Estate Living Magazine Invest SA - Issue 45 September 2019 | Page 57

C O M M U N I T Y
L I V I N G
and electricity supplies – even though these costs remain contained,
since their water and electrical consultants have been involved with
the estate since inception.
Both Jeff and Andrew made the point, though, that management’s
tasks include keeping a continuous watch on trends in everything
from tourism (‘When Cape Town went into drought, we saw a drop
in tourism – and if the rand goes weaker, trips will turn domestic, and
might even grow’) to fibre to the home (‘We watch what’s happening,
ask around. It’s all about the backbone, and if the Eastern Cape’s not
geared for it, it makes no sense for us to factor it in. Yet!’)
These trends will inform decisions that management will have to take in
the future – and therefore inform its planning for its financial reserves.
‘It’s a continuous evaluation of where you are and what’s happening
internationally, and whether there is a better way of doing things –
because we have limited resources, and it’s up to us to make sure that
we utilise those resources to the maximum,’ says Andrew.
Jeff makes the point that St Francis Links is ultimately in the
business of community.
Planning process
Both management and the board of directors involve themselves in
the estate’s annual scenario planning process. ‘Things change, and
this makes you re-evaluate your 25-year plan,’ says Jeff. One example:
energy supply. The estate is currently studying various options for
offsetting the rising costs of electricity. For its financial projections,
‘We have to make decisions based on the good of the entire estate
– and fortunately everyone on our team, every one of our directors,
is taking decisions for the good of all.’
Although the discussion with Jeff and Andrew ranged across topics
as diverse as wildfires, the removal of invasive alien vegetation, and
the estate’s relationship with the local municipality and communities
on the borders of the estate, they both pointed out that all of these
concerns are significant in its financial planning process.
though, the St Francis team works on a 10-year basis.
Limited resources
St Francis Links makes provision in its operational budget for the
costs of consultants required for studies into things like sustainable
water
‘It’s like maintaining an asset: if you don’t maintain it, it’s going to
cost you so much more later – so what we do is we pre-empt that
by doing the planning and the evaluation and the training before it
becomes a problem.’
Bottom line
Clearly, as St Francis Links demonstrates, a well-conducted, well-
maintained financial reserve study exercise will strengthen the standing
of your estate, and having an appropriate, judiciously managed capital
reserve fund will meet many of the legal, professional, and fiduciary
responsibilities of your homeowners association, and also enhance
the resale values of the individual properties on your estate.
Taking a holistic view of the estate’s requirements includes deciding
the size of the contingency amount required to cover ad hoc expenses,
or increases in the specifications of items like security technologies.
‘We used to work on a 25% contingency, but we’ve actually been
able to reduce that to 10%,’ says Andrew. ‘Because there are so many
risks involved, the size of the contingency depends on how often you
evaluate it: if you monitor it closely, you can reduce it.’
Contingency
‘We start over every year: we kick a year out, put in the replacement
costs for the 11th year, and modify our requirements accordingly,’
says Jeff.
‘These things are all part of it, because we assess every single aspect
of the estate, and that’s where we’re coming from,’ says Andrew. ‘It’s
about continuous training, continuous evaluation of our programmes,
and continuous evaluation of where we are, and where we’re going.