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IMPACT OF THE STATE OF THE NATION ADDRESS ON THE TRANSFORMATION OF THE PROPERTY SECTOR

State of the nation address

The South African Institute of Black Property Practitioners (SAIBPP) notes, with much concern, the plans of the government as announced by the President of the Republic, in the State Of The Nation Address. The property and built environment sector in South Africa continues to serve as the bedrock of the mainstream South African economy. It is a sector that has been largely affected by the prevailing energy crisis, consistent increases in interest rates, fiscal austerity and a lack of investment in skills development for increased participation of previously disadvantaged individuals in the sector. All of which remain insufficiently addressed in the State Of The Nation Address.

 

ENERGY CRISIS

SAIBPP vehemently condemns the rolling blackouts that have become detrimental to South Africa’s daily economic activity. Furthermore, we note with much concern, previous remarks made by the chairperson of the board of Eskom, Mr Mpho Makwenya, on the need to implement stage 2 and 3 of loadshedding for the next 2 years as part of the power utility’s turnaround strategy. The Property Sector and its value chain is a colossal consumer of electricity. Secondary to that, the sector remains as an epitome of a slow level of transformation and inclusion. The rolling blackouts have had impact on black property owned companies in the value chain which is further impacting the advances towards transforming the industry.
To add further anarchy to the dire state of our energy security, the approved tariff hike by NERSA of 18,65% for Eskom will contribute to the unaffordability of property (both residential and commercial) for black people in this country. As an organisation that has property ownership at the top of the agenda, we note that without increased wages, increased funding towards SMMEs, fiscal austerity and budget cuts; the rising cost of energy supply further disempowers those who have been previously disadvantaged from access to property by virtue of the economic caste in our country.
SAIBPP is not particularly enthusiastic with the proposed solution of creating a Ministry of Electricity to address the energy crisis. We believe the current structure already caters for that oversight with clear terms of reference for accountability and responsibility. The added layer of bureaucracy will add further delays to addressing the matter directly. Eskom has a Board, which is appointed by the shareholder, and is tasked with dealing with all strategic matters to ensure that their current mandate of supplying South African citizens with energy is released.

We implore the shareholder to appoint a Board that is competent and equipped with the relevant skills, aptitude and innovation to be able to deal with the complex matters facing Eskom at this point. The Board should be able to act with express authority and be given the latitude to co-opt any person / company that will contribute meaningfully in resolving the crisis and finding a sustainable solution. The Board should further be able to employ or head hunt a competent CEO to lead Eskom through this difficult transition.

We call on the Cabinet through the Ministry of Finance, given that the energy crisis is not only impacting our members negatively but has been harsh on SMME’s and poor households in our communities; to implement an energy rebate for these communities that are feeling the wrath of this crisis. Poor and child headed households should be given an energy grant to deal with this intense time of difficulty.

The efforts to encourage businesses and or individuals to provide alternative energy sources should be amplified and any excess power should be funnelled to the grid and these efforts should be compensated and tax incentivised.

INTEREST RATES, LOADSHEDDING & ACCESS TO MARKET

The State Of The Nation also failed to address reforms that government could implement to stimulate domestic demand and investment in the sector. The President had the opportunity to call for reforms to our monetary policy and/or give clear timelines regarding the establishment of a State Bank to finance investments in the country. In a macro economy that is seeing hikes in interest rates, debt lending for investments is already a challenge for black property investors. As such, we hope that the President will fast track the establishment of a state bank, with lending practices that are favourable for black property investors. SAIBPP reaffirms the need for the Reserve Bank to ease interest hikes to keep property interest rates affordable for both residential and commercial property owners.
Commercial property also remains a resource in South Africa that black people struggle to access, utilise and economically benefit from through the rental of retail space in shopping malls owned by large players in the sector. Rolling blackouts have forced a plethora of companies to look for alternative sources of energy and move off of the Eskom grid. Companies such as Attacq have reported that during stage 2 loadshedding, they spend R170 526 (one hundred and seventy thousand, five hundred and twenty six rand) daily to keep the lights on. With income inequality and wealth inequality at an all-time high in South Africa, black players utilising commercial property spaces often do not have the liquidity to hedge against the rising cost of doing business in our commercial property facilities. Furthermore, falling consumer demand has lowered the revenue streams of businesses taking tenancy in our shopping malls. This reaffirms the detrimental effect of loadshedding on transforming our commercial property spaces and increasing access to markets.

We hope that the President and Cabinet will focus on the crisis ahead with renewed sense of urgency, and make impactful decisions that would ensure we have a long-term solution that would set South Africa’s economy on a recovery and growth path, again.