Experts welcome some promised reforms
Last week’s State of the Nation Address (SONA) has injected much-needed optimism into the commercial property sector, with experts praising some of the reforms and statements made by President Cyril Ramaphosa.
Of them all, the announcement that municipalities will be allowed to procure electricity from independent power producers (IPPs) was “undoubtedly the most important” for the economy and, therefore, the property industry, says Rode and Associate’s Erwin Rode.
He suspects the City of Cape Town will be first out of the blocks.
Galetti chief executive John Jack agrees, saying the property sector is “at the mercy” of factors such as power supply and the measures proposed by Ramaphosa form a long-term strategy that will benefit the sector in the near future.
However, implementation procedures still remain to be seen.
“The speeding of processing for commercial and industrial users to produce more than 1MW of power is promising, and most significantly the provision for municipalities to buy from IPPs will have a significant impact.
“We are seeing the government stepping away from Eskom and finding alternative measures. This is highly commendable and will go a long way in aiding investment into the country.”
The next step, Rode says, will be to allow the metropolitan municipalities to run suburban trains.
“This would make it easier to integrate the various modes of mobility.”
Jack says investment in infrastructure to grow the economy will also be a boost for the industry. The outcome of the budget speech will provide further insight into the president’s plans.
“I’m feeling optimistic about some of the plans. Repurposing strategic companies to support growth and development means more focus on the private sector, rather than the constant bail-outs of state-owned enterprises.”
He also praised the announcement of a “smart city” in Lanseria, Joburg, as well as the potential construction of a major dam in Eastern Cape, both major contracts for the construction industry.
“The president said we have raised R660billion in investment commitments into various industries which will put commercial real estate in a great position for growth over the next few years.”
The fact that Ramaphosa had said it was important to recognise the country’s problems in order to retain transparency was welcomed by Greeff Christie’s International Real Estate chief executive, Mike Greeff.
“The real estate sector can take a lot away from the president’s address and should have a fair amount to look forward to after the budget speech.
“The president is positive that by combating unemployment through education and post-school programmes, the economy’s stability should improve.
“He is also positive about the effect the prospective improvements of our ports (mainly Durban’s) will have on imports and exports and make South Africa a more attractive investment for our foreign investors.”
Greeff also praised the plans for Lanseria.
“The development of infrastructure is an excellent way to encourage foreign companies to prove to the world we have first-world capability as well as infrastructure that works and is reliable.”
He adds: “The president has also promised R64bn over the next few years to build student accommodation, which is another definite plus for the real estate industry.”
While Ramaphosa’s comments regarding amendment to Section 25 of the constitution that affects land expropriation was welcomed by Herschel Jawitz, chief executive of Jawitz Properties, he notes that it is the uncertainty around the amendment which is causing the damage and not necessarily the legislation itself.
“Markets and investors don’t like uncertainty and the sooner this bill is finalised the better.”
He welcomed the release of further government land for agricultural use.
The Presidential Youth Employment Intervention could also go a long way towards boosting investor confidence, says Tony Clarke, managing director of the Rawson Property Group.
Like Greeff, he says the government’s planned R64bn investment in student housing – an investment that will also leverage at least another R64bn in private capital – should also trigger “a sizeable resurgence in market activity, as well as stimulating the construction industry”.