Real Estate Investor Magazine South Africa June/ July 2019 | Page 16

COVER STORY
The City of Cape Town is
Living in a Bubble
Red Tape Strangles Property
Development Industry in Western Cape
BY LEANI LE ROUX
T
ake a look at the latest audit report on the City of
Cape Town. It’s so squeaky clean you can eat off it.
But if you look closer at the City’s financials, there are
gaps belying the veneer of functionality. Jobs losses, housing
backlogs and overly cautious officials are among the red flags
that the property development industry raised at the Western
Cape Property Development Forum (WCPDF) conference in
May 2019.
According to the property developers’ spokesperson in
the Western Cape, Deon van Zyl, it now takes an average of
between four and eight years to complete a development in
Cape Town – double the time when compared to a few years
ago.
“This expanded timeframe, largely due to a long, complex
and uncertain regulatory approval process, is now severely
curtailing the development of much-needed private and public
infrastructure, and has come to undermine the construction
industry significantly.”
According to town planning consultant, Tommy Brummer,
since 2016 there have been 86 amendments to the spatial
development framework and this has caused havoc in the
planning industry.
Due to red tape and tough economic headwinds, the
industry is in crisis mode with thousands of jobs at stake.
The property cycle is unpredictable, climate conditions such
as the drought and the uncertainty of the timing of approvals
all influence financial outcomes. An alignment of the stars
is necessary for the successful development and luck clearly
plays a role, said John Chapman, director at Rabie Property
Group. “Some of the regulatory requirements are ludicrous,
for example: a 30-day period is required from the Department
of Labour before work can commence and a contract has to
be in place before it can consider the application.” Demolition
permits and heritage applications were also inhibitors to the
development process, he said. Chapman appealed for the
planning applications to be grouped under one umbrella to
make it a one-stop shop.
Crispian Olver, author of How to Steal a City: The Battle
for Nelson Mandela Bay: an Inside Account, said that thanks
to the constant restructuring and the politicization of the
bureaucratic process at the City of Cape Town, officials are
too scared to make mistakes, which means they don’t make
any decisions at all.
“Cape Town is hiding the complete annihilation of their
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JUNE/JULY 2019 SA Real Estate Investor Magazine
housing services,” said Olver to a rapt audience. According to
Olver, the City’s usual housing statistics were left out of its
most recent financial results for 2017/2018. REImag glanced
at the Annual Reports for 2016/2017 and 2017/2018. What
a shock. Take a look around you when next you’ve been stuck
in traffic for two hours to get into Cape Town and come back
and tell us that housing isn’t one of the major issues facing the
city. The latest Report hardly mentions the words, inclusionary,
student, micro, high rise, retiree and affordable. These are
sectors in the housing industry desperate for attention and the
City has removed all reference to its performance or plans for
these from their results. But at least their audit is clean.
According to Olver, during his research for his book on the
City of Cape Town, someone in the housing department told
him: “I find it impossible to meet our housing targets, because
Cape Town is so into clean audits. The finance department is
very pedantic and you can’t run these kind of housing projects
with inflexible financial management.” The centralisation of
the department created a complete logjam in the Mayor’s
office, said Olver. “As more and more authority got taken away
from the officials; the portfolio committees, they couldn’t get
critical decisions made in the administration.”
Velocity of economy is largely driven by speed at which
officials are allowed or are willing to do their job. Everything
should be done to speed up the process and remove stumbling
blocks to the advantage of everyone, especially the least
advantaged among us, the WCPDF said.
Further scrutiny of the City of Cape Town’s financials by
Professor Brian Kantor, revealed a net debt position of -R6
billion. Net debt is when you combine Cash and Investments
and detract any borrowings. “I can think of many things you
can do with useful capex. You can maintain the (transport)
grid, for example, it’s under pressure isn’t it?’ Remember the
City’s responsibilities: growth and redistribution!” According
to Kantor, leveraging a healthy balance sheet such as this
would offer the City massive amounts of debt to invest back
into bulk infrastructure.
‘If the City says to you that it doesn’t have money, it should
be treated with utter contempt,’ said Kantor.
So where to from here?
The WCPDF says it has already challenged the Premier Elect,
Alan Winde, to establish an Economic War Room with the