south african property review march 2014

S O U T H A F R I C A N

PROPERTYR E V I E W

March 2014

Taking ‘Atvantage’ of great project management

AFRICA SERIESZimbabwe:

time to play the market

THE WORLD UNDER CONSTRUCTIONConstruction management:a pillar of development strength

South African P

roperty Review

Construction m

anagement M

arch 2014

REPORTING ON AFRICATaking a constructive approach to Africa’s future

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f2720_JHI_SAPOA Prop Review Add_MARCH_2014_FRONT INSIDE COVER_PRINT.indd 1 2014/02/05 4:14 PMUntitled-2 1 2014/02/06 10:16 AM

1SOUTH AFRICAN PROPERTY REVIEW

from the CEO

Amid the escalating queries and concerns regarding property rates, SAPOA has

engaged in the conducting of a report in an effort to provide solid data on the impact of property rates on the commercial property sector.

SAPOA is concerned that municipalities are burdening commercial property owners with inflated rates increases to make up for the inability of municipalities to collect the money owed to them. Rates increases of between 40% and 50% are being levied on commercial property each year, an alarming fact that SAPOA is questioning the legality of.

The ever-increasing rates charged to SAPOA’s members are unsustainable and make no sense. While paying rates by all citizens and sectors of the economy is fundamental to the efficient governing of cities, it needs to be undertaken on a fair and equitable basis.

Titled the “Impact of Determination of Property Rates on the Commercial Property Sector”, the report’s objective is to, via a collection of data and analysis, research the impact of property rates on the commercial, retail and industrial property sectors within the nine metropolitan municipalities, and Mbombela and Polokwane secondary municipalities. Business Enterprises at the University of Pretoria and Rates Watch (Pty) Ltd were appointed by SAPOA in January 2014 to undertake the research.

Through this research, SAPOA aims to produce empirical and credible evidence that outlines the following:a) The legislative intention of the Constitution

of South Africa, 1996 (Act No 108 of 1996) in as far as the power by municipalities to impose property tax is concerned against the government’s objective of playing a developmental and transformative role.

b) The purport and consequences of the Rates Act in an attempt to discharge that power that is entrenched in the Constitution of South Africa in as far as the correct determination and implementation of property rates is concerned within the statutory limitation imposed by section 229 (2)(a) of the Constitution.

c) The duty by municipalities to attend to the valuation of rateable properties in their jurisdictions and to compile valuation rolls based on the market value of the properties determined in accordance with market conditions and the applicable law.

d) The determined, imposed and collected property rates for the sector for the periods July 2008 to June 2009, July 2009 to June 2010, July 2010 to June 2011, July 2011 to June 2012, and July 2012 to June 2013, the associated General and Supplementary Valuation Rolls and the relevant approved valuation property rates ratios.

e) The amounts that were written off by the municipalities in respect of residential and non-residential properties categories for the research study periods (2008 to 2013) as reported in their respective audited annual financial reports. (The revenue effort of municipalities by showing whether or not there is consistent, accurate and complete billing and full collection of taxes and charges due from the residential and non-residential property sectors for the periods July 2008 to June 2009, July 2009 to June 2010, July 2010 to June 2011, July 2011 to June 2012, and July 2012 to June 2013.)

f) An analysis, with case studies, of whether or not property rates are correctly determined

and imposed on the non-residential property sector (commercial, retail and industrial) for the aforementioned five financial years.

g) An assessment of the impact of property rates by taking into account the funding models and requirements of the indicated municipalities, the market values of properties and the impact thereof on the operating costs of the commercial property sector and the future sustainability of the commercial property sector.

h) A research model that illustrates, among other things, the impact of property tax on the commercial property sector in as far as, for example, affordability and sustainability of businesses are concerned within their business models.

i) The investigation of best international property tax models.

The report, which is to be tabled at the 2014 annual SAPOA Convention (which takes place from 10 to 12 June at the CTICC), will make recommendations that can hopefully be used to influence policy and/or administrative changes in as far as the determination and imposition of property rates is concerned.

Neil Gopal, CEO

Making cents of property ratesSAPOA CEO Neil Gopal delves into the details of a current SAPOA research report

proposal relating to the impact of property rates on the commercial property sector

Rates Watch agreement signingSEATED (from left) SAPOA CEO Neil Gopal, SAPOA president Estienne de Klerk, University of Pretoria’s Dr Douw Boshoff STANDING (from left) Kokkie Herman and Ben Espach of Rates Watch

CEO_MAR_SUBBED.indd 1 2014/02/06 10:44 AM

2 SOUTH AFRICAN PROPERTY REVIEW

from the editor’s desk

The global � ght over commodities

and natural resources is not a new phenomenon – it’s a war that has been waged for centuries. Think oil, blood diamonds, gold and other precious raw materials. The next big war will be over water, a resource that makes up about 70% of the Earth’s surface.

According to the World Water Vision Report, “There is a water crisis today. But the crisis is not about having too little water to satisfy our needs. It is a crisis of managing water so badly that billions of people – and the environment – su� er badly.”

“As countries around the world seek economic growth, strong employment and safe environments, corporations have a unique responsibility to deliver that growth in a way that

The water warAs water scarcity

escalates across

the globe, a war is

being waged over this

precious resource, with

violent protests among

the poor and pleas for

corporates to implement

more effi cient water

management systems

uses natural resources wisely,” says Paul Simpson, CEO of CDP, an international, non-pro� t organisation providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. “The opportunity is enormous and it is the only growth worth having.”

In association with Deloitte, the CDP Global Water Report 2013 states that the economic e� ects of mismanaging water resources are becoming increasingly apparent. The United Nations has reported that several countries are close to their water limits – a dire situation that exists amid the fact that food output must increase by up to100% by 2050 if current population growth is to be sustained.

“These factors will limit economic development and greatly exacerbate rural poverty

DSTV City

Ed's Letter_MAR_SUBBED.indd 2 2014/02/06 10:57 AM


The water warWater facts and figures (global)l 1,1-billion people live without clean drinking waterl 2,6-billion people lack adequate sanitationl 1,8-million people die every year from diarrhoeal diseasesl 3 900 children die every day from water-borne diseases l More than 260 river basins are shared by two or more countries, mostly without adequate legal or institutional arrangements

Daily per capita use of water in residential areasl 350 litres in North America and Japanl 200 litres in Europel 10 to 20 litres in sub-Saharan Africa(Source: Worldwatercouncil.org)

– particularly in emerging and developing economies,” notes Simpson in the report. “Already countries such as China and India are realising they have to solve water problems if they are to sustain growth or improve quality of life.”

Apart from hampered economic development and poverty, the water crisis will result in widespread social upheaval as well as political instability – something that has already begun across the globe. A prime local example is the violent service-delivery protests that occurred earlier this year over a water shortage in Mothutlung township, during which several people died in clashes with police. It resulted in the ANC mayor of the North West Province’s Madibeng Municipality, Poppy Magongwa, stepping down.

Perhaps this war is a bittersweet one – a harsh method to correct the political ills of our world and bring about a revolution that forces governments to be less corrupt and more “hands-on” when it comes to the management of water. It will also teach the public and private sectors as well as ordinary citizens to appreciate the natural resource even more.

“A shift in practice is required if companies are to realise the true benefits of water stewardship, and achieve business resilience and competitive advantage,” says Simpson. “Using the insights from standardised company disclosures, investors can enhance risk management of this critical issue.”

Candace King

Ed's Letter_MAR_SUBBED.indd 3 2014/02/06 2:08 PM


contents

P R O P E R T Y F U N D

Abland

Abreal

Oilgro


PROPERTYR E V I E W

March 2014

2 From the editor’s desk6 News12 Education, training and development18 Legal update Critical wording of fi nancial guarantees

22 Councillors in conversation24 Constructing our world 30 Taking “Atvantage” of great project management32 Africa report36 Africa uncovered Zimbabwe

40 SA’s crystal ball44 Africa’s build book48 Interview Laying new foundations

50 Is 2014 a watershed year for the listed space?54 Maboeng making cents59 Interview Young blood

62 Statistics64 Off the wall Is it a bird? A plane? No, it’s an Apple


PROPERTYR E V I E W

March 2014

Taking ‘Atvantage’ of great project management

AFRICA SERIESZimbabwe:

time to play the market

THE WORLD UNDER CONSTRUCTIONConstruction management:a pillar of development strength

South African P

roperty Review

Construction m

anagement M

arch 2014

REPORTING ON AFRICATaking a constructive approach to Africa’s future

Cover With Spine_SUBBED.indd 1 2014/02/06 10:40 AM

ON THE COVERThe Taj Cape Town combines old-world opulence with � ve-star comfort, and forms part of this month’s theme. The Atvantage group, with its diverse hotel development experience, project-managed the Taj’s transition and rejuvenation from a bank to a luxury hotel.

Editor in chief Neil Gopal Editorial advisor Jane Padayachee Managing editor Mark Pettipher Editor Candace King Copy editor Ania Rokita Production editor Dalene van Niekerk Sales Riëtte Stevens

Finance Susan du Toit Contributors Advocate Portia Matsane, Martin Ferguson, Baaitse Nethononda, David A Steynberg, Nicky Manson

Photographer Michael GlenisterDISCLAIMER: 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.The publishers are not responsible for any unsolicited material.

Designed, written and produced for SAPOA by MPDPS (PTY) Ltde: [email protected]

Published by SAPOA, Paddock View, Hunt’s End O� ce Park, 36 Wierda Road West, Wierda Valley, SandtonPO Box 78544, Sandton 2146

t: +27 (0)11 883 0679 f: +27 (0)11 883 0684 e: [email protected]

FOR EDITORIAL ENQUIRIES email [email protected] or [email protected].

Printed by

e: [email protected]

ContentsCs5_SUBBED_mp.indd 2 2014/02/06 3:49 PM

www.sapoaconvent ion .co . za

Making a difference today

The Convention provides a comprehensive snapshot of expert opinions and research in terms of what to expect throughout the development and investment year ahead. The two day event will deliver unrivalled opportunities to engage with industry leaders and political representatives, and gain knowledge and inspiration, network and generate new business opportunities. These bene� ts are combined and delivered in one high quality, informative, entertaining and dynamic event.

You are invited to attend our annual convention.

Principal SponsorInternational Convention CentreCape Town - 10th – 12th June 2014

Neil GopalCEO, SAPOA

David GreenChairperson: SAPOA

Convention Committee

“Good subjects with great speakers who have vast experience of the market”Delegate - Convention

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South Africa’s premier property conference of the yearSouth Africa’s premier property conference of the yearSouth Africa’s premier property conference of the year

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news

SA listed property will keep a close eye on sovereign risk, quantitative easing and interest rates in 2014

South Africa’s listed property sector can expect another interesting year in 2014, according to Redefine Properties CEO Marc Wainer,

who predicts interest rates will be one of the most important underlying forces for the sector.

“The direction interest rates take could have a dramatic impact on the prices of listed property stocks and ultimately the yields at which properties trade,” he says. He cautions that 2014 could be a volatile year for pricing in the listed property sector, given the uncertainty about the effects of quantitative easing, because we don’t know what the US Federal Reserve’s policy is yet, nor the impact it will have on bond yields.

“There still appears to be strong appetite from investors

and from the bond market for South African property stocks,” says Wainer. But he notes that the biggest threat to the South African economy in 2014 is the potential of a downgrade of South African sovereign risk.

“Should this happen, there will be a massive sell-off of South African bonds by international investors,” he says. “The repercussions for the South African economy, the listed property sector included, could be dire.”

When it comes to levels of activity in the listed property sector, Wainer believes property acquisitions and developments will be slow in 2014. “We can expect some consolidation between smaller funds as well as a few more listings, particularly those with an international flavour.”

Looking at property market fundamentals, he predicts that retail property will continue to outperform other subsectors thanks to strong demand for space from South African and international retailers alike.

On the other hand, an oversupply of offices will mean further underperformance from this subsector. According to Wainer, the listed property sector will also continue to identify new opportunities in 2014. “Increasingly South African property companies seek ways to diversify their investments into sub-Saharan Africa or other offshore jurisdictions,” he says. “The yields available are better than in South Africa and there’s strong appetite from investors for counters offering a rand hedge component.”

Not only will the sector consider new territories, but also new investment categories. “There is much exploratory work under way to improve non-lettable area income, as well as interest in new property subsectors such as residential, healthcare and storage, among others.” +27 (0)11 283 0000, Redefine.co.za

In January 2014, the International Property

Measurement Standards Coalition (IPMSC) launched a public consultation on the new International Property Measurement Standard (IPMS) for office buildings.

The three month consultation, closing on 4 April 2014, is calling for real estate office sector practitioners and stakeholders to contribute to the new international standard. The new standard, produced by the IPMSC Standards Setting Committee, is the first of its kind and will provide a common language

for measuring offices across international markets, benefiting real estate practitioners such as investors, lenders, agents, valuers and occupiers.

The international standard will ensure that property assets are measured in a consistent way, creating a more transparent marketplace, greater public trust, consistency in the reporting of property size, stronger investor confidence, and increased market stability.

Research by global property firm Jones Lang LaSalle suggests that, depending on the method used, a property’s floor area

Change around the corner for global real estate

I n 2013, Portside office building in Buitengracht Street,

designed by DHK Architects, was awarded a five-star “Design” rating under the Green Building Council of South Africa’s (GBCSA) Green Star rating system for offices. This acknowledgement makes Portside the first five- star Green Star SA-certified high-rise office development in Africa. Just one of the many attributes contributing to this prestigious rating is the approach taken to the design of the parking facilities.

“The parking design for Portside has been developed to promote the use of fuel-efficient transport, using the GBCSA’s technical manual credit criteria as a guideline”, says David Talbot, an associate at DHK Architects.

Motor vehicles in general, and private cars in particular, are responsible for a large percentage of carbon emissions, through fuel consumption and the oil production required to produce the fuel. The building design encourages the use of

alternative methods of transport by providing preferential parking, ease of access and support facilities for alternative methods of transport. This is aimed at reducing the large amount of energy and fuel used by vehicles, which leads to greenhouse gas emissions that are so detrimental to the environment.

“Approximately 70 parking bays within the Portside are dedicated solely for the use of hybrid or alternative fuel vehicles,” says Talbot. “Approximately 20% of these hybrid/alternative fuel vehicle bays are provided and fitted with electric-car charger points, with an additional 35% wired to facilitate the future connection of chargers. These bays are located in preferential areas closest to the lifts and lobby access.”

In addition, Portside has secured bicycle parking for approximately 220 bicycles for staff located within the building. A cycle route is clearly marked and sign- posted to facilitate safe

Portside’s five-star parking with futuristic electric-car charger points

News_MAR_SUBBED.indd 6 2014/02/06 10:59 AM


news

measurement can deviate by as much as 24%. IPMS will be adopted by all 28 coalition organisations, with firms around the world already lined up to implement IPMS from June 2014. The Dubai Government are the first government to commit to its adoption, which will underpin valuations of commercial property and financial reporting through International Valuation Standards and International Financial Reporting Standards.

The new standard is considered one of the most significant developments in the real estate profession in recent history, and will go beyond office measurement standardisation to include other property types, such as residential, in the coming months. Strengthening public

accountability of the IPMSC, the coalition can now announce the appointment of a board of trustees. Members from each of the 28 organisations, including SAPOA, are represented on the board, chaired by Ken Creighton (RICS), with vice chair Lisa Prats (BOMA International) and secretary general Jean-Yves Pirlot (CLGE).

The coalition also confirms new IPMS members joining the coalition – Property Council of New Zealand, Asian Non- listed Real Estate Vehicles, Assoimmobiliare, National Society of Professional Surveyors and Japan Association of Real Estate Agents have all committed to the standards programme. +27 (0)83 632 5555, Rics.org

and easy access to the parking spaces. An additional 30 community bicycle parking bays are located outside on the Portside entrance plaza. All of these bays are provided with racks so that bicycles can be securely locked. Shower and change facilities are also provided for cyclists, with lockable lockers, some of which are fitted with cycle battery charge facilities.

“The design innovations and environmental considerations incorporated into the design of the Portside project make it one of the first buildings in Cape Town to provide such futuristic parking facilities,” says Derick Henstra, head of DHK Architects. “The design was sensitive to both the environmental and aesthetic requirements of the building. We believe that we have successfully balanced the two imperatives while laying down the blueprint for similar eco-sensitive designs in the future, bringing benefit to the City of Cape Town and all its citizens.”

Portside’s estimated completion date is April 2014.+27 (0)21 421 6803, Dhk.co.za

Gautrain stations and traffic congestion direct demand in Jo’burg’s northern office nodes

Office demand is tracking closer to Gautrain stations

across Johannesburg’s prime northern nodes of Sandton, Rosebank and Bryanston, as both new development and redevelopment projects seek to optimise access to public and private transport options.

“Office development is continuing at pace in Sandton, which is quickly consolidating its position not only as the financial heartland of Johannesburg but also the preferred location for corporate headquarters,” says Broll’s Gauteng divisional director of office brokering Fran Teagle.

The node continues to reap the benefits of the Gautrain, which provides connectivity to both OR Tambo International Airport as well as the greater Johannesburg area and Pretoria. Office demand is focused on space within walking distance of the station. About 200 000m² of new projects are either in the planning stages or under construction in the node, with increasing demand for both sectional title office space and smaller premises in evidence.

Redevelopment of older and B-grade space is under way, as is a strong shift to Green Star-rated buildings. Another key trend is the relocation of blue-chip corporate tenants into Sandton and out of nodes such as Rosebank and Illovo. Examples include Sasol, Webber Wentzel

and EY, says Teagle. Gross achieved rentals for prime space in central Sandton are at R225/m² per month, and leases are being secured for five to 10 years. Nevertheless, traffic congestion – especially at rush hour – continues to be a challenge, and demand for parking bays at office buildings is high at five to six bays per 100m².

In Rosebank, the Gautrain station is likewise providing a catalyst for both development and redevelopment, says Teagle, pointing to a number of new prime office developments that are changing the urban face of the node. Prime office space is achieving R200/m² per month with leases of five to 10 years, in line with those in Sandton.

“The planned expansion of Rosebank Mall – which will double its GLA – will provide a top quality retail experience, even though the project is expected to negatively affect the CBD,” she says. Again, traffic congestion is a key challenge, with the Glenhove off-ramp from the M1 highway experiencing logjams at peak travel times.

Bryanston remains a popular node with more affordable rents than either Sandton or Rosebank, at about R150/m² per month. “Easy access to highways and major arterial routes as well as retail facilities and good schools make Bryanston a desirable address,” says Teagle. “These are just some of the locational advantages that led major corporates such as Microsoft, Tiger Brands, National Brands and Dimension Data to locate in the node.”

New developments are already almost fully let, which Teagle predicts will create a demand crunch in the next 12 to 18 months, especially for smaller users of space. +27 (0)11 441 4496, Broll.co.za



news

Dipula Income Fund recently announced that it has

agreed to acquire the Gillwell Taxi Retail Park development in the East London CBD, situated in the Buffalo City Metropolitan Municipality of the Eastern Cape. The development gained planning permission in December 2013; this transaction will become effective after the centre’s construction is complete in the first half of 2015. Dipula agreed to purchase the 21 521m² three-level shopping-centre development from developers Isibonelo Property Services and Eris Property Group. It has also agreed to give Isibonelo the option to acquire a stake in this retail centre.

“The property meets Dipula’s strategy of acquiring larger, quality retail assets in targeted areas and improves the overall quality of our portfolio,” says Dipula CEO Izak Petersen.

“The Gillwell Taxi Retail Park development is a well-located retail site in the retail hub of East London’s CBD. For Dipula, it represents sustainable income growth underpinned by major national retailers.” Leases are currently being finalised with the centre’s anchor retailers Game and Shoprite.

The transaction is subject to various conditions, including 80% of the development’s retail space being pre-let and rental guarantees on any unlet space. As part of the transaction, Isibonelo and Eris will develop the centre and will also undertake its management for the first two years from opening.

“Besides meeting our growth strategy, the acquisition also increases our exposure to the growth opportunities from commuter retail in one of the busiest CBDs in SA,” says Petersen. +27 (0)11 325 2112, Dipula.co.za

Dipula acquires R316-million East London Gillwell Taxi Retail Park development

Retail property to outperform again in 2014Retail property is expected

to deliver better results to investors in 2014, with offices being the weakest commercial property subsector this year, according to Dipula Income Fund CEO Izak Petersen.

“The office sector will continue to experience more pressure than other sectors in 2014,” he says. “While we’ve seen a fair amount of leasing in the office sector, most comes from relocating tenants and not new businesses.” He notes that businesses in all sectors will come under pressure from rising costs. “Sustained economic challenges will make the year difficult,” he says.

Tenants are likely to come under the most strain from increases in municipal costs and electricity.”

Property owners are responding to the pressures their tenants face by finding ways to make their buildings more efficient and drawing on alternative energy and water sources, reducing running costs.

Petersen says the market can expect an active listed property sector in 2014. “Despite the expected challenges, listed property should still deliver a relatively good return compared to other asset classes, so it remains a compelling investment case,” he says. “Investments into foreign funds and assets by South African

listed property funds, tenant-driven developments, sector consolidation, the trade of private portfolios, and transactions between listed and unlisted funds are all likely to feature in the sector this year.”

A fair amount of new property development will come on stream in 2014, mostly in urban areas. But Petersen notes there will be some rural retail development. “With low levels of investment property stock in the market, and relatively low capital available, listed property companies are expected to consider mergers and acquisitions as a means for growth,” he says. “Retail should perform well again in 2014. General warehousing should also produce a strong performance.”+27 (0)11 325 2112, Dipula.co.za

Industrial nodes in Cape Town attract major companies

Well-positioned and easily accessible industrial areas

in Cape Town continue to attract major national and international companies, says Seamus Daly, leasing, sales and investment broker for JHI Properties, who recently concluded a five-year lease in Diep River on behalf of Maccaferri SA – a subsidiary of the worldwide industrial group Officine Maccaferri.

With more than 60 subsidiaries around the world, including 28 manufacturing plants, Maccaferri has been involved in implementing successful environmental solutions for soil erosion control, embankment stabilisation and environmental rehabilitation for 125 years.

Because of the company’s expansion in Africa, it is now trading as Maccaferri Africa (from January 2014) and has relocated its Cape Town operation to Diep River.

“The premises JHI Properties found for us is ideal for our requirements, with sufficient space and good security, and

in an ideal location on the only direct east-west link between the M5 and M3 highways,” says Kim Wright, branches administration manager for Maccaferri Africa. “It is also within easy reach of other popular routes, such as Main Road (M4) and Kendal Road.”

The transaction concluded by Daly is for 1 250m² of industrial space at a total lease value of R2,35-million.

“Diep River is a popular location, as it is served by both Cape Town’s southern suburbs and the Cape Flats railway lines, and is a five- minute walk from the station, making it very accessible for staff,” says Wright. “A small light-industrial node, popular with call centres and distribution companies, Diep River is home to a broad variety of companies, including Ina Paarman Kitchens, Neotel, Direct Axis, New Balance, Medac, Pinnacle Pharmaceuticals, Block & Chisel, and Crawfords.” +27 (0)21 418 1640, Jhi.co.za



news

Since opening its doors at the beginning of August

2013, Bloemfontein’s first Just Commercial franchise is now well established and set to become a major player in the leasing, sales and management of commercial properties in the city. At the helm is highly experienced commercial property broker Thami Nomazele, who is currently supported by two property brokers. “This is a competitive market but we are confident that our service excellence will win us a sizeable share of the market,” he says.

Just Commercial Bloemfontein booming

“Our mission is to provide the best possible service to our clients and landlords, which we hope will make their choice easy.”

As part of the Just Property Group, the new Just Commercial office is conveniently located at 70 Kellner Street in Westdene. “Our initial focus will be Bloemfontein, with the vision of expanding into ThabaNchu,” Nomazele says.

John Roberts, CEO of the Just Property Group, says this is the 44th Just Commercial franchise in the country. “We wish them every success in their new venture and are encouraged by their progress to date,” he says. “After just a few months of operation, they have established their credentials and are poised for steady growth.” +27 (0)51 447 8773, Justpropertygroup.co.za

Tower Property Fund exceeds forecasts in maiden results Newly listed property group Tower Property Fund performed

strongly in its first six months of operation to 30 November 2013, posting diluted headline earnings per share of 42,5 cents, and exceeding its pre-listing forecast with a maiden distribution of 33 cents per share.

Tower was the country’s first new REIT to list when it made its debut on the JSE in July 2013. CEO Marc Edwards says the results for the six months represent an annualised income return to investors of 9,6%, outperforming the average of the listed property sector. He said the fund has taken on the management of 27 properties valued at R1,64-billion, reduced operating costs across the portfolio and made pleasing progress with the greening strategy that underpins the fund.

A strong focus on property asset management has resulted in significant savings by rationalising service agreements and letting vacant space. More than 10 000m² of space has been let to date, reducing vacancies from 11,5% at the end of November 2013 to 8,5%. Edwards notes that the vacancies were largely covered by rental guarantees.

“Tower is committed to a strategy of ‘greening’ to increase the competitiveness and values of buildings in the portfolio, initially focusing on strategies with no or low upfront capital costs,” he says. “Greening of properties is expected to result in reduced occupancy costs for tenants and reduced vacancies over time as a result of the lower occupation costs, and to make properties more valuable and marketable to prospective tenants.

“Tower’s portfolio includes a 5-Star Green Building Council of South Africa rated property, with the highest level 6-Star rating expected on a property in Sandton that was recently completed. Two greening projects have been initiated at Tower’s flagship property, the Cape Quarter. A lighting retrofit programme is expected to reduce operating expenditure by close to R900 000 per year and reduce carbon emissions by 269%, while an extraction retrofit will further reduce costs.”

Tower will share the savings with the tenants. A successful marketing programme was instituted at the Cape Quarter over the holiday season to promote the property as a destinational shopping centre with the community, drive foot traffic and attract national tenants.

Vacancies have reduced to 1.9% since Tower took ownership of the property in June 2013.

Outlining Tower’s prospects for the remainder of the financial year, Edwards says the fund continues to focus on acquiring strategic properties. “We are currently negotiating for commercial property totalling R300-million and are evaluating a pipeline of a further R500-million in acquisitions. After the end of the reporting period we acquired two small properties in Cape Town with a combined value of R34,3-million”.

Edwards also says that Tower remains confident of meeting its pre-listing earnings and dividend forecasts for the 2014 financial year. +27 (0)21 685 4020, Towerpropertyfund.co.za

Arrowhead Properties raises R490-million, receives overwhelming support

Arrowhead, the only JSE-listed property

company to pay quarterly distributions, recently announced the successful completion of an accelerated book build to qualifying investors.

The book was heavily oversubscribed. A total of 36-million A and B linked units were issued for a combined consideration of R490-million. The issue price of the units represents a discount of 3,17% to the closing price on 22 January 2014.

The proceeds of this placement will be used to partially fund R650-million’s worth of acquisitions that have been concluded, including the Sasol Building in Rosebank and the Monash residences; both announced in December 2013.

“The strong demand for Arrowhead units is reflective of the market’s confidence in the company’s prospects,” says Arrowhead CEO Gerald Leissner. “We are very pleased with the level of support we received. These acquisitions are in line with our stated objective to pursue profitable growth through yield-enhancing acquisitions and improving the quality of the portfolio. Both the Sasol building and the Monash residences have been acquired at attractive forward yields that will enhance income returns to our unit holders.”

Java Capital is acting as sole bookrunner for the private placement. +27 (0)10 100 0076, Arrowheadproperties.co.za



news

Redefine International sells office building at massive premium

Redefine International recently announced it has agreed to

sell the St Anne’s House office building in Croydon, England for £8,4-million – £3,4-million above the property’s 31 August 2013 book value.

Mike Watters, chief executive of Redefine International, notes the large premium to book value of 68% achieved on this sale bodes well for valuation increases across its portfolio in the future.. St Anne’s House is a vacant 75 000 sq ft (6 968m²) 1960s office building previously occupied by the UK Home Office. It formed part of the legacy Government Portfolio acquired by Redefine International through its merger with Wichford in 2011.

Redefine International received planning permission for its redevelopment into a 144-bed

hotel with 46 residential units on the building’s upper floors in September 2013.

St Anne’s House is situated opposite the highly anticipated redevelopment of the Whitgift shopping centre in Croydon town centre, and will form part of the regeneration of this area.

“We’re pleased with the result of our business plan for this property and to have made this disposal, which will enable us to recycle the proceeds into other areas of our portfolio,” says Watters. “As the investment and development market improves, we are assessing several other assets across the portfolio that offer the potential to benefit from initiatives such as securing change of use, enabling us to realise additional value for shareholders.” Redefineinternational.com

Village View brings shoppers fresh new retail experienceThe stylish Village View

shopping centre in Bedfordview, Johannesburg is benefiting from a R20-million redevelopment by owners The Cavaleros Group. The major makeover has brought it in line with the latest retail trends and boosted its appeal to loyal and new patrons alike.

This prime centre underwent redevelopment during 2013 to enhance its overall shopping experience, with a focus on providing greater retail variety. Its new retail mix achieves this with the addition of Woolworths in a store of more than 1 500m², the latest in fitness training at Sweat1000, pet store Canine & Co and the popular Turn ’n Tender Restaurant. The newest additions to Village View include

a dedicated @home the Kitchen Store of 120m², which opened in October 2013; SnoYo, which opened in November 2013; and Pick n Pay Liquor, which opened in a 350m² space in December 2013.

“Redeveloping Village View has re-energised the centre with refined retail and dining variety that best meets the needs of our patrons,” says centre manager Vicky Lambros. “At the same time, we have improved shopper flows, met some of the continuing demand for retail space at the centre, and clustered retailers to create feature zones in the centre. All in all, we’ve created a more vibrant shopping and leisure experience.” +27 (0)11 622 3026, Villageview.co.za

Attacq poised for a year of growth

Attacq has entered 2014 on a high note. Since its successful

JSE listing on 14 October 2013, its share price has consistently traded around the R18 mark, with strong demand and positive sentiment. Attacq shares were also the subject of an oversubscribed R900-million secondary placement at R16,10 per share by the Mertech Group of Companies in a November 2013 accelerated bookbuild. The placement was conducted at a three percent discount to the previous day’s closing price and was largely taken up by institutional shareholders, growing Attacq’s investor base. It also saw Coronation Asset Management increase its shareholding in Attacq to more than eight percent.

“An increase in the free float, from about 40% after listing to about 45% currently, will increase liquidity in the share, and the inclusion of Attacq in the JSE SAPY Index at the end of last year had a positive impact on demand for Attacq shares from institutions and fund managers tracking the index,” says Attacq CEO Morne Wilken.

Underpinning Attacq’s appeal is its quality property assets and developments, and work at Waterfall Business Estate, one of the jewels in the Attacq portfolio, is progressing at pace. Two further developments have also been secured in Waterfall since the listing, namely a new 10 000m² distribution centre for Covidien and a 7 000m² office block for Novartis.

All the major developments in Waterfall, including the super-regional Mall of Africa, are on track. To date, four large projects have been completed in Waterfall: the 44 200m² Cell C Campus, the 26 286m² premises

for MBT Technologies, the 23 139m² head office for Group 5 and the 6 198m² head office for Golder and Associates.

And, progressing its diversification strategy, Attacq has acquired 12,4% of African Land Investments, increasing its exposure to its sub-Saharan target markets. African Land owns the 44 000m² Manda Hill Mall in Lusaka, Zambia – the country’s first regional shopping centre and the largest in sub-Saharan Africa outside of South Africa. Hyprop Investments Limited has taken up 87% in African Land. African Land will continue as a separate property entity with a view to growing its property portfolio by acquiring quality, predominantly retail properties in key sub-Saharan African jurisdictions outside of South Africa.

This expands Attacq’s presence in other African countries, which includes co-investment with the Atterbury Group and Hyprop in the property investment company Atterbury Africa. Atterbury Africa focuses on developing regional shopping centres in sub-Saharan Africa.

Attacq has also increased its shareholding in MAS Real Estate Inc from 21% to 47,2%, which is in line with consolidating its international interests in MAS.

“Attacq is very excited for an eventful 2014, when seven further developments will be completed in the Waterfall Business Estate,” says Wilken. “We will also complete the 75 000m² Newtown Junction in Newtown, Johannesburg, and the 55 000m² regional Mall of Namibia in Windhoek, both before the end of 2014.”+27 (0)87 845 1136, Atterbury.co.za



news

Recovery in SA’s five-star hotel market

Positive news in the hospitality sector in South Africa is recorded at the five-star hotel level, which despite experiencing a

substantial decline between 2009 and 2011, recorded a national average revenue per available room (RevPAR) annual increase of 15,6% during 2012. This trend continued into 2013 with RevPAR growth as at the end of August 2013 reflecting an impressive 16,8% increase.

Joop Demes, CEO of Pam Golding Hospitality, points out that in key hubs such as Sandton and Cape Town this sector has reported a notable recovery. “In 2012 the RevPAR growth of 15,8% in the Sandton five-star market was ahead of the Cape Town growth of 12,4% during the same period,” he says. “However, for the first eight months in 2013 this changed substantially, with the Mother City reflecting a further year to date RevPAR growth of 21,4% while Sandton reflected 11,7% growth.”

According to Demes, it’s fair to say that business confidence has driven destination preference, especially with South Africa being a long-haul market. With Sandton being predominantly a business – and increasingly a business-tourism (conferencing) – destination, it stands to reason that business-sector-driven growth resulted in a higher level of recovery in Sandton in 2012.

The lag in Cape Town in 2012, which is mainly a leisure destination, translated into a substantially more aggressive recovery in the city in 2013.

“To get a better understanding of what has been driving five-star hotel performance in South Africa one needs to consider and analyse RevPAR, which is a combination of occupancy and rate,” says Demes. “Occupancy at five-star hotel level has increased by a substantial 10% in comparison to 2012, while the 2013 performance reflects a further growth of 7,9% in relation to the same period the previous year.

“Talk of an oversupply of hotel room inventory in South Africa, especially at the five-star level, is no longer really relevant. What we need to understand about the supply and demand dynamics in the hotel industry is that it differs from most other industries. If the demand for a particular manufactured product increases, one simply increases production to meet demand. However, the Achilles heel of demand in the hotel industry is capacity, as this drives demand (as opposed to the other way around).

“I believe, and we have commented on this in the past, that we should view what we experienced in terms of hotel development from 2008 to 2010 as capacity creation, rather than simplistically taking the easily misunderstood stance of ‘oversupply’.”+27 (0)21 852 5155, Pamgolding.co.za

Strong demand and stock shortages at Century CityCape Town’s Century City

continues to expand its residential offering in the face of high demand for both full title and sectional title homes, as well as rental accommodation.

The 250-hectare precinct offers more than 3 000 residential units within 17 secure developments. Pam Golding Properties (PGP) reports that the rental market is booming, while a number of the secure complexes are achieving notable price growth.

“Century City is now firmly established as a sought-after place to live, work, shop and play,” says PGP’s area principal for the Western Seaboard Emarie Campbell. “More than 60 000 people now live and/or work within its boundaries, with its more than 700 000m² of office space equating to the same size business area as the central city. And it continues to expand at pace. Just recently we have seen the announcement of a new premium office building, Bridge Park, as well as a new residential development, Waterberry, which was sold out a week before construction even began. Another new apartment block, Silvertree, has recently been launched to market with an additional 31 units, while a third phase has been launched at the Oasis Luxury Retirement Resort. The Curro private school, which opened its doors in 2013, can barely keep up with demand.

“In short, this is a thriving precinct that continues to hold high appeal for buyers, especially businesspeople working in the Century City office precinct, and young buyers wanting an affordable foothold in the property market that is conveniently close to transport and entertainment facilities.”

Demand is high across a number of buyer categories, including young professionals and young families wanting access to a secure lifestyle for their children, close to school and work. Those wishing to rent property at Century City may find it challenging to secure a home.

Campbell says that the rental market is booming, with excellent returns being achieved on investment properties. “There is currently a huge shortage of stock, which is driving rentals upwards,” she says.

Besides the convenience of living in a secure environment close to work opportunities, Century City offers a number of other lifestyle benefits –including more than 400 shops at Canal Walk, the 16-hectare Intaka Island bird sanctuary, and several sports clubs (athletics, canoeing, running and boot camp). A new Natural Goods Market also offers the opportunity to spend a relaxed weekend morning selecting farm-fresh produce and home-made goods. +27 (0)21 552 6889, Centurycity.co.za



education, training and development

Martin Ferguson, SAPOA’s HR, education, training

and development manager, collaborates

with thought leaders in South Africa’s property sector

SAPOA introduces new educational programmes and workshops for 2014

During 2013, SAPOA carried out an educational and

training survey to determine what the skills-development

needs of our member companies were and whether the current

educational offerings addressed their

organisational needs

The outcome of the 2013 survey was that our current educational programmes do address the needs of our members. These programmes are: 1 Introduction to Commercial Property Programme (ICPP)2 Essential Commercial Property Programme (ECPP)3 Property Management Programme (PMP)4 Certificate for the Commercial Property Practitioner (CCPP)5 Facilities Management Programme (FMP)6 Intensive Project Management Programme for the Built Environment (IPMP)7 Property Development Programme (PDP)8 International Property Leadership Programme (IPLP)9 The Building Construction Technology Programme (BCTP)

There seems to be an interest in the International Property Leadership Programme aimed at property executives and senior management. It is presented by the Wits Business School and includes an international study tour – but the cost seems to be a problem. We will research this interest again soon and, should we achieve our minimum delegate numbers of 15, we will run it this year.

What is new in education?Our members indicated the need for the following programmes and workshops, which we developed to satisfy our members’ educational and skills requirements. They are:1 Property Financial Programme

(PFP)2 Lease Agreement Workshop3 Negotiation Skills Masterclass

Programme (NSMP)4 The National Building

Regulations Act: SANS 10400 Regulations

1 Property Financial Programme (PFP)This training programme is aimed at new entrants and people who have no formal experience or knowledge of financial concepts in the commercial or industrial property industry. This is a basic programme, with an intermediate and advanced programme currently pending accreditation by the Council for Higher Education. The two-day programme will

be presented by the Department of Finance and Investment at the University of Johannesburg.

The following modules are covered in the basic programme:l Introduction to the financial

and accounting environment;l Working capital management;l Introduction to time value

of money; andl Customer identity.The outcomes are summarised as follows. Delegates will have to:1 Explain and appraise

the context within which the financial management function takes place in property;

2 Apply the working capital management concept by performing simple calculations;

3 Explain the time value of money concept and perform simple calculations on single amounts, annuities, perpetuities and mixed streams of cash flows; and

4 Explain different customers and participants in the property industry.

2 Lease Agreement Workshop (One-day workshop)The lease agreement is one of the most important documents in commercial, industrial and retail property, from the day you start working in property until you retire. Legislation, needs and trends change all the time, and those working with lease agreements have to be aware of these changes and legal requirements.

The workshop deals with the lease agreement, the rights and obligations of the parties to a lease, new legislation and case law affecting lease agreements. The Constitutional Court has recently said the following about the need for fairness in contracts and the changes necessary in contract law (including leases):

“It is highly desirable and, in fact, necessary to infuse the law of contract with constitutional values, including the values of ubuntu, which inspire much of our constitutional compact.

“It [ubuntu] emphasises the communal nature of society and

Baaitse Nethononda, SAPOA’s education

manager, is looking to work with corporates

and industry bodies to improve the property

industry’s education path

HR_SUBBED.indd 12 2014/02/06 11:07 AM



carries with it the ideas of humanity, social justice and fairness, and envelops the key values of group solidarity, compassion, respect, human dignity, conformity to basic norms and collective unity.” – Moseneke DCJ: Everfresh Market Virginia v Shoprite Checkers 2012 (1) SA 256 CC

The workshop will cover the following:1 Essentials for a lease agreement;2 Rights and obligations of

the lessor and the lessee;3 Specific leases, including:w Office spacew Commercial space;4 Legislation affecting

leases, including:w The Consumer Protection Actw The National Credit Actw The Public Finance

Management Actw The Prevention of Illegal

Eviction from and Unlawful Occupation of Land Act

w The Constitution; and5 Recent case law affecting

leases, including:w Fairness and ubuntuw Negligence and liability

for injuries and security.Who should attend Everybody who negotiates, renews, drafts, manages or has to implement lease agreements.Presenter: Johann Marnitz, property lawyer and lecturer at SAPOA Educational Programmes on property law, contracts and leases

3 Negotiation Skills Masterclass Programme (Two-day programme)Having good negotiation skills can mean the difference between success and failure in the business world. Those who know how to negotiate tend to rise to the top of whatever industry they are in.

As property practitioners we negotiate on a daily basis – but we can do it better!

Through an understanding of the processes and skills of negotiation, this masterclass programme will enable delegates to negotiate agreements even from extreme positions, thus emphasising the enormous potential of negotiation as a method of addressing many of the problems and challenges of human relationships effectively.

In order for a person to be an effective negotiator, excellent communication skills at very high levels are essential. Negotiators also need to understand the psychology of the negotiating game, and how to use heightened emotional intelligence to achieve the desired outcomes and manage the other parties effectively.

This masterclass will give delegates the fundamental techniques and necessary confidence to achieve their desired outcomes.

Role-playing is frequently used during the training.Who should attendThe masterclass in negotiations is targeted at everyone in the retail and commercial industries as well as mixed- use developments who has to negotiate or deal with leases, contracts, developments, tenders, and the buying and selling of properties, as well as property professionals who negotiate, renew, draft, manage and have to implement lease agreements.Presenter: Faith Best of Corporate Intelligence, in partnership with SAPOA

4 The National Building Regulations Act: SANS 10400 Regulations (One-day workshop)SANS 10400 issued in terms of the National Building Regulations and Building Standards Act (Act No 103 of 1977), sets the requirements to ensure buildings will be maintained, designed and built in such a way that persons can live and work in a healthy and safe environment.

Since the application of the SANS 10400 building regulations came into effect almost two years ago, there has been much confusion as to what it entails and what must be complied with. The workshop will cover the philosophy and intent behind the regulations to allow attendees to interpret and understand the requirements of the national building regulations. Various sections of SANS 10400 will be covered to ensure that attendees are made aware of the basic requirements needed to develop and maintain buildings and ensure the health and safety of people.Who should attend People who manage any type of property or facilities, landlords, and property and retail owners. We have previously successfully run this programme in-house for all the facilities and property managers of Engen Petroleum Limited.Presenter: Frank Cotton, general manager for legal compliance in occupational health and safety and risk management at ComSaf (Pty) Ltd, in partnership with SAPOA.

5 Brokers Seminar (One day)The Brokers Seminar is not a new addition but it provides very valuable information to new brokers and potential

brokers in commercial, industrial and retail property. We are planning to roll it out to all regions this year.

This interactive seminar is aimed at newcomers to commercial and industrial brokering, brokers’ support staff and people working closely with brokering staff. This will also benefit people who are residential property estate agents and who wish to enter the commercial property brokering field.

The seminar contents have been developed and are presented by Joan Goldswain, and supported by the SAPOA Gauteng Brokers Committee. Topics covered are include the property mix, dealing with the landlord, the offer to lease and the agreement of lease, commercial property terminology, the term “negotiable”, basic town planning, source of municipal information, canvassing/prospecting, and the brokers commission.

The industry code of conduct and brokers’ etiquette will also be discussed. Legal documentation (FICA, sureties, bank guarantees, mandates, confidentially agreements, debit orders), basic property sales, basic property finance, negotiation research, and record/data keeping are also covered in the seminar.

For more information or to register, visit Sapoa.org.za; or call our training coordinator, Mafonti Morobi, on +27 (0)11 883 0679 or e-mail [email protected]

HR_SUBBED.indd 13 2014/02/06 11:08 AM



In 2010, Pareto Limited and SAPOA established,

as co-founders, the SAPOA Pareto Bursary Scheme with the sole objective of creating a fund in the commercial property industry for scholarships and bursaries for previously disadvantaged individuals.

We are proud to announce that, from the first intake, seven students have already graduated the SAPOA/Pareto Bursary Scheme, and most have been placed with member companies.

The intention of the Bursary Scheme is to recruit and enrol new students every year, and to reach a stage where we will be in a position to provide (on an annual basis) graduates who are qualified in commercial property to the SAPOA members and to the commercial property industry.

Government falls short in higher-education financial aid despite tripling budgetThe Department of Higher Education and Training has nearly tripled the budget available to provide loans and bursaries to students from poor and working-class households, but the National Students Financial Aid Scheme (NSFAS) still experienced a shortfall of R2,6-billion in 2013. The NSFAS was unable to support all “financially needy” students, particularly with an ever-increasing number of matriculants qualifying to undertake studies at higher-education training institutions.

The NSFAS’s 2014 budget had jumped from R3,1-billion in 2009 to just over R9-billion – R2-billion of which was allocated to further

education and training colleges – to keep pace with the increasing number of eligible students requiring financial assistance to further their studies. In an effort to deal with the shortfall, the department sourced another R1-billion from the National Skills Fund to cover the 2013 and 2014 deficit for students continuing their studies at universities.

We need your assistance!!It is clear that the NSFAS will not be able to assist all students financially, and will require financial assistance from the private sector to upskill our youth to a skilled South African workforce.

The SAPOA Bursary Scheme, with the support of the property industry, can fill that gap. We can look after our own industry’s skill

requirements but our Bursary Scheme needs more funds. If each SAPOA member company sponsors one graduate for four years (at a total cost of about R400 000), we will have 1 700 qualified graduates entering the commercial property industry by the end of 2017.

SAPOA, on behalf of the commercial property industry would like to appeal to all its member companies to join our current sponsors and make sponsorships/donations to our Bursary Scheme, or to participate in the Bursary Scheme by sponsoring a student for a full degree.

The Bursary Scheme was established for the benefit of our industry. We’re now in a position to support government and our youth to alleviate the skills shortage in South Africa.

SAPOA bursary scheme graduates seven students

The Department of Basic Education has a crucial leadership, policy-making and monitoring responsibility in improving the quality of learning and ensuring sustained education quality improvement across the education sector. According to a statement by the Minister of Basic Education Angie Motshekga, in which she announced the 2013 National Senior Certificate Grade 12 examinations results, she is “pleased to announce that I’m extremely encouraged by the fact that our system shows definite signs of a stabilising education system, and that the time to reap the benefits of our hard work has arrived.”

Today we look at the speech and focus on the quality of the education mentioned, bearing in mind the level of learners the country is producing and the fact that there is a skills shortage in the property sector. According to the minister, in 2012 the pass rate increased to 73,9% and up to 78,2% in 2013. However the pass rates for the various subjects were calculated from a 30% “pass” mark – a mark that is defined by the symbol F (fail).

In the property industry, a qualified quantity surveyor requires a BSc in quantity surveying, for example. With a 30% or 40%

pass mark, a learner who wishes to study in the field of quantity surveying will not have a chance of entry into the degree. From the 78,2% who “passed” last year, only 30,6% (175 000 out of 562 112 learners) qualified to study a degree – this is less than half of the Grade 12 students.

As a professional body, SAPOA represents the interests of the property industry. We believe it’s important that the department raises the bar when it comes to learner assessment. The interventions in the sector are, as per the minister’s speech, of good quality – but the pass rate should be reconsidered.

This will ensure that learners are prepared and tuned in to the levels of knowledge required of them at university. This is despite the report from the minister that the quality of question papers is improved by engaging in international benchmarking.

The minister could explore various avenues towards improving the quality of our pass rates. The minister could set quality standards of the pass rate that will be in line with the quality education that is offered in South Africa, from foundation to senior phase. The minister could also look into enforcing learner preparedness or readiness for higher education rather than getting the numbers of people passing Grade 12 up, and work in partnership with the private sector (such as the property industry) to ensure the birth of thought-leaders and entrepreneurs who will grow the economy of the country. Continued partnership should not only be interdepartmental – the minister should encourage and forge private-public partnerships. This will assist and further encourage learner preparedness for higher education, thus resulting in learners who will have a wider choice of study subjects in addressing scarce skills shortages.

Learner-preparedness to enter into further education and training: is 30% quality material? By Baaitse Nethononda

“Education is the great engine of personal

development. It is through education that

the daughter of a peasant can become a

doctor, that the son of a mine worker can

become the head of the mine, that a child

of farm workers can become the president

of a great nation. It is what we make out

of what we have, not what we are given,

that separates one person from another.”

– Nelson Mandela

For more information, please contact human resources development manager Martin Ferguson on +27 (0)11 883 0679 or e-mail [email protected]

HR_SUBBED.indd 14 2014/02/06 11:08 AM

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3087_SAPOA_Courses_AD_18_11_2013_print.indd 1

2013/11/19 1:43 PM


legal update

By Advocate Portia Matsane, manager of the legal-services department at SAPOA

Bank financial guarantee wording thereof is criticalAs reported under case no: 108/13

T his is an appeal between Nedbank & Top CD (Menlyn) (Pty) Ltd as Appellants and

Procprops 60 (Pty) Ltd as the Respondent. It concerns the interpretation of a letter of guarantee that was issued by the first appellant, Nedbank Ltd (Nedbank) to the respondent, Procprops 60 (Pty) Ltd (Procprops) at the instance of the second appellant, Top CD (Menlyn) (Pty) Ltd (Top CD).

Procprops and Top CD concluded a written lease agreement in terms of which premises were let by Procprops to Top CD for a period of 10 years and seven months, commencing on 1 July 2009. Clause 49 of the lease obliged Top CD to furnish a bank guarantee to Procprops in an amount calculated in terms of that clause. The relevant clause entitled Procprops, in its sole and absolute discretion at any time during the period of the lease or its renewal, to call up the guarantee for payment of any amount which Top CD was indebted to it. Nedbank, on instructions from Top CD consequently issued the guarantee to Procprops, with Top CD indemnifying Nedbank in respect of any payment made in terms of the guarantee which amount shall not exceed R313 845,53 (three hundred and thirteen thousand eight hundred and forty five rand, fifty three cents), subject to the terms and conditions stated below:

“Payment shall be made upon receipt by the bank, at its address stated in clause 3 above, of the landlord’s first written demand, which written demand shall be accompanied by this original guarantee and which will state that the lessee had failed to comply with its obligations in respect of the lease and that, accordingly, the amount of R313 845,53 (three hundred and thirteen thousand eight hundred and forty five rand, fifty three cents), or any lesser portion thereof, is now due and payable. In the event that the branch mentioned in clause 3 above closes for whatsoever reason, this guarantee may be presented at any other branch of the bank.”

In terms of the lease, the rental was payable monthly in advance on the first day of each calendar month, and in this case, Top CD paid rental in terms of the lease up to 1 December 2010 but vacated the premises during December 2010 and made no further payment of rental. Top CD made allegations that it cancelled the lease either as a result of fraudulent misrepresentations on the part of Procprops or by accepting Procprops’s repudiation. Procprops however alleged that it cancelled the lease only at the end of December 2011 as a result of the breach of the lease by Top CD.

[By letter dated 13 January 2011, Procprops demanded payment of the amount of R72 693,66 from Nedbank in terms of the guarantee. In this letter of demand it was stated that Top CD had failed to comply with its obligations in respect of the lease and that accordingly the said amount was due and payable. This amount represented only the rental payable on 1 January 2011. The letter was accompanied by the original guarantee and concluded as follows:

“Could you also please consider the fact that this letter calls upon you to perform only partially in terms of the guarantee and accordingly our client’s rights in respect thereof are not extinguished. Could you please in view thereof return the original guarantee to us to enable our client to call on the guarantee should it become necessary in future.”

On 21 January 2011, Nedbank duly paid the amount of R72 693,66 to Procprops, but did not respond to the request for the return of the original guarantee. On 7 February 2011 Procprops sent a further letter of demand to Nedbank.

Legal_SUBBED.indd 18 2014/02/06 11:14 AM

legal update

In this letter, payment in terms of the guarantee of a further amount of R72 693,66 was demanded. Apart from the fact that payment of a further amount was claimed, the contents of this letter were identical to that of the first demand of 13 January 2011. This letter of demand was of course not accompanied by the original guarantee. Without having received any response from Nedbank, Procprops demanded payment of yet a further amount of R72 693,66 in terms of the guarantee, by letter dated 1 March 2011. To both letters of demand dated 7 February 2011 and 1 March 2011, Nedbank responded on 14 March 2011 in the following terms:

“Please note that Nedbank did perform in terms of the guarantee in favour of your client, when we received your first written demand dated January 2011, accepted return of the original guarantee and duly paid the amount demanded. The guarantee has been cancelled and we are of the opinion that all obligations in terms thereof have been extinguished.”

Despite this, on 16 May 2011 Procprops made written demand

for payment under the guarantee from Nedbank in the amount of R241 151,87, representing the difference between the amount mentioned in the guarantee (R313 845,53) and the amount of the payment (R72 693,66).

When Nedbank did not make payment of this amount,

Procprops instituted action in the North Gauteng High Court against Nedbank for payment in accordance with the letter of demand of 16

May 2011. Nedbank’s plea to this claim was

essentially that when it

made payment to Procprops on the first demand, its obligation in terms of the guarantee had been discharged. Nedbank also joined Top CD as a third party to the action, relying on the aforesaid indemnification. Top CD in turn admitted that it was liable to indemnify Nedbank for any amount that Nedbank might be ordered to pay to Procprops, but joined forces with Nedbank on the question of the interpretation of the guarantee.

The matter was heard by Ledwaba J. At the end of the trial he gave judgment for Procprops against Nedbank in the amount claimed as well as interest thereon, and ordered Nedbank and Top CD jointly and severally to pay the costs of Procprops. He however granted leave to both Nedbank and Top CD to appeal to this court.

It is clear that the guarantee has the features described by Scott AJA in Loomcraft Fabrics CC v Nedbank Ltd & another 1996 (1) SA 812 (A) at 815G-J. It established a contractual obligation on the part of Nedbank to pay to Procprops which is wholly independent of the underlying lease between Procprops and Top CD. Disputes arising between Nedbank’s customer (Top CD) and Procprops in relation to the lease did not detract from Nedbank’s obligation to make payment to Procprops, provided only that the conditions for payment specified in the guarantee were met. These conditions were the receipt by Nedbank at its specified branch of a written demand with the contents set out in paragraph 4 of the guarantee and the original guarantee. In the event of these documents being so presented, Nedbank could escape liability only upon proof of fraud on the part of Procprops. See also Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd & others 2010 (2) SA 86 (SCA) paragraph 20 and First Rand Bank Ltd v Brera Investments CC 2013 (5) SA 556 (SCA).

The central issue is whether on a proper interpretation of the guarantee it provided for more than one payment by Nedbank. The provision that the demand must be accompanied by the original guarantee strongly indicates that


Procprops made

written demand

for payment under

the guarantee

from Nedbank



legal update

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only one payment was envisaged. The purpose of this provision could not have been to provide Nedbank with an original guarantee or to have a record of its terms. In all likelihood, it already had one of its own. The purpose of the provision must therefore have been for Procprops to give up the security of the guarantee to ensure that it could not be presented for payment again. In addition, a meaning must be ascribed to the phrase “first demand”. In my view the phrase excludes further demands. In context it therefore means that there could be no second or subsequent demand in terms of the guarantee. In my judgment the guarantee is unambiguous and clear. Nedbank was only entitled and obliged to make payment of the amount of R313 845,53 or any lesser portion thereof upon receipt at its prescribed branch of Procprops’s first written demand and the original guarantee. It follows

that Nedbank’s obligation in terms of the guarantee was discharged when it made payment of a lesser amount of R72 693,66 on 21 January 2011 pursuant to demand and the return of the guarantee.

Counsel for Procprops attempted to save the day

by relying on the last part of the demand quoted

in paragraph 5 above, namely the request by Procprops that after payment of the first demand Nedbank should return the guarantee to enable

Procprops to call on the guarantee should it

become necessary in future. Counsel wisely disavowed any reliance on the proposition that a new contract was entered into. As I understood it, the argument was that both Procprops and Nedbank understood the guarantee in this manner, and that it should therefore be given this meaning.

This argument is untenable. Evidence of subsequent conduct of parties to an agreement is only admissible when the document is ambiguous on the face of it. See Coopers and Lybrand & others v Bryant 1995 (3) SA 761 (A) at 768C-E. As I have said, the meaning of the guarantee is plain and unambiguous. There is in any event no evidence that Nedbank ever held the belief that Procprops attempts to ascribe to it. The evidence is to the contrary. By 19 January 2011 – that is, after receipt of the first demand but before actual payment thereof – an internal instruction to cancel the guarantee had been issued by Nedbank. There was no duty on Nedbank to advise Procprops of the correct interpretation of the guarantee but it nevertheless did so on 14 March 2011.

It follows that the appeal must succeed. Counsels were in agreement that in this event Procprops should be ordered to pay the costs of both Nedbank and Top CD, both in this court and in the court below. Although Nedbank was represented before us by two counsels, it did not ask that the costs of two counsels be allowed.

The appeals were upheld and the respondent was ordered to pay the costs of appeal of both the appellants. The order of the court a quo was set aside and replaced with the following: “The plaintiff’s action is dismissed and the plaintiff is ordered to pay the costs of the defendant and the third party.”


Delivering excellence in construction anD refurbishment for 35 Years /from a renovation companY to a multi-DisciplineD construction force

renowned local construction company, tri-star, recently celebrated its 35th birthday at melrose arch. the company has grown from a renovation business in the early 8o’s to a broad-based black economic empowerment-certified, multi-faceted, technology-driven and forward-thinking construction group that’s been involved in some significant office, retail, commercial, industrial & residential construction projects in south africa.

Derek Wheals, chief executive officer and his partner billy mcneil, along with a board of directors with decades of experience in the refurbishment, construction and development industry, have taken the company to new heights. What started out as a painting and renovation business in the 70’s and 80’s has evolved into a construction group with subsidiaries and offices all over south africa which provide construction, renovation and turnkey development services to the industry.

part of the 35 year celebration was the signing of a memorandum of understanding with the national Development agency (nDa) that would contribute to their social corporate investment (sci) status. tri-star will offer their resources, services and donations towards south africa’s education from early stages in children’s lives.

tri-star is also proud to have achieved bbbee levels ranging from 4 – 2 amongst the various subsidiaries and a ciDb rating of 9.

major commercial Developments, retail Destinations, office parks, tertiarY institutions anD mixeD use…

the multi-disciplined construction company has a proud reputation and a track record that boasts retail – 200 000m2 of new shopping centres, including Design square brooklyn, river crescent Witbank, blue bird morningside as well as a number of refurbishment retail sites including the conversion of the randburg Waterfront into bright Water commons and the upgrade of key West shopping centre in krugersdorp. over 80 000m2 of industrial warehousing and factories including vector logistics and the stables, some 28 office blocks / parks, and significant multi-unit housing projects delivering well over 10 000 beds including Wits junction, kempton city and the paddocks in Dainfern.

besides the above, tri-star has also been involved in schools, universities, hospitality (hotels), banks & churches.

Delivering excellence in south africa’s construction inDustrY

one of the mottos that tri-star continues to live by – within all areas of the business – is excellence. as a business they believe that excellence in all spheres of construction is non-negotiable and they are committed to exceeding the expectations of their clients and shareholders. not only are their various teams always committed of delivering products and services on time and within budget, but each and every employee realises that the company’s reputation is foundation to their long-standing relationships with clients and contractors.

equally important to tri-star is their employees, as a company is only as successful as their human capital allows them to be. recognition, innovation (through mentorship, career advancement and training) as well as rewards has helped the company attract and retain some of the top talent in the industry.

one of the recent initiatives that tri-star is most proud of is the company’s management buy-in deals, whereby equity in tri-star subsidiaries was acquired by senior staff who formed alliance with shareholders. another noteworthy achievement was selling 26% of tri-star group holdings to malose & albertinah kekana’s company, abakhi. the company aims to continue investing their resources in broad-based black economic empowerment in order to facilitate meaningful change.

While the past 35 years have been marked with a number of achievements and accomplishments, the company expects even more milestones and innovations to come. “i would like to take this opportunity to thank all the professionals, clients, suppliers and sub-contractors who have afforded us these opportunities and worked with us to achieve this résumé. as for the future i trust that the next 35 years will be blessed with more success and allow us to build on our experience,” commented Derek Wheals, chief executive officer at tri-star.

www.tri-star.co.zaTel: +27 12 687 1000 Fax: +27 12 687 1020

Untitled-3 1 2014/02/06 10:29 AM


sapoa national councillors

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Who is Sanett Uys? I’m currently the MD at Excellerate Valuation and Advisory Services, which formerly traded as part of the JHI stable. During that period we established a reputation as one of the leading property advisory service companies in South Africa. We offer a comprehensive range of property services in sub-Saharan Africa. This unique and unrivalled offering is the result of our wide range of expertise, specialised systems and a highly qualified team. We have the ability to convert data from various sources into comprehensive databases, which gives us the capability to extract and formulate pertinent reports. Our main focus is on adding value to our clients’ property portfolios, limiting their risk exposure and enhancing the return on their property investments. At SAPOA, I currently head up the research committee.

When did you join SAPOA? What are your thoughts on the organisation?I joined SAPOA when I entered the property industry 16 years ago. I think SAPOA adds great value to its members through the various initiatives it offers, with legal services being one of the most valuable. I believe SAPOA has a role to play in ensuring that the industry is fairly represented and in supplying market information to its members, as well as indicating trends in the industry and various sectors.

What have been your greatest achievements at SAPOA so far?It’s not a personal achievement because the research committee works as a team but together I think we have ensured that SAPOA obtains the correct service providers to produce the various research reports and to ensure that they are of a high standard.

CouncillorsWe speak to our national councillors about their role at SAPOA and their

future goals at the organisationBy Candace King

in conversationAs part of your portfolio with SAPOA, what do you think are the current industry challenges? How can they be solved? How can SAPOA assist?We need to expand the list of research reports that are available and produced under the SAPOA banner.

What are your future plans with SAPOA? What would you like to achieve alongside or for the organisation going forward?

We need more independent research reports in the industry to show foreign and local investors the debt of the industry, and that we do have valuable and accurate statistics available in the market.

Who is Mark Bakker?I am a registered professional valuer by profession and have been active in

the Port Elizabeth property market since 1992. I am the managing

director at Bruce McWilliams Industries (Pty) Ltd, one of the largest privately owned property management companies in Port Elizabeth. I am a national executive member of the South

African Institute of Valuers and the current national vice

president and chairman of the Eastern Cape Branch. I’m also

an executive member of SAPOA and the current chairman of the Eastern Cape Port Elizabeth chapter.

Councillors_MAR_SUBBED.indd 22 2014/02/06 11:20 AM


sapoa national councillors

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Who is Vinnie Fourie?I’m employed as the senior HR practitioner for Eris Property Group (Pty) Ltd – I’ve been with the company for more than 10 years. Eris is a fully integrated property solutions company that provides a range of specialised services such as property development,

property management and asset management. We provide these services predominantly to commercial property owners and listed funds at Eris Development and Industrial Relations. I was elected to the position of chairperson of the SAPOA HR and Education committee in 2012.

When did you join SAPOA? What are your thoughts on the organisation?My involvement with SAPOA started more than five years ago when SAPOA introduced the student bursary scheme. I assisted with the interviewing and selection of the graduates who applied for tertiary education bursaries. We have continued to prepare the graduates for a professional career in property by introducing the student onboarding programme, which has been running successfully for the past two years. The committee members were generous in volunteering their time to develop the course and facilitate the one-and- a-half day program.

What have been your greatest achievements so far with SAPOA?Being elected as chairman of the education committee. It was an honour to be elected to this role by industry peers. Having always been a big supporter of furthering

one’s education, I take the responsibility very seriously and will always continue to promote education and training within my organisation and the industry as a whole. I have a huge passion for youth education and development, and I was glad to be part of a team to have reached out to thousands of youth in the last two years by marketing the property industry to Grade 11 and 12 learners. I’m confident that we will have a large number of enthusiastic graduates entering the market in the next few years.

As part of your portfolio with SAPOA, what do you think are the current industry challenges? How can they be solved? How can SAPOA assist?A major challenge facing the industry is ensuring compliance with the educational requirements set by the Estate Agency Affairs Board (EAAB). The attraction and retention of equity candidates is still a challenge for many property companies as well.

What are your future plans with SAPOA? Going forward what would you like to achieve alongside or for the organisation?I believe the best way the HR and education committee can better serve the industry is by ensuring that all member companies have a voice. So I made a commitment when I accepted my role as chairman to increase participation by the industry on the committee. The HR and education team at SAPOA has been very supportive in ensuring we meet this commitment. Going forward, I will continue to represent Eris as an active member of SAPOA after my term as chairman comes to an end.

When did you join SAPOA? What are your thoughts on the organisation?I joined SAPOA more than 15 years ago and have been serving on branch executive since then. The organisation has a very active role to play locally, provincially and nationally in protecting the interests of the commercial and industrial property sectors. The networking opportunities SAPOA provides are a major benefit of membership. The education courses offered are seen as benchmarks in setting quality standards. SAPOA is able to provide information that’s useful to members and various levels of government.

What have been your greatest achievements at SAPOA so far?Having been able to serve on the local executive board for many years, and being the chairman the past two years.

As part of your portfolio with SAPOA, what do you think are the current industry challenges? How can they be solved? How can SAPOA assist?The lack of efficiency, accountability and delivery by local authorities, and the refusal of provincial and

national government to do anything, is very frustrating to the industry and has become a major concern. Through continual interaction and the offering of advice and training headway will be made.

What are your future plans with SAPOA? What would you like to achieve alongside or for the organisation going forward?I plan to continue serving on the local executive board and ensure that SAPOA is recognised as an authority to be consulted when needed.

Councillors_MAR_SUBBED.indd 23 2014/02/06 11:21 AM


construction management

ConstructingAs the building block of our built environment, construction management is a thriving field that plays a vital role in the construction industryBy Candace King

Like most fields in the property industry, construction management is a niche

segment that requires a specific set of skills, knowledge and expertise. It’s a field that is also influenced by modern trends, including technology, greening and sustainability.

The core competencies of any construction project manager include the ability to manage relationships, as well as having holistic experience of all trades, contract and cost management, says Howard Betts, CEO of Betts Townsend Construction Project Management.

Construction management requires a shift in mind-set, according to Kevin McGill, managing director at Focus Project Management, a subsidiary of Crowie Property Group (Pty) Ltd, who provide integrated property solutions with companies able to undertake various aspects of the property supply chain.

“It takes an understanding of the client’s needs to be able to mould a project plan and delivery model that suits the specific set of needs and realities,” explains McGill. “Instead of imposing a cut-and-paste model onto a project, it calls for a customised solution that suits the programme, the procurement requirements and the budget.

“What this philosophy does is ensure that the professional team is guided towards design and procurement options that are optimal for the client, rather than be confined to a delivery model that may result in inefficient solutions. That is not to say that all projects will suit this approach; rather it is more suited to refurbishment, brown-fields or fragmented projects, where there are both drawn-out periods or ones where the costs and benefit of the traditional main contractor are limited.”

In addition, McGill notes that where designs and risk elements are not sufficiently resolved at the time when certain works must proceed, it is too risky to contract with a main contractor. In this instance, he advises

that a more client-focused construction management approach would expose the client to less risk, and also ensure that the client’s needs are kept at the forefront even while site and design issues are resolved – without the risk of substantial delays and claims being a constant threat.

How does construction management differ from project management? “The procedures of construction management are different from a traditional project management approach,” says McGill. “Although it varies slightly from project to project, in essence the construction manager looks to carve the deliverables up into components that can be managed in smaller chunks that reduce both liability and overall cost. This requires that the construction manager plays the role of contract coordination and management, while maintaining the transparency that clients would otherwise lose out on with traditional contract arrangements. The construction manager would plan, coordinate and manage all contractors on the project in a manner that keeps the client closer to both the control and impact mitigation than with a traditional model.”

What’s trending?Advances in technology and the increasing awareness of sustainability and heightened implementation of green systems are just a few of the leading trends in construction management and in the construction and property industries.

“Technological advances and the growing awareness of sustainability and energy efficiency have rapidly increased the sophistication of most of the construction projects we are engaged in,” says Paul Louw, group director of the Atvantage Group, a stable of companies that provides professional services (development management and facilitation, project management, quantity surveying,

our world

ABOVE Kevin McGill, managing director at Focus Project Management RIGHT Riverside Mall in Nelspruit, Mpumalanga is an example of a modern retail development that’s shaping a new node in the often-forgotten provinceTOP Fairlands Office Park, a Focus Project Management project, houses the corporate head office for FNB Home Loans and Wesbank

Construction Management_SUBBED.indd 24 2014/02/06 11:24 AM



procurement and logistics management, and construction legal services) to the property and construction industries.

New technologies are streamlining processes, making the construction manager’s life less stressful. “Advances in web-based document control and project planning are assisting contract managers in maintaining a greater level of control over actions and responsibilities,” says McGill. “The advances in communication mean that project issues can be resolved far faster than previously. While design and contractual queries used to wait for site meetings and dedicated forums, these issues can now be photographed, emailed and discussed remotely, and consolidated responses received in a matter of hours.”

Louw says that with the advancement in technology comes the need for more technical skills required of our construction managers to integrate these complex technologies. “We’ve developed and implemented cloud-based communications and collaboration systems that enable us to accurately (and in real time) manage remote locations and teams,” he says. “I believe this will become indispensable in the near future and that without this, construction managers will be unable to deliver the complex projects of the future.”




Source: BER Stellenbosch University

However, the human factor is still the cherry on the construction management cake. “Modern construction managers use modern solutions to enhance their e� ciency while ensuring that the personal touch required by construction projects remains fundamentally important,” says McGill. “Computers and systems don’t deliver projects – people deliver projects, so upfront risk mitigation via deep understanding of client needs and motivation of the entire project team are skills that will never lose their importance in this industry.”

“Key to the successful management of any construction project is the management of information,” says Betts. “While these days a lot can be achieved by means of electronic communication, Betts Townsend believes that there is no substitute for regular face-to-face meetings with the project and design teams. Pick up the phone. Don’t assume that, because you’ve sent an email, the problem is solved!”

Greening and sustainability are other factors that are impacting on construction management. “Codi� cation and regulation of energy e� ciency in design and implementation has greatly assisted our industry,” says McGill. “Although there have been amazing advances in technology around innovative construction materials, many of the principles of energy e� ciency have been around for many years. “What the current drive on green technology has done is bring a level of best practice back to building design that has been less stringently regulated in the past. What this means for construction managers is that designers are now having to bring building operations into the forefront while in the past they focused only on initial capital cost. Life-cycle costs were

often sidelined in favour of bringing initial capital costs down, and often long-term operational costs were compromised in order to achieve initial project feasibility. With this, model building design, best practice and robust life-cycle cost optimisation are being forced on design teams.”

Current conditions of the construction industryReporting on the state of the civil construction industry, the FNB/BER Construction Con� dence Index survey released earlier this year indicated that construction con� dence has reached a new � ve-year high.

After increasing by six index points in the third quarter of 2013, the FNB/BER Construction Con� dence Index rose a further 15 points to 66 in the fourth quarter. This marks the highest level of the index since September 2008. The current level of the index means that close to seven out of 10 respondents were satis� ed with prevailing business conditions during the fourth quarter.

“All of the underlying indicators improved during the quarter,” says Sizwe Nxedlana, chief economist at FNB. “This is a clear sign that conditions in the construction sector are indeed getting better.”

Most encouraging, however, was the rise in construction activity. Respondents also reported a signi� cant moderation in the level of tendering competition. “This could be a result of the increase in construction activity,” says Nxedlana. “With more work available, � rms can now be more selective with the projects for which they tender.” At the current level, tendering price competition is at its lowest level since mid-2007.

100

75

50

25

0

-252002 2003 2004 2005 20082007 2009 2010 2012 2013

Civil construction:Tendering competition

MAIN PICTURE Betts Townsend provided construction services and project management for the lavish Fairmont Zimbali resort in DurbanABOVE The Oprah Winfrey Leadership Academy for Girls in Gauteng is another of Betts Townsend’s project management success stories




2000 2001 2003 2004 20072006 2009 2010 2012 2013

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02002 2003 2004 2005 20082007 2009 2010 2012 2013

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-25

-50

-75

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Expected2014 Q1

▼

FNB/BER civil con� dence index: Percentage satis� ed

Civil construction: Growth in construction activity




CLOCKWISE FROM TOP LEFT Betts Townsend was involved in the development of King Shaka International Airport; Levy Junction in Lusaka, Zambia is one of Focus Project Management’s prime projects in Africa; Focus’s OR Tambo International multistorey parkade and extension are valued at R300-million; Peter Mokaba Stadium in Polokwane was managed by Betts Townsend





However, despite the rise in construction work and tendering competition that is not quite as keen, profitability remained largely unchanged. “Input costs have slowly risen over the past few months – this could be weighing on profitability despite the improvement in activity and competition,” says Nxedlana.

Looking ahead, the survey indicates that the outlook for the first quarter of 2014 is also relatively optimistic, further supporting the rise in confidence. The growth in construction activity in the first quarter is expected to continue at more or less the same pace as in the fourth quarter of 2013. However, gains in confidence may be limited if input cost pressures continue to weigh on profitability.

Louw says that since the financial crisis of 2008 and the downturn in construction activity following the infrastructure boom in the run-up to the 2010 FIFA World Cup, the construction industry in South Africa has been under significant pressure. He adds that the perception of the industry was further marred by the instances of collusion and tender irregularities that involved many of the bigger construction companies. He believes the effect of this will be felt for some time to come.

“In addition to these negatives, I believe we are also in for a period of strong inflation due to (amongst other things), the recent rapid decline of our currency,” he says. “In a cycle where end-user demand is still at low levels, this will put additional pressure on contractor pricing and profit margins. Having said that, I believe that there will always be a strong market for innovation and quality.”

McGill believes that the quality of service throughout the value chain appears to be declining. There seems to be less accountability and ability to take ownership of problems that arise across the spectrum. “It makes proactive management fundamentally important to counter the risks inherent in the various aspects of the value chain,” he says.

“The challenge, therefore, is to be able to take on problems, and be accountable for and deliver quality solutions when others are unable or unwilling to.

“Another challenge is being able to instil in the new generation of leaders the patience to grow at a pace that ensures their long-term interests are maximised. Too many young promising professionals seek to short-circuit their career growth and end up in lofty positions without the required foundations.”

Despite the challenges, optimism is still prevalent in the industry. “Having come through a tough three years, the outlook is far more positive for 2014,” says McGill. “We have been fortunate to have been appointed to some great projects in the last few months of 2013 and in early 2014, with clients we have worked hard with for many years. Aside from us, we notice many of our competitors and partners in the industry appear to be increasingly busy.”

Constructing the futureThe future appears bright for the rest of the African continent. “Local conditions have necessitated the expansion into other regions, especially sub-Saharan Africa,” says Louw. “I believe that this necessity will be the mother of invention and, in the long term, it will strengthen the South African construction industry to compete head on in international markets.”

“We anticipate that construction management will gain a strong foothold in South Africa and throughout the rest of the continent,” says McGill. “The trend, we believe, is towards both construction management and single-point responsibility of professional services. We believe that this is primarily suited to refurbishments and fragmented projects; however, the principles and benefits of the model to clients may mean that it makes inroads into the growing trend of turnkey (design and build) models.”

CLOCKWISE FROM TOP LEFT Betts Townsend was involved in the development of King Shaka International Airport; Levy Junction in Lusaka, Zambia is one of Focus Project Management’s prime projects in Africa; Focus’s OR Tambo International multistorey parkade and extension are valued at R300-million; Peter Mokaba Stadium in Polokwane was managed by Betts Townsend



project management project management

Taking “ATVANTAGE” of great project management and planning teamwork

It may sound cliché when we quote relationships, integrity and professionalism as the core principles

of our business but these are integral to our daily operations. We strive for long-term client relationships, and a deep understanding of their business and their priorities. We are intensely loyal and will always put our clients’ needs above all else.

We have the “heart of an operator” in that we understand that projects are not constructed for the sake of construction but to be inhabited, operated and enjoyed.

The knowledge, attitude and loyalty of our team is our greatest resource and asset available to our business. We nurture that and allow our teams the freedom to express themselves and grow in a relaxed and professional environment. Modern technology (and the way in which we integrate it into our business) has enabled us to maintain such an environment.

The road to successThere have been many highlights and achievements over the years, but most recently Eden Island in the Seychelles, the Taj hotel and Hotel Verde (both in Cape Town) stand out.

We are the project managers, quantity surveyors and procurement agents to the Eden Island development. The scale and remote location of the project necessitated us to hone our project management processes and systems into a fine art of which we are rightly proud. Our construction managers were the first members of the project team to establish in the Seychelles in 2004 and, since then, we have seen a barren island evolve into a paradise and a thriving community.

We were also the project managers on Taj Cape Town and Hotel Verde. While we have diverse hotel development experience, these two again proved the uniqueness of hotel projects: Taj, with its five-star old-world opulence, constructed within the rich architectural heritage of Cape Town, and Hotel Verde as the “greenest hotel in Africa”.

Technological advances in communication help us as project managersRecent advances in communications technology have enabled us to develop and implement systems that greatly improve collaboration within project and construction teams. This is especially applicable to our projects with team members located around the globe. Our cloud-based project accelerator system is live and real-time, and allows all team members (including the client) direct access to all project information and communication.

l Established in Cape Town in

1995 as a collaboration between

three project management

and development entities, this

collaboration evolved into the

project management company

that was established in 2004

as HNV Project Managers.

l In 2005 we established offices

in the Seychelles – initially for

the management of the Eden

Island development.

l Our spectrum of professional

services grew and lead to the

establishment of the Atvantage

Group of companies in 2009.

Currently, the group offers

project management, quantity

surveying, procurement and

logistics, and construction

legal services, all built on

the solid foundation of our

project management capability.

l We opened further offices

in Gauteng (Centurion) and

Kenya (Nairobi) in 2012.

l In the medium term, we

plan to grow the group in

both geographical footprint

and by further diversifying the

professional services we offer.

Hessel Dijkstra

project management

Atvantage_SUBBED.indd 30 2014/02/06 11:29 AM


project management project management

Setting ourselves apart from the competitionOver the years, we have built up a team of dedicated project managers with diverse experience in the hospitality, residential, retail and commercial fields, all of whom are committed to the success of each individual client’s project. Our staff of 60 take great pride and ownership of every project that’s under our management.

Our project and construction management systems enable us to control every minute aspect of the projects under our management, which leads to proactive and early decision-making. One cannot deliver an optimised, personalised project if decision-making is driven by reactive crisis management.

This, together with our diverse international experience on large-scale projects makes us a serious – and competitive – force within the construction industry.

Construction industry under economic pressureThe property and construction industries remain under pressure following the global economic crisis over the past five years. Recovery has been slow and a lot of what we all believed to be fundamental has changed dramatically.

On the other hand, South Africa’s reintegration into global markets has created new opportunities, especially in Africa.

So between the financial upheaval and the new international playing field, this translates into a broadening of our horizons and expansion into exciting new regions.

Moving with greener timesGreening has become an integral part to the design and construction of most buildings. As natural resources diminish further and societal awareness increases, greening will become more and more prominent.

In construction and construction management, this has seen new technologies and contractors becoming involved. Besides the complexities that this entails, the adoption of international rating standards (for example, LEED) forces us to rethink and improve our quality assurance systems for the construction industry as a whole.

+27 (0)21 423 4302+27 (0)12 940 [email protected]@atvantage.co.za Atvantage.co.za

Paul Louw

We talk to Atvantage group directors Hessel Dijkstra and Paul Louw about the company’s establishment and its growth through the years

project management

MAIN PICTURE Eden Island is a paradise development in the Seychelles

ABOVE The Taj Cape Town combines old-world opulence with five-star comfort

Atvantage_SUBBED.indd 31 2014/02/06 11:30 AM


africa report africa report

Mitigating business risk in Africa through regional integration

Published with permission from Deloitte & Touche

© 2012 Deloitte & Touche. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

South African President Jacob Zuma recently proclaimed that “Africa is rising and it is clear for

all to see.”(1) A key determinant of Africa’s sustained rising is regional integration. However, regional integration is not happening fast enough, which undermines Africa’s continued progress and competitiveness. The African market remains highly fragmented. With a similar population size to China and India, Africa includes 54 markets, while China and India operate just one each. And therein lies the challenge for any company wanting access to African opportunities and business on the continent.

The need for regional integration cuts across discussions on trade, energy, financial services, tourism, infrastructure development, agriculture, healthcare, capital and bond markets. It is observed that 27 of Africa’s countries are small, with populations of less than 20-million(2) and economies of less than US$10-billion. Infrastructure systems such as their borders are reflections of the continent’s colonial past, with roads, ports and railroads built to facilitate the export of raw materials, rather than to bind territories together economically or socially. In short – the countries are doubly challenged by size and connectivity.

A 2012 World Bank report shows how African countries are losing out on billions of dollars in potential trade earnings every year because of high trade barriers with neighbouring countries, and that it is easier for Africa to trade with the rest of the world than with itself. On average, only about 10% to 13% of African trade is with other African nations, while 40% of North American trade is with other North American countries, and 63% of trade by countries in Western Europe is with other Western European countries (African Union, 2012).

Regional integration also features heavily in discussions of how South Africa could better leverage it’s “connector” status as the “conduit” between Africa and the BRICS forum. It is contended that as part of the G20 and the BRICS forum, South Africa represents the broader view of Africa and has an onus to ensure

that regional trade bodies function effectively. This will bestow on South Africa more negotiating muscle at the BRICS forum as part of a larger SADC market of 250-million people who are connected, and more influence as part of a functioning Grand SADC-COMESA-EAC Free Trade Area of 26 countries with a combined population of 530-million (57% of Africa’s population) and a total GDP of US$630-billion (53% of Africa’s total GDP). There is power in numbers. Only when this is achieved will there be weight and credibility to the positioning of South Africa as the “gateway into Africa”.

On the trade front, both the private and public sectors concur that doing business in Africa, and especially across borders, is particularly fraught with challenges and that these challenges are, in turn, associated with greater risk – real or perceived. Challenges include but are not limited to:• Delays in moving goods across borders within and between regions. Delays at African customs are, on average, longer than in the rest of the world: 12 days in sub-Saharan countries compared with seven days in Latin America, less than six days in central and east Asia, and slightly more than four days in central and east Europe. These delays add a tremendous cost to importers and exporters, and they increase the transaction costs of trading among African countries. For food and other perishable goods, such delays can be devastating (African Union, 2012).• High volume of paper-work to be processed.• High cost of clearing goods at borders.• Cumbersome visa requirements for the movement of people.

By way of illustrating these trade barriers, the story of the experience of a South African retailer with a presence across the continent is often narrated on the conference circuit. In a report examining the barriers that stifle cross-border trade within Africa, the World Bank revealed that the retailer spends US$20 000 per week in import permits to transport meat, milk and other goods to its stores in Zambia alone. Given its presence on the continent,

The African market remains highly

fragmented. With a similar population size

to China and India, Africa includes 54

markets, while China and India operate just one each. And therein

lies the challenge for any company wanting access

to African opportunities

(1) The opening address of the Africa Dialogue Conference in April 2012, hosted by the South Africa Department of Trade and Industry with Deloitte as the knowledge partner(2) Botswana, Swaziland, Lesotho, Malawi, Zambia, Zimbabwe, Namibia, Rwanda, Burundi, Guinea Bissau, Gambia, Mauritania, Madagascar, Republic of Congo, Eritrea, Togo, Sierra Leone, Somalia, Guinea, Chad, Senegal, Angola, Mali, Niger, Burkina Faso, Côte d’Ivoire and Mozambique

Africa Report_SUBBED.indd 32 2014/02/06 11:32 AM



The diagram below depicts the trade flows between various African regions:

Intra-Africa Trade Flows between Regions

Source: Mihalakas, N, “Intra-African Trade’ – A Renewed Urgency for Further Regional Integration by the AU” 2011.

COMESA4.8%

ECCAS0.6%

SADC10.8%

ECOWAS9.2%

13.1%

1.2%

1.1%

0.6%

5.3%

5.4%1.6%

6.0%0.5%

3.7%

16.1%

2.4%

7.6%

8.9%

3.6%

1.7%

13.1%

2 Deloitte on Africa Collection: Issue 2




approximately 100 single-entry import permits are applied for every week and can rise up to 300 per week in peak periods. On average, according to the World Bank, there can be up to 1 600 documents accompanying each truck the retailer sends with a load that crosses a border in the region (World Bank, 2012).

Another example of trade barriers relates to the costs arising from the administrative requirements for certificates of origin, which can account for nearly half the value of the duty preference. Yet another South African retailer opts not to use SADC preferences at all in sending regionally produced consignments of food and clothing to its franchise stores in non-SACU SADC markets. Instead, it simply pays full tariffs because it currently deems the process of administering Rules of Origin documentation to be too cumbersome.

A large global manufacturer of cellphones, freighting about 30 000 containers annually into the rest of the continent from South Africa, bemoans the lack of visibility in the process as products cross various borders to their destination. Their strategy? To keep their fingers crossed and be relieved when the containers arrive safely.

While regional integration has long been touted, starting with Ghanaian President Nkwame Nkrumah in 1957, now more than ever, when Africa finds itself on the cusp of realising its greatness, there is a need to heed these calls to action. While in 1957 regional integration was a concept that the continent aspired towards, in 2012 it is the very obstacle to increased trade on the continent, similar to Europe just after the war.

But what does regional integration really mean? It is a frequently used but nebulous term. To rephrase, if the three trade zones of SADC, COMESA and EAC were fully integrated within themselves, what would

it look like? Characteristics of an integrated trade zone include but are not limited to the following: l No restrictions on the movement of goods,

persons and services;l Simplified border procedures;l Limited number of agencies at the border;l Increased levels of professionalism of officials;l Removal of a range of non-tariff barriers to trade,

such as: w Restrictive rules of origin w Onerous and costly import and export licensing procedures;

l Harmonised and well-coordinated trade instruments and nomenclature so that country trade laws “speak to each other”.

Based on this “ideal”, what is the status of regional integration on the continent and which blocs are close to realising it? Two African regional blocs, at different levels of maturity, will be compared.

The East Africa Community – EAC – consists of Kenya, Uganda, Tanzania, Rwanda and Burundi. It is at an advanced stage of development and integration, and is often touted as the best example of a well-functioning regional bloc. First formed in 1967, it has a history of cooperation and integration among East African countries. Since 1967, the Community has gone through many phases, some failures and collapses – for example, in 1977 – and is, as a result of these lessons, stronger today. The regional integration bodes well for foreign investment with investors increasingly picking one of the EAC countries as a manufacturing hub and distributing into the rest of the region.

The collective population of the EAC bloc stands at 150-million. The EAC will go online in 2014 with the following:l Free movement of goods;

A cellphone manufacturer,

freighting about 30 000 containers annually into the

rest of the continent from South Africa, bemoans the lack of visibility in the

process as products cross various borders

to their destination

africa report




l Free movement of persons;l Free movement of workers;l Free movement of services;l Free movement of capital;l The right of establishment;l Right of residence.

There is evidence the EAC integration is underpinned by a programme of infrastructure development in order to operationalise the union and lower transport costs in the region. While infrastructure is vital to Africa’s development, it is pivotal to any regional integration efforts.

CEMAC – the Economic and Monetary Community of Central Africa – includes Cameroon, Gabon, Chad, Central African Republic, Equatorial Guinea and Republic of Congo. CEMAC’s key objectives are the promotion of trade and the institution of a genuine common market. In 1994, it succeeded in introducing quota restrictions and reductions in the range and amount of tariffs. Currently, CEMAC countries share a common financial, regulatory and legal structure, and maintain a common external tariff on imports from non-CEMAC countries. In theory, tariffs have been eliminated on trade within CEMAC, but full implementation of this has been delayed. However, the movement of capital within CEMAC is free. Since the ratification of the CEMAC treaty in 1999, the region has been moving, albeit slowly, towards fuller economic and monetary integration. Macroeconomic convergence has improved with greater country adherence to both fiscal and non-fiscal criteria of convergence modelled on the EU experience.

However, limited progress has been achieved in enhancing the functioning of the customs union. Administrative hurdles and an absence of economic complementaries continue to hinder the flow of goods, services and people in the sub-region.

Case Study:Chirundu One Stop Border Post

Chirundu is a border post between Zambia and Zimbabwe, located on either side of the Zambezi River. It is a very busy border with between 300 to 400 trucks crossing the post each day. The Chirundu One Stop Border Post (OSBP) programme is managed by the Secretariat of the Common Market for Eastern and Southern Africa on behalf of the COMESA-EAC-SADC tripartite. The main purpose of the Chirundu OSBP is, by working in a sequenced and harmonised way with other initiatives on the North-South Corridor, to reduce the costs of cross-border transport by reducing the time taken to cross a border.

The Chirundu one-stop border post was officially opened on 5 December 2009 and is Africa’s first fully functional one-stop border post. The establishment of the one-stop border post has provided significant improvements – for example, passengers and commercial traffic stop only once to complete border formalities for both countries, and waiting times for commercial traffic have been reduced from about four to five days to a few hours.

Source: WTO and OECD – AID-FOR-TRADE CASE STORY,

“Improving Service Delivery and Reducing Clearing Times at

Chirundu Border Post” (2011)

Bibliography• African Union Commission, “Boosting Intra-Africa Trade: Issues Affecting Intra-African Trade, Proposed Action Plan for Boosting Intra-African Trade and Framework for the Fast-Tracking of a Continental Free Trade Area” (2012)• Deloitte, “Government Revenue Solutions – e-Borders. Deloitte Leads Single Agency Border Solutions” (2012)• Deloitte, “Government Revenue Solutions: Turning Policy into Practice” (2012)• Deloitte, “Customs & Global Trade Moving in the Right Direction” (2012)• World Bank Report, “De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services” (2012)• WTO and OECD – AID-FOR-TRADE CASE STORY, “Improving Service Delivery and Reducing Clearing Times at Chirundu Border Post” (2011)• IMF Working Paper, “Banking Sector Integration and Competition in CEMAC” by Samer Y Saab and Jérôme Vacher

Intraregional trade still remains low – even in comparison to its West African counterpart. CEMAC’s progress has been hampered by the lack of functional transportation corridors among CEMAC countries. This is the prominent infrastructure bottleneck that hampers trade and limits the gains from regional integration. As a result, the CEMAC region trails the overall sub-Saharan African oil exporters grouping in non-oil GDP growth (IMF). However, these physical challenges of moving around the community are set to be alleviated with the announcement that the regional grouping’s airline will strategically partner with a leading international airline to begin operating scheduled flights among the member countries of the sub-regional bloc.

So what is the way forward? Infrastructure development is a crucial starting point. Also, based on our experience at Deloitte, it is our considered view that a relatively “quick win” in the process towards integration in customs modernisation is to create a one-stop customs system e-border to allow for the ease of tax clearance, goods declaration and immigration processes. An upside of customs modernisation is the increased flow into the fiscus from collected taxes. We have noted that this modernisation process has practical challenges including, but not limited to, a general skills gap and inadequate ICT systems and processes. However, as the Chirundu One Stop Border Post case study illustrates, these challenges are not insurmountable with adequate and appropriate planning.

To conclude, it is clear that regional integration will go a long way towards reducing the challenges and risk of doing business across borders on the continent. The World Bank’s Africa director for poverty reduction and economic management expresses it succinctly: “The final prize is clear –helping Africans trade goods and services with each other. Few contributions carry more development power than that.”



eye on africa


Zimbabwe

The Africa series:

our monthly

country-by-country

focus

▼ Population 12,6-million▼ Major cities Harare 1,6-million;

Bulawayo 0,7-million▼ Currency Zimbabwean dollar (ZWD)▼ Total area 390 757 km2

▼ GDP growth (2012) 5% ▼ Key industries Mining, steel, chemicals,

clothing and footwear, foodstu� s, beverages

Zimbabwe at a glance

Zimbabwe has a tumultuous track record, and has been the object of negative reporting for

several years. With an unstable economy, political instability, rife corruption, poor living standards, land disputes, suffering agricultural sector, inequality and human rights complaints, it can be said that the country is not a shining chapter of the African success story.

But Zimbabwe’s situation wasn’t always dire. According to the Wealth Statistics in Africa report by global-wealth consultancy fi rm New World Wealth, Zimbabwe was one of the wealthiest countries in sub-Saharan Africa on a wealth per capita basis in 2000. During this period, Zimbabwe was ranked ahead of countries such as Nigeria, Kenya, Angola, Zambia and Ghana.

Factors contributing to Zimbabwe’s disappointing performance since 2000 include the diminution of

Despite its black-sheep status on the African continent, Zimbabwe’s property

market appears to be attractiveBy Candace King

land and business ownership rights, which has resulted in the loss of currency value and hyper-infl ation, the banning of independent media, and the constant onslaught of corruption and political unrest brought on by the despotic rule of the ailing Zimbabwean president, Robert Mugabe.

Zimbabwe was the worst performer over the period ending last year, with a decline of 10%. The report further reveals that Zimbabweans are ranked as the poorest individuals in Africa – Zimbabwe’s wealth per person is now $570, down from $630 in 2000.

Zimbabwe’s economy is decelerating as a result of a number of challenges, including limited capital sources at a high cost relative to regional levels. The World Bank’s chief country economist for Zimbabwe, Nadia Piffaretti, recently said that Zimbabwe’s economy would grow by about 4,2% this year – lower than the government’s projection of 6,2%.

Over the past 15 years, bank failures have affected consumer confi dence in the banking sector. Despite this, Zimbabwean Finance and Economic Development Minister Patrick Chinamasa said earlier this year that local fi nancial institutions were in a sound state despite the liquidity crunch that has affected some of the banks. “I want to put it on record that the banking sector is not sick," he said. "We have 21 banks – and of those, three had challenges of liquidity.”

Africa uncovered

Victoria Falls on the Zambezi river forms the border between Zimbabwe and its neighbour, Zambia

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eye on africa


eye on africa



eye on africa

Sum(Unemployment Rate, %)

1.39 - 1.8

1.8 - 3.5

3.5 - 4.2

4.2 - 21

The Zimbabwean property industryDespite the statistics and figures, which make for pretty harrowing reading, Zimbabwe’s property market is fairly positive. Although funding is a challenge for property buyers and investors, property yields average between eight percent and 15%. Currently, there’s a big demand for property but supply is constrained, especially in the residential sector, where demand is leading to densification with stock shortages in some locations.

Current trends in the market indicate that demand for commercial property in the CBDs is declining, and there has been increased demand for office parks. In certain parts of the country, retail is performing better than both office and industrial. Like most property markets on the continent, retail is attracting sound investment (stand-alone retail properties yield between 10% and 12%). At the moment, the Zimbabwean listed property segment is quite small with a market capitalisation of less than R1-billion (August 2013) and low yields of between six and eight percent.

Zimbabwe prime rents and yields

Harare Prime rents Prime yields

Offices US$12/m² per month 8%

Retail US$25/m² per month 8%

Industrial US$4/m² per month 12%

Residential US$3 500 per month* 10%

Bulawayo

Offices US$6/m² per month 9%

Retail US$15/m² per month 10%

Industrial US$1,50/m² per month 13%

Residential US$1 000 per month* 10%* Four-bedroom executive house – prime location Source: Knight Frank Africa Report 2013

Population, persons

655,000 - 744,000

744,000 - 1,450,000

1,450,000 - 2,100,000

Sum(Literacy Rate, %)

84 - 87

87 - 89

89 - 97

Population

Literacy rate (%)

Unemployment rate (%)

Population, persons

655,000 - 744,000

744,000 - 1,450,000

1,450,000 - 2,100,000

Sum(Literacy Rate, %)

84 - 87

87 - 89

89 - 97

Sum(Unemployment Rate, %)

1.39 - 1.8

1.8 - 3.5

3.5 - 4.2

4.2 - 21 Source: Opendataforafrica.org

Zimbabwe's capital city, Harare



eye on africa

During 2012 there was an increase in retail prime rents for new lettings in Harare of about

60%, but the sustainability of

the achieved rents is doubtful because of weak consumer

spending

GDP per capita (USD)

Source: World Economic Outlook, October 2012

U.S

. dol

lars

2000 2005 2010 20150

500

1,000

1,500

2,000

Retail marketRetail space is in high demand across the country. During 2012 there was an increase in retail prime rents for new lettings in Harare of about 60%, but the sustainability of the achieved rents is doubtful because of weak consumer spending.

At the end of last year, an interesting commercial development plan was announced by the Zimbabwean government. In order to boost the country’s troubled tourism sector, Zimbabwe plans to build “Disneyland in Africa”. This was outlined by Zimbabwe’s Tourism

and Hospitality Minister, Walter Mzembi, who noted that the country will spend the equivalent of R3-billion on a massive entertainment complex and resort near Victoria Falls. As expected, this plan has already been criticised, with analysts arguing that the country has more pressing needs and that the Victoria Falls area is a natural haven that shouldn’t be spoilt by an Americanised theme park.

Other major developments include a US$150-million upgrade of the Victoria Falls airport and the construction of the US$100-million Mall of Zimbabwe. With 68 000m² of retail space, the mall is set to be completed in 2015. It will be the single largest private property development ever in Zimbabwe.

Industrial and offi ce marketDue to the decline in the country’s manufacturing sector, demand for industrial space has declined. Void rates are increasing and rents are depressed, while tenant viability is questionable in the current economy, putting the security of income streams at risk.

The offi ce market has been on and off in recent years. Property investment activity continues to be restricted by tight liquidity conditions, although notable recent offi ce transactions have included John Boyne House (4 000m²), which achieved US$4,7-million, and Star Africa House (2 000m²), sold for US$3,55-million. Two signifi cant offi ce developments – the Celestial Park and the Old Mutual project, with a combined lettable area of 26 000m² – are currently under way and should be completed within the next several months.

Residential marketResidential market activity has been slowed because of the absence of long-term mortgage/loan fi nancing. However, some fi nancial institutions have been able to secure external lines of credit to support mortgages for private purchases – but the secured loans have been for relatively small amounts over short periods, making them expensive for borrowers. Despite this, the market experienced price increases of up to 25% during 2012. The rental market remains weak as a result of low disposable incomes.

Real GDP (% change)


Perc

ent c

hang

e

2004 2008 2012 2016-20

-10

0

10

20




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SA’s crystal ballAn interesting year awaits South Africa, with a general election, changes in the economy and more corruption. Here are predictions for 2014

By Adriaan KrugerEdited by Candace King

Lacklustre economic growthMost economists and organisations expect only modest growth for the economy in 2014 – although at a somewhat faster pace than in 2013. Most predictions range from 2,5% to just below three percent compared to the expected growth of two percent in 2013, after economic growth slowed to only 0,7% in the third quarter of last year.

According to the International Monetary Fund (IMF), gross domestic product will grow by about 2,9% in 2014. The IMF, in line with local economists, reduced its outlook for economic growth for 2014 significantly a few months ago, when wide-ranging strikes affected mining production in the earlier part of the year and manufacturing output during the second half of 2013.

Economic activity also slowed as a result of lower consumption spending by households, as disposable income came under pressure from the rising fuel price and other administered prices. Consumer confidence also declined, while personal debt reached such high levels that debt- fuelled consumption has reached a peak.

Most economists note that the economy is vulnerable to any major setback, and it seems that most would be likely to reduce rather than increase their forecasts during the new year. A major risk to the South African economy and economic growth remains the reliance on foreign capital inflows, which can be unsettled by any of a vast number of local and international uncertainties.

InflationThe inflation rate increased steadily month after month during 2013. We have also seen a steady increase in expected inflation for 2014 month after month. Older forecasts pegged inflation in 2014 at about 5,3% to 5,5%, but newer forecasts are mostly about six percent, and a few even higher.

The Reserve Bank’s most recent quarterly economic report included the results of a poll of different economists, business organisations and trade unions, all of which expected inflation to remain at about six percent for the next few months.

Other recent forecasts include that of Standard Bank, which sees an average inflation rate of six percent this year compared to around 5,6% in 2013, and a forecast from Absa Capital, which estimates inflation at 6,1% this year.

The weaker rand, South Africa’s high propensity to import consumer goods and our reliance on imported oil are among the factors that are to be blamed for higher consumer and production prices.

Interest ratesAfter the Reserve Bank’s last monetary policy committee meeting, governor Gill Marcus remarked that concerns about higher inflation and the possibility for higher interest rates dominated the discussions, although the decision to keep rates unchanged was unanimous. In addition, the bank has warned the public that interest rates are bound to increase from the current 40-year lows.

Economists differ on the timing of a possible interest rate hike but are mostly

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in agreement that rates are set to go up. At the moment, the most likely scenario is that we can expect an increase of 50 points any time from the middle of the year onwards.

Gold priceThe gold price has had a strong run from about US$240 per ounce some 13 years ago to a high of just shy of US$2 000 per ounce in 2011. During the last two years, the gold price was mostly range-bound, with a bias towards lower prices.

Although we have seen a maverick prediction of a gold prices of US$6 000 per ounce this year, the more reliable analysts are predicting lower prices as the international economy continues to recover and paper assets win back their lost confidence.

The revered Thompson Reuters GFMS gold market report notes that the gold market already saw an exodus of professional investors in 2013, and gold holdings by exchange-traded funds decreased by 26%, forcing the gold price down by 30%.

Gold received support at lower levels as demand for gold jewellery and from smaller investors increased, but this support quickly disappears when prices rise. Overall, Thompson Reuters GFMS sees gold increasing to US$1 500 in the first few months of 2014, but then declining again as central banks and large investment funds start to sell.

Local investors in gold coins, investment bars and gold-backed investment products were mostly shielded from the sharp price drop during the past two years,

compliments of a fall in the rand. It will be interesting to see how these investment schemes cope with a third year of static gold prices and a more stable rand.

Exchange rateIt’s difficult to solicit a confident prediction on the exchange rate without a whole list of assumptions, and a longer “but if” list. These uncertainties include the risk of capital outflows if the South African economy and investment markets lose favour, more industrial action, uncertainty surrounding the elections and campaigning, and many international events.

Trading Economics publishes forecasts based on analysts’ expectations and mathematical models on a range of economic figures. They predict an exchange rate of R10,74 per dollar for 2014 and R10,94 in 2015.

Petrol priceThe new year started on a bad note, with a hangover and an increase in the petrol price. Unfortunately, it is set to get worse. An exchange rate of closer to R11 and continued strife in oil-producing countries indicate further petrol price hikes.

Demand for oil and oil prices are set to rise as global economies recover with an ever-increasing demand for energy. It won’t be a surprise if fuel prices reach R15 per litre in 2014 – and most probably even higher.

Investment returnsMost market commentators and fund managers forecast lower investment returns in 2014 than last year. During 2013, the JSE ignored most negative news and reached a new record high amid enough volatility for asset managers to be able to squeeze more beta performance out of their portfolios. JSE indices and unit trusts equally indicated a good year on the JSE.

Shares are currently high, given the fairly low expected economic growth scenario, the possibility of higher interest rates and unknown factors that might interrupt earnings flow in an election year. It is noteworthy that the price/earnings ratio on the all-share index is currently at a historic high of about 18 times, usually seen before a period of strong earnings growth before a market correction.

Source: Fin24. The original article can be found at Fin24.com/Economy/14-predictions-for-2014-20140102

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On the JSE, stronger global growth and a weaker currency will help mining and commodity companies – but these shares are quite pricey already. There is not much value to be had in banking shares and industrials either, leaving investors only the option to be very brave and get in quickly whenever the market dips on bad news.

Cash and bonds remain uninspiring, with current low interest rates and capital adjustments once interest rates increase. Property and property trusts offer good value with higher yields but are at the mercy of higher interest rates, which may decrease capital value and, ultimately, returns.

General electionThe South African political scene is growing into a bigger circus each year, with a ballot list that is getting longer and longer with every election. Several new political parties were formed last year to contest the election, most of which can be dismissed as a waste of time. But then, maybe there are enough drug users in the Cape to vote their dealers into parliament.

Agang SA, launched by former businesswoman Mamphela Ramphele, and Julius Malema’s Economic Freedom Fighters seem to be two of the new parties that might get more support, each hoping to have more success at the polls than COPE a few years ago. After the debacle between Agang and the Democratic Alliance (DA), the outcome will be interesting to watch.

Forecasts of the outcome at the polls suggest that the dominant ANC might lose its two-thirds majority. Predictions indicate that the ANC might get between 55% and 62% of the votes. The DA will probably hold on to the Western Cape and might make some inroads into Gauteng but the party’s stated aim to win Gauteng seems to be based more on hope than facts.

Property pricesProperty prices are set to increase strongly this year, as prices of existing homes have been lagging far behind building costs. The most recent figures from mortgage providers and estate agents show that house prices have already started to recover during 2013.

FNB noted that prices went up by 12% last year, while estate agents such as Pam Golding Property CEO Andrew Golding noted that activity is increasing and prices are firming.

CorruptionCorruption has become entrenched in the government, political parties and government enterprises. Just about every state department and every parastatal has been fingered in some scandal or another, from the president’s office down to the clerks who pay welfare grants to the poor. A list of larger corruption cases published by Corruption Watch makes for discouraging reading.

Our most disturbing prediction under this heading is that Public Protector Thuli Madonsela will be axed for not bending to political pressure to whitewash the spending on President Jacob Zuma’s own little family town.

Everybody else who has stood up against corruption has been redeployed or had their organisations taken apart very quickly. One can only speculate whether Finance Minister Pravin Gordhan’s sudden decision not to be available for another term has anything to do with his recent statements about corruption and his actions to stem the tide of crookery, such as taking away top government officials’ credit cards and putting stricter limits of buying luxury cars.

Income disparitySouth Africa’s worst problem and major concern – that of the huge disparity in income between rich and poor – will worsen even more in 2014 as higher inflation swells the value and income of the wealthy, while reducing the living standards of the poor. A large part of the population will, in essence, struggle to buy their daily bread while the rest drives past in shiny cars.

In 2011, South Africa had the largest income gap between rich and poor in the world, according to the Gini coefficient, which measures the distribution of income in a country. In practical terms, there are instances of rich businessmen earning millions per month, while minimum wages for workers are set at below R200 per day – for the lucky ones who have jobs.

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PROPERTYR E V I E W

Online and in hand, these monthly publications are the o� cial voice of the South African Property Owners Association

With a South African property market value in excess of R250 billion, 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.

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.

These members – company chairmen, CEOs and MDs – often control massive companies and their associated budgets. As true decision-makers, some of the brightest and most-talented people in the sector occupy senior roles in the SAPOA member organisations.

The South African Property Review is mailed directly to the associations leading members, and is also available to the general public both internationally and local via www.issuu.com, the online version is an exact copy of its printed original and has on average over 3300 impressions a month, giving a monthly reader exposure of over 5000.

To-date our online July and August issues hit rates have reached 7605 and 7139 impressions respectively, with over 400 solid reads of an average of 9 minutes, and growing....

The true value of the online versions is that they get revisited over and over again and generate a liquid international exposure for your company, making the South African Property Review a ‘must include’ in your marketing plans.

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industry decision-makersS O U T H A F R I C A N

PROPERTYR E V I E W

July 2013

SHINE ON, SAPOAOur Convention report back

PROPERTY EYE CANDYExcellence winners announced

SA REITsThe dream becomesa reality

THE TALENTED MR NOMVETEDelta’s rise and rise

South African P

roperty Review

Architects in focus July 2013

PROPERTYPROPERTYS O U T H A F R I C A N

PROPERTYR E V I E W

May/June 2013

Welcome to the 45th SAPOA

International Convention

and Property Exhibition

EAST AFRICA

Land of promise?

REITs FOR THE

UNLISTED SECTOR

We speak to SAPOA’s

incoming president

URBAN

REGENERATION

Capital in, profits out

South African Property R

eview 45

th SAPO

A International Convention and P

roperty Exhibition May/June 2013

EAST AFRICA

Land of promise?


PROPERTYR E V I E W

August 2013

Heritage, where the heart is

SASOL’s SANDTON HQAlchemy brings the magic

WALKING ON BROKEN GLASSWomen shatter the ceiling VUKILE’s NEW WUNDERKINDWhy Dr Moseneke made the move

South African P

roperty Review

Wom

en in property August 2013

Heritage, where


PROPERTYR E V I E W

September 2013

Inspired, innovative

and independentBroll’s multi-disciplinary property services

ARROWHEAD

Always on target

ALL-STAR ASSET

SA listed property in the lead

THE PRECINCT EFFECT

The rise and rise

of trendy nodes

South African P

roperty Review

Attorneys in focuos Septem

ber 2013

PROPERTYSeptember 2013

ARROWHEADARROWHEAD

Always on target

ALL-STAR ASSETALL-STAR ASSET

SA listed property in the lead

S O U T H A F R I C A NPROPERTYR E V I E W

October 2013

South African Property R

eview P

roject managers O

ctober 2013

Showing off modernityHertford office park

INVESTMENT FUNDINGVunani’s quest for true valueFACILITIES MANAGEMENTIt’s all about integrated service

SANDTON CITY MOVES UP A GEARMuller mulls over retail offerings

PROPERTYPROPERTYPROPERTYThe Africa series:

our monthly

country-by-country

focus

Online and in hand, these monthly

Showing off modernityHertford office park

INVESTMENT INVESTMENT

Vunani’s quest for true value

MOVES UP A GEARMuller mulls over retail offerings


PROPERTYR E V I E W

November 2013

South African P

roperty Review

Engineers & quantity surveyors N

ovember 2013

Banking on green investmentsMore than just finance

CAPE TOWN CBD

City development

open for business

ECOFRIENDLY

MASTERPIECE

Efficiently showing off

engineering and

design aesthetics

GOING THE EXTRA

GREEN MILE

A very real passage

towards sustainability

PROPERTY

PROPERTYPROPERTYcountry-by-country

country-by-country

PROPERTYNovember 2013

ECOFRIENDLY

MASTERPIECE

Efficiently showing off

engineering and

design aesthetics

PROPERTY

S O U T H A F R I C A NPROPERTYR E V I E W

December 2013 / January 2014

Alice Lane on showA wonderland of aesthetic excellence

AFRICA SERIESNamibia in focusBANKING ON DESIGNSetting new standards in interiors

South African Property Review

CSI and interior design Decem

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PROPERTYssssss

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MEET THE MAYORS

Parks Tau

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CSIAre you doing your bit?

Alice Lane on showA wonderland of aesthetic excellence

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CSIAre you doing your bit?


PROPERTYR E V I E W

February 2014

ArchitectureNew-age aesthetics

AFRICA SERIES

Botswana:

from rags to riches

EMERGING MARKETS

Affordable housing

and student accommodation

South African P

roperty Review

Architects and architecture February 2014

GAUTRAINUnlocking the

property pipeline

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With a monthly average exposure

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construction

Africa’s build bookA development boom is engulfing the African continent. But what is being built, where and by whom?By David A Steynberg

The African development story has many contributors, each writing a different

chapter. How the completed yarn will conclude will depend on what African states and their international partners agree to finance and build.

The continent is divided into five regions, each at its individual state of economic and infrastructure development; each with its own priorities; and each with its powerhouses and black sheep.

Development comes in different forms, despite it being for economic or social wellbeing. But a it’s good barometer of a country – and, indeed, a region: development aspirations and priorities are evidenced by what a country builds.

Late last year, professional services firm Deloitte Southern Africa released its second African Construction Trends Report, in which it highlights the big construction projects taking place across the continent, the sectors they intend to stimulate, and where the money trail leads. Only projects valued at US$50-million and above that were not yet complete on 1 June 2013 were included.

According to the report, about 322 large infrastructure projects were taking place, at a combined value of US$222,7-billion.

Energy and power received the lion’s share of investment, followed by transport, mining, real estate and water, and then oil and gas.

Regionally, southern Africa is home to 38% of the projects measured, followed by East Africa at 29%. West, North and Central Africa make the remaining slices of the pie, with 21%, seven percent and five percent respectively.

Who is funding and building these projects? According to the report, it’s not exclusively the Chinese. Investors in Europe and the US fund 15% of the projects, with the Chinese bankrolling 10%. Shockingly, domestic investors account for only seven percent of funding, causing many of the projects to be very costly. Development Finance Institutions

make up 36% of the funding and domestic governments lag at eight percent.

As far as where contractors are from, the US and Europe lead the pack with 37%, while the Chinese are building 12% of the projects.

“Africa, and indeed the world, is hard at work building, modernising and strengthening the African infrastructure inventory, which will lead to greater African self-sufficiency and global competitiveness,” says Andre Pottas, infrastructure and capital projects leader for Africa at Deloitte. “New energy generation hubs are being forged, transport and logistics corridors are being built and basic social infrastructure is being invested in. Telecommunications connections are being strengthened and development is now starting to touch the commercial property sector on the continent.”

Southern Africa: regional powerhouse“Southern Africa has held on to its position as the gateway to Africa for many years,” says the report. “The region remains relatively established, with markets such as South Africa being the largest on the continent, efficient logistics hubs such as Namibia’s Walvis Bay, and relative political stability in the region despite poverty and a lack of social infrastructure and basic services continuing to loom over too many. “Commitment to infrastructure development is tangible in southern Africa – but will this be enough for the region to maintain its economic leadership status in Africa in years to come?”

Mega trends “With the leading number of projects (38%) being in southern Africa, the region is abuzz with infrastructure development through which it aims to maintain its economic leadership on the continent,” the report says. “Furthermore, with developmental hubs such as South Africa, Mozambique and Angola

Regionally, southern Africa is home to 38% of the projects measured, followed by East Africa

at 29%. West, North and Central Africa make the remaining slices of the

pie, with 21%, seven percent and five

percent respectively

Construction Report_SUBBED.indd 44 2014/02/06 12:09 PM


construction

Regional review

Southern Africa

ANGOLA

NAMIBIA

SOUTH AFRICA

BOTSWANA

ZAMBIA

MOZAMBIQUE

MALAWI

LESOTHO

SWAZILAND

ZIMBABWE

Industry breakdown

31%2%

1%1%

17%18%

19%9%

1%

1%

0

10000

20000

30000

50000

60000

80000

90000

100000

40000

70000

Val

ue

(mill

ion

s)

Average

Total $83 199 Million

6

South Africa’s US$300-billion Infrastructure Development Programme will have a signifi cant economic upliftment impact on the region



construction

falling under the Southern Africa Development Community (SADC) banner, the region is hard at work to future-proof its position as a � rst-choice gateway into Africa.”

South Africa’s US$300-billion Infrastructure Development Programme will have a signi� cant economic upliftment impact on the region. Southern Africa boasts the three largest infrastructure development projects under construction (ranked by value) on the continent. Within this programme, a vast US$20,3-billion is being invested into the construction of Eskom’s Kusile Power Station. Medupi Power Station, also under construction, is receiving more than US$10,8-billion in funding. PetroSA’s planned 300 000 barrels per day crude re� nery, Project Mthombo, has received an investment boost of about US$9-billion.

Of all the regions, southern Africa is the one most characterised by a spate of private sector-driven retail malls and mixed-use development projects. The anchor tenants of these malls tend to be South African retailers seeking new markets north of their borders. Coupled with the lack of formal retail infrastructure, this construction is consistent with the rising middle class on the continent.”

Striking oilDeloitte singles out Mozambique as a key to accelerating economic growth in the SADC region because of its recent � nds of oil and gas, coal and iron-ore reserves.

Construction in Mozambique relates to resource exploitation and the movement of resources within and outside the country. Infrastructure developments in ports, rail and road have been noted.

“Development of Mozambique’s transport sector focuses intensively on the Maputo port,” says the report. “With the harbour in Durban consistently operating at or near capacity and the Richard’s Bay coal terminal being close to capacity, the Maputo port will become increasingly important in heightening transport and export e� ciencies.”

A broader spreadCompared with other regions, southern Africa has a broader sector spread in terms of construction activity, says the report. About 31% of the 123 large projects identi� ed in southern Africa fall within the energy and power sectors, with 19% in mining, 18% in transport and 17% in commercial real estate. More than half of the projects (53%) are publicly owned, with the balance being privately owned or owned through PPPs. About 55% of southern African projects are owned by government, with private domestic ownership levels and Europe/US at just 15% each. The remaining 15% in ownership is fragmented, divided between intra-Africa, Brazil, China and other categories.

“The funding split is slightly more evenly shared with private domestic institutions

Top fi ve infrastructure development projects

1 Kusile Power Station (US$20,397-billion)Kusile will be one of the largest coal-� red power stations in the world, and the � rst power station in South Africa to use Flue Gas Desulphurisation (FGD), through which oxides of sulphur (Sox) are removed from the exhaust � ue gases. Kusile will consist of six 900MW coal-� red generating units for a total generating capacity of 5 400MW. This plant will contribute signi� cantly to resolving power shortages in South Africa and in the region, and to providing additional capacity to facilitate future economic growth.

2 Medupi Power Station (US$10,843-billion)With a 50-year operational life, Medupi will be the fourth-largest coal-� red power plant and the biggest dry-cooled power station in the world. Consisting of six boilers, each powering an 800MW turbine, it will produce 4 800MW of power.

3 Project Mthombo fuel re� nery (US$8,981-billion)Demand for transportation fuels is forecast to grow to more than 400 000 bbl/d by 2020 in South Africa. PetroSA’s planned 300 000 barrels per day crude re� nery is one solution to this supply challenge, aimed at reducing imports and producing re� ned products locally.

4 Transnet’s new multi-product pipeline (US$3,035-billion)Transnet has launched a new multi-product pipeline, which will be able to transport petrol, diesel, jet fuel and gas from Durban to Heidelberg. Approximately three-million litres will � ow between Durban and Johannesburg weekly once the pipeline is fully operational.

5 Venetia underground mine (US$2-billion)When completed, the new underground Venetia mine will extend the life of the Venetia pit until 2042. It will, according to the company, replace the open pit as South Africa’s largest diamond mine. Operations will yield approximately 96-million carats during the life of the mine.Source: Deloitte Construction Trends Report 2013

Southern Africa has held on to its position as the gateway to Africa for many years. The region remains relatively established with markets such as South Africa being the largest on the continent, efficient logistics hubs such as Namibia’s Walvis Bay, and relative political stability in the region despite poverty and a lack of social infrastructure and basic services continuing to loom over too many. Commitment to infrastructure development is tangible in Southern Africa, but will this be enough for the region to maintain its economic leadership status in Africa in years to come?

Mega trendsWith the leading number of projects (38%) being in Southern Africa, the region is abuzz with infrastructure development through which it aims to maintain its economic leadership on the continent. Furthermore, with developmental hubs such as South Africa, Mozambique and Angola falling under the Southern Africa Development Community banner the region is hard at work to future-proof its position as a first choice gateway into Africa.

South Africa’s USD300 billion Infrastructure Development Programme will have a significant economic upliftment impact on the region. Southern Africa boasts the three largest infrastructure development projects under construction (ranked by value) on the continent. Within this programme, a monumental USD20.3 billion is being invested into the construction of Eskom’s Kusile Power Station. Medupi Power Station, also under construction, is receiving over USD10.8 billion in funding. PetroSA’s planned 300 000 barrels per day crude refinery, Project Mthombo, has received an investment boost of around USD9 billion.

Of all the regions, Southern Africa is the most highly characterised by a spate of private sector driven retail malls and mixed-use development projects. The anchor tenants of these malls tend to be South African retailers as they seek new markets north of their borders. Coupled with the lack of formal retail infrastructure, this construction is consistent with the rising middle class on the continent.

Who owns? (in %) Government Europe/US Private Domestic Other Intra-Africa Brazil China Not Disclosed

55

15

15

111111

Who funds? (in %) Private Domestic Africa DFIs Europe/US International DFIs China Government Not Disclosed International DFIs/Africa DFIs Other Foreign Institutions Brazil Intra-Africa

20

16

11

7

7

6

62

12

7

4 2

Europe/US Not Disclosed Private Domestic Other China Intra-Africa Brazil Government International DFIs/Africa DFIs Not Disclosed

Who builds? (in %)

28

23

1715

83 3 1 1 1

Of the total projects collected national governments own most of the projects, European and USA companies seem to be doing most of the building and private domestic companies followed by African DFI’s seem to be funding most of the projects. The industries seeing the most activity are the Energy and Power industry as well as the Mining industry.

Deloitte on Africa African Construction Trends Report 2013

Source: Deloitte Construction Trends Report 2013



construction

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5 Feb 2014.indd 1 2014/02/04 04:00:51 PM

leading the funding at 20% of projects, while Africa DFIs fund 16% and Europe/US funders follow closely at 12%,” reveals the report. “Governments are funding only seven percent of infrastructure development projects in this region.

“European construction companies lead the building of projects at 28% of the total number of construction projects, followed by intra-African building consortia at 23%.

Broadly speaking, one would expect large South African construction players such as Group 5 and Aveng to hold a major share of build-based responsibilities. Looking at the sample within this survey however, this can only be alluded to because 17% of the projects are being delivered by private domestic companies, 15% of building parties are classi� ed as ‘other’ and 23% were ‘not disclosed’.”

With the leading number of projects (38%) being in Southern Africa, the region is abuzz with infrastructure development through which it aims to maintain its economic leadership on the continent. Furthermore, with developmental hubs such as South Africa, Mozambique and Angola falling under the Southern Africa Development Community banner the region is hard at work to future-proof its position as a first choice gateway into Africa.

South Africa’s USD300 billion Infrastructure Development Programme will have a significant economic upliftment impact on the region. Southern Africa boasts the three largest infrastructure development projects under construction (ranked by value) on the continent. Within this programme, a monumental USD20.3 billion is being invested into the construction of Eskom’s Kusile Power Station. Medupi Power Station, also under construction, is receiving over USD10.8 billion in funding. PetroSA’s planned 300 000 barrels per day crude refinery, Project Mthombo, has received an investment boost of around USD9 billion.

Of all the regions, Southern Africa is the most highly characterised by a spate of private sector driven retail malls and mixed-use development projects. The anchor tenants of these malls tend to be South African retailers as they seek new markets north of their borders. Coupled with the lack of formal retail infrastructure, this construction is consistent with the rising middle class on the continent.

Intra-Africa Brazil China Not Disclosed

55

15

15

111111

China Government Not Disclosed International DFIs/Africa DFIs Other Foreign Institutions

Brazil Intra-Africa

20

16

11

7

7

6

62

12

7

4 2

Europe/US Not Disclosed Private Domestic Other China Intra-Africa Brazil Government International DFIs/Africa DFIs Not Disclosed

Who builds? (in %)

28

23

1715

83 3 1 1 1

Of the total projects collected national governments own most of the projects, European and USA companies seem to be doing most of the building and private domestic companies followed by African DFI’s seem to be funding most of the projects. The industries seeing the most activity are the Energy and Power industry as well as the Mining industry.

Deloitte on Africa African Construction Trends Report 2013 7

Source: Deloitte Construction Trends Report 2013

Southern Africa boasts the three largest infrastructure development projects under construction (ranked by value) on the continent. Within this programme, a vast US$20,3-billion is being invested into the construction of Eskom’s Kusile Power Station



q&a

Laying new foundationsBy Candace King

Q When did you join Corobrik?I joined Corobrik as national commercial manager in July 2013 and was appointed commercial director on 1 January 2014. I am currently based at Corobrik’s offi ces in Edenvale.

Q Tell us about your experience in the industry?Prior to Corobrik I was the managing director at African Brick. Previously I’ve held senior management positions at both PPC Cement and Saint Gobain Construction Products SA. I am a board member of the Clay Brick Association, and I served as chairman of the Corporate SMME Development Forum CSDF until 2010.

Q What are your thoughts on Corobrik as well as your new role?Corobrik is one of the leaders in the clay brick industry and the company has a considerable track record, strong management in all the disciplines, world-class production facilities, a leading and quality product range, and the capacity to operate in all of South Africa’s nine provinces, the SADC region and beyond.

The company has a pedigree that stretches back more than 100 years and is a trendsetter in the industry. What drew me to the company was that the staff own 26% of the company, which has a Level 4 BEE status.

My brief when I joined was to extend Corobrik’s reputation and infl uence in the public sector, to achieve preferred status as a reliable supplier of superior quality clay and concrete masonry materials to service-delivery and infrastructure projects, nationally, provincially and at local governments.

Q What are your goals?I have identifi ed four entities in the industry – government; the building material suppliers; contractors; and end-users/benefi ciaries – which have goals to achieve. Government is regarded as an important client by Corobrik, and the building industry is vastly dependant on the government’s approved infrastructure, public buildings and housing upgrades. Government projects contribute about 65% of the business in the building industry.

One of my fi rst tasks has been to set up a database of stakeholders, community leaders and government offi cials whom I will inform of the qualities of Corobrik’s products in application. I invite senior

Musa_SUBBED.indd 48 2014/02/06 12:41 PM


q&a

We speak to Corobrik’s newly appointed commercial director Musa Shangase about his direction for the clay brick company and its future in the construction industry

Government offi cials and Ministers to have a look at Corobrik’s end-products, including Bongolethu Primary School in the Cape and Chief Albert Luthuli primary school in Daveyton, Gauteng.

Q How does Corobrik improve the built environment?At Corobrik, we believe that by replacing poor-quality houses and shacks with decent, good-quality brick homes, the health, education and employment prospects of extremely disadvantaged people can be signifi cantly improved and greater community wellbeing can be strengthened.

Based on our experience in supplying our product to building homes in the Free State and Northern Cape, for example, we have seen the positive impact of such quality on communities.

I want those responsible for facilitating and providing infrastructure to sleep peacefully at night, safe in the knowledge that they have given South Africans the best schools, houses and hospitals that they can give. This can be done by bringing the uniquely holistic contribution of brick in building communities to the attention of decision-makers.

Q What is the current state of the construction industry?The past three years have been tough but there is a light at the end of the tunnel. The residential sector, public works, and infrastructure are improving.

It is also nice to see that provinces that have in the past been neglected, such as Mpumalanga, the Northern Cape and the Eastern Cape, are now coming up. The world is getting smaller and international trade is growing – and with it, Corobrik’s footprint into Africa, the Indian Ocean islands and Middle East is on the move.

We are currently faced with numerous alternative building technologies but brick construction in South Africa’s climate and conditions is simply the best solution. Supporting the quest for holistic sustainability, our products are natural and environmentally friendly.

Q What are your thoughts on the future?The company is growing, and I want to be a part of this winning team. Mentoring youngsters is one of my key values – I believe that you cannot go forward without developing people beneath you to keep the ball rolling as a company.

Musa_SUBBED.indd 49 2014/02/06 12:41 PM


listed property

Three themes dominate listed property this year: offshore exposure, consolidation and a shift to growth from defence. We speak to Sesfi kile Capital’s Kundayi Munzara about these themes, as well as which funds need to be watched this year

By David A Steynberg

Listed property has come a long way in 10 years: it has formalised

into REITs, is managed by professional fund managers and is taken more seriously on the JSE. But one of its biggest hurdles is the fact that it’s hugely underexposed to South African pension funds at an average of around three percent, with some invested up to 10% while others ignore it completely.

But things may change over time according to Kundayi Munzara, fund manager at Sesfi kile Capital. “We hold a view that pension funds over time may increase their allocation to listed property and invest up to fi ve percent, which will effectively grow the sector by about 20%,” he says. “The South African pension-fund industry is worth about R2,5-trillion. So 10% of that is R250-billion, and if the shift is made from three to fi ve percent, a lot more money will come into the sector.”

Having opened its doors in December 2010, Sesfi kile Capital is an investment management house focused exclusively on listed property funds locally and abroad. About 95% of the asset manager’s assets are from the local pension industry, where it attempts to increase exposure to listed property. And it has done well. Its own unit trust fund was South Africa’s top

performer in 2012, delivering 37% – 1,2% higher than the sector. The unit trust also delivered a total return of 13,2% in 2013 against the benchmark at 8,4% – out-performance of 480 basis points over the year.

So why, then, have pension funds been reluctant to increase their exposure to property? Munzara believes it has a lot to do with property being relatively illiquid and perceived to be more risky.

“A lot of the life funds and banks have their own property portfolios and, partly driven by higher liquid capital requirements (Bassell III), a few have sold their assets to either property funds of individual investors,” he says. “More assets are now moving into the sector, and this will result in increased exposure to pension funds. I’m confi dent exposure will increase – but I’m not sure how quickly this will happen.”

Either way, this will be good for property funds across the board because their ability to raise capital is improved. Last year’s record R25-billion that was raised, however, doesn’t look set to be repeated, because of a volatile forecast. It’s in this environment Munzara identifi es three themes, or trends, for 2014.

Is 2014 a watershed year for the listed space?

Mohamed Kalla, Evan Jankelowitz and Kundayi Munzara

REITs_SUBBED.indd 50 2014/02/06 1:45 PM


listed property

Theme 1: The offshore story“In the sector we have a few stocks that have either total or partial exposure offshore, such as Growthpoint and Redefi ne International, which was the top-performing fund last year at 112%,” says Munzara, adding that New Europe Property Investments (NEPI) is a sure bet this year. “NEPI is listed here and on the Romanian stock exchange, with its assets in Romania – New Europe being Eastern Europe. The other is Investec Australia Property Fund with Australian assets listed here.”

These funds, with their offshore exposure, have performed very well, partly due to a weak rand, and look set to offer the best returns in 2014.

“Last year the rand weakened 24%, so even if Redefi ne International had done nothing, its dividend would have been 24% higher because of the weak rand,” says Munzara. “Investors go where earnings are in hard currency or in developed economies that are going to recover.

“Within this theme, NEPI is probably best positioned because it has superior earnings growth. For example, NEPI buys shopping centres at between eight percent

Funds, with their offshore exposure, have performed very well, partly due to a weak rand, and look set to offer the best returns in 2014



listed property listed property

Investors want to go where earnings are in hard currency

or in developed economies that are going to recover

SA REITs outperform bonds and cash,and remain good value for investors

South African listed property delivered total returns of 8,4% in 2013, outperforming bonds and cash.

Bonds returned a mere 0,6% and cash 5,2%. Over the past 15 years, listed property has outperformed bonds by 13,3% per annum, a direct result of the asset class’s ability to produce inflation-beating income growth.

“Listed property performed to market expectations despite an extremely volatile year for the sector, and

produced income returns of 6,8% and capital returns of 1,6%,” says SA REIT Association chairman Norbert Sasse (pictured here). Listed property is the top performer out of the four traditional asset classes over the past 15 years, outperforming equities by 6,4% per annum. However, in 2013 equities outperformed listed property for the first since 2009, with a 21,4% total return.

“We believe that there is a place for listed property in investment portfolios, more so that cash and bonds,” says Keillen Ndlovu, head of property at Stanlib. “Listed property offers growing income, whereas cash and bonds do not. This is one of the major reasons why listed property has outperformed cash and bonds over time and we expect this trend to continue in the medium to long term. Last year was a challenging and extraordinary one for the sector. Up to mid-May, listed property had delivered total returns of 21% for the year. But the announcement of US Federal Reserve tapering Quantitative Easing triggered volatility across all emerging markets and most interest-rate sensitive instruments. The sector’s gains were quickly eroded. Our bonds weakened dramatically. The rand wasn’t spared either.”

Importantly, Ndlovu says, nothing changed on the ground in the listed property sector. “Fundamentals remained strong. Vacancies were stable. Shopping centres delivered positive turnover growth. Listed property companies continued to deliver distribution growth that met expectations and, in some instances, even higher than analysts’ forecasts.”

Reflecting robust investor appetite in 2013, the sector raised more equity than in previous years – about R18-billion’s worth. This is ahead of the R11-billion raised in 2012 and the R16-billion raised in 2011. All existing REITs were able raise the equity they required, mostly oversubscribed.

So what can investors expect from listed property in 2014? Sasse says the sector will continue its growth, increasing its representation on the JSE, albeit not at 2013 levels. “The end of the year brought a wave of consolidation, which should continue in 2014,” he says. “We expect to see a few mergers from allied funds, while some smaller listed companies are becoming takeover targets.”

Grindrod Asset Management’s chief investment officer Ian Anderson says the listed property investment class remains a sound alternative to cash, long bonds and several equity investments in 2014. Anderson forecasts property stocks will beat consumer price inflation by at least five percent over the next five years. “Equities could do the same, but won’t necessarily perform as well as listed property,” he says.

Ndlovu notes the sector is trading at a one-year forward yield of 7,8%, assuming a 8,0% income growth forecast. “We expect income to play a bigger role than capital over the next year or two.”

In 2013, REITs with offshore exposure benefited from the weaker rand, posting results better than market expectations. Anderson believes there’s still value in investing in local property stocks compared with offshore property stocks, particularly some of the smaller stocks that offer tremendous value.

Sasse adds that SA REITs with offshore holdings are in a good position to outperform expectations in 2014. “With yields in some offshore territories better than local markets, and a soft rand, the listed sector will be eyeing international investment opportunities.”

and 10%, and funds them at 3,5% because it’s a Europe-based fund. We believe NEPI can do 15% growth over the next three years even if it doesn’t buy any more assets – just from its pipeline, which is mainly retail.”

Locally, Redefine looks good, according to Munzara. “Redefine as a core company has been improving its asset quality over the past three years,” he says. “In the last seven months it has bought R3,6-billion’s worth of assets, which are all good quality. What is interesting is the market still rates Redefine poorly. Redefine today ( January 2014) is trading at a four to five percent discount to net asset value (NAV). Typically, a property fund with a 12-year average trades at a 16% premium to NAV. On a yield perspective, it’s trading at a higher yield than the market because the market is currently, and possibly mistakenly, seeing it as a lower-quality fund.

“On its earnings, growth and risk it shows similar numbers to Growthpoint, which is trading at a premium to the market. Redefine is equally liquid; it’s big, has a good management team and good disclosure. This makes it one of the better opportunities this year. And when it consolidates the entire Fountainhead into its fund, it will have one of the bigger retail exposures. You tend to find retail being rated better than office, for example. Redefine is one of the better picks because it has everything that the others have and hasn’t been priced for it. This is a good re-rating opportunity.”

Theme 2: Consolidation The past few years have been about listing and growing, which has resulted in two very big funds and a few that are worth between R9-billion and R20-billion in assets.

“And then we’ve got those with R3-billion and below,” says Munzara, adding that these smaller funds look set to consolidate between themselves as well as into the bigger funds. “We’ve heard of a potential merger of three funds, though we don’t know which ones.”

Theme 3: Focus on growth Munzara says growth will likely be more important than yield this year. “Those funds with the best growth will probably do better than those that show high yields,” he says. “Ten percent yield and six percent growth may look very attractive but there’s value in another fund showing six percent yield and growing at 15%. There is going to be a shift from someone saying, ‘I’ll take the 10% yield because I can bank that.’

“Resilient, which is big, said it would do between 12% and 16% distribution growth, which is massive. We expect 8,2% from the sector. We think Resilient may even outperform that target. It is doing about six percent yield, which is below the sector’s 7,5%.NEPI, which is about five percent yield, is growing at 15%. These are both big funds – and you’d expect the smaller funds to show this kind of growth because of their low base.”

In addition to increasing exposure to pension funds, all three themes could make 2014 a watershed year for listed property. But is there more space for new listings, or is the sector saturated?

“I don’t know where this perception comes from,” says Munzara. “There are about 28 listed and investible funds, and because of the A and B structures, there are about 32. I don’t think the sector is saturated at all. For many years we’ve been taking issue that there were too few to choose from. What we need are more large funds in the R8-billion to R12-billion range.”



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AKH147_BOMA14_INTL.indd 1 1/14/14 6:13 PMNews_FEB_SUBBED.indd 11 2014/01/16 9:06 AM


feature feature

MabonengAs the regeneration of Johannesburg’s inner city continues, more investors are buying into the CBD’s revived precinct pioneer Maboneng

By Candace King

making cents

The Johannesburg inner-city rejuvenation success story is an ongoing one as investors are starting

to dip their toes into this promising pool of prosperity, breathing life once again into the previously deprived node.

The Johannesburg CBD’s history has been somewhat tumultuous over the past few decades. The thriving inner city lost its spark during the 1990s when citizens fled the area, leaving the node in an economically vulnerable position. With the mass exodus came loss of capital, and the inner city spiralled into decay and neglect, resulting in a seedy space for vagrants, drug lords and criminals to survive in.

Now, some 20 years later, the inner city is experiencing rapid redevelopment and economic growth. People of a higher calibre are moving in, money is flowing back and cultural precincts are mushrooming across the CBD – buzzing with entrepreneurial energy and cultural flair.

A prime example of this is the Maboneng Precinct, a flourishing new-age mixed-use haven situated on the eastern fringe of Johannesburg’s CBD.

During the course of Maboneng’s fast rise to fame, several property and economic investors have got involved with the precinct, including Futuregrowth Asset Management, an institutional asset manager that manages fixed income and developmental investments in a way that sustainably enriches the lives of all.

Futuregrowth and TUHF, a company that drives inner-city investment by helping potential investors become property entrepreneurs, have agreed to provide a joint funding facility of R200-million, split 70/30 respectively, for further development in the precinct. With an investment of R140-million, Futuregrowth will be the primary funder in this partnership but will utilise TUHF’s on-the-ground management expertise and skills to oversee the various building refurbishments and upgrades over the term of the funding.

The loan finance will yield a risk-adjusted return and is specifically structured so that the credit risk and performance of the investment are carefully monitored. “Maboneng represents a debt investment that’s slightly higher risk than your typical investments.

The Maboneng Precinct is a bustling modern node that is attracting a vast number of diverse tenants, including young professionals, small businesses and university students

Maboneng_SUBBED.indd 54 2014/02/06 1:50 PM


feature feature

It’s a highly structured deal,” says Futuregrowth credit analyst Paul Semple. He adds that the risk is mitigated by various protections that have been put in place to make sure that Futuregrowth’s clients’ funds get repaid by Maboneng.

The magic of MabonengMaboneng is a successful, bustling urban community consisting of several different commercial and residential developments, and is home to more than 20 businesses. Propertuity Management (Pty) Ltd, the developer of the Maboneng Precinct, is jointly owned by the brain behind the precinct, Jonathan Liebmann, and a trust held by a private equity partner. The buildings in the area are zoned light industrial but are mostly in a state of disrepair.

Liebmann and architect Enrico Daffanchio have used creative architectural solutions to optimise the significant bulk and volume in the buildings, resulting in a unique cultural area comprising a mix of galleries, artist studios, creative venues, offices, small retail shops, and affordable and upper-income residential units.

An example of a Maboneng building that can be converted into affordable housing

Maboneng is home to several trendy spots, including ground-floor retail, chic cafés and an independent cinema.



feature feature

Semple says the Maboneng development initiative offered a good investment opportunity for clients. “As investors, we’ve seen both demand and increased investment fuelling the growth of inner cities.” He adds that the rejuvenation of the area is opening up the floodgates for the development of affordable housing and student accommodation.

“There is a massive demand for such real estate options, especially for the people who are working in the inner city,” he says. “The regeneration of the node is creating employment, with retail and small businesses booming, which is helping entrepreneurs.”

“Our philosophy is to create diverse offerings within the neighbourhood as well as provide an opportunity for entrepreneurs to start new businesses, which in turn would generate more employment,” says Propertuity CEO Jonathan Liebmann.

For TUHF, which has financed some 18 000 low-cost housing units in inner cities, the development offers further opportunities for rejuvenating the city centre. TUHF group mortgage manager Roselyn Valloo says the company prides itself on its savvy market knowledge. “Affordable housing is in demand in the city – but there are other markets: the young, sophisticated urban professionals, attracted by the vibrant energy and buzz of these new neighbourhoods

that are re-defining the dynamics of the city,” she says. “And they want to be part of it.”

It is this youthful vibe that is making Maboneng a real-estate star in its own right, attracting a wide diversity of people. “The precinct caters for several income brackets – from young wealthy professionals to middle- and lower-income dwellers – which is quite unique,” says Semple.

He believes the future of Maboneng lies in the redevelopment of buildings into affordable housing and student accommodation units. “There is an ongoing demand for affordable housing,” he says. “Maboneng is perfect because of its close proximity to several modes of transport and places of work. There is no problem in finding tenants here.”

It is this youthful vibe that is making Maboneng a real-estate star in its own right, attracting a wide diversity of people

Futuregrowth credit analyst Paul Semple



feature feature

More on Futuregrowth and TUHFWith about R128-billion of assets under management, Futuregrowth is dedicated to the development and

empowerment of South Africa and its people, with many of its investment offerings geared towards making a

meaningful difference. On behalf of its client funds, Futuregrowth provides debt and equity finance facilities to

organisations looking to raise funds in the capital markets. Futuregrowth’s large and experienced team of investment

professionals allows for the management of a full range of fixed income products, from money market funds through

to yield-enhanced funds, as well as a range of development funds. The investment team is well positioned to structure

transactions that add value to both its clients and investee companies, and construct diverse portfolios that enhance

returns, reduce risk volatility and produce relatively stable performance over time.

TUHF provides loans to buy or improve residential property in South Africa’s inner-city areas. It specialises in

lending money to reasonably priced housing projects in areas of urban decline. It gives preference to small- and

medium-sized apartment buildings that are safe and clean, and will offer good returns. TUHF’s strategy is to concentrate

on small areas, creating buoyant residential property markets in the inner cities. As a result, it has an in-depth

understanding of inner-city property markets, making it possible for the company to deliver a better service to clients.

TUHF finances projects that:• Are economically sustainable to generate sufficient income to repay the loans and make a profit;

• Will upgrade buildings in the selected inner-city area, giving preference to residential property projects;

• Will stimulate the economic empowerment of individuals and communities;

• Will promote a positive social impact on inner-city communities;

• Will promote urban regeneration and black economic empowerment.

The future of Maboneng lies in

the redevelopment of buildings

into affordable housing and

student accommodation units

Inhabitants of the precinct don’t need to travel far for city-life amenities – the node offers office space, leisure, hospitality and more

Maboneng is nestled in the hub of Jo’burg’s inner city, a revived city centre for new-age living, working and playing

INSET Aerial view of the Maboneng precinct


DeveloperPRO

PER

TY November 2013

DeveloperDeveloperRelaunch

issueCradlestone MallRetail development under way

PDP class of 2013Rewarding the GSB, UCT, SAPOA course

Futuristic dream or visionary future?24

Bridging the gap in the City of Tshwane14

DeveloperPRO

PER

TY

February 2014

Modderfontein metropolisShanghai Zendai’s city plan

Towering feat: a catalyst for investment38

Cornubia: Durban’s mixed-use marvel35

Cover_FEB_SUBBED.indd 1 2014/01/15 10:03 AM

Developing great new relationships

Relaunched in November 2013, the Property Developer is SAPOA’s specialty property development industry, business to business magazine, which carries important news, views and reports on whats happening in

South Africa’s property development sector.

Published quarterly, Property Developer is mailed along with its sister publication the South African Property Review to all SAPOA’s members, it also appears online to an international audiance on SAPOA’s website

www. sapoa.org.za. and through the issuu.com platform.

SAPOA’s members hold the reins of property portfolios in excess of R250 billon and control the intrests of 90% of all

commercial property in South Africa, they are major decision-makers in their fi elds of expertise, an audience with infl uence!

Don’t miss being in the May 2014 issueAn additional print run of 2000 copies will be printed to accomodate it being present at

SAPOA’s 46th Convention and Property Exhibition, 10 - 12 June - ICC - Cape Town

For advertising opportunities and rates contact Riëtte Stevens t: +27 (0)71 877 5520 e: [email protected]

Developer filler.indd 1 2014/02/06 2:15 PM


interview

Young blood

Q Tell us about yourself and the company you work for.I’m currently employed as a professional architect at Conradie & Greyvensteyn Architects in Klerksdorp in the North West. In November 2013, the firm was awarded the PMR Africa Award for being the first overall practice in the North West province for a fourth consecutive year. I’m also the owner of Creo-B Designs, a company involved with interior, furniture and light design as well as art photography.

Q Describe the current architectural landscape.The recession has had a big impact on the market but I still foresee positive developments. This is evident in the number of projects the office received in 2012 and 2013, from small residential projects and town houses to commercial projects, office park developments and institutional buildings.

I feel people are wary about spending money, checking the markets and so on, but we will see a shift and a bloom period in the market. As for architecture, I think we will see more conscious design awareness in terms of sustainability and availability of land and funds, and clean modern design to achieve a strong architectural language.

Q What is trending at the moment?For the first time in years, architects are enjoying carte blanche in the design industry. The trends now include strong, honest geometric designs, and façades determined by the need or function of the plan as developed from the accommodation needed. Honesty in the sense that it is easy to read a building and the building functions just by looking at how the different spaces are handled on plan and elevation.

The honesty further lies in the material/texture palette used in the design. Materials are used in their natural form so as to expose them to the viewer and articulate design elements. People are more conscious of their carbon footprint, and architects are leaders in the field of minimising the negative effects of energy consumption by integrating passive systems such as natural lighting and wind into their designs.

At the age of 27, up-and-coming Architect Stephan Benadé looks at the industry with fresh eyes

By Candace King

Architect Stephan Benadé

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interview

There will always be the object-driven buildings but, for the larger part, a more context-conscious design development takes place to form a more site-specific and responsive building.

Q What are some of the biggest challenges in the industry?I think one of the biggest challenges is educating the people in terms of good contemporary rational design – to get them to move away from predetermined design ideas or images (for example, the Tuscan and Bali-style estate developments all over the country). A further challenge is to show the public and statutory bodies that sustainability is not a new concept; we have been incorporating it into our designs for years. The new SANS code on sustainable design is a good guide but I’m afraid that it will kill design freedom in South Africa. By doing the basics right – orientation, thermal massing, roof overhangs to minimise sun exposure on windows, taking into account wind directions and angle of incidence of the sun, taking lessons from vernacular architecture – one can design a site-specific and responsive building that is also sustainable. Combining the above-mentioned with good floor and roof insulation and the right glazing, a climatic-response building envelope is achieved.

A real challenge would be to redevelop the CBDs of cities into defensible public spaces, and to stop urban sprawl. To achieve this goal, the city councils, investors and public will have to liaise with each other. Furthermore, I would like to see more freedom in engineering, pushing the standard design envelope in South Africa.

Q Tell us a bit about skills in the industry. Are youngsters studying the trade, and bringing good skills and knowledge when they start out?Personally I think we have a very high standard of design in South Africa, and we don’t have to stand back for our international counterparts. Our designs and skills levels are on par with international work.

Many youngsters are studying architecture, bringing fresh design ideas – a new look – to existing design problems. They have good design knowledge and a good feeling for design, but some of them lack structural knowledge, which is part and parcel of good design. They take about four to six months to adjust to the profession after university before you see them getting comfortable and developing themselves in the profession.

Q What tips do you have for those who are just starting their studies in architecture?Be prepared to work hard. Nothing that is worth it comes easily or without a battle. If you want it badly enough, work for it – you’ll be surprised what you can achieve. Stay determined, stay focused, stay modest and give your best in everything.

To be able to practise your passion every day is a privilege not to be taken for granted. Read up on everything that you find interesting and broaden your horizons – it’s essential to keep developing yourself as an architect. Most importantly, remember to have fun too – you are a student once, so make the best of it.

Q What are architects’ relationships like with others in the industry?Architects operate as part of a professional team with various consultants working on a project to achieve and ensure high standards. The architect is usually the principal agent on a project, and must ensure that every team member performs and produces a product that is in accordance with the specified design and contract.

Q What are some of the best projects that you’ve worked on?It’s always hard to narrow down which projects were the best or the most memorable – each has its merits. Our latest and most notable project is the new faculty building for the North West University, Potchefstroom campus.

The tender asked for two faculties – pharmaceutical and life sciences – to be housed on a single site.

Each firm was given concept floor plans showing the needs of each faculty and its placement on the site. The buildings were to fit into the campus context, be easy to maintain and work well in every aspect of daily life. In other words, the buildings were to fit the needs of each faculty but also be responsive to the site and its conditions.

We were awarded the tender and aimed to relate to the existing campus fibre – a strong geometric shape and form-giving, face-brick walls and off-shutter concrete are just some of the material palette found on campus. The campus fibre is a mix of architecture, modernism, brutalism, classicism and others. Our concept fits into the campus fibre: it takes clues from the surrounding buildings and channels them into a contemporary language of architecture.

Strong horizontal lines are created by the sun slabs that act as shading devices from the summer sun and also define each floor on the façade. Large window openings at office and tuition spaces, and smaller openings at laboratories make the different functions of the building easily legible on the façades.

The use of louvres on the eastern and western façades and sun screens on the southern side help shelter the users from the harsh morning and late-afternoon sun. The courtyard space acts as a green



interview

lung inside the building, allowing it to breathe and letting in the northern sun into the southern building.

The two faculties share a communal walkway and circulation spine. This walkway binds the two buildings together and creates the feeling of one larger building, yet each has its own identity as determined by the functions it will house. Project completion will be in 2015.

Q What are your future plans? What are your thoughts on the future of the industry?Currently, I’m in the process of designing and documenting my own house – and it’s definitely one of the best experiences. For a change it’s my own project, determined by my needs and ideas about design and living, as well as cost.

It’s a tricky exercise to be designing a contemporary house that should be timeless and strong while keeping budget and size as well as ease of construction and maintenance in mind.

I think the architectural landscape in South Africa is quite diverse, and I think the future will hold a lot of new development, technological and material, design, and a cleaner aesthetic. We will always have projects that are object-driven – but, for the most part, a deeper consciousness will prevail in architecture.

ABOVE NWU Faculties/Western perspective shows the walkway link and circulation area between the two buildings. The walkways are left open to create a negative void in the façade so as to pull one into the building. The same finish is used to create the arch over the walkways to bind the two buildings. Well-defined entrances point out the two faculties.LEFT NWU Faculties/Southwest perspective. The materials chosen enrich the design and blend into the campus fibre. They are also low on maintenance. The vertical sun screens can also be seen on the perspective. BELOW NWU Faculties 1/Northwest perspective – pharmaceutical faculty in front, Life Sciences faculty to the back and western entrance to building. The building is on a podium to set it off from the street and to accommodate the semi-basement.



statistics

The lowdown on SA’s metros and municipalities

Source: Fast Facts December 2013, South African Institute of Race Relations (SAIRR)

In the past 10 years, 4,5-million households have been provided with free basic water, four-

million have been given access to sanitation, and two-million have been connected to the national electricity grid. However, discontent with local government is increasing and people are no longer content to wait patiently for the promised improvements to their lives.

According to Municipal IQ, an organisation that monitors and assesses local government in South Africa, between January and July 2013 there had been 97 protests sparked by issues that are the responsibility (or the perceived responsibility) of local government, as compared to 10 protests in the whole of 2004. Also, according to the 2013 South African Reconciliation Barometer, only 49% of respondents said they had confidence in local government.

Below are statistics based on eight metropolitan and 44 district municipalities in South Africa relating to poverty, education, employment, income, and municipal services.

Education Out of all the district municipalities, Sedibeng in Gauteng has the highest proportion of people aged 20 and older with Grade 12, at 32%, and the Alfred Nzo district municipality in the Eastern Cape has the lowest, at 13%. Out of all the metropolitan municipalities, eThekwini (Durban) has the highest proportion of people aged 20 and older with Grade 12, at 37%. Buffalo City has the lowest, at 27%.

Employment Unemployment rates across the municipalities range from 14% to 50%. The Cape Winelands district municipality has the lowest unemployment rate, at 14%. The Sekhukhune district municipality in Limpopo has the highest rate, at 51%. Youth unemployment is 28,9% higher than the official unemployment rate. The West Coast district municipality in the Western Cape has the lowest youth unemployment rate, at 20%, while the Sekhukhune district municipality in Limpopo has the highest, at 61%.

Only five district municipalities out of the 44 in the whole country have youth unemployment rates below 30%, and they are all in the Western Cape.* The official unemployment rate refers to people aged between 15 and 64 who are without work, but who are looking for work and are available to take up employment or open a business. This definition excludes discouraged work-seekers. Therefore, the actual proportion of people of working age without jobs is likely to be higher than the official rate, which currently stands at 26%.

Income According to Statistics South Africa, 15% of South African households are considered no- income households. The municipality with the greatest proportion of no-income households is the Ekurhuleni metropolitan municipality in Gauteng, at 17,8%. The Central Karoo district municipality in the Western Cape has the lowest proportion of no- income households, at 8,4%. Almost one-third (29%)

of households in South Africa receive between R1 and R1 600 monthly. The highest proportion of households in the lowest income bracket is in the Alfred Nzo district municipality in the Eastern Cape, where 48% of households receive between R1 and R1 600 monthly. Only 0,3% of households in the country earn R204 800 or more per month. The biggest proportion of households in this income bracket is in the Tshwane metropolitan municipality, at 0,6%.

Municipal services The Sisonke district municipality in KwaZulu-Natal has a poverty rate of 74%. Only 26% of households there have access to a flush lavatory, while 35% have no access to piped water. The municipality with the highest access to electricity for lighting is the West Coast district in the Western Cape, at 94%. The lowest access is in the uMkhanyakude district municipality in KwaZulu-Natal, at 38%. The highest levels of access to water (inside the household or on a communal stand) are shared by the Central Karoo district municipality in the Western Cape, the Nelson Mandela metropolitan municipality in the Eastern Cape, and the Sedibeng district municipality (Vereeniging and Vanderbijlpark) in Gauteng, at 99% each. The highest level of access to sanitation is in the Cape Winelands district municipality where 92% of households have access to either a flush or a chemical lavatory. The municipality with the poorest access to sanitation is the Alfred Nzo district municipality, where 90% of households have access only to a pit latrine or bucket toilets, or have no facilities at all.

Poverty The Alfred Nzo district municipality in the Eastern Cape has the highest poverty rate, at 79%. The lowest rate among all the district municipalities is that of the Cape Winelands district municipality in the Western Cape, at 48%. The metropolitan municipality with the highest poverty rate is Buffalo City (East London), at 60%. Cape Town has the lowest, at 44%.* The poverty rate measures the proportion of households with an income below R2 300 a month.

According to Statistics South Africa, 15% of South African households are considered no- income households.

Unemployment rates across the municipalities range from 14% to 50%. The Cape Winelands district municipality has the lowest unemployment rate, at 14%

Stats_MAR_SUBBED.indd 62 2014/02/06 2:02 PM

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off the wall

64 SOUTH AFRICAN PROPERTY REVIEWSOUTH AFRICAN PROPERTY REVIEW

Is it a bird? A plane? No, it’s an Apple

The Apple Campus 2 project in Cupertino, California, is a helluva ambitious project worthy of Steve Jobs’s legacy, 30 years after

the Apple Macintosh was fi rst unveiled

It’s called the “spaceship” or “mothership” – a cylindrical � ying-saucer-like building that 13 000 employees of tech giant Apple will soon call home. At a current budget

of US$5-billion – about one percent of Apple’s cash reserves – the new building, which sits on HP’s old premises, features some serious bang for its buck.

Taking up 4,8-million square feet, the four-storey-high cylindrical campus o� ers employees panoramic views from anywhere inside the building, thanks to its outside surfaces being constructed almost exclusively from glass. In a recent Bloomberg interview, architect Peter Arbour said the ring would use about six kilometres of glass in total.

In response to public concerns about tra� c and the e� ect it will have on the environment, Campus 2 will draw most of its power needs from an on-site low-carbon central plant, in addition to � tting out its roof with photovoltaic canopies.

And besides the obvious amenities one would expect from working at an Apple campus – which include a café, a restaurant and a � tness centre – the 80% landscaped area is also replete with jogging and walking paths and apricot orchards, increasing the number of trees on the property from 3 700 to 7 000.

Practically, the campus will contain a 300 000-square-foot research facility, 1 000-seat auditorium and 14 200 underground parking bays.

By David A Steynberg


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Untitled-3 1 2014/02/06 10:35 AM

Value Management

Procurement Documentation

All accounted forEvery time

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Acknowledgement: SAOTA – Stefan Antoni Olmesdahl Truen Architects

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