdings, Leisure Education Trust, Two Oceans Aquarium, Cellu City and Vodacom, Koreserv, Essential Cleaning, Scrabble SA, doh!nuts, Saili, Doc Sciencia, The Look Out, Alphen Farm Stall, McDonalds and Pick n Pay. Growthpoint supports tertiary-level students by contributing not only to the SAPOA bursary scheme but also via its own bursary fund. Theunissen highlights student Lauren Daniels as an example of helping learners to achieve their full potential: “Lauren started with us as a Grade 4 learner who went on to gain a scholarship to go to Christel House International. She was a consistently high achiever, and she has since been awarded a bursary that will fund and support her in her post-secondary studies at Stellenbosch University. “Giving back definitely begins at home. A couple of years ago, we developed Growthpoint Gems as part of Growthpoint Properties’ corporate social investment programme. This programme creates value for lowerearning employees and their immediate families by providing educational grants for their children at primary, secondary or tertiary level.” “At Growthpoint, we believe corporate social investment starts at home – in the communities where our staff live and where our business has an impact,” says Growthpoint Group Chief Executive Officer Norbert Sasse. “By ensuring that bursaries are made available for their children, we can add value to the lives of our employees with Growthpoint Gems. It recognises the importance of

a good education, yet also considers the challenges that many families face because of the escalating costs of schooling and tertiary education in South Africa.” “Through the Growthpoint Gems programme, primary and secondary school education bursaries are awarded to learners from Grade 4 up,” says Theunissen. “The bursaries cover costs related to prescribed school fees, uniforms, stationery and other learning materials. In addition, life skills, vocational guidance and general support are also provided where necessary to help learners on their path to success. “We aim to help learners and students in the Growthpoint family to reach their potential and secure a better future for themselves and their families. We believe the future of South Africa’s youth lies not only in their hands but in ours as well. This is a responsibility we take very seriously. “Equipping future generations with the skills they need to succeed in today’s competitive work environment is not only a win for them – it is a win for all of us.”

Lauren Daniels

education – one on one

SOUTH AFRICAN PROPERTY REVIEW

education – one on one

R1-billion in procurement opportunities for small businesses Property Point, a Growthpoint Properties initiative, has officially facilitated more than R1-billion successful procurement opportunities for small businesses operating in South Africa’s property sector. Property Point was launched in 2008; this year marks a decade of its success in developing sustainable small businesses. Over the past 10 years, it has facilitated market opportunities worth R1,14-billion for the 168 SMEs that have taken part in its two-year enterprise and supplier development programmes. It has also created more than 2 405 full-time jobs

he success that Property Point builds for small businesses is concrete: its SMEs report an average 44% growth in revenue. “Property Point has cemented a decade-long track record of meaningful impact developing sustainable small businesses by enabling access to more than R1-billion in market opportunities,” says Shawn Theunissen, Head of Corporate Social Responsibility at Growthpoint Properties. “Its a massive achievement, and one that we are incredibly proud of. Significant impacts such as this are only possible by working together with the sector and its stakeholders.” “Growthpoint’s genuine commitment to transformation has been actively fostered through Property Point over the past decade,” says Estienne de Klerk, Chief Executive Officer of Growthpoint Properties SA. “Property Point has created a bridge between the property industry and small black business that facilitates real access, opportunities and wealth. This creates jobs and makes a positive contribution to the economy. We are very pleased with its success and the positive impacts we have be able to make through Property Point.” Property Point has pioneered collaboration across the property industry by working with the public and the private sector. With partners such as Attacq Limited and the Department of Small Business Development (DSBD), it is driving enterprise and supplier development forward for the real estate sector. “The commitment of our partners, and the extraordinary passion and persistence of the amazing Property Point entrepreneurs are changing the small business landscape in South Africa’s property sector,” says Theunissen. Property Point has had deep-rooted success in growing competitive small 22

SOUTH AFRICAN PROPERTY REVIEW

businesses and unlocking supply chain opportunities in Gauteng, KwaZuluNatal and the Western Cape. It supports small businesses in growth, building a good reputation, accessing market opportunities, and using innovation to become sustainable concerns that stimulate the economy as a whole. Besides its successful enterprise and supplier incubation for the property sector, Property Point also leverages its

resources to boost entrepreneurs across all sectors of the economy. So far, 3 700 entrepreneurs have attended Property Point’s seminars and workshops, including the popular monthly Entrepreneurship To The Point sessions. “We are excited to build on this success and expand our impact on small enterprise development, job creation, economic growth and a more inclusive economy for South Africa,” says Theunissen.

PROPERTY POINT ENTERPRISE AND SUPPLIER DEVELOPMENT PROGRAMME Annual Impact Report 2008 to 2018

10 THINGS YOU DIDN’T KNOW ABOUT PROPERTY POINT

168

Beneficiary companies

89%

of beneficiary companies successfully graduate from the programme

5 The median annual revenue growth rate of Property Point companies from baseline assessment to graduation since year of selection

Number of attendees at Entrepreneurship To The Point Networking Events

1321

Entrepreneurs attended training and workshops

43%

2375

Number of women-owned businesses on the programme

R 1 142 Billion 10

Beneficiary companies awarded contracts by Growthpoint Properties

44%

Current beneficiary companies

Total value of contracts awarded to programme beneficiary Companies

2259

Full time equivalent Jobs created

A DECADE OF IMPACT

BUILDING SUSTAINABLE SMALL BUSINESSES

SOUTH AFRICAN PROPERTY REVIEW

one on one

Vision for City of Cape Town to become a “walking” city Urban designer, commuter cyclist and lover of music, SAPOA’s new Western Cape Chairperson Simon Nicks is excited about the development opportunities the province and the City of Cape Town hold By Marika Truter

icks is a champion of pedestrianising urban areas. “A fundamental metric of our work is that you measure access by walking distance,” he says. “If you can’t walk there, it’s too far. If you have a resilient city where most people can walk, you’re not as dependent on public transport. “I love my work. I am passionate about urban design. I’m a great believer in design solutions to urban and rural problems. It could be design that is applicable from the detailed right through to the regional scale – from how a street cross-section should work to accommodating informal trading, to non-motorised transport, such as cycling and pedestrianisation. “The Cape Town CBD provides up to 180 000 jobs, with about 55 000 people living in the City Bowl. They have good access to the city; everybody else has to come in by other means. That’s where transport issues start. With a collapsing transport system, SAPOA has indicated to the Cape Town Mayoral Executive that we are very concerned that we are approaching a tipping point. “We’ve been leading a dialogue with the Mayco of the City Council, looking at five main areas of concern: affordable housing, public transport, leadership, the water crisis and development application and administration. The private sector and property industry operate in a policy and implementation framework created by government. We therefore engage on different levels nationally and provincially – but specifically with the City of Cape Town, because this is where 70% of action in the province happens. “Until recently, the Western Cape and the City of Cape Town have been seen as investment destinations that attracted interest above the general national 24

SOUTH AFRICAN PROPERTY REVIEW

Simon Nicks, SAPOA’s new Western Cape Chairperson

average. The Atlantic Seaboard is almost more part of the global property market rather than local. The attractiveness of Cape Town has manifested itself with rural people looking to improve their livelihood chances here. They see Cape Town as offering opportunity, even though cities such as Johannesburg and Durban might be closer. Addressing the potential challenges that arise out of this trend, Nicks says that having a large number informal settlers attracted to your town shouldn’t be a problem – as long as you’re managing their impact effectively. “We’ve become concerned that the ‘shine’ of Cape Town is getting lost in those areas,” he says. Nicks has always been focused on the built environment. “I worked as a housing activist in the 1980s, helping people in informal settlements resist forced removals,” he says. “I studied commerce, architecture, and urban design and planning at UCT and with the City Council. I ended up in a small practice for the last 30 years or so. The practice, CNdV africa

Planning and Design (CNdV africa), is ideally placed to get things done. We are small and flexible, and we can move in different circles depending on the issue we are dealing with.” One of the highlights for the practice, was its work on the Spatial Development Framework, highlighting environmental issues such as water shortages, running of out space for landfills, wastewater treatment works that weren’t functioning, and the need for restructuring a number of urban settlements. “CNdV africa developed a number of framework models that helped us understand the relationships between issues – such as municipalities requiring rates, workers requiring income, the property market requiring rentals, business ventures requiring profit, and savings deposits requiring interest. As soon as one forgets any of those elements in the overall framework, problems start to arise. “My vision for SAPOA in the Western Cape is humble. I’d like us to promote a city that works well for a thousand small designers and developers. We keep talking about catalytic projects – about 80% of resources get sucked into that catalytic glamour. In informal settlements, you’ve got thousands of people all building their houses in parallel and getting it done … and then you have the Athlone Power Station site: 10 to 12 years later, with millions spent on consultant fees, there doesn’t seem to be anything to show for it. “I am sceptical about grand visions. My vision – that we should all be able to walk around our city to get to most of what we need – might be quite mundane and prosaic, but I believe it will be great to get people to focus on that.”

SOUTH AFRICAN PROPERTY REVIEW

retail – one on one

Sandton City: still going strong Forty-five years young, Sandton City is attracting international and domestic shoppers. Constantly looking for ways to keep relevant and on trend, the Liberty Group Limited, Liberty Two Degrees and Pareto-owned centre is still the first choice for flagship international retail brands By Mark Pettipher

andton City was “born” in 1973. When launched, the shopping centre occupied 50 000m2; by late 2011, it measured just over 146 000m2. Today, Sandton City and Nelson Mandela Square together claim to be one of the largest retail precincts in Africa. “Sandton City has always strived to be ahead of the pack, not only in the retail offerings but also when it comes to technology,” says General Manager Preston Gaddy. “While we have achieved a 45-year milestone, we’re not really celebrating the passing of time – rather, we are opening a number of new retail outlets that will continue to excite and delight our shoppers. “We have introduced Wi-Fi, ticketless parking and licence-plate-recognition technology, further enhancing our ability to track, monitor and understand our footfall demographics. “When Stuttafords closed last year, it gave us an opportunity to accommodate new tenants whom we were not able to consider in the past. It also helped us to move and right-size some of our existing tenants.” The dynamic of Sandton itself has changed. There are many more offices and corporate headquarters in the immediate vicinity of the mall. “With an estimated 25 000 office workers in the Rivonia Road area alone, we can clearly see what is driving the need for change in our retail mix,” says Gaddy. “To cater for this change in demographics, we have introduced retailers such as Dis-Chem, Pick n Pay Clothing and DionWired. We are also introducing Turkish global fashion retailer LC Waikiki as an affordable fashion brand.

SOUTH AFRICAN PROPERTY REVIEW

Preston Gaddy, Sandton City Centre Manager

“When Stuttafords closed last year, it gave us an opportunity to accommodate new tenants whom we were not able to consider in the past. It also helped us to move and right-size some of our existing tenants.” “In spite of South Africa being in a technical recession, the Sandton City’s Diamond Walk continues to defy retail trends by showing great growth. Much of the high-end spending is being driven by African customers from oilrich West Africa and the Francophile African countries.” Sandton City is conveniently located within walking distance of the Sandton Gautrain station and within easy access

of highways and main roads within the Sandton CBD. “The iconic Sandton City has been resilient over the years,” says Nikiwe Mkhabela, Asset Management Executive at Liberty Two Degrees. “It caters for every shopper’s needs, and offers a safe and happy environment for everyone to enjoy. With more than 300 leading local and international retailers, Sandton City is a one-of-a-kind premier fashion and leisure destination. It’s an energetic hub of Afro-cosmopolitan glamour – international shopping with South African flair.” “Being well established and a leader in the retail sector give us an advantage over many other environments,” says Gaddy. “If you consider the many stores you see around the country, chances are that their flagship store is here at Sandton City. This is a major plus for us – because when international brands are considering entering the South African market, Sandton City is usually first on the list. “With the introduction of two of the world’s leading children’s brands – Lego and Hamleys – to our centre, we are able to offer ‘kidotainment’ as part of a full family offering. “We realise that the retail environment continues to be threatened in many ways. We also understand that Millennials are looking for instant gratification and a better experience, which they often get with online shopping. “We also know that Sandton is close to both the immediate commercial and leisure environments, so we are also introducing retailers such as Sportsmans Warehouse, who will cater for the Millennial who wants to go trekking. It’s

retail – one on one The convenience of transport when it comes to getting to Sandton City plays a significant role. The Gautrain has brought convenience and ease of access to the centre – it is safe, and it caters for about half a million square metres of office space, which is right on the centre’s doorstep not so much about apparel but more about equipment.” The convenience of transport when it comes to getting to Sandton City plays a significant role. The Gautrain has brought convenience and ease of access to the centre – it is safe, and it caters for about half a million square metres of office

space, which is right on the centre’s doorstep. “This fact is a major contributor to the weekday footfall that Sandton City enjoys,” says Gaddy. “Our footfall is definitely higher than that of most other malls in our vicinity. “As a rule, a shopping mall will cater for shoppers who live or work within a 15-minute drive. The densification of the residential area around us means that we don’t really have another super-regional mall in close proximity. Our competitors – the Mall of Africa, the Benmore Centre and Fourways – are not to be taken lightly because they cater for similar shoppers. But I believe that our growing mix of retail tenants will continue to offer a full on family shopping experience. “The ease of getting to the centre and the full shopping experience – from high-end luxury stores to takeaway

burger outlets – will continue to give us a competitive edge. “Going ‘green’ is another one of our initiatives. We’re constantly looking for improved ways of reducing our waste (for example, through the eradication of single-use plastics) and our energy consumption, as well as for the best ways to continue to save water.”

“Going ‘green’ is another one of our initiatives. We’re constantly looking for improved ways of reducing our waste (for example, through the eradication of single-use plastics) and our energy consumption, as well as for the best ways to continue to save water.”

Sandton City

SOUTH AFRICAN PROPERTY REVIEW

research – retail

The impact of price hikes on retail spend With continuous increases in petrol prices and municipal rates as well as higher inﬂation and a VAT hike, the retail sector appears to be headed for a rough time Extracts from Broll’s retail snapshot report, Q2 2018

South Africans are getting poorer BankservAfrica’s latest take-home pay index revealed that South African salaries increased by 2,2% year-on-year as at June 2018. However, inflation grew by 4,6%, effectively resulting in a year-on-year salary growth of -2,4%. When comparing the rate at which average salaries for whitecollar workers have increased in the last decade, it can be determined that South Africans are in fact getting poorer even though salaries are technically increasing. While real salaries rose at an average of 4,9% per annum between 2008 and 2018, when adjusted for inflation, it turns out that salaries should have grown by 6,7% per annum in order for people to be earning the equivalent of what they did in 2008. Comparing 2018 real vs adjustedfor-inflation salaries, people are 10,6% poorer than they were in 2008.

FACTORS AFFECTING CONSUMER SPEND

Electricity

Inflation rate

The year-on-year inflation rate for June 2018 increased to 4,6%, up from 4,4% in May 2018, with food price inflation increasing to 4,3% year-on-year. In terms of the inflation index for 2008 (compared to that for 2018), inflation increased from 63,6 in 2008 to 106,5 in 2018, an increase of 67,5% over the 10-year period.

VAT and taxes VAT increased by one percent to 15% effective from 1 April 2018, with the spending capacity of consumers further dampened by an increase in the fuel levy of 52 cents per litre and increased sin taxes of between six percent and 10%, depending on the product.

A study done by Globalenergyprices.com during the second quarter of 2018 indicated that the world-average price for electricity was R1,51/kWh, with South Africa averaging R2,05/kWh, ranking 58th out of 95 countries globally in terms of price per kWh. Electricity prices have risen by more than 350% in the last decade. This trend is expected to continue.

Rates and taxes The annual increase in municipal rates, taxes and services costs as well as the re-valuation of properties all increase the financial burden of consumers. For example, increases effective 1 July 2018 had many Johannesburg property owners up in arms, with some reporting increases of 60% – and even 5 000% – on property market values in certain instances.

Top 10workforce global CRE Flexspace trends 2018Innovation Extract fromculture JLL’s 2018 trends report Dynamic Digital drive Dynamic workforce Flexspace Innovation culture Digital drive

Smart real estate Smart real estate

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Smart real estate

SOUTH AFRICAN PROPERTY REVIEW

research – retail Following this outcry, the City of Johannesburg granted a rebate on the first R350 000 of a property’s value, up from R200 000 previously. However, residents still faced increases in the price of water (16,9%), sewerage costs (between 14,2% and 45%, depending on the size of the property) and refuse (6,8%).

Fuel Fuel in South Africa is still considered to be relatively by global standards, sitting in the middle of an average fuel-price scale compared to other countries (with the average price around the world being R15,44/litre). However, the country has been faced with a number of price hikes recently, and on 4 July 2018 yet another fuel-price increase was implemented, this time breaking the country’s fuelprice record with a staggering rate of R16,02 per litre of 95 unleaded. When comparing the fuel price in July 2008 vs July 2018, an increase of 49,7% is evident. These increases not only affect the cost of transport but also the cost of food.

Food When looking at the cost of food compared to a decade ago, it is evident that most products have risen well above the inflation rate, with an average increase of 93,4% for the same basket of goods. White bread has increased from R5,89 in 2008 to R13,49 today. When looking at the rate of inflation and adjusting the

prices accordingly, white bread should only cost R9,86. That’s a 36,8% difference. In terms of inflation, the only products that work out slightly cheaper are milk and wine. Aspects that contribute to these price changes in a major way include electricity and fuel prices, both of which have increased well above the inflation rate, in addition to climate conditions such as the recent drought across the country.

Retail trade sales When looking at the trading densities (TD), sales appear to have increased from 2008 to 2018. To see a true reflection of the trade sales, inflation must be considered. A different outcome is then seen – one that supports current economic data and reinforces the fact that consumers are spending less on certain retail categories as the prices of other services, VAT and transport rise. Of the selected categories, only hardware experienced an increase in TD, which may be attributed to consumers being under pressure and opting to undertake DIY home projects rather than paying for contractors. Decreased consumer spending is also evident in the retail sales figures released by some of the country’s largest retailers during 2018 so far. Many of the retailers that are listed on the JSE are reporting minimal growth and, in some instances, even a decline in certain category sales figures, highlighting the challenging times the industry is facing.

What are consumers spending their money on in 2018? In terms of regional shopping centres managed by Broll, looking specifically at luxury spend and necessities, it is possible to ascertain which retail categories are being the hardest hit by the rising cost of living. Year-on-year TD growth shows that consumers continue to spend their money on necessities rather than luxuries, with categories such as Fine Jewellery and Beauty Salons and Spas reporting a 2,3% and 1,8% decline respectively. Categories such as Grocery/Supermarket and Pharmacy and Personal Care appear to remain resilient – because both food and medical products remain a necessity.

Conclusion The trend is set to continue throughout 2018, with little signs of relief. The price of fuel continues to rise, electricity tariffs keep increasing and living costs continue to rise overall. All of this has an impact on the retail supply chain, which means the goods and services that consumers spend on will continue to get more expensive. This will negatively affect the consumers’ pocket, and is expected to place further pressure on their disposable income. The retail market looks set to remain under pressure, so landlords and retailers alike need to be conscious of the pressure consumers are under. This makes the provision of shoppertainment and unique offerings more vital than ever before.

Adaptive organization Adaptive organization

Future skilling Future skilling

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Nurture an agile culture and workplace Nurture an agileagainst culture the ofagainst market andbackdrop workplace and transformation the digital backdrop of market and digital transformation

Adapting team competencies to meet Adapting team future CRE challenges competencies to meet future CRE challenges

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Create workplaces that are people orientated, Create workplaces that and areexperiential people orientated, personalized experiential and personalized

Buildings to become an epicentre for Buildings to become communities to share an epicentre for passions, experiences communities to share and experiences ideas passions, and ideas

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Consider new and atypical profiles to drive the atypical future of Consider new and your to organization and of profiles drive the future enhance CRE performance. your organization and enhance CRE performance.

Create a new wellness architecture to activate and Create a new wellness sustain human experience. architecture to activate and sustain human experience.

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Enhance human experience Meet community while human buildingexperience on the aspirations by Enhance Meet community potential of automation seamlessly connecting while building on the aspirations by creating and digitization. people andconnecting potential of automation seamlessly comfortable spaces. and digitization. people and creating comfortable spaces.

29 14 14

retail

Technology is pushing retail boundaries There is no doubt that traditional brick-and-mortar shopping remains the backbone of the South African retail industry – but new ways of purchasing are becoming standard practice in retail markets around the world, according to Malcolm Horne, CEO of Broll Property Group, speaking at the company’s release of its latest retail research paper, “From E- to M- to A-Commerce: The Impact of Technology on the Retail Industry”

hile e-commerce is well-entrenched in the market globally and the use of mobile devices (M-commerce) to conduct retail purchases is increasing steadily, A-commerce – also known as augmented commerce – is hovering in the wings, according to Broll’s research paper. Augmented commerce relates to retail that utilises augmented reality, enabling consumers to visualise products virtually in the real-world environment before purchasing. In general, South African consumers have yet to become more acquainted with these new retail practices, but local retailers need to keep up to speed if they don’t wish to be caught “sleeping on the retail watch”. New trends and products are emerging daily, making the retail environment volatile and exciting. “Technology has been the driving force behind these radical advancements,” says Horne. In addition, there is enormous pressure on major retailers to acquire brands that meet their consumers’ expectations and demands, while integrating new technologies into their day-to-day operations. Are these relentless technological innovations driving brick-and-mortar retail towards an eventual retail apocalypse? It’s hard to say. Transforming a traditional retail business digitally and technologically can be an overwhelming task, but may be a necessary one for many retailers as endusers demand improved, instant and simpler shopping transaction experiences. In some cases, retailers have started converting their “bricks into clicks” by closing under-performing stores and creating e-commerce fulfilment centres to beef up their online income stream. The South African online shopping marketplace is still very much in its infancy, but retailers are increasingly incorporating the convenience concept of “click-andcollect” into their business. Larger national

SOUTH AFRICAN PROPERTY REVIEW

Malcolm Horne, CEO of Broll Property Group

retailers such as Dis-Chem, Clicks, Pick n Pay, Mr Price Group and Cotton On now offer this convenient shopping service to assist time-strapped consumers. Broll’s research paper paints a vivid picture of the scope of technologies that could become part of the retail landscape in the near future and which are already being used in some marketplaces. Alibaba’s supermarket Hema, for example, has revolutionised mobile app shopping. Within nine minutes of receiving an order via the Hema app, staff hand-select the goods and send a personalised shopping bag to the delivery warehouse, where it is packaged for delivery and delivered within 30 minutes in a three-kilometre radius. The app also allows shoppers to purchase goods via facial recognition technology. Amazon Go, a partially automated, cashless and till-free store in Seattle, allows patrons to shop in the store using the Amazon Go mobile app. Now the same concept is geared to shake up grocery retail in Chicago and San Francisco. The research also highlights “endless aisle shopping” as the latest retail buzzphrase. As retailers look at downsizing brick-and-mortar portfolios, the concept of providing in-store kiosks where customers

can order products that are out of stock or not sold in store is growing. Once ordered, products are dispatched from off-site warehouses to customers’ homes. “Showroom” or “bag-free” stores take this a step further: a range of product items is “showroomed” in store but not kept in stock. Instead, items are ordered online and delivered directly to customers. If retailers are opting for more warehouse capacity, improved efficiency and speed are vital. This is where robots step to the fore. Various models of autonomous robots are already in operation: LocusBots work alongside warehouse staff and assist in locating and transporting products, while Sure Sort excels at a small-item sorting system. 7Fresh supermarket in China already offers autonomous shopping carts. These guide shoppers to the exact aisle and location of the products needed, display advertising and accept payment. The carts follow customers to their car with their purchases, and are programmed to return to the store completely unmanned. If that’s not mind-blowing enough, here come autonomous self-driving stores: Toyota’s e-Palette, Moby Mart and Robomart are some of the autonomous self-driving convenience stores that could potentially roam the streets 24/7 once they are fully developed. Consumers will use a specific app to request a visit from an autonomous self-driving store; once it arrives, the app can open its doors so consumers can select the products they want. Customers are charged automatically upon exiting the store. It seems clear from Broll’s research that retail is destined to be increasingly dominated by technology. “Adapting and keeping abreast of this uncertain landscape is a challenge that retailers will need to embrace,” says Horne.

SAPOA retail trends report

First positive growth in four quarters The SAPOA Retail Trends Report, compiled by MSCI, shows there has been a growth in the shopping centre trading performance as measured by the IPD Trading Density Index, lead by the recovery of trading densities of super-regional centres Extracts from Retail Trends Report ended June 2018

rading density growth came in at +0,2% year-on-year (y/y) in current price terms for the quarter ending June 2018 â&#x20AC;&#x201C; up from a revised -0,3% recorded for the quarter prior. The 0,2% y/y increase in trading density was a function of a positive 0,8% sales growth and a 0,6% increase in the amount of occupied trading area. Particularly encouraging has been the recovery of trading density growth in the super-regional segment. For the year ended June 2018, it was the top performing segment at two percent y/y, after growth bottomed out at -6,6% in July 2017. Despite the recovery in sales/ m2, the super-regional vacancy rate has continued to creep up. This suggests that the stores vacating were on average lower-density traders. The latest trading density growth figure is lower than Statistics South Africaâ&#x20AC;&#x2122;s nominal retail sales growth of 2,9% y/y for the year ending June 2018, implying that the sample of mall-based retailers underperformed the larger retail market for the period from a salesgrowth perspective. Regional and small regional centres recorded positive year-on-year growth in their annualised trading density of 0,5% and 0,6% respectively for the year ended June 2018. The neighbourhood-centre segment continues its slide, with another quarter of negative annualised trading density growth at -1,6% y/y. Retailersâ&#x20AC;&#x2122; cost of occupancy continued its upward trend with a 50bp y/y increase to June 2018. This was the result of a 0,8% growth in overall sales and a 6,3% y/y increase in aggregate gross rental. Though the aggregate rent-to-sales figure was up half a percent year-on year, there

was some variation in the quantum of increases across the different retail segments. While cost of occupancy in the super-regional segment remains the highest â&#x20AC;&#x201C; 11,1% as at June 2018 â&#x20AC;&#x201C; the largest increase was seen in the small regional segment (+110bps y/y to June 2018). Analysing trading density growth on a merchandise category level reveals some interesting insights. Particularly noteworthy was the spread in the rate of growth between merchandise categories in the different retail segments. A common characteristic in the categories recording positive trading density growth was that this was mainly achieved through reductions in store size. This suggests that landlords are actively rightsizing tenants across different categories in order for them to optimise sales efficiency and improve affordability. The fact that sales growth is also varying significantly between segments also suggests that consumers may be preferring to visit specific retail formats for certain types of purchases, with factors such as convenience, drive time and comparative shopping potentially playing a role.

Key economic drivers for the retail sector The South African economy entered a technical recession in Q2 2018, as the countryâ&#x20AC;&#x2122;s GDP had declined for two consecutive quarters. The economy shrank by a seasonally adjusted annualised rate of 0,7% quarter-on-quarter to June 2018, following a 2,6% quarter-on-quarter contraction in the prior period. The result surprised to the downside, as market consensus was for a positive 0,7% growth.

The latest quarterly decline pushed the annual GDP growth rate down to 0,4% y/y â&#x20AC;&#x201C; the weakest growth rate since the first quarter of 2016, when the economy contracted by 0,3%.

Retail vacancy rates The current retail sector vacancy rate of 4,2% is above its long-term average of about 2,7%. The latest quarter saw quarter-on-quarter increases in the vacancy rate of all retail segments â&#x20AC;&#x201C; with the exception of neighbourhood centres, which recorded a 50bp improvement over the last three months. The super-regional segment recorded an increase of 30bp over the last quarter, meaning its vacancy rate is now more than triple its long-term average of 1,8%. While the super-regional vacancy rate trend traditionally has had a seasonal element to it, the movement since mid-2015 has been a departure from its longer-term trend. The current quarter is the first period since 2010 â&#x20AC;&#x201C; when the neighbourhood centre benchmark started â&#x20AC;&#x201C; where the vacancy rate of super-regional centres exceed that of neighbourhood centres. This trend could persist in the short term as the super-regional segment gradually works through the structural impact of the Stuttafords wind-down and Edconâ&#x20AC;&#x2122;s restructuring. To download the report, visit http://www.sapoa. org.za/research/ retail-trendsreport/

SOUTH AFRICAN PROPERTY REVIEW

retail – one on one

From Mthatha to the top of the property ladder Vuso Majija, Retail Executive Director at Fortress REIT, says the big focus in retail property right now is lifestyle and convenience. Consumers increasingly want retail experiences that offer more than just the opportunity to shop. Nevertheless, he identifies the rapidly developing township market, which is seeing more malls opening, as a definite growth opportunity By Warren Mposi

fter 13 years working for some of the biggest names in the South African property sector, none of the trappings of success has gone to Vuso Majija’s head. Sitting across the table in the plush new offices of Fortress REIT Ltd (a diversified listed property group), he still embodies the humility that was instilled in him during his rural Eastern Cape upbringing. Born in Mthatha, where he completed his early primary school education, Majija moved to the Western Cape to stay with his aunt in Cape Town from Standard 2 (Grade 4). Coming from a family of teachers, he was inculcated with the importance of education from a young age. He soon settled into life in the Mother City, where he was enrolled at Rosemead and then Battswood primary schools before moving on to Wynberg Boys High. Inspired by a mini-building boom he witnessed in Mthatha in the early to mid-1980s, his initial aim was to study architecture after completing high school. “It was probably in about 1987 that several new developments went up in Mthatha, for the first time providing houses that young professionals such as nurses and teachers could afford,” he says. “That really sparked my interest in building, as I witnessed first-hand the sense of optimism and urban renewal that it could engender. At first I thought I’d be an architect, but the fact that drawing was not my strength made me consider other options.” Majija eventually decided to study civil engineering and enrolled at Cape Technikon, which is now the Cape Peninsula University of Technology. After completing the compulsory two

SOUTH AFRICAN PROPERTY REVIEW

Vuso Majija, Retail Executive Director at Fortress REIT

years of theoretical study, he joined Africon International, a civil-engineering consulting firm, to do his third year inservice training in 2001. Placed in the roads department, he gained a thorough grounding in the development of thoroughfares to and from new retail centres and other developments. “Quite a few of the projects involved the construction of roads for shopping centres, where I found myself exposed to the property ownership side,” says Majija. “As a civil engineer, you are told what to do and you execute. I really wanted to be on the side, driving the development.” As fate would have it, a good friend told him about a new degree being introduced at the University of Cape Town (UCT) – a Bachelor of Science in Property Studies. After completing his in-service training at Africon, he quickly enrolled at UCT the following year and found himself thoroughly absorbed in the new Property Studies degree, which covered everything from economics to

town planning and even a bit of quantity surveying. In 2005, during the fourth and final year of his studies, he met his future wife, Vuyokazi, who also hailed from a family of Eastern Cape teachers. After graduating, Majija moved to Johannesburg. He was initially employed as a Property Manager focusing on managing industrial properties and smaller shopping centres in decentralised nodes, but he quickly progressed to Junior Asset Manager. Majija cites this period as critical to his development as a property professional. “I worked under Andrew Texeira, who took me under his wing and taught me so much about the industry,” he says. “It was an excellent grounding in property management.” After a stint working as a centre manager, Majija soon progressed to a full asset manager, working on the entire Fortress retail portfolio – something that put him in direct contact with a hugely diverse range of retail tenants. “Working closely with tenants really enables you to get a thorough understanding of your tenants’ trading environment, and how they view the market,” says Majija. “The great thing about retail is that it’s forever changing, which gives you a chance to learn a lot about trading conditions and the general state of the economy. When you’re engaging with tenants every day, you really feel as though you have your finger on the pulse of the economy.” Despite his love of retail, he concedes that South Africa is over-supplied with large regional shopping centres, particularly given the bleak economic climate. The ill health of the domestic economy was

retail – one on one

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confirmed when Statistics South Africa revealed that real gross domestic product shrank by 2,2% in the first quarter of 2018 – the biggest quarter-on-quarter decline in nine years, and far worse than anticipated. “We’re still trying to emerge from an economic headwind, and that’s complicated by the fact that South Africa has probably built an excess number of retail centres,” he says. “There probably isn’t much room in the current economic climate for more large malls such as Sandton City or Century City – but there are still opportunities for smaller centres here and there.” Majija says the big focus in retail property right now is lifestyle and convenience. Consumers increasingly want retail experiences that offer more than just the opportunity to shop. Nevertheless, he identifies the rapidly developing township market, which is seeing more malls being opened, as a definite growth opportunity. Online shopping is another area that is likely to expand, but Majija cautions that the growth trajectory of the digitalretail segment will be slower in South Africa than elsewhere because of logistical challenges and unique spatial challenges of South African cities – a legacy of our divided past. Having obtained his MBA from the Gordon Institute of Business Science in 2016, Majija was appointed as a Retail Executive last year. In his new role, he has big plans for the Fortress retail portfolio, which currently consists of 66 properties of varying size and quality. He aims to streamline that to about 50 properties that are as similar as possible to the fund’s two flagship centres, the 34 000m2 Weskus Mall and the 36 000m2 Evaton Mall. On a personal level, he hopes to travel more and spend more quality time with his family. He has one daughter, Khanyo, who is just over a year old, and plans to have another child in the next couple of years. He counts cycling and gym among his main outside interests, as well as socialising with friends and family over a braai. “I’m really a family man at heart,” he says. “That is something that is very important to me.”

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corporate real estate

Facilities management in the property sector According to a Forbes magazine article by Jeanne Meister, “The global facility management (FM) market will be worth US$1-trillion by 2025. It’s a discipline that needs to balance the rapidly changing needs and demands of the various stakeholders By Abubakr Hattas, Group Business Improvement Specialist at Servest

n the corporate real estate arena, portfolios are not as simple as renting a floor, a block in an office park, or even buying a real estate property. Businesses want to focus on their customers and invest in their core areas of expertise, which satisfy their customers’ needs. As a result, they are optimising their property selection in order to rationalise cost and achieve portfolios of the right size. The nature of the workplace and what is considered “the office” has evolved to become a business within a business. No matter what shape or form your corporate real estate takes, it requires fundamental maintenance that ensures the space is fit for purpose, limiting the risk to its people and the impact on budgeting constraints, and supporting the overall business objectives. With the introduction of standardisation, and the opportunity for benchmarking, outsourcing and service level agreements with key performance indicators (or KPIs), a new management function has been introduced. In many cases, this will result in considerate business benefits – the greatest one being the tremendous cost savings that come from knowing what to expect from your facilities management providers. Stanley Mitchell, Chairman of ISO/TC 267 – Facility management (the ISO technical committee that developed the standard), says that ISO 41001 will assist organisations in a number of ways by establishing a common approach and a set of processes that can be referred to around the world. “ISO 41001 is the first standard of its kind for facility management,” he says. “It has the potential to make a real difference to organisations by improving workforce health and safety, reducing organisational impact on the environment 34

SOUTH AFRICAN PROPERTY REVIEW

and effecting considerable cost savings and efficiencies.” Source: https://goo.gl/qvTCZD

In fact, this is clearly stated in the foreword of the new standards of Top Trends in FM, says Ian Entwisle, CEO of Global Workplace Solutions EMEA. “Talking to clients, I’m often struck by how quickly the world of facilities management is changing,” he says. “Global influences such as demographic and social changes are contributing to a shift in how the workplace is viewed and what people expect from it.” The standard – much like any other measure – is only a starting point of the already-established facilities services industry in South Africa. But it is also an opportunity to build longterm relationships between facilities management providers and their customers, through robust discussions that affect their business that will allow for a high a level of quality, transparency and accountability. Facilities management needs to be at the forefront of ensuring this value chain to the business, to provide the best value possible. The standard therefore brings with it a common language for facilities management practitioners. In other words, we now have an opportunity to manage expectations that goes beyond just saving money: it also identifies areas where facilities management adds value to an infrastructure. However, it is important to localise the standard in accordance with South Africa’s changing context and conditions, as well as workplace practices. In its analysis, an online report on the top trends in facilities management (how society, demographics and technology are changing the world in

FM) states that “It is said that by 2020, Generation Y will make up half of the global workforce, and that people are also choosing to work for longer.” This is the result of the fact that people are living longer. “Organisations will have to balance the needs of the different generations of people. Wellness is also a factor in boosting productivity, attracting talent and reducing sickness and absenteeism”. Source: https://goo.gl/AnBKLh

In South Africa, there are also issues of diversity to consider, which include accommodating different cultures and religions. Companies will have to ensure the comfort of their people in terms of providing facilities that cater to their needs. (An example of this are prayer rooms for Muslim employees.) The integration of services, therefore, will have a much greater impact on the general provision of services, which cuts across HR and IT. We also need to consider the local context in a manner that resonates with different cultures in the way we choose to communicate and through ergonomics. When we add to this the environmental issues that are closely linked to an organisation’s operations – such as water and sewage, climate changes and efficiencies in resources – we can see that standards require continual improvement, but also adaptations for the local context. South Africa is experiencing dramatic changes in weather patterns across the country, and cities such as Johannesburg and Cape Town now appear to be swapping weather conditions – which will have an impact on infrastructure that was built decades ago. Standards serve the purpose of benchmarking; however, they must always be viewed within the local context – such as the value chain of offerings – as well as cost-saving measures.

reatail initiative

Delivering value to local communities and investors Peri-urban shopping centres can contribute to enterprise development, social upliftment and infrastructure rollout, while also yielding good returns for investors. One example is the recently opened Bambanani mall in Diepsloot West. Jackline Okeyo, Business Development and Operations Director at Nthwese Developments, explains how it’s done

iepsloot, plagued by a lack of services and infrastructure, may not seem like an obvious location for a mall – but it’s a hub of economic activity. Enter Nthwese Developments’ R250-million 18 000m2 Bambanani Shopping Centre, which opened in November 2017.

Why a shopping mall? Despite high unemployment in the area, Diepsloot residents needed a safe place to shop. Bambanani mall offers greater choice, access to more competitive pricing and convenience. Developed to meet the retail requirements of consumers in the lowto middle-income bracket, its tenants include Shoprite, Cashbuild, a medical centre and furniture and fashion stores.

The impact of enterprise development In South Africa, consideration must be given to development of black-owned companies to ensure they can compete. Bambanani can have a sustained social impact and transform the community – provided it’s approached correctly. Nthwese believes investing in local enterprise development leads to longterm economic growth. A key element in the development was Nthwese’s commitment to procuring services from black-owned businesses in the community, sourcing labourers from the township for the duration of construction, and identifying local security, cleaning and landscaping businesses. Nthwese worked with its facilities management partner Fullserve, a Level 1 B-BBEE company, to provide training for Toyiya Empire (cleaning/ landscaping) and Selwalenkwe (security subcontractor). Fullserve subcontracted 30% of its contract to these businesses; Nthwese will assist both in developing capacity to meet the mall’s requirements.

This is a 12-month programme. The business owners also received training in areas such as recruitment, staff management, marketing, and compliance with industry standards. After a year, both companies will be able to demonstrate a track record, and will have the skills and capacity to market their services to new clients. Preferential procurement at this level can help transform the economy. It is vital for established businesses in the property sector to partner with small enterprises, to foster practical participation for emerging business owners and encourage involvement in decision-making. In addition to providing training for these businesses, Nthwese continues to monitor and evaluate their performance to ensure the partnership is sustainable.

Infrastructure development Basic infrastructure is critical for property development. Transport, sewage, water and electricity systems are vital to any retail centre’s viability and prosperity –

and fundamental in creating an enabling environment for sustainable communities. Nthwese has always been committed to addressing the need for new infrastructure to meet the demands of a growing economy. As part of the township establishment conditions approved by the City of Johannesburg, bulk infrastructure for Bambanani had to be developed to meet the requirements of a large retail mall, and improve access to infrastructure for the local community. The assistance provided by the Department of Trade and Industry (DTI), through a community infrastructure grant under the DTI’s Critical Infrastructure Programme (CIP), is an example of a successful public-private partnership. The DTI’s CIP, a cost-sharing incentive for approved developers that co-funds building of infrastructure before projects can go ahead, helped to subsidise the spend on infrastructure for the project, which would otherwise have required additional expenditure from Nthwese.

SOUTH AFRICAN PROPERTY REVIEW

opinion

Rethinking the value of infrastructure in South Africa The National Development Plan notes that to “achieve sustainable and inclusive growth by 2030, South Africa needs to invest in a strong network of economic infrastructure”. And, as we are a little more than a decade away from the targets set for 2030, now is the time to take stock of investments to date, and current and planned infrastructure projects By Mathieu du Plooy, Managing Director at WSP Africa

he need for infrastructure investment and development has not gone away. We need to focus on opportunities that show immediate economic contributions without compromising their adaptability to incorporate new technologies to futureproof our infrastructure networks and ensure sustainable and inclusive growth.

Building confidence in the new guard Despite market optimism, there are some reservations in the private sector with regards to how the country will fare under President Cyril Ramaphosa. Political and environmental uncertainty, reduced government expenditure on large-scale infrastructure projects, and stretched balance sheets of state-owned enterprises (SOEs) are causing the private sector to be “shy” to invest. But there are investors keen to get involved in projects across the country, eagerly awaiting clarity on key policy issues and the new guard’s turnaround strategies for the SOEs.

Regional integration to deliver on opportunities and projects We are not leveraging on integrated opportunities in southern Africa or the SADC region. Take the power industry: there is huge investment in power projects in South Africa to grow outputs, so within the SADC region, focus could be placed on developing trade corridors, and building distribution lines to transport the power. Some progress towards this is being made by the Southern African Power Pool, currently driving transmission interconnector projects. These link or strengthen interconnections between countries in the SADC region, with the intention to create a power pool that will 36

SOUTH AFRICAN PROPERTY REVIEW

Mathieu du Plooy, Managing Director at WSP Africa

offer countries with a deficit the facility to import power, and those with excess the options for exporting their surplus. Similarly, regional cooperation and collaboration can play a role in a robust gas-to-power industry. For instance, as Mozambique sits on the precipice of major infrastructure projects around its gas fields, South Africa is ideally placed to support their development. Since Medupi and Kusile came online, skilled people need to be mobilised. Without a continuation of projects, we face a risk of losing crucial skills as these professionals seek employment in other markets. Through collaboration, South African professionals could bring their experience to projects in Mozambique – and transfer skills to local teams. This would enable up-skilling and develop regional expertise.

Focus on social infrastructure The national government has looked to curb spending over the next three years to reduce the budget deficit. Although there are fewer public projects, funding

has been allocated in the 2018/2019 National Budget for social infrastructure development, including education and healthcare. The Development Bank of South Africa, the private sector and public-private partnership are driving projects in these sectors. Boosting social infrastructure can have a significant influence on growth in the country and on the quality of life of those previously excluded from mainstream economy. The impact on society is easily measurable and complementary to the state’s vision for long-term, sustainable and inclusive growth. Although not traditionally included under the “social infrastructure” heading, telecoms is a social and growth enabler. With wide private-sector fibre and Wi-Fi rollout under way, digitalisation presents opportunities for South Africa to leapfrog traditional development trajectories. In the long term, embracing disruptive innovation presents opportunities to implement changes that will transform how we view and use infrastructure, ensuring it is future-proofed. There is some promise for investment in primary, secondary and tertiary infrastructure development. Public and private sector-driven projects range from transport, power and water to healthcare and education. To continue driving investment, increased engagement and collaboration between the public and private sector must become a priority. It is only when government, private sector and labour work in unison that we’ll be able to develop a truly strong network of economic infrastructure with longlasting benefits for communities, industry and the economy.

Port Elizabeth development overview

Coega SEZ at the forefront of attracting foreign investment The Coega Industrial Development Zone (Coega IDZ), located close to the bustling Nelson Mandela Bay Metropolitan Municipality, remains South Africa’s foremost investment spot for industries with a global perspective. The unaudited 2017/2018 year-to-date numbers indicate 15 new investors, with a combined investment value of R526-million Interview by Mark Pettipher Words by Marika Truter

eveloped and managed by the Coega Development Corporation (CDC), this pioneering multi-billion-rand project aims to drive local and foreign direct investment in export-oriented industries, positioning South Africa as the hub for southern African trade. The Coega SEZ currently has 42 operational investors, with a combined value of R7-billion. The number of jobs has also increased, with 7 953 cumulative operational jobs compared to last year’s 7 243 (an increase of 710), and 9 441 additional construction jobs this year. Seventy-five percent of employees are previously disadvantaged individuals sourced from Nelson Mandela Bay and its surrounding areas. Bricks and mortar are indeed converted to tangible job opportunities. “The organisation has also ensured that it has its sights set on skills development by training more than 2 700 people in the current financial year,” says Dr Ayanda Vilakazi, Unit Head Marketing: Brand and Corporate Communications for the CDC.

Transitioning from IDZ to SEZ Keith Buhr, the Commercial Manager at CDC, is excited that the re-designation of the Coega IDZ into the Coega SEZ can now happen. “The Special Economic Zone (SEZ) Act* that provides for various additional incentives to make South Africa a more globally competitive investment destination has now been gazetted,” he says. “Incentives such as Sec12R, which introduces a potential 15% corporate income tax (as opposed to 28%) for new tax entities located within the Coega SEZ, is an incentive that everyone has been waiting for.

R12-billion: ●● Osho Cement (metals sector), valued at R650-million ●● MM Engineering (metals sector), valued at R350-million ●● Customs Control Area (logistics sector) ●● Beijing Automobile International Corporation (automotive sector), valued at R11-billion ●● Hella (automotive sector), valued at R53,3-million

Dr Ayanda Vilakazi, Unit Head Marketing: Brand and Corporate Communications CDC

Parameters to qualify for the Sec12R incentive are that 90% of the revenue has to be produced in these factories. Also, not more than 20% inter-group trading may happen within South Africa. This has been gazetted for a 10-year-period as an incentive for new investors. Add this to existing incentives – for example, the 12i tax allowance in relation to capital investment for new industrial projects, as well as expansions or upgrades to existing ones; and VAT and customs relief for businesses within customs-controlled areas in IDZs – and industry now has real incentive to grow their businesses and the economy.” There are currently five projects under construction, to a total value exceeding

The following five projects have become operational, with an accumulated value of R180-million: ●● Kenako Concrete (metals sector) ●● Corromaster (packaging sector) ●● National Ship Chandlers (food distribution sector) ●● Sanitech (chemicals sector) ●● Fincorp Trading (logistics sector)

Site development “While CDC would enter into a landonly lease deal for non-generic projects – such as a chemical plant or a cement plant – it remains a strategic policy of CDC to provide turnkey solutions for generic facilities for all investors wishing to locate within the Coega SEZ,” says Buhr. “The ‘box’ could be a warehouse or a factory, with the investor installing equipment as needed. “We provide walls, a floor, a roof, and a cold box as required. All premises are fitted with fibre optics as standard, with Coega Telkom as the service provider offering market-related rates. Zone 1 is an entirely new customscontrolled area. “If an enterprise wants to import and export, and qualify for SOUTH AFRICAN PROPERTY REVIEW

Port Elizabeth development overview the incentive of no duties or VAT, it can apply at our soon-to-be-established one-stop shop for investors, with SARS, banks and regulation facilities on site,” says Buhr. He is excited about the mix of expansion opportunities, with several existing warehouses expanding. “A number of existing investors within the Coega SEZ have expanded their facilities,” he says. “Some of them are already into their third expansion. We are also excited that our first multipurpose facility is now fully occupied – mostly by incubation projects, where people want 600, 800 or 900m2. The facility has small-unit warehousing, with the biggest being 1 500m2 and the smallest 330m2. This is also a customscontrolled area, and a great success. We are in the process of implementing a second facility of similar design and concept. This is really great for smaller businesses, for businesses that want to grow and for incubation projects. The rentals here are considerably lower than in the rest of the market. It is also ideal for people who want to import and export,

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as they don’t have to pay duties and VAT (should they qualify). “Our internal skills training warehouse is used to up-skill people. The Discovery Building, from where Discovery operates its call centre, is also now fully let, with more than 2 300 people working there. Coega Dairy and Coega Cheese (Phase 4) have vastly extended the back of their cold rooms. Remember when you have your next Debonairs pizza that all the cheese comes from here!”

“Our biggest investment to date is the Beijing Automobile International Corporation (BAIC), which is investing R11-billion in phases”

Beijing Automotive “Our biggest investment to date is the Beijing Automobile International Corporation (BAIC), which is investing R11-billion in phases,” says Buhr. “This is the biggest automotive investment in the country in 40 years. The company will

be assembling semi-knockdowns here, and aims to expand to 60% localisation. At full capacity, the R11-billion plant would be able to produce 100 000 vehicles per year. The R4,25-billion first phase will have the installed capacity to manufacture 50 000 units a year, with about two-thirds of production destined for the export market.” The investment is expected to create 2 500 jobs directly and more than 10 600 jobs indirectly. BAIC is the major shareholder in the plant, holding 65% of the venture. South Africa’s Industrial Development Corporation holds the remaining 35%. Buhr is optimistic about the future. “I’m pretty upbeat about the future with Coega SEZ,” he says. “Last year, we mostly had small tenants coming in – but being an SEZ will encourage larger industrials to consider Coega as their point of departure. The 15% corporate tax is just the incentive we needed.” * The Special Economic Zone (SEZ) Act (Act No. 16 of 2014) came into effect on 9 February 2016.

Port Elizabeth development overview

Waterfront Business Park bodes well for PE development The JH Group is a diverse and multifaceted organisation, operating businesses that include hospitality, property, restaurants, aquaculture, fuel retail, technology and packaging. Its flagship office space, the Waterfront Business Park in Nelson Mandela Bay, is a hi-tech development, offering its blue-chip tenants large, modern, open-plan, glass-and-steel office space with enviable views over the port and the magnificent Algoa Bay Interview by Mark Pettipher Words by Marika Truter

ens Heimberg, founder of the JH Group, indicates that these modern, contemporary offices, purpose-built to tenant specifications and all within a secure office park, are very attractive to tenants. Coca-Cola and Investec are good examples of tenants with highend requirements, including connectivity and communications. “Their style is incorporated into the design of their buildings, and includes openplan work spaces, meeting rooms, chat rooms and private rooms,” says Heimberg. “They believe that staff wellbeing is essential and strive to give their staff a state-of-theart environment in which they want to work. The new generation of employees has very different requirements and priorities.” Waterfront Business Park, financed by Investec, is a one-of-a-kind development in the Eastern Cape, making it a unique flagship for the JH Group.

Diversified portfolio Heimberg explains that his group’s approach is often to take advantage of opportunities that exist in starting up new businesses, or taking over underperforming businesses and trading them up, as opposed to buying businesses that are already trading well. “We don’t differentiate between various types of retail – we consider retail to be retail,” he says. “Whether we trade in groceries, hardware, liquor, clothing or packaging, the same business principles apply.”

The changing nature of the shopping mall Shopping malls have changed over the years from pure shopping destinations to entertainment and lifestyle venues.

Jens Heimberg, founder of the JH Group

Some of the big malls – such as Baywest, with its additional offerings of movies, restaurants and an ice rink – have become weekend destinations. Heimberg says that even though online shopping and e-stores have not yet caught on in South Africa, “We have to be aware of the changing nature of shoppers when designing shopping centres and defining the correct tenant mix. The days of just building a shopping centre and collecting the rent are long gone. We are in an ongoing battle with our competitors, in which the biggest challenge is to retain the tenants you have. To do this, you have to move with the latest trends, not only in infrastructure but also in how people shop.”

Bullish approach “We are bullish about the way in which we approach business,” says Heimberg. “At Waterfront Business Park, we are very fortunate with the tenants we’ve secured, because Port Elizabeth has plenty of vacant office space at present. We have attracted top blue-chip tenants, and the property is fully let. We will not be building another business park like this.

Our view is it would be difficult to tenant another 15 000m² of AAA-grade office space in PE in the foreseeable future.” With regards to retail property, Heimberg shares the tale of the new Food Lover’s Market in JH Group’s Balfour Park Shopping Centre in East London.“Checkers, our anchor tenant, occupies 4 000m2. Fruit & Veg City is currently trading out of premises to the extent of 1 400m² and wanted to expand to a 3 000m² new-spec Food Lover’s Market. In order to accommodate the tenant, we utilised current parking space for the expansion, with new rooftop parking being constructed. This is an extremely expensive transformation – but it was necessary to secure this high-calibre tenant, and it’s good for the centre as a whole.”

A view to the future “We are very pleased with what we’ve achieved over the last year or so, and what we’ll be concluding by the end of this year,” says Heimberg. “These projects include the expansion of our Hotel Savoy in Mthatha, securing Pep and a new Food Lover’s Market at Balfour Park Shopping Centre in East London, and the completion of a new Cashbuild as well as the Waterfront Business Park in Port Elizabeth. “Fortunately, we’ve been relatively successful with our businesses. Although we have focused mainly on construction over the past year, we have no new developments planned in this region for the next year. We are looking to focus on our expansion in Cape Town in the future, specifically in the hospitality and retail sectors, while continuing to grow our existing businesses throughout the Eastern Cape and Mthatha.” SOUTH AFRICAN PROPERTY REVIEW

proptech

RMS pioneering data-driven utilities systems Concepts such as “smart wallets”, “blockchain”, “open protocols”, “the internet of things” and “big data” are changing the face of utility metering solutions. Remote Metering Solutions (RMS) is at the forefront of this revolution, both locally and internationally Interview by Mark Pettipher Words by Marika Truter

endrik Greyling, Chief Executive Officer at RMS and Board Member and Director at the Open Smart Grid Protocol (OSGP) Alliance says that RMS came into its own after 2008, when Eskom went through its first set of loadshedding, and the provision of electricity became a focus of property management and for tenants. “Together with the cost increases over the next couple of years, the industry was forced to look at things completely differently,” he says. “From a client perspective, the complexities in applying different tariff structures and having to comply with the various lease provisions needed systems in place to ensure efficient buying and distribution of electricity to its tenants.

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“However, the industry was not focused on that, but on individual tenant metering systems to ensure that billing was as accurate as possible. It sounds like a relatively simple process: you read a meter, you determine the consumption, you apply a tariff, you bill it out. In reality, it is an extremely complex process because of the many variables that change on a monthly basis. We are managing about 20million different variables annually. A lot of things can go wrong, and to manage that to a level-zero mistake is extremely difficult. You can’t do our business at scale without very competent and innovative systems driving it. Trying to do it with people and with Excel just doesn’t work.”

About the company “RMS is probably the latest entrant into the industry, but we manage in excess of 70% of all the listed properties, as well as institutional and private clients,” Greyling says. “Our biggest strategic leverage and difference has been our ability to manage these projects at scale. It’s relatively easy to do 10 or 100, but we do 2 000 buildings. That is the reason for our success. “We manage about R5,5-billion worth of utilities on an annual basis. That is not much less than what a city such as Tshwane would do – the recovery of electricity there is about R7-billion.” RMS employs more than 300 people, with a head office in Pretoria and offices in Durban, Cape Town and Vryburg.

proptech

contracting side – where you can provide electricity and buy electricity – rather than the currency side.”

Smart city systems

“We work with just about every municipality across the country, because our clients have investments across the country,” he says.

Technology and software development RMS develops its software in-house. Its large development team makes it possible to develop bespoke software for different clients and their particular needs. “While meter manufacturers supply so-called head-end systems that allow communication with the meter, managing that process on an automated basis needs systems to integrate the information to retrieve, but also to send commands,” Greyling explains. “In other words, if someone’s wallet doesn’t have the required funds, the electricity meter needs to disconnect. Send that instruction, make sure it happened. If a payment is made, it gets complex, because we use a range of vending systems, and consumers don’t want to wait two days to get reconnected.” Greyling indicates that technologies such as blockchain becoming more prevalent will have a huge impact on revenue collection, as one can now develop on existing platforms. “We are, however, more interested in using the blockchain technologies for their

In recent years, RMS has become more involved with smart city-type projects, where it does the metering design. “Electrical engineers do the reticulation lines and we do the metering across water, electricity and sanitation,” says Greyling. “Steyn City is an example of the concept of a smart city, with a commercial component, a residential component and a retail component. Different services come in bulk from different bulk suppliers, with Eskom providing directly to certain homeowners and to distribution points managed by Steyn City for distribution to consumers and other complexes. JHB City provides water and Steyn City manages piped gas throughout the estate.

“If someone’s wallet doesn’t have the required funds, the electricity meter needs to disconnect. Send that instruction, make sure it happened. If a payment is made, it gets complex, because we use a range of vending systems, and consumers don’t want to wait two days to get reconnected” “We do all the metered appliance and distribution management, as well as the revenue collection, which is done via a smart-wallet system. So the consumer has electricity, hot water

and gas, which they would purchase through one smartphone-based wallet. We measure and bill on a daily basis. “The client can see the profile consumption data, such as how much electricity was used at which point during the day, as well as monetary movement, such as average spend over the past 12 months. This also provides incredibly useful information that’s then transferred back to the individual suppliers.”

The future and open protocols Greyling compares the current systems to developments over the next few years. “About 60 to 70% of all the meters that we manage are still analogue meters, which are not read remotely in any way,” he says. “In the next five years, at least 85 to 90% of meters will be remotely readable. A bigger percentage would become smart meters, which will enable things such as managing off-peak or periods when occupancy is low. “We are already starting to introduce tech that’s very different from what we think are the go-to things at the moment. We are starting to see much more ‘internet of things’-type of solutions coming forward. The next 10 years will be about integrating all these new technologies on a central platform, and providing the data back to parties involved. I see it almost as becoming more of an exchange for meter- and consumption-related data, and what you can do with that data. The future is about the ability to do things with the mass of data we have. “The whole idea of open protocols is that you have a protocol that anyone else can take and do something with. The OSGP Alliance is an international body set up to promote the concept of specific, open, smart grid protocols across as many devices as possible. As a Director of the OSGP Alliance, I am fortunate to be in the middle and at the forefront of these developments.” SOUTH AFRICAN PROPERTY REVIEW

research

Big data critical to the decision-making process Big data and the importance of data in making decisions when it comes to land and property is becoming ever more important for developers and investors to retain a leading edge. Property Review talks to Dr Hein du Toit of DEMACON Market Studies Interview by Mark Pettipher Words by Marika Truter

“B

Dr Hein du Toit, founding member and Managing Director at DEMACON Market Studies

“The company incorporates a combination of expertise, including planners, GIS experts, tourism experts and economists. Different companies offer different expertise and reports with similar, though differing, methodologies and outcomes. It has become a trend for listed funds and development companies to commission two independent market studies from different companies, and then to compare the two outcomes and recommendations” 42

SOUTH AFRICAN PROPERTY REVIEW

ig data enables us to take a more scientific, quantified approach to our qualitative opinions,” says Dr Hein du Toit, founding member and Managing Director at DEMACON Market Studies. “Let us first contemplate what ‘big data’ is. Big data can be defined as extremely large datasets that may be analysed computationally to reveal patterns, trends and associations relating, in particular, to human behaviour and interactions. Big data includes large-volume data, both structured and unstructured, that inundates big business on a day-today basis.” According to Du Toit, South Africa has some of the best and most readily available datasets. “Depending on the project requirements, one could conduct a comprehensive, multilayered analysis based on a variety of datasets,” he says. “A fair amount of data is readily available in the market on demographics, generational profiles (that you could infer from age profiles) and a multitude of behavioural attributes. Supplementing available data with GIS capabilities and analyses allows for a comprehensive and balanced market analysis. “Scientific data is, in general, readily available. Big data could potentially supplement official data sources, but one needs to scrutinise ‘big data’ with caution. Retailers, shopping-centre owners and managers are to some extent already data mining and sharing mutually beneficial big datasets. It is a learning experience, and much scope exists to expand these processes. Some of these big datasets are structured and lend themselves to a scientific analytical

approach, whereas other big datasets reveal a distinct bias and are better suited to qualitative analyses, simple graphs and maps. One has to be able to distinguish the data type, integrity and application possibilities.”

DEMACON’s unique offering The company’s name is an acronym that encapsulates its three core specialities: demographics, mapping and economics. “DEMACON has been going for more than a decade, and we have built up our internal knowledge base on demographics, economics, real estate developments, infrastructures, and other GIS datasets,” says Du Toit. “While pure economists operate on a macro level, our focus is more localised, typically on a site-specific and trade-area basis. We analyse and interpret local area dynamics in the context of macro trends and dynamics. “The company incorporates a combination of expertise, including planners, GIS experts, tourism experts and economists. Different companies offer different expertise and reports with similar, though differing, methodologies and outcomes. It has become a trend for listed funds and development companies to commission two independent market studies from different companies, and then to compare the two outcomes and recommendations.” DEMACON has a staff complement of about 30 people, which includes a combination of permanent and contract workers. “We have a team of dedicated in-house field workers, whom we’ve capacitated and invested in extensively

research “The integrity of the analyst is also key, because there is often pressure from a client to justify certain numbers. The market study, however, has to be completely objective and independent – unbiased by client’s expectations. There have been instances where we could not justify a particular development – and formulated our recommendations accordingly” since 2007,” says Du Toit. “Our in-house team helps establish consistency in method and style of data format and analysis. Based on experience, one easily identifies outliers and anomalies.”

Practical science “In terms of leading international literature on the subject of real estate analysis, it’s clear that what we’re doing is a science – not absolute, but science nonetheless,” says Du Toit. “Although reliable data is a critical success factor, one needs to combine data analysis with insight and experience – that’s where my 25 years of experience in the industry, combined with the expertise of a winning team, has proven to be invaluable. “The integrity of the analyst is also key, because there is often pressure from a client to justify certain numbers. The market study, however, has to be completely objective and independent – unbiased by client’s expectations. There have been instances where we could not justify a particular development – and formulated our recommendations accordingly. The developer proceeded regardless, and today the proof of our analysis is visible to the naked eye – the building is complete but vacant. The burden of proof is onerous. Market analysis is a complex process, and with experience comes an enormous responsibility to act with integrity and to provide an independent view based on a scientific process.”

Du Toit recently completed his PhD, in which he tracked the performance of multiple developments over a 10-to-14year period. The research measured, among other factors, the performance of a development against the initial forecast. This forecast, based on five advanced and integrated modelling techniques, yielded a 4,1% margin of error. “The ebbs and flows within the market require one to understand more than simple demographics,” Du Toit says. “Ultimately it comes full circle: after a market study, the asset is built and completed, then tenanted; it becomes operational for a number of years and the performance can be measured against the initial forecast. MSCI/IPD and other companies measure the performance of different asset classes against which further benchmarking could be done.”

Data in action Du Toit explains that DEMACON differs from entities such as MSCI/IPD and others in that these entities are more data warehouse-oriented and focus on asset indicators, which are then made available to members and building owners. “DEMACON operates at a different level: we consult, we utilise a broad spectrum of data sources, and we calculate (or quantify) market potential, take-up, etc. Our expertise is different to theirs, but in the end it is complementary. Their expertise and focus is centred on financial and related asset performance indicators. “Our focus is much more on translating consumer attributes into demand potential, within the context of current and emerging economic realities. The consumer may be a household or a business, or the government, a parastatal, an agent. Market demand is quantifiable. It is, after all, the quantifiable squaremetre value that translates into the development of a physical asset in time and space. The performance of that asset can be measured and monitored over time, which is where companies such as MSCI/IPD come into play. They will typically work with the asset owner and manager. They also track the asset from a financial point of view over time in terms

of vacancies, rentals and costs, cap rates, returns and so on. “This is similar to what SAPOA and Rode are doing, but at a different level, because their indicators are less financially oriented.” Du Toit says decision-makers need to realise that datasets offered by the likes of MSCI/IPD and SAPOA are useful – but they should be mindful that these datasets do not provide a comprehensive picture of a particular node in its totality. “That picture is based on a select portfolio of buildings only, of which MSCI/IPD may monitor, X and Rode may account for X+n or X-n,” he explains. “Ultimately, this data may guide and inform a decision, but it should not be considered a ‘census of buildings’ – it reflects on a particular portfolio of buildings only. DEMACON considers that data in the context of other layers of data, and supplements it to complete the picture.” “We are active on the ground and can easily observe data anomalies and discrepancies in demographic, real estate, economic and other datasets. In this manner, DEMACON often provides useful feedback to data-warehouse companies to improve and enhance data quality and integrity. Being on the ground with primary researchers gives you an opportunity to experience reality instead of sitting in an office and working with abstract data on a screen. This is particularly useful in rural and tribal areas.”

“We are active on the ground and can easily observe data anomalies and discrepancies in demographic, real estate, economic and other datasets. In this manner, DEMACON often provides useful feedback to datawarehouse companies to improve and enhance data quality and integrity”

SOUTH AFRICAN PROPERTY REVIEW

MetroWatch

Your right to know: Eastern Cape Metro, Nelson Mandela Bay in figures In this sixth instalment sourced from https://municipalmoney.gov.za, Property Review brings you extracts of reports aimed to help citizens understand where public money is spent, and whether this is within acceptable norms. In doing so we hope to empower our citizens, strengthen civic oversight and promote accountability

Nelson Mandela Bay Metro municipality in the Eastern Cape

Population

1 152 114

What are the potential limitations of the datasets and their interpretation? Users should be aware that the data is submitted to the National Treasury directly from the individual municipalities and while the National Treasury endeavours to ensure that the datasets are complete and validated regularly, ultimately the quality of the data is primarily assured by the Chief Accounting Officer of the municipality. The National Treasury has developed standard indicators and norms based on the Section 71 submissions of municipalities, and these indicators and norms have been used as a basis to compare the financial performance of different municipalities on the Municipal Money website. However, there are occasions when municipal financial performance cannot clearly be classified within the accepted norms and where deviations from the norms are not necessarily a negative reflection on the municipality’s financial performance. For example, some metropolitan municipalities, with their large populations and substantive budgets, may opt to adopt

different strategies of service delivery compared to their counterparts. This in turn may involve more outsourcing, less capital expenditure and lower staff costs – all of which may fall outside of the generally accepted norms and standards identified by the National Treasury. While we acknowledge these limitations, the National Treasury believes that these comparisons are still useful and appropriate because they allow users to identify and explore the differences between the municipalities – bringing them closer to understanding the sometimes-subtle nuances between municipalities and between categories of municipalities. To assist users in querying the results of a municipality’s financial indicators, Municipal Money provides a direct email link to the municipal management, where the Municipal Manager and Mayor may respond directly and provide clarification to users. This level of interest and understanding will no doubt contribute to enhanced civic oversight, greater transparency and increased overall accountability.

1 957,6

square kilometres

588,5 people per square kilometre +27 (0)41 506 1911 www.mandelametro.gov.za City Hall Govan Mbeki Port Elizabeth 6000

MAYOR/EXECUTIVE MAYOR

Mongameli Bobani +27 (0)41 506 3267 pamayor@mandelametro.gov.za

Secretary

Ayesha Hoffman +27 (0)41 506 3348 pamayor@mandelametro.gov.za

MUNICIPAL MANAGER

Johann Mettler +27 (0)41 506 3209 cm@mandelametro.gov.za

Secretary

Sindiswa Chuene +27 (0)41 506 3209 schuene@mandelamentro.gov.za

CHIEF FINANCIAL OFFICER

Barbara de Scande +27 (0)41 506 1201 CFO@mandelametro.gov.za

Secretary

Sharon Marais +27 (0)41 506 1201 smarais@mandelametro.gov.za

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MetroWatch FINANCIAL PERFORMANCE Audit outcomes 2017 Qualified opinion

2016 Qualified opinion

2015 Qualified opinion

2014 Qualified opinion

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

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

SOURCE: Municipal Audit Reports

Unqualified Opinion

No findings

Emphasis of matter items

The Auditor-General can state without reservation that the financial statements of the municipality fairly represent the financial position of the municipality and are in line with generally recognised accounting practices.

Same as an Unqualified Opinion with no findings, but the Auditor-General wants to bring something particular to the attention of the reader.

Qualified Opinion

Adverse Opinion

Disclaimer of Opinion

The Auditor-General expresses reservations about the fair presentation of the financial statements. There is some departure from the generally recognised accounting practices, but it is not sufficiently serious to warrant an adverse opinion or disclaimer of opinion.

This is expressed when the Auditor-General concludes that the annual financial statements do not present the municipality’s financial position, results of operations and cash flow in line with generally recognised accounting practices.

The Auditor-General does not have all of the underlying documentation needed to determine an opinion. For example, the lack of underlying documentation and the amounts in question may be so great that it is impossible to give any opinion at all.

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

Cash balance July 2016-June 2017 R1 630 373 743

Cash balance at the end of the financial year. About the same as similar municipalities in the Eastern Cape: R1 660 237 857 About three-fifths of the cash balance for similar municipalities nationally: R2 632 613 401

Good

Positive balance

Bad

Negative balance

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

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

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

Cash coverage July 2016-June 2017 2,1 months Months of operating expenses that can be paid for with the cash available. About three-quarters of the coverage for similar municipalities in the Eastern Cape: 2,8 months About 20% higher than similar municipalities nationally: 1,8 months

Good Average Bad

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

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

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

Spending of operating budget July 2016-June 2017 6,8% underspent Difference between budgeted operating expenditure and what was actually spent. More than double the underspending or overspending for similar municipalities in the Eastern Cape: -2,55% More than 1,5 times the underspending or overspending for similar municipalities nationally: -3,8%

Good Average Bad

Up to 5% Between 5% and 15% More than 15%

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

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

Spending of capital budget July 2016-June 2017 7.8% underspent

Difference between budgeted capital expenditure and what was actually spent. About two-thirds of the underspending or overspending for similar municipalities in the Eastern Cape: -10,945% About two-thirds of the underspending or overspending for similar municipalities nationally: -11,84%

Good Average Bad

Up to 5% Between 5% and 15% More than 15%

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

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

Spending on repairs and maintenance July 2016-June 2017 2,21%

Spending on repairs and maintenance as a percentage of property, plant and equipment. A little less than similar municipalities in the Eastern Cape: 2,285% About 80% of the spending for similar municipalities nationally: 2,585%

Good

More than 8%

Bad

Less than 8%

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

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MetroWatch Fruitless and wasteful expenditure July 2014-June 2015 21,97% Unauthorised, irregular, fruitless and wasteful expenditure as a percentage of operating expenditure. About 25% higher than similar municipalities in the Eastern Cape: 17,92% More than double the expenditure for similar municipalities nationally: 5,16%

Good Bad

0% More than 0%

Reference: Circular 71 Formula: = Unauthorised, Irregular, Fruitless and Wasteful Expenditure / Actual Operating Expenditure = Unauthorised, Irregular, Fruitless and Wasteful Expenditure item codes irregular, fruitless, unauthorised / Income & Expenditure item code 4600, Audited Actual

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

Note Since calling expenditures unauthorised, fruitless and wasteful or irregular can involve quite a lot of debate, the numbers used are the restated audited amounts 18 months after the financial year end – part of the Medium Term Revenue and Expenditure Framework. Did You Know? The current ratio compares the value of a municipality’s short-term assets (cash, bank deposits, etc) to its shortterm liabilities (creditors, loans due, and so on). The higher the ratio, the better. The normal range of the current ratio is 1,5 to two (the municipality has assets more than 1,5 to two times its current debt). Anything less than that, and the municipality might struggle to keep up with its payments.

Current ratio July 2017-June 2018 Quarter 3 2,11 The value of a municipality’s short-term assets as a multiple of its short-term liabilities. About 80% of the ratio for similar municipalities in the Eastern Cape: 2,605 About 1,4 times the ratio for similar municipalities nationally: 1,54

Good Average Bad

More than 1,5 Between 1 and 1,5 Less than 1

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

Liquidity ratio July 2017-June 2018 Quarter 3 1,27 The municipality’s immediate ability to pay its current liabilities. About 80% of the ratio for similar municipalities in the Eastern Cape: 1,57 More than 1,5 times the ratio for similar municipalities nationally: 0,77

Good

More than 1

Bad

Less than 1

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

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

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MetroWatch Did You Know? Municipalities don’t manage to collect all of the money they earn through rates and service charges. This measure looks at the percentage of new revenue that a municipality collects. It is also referred to as the Current Debtors Collection Ratio.

Current debtors collection rate July 2017-June 2018 Quarter 3 73,7% The percentage of new revenue (generated within the financial year) that a municipality actually collects. About 90% of the rate for similar municipalities in the Eastern Cape: 80,935% About 80% of the rate for similar municipalities nationally: 90,89%

Good

95% or more

Bad

Less than 95%

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

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

1 Money generated locally

2 Money from national government

81,07%

18,93%

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

From the equitable share of taxes, and grants from national government.

July 2016-June 2017

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

Where money comes from

Source: Income & Expenditure Audited Actual and Original Budget 48

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

Staff wages and salaries July 2016-June 2017 33,44% Staff salaries and wages as a percentage of operating expenditure.

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

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

Contractor services July 2016-June 2017 7,1% Costs of contractor services as a percentage of operating expenditure.

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

What is money spent on?

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

Source: Income & Expenditure Audited Actual and Original Budget SOUTH AFRICAN PROPERTY REVIEW

howmuch.net

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EVERY YEAR WE ACCEPT a large number of listings and advertisements from SAPOA professionals and service providers across the entire spectrum of property activities. Don’t miss out on this wellused, popular industry resource. SAPOA aims to provide added value by offering the basic listings free of charge to all members. In this respect, we hope we are assisting you in your marketing endeavours to some extent. We thank you for your support in previous years. In an effort to improve the look and ease of usage, we have redesigned the directory layout to a four-column grid and have made available certain entries that will stand out from the norm. PROPERTY REVIEW - LogoTreatment.pdf

2016/08/25

11:31 AM

BOOKINGS 2018-2019 OPEN FOR SAPOA MEMBERS Booking deadline: 16 January 2019 Material deadline: Logo entries 23 January 2019 Column entries 23 January 2019 Display adverts 23 January 2019

The real cost of relocation around the world People have been moving away from the countryside and into urban areas for several decades. Many economists believe this trend will continue, making cities the engines of economic growth for the foreseeable future. But how much does it cost to move to a city – and can you afford it? By Raul Amoros https://howmuch.net/articles/medigap-plan-costs

ur visualisation lets you see easily and quickly a few different insights about the cost of living around the world. First off, most of the expensive cities tend to be in English-speaking countries such as New Zealand, the US and Australia. This trend holds true across continents, and it makes us wonder to what extent the relative level of expense can be directly correlated with the English language.

Top 10 most expensive cities around the world for relocation 1. Dubai, UAE: US$4 243 2. Auckland, New

Zealand: US$3 995 3. San Francisco,

US: US$3 756

For advertising opportunities and rates contact t: +27 (0)21 856 1276 c: +27 (0)61 540 7856 e: pieter@mpdps.com

4. New York, US: US$3 363 5. London, UK: US$3 199 6. Sydney,

Australia: US$2 991 7. Oslo, Norway: US$2 913 8. Zurich,

Switzerland: US$2 890 9. Tel Aviv, Israel: US$2 885 10. Amsterdam,

Netherlands: US$2 722 50

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Another way to think about this is to look at the cheapest cities for relocation – Cairo, Bangalore and Bucharest. We doubt that many people speak much English in these places. Drilling further into the data, our visualisation makes it readily apparent why some places are so expensive. In short, the cost of renting an apartment is exorbitantly expensive in cities such as San Francisco and London. Look how much blue is in the graphic: it is almost always the most expensive component, as indicated by its position on the left. There are a handful of outliers – notably Dubai, Tel Aviv and Manchester. But that’s only because these places have aboveaverage costs for getting a visa. Clearly the UAE, Israel and perhaps even the UK are interested in limiting the number of people who can afford to relocate there – or perhaps they simply want more rich people to move in.

The data for this visualisation came from Nestpick, an online listing service for furnished apartments. The service looked at a variety of factors to curate a list of 80 cities, including the processing time for visa applications,

each city’s start-up culture and the prevalence of job listings. Howmuch.net focused our analysis only on the cost of relocation. First, Howmuch.net grouped every city in Nestpick’s dataset by continent, then created a histogram

heat-map representing the cost of moving to each of the cities, breaking down each category of expense. Howmuch.net included the total figures and each country’s flag for easy reference.

Expense Category

Strasbourg

FOOD/DRINK Oslo

Dublin

Barcelona

INTERNET COST Zurich

Helsinki

Munich

Montpellier

PHONE

Amsterdam

Vienna

Nice

Singapore

Beijing

Tel Aviv

Tokyo

Nantes

Hanoi

Hong Kong

Shanghai

Seoul

Bangkok

Jakarta

TRANSPORT Paris

Madrid

Berlin

Sofia

Riga

San Francisco

Toronto

Brussels

Budapest

New York

Austin

Stockholm

Lyon

Hamburg

Bordeaux

Karlsruhe

Bucharest

Seattle

Buenos Aires

Copenhagen

Dusseldorf

Lille

Toulouse

Los Angeles

Sao Paulo

Medellin

Vancouver

Mexico City

Kuala Lumpur

Auckland Bangalore

More than $4k $3k-$4k $2k-$3k $1k-$2k Less than $1k Manchester

Frankfurt am Main Milan

Prague

Dubai

2018 Total First Month Relocation Costs

RENT

London

2018 First Month Relocation Costs VISA FEES

howmuch.net

Sydney

Melbourne

Johannesburg Cairo

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Western Cape Breakfast Seminar SAPOA Western Cape Regional Council hosted a breakfast session at The River Club on 30 August, entitled “The Future Is Digital”

Stuart van der Veen, Head of Disruption and Innovation at Nedbank CIB, shared insights on how digital technology is taking over the future of real estate

Gustav van Heerden

Michael Rich

Jason Elley

Nearly 80 delegates were in attendance to listen to insights shared by guest speaker Stuart van der Veen, Head of Disruption and Innovation at Nedbank CIB. The breakfast session was sponsored by Growthpoint Properties.

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Barend Engelbrecht

Shirley Milne with Adrian Scholtz

social

Close to 80 delegates attended the breakfast session held at The River Club

Paul Scop Graham Brookman with Sqhamo Banjwa

John Hall with Neale Petersen Sponsored by

Kim and Jurgen Karg with Chantal Lourens

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Western Cape Women’s High Tea SAPOA Western Cape Regional Council, in partnership with Women’s Property Network, held its annual Women’s Day event on 23 August

SAPOA Western Cape Regional Chair Simon Nicks, WPN Western Cape Chair Astrid Gilwald, guest speaker Rojie Kisten and Aneesha Singh-Moosa of Old Mutual Property

his year, the event took the form of an afternoon high tea and was held at the Winchester Mansions Hotel and Spa in Seapoint, Cape Town, with special guest Rojie Kisten. Kisten is an Independent NonExecutive Director at Stadio Holdings Limited and CSG Holdings Limited. She’s spent most of her working career at the Old Mutual Group. She serves as a Director of the Cookhouse Renewable Energy Wind Fund and Assupol Holdings, also serving on various boards as an independent non-executive director. She is the Chairperson of the Cookhouse Community Windfarm Trust, a Director of 54

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the Nelson Mandela Bay Development Agency Board and the African Leadership Network, and a Trustee of the Imam Abdullah Haroon Trust. She has a BAdmin (Hons) degree from Stellenbosch Business School, and has completed the General Management Programme at Harvard Business School. She shared a vibrant, light-hearted view of the changing roles of women in society with an audience of about 80 ladies. The afternoon was thoroughly enjoyed by all in attendance. Thanks go to Old Mutual Property for the valuable contribution towards making the event a great success.

Vanessa McIntyre

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Pamela Santana and Aneesha Singh-Moosa of Old Mutual Property

FROM LEFT Astrid Gilwald, Charmagne Monk, Madeleen Greyvenstein, Angie Goff, Sarah Swabey and Claudia de Reuk

FROM LEFT Simone Franks, Danielle and, Heather Wallace, Kim Faclier, Courtney Wallace and Carolyn Essop Roma Kaylor, Frances Barker and Charlotte Montgomery

FROM LEFT Ntombekhaya Yokwana, Hangwani Musehana, Shamsunisaa Damon and Innocentia Mkhwatshwa

Alison Ahmad, Rori Mzozoyana and Natalie du Preez