The SA Property Owners Association (Sapoa) has slammed the government for its lack of follow through and execution regarding the minister of electricity’s role at Eskom and the energy crisis.
Since appointing Kgosientsho Ramokgopa as minister of electricity three months ago, President Cyril Ramaphosa is yet to clarify Ramokgopa’s functions and powers with regards to Eskom and its plan to end load-shedding.
Sapoa president Malose Kekana, who is also group CEO of unlisted property fund Pareto, told Business Day that it’s a pity that the centre doesn’t seem to hold within the ANC.
He alluded to various media reports suggest tensions between public enterprises minister Pravin Gordhan and mineral resources minister Gwede Mantashe who have powers over Eskom. He believes there is no smoke without fire: “If there are no tensions, how is it possible that Ramokgopa still doesn’t have powers?
“It is unacceptable that we have a crisis, someone has been appointed, and yet there is no expediting of a decision on what their role is,” Kekana said. “Give him interim powers to be able to do something within his ministerial position while finalising details on what his role entails.”
Kekana believes that though it would seem Ramaphosa applied his mind before making the appointment, he was also frustrated and needed to act to avoid the country going into a panic mode.
“This appointment, like all other government decisions requires some level of conviction to follow through, execute and make firm decisions on what needs to be done to solve a crisis,” he said.
Challenges and solutions
Speaking to media on Tuesday, Kekana said Sapoa met with Ramokgopa on May 12 to convey the challenges experienced by the industry, which the minister fully understood, and resolved to meet regularly with the commercial real estate industry body to track progress.
Sapoa also committed to assist with solutions to minimise load-shedding. Many of its members' properties are located in areas served by municipal electricity distributors, and these areas experience huge electricity supply disruptions due to regular and intensifying power cuts.
Kekana said the real estate sector, and shopping centres in particular, are critical for the normal functioning of communities as they provide essential services such as shopping, access to banking and other services.
“The survival and success of shopping centres, for example, is linked to how communities function — a dysfunctional city has huge negative effects on businesses and communities,” Kekana added.
Sapoa has pledged to support and comply with government’s programme of Energy Performance Certification (EPC) of buildings, to encourage the move towards renewable energy, encourage investment into transmission and generation capacity through capital raising via financial institutions, and drive demand-side initiatives.
These include encouraging the design of more energy-efficient buildings and encouraging property owners to integrate excess generating capacity into a municipal grid to power traffic- and street-lights.
As an example, financial services group Investec is the first property owner to partner with the Johannesburg Roads Agency (JRA) and the Sandton Central Management District in an initiative that will enable traffic lights at major intersections in the business area to operate during load-shedding using power sourced from adjacent buildings.
Dysfunctional municipalities
As if increased load-shedding in not enough burden for property owners, municipal rates and taxes continue to increase but service delivery doesn't match funds paid.
According to Sapoa’s 2022 Infrastructure Report, municipal charges accounted for 61% of overall operating costs, and 25.7% of gross income by the end of June.
Over the same period rates were the fastest growing item in municipal charges with increases in property taxes exceeding consumer inflation since 2008 on a rolling five-year basis.
Kekana said property valuations were also a source of concern. Increases can be contested but an unsuccessful application can result in penalties. Pareto, which co-owns Sandton City with JSE-listed Liberty Two Degrees had to fork out about R250m after losing an objection on the mall’s valuation.
Kekana said a functioning democracy and a responsive government entailed social contract; citizens pay their fair share of rates and taxes, and the government delivers services.
“Eskom’s function is not a favour — it is the government’s responsibility to provide consistent and reliable electricity to citizens, and a reason for the power utility’s existence, otherwise government must deregulate and open power generation to the private sector,” he said.
Load-shedding increases the cost of operations and decreases the profitability of businesses, as well as affects people’s mental health which reduces productivity levels and quality of life, he added.
‘An unfortunate mess’
He said the political instability in the City of Johannesburg municipality is “an unfortunate mess”, which has dire consequences for not just the property sector but businesses and communities alike.
The municipality has had nine mayors since 2016, with the mayoral chain changing hands five times since the 2021 local government elections.
Kabelo Gwamanda of the minority party Al Jama-ah is the latest to be installed as mayor, replacing his colleague Thapelo Amad who resigned in April after being in the position for less than 90 days.
Gwamanda is facing allegations of scamming people into investing into an illegal investment/funeral scheme.
The City of Johannesburg is one of three Gauteng metros governed by coalitions since the 2021 local government elections, together with Ekurhuleni and Tshwane, where questionable governance has resulted in power frequently changing hands at the expense of service delivery.
“I’m afraid this may be a precursor to what is going to happen nationally in 2024, and one prays the mess in the City of Joburg doesn’t repeat itself because it’s a residential crisis with many people moving to other provinces, while some are leaving the country altogether.”
Kekana said the biggest effect on the real estate sector is getting approvals signed off at the highest level. Members of the mayoral committee (MMCs) don’t have the authority to make final approvals, and property owners are suffering as a result of the reduced mayoral tenures.
JSE-listed, Dipula Income Fund CEO, Izak Petersen told Business Day the national government is the biggest risk to the country, with dysfunctional municipalities affecting service delivery and the social-political environment.
“Our businesses depend on service delivery; it is hard to function without electricity and water, having to contend with growing potholes on our roads which increases commuting time, and the time it takes to get plans approved is hard on property owners,” he said.
Petersen said there are solutions to these problems — but the political will to implement them is lacking. He said for the City of Joburg to have three mayors in a matter of months is worrying given that the city is the country’s economic hub.
“Government needs to pull up its socks and work. We cannot continue in this manner; it’s not sustainable,” Petersen said.
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