About Me

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I am a qualified Attorney. I specialise in Property Law, Commercial Law, Corporate Law and Trusts.
 
Please visit our website at www.prop-law.co.za for more details.
 
I am an elected Committee Member of the Property Committee of the Association of Pretoria Attorneys and through my involvement, I like to ensure that I am constantly at the "sharp-end" of Conveyancing Practice.

I am the elected Chairman on the Gauteng Council of SAPOA. The South African Property Owners Association (SAPOA) is the biggest and most influential institution in the property industry. SAPOA members control about 90% of commercial property in SA, with a combined portfolio in excess of R150 Billion (about $22 Billion). I am also on the National Council and the National Legal Committee of SAPOA.
 
Member of the Institute of Directors South Africa.

09 March 2012

Accountant survives Pickvest CEO`s complaint

Accountant survives Pickvest CEO`s complaint

Rikus Myburgh fails to get auditing body to act against nemesis Andre Prakke.

Rikus Myburgh, CEO of controversial syndication promoter Pickvest (formerly PIC Syndications), has failed in his complaint against nemesis Andre Prakke.

Last year Moneyweb reported that Myburgh had laid a complaint against Prakke with the South African Institute of Chartered Accountants (Saica). See Pickvest CEO lays complaint against Andre Prakke.

Both Myburgh and Prakke are chartered accountants.

Myburgh’s complaint, which can be downloaded here, accused Prakke of causing the loss of income to Pickvest of “hundreds of millions of rands”. Presumably this income would have been earned as profits on the sale of syndicated properties to investors.

Myburgh’s complaint was referred to the regulatory body for auditors, Irba, which takes precedence when a complaint is made against someone who is both a registered accountant and auditor, as Prakke is.

Irba director Jane O’Connor wrote to Myburgh to inform him that Irba’s investigating committee did not believe that his complaint had provided evidence to charge Prakke with bringing the profession into disrepute. O’Connor’s letter can be downloaded here.

O’Connor noted, somewhat ominously for Pickvest auditors, that, on further consideration, the committee had “decided to investigate the auditors in this matter". It is unclear whether O’Connor was referring to Pickvest’s auditors, Calculus, or those of its syndication companies, Van Sitterts.

Auditors of property syndication companies have taken some flak recently for signing off on dubious valuations. See Property Syndicator’s auditor clobbered and Sharemax: Auditor backtracks on opinion.

Myburgh declined to comment on Irba’s finding. He would only say: “I prefer to wait for the outcome of the other case against Prakke currently being investigated by Irba.”

Prakke says he is not aware of any other complaint pending against him.

Prakke tells Moneyweb that he is considering suing Myburgh for defamation. He is also considering laying counter complaints against both Myburgh and Pickvest attorney Eugene Kruger.

“Money has been stolen from investors, finish and klaar,” says Prakke.

What is clear is that about R883m of Pickvest investors’ funds is unaccounted for. This was confirmed by business rescue practitioner Hans Klopper in his rescue plan.

Prakke has been a vocal critic against many dubious schemes including forex schemes Chinza, Prozet and Leaderguard, and property syndication companies Sharemax and Pickvest.

Prakke’s outspoken opinions have earned him many enemies, especially among the professionals associated with property syndication companies, including directors, auditors, lawyers, and dozens of financial advisers.

Pickvest: Billionaire gets five years to repay investors - Property | Moneyweb

Pickvest: Billionaire gets five years to repay investors - Property | Moneyweb

18 000-odd investors may have till December 2016 to see if the rescue plan works.

Investors in Pickvest’s eight syndication schemes may have to wait until December 2016 to find out if a rescue plan has been a success. That’s when apparent property billionaire Nic Georgiou and his associates have promised to repay the R4.6bn that was invested in the schemes.

In December last year, Pickvest’s investors approved a business rescue plan proposed by practitioner Hans Klopper. About 11 000 of Pickvest’s total 18 000-odd investors voted. More than 99% of those who voted were in favour of the rescue plan.

Unlike the plan proposed by Sharemax, Pickvest’s rescue does not require court approval.

In terms of the plan, all the properties that were supposed to be owned by investors will be transferred into a public company called Orthotouch. This company has three directors: Nic Georgiou, Panos Kleovoulou and Jannie Nel. It is envisaged that Klopper and corporate lawyer Connie Myburgh will also be appointed directors.

The vast majority of Orthotouch’s shares will be owned by the NAG Trust, registration number IT4469/09.

Orthotouch has undertaken to pay investors a monthly return starting at 6% per year and increasing by 25 basis points each year. At the end of five years, Orthotouch promises to repay investors their full R4.6bn.

The rescue plan is significantly less attractive than the original terms on which investors bought their shares. For example, investors in the biggest syndication, Highveld 21, which accounts for R1.3bn, were promised a return of 12.5% and a capital “guarantee”. Thus, investors may still be inclined to lay complaints against their financial advisers with the Fais Ombud.

Klopper says that Orthotouch has pledged its shares to the eight syndication companies, which will remain the property of investors. “If there is any breach of the agreement, the syndication companies can exercise their pledge and take control of Orthotouch,” Klopper explains.

But Klopper is also the first to admit that the rescue plan has a significant risk attached to it.

Orthotouch will only be able to pay investors their monthly income if it succeeds in its efforts to borrow money. In a letter to an investor, Klopper explains that Orthotouch was unable to make contact with financial institutions during the holiday period, and this caused a delay in the payment of interest.

Klopper says that Orthotouch needs to borrow money in order to pay investors and to improve its buildings, some of which are in dire need of an upgrade.

As a public company, Orthotouch’s financial statements ought to be open to public scrutiny. However, since it is a newly-formed company, it may take as long as 18 months before investors will be able to see audited financial statements.

Such financial statements, when they are produced, should provide insight into Orthotouch’s ability to meet its promises to investors. If the company appears healthy, investors in the eight Pickvest syndication companies may have a better chance of selling their shares and redeeming their investment early. At present there are virtually no buyers for these shares at any price.

In the past, Pickvest used to assist its investors to sell shares in the second-hand market. There is no reason why this market should not resume. Elderly Pickvest investors may be willing to sell their shares for a substantial discount and let younger speculators – with more time and stronger stomachs – wait until December 2016 to see if Orthotouch can deliver on its promises.

Klopper says that a trading platform “May very well be something that could be considered”.

R4.6bn Pickvest rescue hinges on property billionaire

R4.6bn Pickvest rescue hinges on property billionaire

Rescue practitioner says the choice is simple: Accept Georgiou’s deal, or liquidate.

Pickvest investors stand to lose an estimated R3.8bn, or 81% of their capital, unless they accept a rescue offer proposed by controversial billionaire Nic Georgiou. This is the message from business rescue practitioner Hans Klopper who filed his plan to save the Pickvest property syndications on Wednesday. The rescue plan can be downloaded here.

It was Georgiou who, through his companies, “guaranteed” the generous returns offered by Pickvest syndications. But these guarantees turned out to be worthless when problems started to emerge at the syndication giant earlier this year.

Klopper was appointed to the eight Pickvest schemes in a bid to prevent their liquidation. His appointment provides the syndications with temporary protection from their creditors. This protection gives Klopper time to decide if the syndications can be saved.

In the 62-page rescue document, Klopper effectively tells investors they can choose Georgiou’s offer, or face the liquidation of their investments. Says Klopper: “It is evident that the prospects of the investors recovering their capital without the [Georgiou] offer being accepted are bleak whereas the recovery prospects, should the offer be accepted, are considerably improved.”

Klopper adds that the Georgiou proposal, known as the Orthotouch offer, is the “only realistic opportunity” for investors to recover their capital.

The Orthotouch offer is nothing new. It was proposed to investors in April. The deal would see Orthotouch, a company controlled by Georgiou, buying all of investors’ buildings, and paying for them after five years. They will also earn an income, starting at 6% in year one, increasing to 7% by year five.

However, Klopper has renegotiated the original transaction with clauses and safeguards that he says are to the benefit of Pickvest investors. He says the deal will be underpinned by property worth more than R4bn, and that investors can appoint two directors to the Orthotouch board. Further, Georgiou’s company, Zephan, will transfer buildings worth approximately R1.5bn into Orthotouch for added security. Orthotouch may not lend any money to or invest in third parties while investors remain unpaid.

Klopper says there has been a “groundswell of optimism” from financial advisers, some of whom were steadfastly opposed to the Orthotouch offer in its original form.

Investors are scheduled to meet on December 14, where they can propose amendments to Klopper’s plan and vote to approve it. The plan amounts to the acceptance of the renegotiated Orthotouch offer.
A key feature of the Orthotouch deal is that it is dependent on its acceptance by investors in all eight property syndications. Those in the Highveld 19-22 might feel they have nothing to lose by voting for Georgiou’s proposal. But those invested in the healthiest syndication, Highveld 18, may be less inclined to invest another five years with Georgiou.


Bleak liquidation scenario

Klopper provides investors with estimates of what they can expect to receive in the event of liquidation. It is no surprise that those invested in the older syndications, Highveld 15-18, are expected to fare considerably better than the others. This is because the older syndications actually own property. The others do not.
In April Moneyweb reported that Highveld 18 is the healthiest of these four syndications, and that 16 was in the most trouble. Klopper arrives at the same conclusion in his business rescue plan.

According to Klopper’s estimates, an investor in Highveld 18 might hope to recover 61% of their capital. An investor in Highveld 16 might get 35c. Klopper’s estimates are based on the orderly sale of assets at market value. He estimates that the return could even be 50 percent lower if the assets are sold at auction prices.

For the investors in the newer syndications, Highveld 19-22, the situation is considerably bleaker. These syndications do not own any property. Their only asset is a claim against a company called Bosman & Visser, which has no assets to speak of. For more on this perilous situation, see this article.

Klopper describes the difficulties of pursuing the claim against Bosman & Visser (B&V) in his rescue plan. He says that at least R10m will be needed to sue B&V. In turn, the liquidators of B&V would need money to sue Georgiou’s company Zephan, which has so far failed to deliver investors’ buildings.

Klopper says that Zephan “will undoubtedly defend such action and institute a counterclaim for damages against B&V.”

If the syndications Highveld 19-22 are liquidated, Klopper expects investors to recover no more than R250m out of a total of R3.5bn invested. He also warns that this recovery could take years. Investors in Highveld 21, the largest, are the worst off, with an expected recovery of only 2% of their capital. The best is Highveld 22 with an expected recovery of 17.6%.

08 March 2012

The truth behind my Sharemax divorce - Dawie Roodt


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The truth behind my Sharemax divorce - Dawie Roodt

Relations with directors and lawyer Connie Myburgh became " progressively intolerable".


Dear Mr Cobbett

I refer to your article of March 1st on Moneyweb; “Was Dawie Roodt fired from Sharemax?

It is indeed unfortunate that I am in effect forced to react to allegations made against me in this way. I would also appreciate it if you could carry this reply on your website. Based on your article Mr Myburgh and Ms Haese either said or implied that I was dismissed from the boards of companies related to Sharemax. This is incorrect, the correct facts and version of events are provided below. Please note that I have documentary proof of all the facts that I list hereunder.

As you know I was appointed as an independent director to the Sharemax syndicated and other related companies during 2010 primarily to assist in the restructuring of the Sharemax group of companies. Over the months I became uncomfortable with the manner in which certain issues within the group of companies were handled and early July last year I wrote an email to Judge Hartzenberg, the Chairman, wherein I listed some of my concerns. The very next day, before a scheduled board meeting, the other directors asked to see me.

At this meeting I was presented with two documents. On the one document I tendered my resignation and on the other I was “dismissed”. The “dismissal” document was signed by Dominique Haese, Dirk Koekemoer (both executive directors) and Rudi Badenhorst (a non-executive independent director). Judge Hartzenberg did not sign this document. I was given a choice to sign either of these two documents, which I refused to do. I then left the meeting and told the other directors that I will revert back to them once I have decided what to do.

It is important to note that Mr Koekemoer and Ms Haese did not have the power to dismiss me since they were not directors of the holding company, which had the right to appoint directors. Furthermore, the letter of my “dismissal” was signed by only one director which was entitled thereto, Mr Badenhorst, while the other director, Judge Hartzenberg, did not sign the document. And lastly, no due process in terms of the law was followed before I was “dismissed”; informing me of complaints against me, providing me with an opportunity to react thereto etc.

After this episode I decided to tender my resignation which I did a few days later. Clearly the allegations by Mr Myburgh and allegedly by Ms Haese are incorrect.

I can, however, confirm that I was asked about my resignation by a caller during a radio interview with Magnus Heystek, as you indicated in your article. Just as we were leaving the studio Mr Myburgh called me and threatened to tell Magnus that I was “fired”. I then told Mr Myburgh to tell Mr Heystek himself since he was standing next to me and I then handed my phone to Mr Heystek.

I have not been fired from the Sharemax related companies as alleged. I resigned after relations between me and some of the board members and the lawyer, Mr Myburgh, became progressively intolerable.

Best regards

Dawie Roodt
Chief Economist/Director



Response by the Sharemax board.

Dear Mr. Cobbett,

We note that Mr. Roodt insisted that his communication of 6 March 2012 be published, presumably by yourselves. This position taken by Mr Roodt is noted.

The board reiterates its stance that it keeps information that is confidential, for whatever reason, exactly as such, namely confidential, including Mr Roodt’s relationship with the historical Sharemax Group.

We will not be communicating with Mr Roodt through the media, save to likewise request that this response is published, verbatim, in context and without any alterations, be it as to content and composition.

Contrary to your apparent view, we do not believe that this matter has any relevance whatsoever, and we will not entertain any further communication in this regard.

The board reserves all its rights.

Regards

Dominique Haese
Managing & Financial Director
Frontier Asset Management (Pty) Ltd

Was Dawie Roodt fired from Sharemax?

Was Dawie Roodt fired from Sharemax?

War of words erupts over Roodt’s departure from Sharemax’s syndication companies.

Was Efficient Group economist Dawie Roodt fired from the boards of Sharemax’s syndication companies?

Moneyweb Radio presenter Magnus Heystek claims that he was informed by corporate lawyer Connie Myburgh that Roodt was “fired”. Myburgh is the architect of the Sharemax rescue plan, which received court sanction early this year.

This is not the first time Moneyweb has heard of Roodt’s alleged sacking. Dominique Haese, CEO of the Sharemax syndication companies, has also made the allegation, albeit indirectly.

During a recent telephone conversation with this journalist, Haese claimed she was aware of the identity of a director who had allegedly leaked documents to Moneyweb. Haese said that the guilty director had been “fired” from the Sharemax syndication boards, and that “steps are being taken against him”.

Haese did not mention Roodt by name, but he is the only director to have left during the relevant time period.

Roodt was appointed to the boards of the Sharemax syndication companies in November 2010. He apparently resigned in July 2011. At the time, Roodt was hesitant to disclose the reasons for his “resignation”. He would only say: “I don’t think I can make a contribution to the [restructuring] process anymore.” He added: “I think it’s also safe to say there were some disagreements.”

Sharemax later confirmed that Roodt had resigned.

But this media release has allegedly been contradicted by Myburgh in a fiery telephone call which took place last Friday evening, immediately after the broadcast of Moneyweb’s Afrikaans radio programme, RSG Geldsake met Moneyweb.

Presenter Magnus Heystek’s version of events follows:

“Dawie Roodt was on our radio show on Friday to speak about the Budget. During the show, a listener called in and asked why Dawie had resigned from the Sharemax boards. Dawie was diplomatic in his answer.”

Roodt answered in Afrikaans: “I was not happy with how things were done and consequently I decided to end my relationship with Sharemax.”

Readers who wish to listen to the relevant portion of the radio show can download it here.

Heystek continues: “As soon as we walked out of the studio, Dawie’s phone rang. He showed me the screen and I could see it was Connie Myburgh calling.

“Dawie answered his phone, and I could hear that he was having a heated conversation with Myburgh.”

At some point in the conversation Roodt handed the phone to Heystek so he could speak to Myburgh.

Says Heystek: “Myburgh informed me that Roodt had been fired from the boards of the Sharemax syndication companies. He promised to send me a letter that would prove this.”

On the following Tuesday, Heystek called Myburgh to ask whether he would send the promised letter.

“What followed was a verbal tirade,” says Heystek. “Myburgh made a number of allegations against me, Moneyweb, and [forensic accountant and Sharemax critic] André Prakke. He called Dawie a liar and denied saying he had been fired.”

Heystek says he knows Connie Myburgh because they studied at the same university. “Myburgh was also in my office four years ago to discuss a property in Mauritius.”

Roodt declined to comment on allegations that he was fired. Neither Myburgh nor his attorney, Coenie Willemse, responded to a request to comment

Manaka defends controversial government leasing deal

Manaka defends controversial government leasing deal

Political connections were not leveraged to secure inflated prices – CEO Joe Mathebula.

The company involved in a controversial leasing agreement with the Department of Home Affairs (DoHA) has defended itself against allegations that it has leveraged political connections to secure inflated prices, saying that rentals are market related.

Manaka Property Investments leases approximately 25 400m² of office space to the DoHA in the Hallmark building in Pretoria’s CBD.

The lease was signed by the Department of Public Works (DPW) which, under its former minister, Gwen Mahlangu Nkabinde, was responsible for authorising the police headquarters leases which resulted in the suspension of police chief Bheki Cele.

Reports released in the media on Monday suggested that the lease agreement was costing the DoHA more than one-and-a-half times what it previously paid for office space.

According to a written reply to a parliamentary question, Home Affairs Minister Nkosazana Dlamini-Zuma, said the offices are costing her department around R109/m² per month, reports said.

This would translate into a yearly rental of R33.2m for 25 338m² of office space, as compared to a total of R25.7m for 30 859 m², or R69.40/ m², the department had been paying previously.

However, Joe Mathebula, Manaka Property Investments CEO, claims that Dlamini-Zuma’s costing has not been adjusted to exclude 400 parking bays being rented to the department at R450 per month.

The actual lease agreement, claims Mathebula, is at a rate of R87.76/ m² per month.

“The lease is for eight years as per our 75% BEE status according to Public Works,” he said.
According to the Rode Report, which evaluates average rental prices for properties, an A Grade property in the Pretoria CBD would typically cost around R80/ m² a month, excluding VAT.

A Grade property would be defined as being “generally not older than ten years, unless renovated, in a prime location with high quality finishes”.

Manaka claims to have invested around R70m into refurbishing the Hallmark building prior to leasing it to the DoHA.

Mathebula also contends that the increase in the price of the office space is natural, owing to the fact that the department has relocated its offices from an outlying industrial area to a prime office location in the Pretoria CBD.

“People want to be silly” when comparing rental prices, said Mathebula. “The department was leasing in Silverton which is an industrial space; it’s not even an office space,” he said.

Four of Manaka’s key management staff, including its chairman, CEO, director and a major investor, served as state officials in Limpopo leading to allegations that it had leveraged political connections to secure the lease agreement.

Manaka’s chairman and 50% shareholder, Thaba Mufamadi, is a serving ANC MP, chairman of Parliament's standing committee on finance and the Former Minister of Finance and Economic Development of Limpopo.

The current Limpopo Premier, Cassel Mathale, is registered by the Companies and Intellectual Property Commission (CIPC) as a Manaka director.

Mufamadi and Mathale are currently facing a probe by Parliament’s ethics oversight committee questioning how a company connected to public representatives had come to be awarded the contracts, apparently in breach of treasury regulations.

However, says Jannie Moolman, MD of the Moolman Group which holds a 25% stake in Manaka, and former chairman of the Limpopo tender board, Mufamadi had not held positions in political office at the time when Manaka was founded in 2007.

And, according to Manaka CEO – who is the former CEO of parastatal Trade and Investment Limpopo – Mathale had been asked to resign from Manaka but, owing to a difficulty with processes at CIPC, had not been able to do so.

“When Mufamadi and I decided to form Manaka he was out of political office,” said Moolman.
“When we formed Manaka he was no longer in politics, he was an ANC office bearer… A few years after, we sat with a situation where Mufamadi became a national MP”.

Moolman was unwilling to comment on the parliamentary probe saying simply that “I hope it’s not the case” that Mufamadi has breached and tender regulations in securing the lease for the Hallmark building.

07 March 2012

New properties set to change face of Soweto

New properties set to change face of Soweto

Abulani Heights is set to change the face of the Soweto housing landscape. The groundbreaking new development will have a mall, hospital, theatre, municipal offices, fire station and filling stations.


A view of the complex.

The three-storey blocks of flats are meant for people who earn too much to qualify for a subsidy and too little to buy a house.

Project funders International Housing Solutions (IHS) released findings of research conducted by property economist and UCT associate professor Francois Viruly that showed a high level of satisfaction among occupants of the new housing product.

Soula Proxenos, managing partner of IHS, said affordable housing was aimed at closing a huge gap in housing that affected "people who can afford to pay but have nothing suitable for them in the market".

She said they were not only building affordable homes, but were taking into consideration things such as locations close to residents' workplaces, amenities and access to transport routes.

"The Jabulani project is ideally located near a mall and a theatre as well as other facilities. We also have apartments in Protea Glen that are also close to public transport routes, schools and shops," she said.
"Our projects are also for people who love living in Soweto, but would still want a feeling similar to those of upmarket apartments in the city close to amenities and also remain close to their families in the township. "We got the professor (Viruly) to conduct research recently to test if we were indeed meeting every aspect of what will satisfy residents, developers as well as our investors."

Viruly said his research also looked at how many jobs were created through affordable housing projects.
The IHS said its products were designed to "ensure healthy, integrated communities rather than just to provide dwellings".


The complex was designed in a modern style with bold stairwells in red.

Viruly's research showed that "over 70 percent of respondents said by moving into the these houses they become healthier".

He said: "Living in a decent and well-located house means people are healthier.
"We were testing the issue of 'housing beyond just a shelter' and found out that access to amenities like schools is critical."

Jabulani Heights is expected to yield 4 200 units of a combination of rental and ownership stock selling from R242 000 for a single-bedroomed bachelor flat to R526 000 for 86m threebedroomed units.

Down the road from Jabulani Mall, 500 new units of neat three-storey blocks of RDP and subsidised rental units are being built. Construction of a 300-bed Jabulani-Zola Hospital in front of the R320 million Jabulani Mall is almost complete. On the other side of the mall, the R150m colourful Soweto Theatre is nearing completion. All these are expected to form a new CBD for Soweto in Jabulani.

The Star

06 March 2012

SA mayors urged to buy up city land

SA mayors urged to buy up city land

The government must intervene radically in the ownership of land around South African cities to ensure optimum economic growth, the country's top mayors were told during a course at the weekend.

Enrique Peñalosa, the former mayor of the Colombian capital, Bogotá, said the quality of urban life was the most important determinant of modern economic growth and that the leaders of South African cities should decide what kind of cities they wanted.

While land and then capital were initially regarded as the most important factors in economic growth, now it was people, Peñalosa told the mayors and their management teams. "How do you ensure that the best South Africans stay in South Africa and don't go to London or New York? By making it attractive."

Peñalosa and his successor are credited by many with turning one of the world's most violent and corrupt capitals into a peaceful and vibrant city in less than 10 years.

Peñalosa spoke at a unique course called "Leadership in local government: building globally competitive cities".

Executive mayors in attendance during the first two days of the course at the weekend included Zukiswa Ncitha of Buffalo City, Patricia de Lille of Cape Town, Mondli Gungubele of Ekurhuleni, Parks Tau of Johannesburg; Zanoxolo Wayile of Nelson Mandela Bay and Kgosientso Ramokgopa of Tshwane.

The cities' management teams are attending the full eight-day course, run by UCT and the World Bank Institute and sponsored by the Treasury and the SA Local Government Association.

The theme of the first day of the programme, which Peñalosa addressed, was "Rapid reform is necessary". That necessity, as he sees it, is based on the fact that South Africa is currently 62 percent urbanised and is likely to experience a rapid increase in urban population in the coming years.

"In South America, where there is 90 percent urbanisation, the population of the cities increased by 300 percent when the urbanisation rate increased from 62 percent to 85 percent... what's happening in South Africa now, happened in South America years ago."

A critical factor determining the success of the urbanisation process would be the availability of land around the growing cities. "If you don't deal with this issue, you won't be able to solve the housing problem."

The lack of available land was resulting in informal developments being established in "very bad locations".

Peñalosa said that the market economy, in the case of land around growing cities, did not work because the supply of land could not be increased to match the increased demand. "This means that rich land owners become richer... just because cities are growing."

He said that the government had to buy out these landowners either voluntarily or compulsorily and create a land bank.

The programme is the second to be convened by UCT's Graduate School of Development Policy and Practice, which aims to promote strategic leadership in government and places a strong emphasis on accountability in governance.

The seminar will see the introduction of the Treasury's Cities Support Programme, which aims to support and strengthen service delivery at municipal level.

Business Report

Residential rental market set to remain weak - FNB

Residential rental market set to remain weak - FNB

The residential buy-to-let and rental markets remain weak and may remain so for some time because of the crowding-out effect of the myriad other consumer costs, according to FNB.




However, John Loos, a household and property sector analyst at FNB, said a weak residential market might have been key in preventing interest rates rising last year because of the large weighting of rentals in the consumer price index (CPI).

"Should the rental market have strengthened more significantly in 2011 at a time when other components of the CPI were rising sharply, overall consumer price inflation may have risen far higher above the 6 percent upper target limit and that may just have been the catalyst for the Reserve Bank to start hiking interest rates."
Loos added that interest rate hikes appeared to have been significantly delayed and residential buying demand had continued to grow gradually.

He expected the rental market to pick up from the start of expected interest rate hikes around 2014. Increases in rates would be a catalyst for a stronger rental market as many aspirant first-time buyers would delay buying a home and rent for longer.

Loos said weak buy-to-let buying did lay the foundation for the ultimate recovery of the rental market by constraining supply, which would gradually set the basis for a future shortage leading to stronger rental inflation.

However, Loos said it appeared that significant strengthening in the rental market might be some way off, with credit dependent first-time home buyers flocking into the home buying market in greater numbers as opposed to renting.

Loos said the percentage of residential buyers who were purchasing properties to let was believed to have remained fairly weak based on the results of FNB's fourth-quarter estate agent survey.

He said agents surveyed estimated about 8 percent of sales were to buy-to-let buyers, virtually unchanged from the previous three quarters and still a far cry from the almost 25 percent recorded in 2004.

Loos attributed the weakness in the buy-to-let market to the current significant household sector pressure.
The sources of this pressure had been a mediocre economic performance despite some recent improvement, along with sharp increases in the cost of high-frequency consumer purchases.

"Although price inflation for petrol and food are starting to turn for the better, their inflation rates remain very high and these highly essential items do exert a significant degree of financial pressure.

"But more significant in limiting the appeal of owning a second home is arguably the ongoing increases in municipal rates while utilities tariffs, most notably in the area of electricity, are skyrocketing."

Loos said while utilities tariffs were generally passed on to the tenant in a rental property, the general levels of financial pressure in recent years must often have meant the negative impact on tenants of these tariffs and other CPI inflation items limited the "pricing power" of landlords in hiking rentals.

Business Report

05 March 2012

Hope for lower income property buyers?

Hope for lower income property buyers?

Property ownership has been, and continues to be a vital aspect of life in South Africa - especially for the lower income groups.

This is plain to see from the amount of protests regarding housing and the incredible demand for RDP homes. The demand for property has gone un-sated mainly due to the fact that it is incredibly difficult for this group to obtain home loans.

While the State of the Nation Address is a key, yearly moment of import for South African politics, it is doubtful that those in the residential property market trade expected any surprises. Predictably the key topics of job creation and infrastructure development took precedence but, there was also significant announcement regarding the purchasing of property.

The President quoted from a letter written by Mzukisi Mali - a public servant in the Grahamstown region. Mr Mali, it turns out, is in the unenviable position, which thousands of South Africans share, of being too well off to qualify for an RDP house but, too risky a proposition for a bank to grant him a home loan. This situation is all too common and very difficult to resolve on a personal level.

In 2010 government announced the creation of a one billion Rand guarantee fund with which it hoped to enable citizens to obtain home loans. Zuma indicated that; "We are pleased to report that this fund will start its operations in April, managed by the National Housing Finance Corporation."

It is important to note that there will now be two financial schemes in play: the national housing-guarantee scheme - of R1 billion - and the housing subsidy for the gap market which will enable prospective home owners earning between R3,500 and R15,000 to procure a subsidy of up to R85 000 from their respective provincial housing departments.

"The roll out of this fund could change the property landscape significantly in that many more people will now be able to afford purchasing a home as opposed to renting a property" says Jan le Roux, CEO of Leapfrog Property Group.

Rudi Botha, CEO of leading mortgage originator Betterbond, says: "We are obviously pleased at the news that the long-awaited housing guarantee scheme will start to be implemented soon - although there is some doubt about whether it will be finalised by April. This scheme will basically subsidise the premium payable by the borrower for an insurance policy that protects a bank against loss if the borrower defaults on a home loan."

South Africa is not the first nation to toy with the idea of assisting buyers in purchasing their first homes. The Dutch have piloted a Home Ownership Guarantee Fund with great success. In 2002 over a third of Dutch mortgages with a National Mortgage Guarantee from the Fund.

According to the Ministry of Housing, Spatial Planning and the Environment, International Housing Unit [link: www.vrom.nl], the fund guarantees: "the lender repayment of the mortgage debt if the buyer can no longer fulfil his obligations. Any residual debt after compulsory sale will in principle be waived and will be borne by the fund." The amount required is born in half by the government and in half by the local authorities should the principal debtor's funds be insufficient to cover the loan.

As a result of this scheme, Dutch home buyers - from lower income groups - have found that financial institutions are more amenable to loaning money and, that they set a marginally lower rate of interest. There are strict requirements: the property (to be purchased) must be below a certain amount and the mortgage costs may not be too high in relation to the applicant's income.

"Should the South African guarantee scheme come into play in 2012, international evidence indicates that it will do much to encourage banks to lend money, thereby placing lower income buyers into their first homes - a move that is long overdue", says le Roux.

Leapfrom Press Release

Carlos Slim tops the Bloomberg Billionaires Index

Carlos Slim tops the Bloomberg Billionaires Index

Mark Zuckerberg, founder of Facebook, didn’t make the cut.

Carlos Slim, the telecommunications tycoon who controls Mexico’s America Movil SAB, is the richest person on Earth, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 20 wealthiest individuals.

The 72-year-old’s net worth fell $478.4 million in a day to $68.5 billion as of the close of markets on March 2, as U.S. moguls Bill Gates and Warren Buffett placed second and third on the list compiled by Bloomberg News. Brazil’s Eike Batista, who ranks 10th, still covets the top spot after vowing a year ago that he’d become the world’s wealthiest man by 2015.

“I’m competitive,” Batista, who trails Slim by almost $39 billion, said in a March 2 telephone interview from Rio de Janeiro. “It’s Brazil’s time to be No. 1. Brazilians have always admired the American dream. What’s happening in Brazil is the Brazilian dream and I happen to be the example.”

The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York. The valuations are listed in U.S. dollars.

Today’s ranking was published with the release of new billionaires profile pages in the Bloomberg Professional service. The profiles feature a transparent analysis of how each billionaire’s fortune was calculated.

Slim’s fortune has increased 11 percent this year, according to the index. A spokesman for Slim didn’t immediately return a telephone request for comment.


Gates, Buffett

Gates, 56, co-founder of Microsoft Corp. (MSFT) in Redmond, Washington, is worth $62.4 billion, down $102.1 million on March 2 and up 11 percent year to date.

The fortune of Buffett, 81, chairman of Omaha, Nebraska- based Berkshire Hathaway Inc. (BRK/B), declined $336.9 million to $43.8 billion on March 2 and is up 2.4 percent in 2012. Almost all of Buffett’s wealth is held in Berkshire Hathaway, the publicly traded holding company he has run since 1965.

The combined net worth of the 20 richest people is $676.8 billion. Nine are Americans, including three from the family of Sam Walton, the founder of Wal-Mart Stores Inc. (WMT)

Number seven is Larry Ellison, 67, chief executive officer of Redwood City, California-basedOracle Corp. (ORCL), the world’s third-largest software maker after Microsoft and SAP AG. (SAP) His $38 billion fortune puts him $4 billion ahead of brothers Charles and David Koch, who each own 42 percent of Koch Industries Inc., one of the biggest closely held companies in the world by revenue. Charles, 76, and David, 71, control the Wichita, Kansas, refiner and chemical maker.

Batista, 55, whose investments range from iron ore to coal, is worth $29.8 billion, up $133.9 million on March 2. His fortune has grown 32 percent this year, the most on the list.

The House Wins

Sheldon Adelson, the casino magnate who owns 47 percent of Las Vegas Sands Corp. (LVS), which operates resorts in Macau and Las Vegas, is number 13 with $25.7 billion. Adelson, 78, and his family have pledged at least $10 million to a super-PAC supporting Newt Gingrich, a Republican presidential candidate.

Liliane Bettencourt, 89, who with her family owns 31 percent of Paris-based cosmetics company L’Oreal SA (OR), is last on the ranking. Bettencourt was the subject of an international scandal in 2007 when her daughter, Francoise Bettencourt Meyers, filed a lawsuit accusing a family friend, photographer Francois- Marie Banier, of exploiting her mother’s frail state. Evidence later revealed Bettencourt had granted more than $1 billion in cash and gifts to Banier. In October, Meyers and two grandsons became guardians of the clan’s $22.4 billion fortune.


Diluting Zuckerberg

Mark Zuckerberg, the 27-year-old founder of Facebook Inc. (FB), the world’s largest social-networking company, didn’t make the cut. Based on a roughly $100 billion valuation the Menlo Park, California-based company has been trading at in the private market, Zuckerberg’s stake may be worth $21 billion, or about 25 percent less than previous estimates, once Facebook holds its initial public offering.

The reason: Facebook will issue more than 500 million shares of its Class B stock at the offering, diluting Zuckerberg’s ownership to 21 percent after he exercises 120 million options and sells about 42 million shares to cover the tax bill associated with the gain from those options.

Sweden’s Ingvar Kamprad is the richest European, according to the index, ranking fourth globally with a $42.5 billion net worth. Kamprad, 85, controls Ikea Group, the world’s largest furniture retailer, through a series of trusts and foundations he asserts he doesn’t own.


Luxury Goods

Bernard Arnault, the chairman of LVMH Moet Hennessy Louis Vuitton SA (MC), places fifth. The majority of Arnault’s $42.3 billion comes from his stake in Paris-based LVMH, the world’s largest maker of luxury goods. Arnault, 63, controls about 46 percent of LVMH’s outstanding stock through his family group, according to the company’s latest annual report.

Amancio Ortega, whose publicly traded Inditex SA (ITX) owns the Zara clothing chain, is Spain’s wealthiest individual and sixth in the world with a $38.8 billion fortune. Ortega, 75, has invested dividends from Arteixo-based Inditex into a real estate portfolio that owns office and retail properties in the U.S. and Europe.

No Russians appear in the index as falling metals prices hurt the fortunes of many of the richest oligarchs. Alisher Usmanov, 58, the Muscovite who controls the Metalloinvest metals and mining company and Digital Sky Technologies, which currently owns 5.5 percent of Facebook, is Russia’s wealthiest person thanks to a $20.1 billion fortune.


Asia’s Wealthiest

Mukesh Ambani, 54, leads Asians with a net worth of $26.8 billion, down $185.4 million in a day. His fortune is up 25 percent this year, according to the Bloomberg Billionaires Index, as his shares in India’s top company by market value, Mumbai-based Reliance Industries Ltd. (RIL), have risen 17 percent.

Hong Kong’s Li Ka-shing, nicknamed “Superman” by the local media for his investing prowess, ranks second in the region, with $25.8 billion. Li, 83, owns large stakes in Hong Kong-based property developer Cheung Kong Holdings Ltd. (1), Hong Kong shipping and ports operator Hutchison Whampoa Ltd. (13) and Husky Energy Inc. (HSE), the Calgary-based energy company.

Lakshmi Mittal, the India-born chairman of ArcelorMittal (MT), the world’s biggest steelmaker, is the third-richest Asian, with holdings valued at $23.6 billion. In addition to his ArcelorMittal stake, the 61-year-old London resident owns hundreds of millions of dollars in U.K. real estate.

On the rise: Gina Rinehart, the Australian mining heiress who is worth $20.4 billion. Rinehart, 58, the daughter of the man who discovered the mines that made Australia the world’s biggest iron ore exporter, inherited perpetual royalty rights to some of Rio Tinto Ltd. (RIO)’s Hamersley mines in addition to other thermal and iron-ore deposits throughout the country.

Soaring demand for coal and iron ore from China have made Rinehart’s assets attractive to acquisitive industrial companies. In separate deals in the past year, steelmakers Posco andGVK Power & Infrasture Ltd. (GVKP) agreed to pay a combined $2.9 billion for pieces of Rinehart’s empire.

...

01 March 2012

Tshwane in bid to enforce use of pre-paid meters

Tshwane in bid to enforce use of pre-paid meters

The Tshwane Metro Council is looking at passing a by-law compelling households to have pre-paid meters within three years to improve its revenue collection.

Agreeing on a three-year prepayment roll-out strategy at the monthly meeting, executive mayor Kgosientso Ramokgopa said the council should pass a by-law compelling every household to be have pre-paid meters.

He said the debt for municipal services (water, electricity and rubbish removal) stood at R3.9 billion.

"At the current rate the municipality is unsustainable. The installation of pre-paid meters will alleviate this problem," said Ramokgopa.

According to the municipality, the credit control measures are not yielding the results hoped for and the debt is increasing while projected revenue is dropping.

If the status quo remains, the projected revenue will decrease beyond the municipality's sustainability.

The council agreed that all accounts exceeding R3 000 over 60 days be changed to pre-paid meters and that pre-paid meters be compulsory for new electricity accounts for rented premises and residential dwellings with high tenant turnover.

All accounts where a tenant's premises cannot be accessed for more than two months or where electricity meters are installed

Tshould be placed on the pre-paid meter system.

Tenders for meter installation have been invited with five service providers, and a third-party vendor tender is in place for three years for the extended reselling of electricity at retail merchants, including petrol stations and spaza shops.

DA councillor Professor Duncan Baker said the rolling out of prepayment electricity was a welcome development.

He said: "Following problems with getting clarification as to (their) electricity accounts, many residents have indicated an interest in using such meters.

"The reasons include the avoidance of electricity account queries, as well as allowing them to monitor their usage."

Baker said the municipality should start a programme to roll out devices that can cut the power to geysers remotely.

"The older example is the ripple relay system.

"Today, this can be done effectively using radio transmitters and receivers. Blocks of users could have the geysers turned off selectively."

Baker urged the municipality to investigate this option, "before Eskom starts to charge exorbitant rates whenever our peak demands exceed a certain level".

"With this in mind, we are reminded that Eskom, those 'princes of darkness', are again warning of power cuts this winter.

"I urge the council to take the matter of demand side management seriously."

29 February 2012

Hyprop total distribution up 7.3%

Hyprop total distribution up 7.3%

Half-year distribution growth 10.4%.

(I-Net Bridge) - The country's largest listed specialised shopping centre fund, with 12 directly owned shopping centres, Hyprop Investments (HYP,) has declared a total distribution for the year ended December of 383 cents per combined unit, an increase of 7.3% on the previous year.

The final distribution of 137 cents, together with the special distribution of 65 cents paid on 17 October 2011, reflects aggregate growth of 10,4% compared with the corresponding period in 2010.

Headline earnings per combined unit for the half-year were 406.3 cents versus 465.8 cents previously.

Like-for-like growth from Hyprop's shopping centres in revenue and distributable earnings was 8.0% and 7.4%, respectively. Property expenses increased by 9%. Canal Walk and The Glen performed particularly well during the year, with distributable earnings growth of 9% and 10%, respectively.

Distributable earnings from hotels reduced due to a net loss at The Grace (prior to sale) as well as underperformance at Southern Sun Hyde Park.

Distributable earnings from listed property securities increased by 10% as a result of improved distribution growth from Sycom and due to the addition of 8.9 million Sycom units, acquired in terms of the Attfund Retail acquisition.

Distributable earnings in the second half include a once-off benefit amounting to 3.7 cents resulting from a deferred payment in respect of the 15 million Attfund Retail consideration units which were re-purchased by the company.

Non-core income includes Hyprop's investment in Word4Word Marketing (Pty) Limited and fee income from Vunani Property Investment Fund (VPIF).

Income from associate relates to distributions received from VPIF. This income reduced due to Hyprop selling 50% of its interest in VPIF concurrently with VPIF's listing on the JSE.

Notwithstanding the larger portfolio, total arrears at 31 December 2011 were R41 million (2010: R41 million). Total provision for doubtful debts at year-end amounted to R17.4 million (2010: R20.8 million).

Total vacancies in the portfolio at 31 December 2011 were 4,1% (2010: 3,9%).
With regards to developments, Hyprop said the planned redevelopment of The Mall of Rosebank had progressed further with the commencement of demolitions on the Rosebank Gardens site.

"Redevelopment of The Mall itself will commence once town-planning approvals have been received and letting requirements have been met. It is anticipated that construction will start during 2012. Further information will be communicated to unitholders in due course," Hyprop said.

Further extensions to Canal Walk, to meet tenant demand, and the refurbishment of Willowbridge South were also planned to commence in the next 12 months, the group said.

Looking ahead, Hyprop said it would continue to focus on the disposal of non-core assets, the expansion and redevelopment of existing centres and improvement of operational efficiencies. Attention would also be given to alternative forms of finance to further reduce the overall cost of debt.

"Hyprop will continue to invest in high quality, sizable shopping centres. The board will consider investment in shopping centres elsewhere, including in the rest of Africa.
"Taking into account the implementation of the Attfund Retail acquisition and short term dilution due to higher gearing, Hyprop expects to show distribution growth of between 4% and 6% for 2012," the group added.

...

EXCLUSIVE: Rael Levitt says it’s “personal”

EXCLUSIVE: Rael Levitt says it’s “personal”

Says allegations are a “well-orchestrated and well-funded” attack.

Allegations of foul play against Auction Alliance and its founder Rael Levitt are a “well-orchestrated and well-funded” attack on a company with a clean track record.

On Tuesday, Levitt stepped down as CEO of the company. In an exclusive interview with Moneyweb, Levitt spoke out on the allegations of kickbacks, ghost bidders and collusion levelled against himself and his business.

The claims stem from a Saturday Star report that a 13-year old paper trail revealed the company had paid kickbacks to attorneys, liquidators, and bank staff to ensure business went their way.

The report also stated that billionaire Wendy Appelbaum was disputing the legality of an auction where she bought the wine estate Quoin Rock.

The National Consumer Commission and the Estate Agency Affairs Board have confirmed that they are investigating Auction Alliance.

Auction Alliance’s board has also set up its own probe into claims of collusion between the firm and Levitt and banks, liquidators and attorneys.


SELF-SERVING ATTACKERS

“It is a personal attack on me. Because I started the business at the age of 20, I am the face of the brand - any attack on me is an attack on Auction Alliance. It has been well orchestrated and well-funded," Levitt said.

He added: “Three weeks ago we had an impeccable reputation and now we have been vilified by the media. It has come as an enormous shock to me that we have been dragged through the mud all through untested allegations, rumours and innuendo…

“My resignation must not be construed, in any way, as an admission or acknowledgement of any impropriety, illegality or wrongdoing on my part. I am voluntarily bowing out to allow Auction Alliance to be saved from the hysterical media scrutiny that has crippled our business with untested allegations, rumours and innuendos. I don’t think any reasonable private person could have withstood the one-sided media attention that I have over the last week – it simply was too much for me,” he said.

Levitt said that similar complaints had never been raised in the business’ 20-year history. In addition, he believes the largely anonymous sources quoted in the media are former Auction Alliance “employees now largely working in competitive auction companies”.

Referring to the recent Carte Blanche expose on Auction Alliance, Levitt said the coverage was “completely unfair, tabloid-style and selective. We are extremely disappointed with the manner in the way that Carte Blanche did not question the credibility and personal agendas of some of their sources.”

Levitt said only 15% of Auction Alliance’s business is generated from banks and liquidators and added that he was unaware of commission payments by Auction Alliance to bank employees, liquidators or court officials in their personal capacities. “… that said, we employ and have employed thousands of people and we are investigating each and every allegation through a firm of independent forensic analysts…


GHOST BIDDERS

“We have made it quite clear from the start that vendor bidding – what many people refer to as ghost bidding – is legal. The same applies to referrals to attorneys. What we have discovered is although they are industry norm and are lawful, the public finds them distasteful. That is one of the issues that our independent report will look into.”

According to the Consumer Protection Act, advance notice need to be given if a sale by auction is subject to a right to bid by or on behalf of the owner or auctioneer (vendor or ghost bidding).

“Sellers use vendor bidders, which is 100% lawful, to protect their reserve prices. Our role is to protect the seller’s asset and we thus use vendor bidders,” he said.

Levitt added that in the Quoin Rock case, the person bidding against Appelbaum was a proxy bidder and not a vendor bidder.

“At auctions we often have people who have either never bid before or do not want to bid themselves. In the case of Quoin Rock the R50m under bidder was bidding on behalf of a wealthy investor who was registered. He saw the media at the auction and specifically asked us to arrange someone to bid on his behalf. We arranged this through someone who has acted in the past as both vendor and proxy bidder for us.
“The mistake that we have made as a business is not clearly explaining the intricacies of auction methodology. Auction systems in South Africa, at Quoin Rock and globally are no different. And because we did not explain vendor bidding and proxy bidding clearly, the public finds it unethical and distasteful. For that mistake I have personally fallen on my sword. The mission of Auction Alliance has been to professionalise auctions and make them a first choice method of sale. The events of the last two weeks have taken our business and the auction sector back 20 years. It’s a devastating time for me to witness such a media disaster.”

...

27 February 2012

EAAB appoints inspectors to probe Auction Alliance

EAAB appoints inspectors to probe Auction Alliance


Investigating allegations of foul play.
JOHANNESBURG - The Estate Agency Affairs Board (EAAB) has appointed independent inspectors to look into the allegations of foul play against Auction Alliance.

This comes after Auction Alliance’s board set up its own probe into claims of collusion between the firm and its CEO Rael Levitt, and banks, liquidators and attorneys.

The claims stem from a Saturday Star report that a 13-year old paper trail revealed the company had paid kickbacks to attorneys, liquidators, and bank staff to ensure business went their way.

The report also stated that billionaire Wendy Appelbaum was disputing the legality of an auction where she bought the wine estate Quoin Rock.

Appelbaum claimed she later found out she was the only genuine bidder and consequently lodged a complaint with the National Consumer Commission, citing irregularities. Levitt responded by suing her for defamation.

According to Margie Campbell, Acting HOD for marketing and communications at the EAAB, members of an independent auditing firm were appointed as inspectors.

“The appointed inspectors will, therefore, be investigating various issues that have manifested themselves from information received by the EAAB, which, has triggered the need for a regulatory inspection. The inspectors will have inspection powers both in terms of the Estate Agency Affairs Act and the Financial Intelligence Centre Act.

“The inspectors will investigate the matter without prejudice or favour and will, in due course, produce a report to be considered by the EAAB. Such an inspection is routine in any matter of this nature and will assist the EAAB in obtaining information to enable it to determine whether any further action needs to be pursued in this matter. It must be emphasised that there are no presumptions as to the outcome of the investigation on the part of the EAAB. Auction Alliance and Mr Levitt have indicated to the EAAB that they welcome the inspection and will cooperate fully with the EAAB in this endeavour,” she said in a statement.

According to reports, Appelbaum also approached the National Consumer Commission. The Commission could not be reached. – With Sapa

CoJ verdict will have far-reaching implications

CoJ verdict will have far-reaching implications

It’s the first comprehensive investigation into compliance notices.
The hearings between the City of Johannesburg (CoJ) and the National Consumer Commission (NCC) concluded on Friday without a verdict being handed down.

The hearings have been on-going since Wednesday with the National Consumer Tribunal (NCT) presiding over an application by the CoJ to have 45 compliance notices issued by the NCC against it set aside.


GROUNDBREAKING

While the two parties laid down their final arguments, the hearings are viewed as being ground breaking in terms of SA’s consumer legislation. This is because the NCT’s final verdict is likely to have far-reaching implications concerning the interpretation of the CPA.

Said the chair of the NCT, Professor Tanya Woker: “We are breaking into new areas. It’s the first comprehensive investigation into compliance notices… We have to apply our minds into these legal issues; its new legislation (so) there is nothing we can judge it by.”

She had indicated that findings will have implications for all of SA’s municipalities as well as the courts.

Owing to the far-reaching implications of the NCT’s findings, Woker has refrained from providing an indication as to when a verdict will be handed down, saying only that it will consider the matter thoroughly and provide its opinion “in due course”.


COMPLIANCE NOTICES

The compliance notices in question relate primarily to allegations that the CoJ has failed to provide its consumers with a “quality service” in billing for water and electricity and that the inaccurate billing of consumers constitutes unfair or unreasonable pricing as defined by the Consumer Protection Act (CPA).

The CoJ has also been accused of failing to provide a quality complaints resolution mechanism that would meet the reasonable expectations of its consumers.

Although the City has admitted that it has “problems” concerning its billing systems and its complaints resolution mechanisms, it is attempting to have the notices overturned based on arguments concerning the applicability of sections of the Consumer Protection Act (CPA) in this matter and on assertions that the NCC did not follow due process in issuing the notices.


JOHANNESBURG

In a nutshell, the CoJ is contesting the legality of the notices although it has not contested NCC’s allegations that it has dysfunctional billing and complaints resolution mechanisms.

Advocate Michelle Le Roux, acting on behalf of the CoJ, contests that the NCC did not follow due process when issuing the compliance notices as it did not launch a full and proper investigation into the complaints upon which the notices were issued.

“What we say is that an investigation needs to ascertain the facts… If the real concern is the complaints system, then you need to find out more about how that system works.

She asked “was the City aware that it was being investigated?” suggesting that a series of meetings that took place between the NCC and the CoJ prior to the notices being issued, did not constitute an investigation as would be legally required.

“The issue here was whether the complaint resolution system of the City works,” she said, adding the meetings were not “scrutinising what’s going on”.

Should it be concluded that the NCC had entered into a sufficient enough investigations to warrant the notices, the CoJ contests that sections contained within the CPA relating to unjust pricing of goods and services and a consumer’s right to demand a “quality service” do not apply to the CoJ’s billing of consumers or its complaints resolution mechanism.

Le Roux contests that the billing of customers is “incidental” to the City’s provision of a “good” such as water and electricity.

She has indicated that unless the billing and complaints functions were outsourced they do not constitute a service.


CONSUMER COMMISSION

However, the NCC’s director of legal services, Oatlhotse Thupayatlase, argues that at a meeting on April 15 last year, the CoJ had admitted that it had had problems with its systems and had agreed with the NCC on a “super-structure” of processes designed to deal with complaints directed to the NCC concerning the City.

“The system that was set-up had failed,” he said. “There was a superstructure that was set up to deal with complaints that were coming through… Either you commit to that structure or you don’t…

“There was clearly not commitment” on behalf of the CoJ, he said.

Following the failure of the City to meet its commitments, the NCC “got frustrated” and with no other avenue left to deal with the complaints, issued a compliance notice.

He argues that the NCC engaged in a “fact-finding mission” prior to issuing the notices and had engaged in a sufficient enough investigation to confirm that the City was failing its consumers as outlined by the CPA.

The applicability of the CPA to the CoJ’s billing system will be something that the NCT will have to decide, he said, although he has previously indicated that it would be “very difficult” for the tribunal to conclude that the City’s billing systems did not constitute a “service” as defined by the CPA.

Property developments lure businesses from Pretoria CBD

Property developments lure businesses from Pretoria CBD

Urban sprawl to the east and south of Pretoria and the trend of decentralisation from the Pretoria CBD have resulted in the formation of nine basic office nodes in the Tshwane Municipality, says Jan Oelofse, leasing and sales broker for JHI Properties.


Construction of the Podium n Menlyn is scheduled to be completed in mid-year.


"These nodes are Arcadia, Brooklyn, Hatfield, Lynnwood/menlopark - the old east as it is known - Menlyn/ Faerie Glen, Pretoria's eastern suburbs, the new east Centurion, and Highveld Technopark developed in the south.

"The office component in Pretoria's CBD has been and continues to be underpinned by government buildings and tenancies, but the private sector has to a large extent moved to the deconcentration nodes, a trend being followed by some government departments."

Factors contributing to this included poor public transport, which had encouraged private transport, which in turn had affected road congestion.

"The old town planning conditions restricted the provision of adequate parking in developments, so Pretoria CBD has insufficient parking facilities. Ageing buildings, designed for office use 20, 30 or more years ago, are inefficient compared with modern designs, and antiquated facilities including lighting are costly to maintain and incompatible with modern technology. Another factor is that CBD office rentals have been distorted by rental agreements entered into by government over the past five to six years."

Oelofse says rent for office space in the Pretoria CBD varies from R45/m 2 for C-grade space to R65/m2 for B-grade, with installation cost contributions by landlords under certain conditions. However, in the absence of new or competitive developments to satisfy the demand for space, government and the private sector are compelled to either accept rentals offered or to move to deconcentration nodes, where they can find acceptable rent in modern, economically designed buildings, with sufficient parking. And, new buildings generally provide for economical space planning and facilities designed to lower and contain operating costs.
He says Arcadia caters mainly for fring e CBD offices and embassies, with most developments comprising residential conversions.

Hatfield's main commercial activities and development centres on Pretoria University. Office developments are low-density office parks with buildings of 1 000 2 to 3 500m 2 on average, catering for 100m2 to 3 500m2 tenants, with average rentals for A-grade buildings R90 to R95/m2. He says Hatfield is relatively stable with a reported vacancy rate of about 6 percent. Industry data indicates a total of 104 476m 2 of A-grade space with 9 386m 2 vacant. However, development opportunities are restricted.

"Popular due to its proximity to Pretoria CBD, Brooklyn and surrounds provide about 162 000m2 of P- (modern, luxury space) and Agrade office space around a mall. The demand for this area is reflected in the low vacancy rate of between 2 and 3 percent for P- and A-grade space, which fetch gross rentals of R100 to R130/m 2. The average tenant profile varies from small (100m2) to medium (2 000m2) businesses, interspersed with government tenancies. Developments are low-density."

Developed in established residential areas and following retail developments, the Lynnwood/menlopark node is concentrated mainly along major arterial roads. The developments are mainly low-density office parks, for tenancies varying between 100 and 1 000m 2 on average.

However, Oelofse says with the vast improvement of accessibility and traffic flow due to major upgrading of the N1 and the on/off-ramp at Lynnwood Road, the growth of this node has been boosted with the Lynnwood Bridge lifestyle and office park being developed in phases.

This incorporates a City Lodge Hotel, 15 000m 2 of offices and 13 000m2 of retail space. The development will measure about 73 000m2.

Gross rentals for P-grade office space in Lynnbridge vary between R140 and R155/m 2, and rentals for A-grade space average around R100/m2. The latest reported industry figures indicate a total of 232 600m 2 of office space, of which 11 3316m2 is P- and A-grade, with a vacancy rate of 6.5 percent.

"Developed around the Atterbury/n1 on/off-ramps, the Menlyn/faerie Glen retail and office development node was the first real decentralised node in Pretoria, offering the potential for significant growth around the Menlyn shopping centre as a pivotal anchor. The upgrading of the N1 and the Atterbury Road on/off-ramps, and the new Garsfontein on/off-ramps to the N1 and the upgrading of the internal and arterial road infrastructure have greatly improved traffic flow and access to the node.

"The major Menlyn Main mixeduse development... provides for 2 100 000m of residential/ hotel, 44 000m 2 retail and 143 000m2 of office space. The planned developments will be high-profile modern buildings with generous parking facilities. The building design allows for the installation of most modern facilities and infrastructure which will qualify it for at least a four-star Green Star rating." A further two new developments,
2 providing for about 27 000m of space, are scheduled for completion in the second half of the year.

According to recently published figures the total P- and A-grade office space in Menlyn amounts to 209 600m 2 with rentals varying between R105 and R145/m 2. The new and planned developments will provide further 75 000m2 of P-grade space at rentals of over R155/m 2.

Oelofse says the Centurion/highveld Technopark development node has a combined supply of 817 892m2 mainly A- and B-grade office space, with a reported vacancy rate of 9.1 percent. This node was established to cater for commercial growth, so it is not subject to growth restrictions that apply to the other nodes.
However, this area has experienced difficult marketing conditions, mainly due to accessibility restrictions.
These problems have been greatly alleviated by the upgrades to the N1 and John Vorster Drive on/off-ramps, with an added advantage being the Highveld Park and Centurion Gautrain stations that serve these areas.

Weekend Argus (Sunday Edition)

24 February 2012

Sharemax: Auditor backtracks on opinion - Special investigation

Sharemax: Auditor backtracks on opinion - Special investigation


Complaint against ACT Solutions prompts a change of heart on clean audit.


ACT Solutions, auditor of the Sharemax syndication companies, has changed its mind on the clean audit it gave Flora Centre Holdings for the 2009 financial year.

It is doubtful whether any of the Flora Centre’s investors are aware of ACT Solutions’ change of heart.

Flora Centre is one of Sharemax’s older and larger so-called income syndications. In 2005 it took R118.5m from investors to buy the West Rand shopping centre.

In August 2010, Moneyweb asked whether the Flora Centre’s 2009 financial statements could be believed. A copy of the financial statements can be downloaded here.

The financial statements appeared suspicious because they had increased Flora Centre’s value by 89%, from R104m to R197m. There was little or no apparent reason for this huge increase.

At the time, ACT Solutions director Jacques van der Merwe told Moneyweb: “We have a detailed valuation report from a registered property valuator. These are the facts. We do not consider wild speculations in the preparation of our audit report."

After publication of the article, a complaint was laid against ACT Solutions with the Independent Regulatory Board for Auditors (IRBA). The complainant claimed that the firm should not have given Flora Centre’s financial statements a clean audit.

In order to respond to the complaint, Van der Merwe did some investigating. What he discovered is that the Flora Centre may not be worth the R197m, as claimed in the 2009 financial statements.

Van der Merwe now claims that the Flora Centre’s valuator, Waldemar Gustav Haese, lacked independence. He also says the Flora Centre’s directors were inaccurate when they wrote in the financial statements that the valuator was independent, and that a capitalisation-rate method of valuation was used.

In the financial statements, the Flora Centre’s directors wrote that Haese “is not connected to the group”. However, WG Haese is the father-in-law of Dominique Haese, the former financial director of Sharemax and current CEO of all syndication companies including Flora Centre.

Moneyweb has in its possession a letter sent by Van der Merwe to the Flora Centre directors (click here to download). It is dated 5 November 2010.

In the letter, Van der Merwe says that Flora had provided ACT Solutions with a valuation certificate which reflects a value of R197m.

“The method of valuation is not properly set out in the valuation certificate dated 25 August 2009 of Mr W.G. Haese which was made available to us for audit purposes,” wrote Van der Merwe.

“We have consulted with Mr W.G. Haese recently and he explained to us in consultation that he used a ‘brick and mortar’ alternatively a ‘replacement value’ method as basis of valuation.

“We have also consulted an independent valuator and he advised us that these methods are inappropriate for this type of immovable property where the income stream (rental income) determines the value and that a capitalisation rate method is the only acceptable basis of valuation.”

Van der Merwe claimed it had always been his impression that a capitalisation-rate method of valuation was used for the Sharemax syndication companies.

However, this excuse may be hard for IRBA to swallow.

A capitalisation rate (cap rate) is a method of valuation in which income is used to derive a property's worth. For example, a property with income of R1 000 a year, capitalised at 10%, is worth R10 000 (R10 000 X 10% = R1 000).

The Flora Centre’s financial statements reveal an operating profit of R5.1m. If this is capitalised at 10.5% (the rate supposedly used by Haese), it gives a valuation of R48.5m, which is less than a quarter of Haese’s valuation of R197m.

It is difficult to imagine that ACT Solutions, when auditing the financial statements, did not pick up this discrepancy.

Van der Merwe claims that Moneyweb’s calculation above is over-simplified. However, he declined to offer an alternative.

Van der Merwe says ACT Solutions has already dealt with its concerns “by following the appropriate audit guidelines followed by an auditor when addressing the type of concerns raised in our letter”.


Revealing e-mails

In his letter to the directors, Van der Merwe refers to an e-mail exchange which took place between Flora Centre’s Matthew Osterloh and valuator WG (Wally) Haese on 24 and 25 August 2009.

In the exchange, Osterloh informs Haese: “We always base our valuation on income”.

The e-mails suggest that Haese valued the Flora Centre without even visiting it. They also suggest a willingness on Haese’s part to adjust his valuation to suit the wishes of the Flora Centre’s directors.

It is also clear that Osterloh did not believe the Flora Centre to be worth anything close to R197m. Osterloh informed Haese: “In its current state I don’t believe that the property would be worth much more than about R75m.”

Moneyweb asked WG Haese to comment on his alleged lack of independence and use of the incorrect valuation model. He declined to comment, and referred questions to Sharemax successor Frontier Asset Management. Frontier CEO Dominique Haese did not respond to a request to comment.


The e-mails can be read below.


24 August 2009, 10:36am

Matthew:

1.What parking is provided (either as number of spots, or as sq. meter)?
From one of the photos, there seems to be some drive-up parking in the office block. If there are indeed parking spots within the office block, as also some covered parking spots, all (or at least some) of these should be income-generating, but I do not note any lettable floor area being allocated to parking in the schedule you have provided.

1.Covered parking
1.1 Within the building (i.e drive-up parking)

1.2 Externally, in the parking area

2.Open parking provided in the parking area.
2.Roof construction:
1.Over retail areas
2.Over office block
I can unfortunately not determine any of the above from the photos provided.

3.What is Sharemax’s own idea of the value of the property? I have the municipal valuation as R171 343 000.
Thanks.

WALLY



25 August 2009, 8:51am

Wally – We always base our valuation on income. In its current state I don’t believe that the property would be worth much more than about R75 million.



25 August, 2009, 09:30am

Matthew

Have a look at the attached concept valuations (municipal, insurance replacement and present market), and let me know if it meets your (i.e. Sharemax) requirements.

Regards

WALLY



25 August, 2009, 09:51am

Wally

The valuation will not work for the purpose that we wanted it for.

I want to get a low value, much lower than the municipal valuation of R171 343 000.00

This is the local authority’s latest value of the property and our assessment rates payment has quadrupled in the past month.

There are a few changes to be made on your valuation:

1) ERF 35 has been sold

2) I would remove the word modern under the description of improvements

3) The entrances do not have automated doors

Thanks



25 August, 2009, 11:20am

Matthew, O.K., attached docs refer, for scrutiny and comments:

I have valued Flora down to the lowest level I can realistically, using a balanced mix of present income generated, calculated replacement cost, depreciation / maintenance, etc.

It is not much below the municipal valuation however. The replacement value is just higher than the municipal value.

Bear in mind that my first draft valuations sent to you for comment reflected “true” valuations, as would still have been applicable at the beginning of this year.

If you really need to lower the valuation any further (for municipal reasons only: NOT for purposes of Sharemax share issue), I can do so, based on the purchase price escalated from 2005 to date, which will probably put the valuation at around R152 000 000 after depreciation, etc. Would this help at all?

Please advise.

Regards

Wally



25 August, 2009, 2:19PM

Thanks Wally. Leave the valuation as previously sent to me, that is at R196 700 180 and replacement value of R218 555 750

Can we get it signed off today?

Property loan stock "elimination"

Property loan stock "elimination"

SA listed property will become more like REITs overseas.

Wednesday’s Budget contained a passage that announced the impending elimination of one of the most popular types of listed investment: the property loan stock. Most listed property counters, including the two largest, Growthpoint and Redefine, come in the form of a linked unit. They are part share, part debenture.

The structure is done for tax reasons, so that the companies can pay rental income to investors in the form of interest on debentures.

But the Treasury said that this “dual-linked structure needs to be eliminated so that other entities do not undertake the same structure to avoid tax by relying on excessive debt.

What does it mean for the sector? Growthpoint director, Estienne de Klerk says his company has been working with Treasury to implement new listed-property legislation.

The result will have two main benefits.

The first will be greater tax certainty. De Klerk explains that there are currently tax “anomalies” in both types of listed property: property loan stocks (PLSs) and property unit trusts (PUT). For example, property loan stocks are subject to capital gains tax, while property unit trusts aren’t.

Another benefit will be a listed structure that more closely resembles the overseas norm, namely the real estate investment trust (Reit).

De Klerk hopes that the changes will increase foreign ownership of listed property. He says that Growthpoint and Redefine have the highest levels of foreign ownership but this is lower than 15% for each company. He thinks foreigners may be put off by what appears to them to be an unusual structure.

De Klerk says that PLSs and PUTs are likely to retain their respective company and trust statuses. In other words, Growthpoint, a loan stock, will remain a company regulated under the Companies Act. And property unit trusts will remain trusts regulated under the Collective Investment Schemes Control Act.

One possible way of eliminating the dual-linked structure of PLSs could be to issue new shares to investors in lieu of their debentures.

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Unexpected reasons to feel positive about Africa

Unexpected reasons to feel positive about Africa

It’s really happening for the continent this time.

It’s easy to be pessimistic about everything these days, with the news headlines full of the crisis in Europe, the brutalities in Syria, unemployment in America, and the growing animosity between Iran and Israel.

However, there are still some things that can serve as a source of optimism, and the economic potential of Africa is one of them.

Let’s take a look at some reasons to think that Africa could be a source of tremendous economic growth and wealth creation over the next few years. Some of these may seem strange, but taken together, they add up to a story of major economic potential.


1.      Reasonably good fiscal positions

Unlike many developed countries, African nations are actually generally going OK on the fiscal front. According to data from the IMF, the average ratio of public debt to GDP in Sub-Saharan Africa is around 42%, much better than the 80% debt-to-GDP burden facing the European Union, or the almost 95% debt-to-GDP burden facing the USA (see table below for details).

In addition, fiscal management in many African nations has improved dramatically over the last few decades. Thanks to stern interventions from funders like the International Monetary Fund (IMF), most African countries have become more disciplined about their spending, and much more careful about maintaining a balance between debt and revenue. All in all, most African economies are entering the 21st century in a solid fiscal position, forming a marked contrast to the nations of the rich world.


2.      Less reliance on social safety nets

This may sound a little odd, but Africa is, in a sense, fortunate that it has not yet developed the kinds of comprehensive social safety nets you see in Europe and Japan. The rich world is currently wrestling with how to manage the ballooning costs of their pension and healthcare plans; in Africa, such plans have not yet been implemented. Admittedly, this means that life is a precarious business for many Africans. However, it also means that African governments face little in the way of social spending costs (South Africa is a prominent exception to this), and that as African nations grow wealthier and start to develop safety nets, they can learn from mistakes elsewhere, and when designing their programmes, ensure that they are sustainable and sensible.


3.       Many African economies have grown dramatically over the last two decades, and diversified

A large number of African countries have grown very rapidly over recent years – indeed, Angola was the fastest-growing economy in the world between 2001 and 2011 (thanks to its oil boom). Overall, African countries have grown at an average of close to 5% a year since the 1990s, according to IMF data. This growth, while coming off a low base, represents the fruit of a number of reform efforts and has been sustained even in the face of the global recession. The IMF predicts that growth in Sub-Saharan Africa will stay reasonably strong over the next few years; the organization predicts an average of 5.5% GDP growth in the region this year, and 5.3% next. This is solid, sustainable, and attractive growth, and means that there are plenty of economic opportunities in the continent.

What’s more, the growth in African economies over the last few years has come from multiple sectors, including consumer goods like mobile telephony and clothing, and not just from resources. In other words, African economies are becoming more multi-dimensional, and are no longer just simple commodity plays.


4.      Demographic advantages

As we’ve discussed before, Africa has the potential to reap enormous economic benefits from its demographic profile. With its large youth population, Africa is unique in a world in which most populations are aging rapidly (including the population of China). With good policies, African nations can turn this youth boom into an economic bonanza.

There are a lot of reasons to feel optimistic about Africa’s economic future, although it often seems as if Africans themselves are reluctant to see them. However, if you still have your doubts, consider the activities of China in Africa; for the last fifteen years, China has been investing heavily in the continent, buying mineral rights, farmland, and even building manufacturing plants. Africa has the potential to be the growth story of the new century, and South Africa has the chance to benefit from this growth. Let’s hope that the country doesn’t let the opportunity slip away.







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23 February 2012

What happened to the buyer's market in property?

What happened to the buyer's market in property?

We read headlines like "Property Bloodbath" and yet somehow I don't see too much blood being spilt out there, says Geoff Stroebel, principal of Stroebel Properties.

It is presumed that in this time of serious recession in South Africa, that house prices would have stagnated considerably, and been at levels stable or low enough for buyers who were previously perhaps unable to enter the market due to price constraints, to indeed find affordable homes and perhaps a few bargains.

Perhaps it is more evident in Cape Town, but this seems to be clearly not the general case, as sellers continue to expect to make unrealistic profits, even out of properties purchased 12 to 18 months ago as the market was entering its supposed decline. Yes, there are distressed sales occurring where people are forced to dispose of their asset due to financial woes, but one would naturally expect that after the rampant seller's boom of the mid-2000's, that there would be some impasse. One surely must agree with Rode that in general, house prices remain 20% to 25% over-inflated.

So the phenomenon's of the "sellers' market" and "buyers' market" need to be studied and questioned. If it was truly such a "sellers' market" in the mid-2000's, (which caused prices to virtually sky-rocket and huge profits to be made), then one has to pose the natural question; "so who was buying all the property that caused this frenzy?" Well simply put, it was indeed our fellow South Africans themselves, many of whom got caught up in the fracas and radically overpaid for their properties and who now expect to not only get their money back, but to even profit thereon!

Then there is the other problem thwarting the precious buyer. It's that of our estate agency business itself. "I truly believe that if the property market could be kick-started, then it is up to my fellow agents themselves to adopt a more professional approach and cease overpricing properties in their apparent frenzied ritual of securing mandates", says Stroebel.

"It's dog-eat-dog out there at a time when the market is stagnant, and whilst competition is always healthy, I believe that many more properties would be affordable for purchase if they were priced correctly to sell by both sellers and agents alike". We perhaps have to remind ourselves what a good (and reasonably realistic) return on a property investment is considered to be. Is 10% compounded growth per annum unacceptable? Let's get real.

Stroebel Properties Press Release

Auction Alliance Board Statement : Property News from IOLProperty

Auction Alliance Board Statement

The Board of Directors of Auction Alliance has commissioned an investigation by an independent company into allegations that have been levelled against the firm in recent weeks.

"The Board considers the allegations against Auction Alliance and its CEO, Rael Levitt, to be of such a serious nature, that such a step is warranted," says Auction Alliance Board chairman Sango Ntsaluba.

He adds that in order for the investigation to be properly conducted, the Board will make no further statements until it has been concluded.

Auction Alliance Board Statement
www.auction.co.za

Budget in a nutshell

Budget in a nutshell - 2012 Budget

The budget and your wallet...

The budget and your wallet:
  • Personal income tax relief of R9.5bn. 54% of the relief will go to taxpayers who earn less than R260 000 a year.
  • General fuel levy increases by 20c a litre, the Road Accident Fund levy increases by 8c a litre.
  • Sin taxes: A packet of 20 cigarettes will cost 58c more, a 750 ml bottle of liquor (spirits) R6 more, a 340 ml can of beer 9c more and a 340 ml can of cider will cost 8.84c. A litre of wine will cost 18c more.
  • A new tax credit will replace the tax reduction for medical aid contributions.
  • Tax incentive to encourage savings that may replace the current interest exemption thresholds.
  • A 15% dividend withholding tax to kick in on 1 April. Pension funds, companies are exempted from this tax.
  • Significant tax concessions and reduced red tape for small businesses.
  • Electricity levy increased by 2.5c/kWh.

Economic outlook:
  • Budget deficit of 4.6% in 2012/13, 4% in 2013/14 and 3% in 2014/15.
  • Government spending to reach R1.1 trillion in 2012/13.
  • National government’s net loan debt to reach R1.5 trillion in 2014/15.
  • The national treasury expects economic growth of 2.7% in 2012, 3.6% in 2013 and 4.2% in 2014.
  • The national treasury expects headline inflation to be 6.1% in 2012, 6.2% in 2013 and 6.1% in 2014.

Government spending plans
  • R9.5 billion for the Economic Competitiveness and Support Package, including R2.3 billion for dedicated special economic zones;
  • R6.2 billion for job creation;
  • R3 billion for equalisation of subsidies to no fee schools and expansion of access to Grade R;
  • R1 billion for National Health Insurance Pilot project;
  • R1.4 billion for Early Childhood Development;
  • R4 billion for Passenger Rail Agency of South Africa for coaches, as the start of a programme to replace the current fleet;
  • R1 billion for Signalling and depot infrastructure related to this new rail transport programme;
  • R4.7 billion for electricity demand side management grant: Eskom for the installation of solar water geysers;
  • R1.8 billion for municipal water infrastructure;
  • R3.9 billion for upgrading informal settlements.







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