Joburg
TwitterFacebookYoutubeFlickrLinkedinGoogle

aresebetseng banner

ANNUALREPORT201617

 IDP Banner

 employee participation web icon 002

Tariffbanner 2017


Blog

itl click thru


newsroom-110x300-banner-1


emergency blue

AMBULANCE, FIRE & JMPD
011 375 5911; 10177


general blue
ANTI- FRAUD HOTLINE
0860-JOBURG


PAIA, 2000 (Act 2 of 2000) 


home > archive
 
other city news
Neil Fraser on Sapoa conference
02 June 2008

Panelists at the annual conference of the South African Property Owners' Association point out that many of South Africa's challenges are not unique, but are felt on an international level, such as black outs, corruption, hardship and xenophobia.

Neil Fraser
Neil Fraser

I SPENT Thursday, 29 May at the first day of the annual South African Property Owners' Association (Sapoa) conference in Cape Town. It's many years since I attended one of these - the last occasion was probably about seven or eight years back when I was invited to speak about the future of the Johannesburg inner city.

At that stage, it represented massive losses and provided no economic future as far as most of the then audience of property developers and property owners was concerned. I think I may have been a bit rude to them regarding their scepticism and their somewhat hostile attitude to the inner city - hence probably only being invited back now! This time it was to sit on a panel focusing on Safer cities, safer South Africa: remedy to crime the New York way.

The conference was held at the Cape Town International Convention Centre (CTICC). Although it was built in 2003, this was my first visit to this particular facility. It is as good as anything I've seen in many other cities in the world and, in fact, better than many.

Last year, 2007, the centre recorded a turnover of more than R100-million and it made a significant contribution to job creation both direct and indirect. Over 45 000 international delegates were attracted to the centre in 2007'; it also recorded the highest number of visitor days since opening, 1 242 000 - number of delegates multiplied by conference days - of which nearly 250 000 were international delegates.

Surveys have shown that "international conference delegates spend on average R2 400 per delegate per day on registration, accommodation, local travel and transportation, gastronomy and souvenirs". The macroeconomic effect of the CTICC is measured in terms of its contribution to the South African gross domestic product - an amazing R6,86-billion over the past five years with foreign exchange earnings of nearly R1-billion from 2004 to the end of its 2007 financial year.

Convention centre
It evidently has great expansion plans that will quite dramatically increase the space it occupies and thus the facilities it can offer. There can be little doubt that the lack of a facility of this standard and size is a negative for our inner city. Convention centres in Sandton and Midrand do not bring much or any value to the inner city itself.

Ah, but I can hear many thinking, "Cape Town is Cape Town, an inner city venue in Johannesburg would not be able to compete!" I don't believe that, never have. Over time we could offer something special; we certainly have unique experiences on our doorstep for delegates and their partners to visit. Yes, but the xenophobia? Well, I learned that Cape Town has just as many displaced people as we have.

So what does the cream of South Africa's property industry discuss when they come together? This year, economic development; emerging markets; perspectives on development and retail; foreign land ownership; safer cities; delivery; and capacity - all highly pertinent to where the property industry finds itself.

Because I arrived a bit late, I missed the keynote address by Tom Boardman, the chief executive of Nedbank, but I believe it was very positive, as keynote addresses generally are, and partly centred on the issue of leadership in turnaround situations such as his company has been experiencing. There wasn't a copy of his address available, but I believe it will be on the Sapoa webpage at the end of next week for those who may be interested.

Anyway, Nedbank was, of course, one of the major institutions that fled the city having built a multimillion-rand (if not billion) edifice in umlungustan as truly befitting a prestigious financial institution. That was, of course, before Boardman's appointment. Leadership in turnaround situations? I wonder what he would have done about the location of its head office! It could have been a double whammy - a business turnaround occurring in parallel with assisting a city turnaround.

Get worse
I was in time for a panel discussion entitled Harnessing the property sector for economic development which was introduced by Sizwe Nxedlana, the property economist at Standard Bank (Standard didn't flee the inner city but stayed and continues to pump in investment). His short-term forecasts for the economy were as dismal as one would expect and clearly things will get a lot worse before they get better.

He seems to see just post-2010 as being a possible tuning point. I've always wondered if just post-2010 won't be stagnant as all the major 2010 capital investment comes to an end, but he's the economist. One figure that stuck in my mind from his presentation was that in the past four weeks, 23 out of every 100 people looking for jobs were unable to find employment - put that way our unemployment issue becomes a much more stark reality.

Interestingly, the profile of this group is "young, black, mainly female and generally uneducated". That makes me realise again how little we have been able to dent the unemployment issue over the past 14 years and that lack of education is so key in unlocking the problem.

Panelist Manye Moroka, the director-general in the Department of Public Works, gave an interesting answer to an irate property company which was querying the short length of leases (two years) that the department was now negotiating. Evidently the new policy is that the length of lease is determined by your company's black economic empowerment status - the higher the BEE holding the longer the lease!

I wanted to ask him what his department was planning to do with its decaying buildings that blight many of our cities, such as the old Police Barracks in Marshall Street. But before I could do so, he said that the department had just finished a detailed examination of every building in its R100-billion property portfolio and had developed a policy regarding improving the use of various buildings as well as disposing of others. The policy is just waiting for the signature of the minister. But I've heard that story for a long, long time!

Emerging markets
A particularly interesting session was an Emerging market perspective on development and retail - dual realities and challenges. Two scenarios were presented - one of India and the other of China. The two speakers were Rajnish Changrani, the vice-president of equity investments of Red Fort Capital in India, and Martin Wragge, the director of Cobrole. Wragge is better known in South Africa as the developer of Canal Walk, Century City, Ratanga Junction and Tyger Valley Centre, all here in the Cape, than as a developer in China.

Both presentations were thought-provoking. Changrani explained why his large investment company did not invest in retail in India. Evidently, some 95 percent of all retail in India is single, standalone shops usually family owned. The other 5 percent is in malls. Malls, however, tend to be a series of shops disconnected from each other and parking is usually not provided. The very high cost of land makes rentals unaffordable other than by the anchor tenant. As a result, a number of malls are being recycled into other activities.

The development sector in India also faces major challenges, such as no clear cut evidence of land ownership; rapid urbanisation involving many millions of people (20 million condominiums are required over the next 10 to 15 years); a huge shortage of skilled labour; and, again, the very high land prices. All of this results in unaffordable sale prices or rentals.

He stated that there were very few "good deals" where land title was in place; plans prepared and skills available. Corruption is clearly a major issue - of one rupee set aside for infrastructure, only 0,15 finds its way ultimately into the project. The balance generally goes into the pockets of others, particularly politicians.

Much of the land is not generating enough to sustain the population. In Kolkata, a number of public-private partnerships are introducing a new approach to land reform. Farmers are being persuaded to give up non-generating land in return for a shareholding in the development on their land. The profits generated by the development thus become their income, making it beneficial for them to give up their land and results in poor farmers becoming real stakeholders in the country.

I have always said that the urban revitalisation of the inner city will never be complete until there is an equitable distribution of the ownership of property. I, therefore, related to Changrani's comments and those made by one of the panelists in the previous session, Wayne van der Vent, the head of investments at PIC. He said that the previously disadvantaged had been bricklayers, carpenters, tea ladies and security guards in the property industry for far too long and now was the time for them to be included as real stakeholders in the economy.

China
China, population 1,3 billion, has 660 cities, of which 100 have a population of more than a million. Twenty million people a year are moving to the cities - Shanghai will grow from 20 to 80 million within a short space of time. The current 190 000 kilometres of expressways will be increased to 370 000 kilometres by 2010.

The mind boggles at the rate of growth. However, as became clear from Wragge's presentation, China represents an "enormously complex" market.

Wragge was part of a non-property delegation to China in 2001. However, a city of about 1,5 million people that he visited was divided into two distinct areas with a large, 180ha piece of farmland between the two sections. He sensed that the farmland was going to become the centre of development at some stage in the future and that the right development, now, would accelerate this trend.

Within four days he had tied up a "deal" with the city council basically to evict the 2 000 farmers and develop substantial residential accommodation, small retail and park facilities. The eviction was done with 24 hours notice before the houses would be demolished.

In essence, he would build a 100ha park that would be handed back to the city council for use by all residents, in exchange for which he would retain the balance of 80 hectares for high-rise residential development and a small retail facility. One year later he was breaking ground and has completed a substantial number of units, the park and is now busy constructing the retail and a 21-storey office tower.

These latter were "imposed" on the development for political reasons. He described the difficulty of the process and the high level of political involvement and demands for facilities that were just not logical nor economic.

Of course, the eviction of the 2 000 farmers created quite a stir at the conference. Wragge's justification was: "Two thousand farmers were living on the ground and not using it. In 10 years time they'll still be there not using it." However, it later transpired that the evictees were not left without accommodation.

Wragge lauded the dynamic leadership in China at all levels of government that had resulted in its robust economy. There are no squatters or low-cost developments - if the farmers were evicted then they would have been appropriately relocated: "The city takes care of its own." He pointed to the squatter camps that line the drive from Cape Town airport to the city, stating that this would just not be acceptable in China.

"In China they do what is necessary to go forward - here we are held hostage by people who have no idea of economics and what is needed to be done."

This approach led to a question from the floor as to whether the panel was suggesting that development could only take place in countries like China where people could be summarily moved off the land and where there was a high level of political meddling and corruption.

International challenges
The third panelist in this session was Ian Watt, better known to most as the head of Old Mutual Properties, but who is now in a new position that bears the imposing title of innovator in chief - retail expressions.

He made some interesting comments from his extensive international exposure. South Africans developers and property investors tended to think that all the problems they experienced were unique to the country, he said. Wherever you went, however, the problems were all similar to what we were experiencing in South Africa.

For instance, in Italy, all Bulgarian workers have recently been sent home but the world does not shout, "Xenophobia"; in India you get 30 percent of the water you apply for and there are constant blackouts. And, as we heard, corruption is rife. There are complex developmental issues in China and in India hardship is a part of daily life. Yet everyone in those countries does not go about in a mood of gloom and despair. They get on doing what has to be done, often in conditions far worse than we can imagine.

Watt suggested that we should be far more entrepreneurial than we are.

The Sapoa annual award for Innovative Excellence in Property Development in the category office developments was won by Turbine Square Newtown, which also was awarded the Overall Sapoa Award for Innovate Excellence. Yes - Joburg inner city scores again.

It was a good first day at the conference, with lots of issues to chew on.

Regards from a wet and blustery Cape Town,

Neil

Related stories:

Bookmark and Share
Last Updated on 02 June 2008