South African Property Review September 2018 by SAPOA

PROPERTY SOUTH AFRICAN

September 2018

REVIEW

PROPERTY REVIEW - LogoTreatment.pdf

Property Development Programme Delegates sent to the Gallows

Expropriation without compensation

SAPOA’s submission to the Land Commission

Buffalo City

Development overview

MetroWatch

Buffalo City in ﬁgures

2016/08/25

11:31 AM

SOUTH AFRICAN PROPERTY REVIEW

from the CEO

Certainty (and uncertainty) in the Land Reform and Redistribution Debate During President Cyril Ramaphosa address to the nation at end July, he announced the ruling party’s decision to propose an amendment to the Constitution to expropriate land without compensation and that it will have a positive effect and meaningful contribution to economic growth. This despite people saying otherwise. Ramaphosa said: “The ANC will, through the parliamentary process, finalise a proposed amendment to the Constitution that outlines more clearly the conditions under which expropriation without compensation can effected.”

hilst the historical background of land ownership needs to be addressed with urgency, it is critically important that South Africa navigates through the sensitivities with a greater vision being to ensure that the imbalance is dealt with and that economic stability and food security continues to be reinforced. Section 25 created the necessary compromise and balance between the protection of our economy based on private property and free market enterprise and the need to dramatically transform the economy following decades of oppressive laws and policies. But there was no requirement that the State must follow a policy of a willing buyer / willing seller. Rather, Section 25 mandates the State to expropriate land to achieve its land reform objectives. Unfortunately, the State’s track record over the last 20 years, in giving effect to restitution and redistribution, has been poor. It adopted a willing buyer/willing seller policy when there was no need to do so. It has not used its expropriation powers to redistribute land. The most important constraints to effective land reform have been corruption, the diversion of the land reform budget, lack of political will and the lack of training and capacity. These are the areas that require immediate focus, anything less will dent investor confidence. In our engagements with Government, particularly with Deputy Minister Cronin, we believe that the ANC has

committed to defend property rights and is clearly concerned about the impact that talk of expropriation without compensation is having on the economy and investor sentiment. We need to also be mindful of the fact that whilst the EFF believes that nationalizing all land is the correct mechanism to address land reform, the ANC does not. Whilst we call for the protection of productive agricultural land, we are in favour of land owned by parastatals in cities to be a priority. So too do we call for abandoned buildings in city centres to be expropriated. Mayor Mashaba’s recent focus on Johannesburg’s inner city requires support. Plots of land owned by state-owned enterprises in the main cities are excellent opportunities to bring people closer to working opportunities and also solve some of the housing backlogs. Expropriation is a mechanism for breaking a deadlock, whether you compensate is a different matter. The possible expropriation of 2 farms in

Limpopo form the basis of testing the Constitution on the matter of expropriation, where the courts will ultimately decide on the matter. Finally, talk of amending the Constitution or introducing new legislation is what it is, talk. Any amendment to the Constitution will face very complicated, intricate and protracted Constitutional and legislative obstacles, which can take years. It is reasonable to suggest that the way this matter will be settled, will follow close on the heels of the kind of dispensation that South Africa is aßœ Constitutional democracy. Expropriation carried out with the intensity that is contrary to the Constitution would destroy South Africa’s economy as it did in Zimbabwe. What is happening so far is what happens in a democracy, not in an authoritarian state. Let’s hope this plays out that way. Best regards, Neil Gopal, CEO

With Deputy Minister of Public Works, Jeremy Cronin, at the 2018 SAPOA Convention

SOUTH AFRICAN PROPERTY REVIEW

contents

September 2018

PROPERTY SOUTH AFRICAN

REVIEW

1 South African Property Review

PROPERTY SOUTH AFRICAN

REVIEW

PROPERTY REVIEW - LogoTreatment.pdf

Property Development Programme Delegates sent to the Gallows

2016/08/25

11:31 AM

ON THE COVER The focus of the September edition is on development. Property Review heads to the Eastern Cape, bringing opinions from some of Buffalo City’s leading property practitioners.

Development

SAPOA has also submitted a comprehensive Expropriation without compensation

September 2018

view on land expropriation without compensation

SAPOA’s submission to the Land Commission

Buffalo City

Development overview

MetroWatch

Buffalo City in ﬁgures September 2018

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

SOUTH AFRICAN PROPERTY REVIEW

1 From the CEO 4 From the Editor’s desk 6 One on one Experienced SAPOA member takes to the Board 8 One on one MOMFA updates standards document 10 Legal update Submission to the joint constitutional review committee on the review of Section 25 of the Constitution 20 Education Sending the class of 2018 to the Gallows 24 Integrated Development Planning Review of Buffalo City Metropolitan Municipality’s Integrated Development Plan (IDP) 2018/2019 31 BCMM Property Rates SAPOA concerned over massive rates increases at Buffalo City Metropolitan Municipality 32 Development Johannesburg inner city turns into a construction site with the launch of the 71 Properties Prospectus 34 One on one South African Council for the Projects and Construction Management Professionals 36 East London development overview ELIDZ: a platform for innovation and transformation 42 Proptech Open Box real estate solutions 44 GDP – Western Cape The role and impact of the commercial property sector 46 MetroWatch How well is your municipality managing its money? 52 Howmuch.net How much countries spend on research and development 53 Opening event South Africa’s first LEGO Certified Store opens in Sandton City 54 Social 64 Off the wall On the wall 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 Anne Schauffer, Greatyellowbrick.co.za, Municipalmoney.gov.za, Martin Jonker, Marika Truter, Maud Nale, Raul/Howmuch.net, Shaun Madumbo, Tshepo Tshabalala 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

Development in focus Every year, we take an “excursion” to the Eastern Cape. What we found this year is enough to fill two editions – so this month, we’ve decided to focus on the overview of Buffalo City, with Nelson Mandela Bay to follow in the October issue

ith expropriation of land without compensation taking up most of the country’s press headlines, SAPOA has submitted its views to the Land Expropriation Committee. In his CEO’s message, Neil Gopal discusses SAPOA’s stance on the subject. In this issue, we meet new SAPOA Board Member Khotso Matsau, the Managing Member at Lalela Properties. He has been a SAPOA member for a number of years and was voted onto the Board at this year’s Annual Convention & Property Exhibition. He brings plenty of property brokerage experience to the mix. We also talk to Sean Liebenberg, SAPOA’s Methods of Measuring Floor Areas Committee Chairman, who gives us an understanding of what is required to measure up. Getting to East London from Cape Town for a 10am meeting is a bit of a challenge, so I decided to get there via Johannesburg. Catching the first flight out of OR Tambo International made the choice of my first “port” of call easy, and our Eastern Cape round-up began with a visit to the East London Industrial Development Zone for a chat with its CEO, Simphiwe Kondlo – a man who is incredibly passionate about education, transformation and job development. It was the perfect introduction to Buffalo City Metro (BCM). SAPOA’s East London Chairman Johan Burger and Glynis Heger lined up some important players in the BCM for us to speak with. Former SAPOA regional chairman Grant Wheatly told us about an exciting “heritage” re-purpose and renovation project that he is working on in King William’s Town. Mission Holding Group was excited about its “new Kidd” on the block, taking residential from cradle to retirement with sports facilities thrown in. National Treasury secondee 4

SOUTH AFRICAN PROPERTY REVIEW

Andrew Murray gave us a positive financial overview of the metro, and East London’s “oldest” mall Vincent Park got a whole bunch of new retail offerings. Forty-nine years on, SAPOA and the University of Cape Town’s Graduate School of Business hosted to yet another twoweek Property Development Programme. Special thanks go to the City of Cape Town for providing the 60 delegates with Gallows Hill near the CBD as a project site. Apart from the winning project, a major highlight – and the culmination of the gala awards dinner – was the raising of about R13 000 for charity. The money raised will be going to Everyone Love Everyone. Of importance to our members is the overview of a number of the metros’ Integrated Development Plans (IDPs). Since this month’s focus is on Buffalo City, we take a look at the summary of its IDP, as well as those of Nelson Mandela Bay and Polokwane. In addition – and keeping finance in mind – we have taken our fifth MetroWatch extract to present you with BCM’s figures. Property Review also spoke with Open Box about its robotic process automation offering – proptech that helps accelerate the innovation agenda in commercial real estate. If you’re not already utilising some form of automated reporting, then

you’ll be interested to know that some of the sector’s leading players already are. Networking played a huge role in SAPOA’s calendar last month, so we report back on yet another successful Meet the Mayor dinner in Port Elizabeth, an informative breakfast session in Nelson Mandela Bay and a KwaZulu-Natal brokers’ breakfast. Gauteng also hosted a Ladies’ High Tea and, in celebration of the Nelson Mandela centenary, SAPOA’s head office team spent time at the Progress Day Care Development Centre in Alexandra. Supporting other property associations is an important aspect of SAPOA’s activities. This year we were invited to attend the South African Institute of Black Property Practitioners’ 22nd Annual Convention – and Public Relations Officer Maud Nale, who attended on SAPOA’s behalf, gives us the scoop. Looking forward to next month’s edition, we will continue our developer round-up with a look at Nelson Mandela Bay. Research will be a feature, so we’ll speak to SAPOA member Hein du Toit of , Demacon about the pros and cons of market research, and look at some of SAPOA’s regular reports. Retail will also be an interesting focus as we examine some of the big REITs in that sector. As we head towards the end of the year, for those of you that are keen on green issues, November will bring the latest in the green space as well as indepth interviews with two women who have made it their goal to incorporate sustainable green components into their architecture and buildings. Don’t forget we’re available online at www.southafricanpropertyreview.co.za – here you’ll find the magazine and its back issues, 365 days of the year. Enjoy the read. Mark Pettipher, Editor and Publisher

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one on one

Experienced SAPOA member takes to the Board Khotso Matsau, Managing Member at Lalela Properties, is a consummate salesman. He’s been in the property industry for more than 16 years and a SAPOA member for more than 12 – and is now three months into being a SAPOA Board member By Mark Pettipher

or the past 12 years, Lalela Properties’ Managing Member Khotso Matsau has worked as a member of SAPOA’s Office Vacancy Survey Committee, keeping a watchful eye on activities and movement in the Gauteng area as well as working on office and industrial vacancies. Matsau co-founded Lalela Properties in 2003 as an empowerment company with fellow broker Helen Fordyce. The management – with more than 25 years of experience in the commercial property market between them – works closely with key land developers, the major REIT organisations and a number of private clients. “Lalela Properties specialises in commercial and industrial properties, as well as a small amount of retail,” says Matsau. But the company’s scope is far broader than he lets on: it’s a company that delivers brokering services, land sales, lease agreements, development and investment products to corporate South Africa, the government, quasi-government and parastatal organisations. Whether it’s industrial or commercial property, Matsau is able to offer expert advice on financial structuring of deals, all aspects of the sale and purchase of land, evaluations and comparisons of similar properties, the putting together of sites, examination and development of new and existing buildings, assessment and refurbishing of older buildings and as well as consultation of leases and purchases. Property investment and investment structuring also falls under Lalela Properties’ gambit. “Whether you are in the market for a new development or a revamp, or you wish to invest in a joint

SOUTH AFRICAN PROPERTY REVIEW

Khotso Matsau, Managing Member of Lalela Properties

venture, we can structure a financial package that suits your investment profile,” says Matsau. “We cover office accommodation, industrial property and shopping centres. We apply strategic considerations that maximise returns and enhance asset value.” In terms of office vacancies, according to SAPOA’s July 2018 Q2 Office Vacancy Report, the national office vacancy rate was 11,1% – down 40bps on the quarter before, and at the lowest level recorded since Q1 of 2017. The improving vacancy rate saw asking rental growth stay above inflation at 6,3% year-on-year. “The current vacancy cycle has been characterised by the occupation of largescale new developments – often by single occupiers,” says Matsau. “Sasol, Discovery and Old Mutual in Sandton are some of the examples that come to mind.”

Quoting from the report, Matsau also said that the highest vacancy rate was the one recorded for the Ethekwini municipality at 13,2%, with the secondhighest being the City of Johannesburg with an overall rate of 12,4%. The Johannesburg CBD was high at 16,2%. In terms of decentralised nodes, Sandton, Sunninghill and Parktown all had office vacancies in excess of 14,5%. For a property broker, this means there is a lot of available potential. “It’s great to be on the SAPOA Board,” says Matsau. “We are always looking at the bigger picture, and how we can all contribute to the industry. We speak about transformation, and we are looking at ways of driving that in the property sector. We are also looking at how municipalities and metros are performing, both on a national and a provincial level. These topics are what keeps the organisation relevant – that, and being able to network with the industry’s leaders as well as with senior government officials. “As practitioners, it is important for us to examine the available information, analyse it and see how we as industry professionals can work with government bodies to help improve performance and deliverables. This is something SAPOA has been doing for years. “In addition to being a member of SAPOA, I am also a member of the South African Institute of Black Property Practitioners. So it was wonderful to see SAPOA’s President Ipeleng Mkhari take part in a panel discussion about the state of transformation in the property industry at the recent SAIBPP Convention in Sandton.”

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one on one

MOMFA updates standards document The Method for Measuring Floor Areas in Buildings (MOMFA) standards are undergoing of a major overhaul to adapt to new developments in the building industry Interview by Mark Pettipher Words by Marika Truter

n his second year as the Chairperson of MOMFA, Sean Liebenberg says that “The current document was released in 2008 and has been used in the industry, but it has only started to gain traction more recently, with us getting queries over the past few years with regards to the training we’re doing across country. Once the revision is out in the market, we’ll look at the impact of it in relation to what’s happening internationally. “We are currently reviewing the grammar and the accuracy of the document as well, to release a revision that addresses all current errors. The structure of the document is not changing, so it will still be in the four categories of office, retail, industrial (single- and multi-tenanted, which we’ve now added), and residential.” Asked how closely the construction industry adheres to the MOMFA standards, Liebenberg says, “I do quite a bit of training around the country. The delegates from the professional bodies – including quantity surveyors and architects – right through to the property sector, know the standards and refer to them as something that is quantifiable and measurable.” Liebenberg indicates that the office and retail sections have been reviewed and that the images were changed to reflect more accurate information. “We are, however, struggling in certain areas, so we are going to reintroduce a canvass-group scenario with certain representatives of the industry. We will place all the queries on the table and ask for their input. They have bigger 8

SOUTH AFRICAN PROPERTY REVIEW

portfolios, and they generally apply the rules and measure their buildings. We will then go through the process of ensuring that when we release this revision, we have addressed the general issues and the majority of concerns.”

Sean Liebenberg, Chairperson of MOMFA

“We wrote a memorandum with Sanlam on the understanding of the grey areas in between, and how we would apply it. With Greg’s involvement and interpretation, we had the SAPOA guidelines and our memorandum of understanding”

The road to becoming chairperson Liebenberg’s experience in measuring flooring space started in his student years. He was doing practical work as part of his studies at Wits Technikon and UJ, working at an architectural firm and doing interior fit-outs for large entities such as Bank City. “Part of that process was to try to work out building areas, so we started dabbling with questions such as ‘What are the measurement criteria?’,” he says. “I worked for them for about a year when an interview came up for Sanlam Properties. Over and above designing the interior spaces, my job there was to measure the buildings and prepare the buildings’ lettable area records. I devised systems and templates, and measured most of the portfolio at that stage. I was based in the Johannesburg office, but became the national manager of all the different offices and measurements of the different buildings. Through my work, I had a lot of queries to SAPOA. Greg Pietersen, one of the committee members, was one of my contacts. “Eventually, we wrote a memorandum with Sanlam on the understanding of the grey areas in between, and how we would apply it. With Greg’s involvement and interpretation, we had the SAPOA guidelines and our memorandum of understanding. I was part of the canvass group; a lot of the issues that weren’t addressed initially were addressed in a new version. Probably through my involvement, the committee eventually asked me to join about six years ago. From that came the natural progression to becoming the MOMFA Chairperson.”

one on one Developing the guidelines

Technological advancement

According to Liebenberg, “It’s challenging to develop a document so that you do not repeat too much for the different components. General principles should carry across – for example, the dominant face in retail, where you look at the external façade, external walls and even shopfront details. The logic of the dominant face in retail should be the principle that would apply in industrial, even if we haven’t said it or written it up. Those are the kind of things we’re dealing with. People are asking questions, and assuming that we have the guidelines for every single thing.” SAPOA’s website will be the interface to disseminate this information. Queries will be responded to and published on the SAPOA website. Check there first: you might find that your query has been addressed already.

“We are moving towards international standards and towards recommending going fully electronic, so that your measuring device produces information that can be overlaid with different versions, and so that any disparities can be easily found,” says Liebenberg. “Electronic drawing allows you to do this because you overlay different versions of drawings and see where the disparity lies. “You can now measure everything with apps on your smartphone. This is creating a lot of confusion for tenants, because there are so many different aspects and components that are measured. As a landlord or owner of a property, it’s not just a specific room, but the whole building you try to recoup income from. This involves all common facilities related to the building,

KwaZulu-Natal MOMFA Workshop

as well as remote facilities that can be attributed to the building and that can be recouped as rental. “A tenant, is simply concerned about the physical area that they occupy – and the advent of a technology that quickly measures the space will make them query things. For example, a tenant might say, ‘I only occupy Xm2 – so why are you charging me for Ym2?’” Liebenberg indicates that MOMFA will not be recommending a certain device that has a certain calibration. “From a MOMFA or SAPOA perspective, we set the parameters and guidelines for electronic measurement devices and computeraided drawings – and the markets should dictate what’s best for their use,” he says. “We try to give people the guidelines and try to be as accurate as possible in the way we provide that information. It’s our care of duty.”

he Method of Measuring Floor Areas (MOMFA) half-day workshop was held at Master Builders Conference Centre in Westville, Durban on 6 August 2018. All 16 delegates found the workshop, facilitated by Sean Liebenberg, to be very topical, current and informative, and appreciated the facilitator’s expertise on the subject.

Delegates who attended the KZN MOMFA Workshop, facilitated by Sean Liebenberg

SOUTH AFRICAN PROPERTY REVIEW

legal update 14 June 2018 The Joint Constitutional Review Committee Parliament of the Republic of South Africa c/o Ms P Jayiya Committee Section PO Box 15 Cape Town 8000 By email: pjayiya@parliament.gov.za Dear Committee Members

SUBMISSION TO THE JOINT CONSTITUTIONAL REVIEW COMMITTEE ON THE REVIEW OF SECTION 25 OF THE CONSTITUTION 1. Introduction 1.1 The South African Property Owners Association (SAPOA) is the representative body and official voice of the commercial and industrial property industry in South Africa. 1.2 South Africaâ&#x20AC;&#x2122;s property industry is currently estimated to be worth about R8-trillion and is the bedrock of our economy. 1.3 SAPOA supports land redistribution and reform so as to redress past historical imbalances. Unless there is significant reform and redistribution within the property sector, the entire sector is placed at risk. Accordingly, SAPOA welcomes the opportunity to submit representations on the issues identified by Parliament in its resolution of 27 February 2018, namely: (a) Whether current policy instruments, including the willing buyer/willing seller policy and the other provisions of Section 25 of the Constitution, are hindering effective land reform; (b) Whether expropriation of land without compensation should be introduced, and whether it is possible to implement this in a manner that increases agricultural production and food security; (c) What future land tenure regimes should be adopted or implemented. 1.4 The progress of land reform and land redistribution, since 1994, has been inadequate. Quite clearly, steps need to be adopted to accelerate the pace of land reform and redistribution. 1.5 Parliament, the State and civil society, including such organisations as SAPOA and its members, need to work collectively to achieve this aim. 1.6 SAPOA agrees that some of the current policy instruments, such as the willing buyer/willing seller policy may have hindered effective land reform. 1.7 Section 25 of the Constitution provides all of the effective mechanisms to achieve land reform. The State needs to unlock its considerable land holdings, mainly vacant and unused land, in urban and rural areas so as to accelerate reform and access to land. The willing buyer/willing seller policy needs to be changed, and the State needs to use 10

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its powers under Section 25 of the Constitution to expropriate land required for land reform. 1.8 There is no need for land to be expropriated without compensation. Section 25 of the Constitution provides that just and equitable compensation is to be paid on expropriation. This does not necessarily mean that the compensation has to be at market value, but rather equitably determined taking into account the factors set out in Section 25 of the Constitution. 1.9 All expert reports and opinions gathered thus far conclude that Section 25 does not need to be changed for effective land reform. 1.10 Financial resources have not been the impediment to achieving effective land reform. 1.11 The economic impact of amending Section 25 of the Constitution, so as to provide for expropriation without compensation, needs to be considered. A wider and more considered consultation is required. It is important not to undermine the R8-trillion investment in the property sector. 1.12 It would appear that the focus of expropriation without compensation is on unused land, vacant land and disused buildings. These are all located within the urban context, and therefore have no bearing on food security and agricultural production. Rather, the economic impact to the property sector, as a whole, needs to be considered. 1.13 SAPOA supports a new framework for land reform, which includes tenure reform. A credible and independent database on land ownership should be developed. A land redistribution policy needs to be formulated. It needs to distinguish between land in urban areas and land used for agricultural purposes. The recommendations of the Parliamentary High Level Panel on tenure reform should be implemented. This would provide security of tenure for about 17-million South Africans, which in turn would significantly boost the property sector. Affording tenure security to this group of 17-million South Africans will result in significant further investment and growth to the economy.

legal update 1.14 The Constitution, and in particular the Bill of Rights, is to be interpreted in the context of International Law, and our Constitution measured against other democratic countries. 1.15 International Law does not permit expropriation without compensation. 1.16 Actions that erode legally enforceable property rights will raise concerns for investors both locally and internationally. 1.17 If South Africa is seeking to promote international investment, the amendment of the Constitution to allow expropriation without compensation would be unwise. 1.18 It is in the interests of all South Africans, and particularly the property sector, that the challenge of land reform and land restitution is solved. SAPOA would like to work with Parliament in seeking a solution to this problem, which protects the investment in the property sector and the overall economy.

2. SAPOA and the commercial property sector 2.1 The property sector, excluding agriculture, is valued at R8-trillion. It has increased in value from R5,8-trillion, which was the estimate provided by the Property Sector Charter Council in 2015. 2.2 The residential property sector accounts for threequarters of all property owned in South Africa. 2.3 From the Property Sector Charter Council’s report, residential property accounts for three quarters of the value at R3,9-trillion. Commercial property carried a value of R1,3-trillion, with R790-billion held by corporates, R300-billion held by REITs listed on the Stock Exchange, R130-billion by unlisted property funds, and R50-billion by life and pension funds. 2.4 Of the non-residential properties, retail property had the highest value of R534-billion, office properties at R357-billion, industrial properties at R281-billion, and hotel and other properties at R94-billion. 2.5 Informal residential properties were not valued. Making up the balance of the property sector is the public sector at R0,2-trillion and vacant land zoned for residential use at R0,5-trillion. 2.6 The public sector land is divided between Stateowned enterprises (R66-billion), metros and selected local municipalities (R69-billion), and the Department of Public Works (R102-billion). 2.7 These figures also exclude agricultural land and land held by the State or Ingonyama Trust. 2.8 In 2012, the formal property sector’s contribution to GDP was R191-billion; in terms of annual income and expenditure flows, it generated R46,5-billion to the fiscus. 2.9 The Property Sector Charter aims to achieve that the property sector be held 25% by blacks within five years and 50% within 10 years, representing (on 2018 figures) R4-trillion.

3. Section 25 of the Constitution

3.1 The Freedom Charter, which the ANC Congress adopted in Kliptown in 1955, called for all land to be returned to the people and redivided. 3.2 When it came to negotiating the final Constitution about 40 years later, the same call was made. It was, of course, a different era. Nevertheless, Section 25 – the property clause – was the most hotly debated and the last to be resolved. A compromise was reached. Ownership of property was protected, subject to three exceptions: (a) The State was conferred the right to expropriate property not only for public purpose but also for public interest. (b) Public interest included the nation’s commitment to land reform and to bringing about equitable access to natural resources. (c) Compensation would be just and equitable, and not necessarily based on market price. 3.3 Two further sections were also inserted. Section 25(5) obliges the State to take reasonable legislative and other measures to enable citizens to gain access to land on an equitable basis. 3.4 Section 25(8) states that no provision of Section 25 would impede the State from taking legislative and other measures to achieve land, water and related reform, so as to redress the imbalances of the past. 3.5 These measures, however, were qualified by Section 36(1) which provides that limitations have to be reasonable and justifiable in an open and democratic society based upon principles of dignity, equality and freedom. 3.6 Section 25 created the necessary compromise and balance between the protection of our economy based on private property and free market enterprise, and the need to dramatically transform the economy following decades of oppressive laws and policies. 3.7 There is no requirement that the State must follow a policy of willing buyer/willing seller. Rather, Section 25 mandates the State to expropriate land so as to achieve land reform. 3.8 Unfortunately, the State’s track record over the past 20 years in giving effect to restitution and redistribution has been poor. It adopted a willing buyer/willing seller policy when there was no need to do so. It has not used its expropriation powers to redistribute land. 3.9 It must also be borne in mind that the Constitutional Court has, on numerous occasions, emphasised that Section 25 must be interpreted in a manner that balances the pressing public interest in reform and transformation against the private interests of the property holder. Section 25 should not be interpreted in a manner that frustrates meaningful land and other reform. 3.10 This was clearly set out in the AgriSA judgement1 where the Constitutional Court held that Section 25 must be interpreted in the context of the need to facilitate 1 AgriSA vs Minister for Minerals & Energy 2013 (4) SA 1 (CC) SOUTH AFRICAN PROPERTY REVIEW

legal update nation building and reconciliation and the opening up of economic opportunities. In interpreting Section 25, it was necessary not to over-emphasize private property rights at the expense of the State’s social responsibilities. There would inevitably be tension between the interests of the wealthy and the previously disadvantaged. 3.11 Section 25(3) states that the amount of compensation must be just and equitable, reflecting an equitable balance between the public interests and the interests of those affected having regard to all relevant circumstances. Market value is only one of the factors listed in Section 25(3). 3.12 Section 25(3) and the possible amendment thereof to provide for expropriation without compensation is analysed more fully within the International Law perspective in paragraphs 10 and 11 below, where the conclusion is reached that an amendment providing for expropriation without compensation will be contrary to International Law and accepted norms in constitutions in open and democratic societies, and would not pass the proportionality test of Section 36(1) of the Constitution. There is, however, room for amendment for expropriation law within a very narrow and properly circumscribed field on the basis that it would still be just and equitable to pay little or no compensation. 3.13 SAPOA therefore submits that there is no need to amend Section 25 of the Constitution, which in its current form is not an impediment to land reform.

4. The Parliamentary High Level Panel 4.1 SAPOA supports the conclusions and recommendations of the Parliamentary High Level Panel (the Panel). 4.2 It believes that there is an urgent need to address the tenure rights of the 17-million South Africans who occupy State or communal land. It agrees that there is a need to confer individual land rights, recognising customary traditions, under a new form of title, and that this should apply both to urban areas as well as to rural areas. Achieving this will result in significant investment in land and in the property sector generally. 4.3 It also supports the creation of a new land record system that would enable the property rights of all South Africans to be recorded and registered on a sustainable basis. This new legislative framework, as recommended by the Panel, would provide for a continuum of rights and encompass not only historic property rights registered in the Deeds Office but also land rights of those in shack settlements around cities, those on communal land within the former homeland areas and those on trust or communal property association land settled post-1994. 4.4 SAPOA agrees with the conclusion that Section 25 contains all of the legislative mechanisms so as to enable the State to achieve proper redistribution. 12

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4.5

4.6

4.7 4.8

The Panel concluded that budget constraints have not been the main barrier to redistribution. There is therefore no need to amend the Constitution or to remove the obligation to pay compensation. The most important constraints to effective land reform identified by the Panel have been corruption, the diversion of the land reform budget to elites, lack of political will and the lack of training and capacity. The Panel highlighted the need to provide land and housing in urban areas. This is so as to remove the legacy of the apartheid city, where the poor are distanced from centres. SAPOA believes that municipal and State land within urban areas should be identified, as a first step, for development, and this can be done in public private partnerships. Section 25 contains all of the mechanisms to achieve this. SAPOA also notes the conclusion reached that there has been a significant downward trend in the pace of redistribution measured by hectares since 2008. In 2008, redistribution peaked at 500 000 hectares per annum, but by 2016/2017 it was almost at zero. Clear policies need to be finalised to identify the purpose of land redistribution.

5. Other experts 5.1 Apart from the expert reports contained in the Panel report, other sector experts have all concluded that Section 25 contains the necessary mechanisms to achieve land reform, and there is no need to amend the Constitution. 5.2 Constitutional Court Judges Albie Sachs and Dikgang Moseneke have both been critical of the State’s failure to use its powers of expropriation contained in Section 25 of the Constitution. The concept of just and equitable compensation provides sufficient flexibility through the weighing of all relevant factors1. 5.3 Professor Elmien du Plessis of North West University has stated that a land reform programme based upon market value will be unaffordable and, therefore, the

2 There have been calls for the Constitution to be amended because of the belief that compensation is on the basis of a willing buyer and a willing seller. However, the willing buyer/willing seller formulation is not included in the Constitution. A submission by Justice Albie Sachs states that, “Factors which could considerably reduce the amount of compensation could well include whether the property was given free of charge by the government or acquired at a knockdown price, whether the State has invested in or subsidised the land or improvements, and/or whether the property is in use or simply being held as a speculative investment.” He concludes as follows: “Far from being a barrier to radical land redistribution, the Constitution in fact requires and facilitates extensive and progressive programmes of land reform. It provides for constitutional and judicial control to ensure equitable access and prevent abuse. It contains no willing seller/willing buyer principle, the application of which could make expropriation unaffordable.” This interpretation is the same as that of former Deputy Chief Justice of the Constitutional Court Dikgang Moseneke, who states in his submission to the Panel: “Everyone whose property is expropriated must be for a purpose the Constitution authorises and against payment of equitable compensation. The willingness of the buyer and/or of the seller may facilitate a smooth transaction but does not seem to be a constitutional requirement.”

legal update courts need to define what just and equitable compensation means1. Professor du Plessis has re-affirmed that the challenge lies in the State’s failure to give effect to Section 25(3) of the Constitution. Section 25(3) sets out the criteria for determining just and equitable compensation. To date, the State has continued to use market value for compensation rather than defining just and equitable compensation. 5.4 Professor Ruth Hall of the University of Western Cape has indicated at various platforms that Section 25 of the Constitution provides a powerful mandate for transformation, land redistribution and the restoration of land that was dispossessed. Hall has stated that the Constitution is not the impediment to land reform, but rather that the State, to date, has failed to use its Constitutional powers2.

6. The Property Charter 6.1 SAPOA is a member of the Property Charter Council. The Property Charter Council has developed the Property Sector Code, which is intended to meaningfully transform the commercial property sector. 6.2 SAPOA believes that a focus on achieving the goals set out in the Property Sector Code will most effectively achieve transformation within the commercial property sector. The Property Sector Code applies to the residential property industry, the commercial property industry and property services. It therefore affects the entire R8-trillion of property sector investments. 6.3 SAPOA believes that a combination of the State utilising its powers under Section 25 of the Constitution and the committed implementation of the Property Sector Code will achieve sustainable transformation in the property sector. 6.4 This should be the focus of the State, civil society and the private sector.

7. New framework for land reform 7.1 The current discourse on land reform often fails at the beginning, due to a lack of accurate information on land and property ownership. This has allowed much of the public debate on the interventions required to be misinformed, and has become a serious constraint in policy-making. 7.2 The need for an independent and credible database on land ownership and land transfers, together with appropriate data on the use of land, is essential. The two national audits recently released by AgriSA and the Department of Rural Development & Land Reform have completely different conclusions.

7.3 SAPOA recommends that a public private partnership be established in respect of the acquisition, retention and storage of land data. 7.4 A clearly defined land redistribution policy is also required. There is still no consensus on who should get land and for what purpose. 7.5 In the initial phase of land reform, land reform was only for the poor. Land acquisitions were modest parcels of land primarily for residents and some land for cultivation. 7.6 In the mid-2000s, the government moved away from the pro-poor programme to a commercial-farmer programme. In 2009, this programme was abandoned, and the government introduced the proactive landacquisitions strategy, where farms were acquired by the State and released to persons. This programme was elite-driven, with farms often allocated to nonfarmers and used for political patronage. 7.7 There has been little effective focus on urban or peri-urban land reform. 7.8 In 2008, the Centre for Enterprise Development (CDE) recognised the need for urban land reform. Anne Bernstein (2007) stated that, “South Africa is urbanising rapidly. Land reform, therefore, must include the identification and release of urban and peri-urban land for settlement, housing and economic development, as well as reform of ownership and use of land suitable for farming.” 3 7.9 The motivation for urban land reform raised by CDE has now come to the fore. Across many cities, people are mobilising, and there is a growing discourse that land reform is not a rural issue. It is imperative that a new comprehensive land reform framework must address the need to access land for changing the spacial layout of apartheid “untransformed” cities, where the poor live furthest from their place of employment and informal settlements continue to grow. Rapid access to land on the periphery of urban areas for housing and other economic activities should be a prioritised programme. 7.10 In the restitution space, claims need to be resolved and the restitution process finalised. The threat of pending or future land claims is a serious impediment to property development.

8. Clarification statements

1 At an AgriSA workshop held in March 2018, at which the topic of land reform and expropriation without compensation was discussed, Professor Du Plessis called for an equitable balance between market value and just and equitable compensation.

8.1 SAPOA notes the clarification statements made by Deputy Minister Cronin and others to the effect that the expropriation-without-compensation process will target unused vacant land in cities, abandoned buildings and commercial properties held unproductively and for speculative purposes. 8.2 It appears that the focus of the debate is on urban land as opposed to rural farming land.

2 Professor Ruth Hall (PLAAS – University of the Western Cape) Land Reform Challenges, Daily Maverick, March 2018

3 Anne Bernstein, Business Day, 17 April 2018

SOUTH AFRICAN PROPERTY REVIEW

legal update 8.3 The clarification statements do not provide any comfort to SAPOA and its members. As indicated above, the Property Charter Council in 2015 valued vacant land that is awaiting development at R500-billion. It therefore has very significant value. 8.4 It is submitted that it is inappropriate to categorise commercial property as unproductive. Although it may, at any point in time, not be used in the most productive manner, through market forces land would naturally be converted to a better and higher use. 8.5 Speculative investors invest in land where there is a high risk and potentially a high return. 8.6 Vacant land attracts higher rates, and property owners are prepared to pay these rates because of the future potential of the land. 8.7 An economic study of the Waterfall Development in Gauteng prepared by Dr D Prinsloo in April 2018 shows that the R40-billion development cost creates 46 000 construction jobs and, upon completion, 60 000 permanent jobs. In addition, the development will add R75-billion to the local economy and R700-million in property taxes per year. Parcels of this land have been invaded as a consequence of the call to expropriate so-called “idle land” held for speculative purposes, with a significant adverse effect to our economy. 8.8 There appears to be no logic or justification for singling out these categories of land as being appropriate for expropriation without compensation. 8.9 If vacant land is required to achieve urban land reform, then it should be expropriated against the payment of just and equitable compensation.

9. Economic factors 9.1 The Parliamentary Resolution (as well as various statements made by the ANC following the December Conference resolutions and by President Ramaphosa in the State of Nation Address) states that the concept of expropriation without compensation is to be implemented in a manner that increases agricultural production and food security. 9.2 As the thrust of the debate appears to be on urban land, agricultural production and food security is irrelevant. 9.3 The economic impact, and the impact generally to the property sector (valued at R8-trillion) needs to be carefully considered by all experts. 9.4 SAPOA believes that the economic cost of introducing a policy of expropriation without compensation and amending Section 25 of the Constitution would far exceed the financial benefit of acquiring land without having to pay compensation. 9.5 The Zimbabwe example shows that the economic cost of expropriation without compensation was US$20-billion, whereas the compensation that would have been payable was estimated to be US$11-billion4. 4 See “Why Land Expropriation without Compensation is a Bad Idea” by Wandile Sihlobo and Dr Tinashe Kapuya, agricultural economists, Pretoria, May 2018, an article drawn from essays on land reform co-authored by

9.6 The Panel report concludes that compensation is not the impediment to effective restitution. 9.7 There is accordingly no need to link land reform and redistribution with no compensation.

10. Expropriation without compensation is a breach of International Law 10.1 Customary International Law does not countenance expropriation without compensation, i.e. confiscation of property. In terms of Section 232 of the Constitution, Customary International Law forms part of South African Law, unless it is inconsistent with the Constitution or an act of Parliament. The question is thus whether the Constitution or an act of Parliament can be adopted or amended to provide for expropriation without compensation, while still conforming to International Law. 10.2 Expropriations are indeed lawful in International Law if for a public purpose, without discrimination against foreign nationals, and if compensation is paid promptly. 10.3 It must however be stressed that the subjects of International Law are sovereign states and international organisations with legal personality. Private individuals or companies benefit from the protection of International Law on two levels: (a) Firstly through diplomatic protection of their state of nationality if the host state acted in breach of the minimum international standard applicable in the case of expropriation of property of a foreign national; and (b) Secondly through international arbitration in terms of treaties, should the host state expropriate property without compensation and in breach of the treaty. 10.4 Diplomatic protection (a) Should the host state expropriate property without compensation, it amounts to an international delict against the state of nationality of the investor. That state of nationality is entitled that the host state treats its nationals according to the international minimum standard, which requires that compensation be paid. (b) The state of nationality which has been so offended may then lawfully revert to diplomatic protection of its national. Diplomatic protection may take various forms including economic sanctions, as were instituted against the Republic of Zimbabwe by inter alia the United States and Great Britain. The dispute may also end up before the International Court of Justice. However, the Republic of South Africa has not consented to its jurisdiction yet.

Professor Johann Kirsten, Director for Bureau for Economic Research, Stellenbosch University SOUTH AFRICAN PROPERTY REVIEW

legal update (c) It would thus be rather foolish to heed a political cry for expropriation without any compensation as a general measure. This would be a very blunt instrument to attain internal political objectives and land reform. South Africa may then find itself in an international controversy whereby there may be very little chance of escape from international censure. 10.5 International arbitration (a) Private foreign nationals may not commence international proceedings against a host state in any international tribunal, unless status is granted to them through treaties or agreements between states, whereby rules of International Law may govern the relationship between the states and the individuals or companies concerned. The individual or company is then entitled to institute international arbitration proceedings directly against the offending host state. (b) The Republic of South Africa has indeed been taken on international arbitration twice on the basis of Bilateral Investment Treaties (“BITs”) with Switzerland, Italy and Lichtenstein. Since then, most of the BITs were cancelled or were not renewed, and statutory provision has sought to be made to accommodate such claims. 10.6 Quantum of compensation under International Law (a) The traditional measure of compensation, which was accepted as Customary International Law until about 1974, was adequate or effective compensation that was equated to full compensation or at least market value of the expropriated property. Full compensation means an amount that, insofar as money can do so, will restore the expropriatee to the same financial position in which he/she was before the expropriation. This is still the measure insisted upon in International Law by certain countries such as the United States, Britain and most of the European countries in BITs. This was also the state practice of the Republic of South Africa in a large number of BITs. (b) However, since the acceptance of the Charter of Economic Rights and Duties of States by General Assembly Resolution 3281 (XX1X) on 12 December 1974, there has been a marked deviation from the said measure of compensation. In the Charter, which is not binding International Law because a General Assembly Resolution is not binding on member states, the measure of compensation was watered down in Article 2(2)(c) to “appropriate compensation”, taking into account the particular state’s relevant laws and regulations and also contentions that the state considers pertinent. Although the article has been described as an utter rejection of International Law and has since 1974 given rise to the most disputed issue in International Law, the erosion of International Law has gone so far that the United States judiciary has already expressed doubts upon the validity of the traditional measure of compensation in International Law. What is, however, 16

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(c)

(d)

(e)

(f )

clear is that a mere subjective norm for assessing appropriate compensation is still unacceptable. The subjection of compensation solely to municipal (or internal) law cannot be regarded as part of International Law unless the norm set in such law conforms to the requirements of International Law. The norm of appropriate compensation has no fixed meaning of its own and depends upon the circumstances of each case. It has been decided by an International Tribunal that in every case it would be necessary to have regard for all circumstances with special reference to the legitimate expectations of the parties. The basic principle underlying payment of full compensation is that of equality in the bearing of public burdens. It is on the basis that where one or more individuals has to bear a sacrifice in the form of the loss of property for the common good, their individual and excessive burden should be compensated by the community. That burden should not partially or wholly be imposed on expropriated land owners. The equality principle does not allow nominal compensation, nor (as a rule) does it justify less than market value. However, various countries had deviated from the traditional full compensation concept and require in their constitutions just or fair compensation. Fair compensation is an amount that will redress the imbalance caused by the expropriation between the public interest and the interest of the expropriated land owner. Fair compensation can be equal to full compensation, but it may also be less. The South African circumstances, an imperative for land reform, may give rise to an internationally acceptable formulation of measures of compensation in individual specified cases. In various international arbitrations a wide margin of appreciation has been allowed for necessary social and economic reforms in applying International Law when quantifying compensation on expropriation. The measure of compensation in Section 25(3) of the Constitution is a very flexible instrument, which may in some circumstances give rise to full compensation and (if just and equitable) to less than full compensation – and even very little or none in very exceptional cases. It is premised on a just and equitable balance of interests. Justice and equity may, under very restricted circumstances, have the result that very little or no compensation will be payable, for example where the expropriated property has been abandoned by the owner prior to expropriation. It is important to note that the expropriatee, even if no compensation is payable under these circumstances, is not a victim of a confiscation, because he is under Section 25(2) and Section 25(3) of the Constitution entitled to just and equitable compensation, which may then

legal update conceivably be none. In applying Section 25(3), the principle of equivalence whereby the expropriatee should not bear the burden on behalf of the society at large, remains important and will be inherent in the concept of just and equitable compensation, even though it may be minimal. (g) As background, and whether Section 25(3) is acceptable in terms of International Law, Article 16 Paragraph 1 of the Charter may not be ignored. It provides that it is the right and duty of all states, individually and collectively, to eliminate colonialism, apartheid, racial discrimination and the economic and social consequences thereof as a prerequisite for development. This section of the Charter is not part of the International Law controversy. If evaluated against this background, Section 25(3) (read with Section 25(4)(a) and Section 25(8) of the Constitution) provides for legislation, such as an expropriation act, to be adopted or amended so as to provide for the application of Section 25(3) in order to eliminate the consequences of apartheid by taking into account all relevant circumstances, and to provide for a comprehensive formula that is acceptable in international terms as an exception to the traditional full compensation measure. (h) However, a statutory provision for blanket expropriation without compensation in respect of all expropriations is – from an International Law perspective – totally unacceptable. 10.7 The necessity to amend the Constitution from an International Law perspective (a) It is thus submitted that it is unnecessary to amend Section 25 of the Constitution as the measure of compensation in Section 25(3) thereof is flexible enough to accommodate the concept of just and equitable compensation which is less than full compensation, and which may in very narrow circumstances lead to minimal compensation. It is submitted that Section 25(3) of the Constitution is acceptable in terms of International Law, taking into account the imperative of the elimination of the economic and social consequences of apartheid as a prerequisite of development, for which a wide margin of appreciation will be allowed. (b) If the Expropriation Bill (2015) is to be amended to unpack Section 25(3) of the Constitution in order to provide for specific relevant circumstances when minimal or no compensation will be payable, it will be necessary to: (i) closely and very clearly circumscribe the circumstances; and (ii) subject such provision to the just and equitable qualification of Section 25(3) in order to ensure that the equivalence principle discussed above, remain applicable.

(c) The expropriated owner will then be entitled to show that no or minimal compensation is not just and equitable. It is submitted that, that would also close the door to a successful challenge of the constitutionality of such provisions under Section 36(1) of the Constitution. It is submitted that it would also make such amendments internationally acceptable, particularly in view of Section 16 Paragraph 1 of the Charter. (d) It is difficult to conceive that an amount of compensation can be just and equitable under Section 25(3) but not “reasonable and justifiable” under Section 36(1) of the Constitution. Should, however, the political call for expropriation without compensation, even if only in land reform cases, be heeded, the position changes dramatically. We undertook a comparative constitutional study, not only for purposes of Section 36(1) of the Constitution, but also for the international acceptability of expropriation without compensation.

11. Foreign constitutions 11.1 After a study of twenty-four constitutions worldwide, only one constitution could be found that specifically provides for no compensation. 11.2 Article 71(3) of the Constitution of the Republic of Zimbabwe provides for fair and adequate compensation on expropriation. However, the Constitution was amended as contained in Article 72(7), which reads as follows: “In regard to the compulsory acquisition of agricultural land for the re-settlement of people in accordance with a programme of land reform, the following factors shall be regarded as of ultimate and overriding importance: 10.5.1 Under colonial domination, the people of Zimbabwe were unjustifiably dispossessed of their land and other resources without compensation. 10.5.2 The people consequently took up arms in order to regain their land and political sovereignty, and this ultimately resulted in the independence of Zimbabwe in 1980. 10.5.3 The people of Zimbabwe must be enabled to reassert their rights and regain ownership of their land. And accordingly(i) the former colonial power has an obligation to pay compensation for agricultural land compulsorily acquired for resettlement through an adequate fund established for the purpose; and (ii) if the former colonial power fails to pay compensation through such a fund, the Government of Zimbabwe has no obligation to pay compensation for agricultural land compulsorily acquired for resettlement.” 11.3 Various formulations of the norm for compensation are found in various constitutions: SOUTH AFRICAN PROPERTY REVIEW

legal update Just compensation ●● The Central African Republic, 1995, Art.14; ●● The Constitution of the Republic of The Congo, 1992, Art. 30; ●● The Constitution of the Arab Republic of Egypt, 1971, Art. 34; ●● The Constitution of Japan, 1946, Chapter 3, Art. 29; ●● The Constitution of the People’s Republic of Mozambique, 1990, Art. 86; ●● The Constitution of the Republic of Namibia, Act 1 of 1990, Chapter 3, Art. 16(2); ●● The Constitution of the Republic of Poland, 1990, Art.7; ●● The Constitution of the Republic of Senegal, 1963, Art.12; and ●● The Constitution of the United States of America, 1787, Fifth Amendment, 1791, Art. [V].

Fair compensation ●● The Constitution of the Arab Republic of Egypt, 1971, Art.34; ●● Declaration of the Rights of Man and the Citizen, 1789, incorporated into the Constitution of the Fifth French Republic on 4 October 1958; ●● The Constitution of the Republic of Madagascar, 1992, Art. 34; ●● The Constitution of the Republic of Rwanda, 1991, Art. 23; and ●● The Constitution of the United Republic of Tanzania, 1977, Section 24(2).

Full compensation ●● The Constitution of the Kingdom of Denmark, Act 1953, Section 73(1); ●● The Constitution of Kenya Act 1969, Section 75(1)(c); ●● The Constitution of Lesotho, 1993, Section 17(1)(c); ●● The Constitution of the Kingdom of Norway, 1814, Art. 105; ●● The Constitution of the Russian Federation, 1993, Art. 35.3; and ●● The Constitution of the Republic of Seychelles, 1993, Section 26(3)(d).

Adequate compensation ●● The Constitution of the Republic of Botswana, Section 8(1)(b)(i) (interpreted by the Botswana Court as including market value and loss); ●● The Constitution of Malta, 1964, Section 37(1)(a); ●● The Constitution of the Republic of Uganda, 1955, Section 26(2)(b)(i); and ●● The Constitution of the Republic of Zambia, 1992, Section 16(1); 18

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No norms for assessment of compensation ●● The Constitution of Jamaica, 1962, Section 18(1)(a) (principles to be laid down in law); ●● The Spanish Constitution, 1978, Art. 33(3); ●● The Instrument of Government of Sweden, 1974, Art. 18; ●● The Constitution of the Republic of Italy, 1947, Art. 42.

Compensation to reflect an equitable balance of interest ●● Basic Law for the Federal Republic of Germany, 1949, Art. 14(3) (a fair balance between the public interest and the interests of those affected); and ●● The Constitution of the Republic of South Africa, Section 25(3). 11.4 From the aforegoing it is clear that no general principle that expropriation may take place without compensation can be found in these constitutions, except in the case of the Republic of Zimbabwe in respect of agricultural land for land reform purposes. The interpretation of courts in Common Law countries is generally that compensation should equate at least market value. 11.5 There would thus be no support in the application of Section 36(1) of the Constitution for a law that provides that no compensation on expropriation is payable having regard to the criteria set out in Section 36(1) of the Constitution.

12. Conclusion We therefore conclude that: 12.1 The call for expropriation without compensation in the field of land reform is totally unacceptable from an economical and legal point of view, and has the strong probability of landing the Republic of South Africa in international controversy and disastrous consequences for the economy. 12.2 It is unnecessary to amend the Constitution as Section 25(3) of the Constitution is flexible enough to provide in certain exceptional circumstances in minimal or no compensation being awarded where it is just and equitable to do so. 12.3 Amendment of the Expropriation Bill (2015) is possible without infringing upon International Law and without successful challenge in terms of Section 31(1) of the Constitution, if the principles set out above are adhered to. Yours sincerely

N GOPAL Chief Executive Officer

AMA GROUP AMA Architects design innovative, sustainable and humancentred emotive architecture. This South African design-led architectural firm, celebrates its 25th Anniversary in June 2018. The AMA Group embodies a passionate commitment to the timeless design values of high-quality contemporary architecture. As a Mixed-use design catalyst, our mission is bound up in the firm’s holistic view of Urban Design, Architecture and Interior Design. AMA Architects is recognised as a leading Architectural firm, dedicated to its vision and passion for design excellence. The AMA Group has won the overall SAPOA award for a green star rated refurbished office building, and Environmentally Sustainable Design is a high order priority of the group’s ethos. Our commitment to global progress in architecture through sustainable man-made environments is bound up in the design and exploration of the uniqueness of place. Our client’s indicidual requirements are fully explored through an engaging design process, resulting in the visionary expression of each distinctive building. Specific solutions are sought in accordance with the needs of a projects’ unique demanding set of criteria The realized impact of the site-specific building, within its contextual urban framework or local landscape, is as important as the architectural design of the building itself. A recogniseable spatial intelligence is further accomplished through our commitment to best practise construction technologies and the poetic of place making. The firm’s professional commitment is imbedded through a responsive collaboration with various built environment disciplines, including the Interior Design of our buildings through D12 Interiors. AMA Architects seeks like-minded property developers, property owners, financiers, and built environment professionals, who are committed to promoting the long-term view of well-considered building design. The firm is a leading African Architectural & Interior Design practice, claiming notable success in the design of Commercial head office buildings, Luxury Residential Apartment projects, specialised Retail projects, extensive Commercial Refurbishments, Leisure Projects, landscaped Office parks, bespoke Luxury homes, complex Office relocations and efficient Distribution warehousing facilities.

131 12th Avenue, Rivonia Sandton, South Africa PO Box 1299, Gallo Manor South Africa 2052 +27 (0)11 807 7505 adrian@amagroup.co.za maker.developer.oasis

25 YEARS

education

Sending the class of 2018 to the Gallows SAPOA’s annual Property Development Programme (PDP) started its 49th class in the usual manner: 60 delegates reported for registration in mid-July to take part in a week of seminars and a further week of completing an assignment. The participants emerged exhausted, elated and ready for their final celebration: the gala dinner Words and photographs by Mark Pettipher

Mr Norman Griffiths

Perspective view of Gallows Green

he PDP class of 2018 started on a cold but bright Sunday morning in the middle of July, with registration and photographs of all the delegates. SAPOA Education Officer Mafonti Morobi welcomed the delegates, and thanked this year’s sponsors (first place: Hamlyn Gebhardt Quantity Surveyors; second 20

SOUTH AFRICAN PROPERTY REVIEW

place: SVA International (Pty) Ltd) and tour facilitator V&A Waterfront for their support. SAPOA provided support as the third-place sponsor. The course’s conveners were introduced at the University of Cape Town’s Graduate School of Business (GSB). This year, it fell to Randhir Ramharack, GSB’s Executive

Education Programme Coordinator, to take the students through orientation; this was followed by a brief overview from GSB’s Director of Executive Education Kumeshnee West. The course facilitator, François Viruly – professor of Urban Economics, Property Development and Portfolio Management at UCT – outlined with enthusiasm what the delegates could expect from the course, promising“collaborative discussion, relationships that may become strained, a unique ‘party’ spirit and definitely a lack of sleep, but an experience that will leave a lasting impression on each participant”. The delegates were divided into seven groups and each provided with the same project brief to develop a parcel of land provided by the City of Cape Town at Gallows Hill. The site is currently occupied primarily by the traffic department. At the end of the second week, each group was required to submit a complete proposal to the panel of judges, which

education

Yongama Mabece What’s the most valuable lesson you’ll take away from the course? I learnt about team dynamics, and to understand different people’s strengths and weaknesses and how these can be harnessed in a team environment to achieve a common objective. I think this was one of the reasons we came out top in this year’s PDP: we clicked as a team. We appreciated one another’s different strengths and trusted one another to deliver on the tasks allocated to us. Where there were weak spots, we were all willing to step in and help. For me, the lectures that dealt with team dynamics were the most valuable.

Urban analysis site map

included Henry Chitsulo, Tony Gebhardt, Norman Griffiths, Johan Marnitz, Simon Nicks, Clive Shepherd, Leanne Sowray, Yanda Tolobisa and Dave Marais. Using a clearly defined set of criteria, the proposal had to include: ●● Urban planning and architectural design; ●● Market analysis; ●● Social equity/ownership; ●● Legal structure; ●● Building cost and programme; ●● Financial viability; and ●● Financial structuring. Each group then had to present the submitted project, including an executive summary and an oral presentation. The judges were unanimous: Group 7 – which consisted of Viresh Mahabeer, Enzo Oosthuizen, Jannie van Rensburg, Yongama Mabece, Zantélli Krüger, Patrick Matute, Matthew Marshall and Lynn January – emerged victorious. Group 7’s executive summary of the proposal outlined their scheme: “Our scheme is conscious of social and economic interests of the community. Through the development of affordable housing and an innovative freehold/ leasehold structure, the scheme can deliver significant value to selected beneficiaries in time. GG Group Limited is a 51%+ black-owned corporation. “After considering all relevant factors and current market conditions, we have decided on a mixed-use development that will include the following:

●● 781 residential units, of which a portion will be sold off to recover the initial cost on the development. The remaining portion of the residential units will be retained as rental stock over the medium to long term. ●● Basement parking, which will be provided in line with the parking requirements for the site, and available to tenants and buyers only. We will provide limited on-site parking for visitors. ●● An office component of 8 949m² in line with the requirements as well as new stock that will be rented out (supported with lease agreements). ●● A retail component of 1 600m², which will offer convenience facilities to tenants and residents of Gallows Green. ●● 344m² of storage facilities, available for residents and tenants (supported by a short-term lease). ●● 3 000m² of yard space, provided for the City of Cape Town. “The subject site offers various zoning rights. In order for us to extract maximum value and density out of the available site, we will obtain rezoning to Bus 3, which will allow us to develop as follows: ●● Zoning: MU2 – Mixed use ●● FAR: 4.0 ●● Coverage: 100% ●● Height: 25 metres ●● Parking requirements: office 2,5 bays/ 100; residential 1,25 bays/unit ●● Building lines: 4.5 over 10m up to 25m ●● Transportation: TR 2.”

What advice would you give potential delegates? To leave their phones at home! But seriously, potential delegates need to understand that the PDP is an intense programme. The material presented in the first week will require their full attention because it’s crucial to putting the project together in the second week. Being distracted by calls from work and having to attend to work issues while at the PDP defeats the purpose – you miss out on an opportunity to learn and engage in discussions with the lecturers and other delegates.

The gala dinner Leanne Sowray, SAPOA’s PDP Chairperson, welcomed the delegates to the awards dinner at the One&Only hotel by saying that “The PDP is a sought-after, property sector-recognised course. This year there were 90 applicants, of which 60 were selected. Delegates who take part in this the course are highly skilled individuals from all areas of the industry, and already have a wealth of knowledge. They have the ability to help transform, develop and pay forward what they have learnt during the past two weeks.” Sowray believes that the PDP will resonate with the delegates for years to come: “Friendships formed, ideas shared and knowledge gained will be remembered long after the course has ended.” Each year, misdemeanours are fined, and the funds raised are given to a charity organisation. This year was no different: Ruben Smit, who is an asset manager at Investec, told us that the charity Everyone Love Everyone (www.ele.org.za) would be the recipients of a record collection of R13 000. SOUTH AFRICAN PROPERTY REVIEW

education

Viresh Mahabeer What’s the most valuable lesson you’ll take away from the course? I’m an architect, so it was interesting to see how a developer/investor (my future client) makes decisions at the very early stages of a project. I enjoyed looking into all the viable development options (funding and budget), feasibility, risks (financial and other), forecasting, and the fact that client already knows what they want months before a professional project team is considered. We only get involved later, once these decisions are made; then we have to work with the client’s available budget, and put their needs and wants into form. What advice would you give potential delegates? Be prepared for an experience you’ll rarely get in your usual working environment. For example, architects liaise mostly with a client, a contractor and other professionals in the building industry – but in Group 7, I had the chance to interact with bankers, development and portfolio managers and operations managers on a level that I’m unlikely to experience under normal working circumstances.

BACK ROW, FROM LEFT Morne van Greune, Jan Oberholzer, Lazola Kubukeli, Jaco Louw, Carl Hirsch, Ierfaan Cassiem, Jason Riddle, Mlamuli Nxele, Graig Rutherford, Andrew Miskin, Kosie Botha, Pierre Du Bruyn and Johan Janse van Vuuren 5th ROW, FROM LEFT Isma-el Ebrahim, Ronnie Purnell, Gabriele Farelo, Siapenga Simango, Sandile Mpanza, Andrew Theunissen, Matt Marshall, PG de Jager, Mali Langa and Kobus Landman 4th ROW, FROM LEFT Jannie van Rensburg, Zantélli Krüger, Esward Munyangadzi, Anthony Gould, Polla Scholtz, Debbie Bands, Naseegh Long, Wiann van der Merwe and Ruben Smit 3rd ROW, FROM LEFT Stewart McGill, John Karantges, Jody Moore, Joshua Botha, Enzo Oosthuizen, Gontse Zuma, Nico Barnard, Catherine Hendry, Shaan Steyn and Lynn January 2nd ROW, FROM LEFT Mpumelelo Dail, Wendy Cerutti, Themi Argyrou, Tefo Kelobonye, Bekumzi Mgqibi, Brian Kgariya, Linda Zondi and Bella Mfenyana FRONT ROW, FROM LEFT Yongama Mabece, Patrick Matute, Viresh Mahabeer, Mourise Molepo, Emily Adair, Matseliso Tlelai, Nomfundo Sibanyoni, Professor François Viruly, Thandeka Ndlovu, Baby-doll Mahlo, Kashiefa Abrahams-Toffar, Deslyn Faure and Randhir Ramharack

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education

FIRST-PLACE WINNERS FROM LEFT PDP Chairperson Leanne Sowray, Enzo Oosthuizen, Jannie van Rensburg, Yongama Mabece, Zantelli Kruger, Lynn January, Viresh Mahabeer, Matthew Marshall, Patrick Matute and Tony Gebhardt

SECOND-PLACE WINNERS FROM LEFT Esward Munyangadzi, Naseegh Long, Wiann van der Merwe, Nico Barnard, Baby-doll Mahlo, Gabriele Farelo, Kashiefa Abrahams-Toffar and Bekumzi Mgqibi

THIRD-PLACE WINNERS FROM LEFT Isma-el Ebrahim, Craig Rutherford, Siapenga Simango, Catherine Hendry, Matseliso Tlelai, Anthony Gould, Nicolaas Jacobus Landman, Ierfaan Allie Cassiem and Joshua Botha

Lynn January What’s the most valuable lesson you’ll take away from the course? The networking opportunities and friendships that were established, as well as the wealth of knowledge shared and received. The overview this course provides is invaluable – and essential for any property professional. What advice would you give potential delegates? Be prepared to work hard, contribute and learn. It’s worth it!

SOUTH AFRICAN PROPERTY REVIEW

integrated development planning

Review of Buffalo City Metropolitan Municipality’s Integrated Development Plan (IDP) 2018/2019 The Buffalo City Metropolitan Municipality (BCMM)’s five-year Integrated Development Plan (IDP) has been developed for the period 2016-2021. It is a municipal requirement that this plan is reviewed annually. This article serves as a summary of the council-adopted IDP for the 2018/2019 financial year

A Well Governed, Connected, Green and Innovative City

VISION

The broad theme for the current IDP is “Unity in Action: A City Hard at Work”. The following strategic framework has been adopted in the IDP: An innovative and productive city

Rapid and inclusive economic growth, which focuses on competitiveness of various industries, increased export potential, and promoting entrepreneurship.

A green city

Environmentally sustainable city, a clean and healthy city, management of open spaces, encouraging recreational activities and minimising the impact of air pollution.

A connected city

A high-quality city that has connections to ICT, electricity and transport network. Full logistics hub by 2030. Insurance that investment in the metro is in line with infrastructure development.

A spatially integrated city

Minimise the spatial divisions in the city and overcome township economies. Address the energy backlogs and ensure that all households have access to basic water.

A well-governed city

A smart and responsive municipality that delivers services and infrastructure, minimising administration and political disruptions. Sustainable city that meets its financial obligations.

THE 10-POINT PLAN The council has developed a 10-point plan of strategic objectives to achieve service delivery:

1 2 3 4 5

Economic development-supporting SMMEs, youth job-creation programmes, township economy, investment attraction, supporting existing tourism.

Agricultural/rural development, including fencing, dipping tanks and the development of rural nodes.

Infrastructure, including bulk and economic infrastructure, road maintenance and upgrade, and civic centre development.

Operations and management of revenue generating assets.

Safety: CCTV cameras, metro police, disaster control centre.

The current economic climate The IDP has identified several economic challenges that the metro was facing. These include: ●● Immaterial economic growth; ●● High unemployment resulting in bad debts; 24

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Housing: accreditation, beneficiary admin, electrification and title deeds.

7 Land: audit, policy and by-law enforcement.

8 Waste economy: recycle integrated management.

9 ICT smart city and smart metering.

10 Institutional service delivery and operating model.

●● High percentage of losses (electricity and water); ●● Small revenue base (dependent on household consumers); ●● Urbanisation effect and rural effect; ●● Ageing infrastructure, directly impacting inflow of investors;

●● Collection rate as at 31 March 2018 of 85,09%; and ●● Cost containment measures.

Catalytic projects Catalytic projects have been identified in the city and depicted spatially in the eastern and western side of the metro. A more detail summary is provided below.

Eastern zone The central urban core from East London to Mdantsane is an area regarded as the “heart” of the “city in a region”. This is the result of the large number of people living here, and is subject to critical infrastructure/ service backlogs. The urban area also has the potential to accommodate between 40 000 and 50 000 households at increased densities in the future. This area includes a variety of key catalytic projects, and is a key priority area for the consideration of SAPOA as this is where the majority of industry-related activities occur. The catalytic projects within the eastern zone of the BCMM include: 1. Mdantsane urban hub 2. Wilsonia industrial area 3. Amalinda Junction 4. Duncan Village redevelopment 5. CBD & Sleeper Site 6. EL port upgrade 7. West Bank industrial area & WWTW 8. Racetrack 9. EL airport 10. Buffalo Bridge and N2 re-alignment

Western zone The King Williams Town/Bhisho and Quenera area, located outside of the city, can open doors for investment and growth in the metro. King Williams Town/ Bhisho as an extended rural service centre is an important segment of BCMM, and

integrated development planning continued support is required. Provincial government is leading initiatives to consolidate Bhisho as an administrative capital of the Eastern Cape, and BCMM needs to support them by ensuring there is sufficient bulk infrastructure. The Mza’momhle and Nompumelelo settlements also require an upgrade. Along the western zone of the metro, the following areas have been identified as priority by the IDP: 1. Bisho-King Williams Town revitalisation corridor 2. Dimbaza industrial area 3. Bulembu airport 4. Berlin Green Energy.

Key performance areas The IDP also outlines local government’s key performance areas. These are: ●● Municipal transformation and organisational development; ●● Municipal basic service delivery and infrastructure development; ●● Local economic development; ●● Municipal financial viability and management; and ●● Good governance and public participation.

BCMM investment round-table The IDP also states that there’s a need for a land audit and proactive acquisition of land for further/future developments. The region’s industrial base is shrinking because of the lack of investment and reinvestment. There is a recommendation to have an investor conference (late this year or next year) in the BCMM, in partnership with business and government.

Strategy and stakeholder engagement The Call-2-Action Programme, a partnership between the city and business to change the face of the city, is an initiative that seeks to redefine the relationship between business and the city, as well as how they can work together.

Budget The budgetary plans for the metro include: ●● Renewing the focus on core service delivery functions and reducing costs without adversely affecting the basic services;

●● Increasing water bulk purchases by 9,46% as negotiated with Amatola Water Board.

●● Inflation-linked CPI; ●● Increasing employmentrelated costs for the 2018/ 2019 financial year by CPI + 1; ●● Increasing electricity purchases by 7,32% as per the guidelines received from NERSA; and

The total estimated expenditure budget for the 2018/2019 is R1 734 500 240, while the grant allocation to the metro is R1 970 715 000.

PRIORITY SECTORS The following priority sectors have been identified within the BCMM:

Automotive

Manufacturing

Marine

Tourism

Township Revitalisation

Industry participation in the review of the Nelson Mandela Bay Metro’s Integrated Development Plan – one year on The Nelson Mandela Bay Municipality recently completed the first review of its five-year Integrated Development Plan (IDP) for the 2017/2021 period. The compilation and the annual review of an IDP is a requirement of the Municipal Systems Act (Act No. 32 of 2000), and is a strategic planning instrument for local authorities that guides and informs all planning, budgeting, management and decision-making. The IDP is thus seen as a strategic business plan that guides municipal planning and management over the short and medium term By Shaun Madumbo and Martin Jonker

or the second time, SAPOA – as a representative body for commercial and industrial property owners – participated in the review process of the municipality’s 2018/2019 IDP document. The current review builds on the policy foundation set in the complete update undertaken in the 2017/2018 period. The IDP was crafted with the intention to place the city on a pathway of growth and development that will see an increase in employment, improved service delivery and the eradication of corruption. Core to the municipality’s policy framework is its strong emphasis on the following six strategic focus areas: Opportunity City, Safe City, Caring City, Inclusive City, Well-Run City and ForwardThinking City.

During the public participation period, SAPOA representatives attended several public meetings as well as the municipality’s IDP Representative Forum. The public participation process was extensive and, for the first time, residents could make use of social media and other electronic platforms to submit comments on the development of the IDP. Several public meetings were interrupted by community protests and re-scheduled to alternative dates and venues to ensure the security of those in attendance. These deferred meeting dates, however, were not made widely available. The IDP Representative Forum, together with the IDP Strategic Steering Committee, is established in terms of IDP guidelines developed by the government. Its members SOUTH AFRICAN PROPERTY REVIEW

integrated development planning

include councillors, ward committees, SOEs, tertiary institutions, industry representative bodies, and several other civil and community organisations. The forum allows stakeholders to raise issues on municipal service delivery and obtain immediate feedback from senior municipal officials in attendance. In the previous year, issues concerning day-to-day maintenance of infrastructure and services had the greatest priority for SAPOA members in the IDP submission to the municipality. The frequency of waste removal in commercial and industrial areas, illegal dumping, roadspace maintenance, and pothole and water-leak repairs were among the issues raised. Members were also concerned that increases in the municipality’s electricity and municipal property rates and tariffs were not aligned to other metropolitan municipalities, with the consensus that a greater level of certainty on such increases is needed. Also, the suggestion was made that the relationship between the Metro Police Service and local business and industry be further explored to build towards one of cooperation and mutual support in combating crime. There is also no clear policy on how the municipality will deal with possible water and electricity supply 26

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issues in times of crisis, or the use of renewable energy resources to augment current supply. One year on, the question is what progress has been made to address the issues raised by SAPOA. Progress has been made on several issues. The municipality’s “War on Waste” campaign is ongoing and intends to eradicate illegal dumping across the municipal area. This should, however, be supported by incentives that encourage recycling, and adequate policing and law enforcement to reinforce the campaign’s overall objectives. Law enforcement of municipal by-laws is a recurring issue for SAPOA members, and it is believed that greater attention should be placed on improving policing. The Executive Mayor has reiterated his determination to keep property rates and tariff increases low and affordable in order not to “overburden ratepayers”. The current budget specifies an average increase of 8,5% for water and sanitation, a five percent increase in property rates, and a 7,5% increase for refuse removal. This compares well with other South African cities. Average tariff increases in the City of Cape Town are 19% for water and sanitation and 6,5% for property rates, with the refuse removal tariff somewhat lower at 5,7%. The City of Jo’burg’s average increases were

13% for water and sanitation and 6,8% for refuse removal, while its property rates remain unchanged for the new financial year. SAPOA will continuously emphasise the development of a clear policy on tariffs that would instil stability and confidence in tariff pricing policy going forward. It is, however, encouraging that local leadership and the Executive Mayor support affordable and reasonable taxation of property owners. These issues have again been raised by SAPOA members at the review of the current IDP process. There is concern that ageing sewer and storm-water infrastructure along Burman Road and Sturrock Street in Deal Party may collapse. Following heavy rain, blockages in the storm-water system cause severe localised flooding. A collapse of critical municipal infrastructure in commercial and industrial areas may cause considerable disruption in business activity; SAPOA members operating in this area consider this their highest priority. Although the IDP does show expenditure on municipal infrastructure upgrade and maintenance programmes, it would be more beneficial if these showed specific areas of spending. Response times to service call-outs such as water leaks, pipe bursts and faulty traffic lights remain poor in some instances.

integrated development planning SAPOA suggested that feedback systems and performance targets for responses be revisited to improve the level of service at the call centre. Members have also noticed illegal or non-compliant advertising signage in certain commercial and business areas of the municipality. It is advised that enforcement of the municipality’s advertising signage by-law be improved or, alternatively, the application approval process be streamlined to encourage higher levels of compliance. Furthermore, there appear to be insufficient follow-up inspections on civil works and excavations undertaken in municipal road spaces. An excavation in Ninth and Main Road in Walmer was recently left open for a considerable length of time following the completion of works. Such actions are considered serious violations of safety protocols. The water pressure for the fire reticulation system in the Deal Party area of Port Elizabeth is also low. This poses a risk in the event of a fire emergency, particularly in an area of warehousing and industrial activity. In the Port Elizabeth CBD there is insufficient public parking, particularly along Govan Mbeki Drive. SAPOA members implore the municipality to investigate policy interventions to address public parking and explore the impact of the Integrated Public Transport System (IPTS) infrastructure on footfall to businesses along Govan Mbeki Drive. This road is characterised by small, independent business that relies heavily on passing traffic and footfall for trade. A key difference between the new (2018/2019) and previous IDP (2017/2018) is the focus on the municipality’s longterm growth and development plan that is “designed to provide a framework for three successive five-year Integrated Development Plans until 2032, aimed at achieving a comprehensive socioeconomic turnaround for the Nelson Mandela Bay Municipality”. The plan focuses not just on the five-year planning horizon of the current IDP but is rather seen as the foundation for successive plans to ensure continuity and to realise the municipality’s long-term vision. It entails the continued transformation in human resources and

institutional development, infrastructure provision, business development, as well as the local economy. Sustainable development that is resilient in the face of changing economic and environmental conditions is also an integral component of the long-term delivery plan. The plan describes an extensive list of projects and proposals that may impact on business and commercial property owners. This is particularly relevant in the case of infrastructure provision where there is a move towards more sustainable and alternative forms of water and electricity provision. Other proposals include the establishment of a trade and investment arm to the municipality, the re-classification of the Coega Industrial Development Zone to include the adjacent Markman industrial area, and possible new policies to encourage better waste management practices at the consumer or propertyowner level. Although the plan is broad, the proposals in the municipality’s long-term plan may have far-reaching

implications for business and commercial property owners. A clearly articulated plan with timelines and a set of targets against which performance can be measured will be necessary to encourage engagement and dialogue. Finally, the municipality’s policy objectives support initiatives that attract and encourage business and investment in the municipality. How this translates into practice is not clear from the current IDP. SAPOA acknowledges the progress that has been made and is encouraged that the municipality is prioritising spending on infrastructure upgrades and maintenance, but it hopes that such spending is based on a pre-emptive approach rather than a reactive one. Plan 4 SA Professional Planners & Project Managers Shaun Madumbo/Martin Jonker e: shaunm@plan4sa.co.za e: martinj@plan4sa.co.za

Industry participation in the review of the City of Polokwane’s Integrated Development Plan 2018/2019 Polokwane’s Integrated Development Plan (IDP) 2018/2019 review process commenced in July 2017. The process serves as a strategic planning instrument for local authorities and guides and informs all planning, budgeting, management and decision-making in district and local municipalities. In practice, the IDP serves as a comprehensive strategic business plan for municipalities over the short and medium term. The Municipal Systems Act (Act No.32 of 2000) requires that municipalities review their IDPs annually in accordance with an assessment of performance measurements

unicipal IDPs affect the property industry directly and indirectly as policies, projects and budgets (including municipal rates and tariffs) relating to all aspects of municipal governance and service delivery are formulated, debated and approved annually during the IDP review process. The Municipal Systems Act stipulates that a municipality must establish appropriate mechanisms, processes and procedures to enable local communities to participate in the

affairs of the municipality. SAPOA is an important representative stakeholder of the property industry in Polokwane and provides inputs to the annual IDP review process through the IDP Representative Forum. The Polokwane Municipality presented the draft 2018/2019 IDP, Budget & Tariffs during a Representative Forum meeting on 19 March 2018. Representative stakeholders were requested to make comments and representations to the SOUTH AFRICAN PROPERTY REVIEW

integrated development planning

municipality on the draft report. SAPOA’s comments, inputs and concerns with regards to the draft IDP, Budget & Tariffs were communicated to the Polokwane local municipality, and have also been summarised below. The moratorium on residential densification and township establishment that was introduced in May 2013 as a result of a lack of sufficient bulk water and sewerage infrastructure has had a massively negative impact on the economic growth of the city, and on the property industry in particular. Developers and land owners have been allowed (since February 2018) to submit applications that effect an increase in water consumption to the Polokwane Municipality, which was previously not allowed. The municipality administrates such applications up to the point of approval, but the building plans of these new developments will not be approved until sufficient bulk water and sewerage capacity is available in the city. The current water supply of the city is 80-94ML/day, while peak water demand is 163ML/day. Similarly, the capacity of the municipal sewerage works is 28ML/day; the current sewerage load is 34ML/day.

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Polokwane is a water-scarce city with more than 60% of its water being sourced from outside the boundaries of the municipality. The two main sources of water are the Olifants-Sand Scheme and the Ebenezer Dam. Both of these water schemes are managed by Lepelle Northern Water (LNW). The extension of the Olifants-Sand Scheme to provide additional bulk water to the city will cost R1,2-billion over a period of 48 months. LNW is in process of augmenting bulk water supply from the Ebenezer Dam at a cost of R230-million, which will take 18 months to complete. In 2017, the Polokwane municipality began to explore the availability of additional water sources, especially groundwater sources. The investigation indicated an additional groundwater potential of 34,6ML/day. Contracts have been awarded to test, drill and equip boreholes, and further contracts will be awarded to construct main pipelines to distribute water to the city’s water network. The municipality has indicated that this short-term strategy will solve the current water shortage for the city within the current year for a period of approximately five years.

The bulk sewerage problem will be resolved by the new Regional Waste Water Treatment Works (RWWTW), with an initial capacity of 40ML/day. The design of the works is in process, and a tender was awarded for the design and construction of three bulk outfall sewer lines. The RWWTW will only be operational in 2020/2021. Polokwane municipality is in the process of upgrading and refurbishing the Polokwane Sewerage Works to create an additional capacity of 6ML/day and to ensure that the plant is operating at optimum capacity. These two projects will be completed in 12 months’ time. SAPOA could not get clarity from the Polokwane municipality when the moratorium will be lifted to allow for much-needed development in the city. SAPOA will monitor the progress and implementation of bulk water and sewerage projects, and put pressure on the municipality to lift the moratorium as soon as possible. SAPOA raised its concerns with regards to the lack of security at the Olifantspoort Water Plant, which provides bulk water to the city. Disgruntled communities have shut down the plant

integrated development planning

four times in 2018, despite the fact that their issues are not water service deliveryrelated. Every time the plant is “under siege”, water is not pumped to the city for approximately two days, leaving the city’s reservoirs empty, and residents and businesses without water. SAPOA regards the frequent water-supply interruptions due to the sabotaging of the plant unacceptable. Although the Olifantspoort Water Plant is operated by LNW, SAPOA is of the opinion that the municipality (as the water service provider) must ensure that service providers such as LNW secure the city’s bulk water sources and the supply infrastructure. SAPOA will address this issue during future talks with the municipality. Property developers in Polokwane still experience problems with obtaining occupancy certificates for new buildings because of the low water pressure in the municipal water reticulation systems. The Fire Services Unit of the municipality conducts fire water pressure tests on new building developments, and does not provide an occupancy certificate if the water pressure is below the minimum requirement. Developers need to erect elevated storage tanks for new buildings (at a considerable cost) to obtain the required water pressure, which would not be necessary if the municipal reticulation system has adequate water pressure. This matter was taken up with the municipality during the IDP process. The municipality indicated that the replacement of old asbestos water pipes in the city will resolve this issue, and that it will be spending R394-million over the next three financial cycles on replacement of the pipes. This project will also help curb water losses in the city and Seshego that amounts to 48%. Uncontrolled land invasion and informal settlements close to the urban area of Polokwane and Seshego remain a major problem. Substantial land invasion occurs on farm land to the southwest, and especially to the east of the city along the R71 towards Mankweng and Tzaneen. The uncontrolled settlement on

land puts an additional burden on the city’s current insufficient water resources, pollutes groundwater sources, and poses serious traffic problems because of the illegal/informal access onto the national Polokwane-Tzaneen R71 road. SAPOA raised its concerns again during this year’s IDP review process, informing the municipality that uncontrolled settlement of land allocated to communities for restitution and redistribution purposes is illegal, and that the municipality has the obligation and the authority to act against such illegal settlement. The municipality stated that it is a land claim and restitution matter, which is very sensitive and must be handled with caution, and that all due legal processes are being followed in order to deal with it. SAPOA will closely monitor the actions of the municipality, or lack thereof, in addressing the situation.

SAPOA raised concerns about the lack of action against illegal land use within and around the city. Numerous residential properties within Polokwane are utilised illegally for office and business purposes, and it seems the municipality lacks the capacity to act against such illegal activities. Illegal land use is also a common sight on surrounding smallholdings. SAPOA raised concerns about the lack of action against illegal land use within and around the city. Numerous residential properties within Polokwane are utilised illegally for office and business purposes, and it seems the municipality lacks the capacity to act against such illegal activities. Illegal land use is also a common sight on surrounding smallholdings. Owners of

smallholdings develop residential rental units, industrial concerns and offices on their properties without following required land use application procedures. Inadequate septic tank systems on these properties are a serious concern, and property owners are complaining about the stench resulting from overflowing tanks. SAPOA requested the local authority to address illegal land-use practices in and around the city, and to act against the perpetrators. The municipality responded by assuring all stakeholders that action is taken against illegal land use, indicating that site inspections are conducted weekly to identify and list illegal land use on the municipal database. There are currently more than 20 cases that have been referred to the High Court; apparently 100% of these the cases have been subjugated in favour of the municipality. Previous years’ IDP analysis documents and the 2018/2019 IDP document state that municipal fire-fighting services are under severe pressure as a result of old vehicles and equipment that will soon be decommissioned. Certain vehicles (such as tankers) and equipment have already been decommissioned due to their bad condition, and limited lifesaving equipment is procured because of budget limitations. A shortage of vehicles and equipment has a major impact on fire-fighting and rescue services. SAPOA raised a concern during the 2017/2018 IDP process and again this year, as the 2018/2019 municipal budget did not reflect any purchasing of fire-fighting vehicles. The municipality responded that fire-fighting vehicles will be included in the next financial year. The municipality budgeted for the review and drafting of several municipal spatial and infrastructure plans/strategies in 2018/2019. This includes the review of the municipal Spatial Development Framework, development of an Integrated Land Use Scheme to comply with SPLUMA requirements, Integrated Urban Development Framework, review of the Economic 2030 Growth and Development Plan, City Development Strategy, Infrastructure Development Strategy, etc. SOUTH AFRICAN PROPERTY REVIEW

integrated development planning SAPOA intends to provide input into the drafting of these future plans and strategies, and requested the municipality to register SAPOA as a role-player for participation purposes. SAPOA commented on the Draft 2018/2019 Tariffs and Tariff Policy, and raised some concerns with the municipality. SAPOA subsequently met with officials of the Financial Services: Revenue and Administration unit of the municipality to discuss these concerns and comments. The proposed reduction of rebates on high-value properties that was scrapped in the draft 2018/2019 Tariff Policy was included in the Tariff Policy again and subsequently approved by the council. Other issues that were raised included the continuous nonpayment of rates and taxes by residents of certain townships, tariff amounts that were rounded off and subsequently lead to higher-than-approved tariff increases, and tariff amounts that were published in an erratum to the approved tariffs in 2017 that were not used to calculate new tariff increases. Rates Watch advises SAPOA on matters relating to municipal property valuations. According to Ben Espach, Director of Valuations at Rates Watch, Section 226 of the Constitution provides for the power of municipalities in South Africa to levy property rates. The Municipal Property Rates Act of 2004 (MPRA) that came into effect on 2 July 2005 regulates the power of municipalities to impose rates on

Other issues that were raised included the continuous non-payment of rates and taxes by residents of certain townships, tariff amounts that were rounded off and subsequently lead to higher-than-approved tariff increases, and tariff amounts that were published in an erratum to the approved tariffs in 2017 that were not used to calculate new tariff increases. 30

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properties. The amount of rates payable by property owners is a function of the market value of the property and the rates tariff that is determined annually by a municipality as part of its budget. A tariff is linked to the specific category of a property. The market value and category for rateable properties are determined by the municipal valuer and are then included in the valuation roll. Categories are based on the permitted use, or the actual use, or a combination of the permitted and actual use of a property. It was the duty of every municipality in South Africa to adopt a rates policy before the first valuation roll prepared in terms of the MPRA was implemented. Rates policies must be reviewed annually and must accompany the municipal budget when it is tabled. This process forms part of the annual review of the IDP and budget of municipalities. The main purpose of a rates policy is to determine the property categories to be included in the valuation roll, and the property and owner categories to grant relief to ratepayers. It is common practice for municipalities to table the draft rates policy with the draft budget, invite comments as part of the public participation process and then approve the policy through the budget process. It means that the property rates policy for 2018/2019 will be approved with the 2018/2019 budget by the end of May 2018. This is not a problem from the second year onwards in the life cycle of a valuation roll, but there is a challenge when a new valuation roll is implemented. To illustrate the issue, the City of Johannesburg is quoted as an example. The City of Johannesburg, which implemented a new valuation roll on 1 July 2018 (GV2018), approved the municipalityâ&#x20AC;&#x2122;s 2018/2019 property rates policy when its budget was approved in early July 2018. What is wrong with this scenario? There was no approved rates policy when the municipal valuer compiled the new valuation roll (GV2018) or when it was submitted. (In terms of the Municipal Property Rates Regulations of 2006, the valuation roll had to be submitted before 1 February 2018.)

There was no approved policy when the roll was open for inspection from 20 February 2018 to 6 April 2018, and ratepayers were not in a position to determine whether their properties have been correctly categorised. This problem is not unique to the City of Johannesburg: Rates Watch is not aware of any municipality in South Africa that has an approved policy when a new valuation roll is compiled. There was no approved policy when the roll was open for inspection from 20 February 2018 to 6 April 2018, and ratepayers were not in a position to determine whether their properties have been correctly categorised. This problem is not unique to the City of Johannesburg: Rates Watch is not aware of any municipality in South Africa that has an approved policy when a new valuation roll is compiled. SAPOA met with the CFO of the City of Polokwane during June 2018 to discuss issues relating to the rates policy, tariffs that were approved for 2018/2019 and the new valuation roll that is planned for 2019/2020. The approval of the rates policy for 2019/2020 was raised, and the officials realised they had to act fast to provide the appointed municipal valuer with an approved policy. A concept rates policy for 2019/2020 was drafted, and Rates Watch, representing SAPOA, met with officials on 18 June 2018 to refine the policy. It is envisaged that this draft rates policy will be tabled and approved by council to enable the municipal valuer to allocate categories when the new valuation roll is compiled. The City of Polokwane must be commended for complying with the notso-obvious requirements of the MPRA. Let us hope that other municipalities will follow soon.

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. Meet Remi Tshikororo, Operations Director of Tshiko Electrical which specialises in holistic electrical services including new electrical installations, repairs, maintenance,inspecting and testing as well as certification. ‘’My father was an electrician and I grew up assisting him over the weekends, I always aspired to be a better electrician that him’’ says Remi. His early exposure to the industry and natural desire to stand on his own and make things happen is what inspired Remi to start his business. Remi admits that some of the biggest Remi Tshikororo, Founder and Director of Tshiko Electrical

challenges he faced were finding employees who shared the same vision, delayed payments from clients, and accessing new markets, ‘’ I applied to the programme because the business had become stagnant in terms of revenue and client base’’ he explains, ‘’ but I am now in a position to grow the business by increasing sales.’’

Tshiko Electrical went from employing just two people, to nine full-time employees, and has been able to hold on to clients while acquiring new ones. This programme has taken me out of my comfort zone, my personal vision has now changed to have more of a focus on the growth and sustainability of the business’’ explains Tshiko. He highlights the learnings received around branding, marketing and networking is what has helped the most so far. ‘’This is a valuable programme for market exposure and networking, I would definitely recommend Property Point to other entrepreneurs who want to grow and make their business sustainable.’’ 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 Tshiko Electrical, remi@tshiko.co.za.

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development

Johannesburg

inner city turns into a construction site with the launch of the 71 Properties Prospectus “The City of Jo’burg is open for business. I am pleased that we started the process of turning the Johannesburg inner city into a construction site through the launch of the 71 Properties Prospectus. This is a historic moment: in bringing this plan to life, residents of this city will enjoy the benefits of service delivery that speaks to their needs,” said City of Johannesburg Executive Mayor Herman Mashaba on 13 August 2018 at the launch event held at the Council Chambers

A Herman Mashaba, City of Johannesburg Executive Mayor

“I remain committed to creating clean and safe city precincts – a city where residents can make a living without fear of their livelihood being threatened. The city will be dealing with the challenges of bad buildings, ensuring that illegal activities are rooted out and that buildings managed by bona fide owners” 32

SOUTH AFRICAN PROPERTY REVIEW

s a result of slow economic growth, high unemployment and ongoing crime, the Executive Mayor has developed a 10-point plan for the city. It involves: ●● A ttaining economic growth of five percent by 2021; ●● P romoting more compact, mixeduse and walkable neighbourhoods; ●● R educing distances, travel times and costs by bringing jobs and social amenities closer to communities; and ●● C reating safer, cleaner and connected communities with access to economic opportunities within the area. The 71 buildings earmarked for the regeneration of the inner city are expected to deliver at least 4 000 units for student accommodation, small business premises and affordable accommodation for some of our poorest residents. The city is making its property available for progressive transformation of the inner city into a space where residents can live, work and play. According to Mashaba, the city does not have the resources or capacity to bring this vision to fruition alone, so he has extended an invitation to property developers, funders, professionals and the construction industry to work with

the City of Johannesburg to redevelop the various precincts. The city is sensitive to the fact that skills development, employment and SMME development must happen alongside plans to transform the inner city to address the unemployment that many of its residents face. Through creating this urban construction site, 5 000 temporary jobs will be created during the construction phase. As part of the submission process, developers will be required to set out how many work opportunities are to be generated as part of their bid. This will create opportunities for the residents, particularly the youth, to enter the job market. “I remain committed to creating clean and safe city precincts – a city in which residents can make a living without fear of their livelihood being threatened,” said Mashaba. “The city will be dealing with the challenges of bad buildings, thereby ensuring that illegal activities are rooted out and that buildings are managed by bona fide owners.” Tenders are available for purchase at the Joburg Property Company’s office in Braampark, Johannesburg. The closing date for responses is 30 November 2018.

To access the detailed prospectus, please visit: http://www.jhbproperty.co.za/images/ICProspectus.pdf

development development

CONDITIONS FOR RELEASE

Participation in local urban management forum (CID/NID) Facilitating the provision of Temporary Emergency Accommodation (TEA)

Job creation during and after construction

Provision of affordable student accommodation

SMME development during and after construction

Build on behalf of the Municipalities

Develop homes for private sale and rent to provide cross-subsidy for social housing and help create sustainable mixed tenure communities

Venue: Ground Floor, Old Council Chambers, CoJ Offices 158 Loveday Street Braamfontein

Briefing session (3) 19 October 2018

(Non-compulsory)

Briefing session (2) 14 September 2018

(Non Compulsory)

Venue: Ground Floor, Old Council Chambers, CoJ Offices 158 Loveday Street Braamfontein

Bid closing date

30 November 2018 (Non-compulsory)

Bid evaluation

Bid executive adjudication committee and award

Issue advertisement 23 July 2018

The document is available at JPC from 12pm Cost: R500

Venue: 1st Floor Forum 2, Braampark 33 Hoofd Street Braamfontein

Issuing of prospectus and briefing session (1) 2 August 2018 (Venue to be confirmed)

TIMELINE

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one on one

South African Council for the Projects and Construction Management Professionals Property Review talks to acting Registrar and Stakeholder Relations and Communications Manager Yuven Gounden about SACPCMP’s objectives, as well as its 6th Project and Construction Management Professions Conference, to be held at the Gallagher Convention Centre from 29 to 31 October By Mark Pettipher

ike SAPOA, the SACPCMP is a memberdriven organisation with specific core values – a statutory body that was established to register, certify, regulate and promote the built environment management professions. According to the SACPCMP prospectus, the organisation regulates professionals to protect the public by identifying the type and scope of work, and maintaining a national register of members who adhere to the SACPCMP Code of Conduct. It also accredits project and construction management programmes at tertiary educational institutions. “The Ministry of Public Works, headed by Thulas Nxesi, is the executive authority, which communicates with our council through the Council for the Built Environment,” says Gounden. The SACPCMP works alongside six other councils: the South African Council for the Architectural Profession, the Engineering Council of South Africa, the South African Council for the Landscape Architectural Profession, the South African Council for the Quantity Surveying Profession, the South African Council for the Property Valuers Profession, and the Property Sector Charter Council. The SACPCMP has four focus areas: project and construction management, construction health and safety, continuing professional development and a student chapter. The latter initiative aims to be at the forefront of the development and advancement of construction education. Furthermore, the Student Chapter also serves as a primary category of registration for eligible students studying project and construction management and construction health and safety programmes at institutions accredited by the Council.

SOUTH AFRICAN PROPERTY REVIEW

Yuven Gounden, Registrar and Stakeholder Relations and Communications Manager

Transformation The SACPCMP places particular emphasis on transformation. Working with various stakeholders and voluntary associations (VAs), the goal is to achieve transformation by empowering people and developing sustainable action plans that will drive change in the industry. The SACPCMP initiated a Presidential Forum in October 2016, using the VAs’ individual programmes and bringing them together in a cohesive drive. “If we can bring the VAs’ initiatives together in a unified way, the transformation issue will be better served,” says Gounden. “We will be stronger if we can come together as one body.”

Education The SACPCMP is also working on various developmental programmes that both encourage and ensure that the pipeline of skills – from high-school awareness through to employment – is effective and efficient. The SACPCMP is mandated to accredit and assess programmes that are offered by tertiary educational institutions in consultation with the South African Qualifications Authority and the Council for Higher Education.

The Council has accredited Wits, the University of Johannesburg, the University of Pretoria, the Tshwane University of Technology, the Durban University of Technology, the Mangosuthu University of Technology, the Central University of Technology, the University of the Free State, Nelson Mandela University, the Central University of Technology, the Walter Sisulu University, the University of Cape Town and the Cape Peninsula University of Technology.

Three-day conference Day one of the 6th Project and Construction Management Professions Conference will feature a number of masterclasses and workshops. Day two will see the official opening, with Minister Nxesi delivering the keynote address. Gauteng Premier David Makhura and Mayor Herman Mashaba have both been invited to attend. The main body of the conference will include plenary sessions and panel discussions lead by the Construction Industry Development Board, the Department of Higher Education and Training, and the Department of Public Works. Skills Development will be a major topic, which aims to address the shortage within the industry. The slump in the construction industry has also been identified as a topic for discussion. Legislation will be discussed by the Council for the Built Environment. With 37% of the country’s populace being made up of youth – and given that the property sector is valued at R5,8trillion – the conference organisers have recognised the importance of the impact the youth may have in the sector. A panel discussion has been highlighted to talk about options open to the youth of South Africa, as well as what can be done to further champion transformation.

BCMM Property Rates

SAPOA concerned over massive rates increases at Buffalo City Metropolitan Municipality Rising municipal rates and taxes are a hot-button issue – one that not only negatively affects operating costs and gross rentals, but also makes demands on property management resources

APOA represents companies and organisations in the commercial property sector and, as Chief Executive Officer Neil Gopal points out, “SAPOA members contribute significantly to the rates base, and we believe it to be in our interest – and the interest of municipalities across South Africa – to partner on this matter. As a sector, commercial and industrial property wants to contribute in a positive way towards the efficient functioning of municipalities.” This 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 inflation. This, according to Gopal, does not bode well for attracting further property investment into Buffalo City and has created a businessunfriendly environment. “In terms of the tariff increase, although it is indicated in the draft budget that no increase is proposed, because the values of properties have increased from the previous valuation roll to the new valuation roll, the tariff should have been reduced,” says Gopal. “The revenue increased from R1 121 175 to R1 421 961, indicating a 26,8% increase in property rates. This tariff should be reconsidered.” SAPOA has been vocal in challenging the legality of increased municipal rates charged to its members. “Rising operating costs are threatening the

sustainability of net returns across the spectrum of commercial and industrial property investment,” says Gopal. “Since the sustainability of the property sector is a key focus for SAPOA, we have been vocal in challenging the basis and consistency of municipal rates charged to our members.”

This 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 inflation. This, according to Gopal, does not bode well for attracting further property investment into Buffalo City, and has created a businessunfriendly environment The increases post-2007 have come in a much tougher macroeconomic environment, with economic growth currently significantly lower than the

preceding three/four years. Consequently, 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,” says Gopal. SAPOA acknowledges that rates are necessary to fund municipal service delivery and outputs, but these must be levied correctly. “Our Constitution and laws are clear, stating that rates and taxes must be levied in a just and equitable way, and that this should be done by accurately determining the value of properties,” says Gopal. “SAPOA is committed to ensuring that rates are being levied from a correct base, and not being 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. “Property development activity is likely to be curtailed in favour of cities that are more conducive to property investment. We appeal to the Buffalo City Metropolitan Municipality to reconsider its tariff increases for 2019/2020 and 2020/2021.” SAPOA has appointed its team of consultants, Rates Watch, to monitor the property rates charges and comment on the revaluation. SOUTH AFRICAN PROPERTY REVIEW

East London development overview

ELIDZ: a platform for innovation and transformation The East London Industrial Development Zone (ELIDZ) is not just a platform for assembling and manufacturing, but a facilitator to create entire new enterprises. Its unique Science and Technology Park strategy allows ELIDZ to drive innovation and the formation of brand-new industries, from concept to prototyping and actual commercialisation Interview by Mark Pettipher Words by Marika Truter

LIDZ CEO Simphiwe Kondlo shares some of the unique factors that differentiate ELIDZ from other IDZs such as Coega, Saldanha Bay and Richard’s Bay. The zone’s focus is not just to be a centre for manufacturing but also to be a platform for innovation. “We’ve got the Fourth Industrial Revolution happening right here,” he says. “We have various incubator hubs focusing on ICT and chemistry. In addition, we also have a renewable energy lab that stimulates innovation that will support future sustainable energy. This hub allows manufacturers and inventors to develop prototypes, and to partner with local academic institutions such as the University of Fort Hare, Walter Sisulu University, East London University and Stenden University to take them to a testing level until ready for commercialisation.”

Infrastructure at ELIDZ “An investor in ELIDZ walks into a plugand-play environment,” says Kondlo. “We have a fully serviced infrastructure that includes state-of-the-art connectivity through fibreoptics. Our outstanding connectivity potential is being taken even further with the landing of the international undersea internet cable here at the IDZ. Better bandwidth will unlock a lot of opportunities, especially for academic institutions in terms of how research and education can be instantly linked globally.” Kondlo is passionate about education and driving job prospects for young South Africans. “We partner with different universities depending on the sector we have represented within the IDZ,” he says. “We have to capitalise on having 36

SOUTH AFRICAN PROPERTY REVIEW

●● Adding to the IDZ’s diversity, it is set for another investor doing fence manufacturing.

Connection with Buffalo City

Simphiwe Kondlo, CEO ELIDZ

four universities in our province, and we need to use that advantage to generate the skills that the economy needs.”

Developments at ELIDZ ELIDZ has just seen a R1-billion factory launched – its biggest factory to date – through Yekani Manufacturing. The new facility covers 28 000m2 and will manufacture electronic products. It is expected that 1 000 jobs will be created as a result. Other recent developments include: ●● Clariter, which recycles plastic waste to develop oil and related products, has just finished building its factory. ●● The launch of the new MercedesBenz C-Class has led to a number of factories, with at least three new factories in design stage going into tendering.

ELIDZ is the only IDZ that has a dual ownership, where the municipality has a shareholding in the zone, together with the provincial government (who is the majority shareholder). “We are very connected in planning critical infrastructure,” says Kondlo. “We act as a mini-municipality as distributor of services in the zone; however, we are still dependent on the feeder services from the municipality. “ELIDZ cannot be an island. We need East London to be a functional city in order to ensure growth. Our partnership is therefore critical, and must include residential development – our investors also need to be residents. We need schools as well as hospitals and other community support services. The Buffalo City Metro should be a place in which they can live, invest and enjoy the lifestyle of the city.”

Investor support “We have an agreement for an expediting desk for IDZ for approvals needed from the municipality to present a world-class proposition to investors with red tape reduced,” says Kondlo. “We are now looking at establishing a one-stop shop that started at the DTI Campus for the province. This will be the one place where you will find government bodies such as SARS, Home Affairs and Customs. “We have come to accept that the red tape has a hidden cost in terms of

East London development overview the cost of doing business. There is a need for government to be working on streamlining approval processes, so that the turnaround time for people who want to do business with us is improved.”

Transformation and youth unemployment ELIDZ is championing transformation. “We are looking specifically at the issue of youth unemployment, in particular when it comes to big contracts,” says Kondlo. “We encourage all those who get awarded contracts by us – whether those contracts are as consultants or as contractors – to take on a number of young students for experiential training and learnerships. Through our projects, we are able to improve their prospects for future employment, and help them gain experience in the various areas. “The Yekani investment, which is our biggest industrial project so far, is coming up with various ways of ensuring transformation through several partnerships with the DTI and the ECDC. We embrace that: we will make sure that we support them with skills development as they roll out their manufacturing venture. “One of the biggest causes of youth unemployment in South Africa is our poor skills match. The upgrading of the skills of the country’s unemployed youth is critical to ensure that we catch up with the wave of new industries that we are attracting. As a result, linkages with international players through ICT have become critical. “We need to be building a massive industrial skills-development programme, where we are able to take some of our young people and actually expose them to the new economies. “I’m concerned that international investors will come to our shores with new technology and with new robotics that our people will not be able to run. Those investors will then employ foreign technicians to run those processes. We need to be training our young people to catch this wave.”

Kidds Beach:

new kid on the green block Multi-purpose residential mixed-use development is the focus of Kidds Beach Green Estate on the outskirts of East London, which will see 5 000 houses being built over the next 10 years. This gated green development consists of six secure estates, providing a range of homes for all income groups Interview by Mark Pettipher Words by Marika Truter

Tim Dlulane, MHG Business Development Manager

idds Beach, Mission Holding Group’s (MHG) flagship development, is situated on the Mcantsi River, 20km from the East London Airport. The development offers a full cradle-toretirement lifestyle opportunity, with amenities such as private schools, a shopping centre, a private hospital, a high-performance sports centre, office parks, and a hotel and conference centre. Former Springbok loose forward Tim Dlulane is adding value to MHG as the Business Development Manager. After buying his first property at the age of 22, Dlulane is excited to share his experience as a builder of a private property portfolio with local rugby players, and to encourage them to invest money – specifically in property.

Pristine, safe location Dlulane’s passion for this development shows clearly in his explanation of its location. “The Kidds Beach Green Estate is situated on rezoned farmland,” he says.

“Vast amounts of natural areas have been left untouched to maintain the natural topography. Indigenous trees and other vegetation have been planted strategically, and wildlife such as blesbok, ostrich and guinea fowl roam the area. Our clients are environmentally conscious, and we strive to preserve the nature within and surrounding our development.” The development will see an integration of homes ranging from R700 000 to R10-million in the different estates, all associated with the prestige and success of Kidds Beach. Darryl Jackson, Sales Director for Balugha River Estate, explains: “We see our residents growing through the price points, supporting this cradle-to-retirement development. It’s like driving a MercedesBenz – whether you drive a C-Class or an A-Class, you drive a Mercedes.”

Environmentally friendly development Marketing Manager Natelie Kriel is enthusiastic about the many unique features of Kidds Beach, such as environmental conservation and the state-of-the art sports centre. “All houses are fitted with renewable energy devices, such as solar geyser panels, LED lighting and gas stoves. Waterwise features such as rainwater-harvesting tanks and indigenous trees and vegetation add to the conservation aspect. The roof design allows for natural cooling and heating. “The sports centre will boast a sports academy and will have a hockey field and volleyball courts, as well as an athletics track. The swimming pool will provide for aquatic sports such as water polo. SOUTH AFRICAN PROPERTY REVIEW

East London development overview The centre also includes accommodation units, so that visiting teams can be accommodated while training for longer periods of time.”

Infrastructure needs Dlulane stresses the importance of MHG working closely with the Buffalo City Municipality (BCM). “At this point, we have sufficient water for houses, so we are quite safe in terms of requirements,” he says. “But with foresight, we have to partner with the municipality so they can understand our needs and expectations in relation to the infrastructure needed beyond the development. BCM needs to buy into the bigger development picture. Importantly, we require extended roads and a sustainable water supply system.” Dlulane sees the creation of jobs and opportunities for local SMMEs as a paramount aspect of the development. “We expect our big contractor, Raubex, to employ local SMMEs,” he says. “This is not a mandate from the municipality, but it is our directive as the developer. We are in constant contact with the surrounding communities and the respective chiefs, keeping them informed of opportunities that will come. Our philosophy is to develop and uplift the local community wherever possible.”

Community development “One of our areas of interest is training young investors to purchase the affordable

Kidds Beach Green Estate on the outskirts of East London

SOUTH AFRICAN PROPERTY REVIEW

housing units,” says Jackson. “We expose them to the affordable housing sector, and encourage them to start building up a property portfolio. These investors want to acquire an affordable home, put a tenant in it, and in two or three years’ time expand their portfolio using capital gained from the rental income to offset their bond, thereby growing their personal portfolio. We explain the various scenarios, get people in from different service providers – specialists in trusts, conveyancing and transferring – to teach them the process. “We often see very astute and financially aware black women who are building their property portfolio come to our presentations. Sometimes 60 to 70 women will form consortia.” There are currently 1 069 affordable housing units in Kidds Beach, and the lowest came to the market at R599 000. Dlulane adds that MHG looks at what is affordable for East London. “We don’t want to miss out on income groups, so we cater for everyone.”

often gets enquiries from people and investors wanting to live in East London, but they cannot get their children into schools. At Kidds Beach, you can buy a house and enrol your child at a school that is within walking distance of home. “We might come up with a formula in future to link enrolment with buying a property – but space is not an issue at the moment,” adds Kriel. Dlulane further points out that there’s a shortage of retirement accommodation in East London. “Kidds Beach addresses this need with Impangele Estate, which offers (among other things) single-level ground design, front door and passage width to accommodate wheelchairs and walking aids, and additional space in the garage for a shower and a toilet,” he says. “The estate is also situated close to the future hospital.” The 3 375m2 open-air Kidds Beach Retail Centre will start trading from 1 December 2018. The centre will house some big national brands – such as OK and DIY Depot – as anchor tenants.

Schooling, retirement and shopping

Final thoughts

Kidds Beach will have two primary schools. The first one, St Christopher School, opened its doors in January 2018. It will initially be a primary school only, extending year-on-year until it reaches Grade 12 capacity. “There is a huge shortage of schools in East London,” Jackson explains. “MHG

“Multi-purpose residential mixed-use development is something new in East London,” says Jackson. “All indications are that Kidds Beach, with its various opportunities for growing families, investors and luxury home-owners to secure property within a leading private green development, will achieve its aims.”

East London development overview

Novate Property Investments Novate Property Investments, with its property portfolio focus in the Eastern Cape for the past 20 years, is redeveloping part of the iconic Da Gama Textiles plant into an exciting retail space Interview by Mark Pettipher Words by Marika Truter

A new type of mall “The exciting new development outside King William’s Town (KWT) in the village of Zwelitsha is to be a move away from the traditional type of strip shopping mall,” says Novate Property Investments Property Development Manager Grant Wheatley. “We acquired the massive spinning sheds owned by Da Gama Textiles in Zwelitsha. They used to cater for the niche shweshwe market, and are still producing shweshwe today.” Novate will utilise 20 000m2 of the sheds to be re-purposed into retail, with SuperSpar as the anchor tenant taking 4 500m2. “We’re inspired by places such as the V&A Waterfront, where shipyard buildings have been converted into spaces such as the Red Shed office initiative.” The Da Gama factory will be converted into a suburban mall, serving Bhisho, KWT and Zwelitsha. Bhisho is five minutes away; KWT 10 minutes. The mall will be situated on the main arterial road with good access from surrounding towns and villages. There will be a fuel station at its entrance, and plenty of parking. Currently, KWT is quite congested in terms of retail, while there is practically no retail in Zwelitsha.

the new retail node. The main aim of repurposing the building is a very exciting part of the development. This will also keep costs down, which we will be able pass on to tenants. “Tenants need not worry about the buildings being structurally safe – they were, after all, built to house massive spinning machines!”

Transformation at the development “This development will eventually provide between 1 000 and 2 000 employment opportunities, with the SuperSpar alone employing more than 300 people. KFC will employ between 40 and 45 people,” says Wheatley. “The construction itself also provides employment. From an economic multiplier point of view, this development has a huge impact. “Because we are administering and coordinating the whole building project ourselves, construction mainly consists

of subcontracts – such as for roofing, internal partitioning and electricity. SMMEs play a big role – especially locally. As a local property developer, we have existing relationships with world-class local contractors. “The tenants will be mostly nationals – but in a way local as well, because many will be franchises, such as the Spar (with a local owner trading under the Spar brand). The same goes for KFC and the fuel station. The fashion retailers will be the big chains. It boggles my mind how many fashion retailers there are – if you take out the big ones such as Woolworths and Pick n Pay, most malls consist of 70% to 80% fashion.” Because this development falls within the old Ciskei ordinances, there was a fouryear delay in zoning and planning approval. However, Novate now aims to create thousands of new jobs after getting full approval for the development.

Tradition meets innovation “The unique character of those old spinning sheds lends itself to creating a new-look shopping mall, maintaining the character of the old sheds and utilising the industrial look, with exposed steel girders concrete floors,” says Wheatley. “We want to create something authentic that’s also future-proof. We are therefore looking for conventional tenants, such as Pepkor, Ackermans and affordable clothing providers, for which there is a market.” The factory was built in the 1960s and is seen as part of the heritage of the area. “We need to sand, paint, put in insulation,” Wheatly says. “We will use as much as we can of the existing buildings to create

KwaTshatshu Shopping Complex, King William’s Town

SOUTH AFRICAN PROPERTY REVIEW

East London development overview Who we are, and how we do what we do “We currently only develop property in the Eastern Cape,” Wheatley says. “We are a bunch of guys from the Eastern Cape, and we operate independently from any funding, other than usual bank funding. All directors have their own retail portfolio, and we operate from our own properties. Certain brands are linked to our business, such as KFC, the Spar group, Caltex and OK Foods.” Wheatley says they are highly branddriven and work closely with brand identity compliance. “I believe in brands. People love brands – they provide security and that ‘warm, fuzzy feeling’ of getting a favourite meal at KFC, for example.” Novate has a portfolio of between R500- and R600-million. “We’re not very acquisitive – we prefer to redevelop,” says Wheatley. “When we see a factory that’s shut down, we immediately ask ourselves how we can redevelop it, and what the opportunity is. That drives our property growth – but it could be a mistake. It is easier to buy nine percent yield on a property, and let someone else have the issues with building plans and zoning permissions.” But his enthusiasm for the business shines through: “We are in this industry because it is fun. We have just done a redevelopment in Alice – an old fuelstation site that’s been dilapidated for about 40 years. We levelled it and put a KFC, Debonairs and Caltex on it. It changed the town – Alice looks totally different when you drive in now. It opened the town up and made it shine, and added huge value. Other big properties there have also benefited.”

The future of retail for Novate Novate’s developments could be seen as the epitome of developing so-called “shoppertainment”, with people going to malls for much more than just shopping. “It’s a comfort experience,” Wheatley explains. “It’s changing in all the brands we see. A Spar can’t just offer food down an aisle, and that’s it. Is there coffee? Is there sushi? At KFC, the customer wants music, free Wi-Fi, and a place to sit down and have a cup of coffee.” 40

SOUTH AFRICAN PROPERTY REVIEW

Buffalo City on road to renewal and transformation In 2016 Buffalo City developed a long-term 2030 vision – the Metro Growth and Development Strategy (MGDS) – to transform the city into a connected, spatially transformed, productive, innovative and green city Interview by Mark Pettipher Words by Marika Truter

wo years on, after an initial period of analysis, Andrew Murray – seconded from National Treasury’s Government Technical Advisory Centre to Buffalo City to support the city – is upbeat about the prospects of achieving the vision. “Two in-depth project charters so far involve moving towards a clean, green city, focusing on improving efficiencies in disposal and moving towards recycling and waste diversion,” says Murray. “We are looking at investment blockages, and advising the city on what makes sense from a business cost-benefit perspective.” He is enthusiastic about the next leg: support for catalytic programmes. “After a few years of depressed business confidence, things are starting to improve,” he says. “The ELIDZ has the full incentive package associated with an SEZ, and there’ve been positive developments towards putting port expansion on Transnet’s agenda. MBSA is expanding its plant with a R10billion investment, and Yekani (a hi-tech manufacturing firm) is investing more than R1-billion in the IDZ. The expansion of the port will be a game-changer. It will change the trajectory of the city.”

Establishing the baseline The initial stages were vital to establish departure points, says Murray. “Our starting point was a diagnostic,” he says. “We used a McKinsey-type methodology – the 7S diagnostic of strategy, structure, systems, skills, styles, staff, and shared values – across a range of systems. We found many issues in the way the city was conducting business. We also looked at the financial health of the city and carried out ratio analyses. Unlike many other metros in the country, Buffalo City Metro (BCM) is financially healthy, with an A-rated global

credit rating, because the city does not have a lot of debt.” Ratios such as indigents to ratepayers and the numbers of registered SARS taxpayers to total population provided proxy indices of financial stability and risk. “Increasing levels of private investment and growing the revenue base is essential,” says Murray. “We looked at the number of building plans registered, fixed capital formation, fixed investment. From these, a picture of the city was formed, showing both positive and risk areas. “The bigger picture allows us to identify the support we need to guide the city based on investment. We need to reduce the cost of doing business for production and property investment. We want to increase the ratepayer base. Wherever we can generate revenue, we want the city to support those initiatives.” Implementation of BCM’s support is urgent. “We don’t want to wait two years for properties to be registered, for businesses to be connected to electrification, for construction permits to be issued.” There is also some concern about the cleanliness of the city. “It’s a constraint to investment, makes for disgruntled citizens and ratepayers, and impacts on tourism. I’ve been working extensively to get the department to procure street furniture such as bins and skips, and to implement by-laws that already exist. We can’t really fine someone for littering in the CBD when there are no bins around…”

Integration for development “We want to push the built environment performance plan – a spatially based plan – as the integration mechanism,” says Murray. “The approach to integration is then rooted in the reality of local space.

East London development overview One good thing is the own revenue the city is investing in infrastructure, which (as a proportion) is much higher than any other metro. “It’s about densification – in the inner city, in transit areas, in corridors around transport. In Buffalo City, we have the welldefined Mdantsane-East London corridor. We must find pockets of land within the corridor and initiate the sleeper site project, which resides with the BCM Development Agency. It’s been given the waterfront, the beachfront and the sleeper site to plan and develop, with a combination of public and private funding.” Transnet is developing a business proposal for the widening and deepening of the port and the development of the property around the port. “Parcels of land in the inner city could be used for low-cost and social housing,” says Murray. “We need people living in the city. The CBD is full of officials and businesses during the day, but it’s a ghost town at night. So is the beachfront: people come for conferences and stay in hotels, but there are too few residents to catalyse the development of restaurants and retail. I’m not advocating gentrification, but we need middle-class residents in the inner city and on the beachfront to trigger development and investment. “I believe the sleeper site will be a catalyst not only for the site itself, but also for the integration of the beachfront. The planned city-to-sea boulevard will provide a clear link between the CBD and the beachfront. If we develop the beachfront – boardwalks, residential, and public, commercial and recreational spaces – investors will be forthcoming “However, we need to put our money where our mouth is, and we need to lead this investment. The sleeper site is just one project that could be a catalyst for the entire inner city if done appropriately. We must also work closely with our universities – especially Fort Hare, which is investing heavily in the area.” Murray believes that the installation of the planned undersea cable will provide the city with incredibly fast and cheap data in 18 months’ to two years’ time: “It will take the city right into the Fourth Industrial Revolution.”

A new Vincent Park emerges October will see a revived, re-energised 42-year-old Vincent Park emerge, with international retail giant H&M as its prime tenant Interview by Mark Pettipher Words by Marika Truter

Joseph Parsley, Vincent Park Centre Manager

hen a market is as competitive as the retail sector, landlords lean towards conservatism when it comes to capital expenditure. “Even though Vincent Park is at the centre of an established demographic, we’ve taken a careful view of longevity going forward,” says Vincent Park Centre Manager Joseph Parsley. “We looked at the mall’s shortcomings and opportunities, and established that the way forward is to rectify the shortcomings and grab hold of the opportunities we have with Vincent Park as a player in the field of retail and shopping. “The opportunity to bring H&M to the mall was one that we absolutely could not pass up. The retail giant has been a game-changer for many malls across the country, and being the only mall in the region to house an H&M store, we have the competitive edge. H&M will be bringing a dynamic edge to our tenant mix, and will definitely be a hit with our shoppers because of its affordability and trend-setting nature.” Parsley is very excited about the H&M inclusion. “We’re expecting H&M to do fantastically well for the centre,

and indirectly for the other retailers as well. H&M will be anchoring the upper level, with Clicks anchoring the lower level. Clicks has, for years, been a solid performer for the centre – and will continue to be, as it is within the top performing stores in the country.” Pick n Pay’s downsizing from just over 8 000m2 to just under 5 000m2 is also a key factor in Vincent Park’s revamp. “As a result of the extra space, we can now also offer retailers such as Mr Price Sport, Pick n Pay Clothing and Capitec Bank GLA space in our ever-growing mall. Adding to our competitiveness, Absa has decided to establish its regional branch at Vincent Park by consolidating into this branch.” Parsley expects a steady increase in both the footfall and car count as a result of Vincent Park’s latest innovations. “The space we currently occupy is just under 37 000m2,” he says. “We did not need to expand our current footprint because of the way we have reallocated the space pockets, which has had very little impact on available parking. Going forward, should we decide to develop further, parking will have to be factored into the expansion. “We are classified as a small regional mall, and our identity is a family-andconvenience lifestyle hub. Vincent Park is deeply anchored in this precinct, which used to be a strongly residential suburb. Recent years, however, have seen a number of small business coming into this area – business that are now feeding into the centre.” Parsley says they are looking forward to the phase of tenants settling in and the numbers starting to come through. Demand will drive future expansion, and the presence of H&M might even pave the way for Vincent Park to expand on its international offering. SOUTH AFRICAN PROPERTY REVIEW

proptech

Open Box real estate solutions How often is it that, in conversation with a fellow SAPOA member, we find an opportunity to “join the dots”? Having recently listened to Phil Barttram of MSCI as well as Lisa Stanley – both keynote speakers at SAPOA’s recent Convention – talk about big data, augmented reality and artificial intelligence, Property Review then spoke to Gavin Cummins of the Valuator Group about technology in the real estate industry. “Joining the dots”, Cummins mentioned Open Box – an international real estate technology solution provider that’s based in South Africa By Mark Pettipher

roperty Review met with Dustin Strydom of Open Box in Cape Town, and spoke telephonically to Steve Murphy of Altus Group in London. “We deliver software and services to the real estate industry,” said Strydom. “We ore than half of the CRE industry position our services to large commercial insiders that Altus Group and its real estate firms globally to help them research partner spoke to agree that automate theCRE base layer and of workprocesses most major processes within their provide endflows can businesses. be significantly We or completely automated. So withfor automation poised from to-end solutions our clients, to become a major disruptive force working with them to understand their in the CRE world, we decided to look requirements, to design, development, into this in more detail, based on our testing, implementation, and ongoing industry experience. According to the support and maintenance. We help our experts surveyed, debt underwriting, capital marketsand brokerage andthe propclients identify rethink type of erty management emerged as having tasks allocated to their staff, then look good potential for automation. Property at customising software and finding management is where we are seeing innovative technology solutions to build significant interest from clients, and so efficiencies business. we want towithin focus ourthe deep dive here. We also leverage existing client investment in technology and find ways of integrating the current systems and services, or customising ERP functionality.” The recent Altus Group CRE Innovation Report, Accelerating the Innovation Agenda LOCKING in Commercial Real Estate, posed this question: are transformative technologies driving change in the industry? Globally, the response from the 400 CRE C-level and senior executives surveyed was lukewarm at best about disruptive technologies (such as artificial intelligence (AI) and predictive analytics) that are seeing a lot of hype in the media, at conferences and from analysts. What has come out of the report is the impact that process automation can have on business operations. More than 50% of the executives surveyed say they think that most major CRE processes and workflows can be significantly or completely automated.

According to the experts surveyed, debt underwriting, capital markets brokerage and property management emerged as having good potential for being fully or highly automated. Can be fully or highly automated across all processes and workflows

% of respondents Source: Altus Group CRE Innovation Report: Accelerating the Innovation Agenda in Commercial Real Estate

Process automation is best described by Open Box: “In the same way that Windows was the foundation for computer use as we know it today, or cloud computing is the gateway to new products, services and economic models, automation is an essential foundation for increasingly advanced technological innovation and disruption. For instance, companies can’t deploy AI and machine learning if their data is sitting on scraps of paper in filing systems, or if it hasn’t been accurately and systematically entered into an appropriate system. “In short, a lot of work – the type of work that humans do not particularly enjoy – needs to happen before CRE companies can even start imagining how they can leverage more advanced disruptive technology. But the good news is that automation is very good

AUTOMATION

SOUTH AFRICAN PROPERTY REVIEW

at repetitive, boring and process-driven jobs – unlike humans. Plus, this work needs to happen, and it’s probably taking too much of skilled professionals’ time. “That’s the other good news: by implementing process automation, CRE organisations can save time and money, and claw back the time that professionals can instead spend on more strategic, revenue-driven activities. “Open Box clients have experienced staggering efficiency gains of up to 90% as a result of using robotic process automation (RPA), with one company reducing a four-hour process to take less than 25 minutes. In addition, up to 40% of employee time has been reclaimed from performing repetitive tasks.” Open Box and Altus Group have teamed up to enhance productivity for some of the largest players in the commercial real estate industry. “ARGUS Developer allows developers to build cash flow forecasts of different project scenarios to ensure they quantify risk and find the highest return from the development opportunity,” said Murphy. “Once the asset is built and generating revenue, ARGUS Developer cash flow models can be imported into ARGUS’s flagship product ARGUS Enterprise for performing valuations and providing enhanced asset and portfolio management. “The ARGUS suite of products helps to systematise the multiple workflows that make up the development and asset management cycles. The workflows include pre-construction modelling to raise finance, tracking the variances between construction cost actuals and forecasts during construction, through to the post-construction unit sales or lease

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What is robotic process automation?

Robotic process automation (RPA) technology has reached a level of robustness that is set to automate business processes and allow us to rethink the types of tasks we allocate to human beings. This means we can use software robots to take over tedious, repetitive, manual work, such as capturing invoices or migrating data. Robots are better than humans at this sort of thing – and it frees up humans to do more intellectual, creative, strategic work. The Open Box Real Estate Automation Engine, known as Rob Sparke, leverages best-of-breed RPA technology with our wealth of knowledge and experience in understanding, mapping and improving real estate business processes. It combines these elements with our expertise in the development, support and integration of real estate software solutions to deliver RPA on a robots-as-a-service (RaaS) basis.

management and ongoing valuations, property, asset and portfolio management, and the ultimate sale of the asset.” “The Open Box custom software solutions help refine controls over software and administration systems,” says Strydom, “Altus and Open Box work together to minimise the amount of manual processing that takes place during large-scale real estate fund valuations to deliver a more

According to the Altus Group CRE Innovation Report, “As PropTech investment drives a proliferation of CRE-specific applications, the industry faces a growing integration and data challenge:

●● 58% of respondents said they are using significantly more applications now than they were three years ago; ●● 59% do not have significant integration between major management systems/applications; ●● 50% of firms surveyed said they are facing a significant shortage of skilled IT staff or are not adequately staffed and need more technical resources.”

efficient and accurate service to clients. Today our software robots receive client tenancy schedules, income and expense and capex statements in various formats along with ARGUS Enterprise files per property, convert the data into machine readable format and build out detailed variance reports between prior and current quarter datasets, as well as manage the flow of data in and out of ARGUS Enterprise to enable the valuer to perform his/her job without having to perform any timeconsuming repetitive tasks. This means valuations can be done much faster and risk of human error is completely removed.” “This system allows for the analysis of machine-readable data, review of input files, analysis, and generation of reports that highlight variants and anomalies. What would take up to four weeks to input and analyse for 100 assets can now be done in 35 hours.” The Altus Group CRE Innovation Report further states that CRE firms need to start looking at how their technology infrastructure will allow their processes, workflows and data to “digitally plug into” the technology

advancements of the proptech future that are starting to come to market now. This encompasses adoption of process automation and deploying data solutions that will allow firms to utilise new industry-wide processing frameworks, such as new commercial debt technology infrastructures and performance management benchmarking solutions. CRE industry investment in business process automation and workflows will be critical going forward. Even if a firm’s leadership does not recognise an immediate strategic imperative for advanced digitisation, simply meeting the major asset class standard of being able to measure, benchmark and manage operational performance across workflows and processes should be reason enough for any CRE firm to start assessing and addressing its technology infrastructure. Acting now will be critical to ensuring an organisation’s ability to be competitive in the future. To see Dustin Strydom in action at PropTech 2018 click through to https://youtu.be/K-Xp34KAiIU SOUTH AFRICAN PROPERTY REVIEW

GDP – Western Cape

The role and impact of the commercial property sector Urban-Econ Development Economists were appointed by SAPOA to investigate the commercial private property market in the Western Cape (with specific reference to Cape Town), KwaZulu-Natal (eThekwini), Gauteng (Johannesburg, Tshwane, Ekurhuleni) and Mpumalanga (Mbombela).Over the next four issues, Property Review brings you a concise illustration of the findings

GDP R31,3-billion Jobs 155 400 Tax revenue R1,1-billion

he first objective in this regard is to investigate the impact of the property sector on various provincial economies, with applied variables that include its contribution in terms of gross domestic product (GDP), employment creation, and broadening the tax base of the public sector (tax revenue generation). The second objective is to analyse the economic impact of possible delays in property development applications in the various identified municipalities. Property development applications include land use management (LUM) applications (township establishment, rezoning, subdivision, etc) and building plan applications, with the analysis being focused on identifying the prescribed application time frames, as well as determining the efficiency ratio (portion of the applications finalised within the prescribed time frames)

New business sales The process in which labour and assets are used to transform inputs of goods and services into outputs of other goods and services.

GDP Gross domestic product refers to the market value of all final goods and services produced in a country in a given period of time.

Primary reasons for delays: ●● Application admin ●● Poor communication ●● Controversy ●● Capacity issues ●● Clerical errors/delays ●● Technical issues

SOUTH AFRICAN PROPERTY REVIEW

for the various municipalities. The third objective is to identify the specific challenges inherent to the property development applications in the municipalities.

Methodology An important aspect of the investigation is analysing the economic impact of delays in the property development application process. In analysing the impact, an integrated development and impact evaluation is undertaken via the SAM Modelling Technique. The aggregate impact of applications is quantified through four indicators: new business sales, GDP, income and job creation. As applications are delayed, so too is the potential positive impact of property development on the local and provincial economy, as reflected in the various variables.

Employment opportunities Opportunities to increase the working population that forms part of the total local labour force.

Income generated The income generated by the project refers to wages and salaries earned by those employed directly in the project and the suppliers of goods and services.

GDP GDP –– Western Western Cape Cape The economic model incorporated into the The economic model incorporated into the impact simulation is based on 100 commercial impact simulation is based on 100 commercial property developments, each 1 000m22 in size. property developments, each 1 000m in size. Certain property development assumptions Certain property development assumptions are utilised in the impact simulation, including are utilised in the impact simulation, including the average CAP rate in the various the average CAP rate in the various municipalities; commercial property rental municipalities; commercial property rental income per month; annual rental escalation; income per month; annual rental escalation; average construction cost; average operational average construction cost; average operational income and expenditure per month; income and expenditure per month; maintenance cost per month; total rateable maintenance cost per month; total rateable

property value; and total loan repayment property value; and total loan repayment per annum. per annum. The impact assessment seeks to illustrate The impact assessment seeks to illustrate the impact of this developmental injection the impact of this developmental injection on the local economy and subsequently on the local economy and subsequently translates this impact in terms of the delay of translates this impact in terms of the delay of a single property development application. a single property development application. Accordingly, the outcome of the impact Accordingly, the outcome of the impact assessment defines the economic contribution assessment defines the economic contribution that cannot be made as a result of the fact that that cannot be made as a result of the fact that the application is delayed. the application is delayed.

The Western Cape The Western Cape economy is supported economy is supported by a commercial private by a commercial private property market that property market that contributes more than contributes more than R31-pillion to the GDP, R31-pillion to the GDP, 155 400 employment 155 400 employment opportunities, and R1,1opportunities, and R1,1billion in tax revenue. billion in tax revenue. Accordingly, delays in Accordingly, delays in LUM and building plan LUM and building plan application may contribute to application may contribute to declined business sales as well declined business sales as well as impacts on GDP, income as impacts on GDP, income and job creation. Delays in and job creation. Delays in application processing are application processing are attributed to several attributed to several challenges, such as poor challenges, such as poor communication, capacity communication, capacity issues and clerical errors. But a issues and clerical errors. But a comparatively high portion of comparatively high portion of LUM (78,95%) and building LUM (78,95%) and building plan applications (85%) plan applications (85%) are processed within the are processed within the delineated time frame. delineated time frame.

Economic Economic impact impact (application (application delay) delay) 30-day 30-day delay delay

1-day 1-day delay delay

New business sales New business sales

R1,9-million R1,9-million

R65 000 R65 000

Gross domestic product (GDP) Gross domestic product (GDP)

R700 000 R700 000

R23 000 R23 000

Income Income

R310 000 R310 000

R10 300 R10 300

Jobs Jobs

2 per month 2 per month

PROPERTY SOUTH AFRICAN

REVIEW

Getting your brand noticed by South Africa’s leading property industry decision-makers PROPERTY REVIEW - LogoTreatment.pdf

2016/08/25

11:31 AM

Each member is a leading player and decision-maker in the commercial property arena – and they use the South African Property Review as an extension of the SAPOA website and information platforms. With a monthly average exposure of more than 5000 readers, the South African Property Review is a growing and recognised news platform and go-to source of important industry information, interviews as well as in-depth African and regional reports. With a South African property market value in excess of R5.7 trillion, SAPOA members control in the region of 90% of South Africa’s private sector commercial land and building stock, and manage the majority of property funds listed on the JSE.

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June 2018 The South African Property Review is mailed directly to the association’s leading members, and is also available to the general public both internally and online via www.southafricanpropertyreview.co.za - the online version is an exact copy of its printed original and has on average over 3675 impressions a month, with an average read of upwards of six minutes per issue, giving a monthly reader exposure of over 5000.

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For advertising opportunities and rates contact, t: +27 (0)21 856 1276 / e: pieter@mpdps.com For editorial enquiries contact, e: mark@mpdps.com SOUTH AFRICAN PROPERTY REVIEW SOUTH AFRICAN PROPERTY REVIEW

45 45

MetroWatch

How well is your municipality managing its money? In this fifth instalment sourced from https://municipalmoney.gov.za, Property Review continues to bring you extracts of reports aimed to help citizens understand how public money is spent, and whether this is within acceptable norms. In doing so, we hope to empower citizens, strengthen civic oversight and promote accountability

Buffalo City

Metro municipality in Eastern Cape Population

781 026

What is a municipal financial year?

What is meant by “similar municipalities”?

A financial year is an organisation’s accounting period of 12 consecutive months, at the end of which the accounting books or records for that period are closed. The financial year is used as a basis for planning, budgeting, measuring financial performance and financial reporting. The financial year for South African municipalities runs from 1 July of each year to 30 June of the following year. Budgets need to be prepared and approved for each financial year. At the close of the financial year, reporting against the approved or adjusted (if any) budget is required in the form of annual financial statements and an annual report.

There are three categories of municipalities in South Africa: ●● Category A: Metropolitan municipalities ●● Category B: Local municipalities ●● Category C: District municipalities

What is a financial quarter, and why is some of the data presented quarterly (rather than annually)? A “quarter” is a three-month period in a financial year and is often expressed as Q1, Q2, Q3 or Q4. A quarter is usually accompanied by the year it relates to. For example, “2016 Q1” refers to the first quarter of the 2016 financial year (2015-2016). Since the municipal financial year begins in July of one year and ends in June of the following year, the period being referred to here is July to September 2015. While most of the financial data provided to National Treasury by the municipalities is submitted annually, some data is refreshed and submitted on a quarterly basis. Quarterly updates are important for planning and monitoring purposes and acts as an early warning system. For example, quarterly figures could show that the municipality was not collecting enough of the money owed to it to cover its debts. Rather than waiting for annual financial figures to reveal this, the quarterly information allows the municipality to identify a problem and take corrective action sooner. 46

SOUTH AFRICAN PROPERTY REVIEW

Within these categories, there may be significantly different circumstances between municipalities across the country – therefore, a further set of sub-categories has been developed for analytical and statistical purposes. These sub-categories have been widely used in assessments and previous policy initiatives by the Department of Cooperative Governance (DCOG), National Treasury, the Municipal Demarcation Board and others. For examples of how the sub-categories are used, please see: ●● State Municipal Capacity Assessment 2010/2011 National Trends in Municipal Capacity by the Municipal Demarcation Board, p.3 ●● The Municipal Infrastructure and Investment Framework (MIIF 7) for South Africa. Round 7 (2009-2010): A capital investment perspective by the DCOG and the Development Bank Southern Africa, p.10 ●● Delivering municipal services in rural areas by National Treasury of South Africa, p.3 When referring to similar municipalities, we are then referring to municipalities in the same sub-category as per the table. When we calculate an indicator comparison for similar municipalities, we use the median value of the municipalities in the same sub-category.

2 751,7

square kilometres

283,8 people per square kilometre +27 (0)43 705 2000 www.buffalocity.gov.za Trust Bank Centre c/o Oxford & North Street East London 5200

MAYOR/EXECUTIVE MAYOR

Xola Pakati +27 (0)43 705 1901 execmayor@buffalocity.gov.za

Secretary

Philasande Pula +27 (0)43 705 1072 philasandep@buffalocity.gov.za

MUNICIPAL MANAGER Andile Sihlahla +27 (0)43 705 1046 andiles@ buffalocity.gov.za

Secretary

Phindiswa Sululu +27 (0)43 705 1901 phindiswas@ buffalocity.gov.za

CHIEF FINANCIAL OFFICER

Vincent Pillay +27 (0)43 705 1892 vincentp@buffalocity.gov.za

Secretary

Candice Bahlmann +27 (0)43 705 1887 candiceb@buffalocity.gov.za

DEPUTY MAYOR/EXECUTIVE MAYOR Zoliswa Patience Matana +27 (0)43 705 2899 zolswam@buffalocity.gov.za

Secretary

Princess Feni +27 (0)43 705 2899 princessf@buffalocity.gov.za

MetroWatch FINANCIAL PERFORMANCE Audit outcomes 2017 Unqualified: Emphasis of matter items

2016 Unqualified: No findings

2015 Unqualified: Emphasis of matter items

2014 Unqualified: Emphasis of matter items

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

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 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.

Adverse Opinion

Disclaimer of Opinion

This is expressed when the The Auditor-General does not Auditor-General concludes have all of the underlying that the annual financial documentation needed statements do not present to determine an opinion. the municipality’s financial For example, the lack of position, results of operations underlying documentation and cash flow in line with and the amounts in generally recognised question may be so great accounting practices. that it is impossible to give any opinion on all.

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

Cash balance July 2016-June 2017 R1 690 101 970

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

Good

Positive balance

Bad

Negative balance

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

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

When something is listed as “Not Available”, one or more of the things needed to show the indicator for that date was missing from National Treasury’s local government database. This usually happens when the relevant municipality has not submitted the data to the National Treasury in an acceptable form in time. It might have been submitted late and will be available in the next quarter. It might also be available directly from the municipality but without the vetting done by National Treasury before inclusion in 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 3,4 months Months of operating expenses that can be paid for with the cash available. About 25% higher than similar municipalities in the Eastern Cape: 2,8 months Nearly double the coverage for 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 1,7% overspent Difference between budgeted operating expenditure and what was actually spent. About two-thirds of the underspending or overspending for similar municipalities in the Eastern Cape: -2,55% About half of 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 14,09% underspent

Difference between budgeted capital expenditure and what was actually spent. About 1,3 times the underspending or overspending for similar municipalities in the Eastern Cape: -10,945% About 20% higher than 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 2,36%

Spending on repairs and maintenance as a percentage of property, plant and equipment. A little higher than similar municipalities in the Eastern Cape: 2,285% About 90% 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)

SOUTH AFRICAN PROPERTY REVIEW

MetroWatch Fruitless and wasteful expenditure July 2014-June 2015 13,87% Unauthorised, irregular, fruitless and wasteful expenditure as a percentage of operating expenditure. About three-quarters of the expenditure for 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 3,1 The value of a municipality’s short-term assets as a multiple of its short-term liabilities. About 20% higher than similar municipalities in the Eastern Cape: 2,605 About double 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 1,78 The municipality’s immediate ability to pay its current liabilities. About 20% higher than similar municipalities in the Eastern Cape: 1,57 More than double 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.

SOUTH AFRICAN PROPERTY REVIEW

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 88,17% The percentage of new revenue (generated within the financial year) that a municipality actually collects. About 10% higher than similar municipalities in the Eastern Cape: 80,935% A little less than 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 Buffalo City 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

68,85%

31,15%

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 50

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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 25,82% 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 0,0% 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.

Planning and Development Health

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

howmuch.net

How much countries spend on research and development Spending money on research and development is a funny thing. It’s hard to tell what’s going to be a success, and sometimes the results aren’t valuable for decades. For example, Uber is investing heavily in driverless cars with the explicit goal of revolutionising transportation. Even if the results aren’t always successful, Howmuch.net is convinced R&D investments are a leading indicator of long-term economic strength By Raul - https://howmuch.net/articles/research-development-spending-by-country

owmuch.net found the numbers for its visualisation thanks to the UNESCO Institute for Statistics, which collected the data through a series of smaller regional surveys. UNESCO adjusted the figures to reflect purchasing power parity (PPP$), which makes it possible to compare amounts from country to country. The numbers include government, private, academic and non-profit investments into research and development, painting a complete picture of the R&D market across the world. Howmuch.net created its visualisation by combining a bubble map with both an outline of the country and its flag; it also colour-coded and grouped together countries based on their financial outlay. The result is a snapshot of a critical component for economic growth. The first and most obvious trend in the visualisation is how top-heavy R&D investments are. You can easily see this just by glancing at the visualisation. See how large the inner circles are compared to the rest of the visual? Try to count how many tiny red dots exist on the far exterior. The graphic makes it easy to judge which countries are on the top (and bottom) of the R&D market. In fact, 10 countries account for about 80% of the entire world’s outlay. The US is far above and beyond the rest of the globe, contributing more than US$100billion than second-placed China. Drilling further into UNESCO’s data reveals another leading indicator: whereas the US employs 4 295 researchers per million inhabitants; China only has 1 096 per

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million. Of course, China is home to a lot more people than the US, but the American dominance over the R&D market is quite clear, accounting for 27% of the entire global expenditure. That is significantly more than the bottom 100 countries combined. Keep in mind that R&D involves a wide variety of different industries. Howmuch.net’s figures include the expenditure for everything from artificial intelligence research to inventing new pharmaceutical drugs and building cutting-edge fighter jets. Political scientists have said that demography is destiny for winning elections. Howmuch.net thinks that investment in research and development predicts how countries develop over the

long term. Judging by its visualisation, it’s clear that the US and China will continue to be locked in an ongoing standoff for economic control over the rest of the world.

Top 10 countries investing the most money in research and development 1. United States: US$476,5-billion 2. China: US$370,6-billion 3. Japan: US$170,5-billion 4. Germany: US$109,8-billion 5. South Korea: US$73,2-billion 6. France: US$60,8-billion 7. India: Us$48,1-billion 8. United Kingdom: US$44,2-billion 9. Brazil: US$42,1-billion 10. Russia: US$39,8-billion

opening event

South Africa’s first LEGO Certified Store opens in Sandton City South African LEGO fans have been flocking to Sandton City to revisit their youth at the very first LEGO Certified Store to open in the country

outh Africa’s first LEGO Certified Store, operated by the Great Yellow Brick Company, opened in Sandton City in Johannesburg in late July. While LEGO products are available at independent toy retailers elsewhere in South Africa, the new store stocks and displays a variety of LEGO options, exciting installations, exclusive and extended sets, and experiences not previously seen in South Africa. “This resoundingly warm welcome from South Africa’s LEGO fans is the best encouragement that we could hope for as we continue with our plans to expand the footprint of LEGO Certified Stores in South Africa,” says Robert Greenstein, co-founder of the Great Yellow Brick Company.

The store includes the following signature features:

Robert Greenstein, co-founder of the Great Yellow Brick Company

●● Pick a Brick Wall – a custom-built fixture with round canisters, each filled with an assortment of LEGO bricks and elements that fans can purchase in set priced cups or by weight; ●● Build a Minifigure Station – where you can customise up to three mini-figures for a set price, from a large variety of parts and accessories; ●● A Johannesburg-specific model; and ●● A mosaic of the iconic Big Five – designed and built out of LEGO bricks especially for the store. South Africans who are unable to get to Sandton City will soon be able to buy the LEGO sets exclusive to the Certified Store on the Great Yellow Brick Company’s website, Greatyellowbrick.co.za.

LEGO fans attend the launch of the first certified store in Sandton City, Johannesburg

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meet the mayor

Committed to making the city work SAPOA meets the Executive Mayor of Nelson Mandela Bay Metropolitan Municipality

FROM LEFT GladAfrica Group COO Sigi Naidoo, SAPOA PE Regional Chairman Mark Bakker, SAPOA CEO Neil Gopal, SAPOA President Ipeleng Mkhari, Executive Mayor of the Nelson Mandela Bay Municipality Councillor Athol Trollip, GladAfrica Group CEO Kulani Lebese and Gerhard Albertyn, GladAfrica Independent Non-Executive Deputy Chairman

FROM LEFT Dulegang Maboi, PE Regional Secretariat Caroline Ritson and Monica Dlamini-Mashile

APOA executives and members of the Board met with the Nelson Mandela Bay Metropolitan Municipality recently as part of the Meet the Mayor initiative. The initiative, which is one SAPOA’s key endeavours to strengthen partnerships, dialogue and collaboration between the commercial property sector and government, was attended by the Executive Mayor of the Nelson Mandela Bay Metropolitan Municipality Councillor Athol Trollip, SAPOA President Ipeleng

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Mkhari, SAPOA Chief Executive Officer Neil Gopal, SAPOA Board members and representatives from the Nelson Mandela Bay Metropolitan Municipality, as well as various key government and property stakeholders. This is Trollip’s first engagement with SAPOA since his election as Executive Mayor in August 2016. During her welcome address, Mkhari highlighted the importance of these events to an industry body such as SAPOA.

“A key issue for us – as SAPOA and as business – is the issue of intergovernmental relations,” she said. “We acknowledge that mutually beneficial partnerships and a joint working relationship with the government can at times be fraught with challenges that could be avoided through better understanding. The reality is that we are inseparable – and we have to work together.” She further pointed out that as the urban conversation advances between SAPOA, the property industry and the government, South African cities would begin to progress and evolve to compete on a global scale. “Cities and how they are governed and managed must be at the heart of the national economic jobs and growth debate if we are to have any hope of reaching our employment target,” she said. “The ongoing concerns from both the private and the public sector surrounding challenges that we face requires that both parties become more actively involved with each other.

meet the mayor

Charmaine and Johan Jansen van Rensburg

Liane Koorsse with Steve Gough

FROM LEFT Leandre Nel, Clayton Johnson-Goddard and Jannie Wagenaar

FROM LEFT Michael Gallinetti, Johan Jansen van Rensburg and Jacques Wessels

FROM LEFT Lance Deysel, Thabang and Nomteto Moleko, and Dean Pillay

Dr Gillian and Prof Chris Adendorff

PJ Duffy with Cathy Ossher

We need to engage in meaningful dialogue, and we need to work together to improve business and the infrastructure in South Africa.” Mayor Trollip emphasised the desire for his city to forge strong partnerships with SAPOA. “We are under no illusions about our current relationship with you as property owners,” he said. “As a municipality, we have taken the approach of looking after you and doing anything in our power to ensure that you continue to spend your money in the city.” He also highlighted three key plans for his term in office as a master plan to attract investment into the city: stopping corruption, growing the economy and improving service delivery. “As a city, we have made the decision to stop corruption, he said. “Although it does happen, corruption is not entertained in this city. Growing the economy has been difficult but we have shown some growth since we came into government. We have had two credit-ratings upgrades, equivalent to the City of Cape Town. SOUTH AFRICAN PROPERTY REVIEW

meet the mayor People know that we have stable financials. We have focused on tourism to grow the economy, and our numbers are better than they’ve ever been, especially in the area of sports tourism, with a few key sporting events scheduled to take place. “In addition to this, we have started an Unemployed Graduates Programme, a triple-helix relationship with the Nelson Mandela Bay Business Chamber and the Nelson Mandela University, so that we can find opportunities for young graduates. The results have been extraordinary.” The city’s current unemployment rate sits at 50% – the highest in the country – so it is definitely an issue that needs to be addressed. Improving service delivery is at the top of the city’s agenda. “We want the city to be unrecognisable,” said Trollip, before turning his attention to property owners and noting that the industry is going through a difficult time but that the city is working hard to attract investment, especially from the sector. “If we can complete our term in office, the city will be unrecognisable. We have three years to realise that dream. We have managed to achieve financial stability, but we need political stability for investment. We have a lot going for us, and we are committed to making this city work.” One of SAPOA’s priorities is ensuring that government departments and representatives remain in constant conversation with the property sector, and that the industry’s needs are addressed at a legislative level. As a result, the Meet the Mayor initiative will continue in other cities and remain a highlight in SAPOA’s diary. The Meet the Mayor dinner was sponsored by the multi-disciplinary builtenvironment consultancy GladAfrica.