Real Estate Investor Magazine South Africa June/ July 2019 | Page 19

RETAIL
and ultimately project handover. It also enables users of the
model to access regulatory, up-to-date documentation and
information on legislation governing the industry.
“But what this model is, in particular is a tool to facilitate
engagement with the relevant roleplayers in order to unblock
the blockages,” adds McGaffin
“The model gives a detailed breakdown of why developments
are now taking between four and eight years to complete.
How long a process should take and the reality of how long
it actually takes, are worlds apart. This model substantiates
what many developers have been saying for some time – that
there is a crisis that is leading to the current destruction of the
development and construction industries.”
The irony, notes van Zyl is that this is not only a private
sector problem: “If I was a civil servant responsible for the
delivery of housing projects, schools and clinics, I would
be saying exactly what the private sector is saying. The
development of public infrastructure accounts for 80% of the
output of our industries. Every government project that needs
to be delivered goes through exactly the same quagmire as the
private sector.”
Another concern to the WCPDF is that the City
underspent on its own capital budget by 27% in its previous
financial year and looks again to underspending 24% in the
current financial period.
“If you do the calculations, the City of Cape Town will have
underspent by R2.8 billion by the end of its current financial
year. That equates to R788 million in labour wages that has
not been spent in the metro. Why has no red light yet gone
on? Construction companies don’t fall off a cliff because they
didn’t get a job yesterday. They fall off a cliff when they haven’t
been getting work for three to five years,” says Van Zyl,
“Plus, if the City’s budget cycle is three years long, how
can it honestly budget for infrastructure projects not knowing
when these are themselves going to get through the City’s own
statutory processes that can delay a project for years before it
breaks ground?”
Noting the City’s tender process as one of the areas failing
the industry, Van Zyl refers to the City of Cape Town’s claims
that it takes 24 weeks to award a tender: “However, companies
on the ground will tell you that it actually takes anything from
54 to 90 weeks.”
Adding to this, Grimbeek stresses: “The reality on the
ground is that the construction sector has failed. We have one
company after another folding and we have hit the wall.”
“As the WCPDF, we are hearing from all the representative
organisations that make up our membership base how the
regulatory complexity and the lags in approval are killing the
industry. Hundreds of thousands of construction jobs have
already been lost, not to mention the investment that has gone
elsewhere when willing investors do not get their projects even
past first base.”
In the past, notes Grimbeek, the highest risk was always
cost, but what has now replaced this is the time it takes to
obtain land rights and planning approval: “This model enables
us to see what the timelines should be, and measure what they
have now become.”
But perhaps the most problematic result of this stagnation,
apart from the loss of important construction job and
investments, notes Grimbeek, is that: “The current regulatory
environment is promoting gentrification. The delays being
experienced and the costs associated with it reduces the
viability of more affordable projects, which means developers
are forced to produce exclusive products that will sell at higher
prices. Who can afford these products? Only the wealthy. We
are now increasingly unable to service the most important
markets where the real residential demand lies, and the result
is an ever-overheating bubble at the top end.”
In conclusion, Van Zyl notes: “A takeaway from the
national and provincial elections is that the electorate is no
longer tolerating excuses for lack of delivery. The model
developed by the URERU and WCPDF is a tool that can
help government to unblock its own delivery pipeline and help
private sector investors to objectively understand the property
development process.”
SA Real Estate Investor Magazine JUNE/JULY 2019
17