President Cyril Ramaphosa’s call for the prioritisation of economic recovery and reform in his State of the Nation Address this evening is just what property leaders wanted to hear – and now they need these words to be backed up by action.
The industry also needs more government support if it is to play a role in this recovery. “As a major employer, the property industry is crucial to this economic recovery,” says Galetti Corporate Real Estate chief executive John Jack.
“The President called for us to come together to overcome joblessness and poverty, but that cannot happen without direct support from our government in the form of subsidies for developers and struggling businesses in both the commercial and residential property sectors.”
While the residential property sector has seen occasional growth spikes, aided by government subsidies to certain major developers, he says the commercial real estate sector is “floundering”.
And as this sector is underpinned by all forms of business, it should be a major target for growth and support.
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“Of particular concern is the construction industry, a major enabler of infrastructure development, which has been in decline for the last five years with many major employers forced to downsize and liquidate.”
The fact those property businesses and the private sector at large, have “always been a much-needed injection of capital to government” is also an issue that needs to be addressed.
“Tax is a major concern for the President but there’s only so much blood you can draw from a stone. A company cannot pay tax if it is not making a profit.”
Jack adds: “At the Budget Speech on February 24, I hope to hear of the government’s practical plan, with timelines, to allocate stimulus to focussed sectors allowing for their growth and expansion.”
Adrian Goslett, chief executive of Re/Max of Southern Africa agrees: “The focus on economic recovery, economic reform and the fight against corruption are all good objectives but the country now needs to see actions to back up the words and promises.”
Similarly, Yael Geffen, chief executive of Lew Geffen Sotheby’s International Realty, says the address was more a case of “admirably lofty goals” and needed substance.
“What we needed to hear this year was a detailed plan for economic recovery, but much of Ramaphosa’s speech may as well have been a copy and paste of last year’s SONA, and the one delivered the year before, which is both disillusioning and discouraging.
“The government has been singing from the same hymn sheet for years without offering tangible results. We are still without electricity, government corruption is still rampant and the private sector is imploding.”
At the same time, she says the President has laid “the bulk of responsibility for job creation this year” at the door of the private sector, “which categorically does not have the capacity in the current economic climate to step up to the plate”.
“In fact current policies are largely punitive and further diminish the private sector’s capacity to contribute to growth.”
Geffen says perhaps the most telling statistic to emerge from the speech is that the national economy has shrunk by 6% since Q4 of 2019.
“It is laudable that the President has ambitions to move forward with projects such as smart cities, but what is needed now – in a time of crisis like no other – is a tangible road map with achievable short-term goals to underpin and fuel economic recovery and boost job creation.”
Although Goslett agrees with Ramaphosa on the need for South Africans to support local companies, he says government must provide “massive incentives” to local manufacturers to keep costs down, to stimulate employment, and to ultimately enable greater competitiveness against foreign products.
“If you want to reduce unemployment, don’t focus on employment. Focus on supporting SME’s and entrepreneurs by reducing red tape and providing tax incentives for employment. Government and big business will never be able to employ enough people. Big business has been going the other way for years now – big companies have been laying off people consistently for years.”
Therefore, relying on them for growth is “futile”.
He cites Singapore as an exemplary example of a country that promotes and supports new business ventures.
“It is one of the quickest (and most efficient) countries in the world in which to start a business – from business registration, tax registration, opening of bank accounts and general business compliance requirements.
“By dropping barriers to entry, you unlock the potential of new entrants to the different markets and industries.”
Meanwhile, Goslett says the redistribution of 5500 farms to 300,000 people has been a “minor win”, but adds that “so much more should have been done by now to issue deeds of property ownership to rightful owners”.
“In a talk I attended 18 months ago, addressed by Kgalema Motlanthe, he said the focus should be on issuing title deeds to the masses of individuals who are the rightful landowners first, instead of fighting around Section 25 of the Constitution. Eighty percent of land ownership issues would be resolved through this initiative and immediately provide equity for individuals and their families.”