LAND [Part 2]

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From Biznews, 19 July 2019.

What a compliment to a man who has fought his fight in a team of fighters to retain the independence of the SARB. Thank you for the rate cut, Mr Governor, But even more so, Thank you for fighting for what is right….

“Lesetja Kganyago has had a tough time of it. With the economy tanking, some have been calling for a political takeover of the SA Reserve Bank (SARB) in order to, one assumes, print money in the hope of inflating our way to prosperity, or at the very least, tweak the central bank’s mandate to focus more on growth.
In his role as governor, Kganyago has been a powerful voice for SARB independence. That’s no small feat at a time when central banks are under political pressure from Turkey (where the governor of the central bank was summarily fired by the Erdogan) to the US (where Trump has been giving Powell a rough ride). SA is in the fortunate position of having an independent, technocratic central bank, and Kganyago is working hard to retain that.
Which brings us to yesterday’s rate cut. While some may see political pressure in the decision, the monetary policy statement clearly outlines a balanced and rational case for a cut. With the economy contra Best”
Felicity

The first Land read was interesting, hey? I mentioned Bulpin, the author, to my well-read, elderly neighbour and he said he certainly knew of him in his day; a good author he said. At least that gives me some comfort as to source.

Given that we are not going to debate who was where when, I’d like to unravel a little of the emotion around land. On the one hand, the owner of a unit on the 17th floor, The Michael Angelo, ultra-luxury apartments in Sandton, surely does not care about the value of the land? That problem was solved 10 years ago when the developer bought a plot and began building a high-rise. On the other hand, does the person who “owns” a piece of “heaven” on the beach along the Wild Coast where he has a rudimentary two bedroom house and a 3-cow herd of cattle and 15 chickens also doesn’t care about the land; he rents it from his tribal leader and never achieves value other than the subsistence farmer that he is? And what about the great 12000Ha farms in the Karoo that can sustain a herd of sheep and a few other animals in the vicinity of the homestead? And finally, the Top Road, Clifton owners who have multi-million homes with views to suit?

In order to do some justice to the effort, let’s divide the thoughts into:

Culture

Commercial

Capital.

CULTURE: [I need to declare my cultural heritage and the bias it brings. I am English speaking, over 60 years of age and first-generation South African with parents from the UK. Naturally, I have a view of the world that may not reflect all my readers’ and hence there may be bias for which I apologise.]

This topic is serious and emotional. It probably speaks to the heart of the Land issue in South Africa. The dispossessed now have protagonists of their cause – EFF and Black First Land First, as front-runners. Unlike Australia, New Zealand and the United States, for example, we had the word Apartheid applied by Europe (as I understand its source) as we made a science of social engineering. The demographics of apartheid and the grande design of separation-with-a-purpose, or separate development in homelands, was never going to make muster. It was hated, exploited and overcome after years of the struggle and we will never return to its indignity and spatial dynamics again. The dispossessed are aggrieved deep into their souls and the land-holders are threatened to the nth degree. But somehow, this matter needs to be resolved and we live in future imperfect as our President attempts to make inroads into the problem. No wonder he says one thing to one constituency and another thing to the next constituency – he probably, better than many of us reading this, truly knows how hard the task will be to keep everyone satisfied and the economy on an even keel at the same time. Our “right” to land was destroyed when strangers appeared from another continent and began to broke or force away our land. Like Israel and Palestine, that dispossession and its well-told stories have woven itself into our fokelore for the Ancient and our spatial demographics for the Modern.

Different peoples have different views culturally. In Joburg North, I really don’t care if my land is in Lonehill or Fourways Gardens. Culturally I have no sensitivity at all; it is simply a suburb preference. But for others, a plot in Magoebaskloof is vital for family continuity and memories; even spiritual for millions of people. I’ll never forget learning about a culture of our Black people that if a relative dies away from home a ceremony takes place using a Buffulo Thorn branch at the scene of death. The branch is brushed over the ground in order to “catch up” the spirit of the deceased. The branch is then returned to their home and placed, say, in their room so that their spirit may settle in again. That may sound unusual to me, but how strange it is to see crosses and flowers at scenes of road accidents remembering a loved one’s place of death. On Saturday I went past such a shrine which has been there for years on the Hartebeespoort road and the large printed photo of the deceased is now pale and worn by the elements. Perhaps those left behind have moved on but even the road workers don’t clear the memorial.

So Land carries enormous cultural significance. Perhaps the best we can do is understand that the plot at Magoesbaskloof means the same to someone as the family home in Plettenberg Bay to another person. And the point is, millions are aggrieved by what is deemed to be dispossession and I’m not sure where the fight is going to end in the final analysis.

As a boy in Natal, I watched as the Whites were removed from Isipingo and replaced by Indians, there and others relocated to Chatsworth. At the same time, homelands were being boundaried and funded at great cost along tribal lines as best the government of the day understood it. As a consequence, we had upset Whites moving into the suburb where we stayed, Indians getting “prime land near the sea” and the strange so-called independent state of Bophuthatswana fragmented into many little “states”. Frankly, what a mess! But as a result today, we have Black First Land First and others, like our Hermanus Land First, making mayhem in our country.

Culture and Land intersect in agriculture. There’s something about the dry soil running through their hands that makes farmers love their Land. I think the same applies whatever race or nationality you belong to. Farming goes hand in hand with Food and therein lies the rub for all those who threaten and even attempt to kill off farmers; take the Land and you cull the production. Cull the production and you’d better get used to the feeling of sand running through your fingers because, frankly, that’s the only worth that land has.

If ever a Loser existed, Zimbabwe takes the trophy. Venezuela is too far away for any other than CNN to convey the mess, but our Northern neighbour is on our doorstep. Economically, southern Africa’s own Syria in which millions of people have suffered, the rich and skilled have emigrated and the poor have migrated. Tragic social engineering of a different kind; Land capture by a threatened, greedy State. God help us if we sink into land-for-pals’-votes in such a grotesque manner. Culture and votes drove the dispossession for the people, but hatred and assault drove the farmers away. With them went the food, sustenance and foreign currency of a nation – how stupid can you be! And we are not immune, Culture is the pretext for much of the Land political rhetoric but whether the politicians have a point or not, the end result is scorched earth. The notion that you can “take back the land” and not do inexorable damage to the nation is far-fetched. Just ask the estate agents who are now “stocked up” by sellers longing to sell at a reasonable price and not even getting any offers. And the politicians need to understand that the “end justifies the means” is nonsense when it comes to destroying for the sake of rebuilding. In my humble opinion, only war carries that logic as would be indicated in Germany who had the Marshall Plan to help restore it, and Japan who took Hiroshima from rubble to skyscrapers in 25 years in what was a display of intense national pride. Unfortunately, all we have managed to do in this country is take a grand old airline like SAA and bankrupt it while getting its baby brother, SAExpress, grounded. A very different intent and purpose. Land in Zimbabwe was given to the least deserving, ala Grace Mugabe, while the locals who received plots continued to live in un-supported, un-serviced squalor.

Culture is a prime driver of the value of land. It may not add much to its value commercially but it certainly drives peoples to want it or defend it, either even with their lives.

COMMERCIAL: This is the application of Land that many of us understand well. For the sake of it, this land comprises all land zoned Commercial or invariably, that land and buildings which houses factories and office space. The point is that this land derives its value from its rental income and rental contracts. For our benefit, we will include buy-to-let apartment units.

I remember when I first learned the word “Opportunities”. It took care of the Michaelangelo Towers example above. Essentially, an opportunity was the total cost of the land and the building divided by the total square meterage of the saleable floor space. The selling price then included a profit margin for the investor and/or developer. 100 units were 100 opportunities for sale.

This formula of total cost divided by floor space allows for a return on capital which is acceptable to those who have taken risk for the development. If all sold, the opportunities yielded many a handsome profit for developers. However, not too many developments have been plain sailing. I remember when Summercon developments came to a halt as electricity could not be guaranteed. Nobody offered an offset for development loan interest or the time cost of delay; those developments just “hung” as vacant land or part-finished properties. Very costly indeed. Then there is the development risk ie sales are not enough to cover costs and bonds and serious damage can occur. Fortunately, the banks understand the cashflow risk of developments and tend to nurse the developer through. Sometimes they will have taken equity in the hope of upside in which case they make themselves part of the solution.

Apart from capital profits – build 100, sell 100 – the primary form of returns is rental. This is where things really get interesting over long periods of time. The amount of the lease, the term of the lease and the quality of the tenant then play a huge role in the value of the property. Now its land and building cost is just that and only its value of the lease agreements give it any value whatsoever. After all, who wants to own an empty building in Claremont with crippling costs pumping through every month? The discounted cashflow of the net rentals becomes the source of value. That present value, after all operating and financial expenditure is the only value worth talking about. Of course, right now you may like Checkers as the anchor tenant but you may also be focussed around an Edgars as well. Better the former, for sure! We have a building in Hermanus with both and I often wonder what would happen if Edgars finally gives up the ghost. Of course in similar vein, it’s also interesting that the new Whale Coast mall has a flagship Checkers [Whitey Basson lives just down the road] and thus the mall store obviously cannibalises the village store. We often now hear of renegotiations of lease costs by major tenants in order to meet low economic activity. Each time, the owner of the complex takes a knock in their value. Vacancies also play havoc with these values over time.

Point is that commercial property has no “land” value per se. Only the net flows of income matter when it comes to determining the saleable value of the property.

But to see Culture and Commercialism come together roughly, we need look no further that the same Whale Coast mall. The locals believed that the land was earmarked for affordable housing and I have no reason from some Press articles of the time to deny their understanding. But the mall was built after an 8 year approval process. Needless to say, the mall was targeted and threated by marchers during the protests in no uncertain terms. I’m not sure what this underlying, unresolved issue will do to the mall’s value in the long-term; time will tell.

We will leave CAPITAL for next time……….

Yours in Property.

LAND (Part 1)

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The issue of land predominates our thinking these days. In a short series under the name, we will explore some aspects of land and what gives it worth. I do not expect every reader to agree with me. Nor do I imagine that every reader will take from my opinion anything other than their own version of what remains the elusive truth of what really took place as a global phenomenon, namely, colonialism.

I was given a book by my Uncle Piet who presently lies in Gauteng quietly awaiting a long and kindly sleep to embrace him. In a sense, this blog is a tribute to this old man who has sunk more mine shafts and mined more gold ore than any other I know, but who also has managed to live a remarkable life. In addition to his wife and family, he too loved my wife and I.

To whet the appetite and get you thinking, I extract from the book by TV Bulpin, Lost Trails of the Transvaal, which was published in South Africa in October, 1956. I was just 19 months old then and a resident of then, Northern Rhodesia, now Zambia. When Uncle Piet gave it to me, I couldn’t wait to read its secrets. I learned that the lost trails are those ancient highways created probably initially by animals searching for water or seasonal grazing but later, expanded by pioneers and settlers of every kind, in search of grazing, or hunting, or something new underground, or the ever-elusive sea. Trade had become a force and supply lines needed to be shortened for the commercial gain of easy access to larger quantities and secure supply lines. Of course, there too were military operations that relied on the expansion of the trails for military execution.

Hope you enjoy the series and that it gives you a richer sense of what values property today…….

TV Bulpin writes in his Foreward:

The infinite patience and artistry of that old craftsman, Nature, has wrought upon the face of earth some wondrous themes and changes. With the resistless erosion of the elements as the principal tool, all manner of strange shapes have been ingeniously contrived. Deserts and mountains and oceans have been made and then, through some whim, the whole lot changed; the plateaux into seas; the seas into desert; and some longstanding geological systems of a magnitude staggering to mankind simply vanished away with a facility of a mis-spelt word being changed in a schoolchild’s lessons book.

That segment of the complex face of Africa lying between the Vaal and Limpopo rivers, and called the Transvaal, has known in full measure the sublime cycle of restless creation. Of the whole continent of Africa, in fact, there is no section possessing a greater variety of scenic marble; a more complex geological history; or a richer endowment bequeathed to it from the mineral treasure chest of providence.

With such a bait to lure man on, in a natural setting so magnificent, it would be surprising, indeed, if anything less had resulted than a human history of immense variety, restless movements, and all the varied passions which the presence of incalculable wealth can be expected to arouse.

To the Transvaal, in fact, has come a remarkable collection of human beings, attracted there from the ends of the earth in hope of finding their hearts desire of freedom or fortune in the wilderness.

…..and Bulpin continues into Chapter one:

Just who precisely were the first men to ever wonder across the face of the Transvaal remains unknown. The succession of prehistoric men whose remnants distract the scientists pass like phantom figures, brutal and bestial, through a nightmare that lasted for untold millions of years. Taung man, Rhodesian man, Boskop man; all had their epochs. None left anything lasting of themselves behind save a few bones to be accidentally found in the places which have given their kind of names. From creatures more animal than man, they changed to creatures more man than animal. And then, at last, some 15000 years ago, the people loosely known as the Bushmen, came to displace and absorb the last of the really elementary humans, the so-called, Boskop men.

These Bushmen migrants from the north must have found the Transvaal on the threshold of the present topographical shape. Enormous changes had warped and modelled the landscape through ages of time. It had been left eroded into two principal regions differing widely in their attitude and associated climate and varieties of flora and animal life.

The lowest region, averaging some 2500 feet above the level of the sea, was a place of dense Acacia bush in its southern reaches and changing in the north across the Tropic of Capricorn to that wilderness of Mopani trees which stretches off for 2000 miles across the heart of central Africa. Africa must have been very new. Its face was covered with an explosive rash of volcanoes and their furnace glow must have made the nights a phantom sight.

The second region of the Transvaal, the northern end of the high lying central South African plateau which projects over the Vaal river, is totally different from the Bushveld. Rising up to 7651 feet in its highest point (the Steenkampsberg), it is in an open wind-swept prairie with little to break its spacious sweep save an occasional rocky ridge or hillock, or one of the shallow, hard dried out lakelets known as pans.  These pans, especially those around the principal Transvaal specimen of its kind, the 6 mile long Lake Chrissie, have a curious geological history. Some of them seem to be relics of ancient river drainage systems, long since disrupted by changes in the landscape.

It is underground, indeed, that the principal features of the Highveld are found. The most phenomenal of all these features is without doubt the elevated ridge which forms the northern watershed of the highveld. This ridge, the famed Witwatersrand, or ridge of white waters, consists of the surface crust of a sandwich of reefs 25000 feet wide and of unplumbed depth. In the midst of this sandwich, like a layer of jam, is the 2000 feet wide main reef which, for 70 years, has supplied the bulk of the world’s gold.

It was over this varied land that the simple Bushmen wandered. With no clue at all of the marvels beneath their feet they hunted the game and lived unchecked by anything save the rivalries and squabbles of their own contrivance. About 1000 years after Christ, the first Bantu started to drift in from the north. Offshoots of the Karanga people of Rhodesia began to arrive in the shape of minor clans and groups of individuals shaken off from the main body by some domestic row or disagreement between factions. These groups of people carried with them into the Transvaal some of that peculiar knowledge of building with stone and working with metal which has made their parent tribal group so famous in Africa. Subsequent migrations and conquests have largely disrupted these early settlers and, in any case, they were never particularly numerous; but behind them they have left memories and mysteries that can never die.

Then in the early 1900’s, a European hermit of the wilderness, Bernard Francis Lotrie, known as “The Wild Lotrie”, took up his residence in a shack by the banks of the Limpopo close to the forbidden hill, The Hill of the Jackal. This Lotrie was a curious soul. Born in Grahamstown in 1825, the son a French botanist sent to South Africa by Napoleon, he was a man of some education.

Bulpin then continues to relate stories of all the ancient tribes who occupied the Transvaal (obviously, now Gauteng), their life routines, their disagreements and their places of worship. Suffice to say, for generations these people lived on their mountain, and then, with later invasions of alien people to the district, they dispersed and merged with their neighbours on the plain. Many of the place names the old Sotho settlers gave to the land still exist. In past years the Magaliesberg was known to the first English hunters and traders as the Cashan Mountains, from the name of the chief Khasane of the Taung section of the tribe who lived there. Later, when the Voortrekkers arrived, they found the chief Mohale or Magali of the 6aPo tribe resting there; and hence came the new name for the Magaliesberg.

I will not be drawn into the debate of who was there or where first. Frankly, the Bushmen [San, Khoisan] seem to be the first as, in fact, was the finding of Jan van Riebeeck in 1652 in the Cape. Another historical fact is that the Europeans, by their very name, were always second and the debate of where they found empty spaces or settled tribes is unknown in the detail required to make it significant. It is simply too factious for me to enter into; nor is it relevant to this series.

But this much I will venture, if we could find a way to allow the past to only influence our good in a spirit of mutual belonging, mutual respect, and mutual co-operation, then this beautiful, tortured country of ours could be great among the nations.

Yours in Property.

HALF-YEAR 30 JUNE 2019

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Hard to believe half the year has flown by!

It has been loaded with politics including a national election and the finalisation of parliament, economic data for the first quarter that sucks at -3.2% GDP growth, SOEs’ revelations every day that boggle the mind, defamation claims that seem to have become lawfare, and emigration statistics that leave you reeling. Never a dull moment in SA Inc.

That said, we have survived and even Donald and China seem to be reaching some agreement. Hauwei or Meiwei is Donald’s Wei but I Mustsei, he currently has the best stock exchange performance in the world – often in excess of 15% with the Nasdaq flying. And then there is the Brexit “Deal or No Deal” show which, with the weakest Bachelor I have ever seen, has had us glued to the screen more than Netflix. I never knew I would binge on Theresa May – flicking from her to Deputy Chief Justice Zondo more times than a fly escapes its swatter. Never a dull moment in world politics either.

Our property market has moved sideways and getting a positive article out of anyone that I didn’t think was simply “talking it up” has been really hard. But out there, hard-working men and women have made ends meet and sold and sold despite the push-back of the market. That it is a buyers’ market, there is no doubt but even getting a buyer to bite has been tricky. You can’t do deals with people walking through your show-house; you actually need an offer to make a negotiation possible. My friend who has had 25 couples come through his house in two months feels exactly what I’m talking about. But I must say, both from a rate and an approval point of view, the banks have remained really good. No shut down from them and truly, they hold the key to continued sales and borrowing. If we can just hold Eskom solvent, we have a good chance of emerging from the mess we are in. Heaven help us, please!

Getting technical for a moment, I received a good article in Businesstech, 29 June 2019, quoting Tobie Fourie, National Rentals manager, Chas Everitt and entitled, New South African rental laws may be implemented soon – these are the changes you need to know about, that gave some good insight for those of us owning buy-to-lets or in the rental business. Some extracts:

Top of FormBottom of Form

The Rental Housing Amendment Act will be implemented soon. The ‘new’ Act – which was actually passed in 2014 – contains the most recent amendments to the Rental Housing Act of 1999, which is still in force.

 

The act currently governs the overall relationship between tenant and landlord and sets out their statutory rights and obligations and aims to clarify certain aspects of the older Act that have given rise to many differences of interpretation.

 

The main provisions that landlords and tenants need to be aware of include:

  • It will become compulsory for lease agreements between the landlord and the tenant to be in writing and legally enforceable.
  • All sections of the lease and any explanations and definitions it contains will need to be explained to the tenants and understood before the document is signed.
  • It will be the landlord’s responsibility to ensure that the rental property is in a habitable state, which is in line with the existing Rental Housing Act.
  • The landlord will be responsible for maintaining the rental property and will have to ensure that it has access to basic services such as water and electricity.
  • Only the local authority will be permitted to cut off services to non-paying tenants.
  • No tenant may be prevented from entering the rental property or denied access to the rental property without a court order.
  • A joint inspection by the landlord and tenant has to be done on the commencement of the lease period, and if the landlord does not participate in this inspection, no part of the tenant’s deposit for repairs or damages may be withheld when the tenant leaves.
  • A defect list will have to form part of the lease agreement as an annexure.
  • When the deposit is paid back to the tenants, the interest earned on that deposit must also be paid to the tenant within seven days of the expiration of the lease, subject to any deductions for damages.

 

Landlords who fail comply with these and other requirements within six months of the new legislation coming into force could be liable to pay a fine or even face a jail sentence for non-compliance.

 

“And these legal complexities will make it all the more important for landlords to appoint reputable, reliable, knowledgeable, qualified and legally registered rental management agents to assist them and ensure they remain compliant”, said Fourie.

 

Let’s face it, if you are letting a premises that is not habitable, without a written lease and for which you do not have an inspection list at the beginning and the willingness to fix problems that arise, you should not be a landlord. On the other hand, good landlords have always paid some interest on deposits as they have earned [read: saved] interest if they took the money and put it in their bond on the property. But, there is the nagging feeling that letting is carrying more and more onus on the landlord to be proven right and the tenant to be proven wrong. Having said this, I can honestly say I have never had a bad tenant. Those of you who have will tell me to be very grateful, I know.

 

We enter the second half. Hopefully our politics settles down and the Zondo Commission provides an interim report on glaring state capture and we have a rate decrease. Then if we can hold onto our investment grade from Moody’s and fund enough of Eskom to keep the lights on, we may be through the first part of the drift. It’s knife edge to be honest but failure is also not an option.

 

Neither is pessimism. I understand how you feel believe me but one thing I know from personal experience is that all the worry in the world does not move you forward. Worry is like sitting on a rocking chair thinking you’re moving. You’re not; you’re just standing still and getting weaker every day, physically and emotionally. Cut it out and remind me to do the same if I lapse back. Homeloan Junction is in the same boat as you, nothing more and nothing less. We are here to support you to the best of our ability and are onside to help you succeed. Success to you in the second half!! – the same success we wish ourselves.

 

Yours in Property.

 

INTERESTING THOUGHTS ABOUT PROPERTY

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This blog covers a few interesting aspects of property ownership and investment. Hope you enjoy the read.

Renting has always been an option. For some, it is the only option given their inability to afford a bond but it is also for some an ownership alternative and lifestyle choice. In a recent [5 June 2019] article in The Business Insider, It is now cheaper to rent a home in Gauteng and the Western Cape than a year ago, James de Villiers explores the cost of renting in the Cape and Gauteng.

“The average rent charged in the Western Cape declined by R94 between the first quarter of 2018 and the first quarter of 2019, and by R64 in Gauteng, rental payment platform PayProp‘s numbers show. This as Statistics South Africa on Tuesday announced that the country’s GDP declined by 3.2% in the same quarter. 

When PayProp’s Rental Index for the first quarter of 2019 is compared to its 2018 rental index, it shows that the average rent in South Africa stood at R7551 a month in the first quarter of 2019, compared to R7610 a year before, a R59 decline. 

PayProp said most national rentals (31.7%) in the first quarter were in the R5000 to R7500 bracket; 22.3% in the R2500 to R5000 bracket, and 18.4% in the R7500 to R10000 bracket.

The average national distribution of rental properties across price bands (supplied, PayProp) 

The average national distribution of rental properties across price bands (supplied, PayProp)

Rent in the Western Cape, the country’s most expensive rental province, stood at an average of R9030 per month for the first quarter of 2019 compared to R9124 in 2018.

The Western Cape is followed by Gauteng where the average rent is estimated to be R8000 compared to R8064 in 2018. 

The Northern Cape saw the sharpest decline in average rent from R8153 in 2018 to R7817 in the first quarter of 2019 – a R336 decline. 

It is followed by KwaZulu-Natal where rent declined by R154 from R8129 a month in 2018 to R7975 in 2019. 

The Free State is one of three provinces which saw an increase, with average monthly rentals increasing from R5942 to R6054. 

Mpumalanga saw the second biggest increase, from R7248 to R7298.

Mpumalanga saw the second biggest increase, from R7248 to R7298

Johette Smuts, data and analytics head at PayProp South Africa, expects the average national rent to increase in the next few months as uncertainty remains in the South African economy. 

“Generally, uncertainty decreases consumer confidence, which could leave property buyers reluctant to commit in coming months, effectively dampening demand and putting downward pressure on prices,” Smuts said. “Meanwhile, all these prospective buyers need to live somewhere, and they’ll most likely be forced to rent a property, thus increasing demand for rental properties and pushing up prices.” 

 

The bottom line of this article is that:

  • Little change has occurred in the average cost of rentals in the period. As a landlord, I would be concerned with that as the normal 8-10% is obviously not applying. Could the renters be saturated? If so, not good news for the landlords.
  • As usual, the only good news of stagnant property prices for landlords is that they get an equal or better return on their property as rentals rise. This equals out at point in time as the rental less ever-rising service costs, eventually begins to eat away at yields. Time to sell then, especially as I found that yields in no-hassle, risk-free investments were better than the risk-fraught rental market.

Extracts from the next article have been overcome by recent events that seem to confront our President. However, BIZNEWS 12 June 2019, in their article by Theuns Eloff, the Chairman of the Board of Advisors of the FW de Klerk Foundation, Give Ramaphosa a chance, there is light in this dark tunnel, has this to say:

“One can almost feel the despair of the South African population. Many South Africans are asking, “What is Cyril doing about this? He is the President now!”

And that’s partly true – our President is in a better place than a year ago as far as party politics are concerned. He followed up his victory at Nasrec (53%) with a 57.5% victory at the polls in May. He is no longer an “interim” President, but one that has led his party to a victory (and probably single-handedly rescued them from a defeat). But, unfortunately, it doesn’t mean he is untouchable and can do what he wants.

There are a few stumbling blocks on his path. And to understand what’s happening now, one needs to know what these stumbling blocks are. There are still Zuma supporters in the Cabinet Only Ramaphosa’s leadership and drive will force them to take action. 

The second stumbling block is that, though there may be a new Cabinet, the people who will apply (hopefully) new policies, are still the same old officials – and the majority of them are the product of the toxic mixture of racial transformation and cadre deployment. It will take time to get better officials appointed on merit. Proper lifestyle audits are the only way in which the corrupt can be shown the door in the medium and long term.

Thirdly, it would still take longer to make a significant difference at the local level – that is how the three spheres of government work across the world. President Ramaphosa’s (and any President before and after him) ability to relieve the Mayor and Councillors of a completely dysfunctional municipality such as Lekwa (Standerton) of their duties, are extremely limited. In terms of Lekwa, which no longer even has the capacity to pump enough water for the community and businesses only a few kilometres from the Vaal River, and where the homeless sleep in the municipality’s offices at night, he can only work through the (also inept) provincial government and ANC structures. And it takes time…

The fourth stumbling block is that President Ramaphosa faces serious opposition from within his own ranks. The current face of this opposition is the ANC Secretary-General, Ace Magashule. He unleashed the current storm within the ANC through unsolicited statements about a changed mandate for the Reserve Bank. They can conspire together in the short term but also the medium term, with a view to the ANC’s internal processes and election conference that lies ahead in 2022.

Against the backdrop of these stumbling blocks on Ramaphosa’s path, one should never have expected the damage of the nine wasted Zuma years to be reversed soon. President Ramaphosa cannot put Ace in jail, as there are legal proceedings to be followed. President Ramaphosa also cannot just show Ace the door – he was elected by the ANC’s elective conference. Only when Ace is found guilty of a crime, can he be replaced as Secretary-General.

What can be done? President Ramaphosa has three “power blocs” in which to operate. Each of these three power blocs is unique, and like circles, they overlap.

The first power bloc the is ANC’s headquarters in Luthuli House. This is where Ramaphosa’s party political mandate comes from – and he can’t alienate himself from the majority of his own party. As a result of the outcome of the Nasrec election conference (and specifically the election of Ace Magashule as Secretary-General and Jessie Duarte as Deputy Secretary-General) he is not in charge of Luthuli House. He will have to take this factor into consideration and manage it at all times. 

The second power block consists of the Legislature and the Executive: Parliament and the Cabinet. Here Ramaphosa is in control, with the majority of the ANC parliamentarians and Cabinet supporting him – even if only because he is now firmly seated in the presidential chair. He can use this power bloc effectively, but still cannot act against the wishes of the majority ANC caucus members. This is where Ramaphosa has real power.

The third power bloc is that of the Constitution and its institutions. This includes the Chapter 9 institutions (such as the Public Protector, the Human Rights Commission and others). It also includes the judicial authority of the courts, especially the Constitutional Court. President Ramaphosa’s mandate as president of the country comes from the Constitution, not from the ANC. This power bloc is probably the strongest and can be very effectively used by Ramaphosa.

The way President Ramaphosa manages these three power blocs will play a decisive role in his success (or failure). He will have to make use of the power blocs where he is in control, or where he has a strong mandate, to neutralise the power bloc of Luthuli House. President Ramaphosa will have to play this ongoing game of chess and the underlying power struggle while he works against the other stumbling blocks to his reform strategy. It is no easy task, and will take time and require excellent timing.

What does this mean to ordinary South Africans? Take these stumbling blocks and power blocs into consideration in your assessment of our country’s current situation. It is not an ideal situation, but through it, there can be progress made towards a better South Africa. Do your job and look after your responsibilities, among other things by taking even better care of your own and others’ safety. Recognise that millions of other South Africans feel like you do, have the same concerns, and at times, much worse experiences. Above all, keep a cool head – there’s light in this dark tunnel.”

I appreciate an article like this for I share with many people the frustration of the pace of change. I often come across a general distrust in every aspect of the government, including the President. However, when I read of the complexities he faces, the latest being the appointment of questionable Chairs of parliamentary committees, and the Public Protector’s antics [or, is she onto something?], I realise that my opinions should be tempered by his realities as he must be a President and a politician in a toxic environment that he has inherited. Strength to your arm, Mr President, and may right prevail over wrong.

Point is, that as long as all this stuff leads to policy uncertainty and while Malema insists that by year-end all land must be transferred to the State, the economy will continue to falter and even collapse. We truly live on a precipice.

Now here’s an interesting and novel article to end with:

“Property stokvel buys its first 5.8ha piece of land

BY XOLILE MTSHAZO – 02 April 2019 – 10:08

 

After only launching in May last year with a membership of 30 potential investors, the Rustenburg Property Investment Stokvel has grown to 90 members and has already purchased a 5.8ha piece of land worth R5m that is ready to be serviced.

The property stokvel is the brainchild of investment pundit Lebo Ratema, who brought most of her clients – people that she knew – under one roof to get their buy-in to start investing in property.

“As an investor I have the information and the data. I then talked around most of my friends and people that I knew were interested to put our heads together and create wealth,” explains Ratema.

“Many of my clients had been declined by the banks. Some had made mistakes and had been taken advantage of because of their lack of knowledge and know-how to get into the property investment business.”

Ratema is ecstatic with the progress made as Rustenburg Property Investment Stokvel has grown from 30 to 90 members in less than a year.

Each member holds 100 shares sold to them.

Every member has a choice of three investment options. The first option is over three years, the second over four and the last over five years. If you opt to invest over a three-year period you contribute R5,500 monthly, over four years R4,125 and over five years R3,300.

“We have different voluntary contribution and payment plans to suit every member to be able to purchase shares.

“This is not a one-man initiative. I must emphasise that we have a 10-member-strong committee in charge of running the whole project. All of them have signing powers.”

Ratema said the land they are ready to develop is where they are based, in Rustenburg, but the whole project of servicing the land costs R19m, before the actual building of the housing

 

“The rezoning of the land will be completed within a year as we are now busy with proclamations and servicing the land.

“The development of infrastructure like roads, electricity and water must be factored in.”

Ratema and other stokvel members have been liaising with property experts and property management companies who will help manage the properties.

She said the stokvel is open to everyone who aspires to invest in property.

Ratema warned that the project was not a get-rich-quick scheme but a long-term investment. She said members would start getting dividends from their investment once the first house is sold and would share the profit, depending on the number of shares a member has bought.

“Once the last house has been sold and every member has been given their share dividend, we will dissolve the investment stokvel and start all over again.”

 

If Ratema can pull this off, one wonders how novel this model could be and how scaleable it could become. Let’s hope we get some ongoing Press coverage to track the progress.

 

And finally, an old friend is quoted in BUSINESSTECH’s 22 JUNE 2019 article, Luxury homes in South Africa are now selling for a ‘bargain’:Top of Form

Bottom of Form

“Luxury home prices are generally declining in many of South Africa’s most sought-after suburbs, and sellers are more willing to negotiate.

Citing recent FNB statistics, the property group noted that the rate of home price growth on the Atlantic Seaboard – South Africa’s most expensive area – has dropped from a high of 25.5% in the first quarter of 2016 to -5.1% in the first quarter of 2019.

“The rate of home price growth on the Atlantic Seaboard, which is South Africa’s most expensive area, has fallen from a high of 25.5% in the first quarter of 2016 to -5.1% in the first quarter of this year,” said Rory O’Hagan, head of the luxury portfolio division of the Chas Everitt International property group.

“House prices in the Southern Suburbs, including areas like Constantia, Bishopscourt, Newlands and Claremont are currently declining at the rate of 2.4% a year, after reaching a peak annual growth rate of 15.4% in 2015.”

O’Hagan said that he has seen similar drops in Gauteng and other parts of the country.

In Hyde Park, for example, brand new cluster homes that were on for sale at R28 million are now priced at R20 million, and a home originally listed for R19 million is now available for R15 million, he said.

“Our luxury portfolio teams in estates such as Val de Vie in the Cape Winelands and Zimbali on the KZN North Coast report a similar trend, with asking prices on specific homes dropping in the past month from R16.9 million to R13 million; from R15.9 million to R12 million; and from R13.9 million to R11.5 million.”

O’Hagan said that for luxury buyers planning to upgrade to a bigger property can acquire more home for their money in the current market. He said that appetite for luxury property around the world – including South Africa – is currently also being boosted by volatility in equity markets, which traditionally prompts investors to turn to brick and mortar.”

So now you too can live with the rich and famous. No longer do you need R25m to buy your dream home, R17.8m will do the trick 🙂 Just joking, Rory!

Property remains interesting and there is never a dull moment. We swing from luxury houses, to “give the President a chance”, to stokvels beginning to invest and rentals beginning to flatten out. What could be more interesting than property? Well, with all that said, I’m off to the cliffs to see if I can sight a whale. If I was on Twitter and a cook, I’d post a recipe like our Minister of Finance. 🙂

Yours in Property.