Berry Everitt, CEO of the Chas Everitt International property group:
The very detailed State of the Nation Address dealt with all of the economic and social issues that are currently of concern to the real estate industry, including the need to rebuild investor and consumer confidence in SA, stimulate economic growth, accelerate job creation and eliminate widespread corruption.
“It was inspiring to hear how much progress there has been in the past year in reaching the R1,3-trillion investment target set by President Ramaphosa, in rebuilding sustainable relationships between government, labour and business, in restoring the credibility of institutions like the NPA and SARS and in addressing gender-based violence and other critical social issues in SA”.
“The President also shared what was being done to try to solve the Eskom crisis and to ensure that the perpetrators of corruption not only fce real consequences for their actions, but ate forced to return money stone from the ‘public purse’.
“However, the SONA was also very optimistic and forward looking, and we are excited by the announcement of several initiatives that will not only reduce the social housing shortage but significantly increase the number of South Africans who are able to build their own homes and /or enter the formal housing market – if they come to fruition.”
These initiatives, he says, include the release of State-owned land in strategic locations that are close to work opportunities for housing development that will be integrated with the provision of all necessary transport, schooling and health facilties. “We assume this initiative will run alongside plans for more than 500 000 new social housing units to be built over the next five years, and for R30bn to be spent on fixing, improving and expanding municipal infrastructures.
“At the same time, government intends to expand the People’s Housing Programme, which provides serviced stands to households and housing collectives that are prepared to build their own homes, and is to set up a Human Settlements Development Bank to leverage private sector investment in new housing”.
“Meanwhile the special presidential task force on reducing the constraints on the establishment of new businesses – and especially small businesses – could, we think, be a real game changer in enabling more South Africans to earn enough to buy their own homes. Small business is after all the major engine of job creation, and jobs plus confidence in the future are the foundation stones of a healthy property sector.”
Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty:
South Africa was the living embodiment of the “good news, bad news” paradigm.
“There are a million jokes with that punchline, but I’m currently seeing the dark side of Chögyam Trungpa’s brain bender that goes ‘The bad news is you’re falling through the air, nothing to hang on to, no parachute. The good news is there’s no ground’”.
“For the country the good news is that the government’s foreign investment attraction strategy seems to be on track. Last year’s investment conference generated pledges of around R300 billion in investments and in the first nine months of the year R70bn in FDI arrived in the country, according to President Cyril Ramaphosa“.
“FDI is critical for economic growth, but the bad news starts with yet another rescue plan for Eskom and while Ramaphosa is adamant that the fiscus won’t shoulder the SOE’s debt, there seem to be few qualms about passing the burden of payment onto the private sector“.
“Eskom is R420 billion in debt, energy experts estimate it has a staff bloat of more than 50% and AfricaCheck has put the average cost to company per employee at R600 000 per annum. This while Eskom is asking Nersa for a tariff increase this year of more than 15%.”
Geffen says the fundamental failing in the President’s plan is that the government is attempting to build a mansion on a foundation of termite-ridden wood. It looks pretty to the world for now, but it will fall in on itself sooner rather than later unless some serious spadework gets done.
“We can attract investment and shout the good news, but when the global money and the investors arrive in South Africa, we have to start the narrative with the bad news of how operational costs will drive their profit margins into the ground because the power utility is broken and that they’ll have to pay staff more to cover basic bills at home“.
“But wait; there’s more. The other bad news is if investors sink billions into land and create infrastructure, we’ll also have to tell them they’re in the same boat as the country’s citizens and there’s no guarantee they’ll get to keep it or see a cent for it should the government decide to take it away. This with Ramaphosa’s adamant reiteration during the SONA that the government is going to drive through the amendment to Section 25 of the Constitution that will confer on them the right to expropriate land without compensation“.
“And just like that, the pretty mansion that the government is trying to tell the world is the new ‘us’ collapses, and those who’ll suffer most if that happens are South Africa’s citizens.”
Geffen says that on the face of it Ramaphosa’s second SONA was upbeat and would most likely be broadly hailed as good news for the country – a popular and suitably cheery opening of Parliament in an election year – but a single scratch to the glossy coat of paint would reveal the sharpness of the precipice below.
“Too many people fought too hard for liberation and they don’t deserve to have their dream ripped away from them in this manner. Cabinet needs to think long and hard about who its members work for – not the state, but its people”.
“As with all election years, though, it’s probably best to consider any speech to be a campaign speech, and with any luck on May 9 after the poll the Cabinet will crack the whip and get the government working hard to affect a successful turn-around strategy for the national economy”.
“They’re responsible to around 50 million bosses so hopefully they’ll put their backs into it and get the job done.”
Rudi Botha, CEO of BetterBond says the SONA was very wide ranging and covered a huge number of initiatives, but that there were definitely some highlights for the real estate market.
“Essentially, higher home ownership and the increased personal wealth that this brings is dependent on three things: investor confidence, economic growth and job creation, and the SONA made it clear that President Ramaphosa and his team have been working very hard to increase all three“.
“They have openly addressed and taken action on things that make potential investors nervous, such as a previous lack of clear policy direction in mining and land ownership, rampant corruption and the near-collapse of State-Owned Enterprises like Eskom. They have also been very open to working with the private sector to accelerate the implementation of many new projects that will stimulate economic growth and job creation”.
“And looking ahead, we are particularly pleased by the establishment of the new R100bn National Infrastructure Fund to leverage private investment into the revitalization of existing infrastructure and the development of new roads, railways, dams, harbours, hospitals and schools – as well as the provision of urgently needed student housing at tertiary institutions. Thousands of jobs will be created in the process.”
In addition, he says, the establishment of the new Human Settlements Development Bank has real potential to solve SA’s social housing shortage within a few years, especially if its plans are integrated with those to release large tracts of State-owned land in strategic urban locations for housing development, and to recapacitate local authorities and rebuild local infrastructures.
“We also applaud the high-level plan to reduce the level of economic concentration in SA so that small businesses can compete on a more equal basis and create millions more jobs in agriculture, tourism, the oceans economy and other entrepreneurial sectors”.
“Also exciting are all the measures being taken to ensure that SA will be positioned as a global competitor in a digital future, including the establishment of a special Presidential Commission on the Fourth Industrial Revolution. The aim is to ensure that young South Africans will not be left behind in fields like IoT, AI and robotics, and will have all the skills and qualifications necessary to thrive – and become the homeowners and property investors of the future.”
Herschel Jawitz, CEO of Jawitz Properties welcomed the 2019 SONA address saying that:
“At last there were some concrete proposals on real issues facing the country. Issues such as fixing Eskom, reducing barriers to doing business in South Africa and tourism, and a key focus on childhood education and healthcare that are so critical to the short and long term development of the country. We have the ability to fix these issues but what has been missing is a real will and the right leadership. The initiatives announced at SONA are an encouraging start. What was also positive is that government has identified state owned land as part of the land reform program, which will take away some of the uncertainty with regard to the land expropriation issue. The real key is going to come down to the execution and implementation over the next year, but for the first time in a decade, the country has a direction to fix the problems and that is very encouraging.”
President Cyril Ramaphosa’s SONA 2019 (state of the nation address) was very positive, and one of hope and taking the next steps towards his “new dawn” and economic renewal.
Samuel Seeff, chairman of the Seeff Property Group says that, ahead of the address, the group also noted with encouragement that business confidence had stabilised.
Seeff said further that he was particularly encouraged by the investment successes, and firm stance and proposed action to deal with corruption and maladministration including prosecution and the recovery of funds and assets.
“The progress around governmental cost-cutting and the state structure and administration, management of the SOEs, and in particular the proposal around dealing with the Eskom crisis should be very positive for the economy“, he said further.
“The focus on economic growth sectors including the ocean economy, tourism and so on, are all positives, and we note with encouragement the news of a significant gas find off the coast of Mossel Bay.
On the issue of land, the proposal to use state owned land for redistribution and other proposals including a Human Settlements Bank are all noted”.
Seeff said further that the group is encouraged by the stability that seems to be returning to the economy and currency.
“Our message is indeed, Mr President, we are “watching this space”, and looking forward to a renewed growth path“, he said further.
“For now though, we should note that there is no “magic bullet” and economic recovery is likely to be gradual, simply because there is much to be done. On the back of this, the property market will continue to trade fairly flat with mostly sideways activity during the early part of this year”.
The “must buy and must sell” market, generally below R1,5m (up to R3m depending on the area), will remain active and well-priced properties will sell within a reasonable time frame.
The second market, i.e. those with discretionary money who do not have to buy or sell, are likely to continue waiting and watching how things unfold as we lead up to the National Election which has now been confirmed for Wednesday, the 8th May.
That said, Seeff’s advice to buyers and sellers, is that there is no reason to wait if you need to, or want to sell: “Price growth has remained fairly subdued, and the lending landscape remains positive. While it may be riskier now, you could ultimately see greater returns“.
Sellers though, will need to keep their price expectations in check if they want to transact right now. There are no guarantees, and Seeff concludes that if you need to, or want to sell, be sure to consider all serious offers.