Property & Wealth

SA property market a shining star amid economic doom and gloom

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Whereto for the South African property market amid the doom and gloom that seems to dominate the domestic economy at present?

Just this past week, the IMF drastically revised downwards its 2016 growth forecast prospects for SA to less than 1%.

This means that GDP for citizens and our many foreign residents is shrinking; the economy is effectively in recession; and the government has, once again, access to fewer resources to tackle youth joblessness with over 500 000 new matrics entering the already under-employed work force.

And, against this ominous macro-economic backdrop, the debate on racism has escalated on all the media platforms – reverberating across all spheres of our society. You may ask what the reason is that I dare to raise this contentious sociopolitical issue in this column.

Simply because it has everything to do with the economics of property.

In a Business Day article last week, outspoken author Thando Mgqolozana reaffirmed his controversial tweet that in his view “we can't deal with one Penny Sparrow at a time. We have to go for the full thing once. Decolonisation. GET LAND. Forcefully”.

The point here being that he is directly endorsing the growing call, by some in academia, the intelligentsia and radical circles, for a total restructuring of the economy. In his case, the route proposed is the most strident one (also mooted by the EFF whenever the opportunity arises) that ‘decolonisation’ is the only way in which black people can realise the fullness of their humanness by “taking back the land, as it will not be handed to us, being the first mission in such a process”.

In such volatile situations, we at The Intelligence Bulletin remain committed to find firm evidence on which to base our arguments, convictions and points of view.

So, in this situation, where do you turn to to formulate a sensible alternative – a response?  

We would far rather suggest that the solution to these undoubted challenges does not rest with a Mugabe-style land grab, but with an innovative economic policy shift that can free up privately controlled land on a large scale via entrepreneurs for the direct benefit of a land-hungry population.

This means the key question here is: Where can we find a similar scenario from which to learn and draw inspiration to fast-track SA out of the doldrums?

Look no further than our ally and major foreign trade partner, China.

Despite their stock exchanges having already tanked by some10% this year, it has to be remembered that many of China’s wealthiest individuals and corporations have actually made their vast wealth in the real estate sector.

And it is not difficult to understand why. China’s central government has steadily been driving a massive campaign of industrialisation (employing people in their droves) across the country. In the process massive urbanisation took place, helping to and incentivising its rural people to relocate to new cities to take up the jobs being created across all sectors of their economy.

The Chinese economic model

In one of his many talks on the high- and low-road scenarios facing our macro-economic planners, Clem Sunter often refers to the China Model – based on first-hand experience, witnessing many marvels of China’s drive to improve the lot of their 1.2 billion citizens.

He, for instance, mentions their understanding of the value of the cheap energy an economy needs to grow. While the debate on clean energy rages worldwide, China has for some years now been quietly commissioning a new coal-powered power plant every second week!

And what he found particularly relevant to our circumstances was their National Academy for training that Communist Party cadres destined for senior government positions were all required to attend first. There they acquired the necessary competencies and standardised know-how with which to fulfil their roles with aplomb!

But back to the focus of this column. The Chinese economic planners recognised the essential of role of the real estate industry in driving their ambitious plans and growth targets.

In the process they automatically stimulated the growth of the massive supply chains needed to supply architects, construction experts, developers, logistics, producers and suppliers of cement and other materials, procurement, scaffolding, town and regional planners ... the list is never-ending.

South Africa’s real estate market as potential economic growth driver cannot be overestimated.

Let’s not forget that, since 2010, China has overtaken the United States as the manufacturing superpower. Yet, it was reported that 30% of China's richest people come from the real estate sector as compared with only 5% in Germany, Japan and the USA. This indicates the massive role that this strategic sector can play in an emerging market economy like SA.

It offers many opportunities for black entrepreneurs to come to the fore and for our property sector to get to grips with developmental objectives set out in the B-BBEE Charter. 

It offers an opportunity to government, private property owners and specialised funding government agencies like the National Empowerment Fund and the IDC to work together to create a new class of aspirant black property moguls and a new generation of property owners.

Message to South Africa's economic planners

Right now is the ideal time to focus on the many opportunities the real estate market offers to stimulate growth across the economy.

Just last week headlines screamed “Thousands of Farms up for sale”. The report mentions 5 000 for-sale listings in Gauteng, 1 955 in Limpopo, 2 207 in the North West Province and 3 485 in the Western Cape.

Does this not offer our national and provincial governments and their multitude of agencies, the perfect opportunity to examine where they can fast-track land acquisition at, one imagines, highly competitive prices with the China Model in mind?

The national drought has unexpectedly offered a rare buying opportunity on a “willing seller” basis.

It is time for government and black entrepreneurs to jump into the real estate market as “willing buyers” – without the need for the lame, economy-destroying land-grab option touted by Thando Mgqolozana and others.

by Eve van Basten

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