Political movements that could affect rentals of commercial property in Cape Town, South Africa

 In February this year, President Zuma affirmed the national government’s continued intention of redistributing land to enable the participation of previously disadvantaged groups in economic affairs – namely agriculture. At the 2015 State of the Nation Address, the president announced the Regulation of Land Holdings Bill will be submitted to Parliament later in the year. Key in the proposed policy is the barring of foreign persons or foreign-controlled enterprises from owning agricultural land in the country: instead, offering them the option of thirty to fifty-year leases. The Bill provides for a maximum of 12000 hectares that an individual person or corporation can own, with excess land to be purchased and redistributed by the state.

 Although the Presidency confirmed properties for residential and commercial use other than agriculture would not be affected, reaction from participants in the property industry has been negative, pointing to the possibility of a fall in foreign investment due to decreased business confidence and land tenure uncertainty. The SA Property Owners Association has raised concerns that, in future, laws banning foreign ownership of land and property could extend beyond the agricultural sector: manufacturing, industrial and retail could be impacted. However, this much-debated legislation is set to have only a minimal effect on property rentals and purchases in the foreseeable future, given that an estimated 3% of all property types in South Africa are owned by foreign nationals.

Of more interest to the property industry in the short term is the recent South African National Budget Speech 2015/2016, in which Finance Minister Nene outlined the national government’s approach to economic development, employment growth, tax and revenue allocation. A potential windfall for the commercial property sector lies in the allocation of R2 billion to the development of manufacturing and Special Export Zones, along with the service industries (prominently, the offshored BPO sector). An additional R5.4 billion will be utilised to assist 1 450 companies with facility upgrades and skills development. As the country – already an attractive offshoring and manufacturing destination – continues to experience growth, so should the demand for industrial and office floor space. This is particularly applicable for the coastal economic hubs of Cape Town and Durban.

Allocations for infrastructure and small business development to boost retail, area property values and rentals

  • R3.5 billion of support for small businesses via the newly-established Small Business Department
  • An injection of R4 billion into the Jobs Fund for public-private partnerships, for projects designed to create employment
  • R80 billion for 220-plus water and sanitation projects as well as local roads
  • R105 billion set for housing and bulk infrastructure construction
  • The Passenger Rail Agency’s currently underway ten-year renewal programme, worth R53 billion. 44 new train sets (528 coaches) are expected to be delivered over the next three years.

 

 

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