Archive for year: 2019

We discussed Culture and Commerciality as part of the value of land in Part 2 of our blog on Land.

We begin with Capital in this feature.

CAPITAL: Us laymen understand this best. But in order to gain a full perspective, we will incorporate the other two.

I was once corrected when I told a group that their home is their biggest asset. “No’, said one participant, explaining that their pension was bigger. So, the moral of the story, don’t job-hop! Our houses are big investments and I know of no one who has decided never to buy. Our objective is to buy a home as soon as possible, pay off the bond and then enjoy the proceeds from its sale one day to supplement our retirement funds. In between, we may change homes in life-stages moving up the ladder of size and in the end, downscaling for reality. The theory is that our homes will appreciate in value and that that accretion of capital will complement our savings in other vehicles both onshore and offshore. But there are some other considerations that come into play so let’s explore them.

Robert Kyosaki of Rich Dad Poor Dad fame, taught me a thing or two when he postulated, against all the current wisdom, that a house is a liability and not an asset. In fact, he made the point repeatedly (even annoying NYSE and the influential National Association of Realtors) that any asset which does not yield an income, is naturally a liability. I have alluded to him so often over my years of writing blogs as his wisdom is so unconventional but completely unassailable. This is especially the case when property is not selling almost at any price – I have two friends who right now are experiencing this. It feels like, “There are just no buyers” said one of them recently. Kyosaki’s view was simple, if you wanted to own a Porsche, take the cashflow you would spend and buy a factory. Then as the factory’s tenant paid off the bond, use the net proceeds to buy the Porsche. Thus, for a little deferred satisfaction, you had the factory and the Porsche, and you would not feel the liability that we all know a Porsche is. Being Head of Homeloans and a proud homeowner, this was unbelievable news to me. But even sitting here looking onto my garden, it’s quite obvious that this home could make a lot of money on AirBnB that we don’t have by living in it, and re-painting it last year was costly not income-generating. Point is, we don’t think like this [or even agree with Kyosaki] when our homes are growing at 8+% compounded every year. It’s only when that rate of growth collapses and even selling your house, [pointing to property’s illiquid nature; never mind having to perhaps pay a bond], becomes very remote, that we have this discussion. The Western Cape has felt the cold wind that has chilled the Gauteng property market for years. To sum it up, if your house is growing at 8+% in value every year it more than mitigates the cost of maintenance and that makes it an investment amongst other investments. Capital is often locked up in an asset.

Another point is land ownership. Your home is built on land and how that land is owned or regulated is important to it and your houses’ capital value. The 99-year Lease has always been the nemesis of the banks, but 99 years is a seriously long time. A bond of thirty years would fit into it 3 times and only with the last would the bondholder need to worry about value in terms of continuity of tenure. Take the famous example of the Duke of Westminster who owns 300 acres of London being Mayfair and Belgravia. It’s worth UKP10bn and is leased long-term to everyone who lives or trades in the area. I know when I got back from Mauritius last year that I mentioned their 60-year lease form of land ownership nationally. Ownership methods in South Africa fall into a number of categories and let’s look into them for the sake of understanding Capital value.

Freehold: This form of ownership is common, and the title of ownership is registered in the Deeds Office. It gives you unfettered ability to do whatever you like with your property so long as you pay for services and remain within municipal bylaws. Your house is your castle and you can add on, paint and sell at a reasonable whim. All of the capital loss and appreciation accrues to the owner; but the point for our conversation is that the capital does that because you own the land.

Rental: In this case someone else owns the property and title never transfers. But for certain exceptions contained in the written and signed [now a law that it exists ie verbal lease agreements are not permitted] Lease agreement, maintenance, services [normally excluding electricity and water] and any depreciation or accretion of value are the responsibility and right of the owner. In short, the tenant never has any capital opportunity but also seldom takes any significant maintenance responsibility. In fact, in most leases, the tenant must return the property to the landlord in the same condition they initially received it, wear and tear aside.

Cluster: This is a form of ownership akin to freehold but where a form of community living is intended. The primary purpose is shared security, but the style also became popular when cities began to encourage densification so as to alleviate urban sprawl. In this case a small communal area levy is paid normally to an innocuous Home Ownership Association [HOA] for caretaking of the common areas such as parks, pavements, internal roads and water features. But you are constrained by the Estate Guidelines if you want to alter your dwelling, sometimes even to the colour of the paint. It can be annoying but normally neighbours become friends, and everything can be handled as amicably as possible. As regards capital upon sale, it belongs to the seller but be careful of “estate levies”. Ours is 0.25% and clearly agreed and signed at exception, however, I have family who were stung 12% upon sale and shocked at the loss they suffered!

Sectional Title: Marina Constas of BBM Attorneys wrote a book almost 20 years ago titled, Demystifying Sectional Title, which is a good read if you’re interested. To sum up this form of ownership, she writes, “Complex living is…..complex.” This form of ownership extends to cluster-type developments, semi-detached and high-rise buildings. The example right at the beginning of this blog series, the owner of a unit on floor 17 of the Michaelangelo Towers, is typical of sectional title. Great for security, a lower cost of building [though you seldom feel that!], and capital accretion. The Body Corporate [BC] is accountable for property maintenance and disasters and must insure for these and is also accountable for the integrity of the common areas ie as regards maintenance and normal use. The biggest problem comes in when self-destruction is caused to the property or when the BC funds deplete. Banks will not lend into a defunct BC balance sheet and nor should you consider buying into such a complex; it’s bad news and an individual owner has little influence in the Scheme. But all things going well, sectional title has served property ownership well so far in our country. Capital belongs to the owner.

Leasehold: I think we have covered this style of ownership implicitly above. However, I was surprised to learn that Waterfall Estate in Midrand is a leasehold property. I don’t have the detail, if I’m correct, but it would be honestly disclosed, I’m sure. Capital is the owners but beware being the last owner before the long-term lease ends. Logic says the Lessor will simply extend the lease as happens in the Duke’s case but practice could be different.

Fractions: This form of ownership, quite distinct from timeshare, is excellent if properly managed and let [in a rental pool] and can give the fraction owner a good return on investment in a sough-after complex. Its downside lies in the unavailability of funding due its “shareblock” characteristics so only cash buyers can participate. In my experience, very little capital accretion occurs, and the ownership style is recommended only amongst “friends” and for vacational properties. Certain of the Sandton apartment complexes allow for units purchased to be aggregated in a rental pool in the context of a hotel and conference center. Capital in the Park in Sandton is such a successful development, but such schemes are not fractions but rather a play on sectional title with a formal rental pool.

No one blinks an eyelid with any of these examples for one reason and one reason only: Consistency of Policy. It is the inconsistency of policy, the willingness to amend Section 25 of the Constitution, which now seems a certainty, that has spooked the property market in South Africa. “Spooked” is a euphemism for the anger, fear and frustration that land ownership may no longer be sacrosanct in law and that expropriation with compensation may no longer be engraved in every property transaction since the beginning of property title. No power line, railway or road has been built that has not implied expropriation in their path. I give you some land and I am compensated using a Sworn Appraiser’s valuation. The problem now is dispossession and the critical need to re-address the past as it is understood by the majority of our citizens. There lies the aggravating rub and I must say, the only government I would trust with the process if it has to go ahead, is one headed by Cyril Ramaphosa. I would rather the land redistribution legislation do its proper work but if something more radical [which I do not believe] is required, he should head it. What the future holds is precarious our beautiful, tortured country is suffering from deep uncertainty.

Also, for me at the heart of this issue where we have explored the wealth creating potential of land ownership, is the fact that land redistribution has not worked, that many units in the likes of Soweto are still not owned, and that tribal lands remain under the rental control of chiefs. Bottom line, no capital has been built in these three areas and only Culture is served by tribal lands. The downright hypocrisy of these issues against the willingness to “bet the bank” with expropriation without compensation [EWC], is anathema to me. Get land redistribution working with proven models in place that can be scaled then we can stomach EWC as a nation. Get the title deeds of so-called “matchbox” houses delivered then we can stomach EWC as a nation. Get some form of land value and “sectional title” into tribal lands so tenants have wealth creating and not just subsistence benefits from their use of their land and then we can stomach EWC as a nation. And a final bet I would wager is that those initiatives would solve so many problems that we would never need to radicalise uncompensated land expropriation.

Long may the property industry last!

Yours in Property.

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.

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)

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.

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.

Second last article in the LIFE series and now I’m going to discuss entrepreneurship with entrepreneurs.

Yes, you and you……..

If your job includes:

Setting up a business in the hope of making a profit,

then you are an entrepreneur.

I would put to you that every bond originator, estate agent, principal or a plethora of other occupations that employ you and/or others where the income ranges from commission to fat profits, is an entrepreneur. Anyone who is self-employed is probably an entrepreneur but anyone who is employed can be an intrapreneur and we’ll mention your role below. Bottom-line, the attributes of an entrepreneur can be applied whether you have your own business, work for a boss, or wish you didn’t and you intend to find your way out.

So as not to preach to the converted, let me start with drive. In this context, it probably means that you have done it on your own, want to do it on your own or, at least, think you can do it on your own. You know my old adage, you want to employ people who believe that they could employ themselves. That makes a boss uncomfortable and employee wide awake to opportunity. It raises the creative tension on how the boss treats you and how you treat the opportunities in her business. You want to learn and achieve, she wants productivity so she’s teaching you, exposing you, stretching you and eventually, unless you have something to stay for, you could find yourself as a blue-blood entrepreneur. With that cycle established, it’s not surprising that entrepreneurship includes:

• A new business
• A drive to succeed
• A risk
• A profit motive.

Those of us who’ve done it, know that profits are a by-product of sweaty hands and foreheads, also called “stress”, so let’s tone it down a little. Like you get the Health Warning on TV in a stunt act “don’t try this at home”, never think entrepreneurship is easy. If it is, you’re probably one of many who have tried and failed, or succeeded. If they failed, beware unless you know why. And, if they succeeded, beware because competition does not let you in easily. Ask Luyt Lager, Top TV et al. They thought they could win, but ran out of steam; admirable effort but a loss. On the other hand, Blue Label Telecoms entered the market of telecommunications when it looked impossible to succeed against the giants and they won a profitable share. Every estate agent and bond originator has the same story and I guarantee, to a greater or lesser degree, they have succeeded along similar principles.

You need to risk it. You could spend another’s money and he would forgive you, but deep down there must have been something to lose. Whether it’s your own, the bank’s or someone else’s or a mixture, honour should come into play. It’s wonderful to win but it’s horrible to lose. Risking it is not for fools and remember, once you have, the Law of Unintended Consequences kicks in. The best laid plans of mice and men, cannot foresee all that may happen. Normal risks around profit margins, turnover, costs etc. can be built into models, but those which you cannot see are a blow to the financial solar plexus. Expect them, whatever they are, but just as importantly, know that they will be there and suss them out from people in business or in your industry of choice before you venture in. Homework is the best work before you take the plunge; you will not be sorry. Linked to this financial aspect is the size of the downside. I remember going into BondExcel and signing a lease for our building [I drove past it the other day in Republic Road with fond memories]. Round figures, it was R4000 for 6 months, or R24000. Knowing we had earned nothing yet, I can tell you that was an enormous decision for me. But that angst taught me something which I’ll simply express like my mother taught me, Look after the pennies and the Pounds will look after themselves. Or, put another way, because we turned every cent, the Rands came in due course.

The idea and the intellect and the drive need to match. In the old days, a guy by the name of Tony Factor set up a retail store in central Joburg in the 70’s. Open to correction, I believe he made some money selling false teeth in London but he was dyslexic; he really battled to read and write. However, he managed to become the discount king of South Africa when discounts were “unpopular” and Factor’s Discounters was a beautiful building in Pritchard Street, if I recall. The point is, Tony had an idea and all the skill to drive it home despite his inability to read or write properly. You see, entrepreneurs are not brilliant, they just know what they can do, what they can’t do and what they must do. If one of those things are missing and you can afford to ‘buy it in”, stay in your day-job, please. One of the rules from Tom Peter’s Thriving on Chaos fame was “stick to your knitting” i.e. do anything as long as it was somewhere in your skill set. I’ll never forget buying RMD Meats though – I could braai so I bought a meat factory – crazy but true. Suffice to say, we knew how to run a business, knew a little about Retail and making customers happy but did we sweat learning about all kinds of meat – cutting a Fillet into 200ml steaks and hiding the “tail” in the batch of “eyes” and then vacuum-packing and labeling every packet before sending them out to restaurants across Gauteng. I loved the time for learning something completely different, but if you want to “buy a butcher”, beware! As another example, we have a restaurant in town that was built and owned by two locals who are very well known and brilliant at what they do. Sadly, they have just sold to new out-of-town owners and I would wager they will not last 6 months. Going into winter and losing the turnover of friends of the sellers is going to cost them dearly; I really hope not for their sake. To summarise, a good idea, needs to be thought through and then driven to success otherwise it and I will not be entrepreneurial.

I think we all understand profit. That lovely stuff when you have sold lots at the right margin and everybody has been ready, willing and able to pay you on time. The experts may say that I’m mixing up profits and cash flow, but until you’ve invested your own money in a business, you won’t understand how the two become one continuous cycle in your head. Like the picture of the little guy sitting on his potty, the jobs not over ‘til the paperwork’s done. However, there is one type of entrepreneur that I really do admire these days and that is the Social entrepreneur. Many kinds of business abound like the guy in Somerset West who produces a “dry powder shower”. Fascinating but very necessary when you consider being in a drought for 6 years in Southerland. Another lady I read of is making handbags from tea bags and exporting her art-bags overseas. How many more – all plastic recycling, a social worker building shacks, bee-keeping, bamboo clothing – are out there making profit by being good to the environment and her people? What an amazing achievement by people who are pulling themselves up by their own bootstraps!

So what does it take to be an entrepreneur? Here are some thoughts without repeating those above:

• A great idea or the drive to be better than the competition.
• Vision. Begin with the end in mind; you’ll need to in times of “why did I do this”?
• Never-give-up spirit.
• Funding. Or a carefully crafted business plan for funders. If you can’t encapsulate it, you can’t expect anyone to give you money.
• Support. Friends, business colleagues and professionals; most come at a price but all are needed from time to time.
• Business acumen. Making profit is not making money, collecting cash and more debtors than expenses and creditors, is.
• Being prepared to start small and grow. Ego has no place in entrepreneurialism; it may get you in but it can also terminate you if allowed to dominate your business.
• Others. Partners, if you have, and people who trust you to deliver. People will jump with you if you have a plan with a vision and medicine-fills of enthusiasm. People are willing to follow visionary leaders.
• Risk management. You’ll need it an hour after risk-taking.
• Un-burnt bridges. I know your boss may have peeved you but the world is small. Become an entrepreneur with a forward-looking motive rather than an “I can’t wait to get out of here” attitude. Of course many people have done so, and probably my best example was Bill Venter, the founder of Altron and Powertech. The latter company, if my memory serves me correctly, he told his boss he would buy “one day” and he did. But I think they’re few and far between and in any case, why not be happy and positive while you’re working hard to succeed?

And by the way, Intrepreneurs do all of this in the context of their work. Right at work, fresh ideas implemented are driving bosses to realize the gems they have behind the desks in their offices. That symbiosis of real recognition for really good effort is occurring every day. If not, the boss may realize money talks but talent walks.

If ever there was an entrepreneur that I admire, he’s Vincent. As I’ve shared before, he joined BondExcel 2 weeks before I left Nedbank, survived sub-Prime on a farm breeding puppies [which he no longer does!!], re-built the Homeloan Junction business off a nearly zero-base and then started his Vape Junction. Unassuming, but a risk-taker of note. Humble yet efficient, he is people-centered to the point of care beyond the call of duty and sometimes to the point that it hurts. So, when we say “talk to us” it’s not because we think we’re cool know-it-all’s but rather that along the way of business life, we’ve learnt a few lessons that you don’t need to endure if you just ask.

Here’s to entrepreneurs, fearless men and women who get up every morning and make business and employment happen at financial risk to themselves. Clem Suntner says of you:

“I’m not saying that you shouldn’t focus while you’re running a business but you should have that radar system that is able to capture different possible futures and when they start occurring against expectations, that you have the ability to adapt.”

 

Yours in Property.