Advice and Opinion

Property industry weighs in on SONA 2020

Media Business

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett:

The disruptions that suspended proceedings at SONA does not bode well for investor confidence in our nation. Despite this, President Cyril Ramaposha has made some encouraging promises and inspiring statements in his state of the nation address, but I am interested to see how many of these promises will come into being.

While some might feel that the presidency has not done enough to solve the country’s most pertinent issues, others will have had their confidence restored by the solutions posed in this address. Though we might notice a positive upswing in market activity following the SONA caused by this renewed confidence, this momentum will wane if people become disillusioned by a lack of implementation. Only once his statements around lowering unemployment, improving economic growth and dealing with the Eskom crisis come into being, will we start to see a notable and sustainable change in the real estate market.” says Goslett.

At the end of the day, this country does not have an economic problem. It has plentiful resources and immense growth opportunities. There should be no reason we are not among the world’s elite economies. Unfortunately, we have too many people in positions of leadership who have a lack of integrity and a culture of greed and indifference. True change in the form of investment and economic growth will only come about if there is follow through on corruption and consequences for corrupt individuals. The other solutions President Ramaposha posed during his address will mean little to nothing if we do not get this right.

Joff van Reenen, Director of High Street Auctions:

Any turnaround now will come from the private sector and business is going to be working alone to pull this country from what can only be described as ‘disaster’“.

This private-public partnership Ramaphosa has touted ever since he walked into the Presidency hasn’t materialised so far and will never get off the ground as long as the government’s policies continue to actively deter investment confidence.”

We don’t need more State ownership, we need less, we don’t need the prospect of land expropriation without compensation or judicial recourse hanging over investors like the sword of Damocles, we don’t need more party-political pronouncements that push us closer and closer to total junk status and we don’t need insane and unworkable government job creation programmes forced onto us“.

We need entrepreneurship, we need innovation and we need business to believe in the future of the country and step up to the plate. As far as government is concerned, the only thing it needs to get right and quickly is a stable power supply so that business can get on with the business of rescuing South Africa.”

Van Reenen says it’s ironic that Ramaphosa chose in his opening remarks to quote the late President Nelson Mandela’s inaugural address in 1994, choosing the words: “Today we enter into a covenant that we shall build a society in which all South Africans, both black and white, will be able to walk tall, without fear in their hearts, assured of their inalienable right to human dignity.”

More than 25 years after Mandela spoke those words, it’s a tragedy that his vision for this country is still a pipe dream, and there is truth in the fact that the greatest dignity a nation can afford its citizens is the sense of pride that comes from individual prosperity in a free, dignified society,” says Van Reenen.

Perhaps more apt to ponder in light of where we are as a country right now are Mandela’s words from a year earlier – his 1993 address to Cosatu when he said ‘… if the ANC government does not deliver the goods, you must do to it what you have done to the apartheid regime’.

Given South Africa’s economic outlook and what that means for everyone trying to eke out a living in this country right now, maybe it is time to start asking the hard questions.”

Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty:

The world would be forgiven for thinking they were listening to a rebroadcast of 2019’s speech; we’re in the same place economically and a year down the line the president is talking about the same things“.

Load shedding is crippling the economy, corruption continues to plague government, our public service wage bill is bloated in the extreme, crime is rampant, the youth need employment and our economic outlook is dire, to say the least“.

The speech also failed to allay investor concerns about the future of private land ownership, which is going to be felt across the economy.”

In his speech Ramaphosa said: “Government stands ready – following the completion of the Parliamentary process to amend section 25 of the Constitution – to table an Expropriation Bill that outlines the circumstances under which expropriation of land without compensation would be permissible.”

Geffen says this push by the executive borders on insanity while the government sits on nearly 2 million hectares of state land that could be used for redistribution before touching privately owned property, especially in the current economic climate with the country facing junk status.

The president admitted in his speech that so far only 44 000ha of state land has been released; a veritable trickle in the greater scheme of things. But very ambitiously we’re being told a whopping 700 000ha will be released in the coming year, which will be an administrative impossibility.”

Geffen says one of the few welcome announcements was the substantial sum of R10 billion being invested over the next five years in empowering women in business.

The president is correct in saying that empowering women is critical to inclusive economic growth, but at the end of the day success is going to hinge on roll-out.

We’re staring over the presn’t given us much more than jazz hands. South Africa is far from out of the woods.”

Herschel Jawitz has cautiously welcomed President Ramaphosa’s State of the Nation address, which addressed most of the critical issues facing the country but not necessarily in enough detail.

Jawitz believes that the key to restoring economic growth is confidence by business to invest and consumers to spend. Key comments by the President in his address that may start to restore confidence include decisive action on Eskom, load shedding and the need to accelerate the inclusion of alternative energy sources.

In addition, his comments regarding the finalisation of the amendment to Section 25 of the constitution that affects land expropriation are welcomed. It is, however, the uncertainty around the amendment which is causing the damage and not necessarily the bill itself.

Jawitz welcomed the release of further government land for agricultural use. Many of the land issues could be solved through allocation of government-owned land and the issuing of title deeds to people who have been living on their land for extended periods rather than resorting to expropriation.

Markets and investors don’t like uncertainty and the sooner this bill is finalised the better. Once again, the key test for the implementation of the many initiatives highlighted by the President was summed up in his comments that ‘we will embrace change and fear nothing’. If confidence is to be restored, South Africans will have to see action on the ground.

From a residential property market point of view, the current market in terms of bank lending, interest rates and property prices offers the best buying opportunities since 2008. The lack of confidence to think long term and invest long term in residential property is what is holding the market back rather than affordability. The state of the residential market is a crisis of confidence.

Carl Coetzee, CEO of Betterbond:

While it is hardly news that what is desperately needed in South Africa is economic growth and a dramatic increase in the employment rate, it was nevertheless reassuring to have President Cyril Ramaphosa address these issues and flag them as a key priority in his State of the Nation address“.

Restoring investor confidence by tackling corruption and government debt through realistic and attainable measures is foundational to demonstrating to ratings agencies and investors that we are serious about sustainable change and a better, more stable future for all“.

The question around land expropriation without compensation (ewc), or rather the lack of a clear policy on the matter, has been plaguing the country and it was a pity the President did not use this opportunity to offer clarity around this contentious issue, other than that “government stands ready… to table an Expropriation Bill that outlines the circumstances under which expropriation of land without compensation would be permissible”.

The overall health of the economy, consumer confidence, and employment growth in particular are key factors influencing the health of the real estate market. As such, we’re pleased by government’s plans to create more employment and opportunities for the youth in particular, which is sure to set us on the right path“.

Social housing remains a priority, which is why the president’s commitment to building rental accommodation for low-income families is encouraging. Positive for the property sector is the estimation that this could leverage as much as R9 billion in private investment for the construction of some 37 000 rental apartments“.

Student accommodation, similarly, is set to leverage at least R64 billion in private investment with government spending an additional R64 billion on the same. It will be interesting to track the development of the smart-city currently in development in Lanseria. Over the next decade, the President said, between 350 000 and 500 000 people will call it home. Set to be both 5G ready and “a leading benchmark for green infrastructure continental and internationally”, we are ready and excited to embrace new ways of thinking about how we live“.

However, we remain concerned about the economic burden Eskom and other State-Owned Entities place on the fiscus and, by extension, the consumer. A vast portion of the population is already struggling to make ends meet, leaving little room for them to pay rent, save for a deposit on a property or be in a favourable position to qualify for a bond“.

Each of the President’s plans and promises are admirable and have the potential to bring about the changes and the growth we so desperately need in South Africa, but it remains to be seen how it will play out in practice“.

SAIBPP:

The South African Institute of Black Property Practitioners (SAIBPP) welcomes the State of The Nation Address made by HE President Cyril Ramaphosa and welcomes the various commitments made, specifically those that have a bearing on the property sector as this is seen as a great opportunity for the meaningful involvement and inclusion of black property practitioners“.

We are encouraged by the commitments and believe that there are clear signs of the governments focus on delivery and transformation of the economy. We note the announcement of funding for student accommodation which we believe when the detail thereof is elaborated on, we would support a sizable share of the investment directed towards previously disadvantaged and marginalized higher education institutions“.

We believe that this along with the plans for an increased focus on technology and innovation led education will go a long way in uplifting the overall educational environment of our youth. The identification of Lanseria as an emerging smart city is welcomed, and we are more encouraged that this mega development is potentially the only majority black-owned and led smart city development in the country. This shows a clear commitment to the economic transformation in the property sector by this administration“.

We do however still remain concerned that The Presidents address was silent on investment in existing cities, specifically inner cities which have become dilapidated yet house the majority of our poor citizens. SAIBPP welcomes the emphasis placed on the provision of social housing and hope that there will be increased efficiencies created between government and the various funding institutions in this space. We thus welcome the formation of The State Owned Bank which we feel should alleviate the lack of funding available to black property entrepreneurs caused by the stringent risk measures currently imposed on them. We do however note that the address was silent on the housing development bank and its ability to ease the burden of access to finance and funding for housing.”

SAIBPP is disappointed that the president was non-commital on the issues of land specifically the over emphasis on land for Agricultural benefit and not contemplating it for real estate which could see the extraction of its value maximised, this along with the release of some of the government land assets to unlock capital value and catalyse public investments“.