the south african valuer...2 3 the south african valuer november 2016, no 126 the south african...
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
VALUERTHE SOUTH AFRICAN
VALUERN
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GS's visit to REIZ
Northern Branch Country Seminar
mSCOA: an overview
SA's oldest practising valuer?
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
THE SOUTH AFRICANINSTITUTE OF VALUERS
PRESIDENT ’S
LETTER
V
Greetings fellow valuers.
The end of 2016 is rapidly approaching
and what a year it has been!
In between student protests, service delivery
protests and the wranglings of Treasury, the
valuer profession continues to deliver unabated
what it does: the valuation of some of the most
important assets which make up a substantial
element of many personal and business balance sheets.
In the world of the South African Institute of Valuers this is no different, albeit at a
somewhat different level. In the Municipal Property Rates Act space, with specific
reference to the MPRA Standards Version 7_2, the SAIV through representations by
Janet Channing, Martin Fitchet, Trevor Richardson, Douw Boshoff and the General
Secretary, has advanced our view considerably by participating in the Technical Task
Team, which was to review the document and make the necessary changes so that it
meets the requirements of the municipal valuation environment. The changes were
deliberated and we wait for the final draft to be presented. This was due in August and
it is understood that communication from the chairman of the meeting, Chris Gavor, will
be forthcoming by the end of November 2016.
With regard to progress on the proposed Municipal Assessors Qualification,
communications from the SAIV have been sent to the Local Government Sector
Education and Training Authority (LGSETA) and the Quality Council for Trades and
Occupations (QCTO) to whom we have given our views on both the proposed course
content and the naming of the position and similar to the MPRA Guidelines; we await
further communication on this.
The Memorandum of Agreement signed by the SAIV immediate Past President Mark
Bakker with the presidents of the Black Professional Valuers Association and the
Professional Valuers Association in November 2015 has come up for renewal and, given
that the above matters are not yet concluded, we have proposed an extension of the
MoA on the same terms and conditions, for a further year. This has been communicated
to the presidents of the respective voluntary associations.
The MoU which we signed between ourselves and the REIZ (Real Estate Institute of
Zimbabwe) has already begun to yield the desired results. The SAIV was invited to
attend their Winter Workschool. I was unfortunately not able to accept, but our General
Secretary, Melanie Vallun, willingly offered to fill in for me and the trip was a great
success. The fruits of this have been a number of applications from members of REIZ
to become affiliate members of the SAIV.
Patrick O’Connell
So here’s the deal: Rode is o�ering valuers and candidate valuers who are registered with the SACPVP AND who are members of the SAIV a special on our authoritative Rode’s Report on the SA Property Market at a discounted rate of R2 200 + VAT per annum (i.e. four issues). The standard price is R4 500 + VAT.
Please note: The o�er is only applicable to valuers and candidate valuers who are not in the employ of an institution or non-valuation company.
Special o�er to valuers and candidate valuers who are registered with the SACPVP AND who are members of the SAIV
Make Rode’s Report work for you. Order now!To get your copies, simply email us on [email protected] with your request. It’s that easy.
In the current economic climate, planning is just that much easier if you’re able to base yourdecisions (especially property-related ones!) on accurate and up-to-date research.
C
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Rode's Report marketing v6.pdf 1 2016/11/24 3:23 PM
Continued on page 3
NATIONAL EXECUTIVE OFFICE BEARERS 2016/2017PRESIDENTPatrick O’ConnellVICE PRESIDENTTracey Myers LEGAL AND CONSTITUTIONDerrick Griffiths (portfolio head)Patrick O’Connell, Edwin Schoeman, Adrian VallunMANAGEMENT AND FINANCETrevor Richardson (portfolio head), Mark Bakker,Adrian Vallun, Thys Beukes, Patrick O’Connell Farrel OctoberMARKETING Tracey Myers (portfolio head), General Secretary (website)PROFESSIONAL LIAISON Patrick O’Connell (IAAO, WAVO, CBE and VAs)Tracey Myers (RICS)General Secretary (SACPVP, IVSC, SERVICES SETA and SANRAL)Adrian Vallun (AfRES, REIB and REIZ)Janet Channing Co-opted (SAGI)MEMBERSHIP AND DEMOGRAPHICSPatrick O’Connell (portfolio head)Thys Beukes, Tracy Kuyk, Gerrie Minnaar, Mark BakkerEDUCATIONTracy Kuyk (portfolio head), Edwin Schoeman, Tracey Myers, Thys Beukes
GENERAL SECRETARY’S OFFICE
GENERAL SECRETARYPO Box 35500, Menlo Park, 0102t. 086 100 SAIVf. 086 657 3164e. [email protected]
ACCOUNTSe. [email protected]. [email protected] QUERIESe. [email protected]
SAIV BRANCHESCENTRAL BRANCHt. 053 831 6500 f. 086 657 3023e. [email protected] CAPE BRANCHt. 041 396 1400 f. 086 657 3003e. [email protected] BRANCHt. 081 428 4137 f. 086 657 3031e. [email protected] BRANCHt. 012 348 1752 f. 086 657 3201e. [email protected] BRANCHt. 081 405 8402 f. 086 730 9193e. [email protected]
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
SA Valuer Editorial Panel:
Thys Beukes (Central Branch)
053 831 6500 / 071 600 5327
Mark Bakker (Eastern Cape Branch)
041 396 1400 / 083 227 3496
Janet Channing (KwaZulu-Natal
Branch)
033 343 2868 / 082 570 5834
Tracey Myers (Northern Branch)
011 721 7141 / 083 408 1755
Dean Ward (Southern Branch)
021 400 9915 / 082 714 9490
Editor and advertising:
Patricia Leitich
The editor welcomes contributions
(by way of letters or articles) that are
appropriate and that address an is-
sue that is topical or of strategic con-
cern to the sector as a whole. These
should be submitted to the editor at
[email protected] for pos-
sible publication. Please, use the SA
Valuer as your platform to promote
dialogue between SAIV members.
The information and data presented
in the SA Valuer are recorded in
good faith, using sources believed
to be reliable.
The views and opinions expressed
in the SA Valuer are not necessarily
those of the SAIV, notwithstanding
the fact the SA Valuer is the official
publication of the SAIV. Neither are
they representative of the opinions
of the editor. Copyright applies to
all material contained in this issue
and reproduction in whatever form
is not permitted without the written
authorisation of the editor.
C O N T EN T SV
N o v e m b e r 2 0 1 6 , n o . 1 2 6President’s letter
Cover story: Visit to REIZ Winter School and AGM in Gweru, Zimbabwe
Northern Branch Country Seminar 2016Background, purpose and functioning of the Office of the Valuer-General, by Christopher GavorCase Study: Serengeti Golf Course & farm land, by Ben EspachSubdivision of agricultural land, by Derrick GriffithsAPP up your valuation, by Pieter VenterMeasuring efficiently, by Huxley ReynoldsDemystify the valuation of trade related properties with reference to hotels and hospitals, by Tom BateThis is us – a demographic overview, by Dawie RoodtKnots and Ties, by Dr Antonie GildenhuysWhen valuers rush in where angels fear to tread, by Dianne de Wet and Darran Kuppan
Valuing real estate in Mozambique – a case of input availability uncertainty, by David Jansen van Vuuren
Municipal Standard Chart of Accounts, mSCOA: an overview, by Janet Channing
Filling station valuations for bank security purposes – a practical approach
Buying a farm - a valuer’s perspective, by Rumpff Krüger
Legal beagleAct 70 of 1970: Subdivision of Agricultural Land Act (part two), by Derrick Griffiths
Gladwin v Ekurhuleni Metropolitan Municipality, by Chantelle Gladwin and Rogan Heale
Prescription of municipal charges, by Chantelle Gladwin and Rogan Heale
Restraint of trade and unlawful competition: what’s the difference? by Pierre van der Merwe
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In addition to this, the MoU which was signed between the SAIV and the Geomatics
Institute has also been met with success. The SAIV was invited to take a stand at their
annual convention which took place on 12 and 13 September at Emperors Palace. Our
stand was manned by Melanie Vallun – our thanks to her for this. Our sincere thanks
are also extended to Peter Newmarch, current President of the Geomatics Institute, for
affording us this opportunity.
And so, with all of the above on the go, the year has slipped by rather quickly and we
now find ourselves preparing for end-of-year celebrations and hopefully for most of
us, a well deserved break. If you are taking a holiday and plan on travelling, please do
so safely and come back to meet the new year with renewed energy and enthusiasm.
Patrick O’Connell
John Loos writesThe residential mortgage market is weak in terms of transaction growth.Overview – commercial property outlook.Home buying continues to be very much about size, smaller being better.The sectional title housing market segment still mildly outperforms the full title segment.
SAIBPP annual convention: The future of empowerment in property development
Appraisal Institute news
SAIV at home Fellow in focus: David Arthur Thomas WhiteSouth Africa’s oldest practising valuer?General Secretary’s news Membership statistics
Tailpiece: Top ten fastest growing cities in Africa
Professional Directory
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Continued from page 1
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
ViSiT TO REiZ WiNTER SChOOL ANd AGM iN GWERU, ZiMBABWE
V
Everything was in place to honour the SAIV’s acceptance of
the invitation from the Real Estate Institute of Zimbabwe (REIZ)
to attend their 2016 Winter School and AGM from 7 to 10 July.
Then came the abrupt interruption of all the planning because of violence
in Zimbabwe.
Less than a month later, however, on 18 August, Erwin Rode
and I were on the plane to Harare. Kura Chihota drove us
from Harare to The Village Lodge in Gweru, where the REIZ
proceedings were to be held.
Having visited Zimbabwe some 17 years ago, I remembered
the many farm stalls and vendors next to the road bringing
colour and life to the scenery, and making road trips interesting.
It was sad to see the vendors with their creative wood, wire
and other art work no longer there. What has happened to
them? Could it be because tourism has all but disappeared?
In their place we experienced repeated policing and checking
of vehicles before entering and when exiting a town. I have
never previously come across such visible policing.
The next morning any anxiety one may have had was quickly
dispelled like mist in the sun by the hospitality of the people:
each person was treated with respect and acknowledged for
who they were and what they did.
The Village Lodge was a small but peaceful venue with a
relaxed ambiance. The seminar was attended by some
75 valuers from all over Zimbabwe and Botswana. It was
interesting to note that with all the different languages spoken
by the delegates, all the presentations took place in English,
with jokes here and there in a home language.
The highlight of the day was the address by the Vice President
of the Republic of Zimbabwe, the Honourable E Munangagwa.
Erwin and I were particularly surprised and honoured when
Mr Munangagwa welcomed us personally and thanked us for
our attendance. Here again, thoughts of acknowledgement
and respect came to mind.
Tea breaks and lunch provided the necessary time to mingle
and meet the delegates. During lunch an elderly gentleman
with a shy smile approached me. It was a great surprise
c o v e r s t o r y
when I realised that he was a long-standing affiliate member
of the SAIV, Ian Dlamini. It was especially good to meet him
and enjoy a face-to-face conversation with him instead of
communicating via email.
Saturday’s events were rather different from those which we
usually present at our national events in SA. The day was
spent taking part in leisure activities such as golf, elephant
rides, a boat cruise, fishing, horse riding and a walk with
lions (all included in the conference cost!). It was altogether
a wonderful, relaxing day for networking and a contrast to
the formal dinner that evening (with fines to be paid should
anyone not dress according to the rules).
My address to the REIZ members follows.
REIZ President Siza Masuku, Vice President Luke Matimba,
ladies and gentlemen:
On behalf of the SAIV I would like to express our sincere
appreciation for the invitation and the opportunity to attend
the Real Estate Institute of Zimbabwe’s Winter School and
related events.
Before I commence I would like to applaud all attendees
for your hospitality. It was remarkable to experience such
friendliness and I must say you made Mr Erwin Rode and me
feel at home. Please give yourselves and Zimbabwe a round
of applause.
As a past president of the SAIV and General Secretary of the
SAIV for the past five years, the profession has presented
me with various memorable historic moments. So I had the
pleasure of meeting Mr Masuku and Mr Mpofu in May in
Cape Town when they attended our annual national events.
It was also a great honour and privilege to be present when
Mr Masuku and our President Patrick O’Connell signed the
Memorandum of Understanding between our two institutes.
The purpose of the MoU is to stimulate strong relationships
between our associations and the profession in the two
countries.
Industry best practice, education and collaboration are highly
ranked on both our agendas. To this end the SAIV would like
to take the next step in furthering collaboration and advancing
our existing relationship by opening the doors to knowledge
sharing and education between our organisations and our
members:
Mr Masuku, Siza, in the light of advancing our relationship, our
National Executive has deliberated, and I am here tonight not
just to enjoy all the interaction, but with your permission and
blessing, to offer all REIZ members free affiliate membership
of the SAIV until 31 May 2017.
Industry best practice and education, as all of us are aware, is
the key to success. REIZ members, as non-resident affiliate
members of the SAIV, will be able to
• access the SAIV’s website;
• purchase webinars online at member rates;
• receive the SAIV’s quarterly publication, The South African
Valuer, at no charge;
• attend SAIV seminars at member rates.
We are hoping that, in the months to come, your members
will have the opportunity to experience the benefits of SAIV
membership and decide whether you want to continue your
membership of the SAIV.
I, we, the SAIV, sincerely hope that REIZ members will grab
this opportunity of sharing knowledge and collaborating with
each other.
Just to end off:
Mr Masuku, the SAIV once again thanks the REIZ for inviting
us to your Winter School and other proceedings.
I would like to present our Coat of Arms to your President,
Mr Masuku, and respectfully request that you join me
on stage.
Thank you ladies and gentleman. May we together uphold the
valuer profession.
by Melanie Vallun, General Secretary,
South Africa Insitute of Valluers
Erwin Rode
addresses the
Winter School
Networking
Alex Millin with
Melanie Vallun
Ian Dlamini with
Melanie Vallun
Melanie Vallun presents
the SAIV Coat of Arms
to Mr Masuku
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
NORThERN BRANCh COUNTRy SEMiNAR 2016
V
This year the Northern Branch held its annual Country Seminar on
16 and 17 September at Faircity Roodevallei Hotel, north east of
Pretoria. The theme of the seminar was ‘adding value’. The seminar
was opened by Derrick Griffiths, chairperson of the Northern Branch, who
welcomed a record 180 delegates, some of whom had come from as far
afield as Botswana, Knysna and KwaZulu-Natal.
Friday morning’s first presentation was given by Christopher
Gavor, appointed South Africa’s first Valuer-General in
August 2015.
BACKGROUND, PURPOSE AND FUNCTIONING OF
THE OFFICE OF THE VALUER-GENERAL (PROPERTY
VALUATION ACT NO 17 OF 2014).
(The Regulations to the Act are expected to come out soon
for public comment; the gazetting of these has been delayed.)
THE PRACTICAL PROBLEM
The brief:
Owner: John Memphis; Property: Portion 0 of farm …
The following information is relevant:
1. Land prepared and in line for 2016 planting: 38.4000 ha
2. Land under pineapples: 110.6300 ha
3. Mixed established dry land kikuyu pastures: 258.3000 ha
4. Bush and thick veld grazing: 403.5900 ha
This instruction is to value plant and crops only, ie 1 and 2 above.
What was produced? There are few farms in the area where
pineapples are produced; the majority of properties in
the area are grazing and game farms. There are almost no
transactions in the market for pineapples. It is very difficult to
value land fit for pineapples as well as pineapple lands under
production.
Summary: as mentioned previously, there are very few
pineapple farms coming onto the market. The valuation
proves to be difficult as there are no guidelines that
everybody agrees to.
DEFINITIONS
land reform means: land redistribution, land restitution, land
development and tenure reform;
market value: estimated amount; valuation date; willing buyer;
willing seller; arm’s length transaction after proper marketing
and where the parties had each acted knowledgeably,
prudently and without compulsion
provided that in determining market value for purposes
of section 12(1)(a), prices paid by the state for any
acquisition of property must be excluded: Provided
further that in the event that no other credible data is
available, prices paid by the State for any acquisition of
property may be considered.
‘property’ means
• immovable property registered in the name of a person;
• any movable property which is contemplated to be acquired
together with the relevant immovable property; and
• a right in or to such property, including an unregistered right
recognised and protected by law;
‘valuation’ means
• the process of estimating the value for a specific purpose
of a particular interest in property at a particular moment in
time; and
• the outcome or result of the process above.
‘value’, for purposes of section 12(1)(a), means the value of
property identified for purposes of land reform, which must
reflect an equitable balance between the public interest and
the interests of those affected by the acquisition, having
regard to all the relevant circumstances, including the –
(a) current use of the property; (b) history of the acquisition
and the use of the property; (c) market value of the
property; (d) extent of direct state investment and subsidy
in the acquisition and beneficial capital improvement of the
property; and (e) purpose of the acquisition.
THE CONSTITUTION
Section 23 of the Constitution states that an owner of affected
land “shall be entitled to just and equitable compensation as
prescribed by the Constitution”.
Section 25(3): The amount of compensation and the time
and manner of payment must be just and equitable reflecting
an equitable balance between the public interest and the
interests of those affected, having regard to all the relevant
circumstances, including (a) the current use of the property;
(b) the history of the acquisition and use of the property; (c)
the market value of the property; (d) the extent of direct state
investment and subsidy in the acquisition and beneficial
capital improvement of the property; and (e) the purpose of
the acquisition.
INTRODUCTORY CONTEXT
Land Identification which is imperative for redistribution
of (agricultural) land; the registry of all land made
available, eg ownership, size, location, land potential, land
utilisation, current value; for regulations/standards; different
methodologies and for the prevention of over-inflated
land prices.
SOME KEY CHALLENGES
Lack of a nationwide comprehensive, reliable, collated hub of
property data; not standardised in terms of valuation practice
Conflict of interest and malpractice
Registry of all land made available, eg ownership, size,
location, land potential, land utilisation, current market value
Just and equitable value for property
Regulations/standards
Potential and highest and best use
SACPVP visibility in dealing with valuation malpractices.
REASONS FOR THE CREATION OF AN OVG
To have an autonomous OVG
To have a juristic person with full legal capacity
To have an OVG who is impartial, and acts without fear, favour,
or prejudice; and is accountable directly to the Minister
For the enhancement of land market information analysis and
policy formation.
THE OVG
The OVG should be a balance between policy and regulatory
function and operational functions. There is a requirement
to keep the OVG independent for operational reasons, while
ensuring that the OVG is able to render policy and regulatory
advice effectively.
PURPOSE OF THE OVG
To provide for
• the establishment, functions and powers of the Office of the
Valuer-General;
• the appointment and responsibilities of the Valuer-General;
• the regulation of the valuation of property that has been
identified for land reform;
• the regulation of property that has been identified for
acquisition or disposal by a department.
FUNCTIONS OF THE OVG
• To value properties for land reform
• To value properties for acquisition or disposal by
a department
• For any other reason
• To make recommendations to the Minister
- criteria for valuing properties for land reform
purposes;
- procedures and guidelines for the valuation of
properties (excluding the methods for valuations);
- a system to monitor compliance with the criteria
and procedures;
• To determine matters that must be reflected in a
valuation report.
ROLE OF PROFESSIONAL VALUERS
Whenever a property has been identified for
(a) purposes of land reform, that property must be valued
by the Office of the Valuer-General in order to determine
the value of the property having regard to the prescribed
criteria procedures and guidelines; or
(b) acquisition or disposal by a department, for any reason
other than that mentioned in paragraph (a), the market
value of such property may, at the request of a department,
be determined by the Office of the Valuer-General.
CONDUCT OF AUTHORISED VALUERS
• May not use the position of valuer for private use.
• Must disclose any personal or private business interest.
• May not perform the valuation in which he/she has interest.
• Must comply with the criteria and procedures to be set out
by the OVG.
TYPES OF VALUE
• market value • use value • investment value
• assessed value • going concern value • insurance value
• fair value
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
MARKET VALUE AND USE VALUE
• price (amount) • date (point in time) • open market
• willing buyer • willing seller
• utility • NPV • cash flow or other benefits • specific owner
• specific use
JUST AND EQUITABLE
“The price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date.’’ - FASB, RICS, 2012
“The estimated price for the transfer of an asset or liability
between identified knowledgeable and willing parties that
reflects the respective interests of those parties” - IVS, 2011:3
Fair value: estimation of fair price in exchange between two
specific parties without disregard for market criteria.
CLOSING COMMENTS
Use value as the basis of compensation for the “current use
of the property”; this provides the foundation for determining
just and fair and equitable compensation. The role of the
OVG is to help define the meaning of “just and equitable
compensation”; to develop a framework to assist the process,
balancing the private right to full compensation and meeting
the needs of land reform.
The Minister will pay just and equitable compensation as
contemplated in section 25(3) of the Constitution to the
private landowners for the acquisition contemplated in clause
5 above.
...reasonable and determined jointly by –
• an appropriately qualified valuer of not less than 15 years’
experience agreed upon by the parties, or failing agreement,
appointed by the South African Institute of Valuers; and
• an accountant of not less than 15 years’ standing, either
agreed upon by the parties, or, failing that, appointed by
the chairperson of the South African Institute of Chartered
Accountants,
• provided that, failing agreement between the valuer and the
accountant, the opinion of the accountant will prevail.
Christopher Gavor was the Director of
Valuations for the City of Cape Town
before taking up the position of Valuer-
General; he is also Deputy President of
the SACPVP.
Next Brian Jewell, national sales
representative, spelled out the
benefits of using the SOUTH
AFRICAN PROPERTY TRANSFER
GUIDE (SAPTG) for up-to-date
data of property transfers in South
Africa.
After tea Marina Constas
addressed the delegates on the
SECTIONAL TITLE AMENDMENT
ACT. As predicted by Marina
Constas, who had everybody in awe
of her knowledge of sectional titles,
the Ombudsman for community
schemes has been appointed and the new Sectional Titles
Schemes Management Act and Regulations will now come
into effect. Marina is a director at BBM Inc Attorneys, a Fellow
of the Association of Arbitrators and an international mediator.
Adrian Vallun, director of Valquest,
then guided the delegates
through the SAIV INCOME
CAPITALISATION Model.
It shows what has
been developed
and also what is
planned for future
developments.
SG overlay on Google
Ben Espach presented a CASE STUDY: SERENGETI GOLF
COURSE & FARM LAND. The purpose of this presentation
was not to make delegates experts on MPRA valuations,
but to share his experience with the valuation of this
unique property.
The principles are also applicable to non-MPRA valuations.
This Serengeti is not the Serengeti in Central Africa, but the
Serengeti next to the R21 on the way to OR Thambo, the
27-hole signature course.
Next will be the beautiful houses, those comma houses -
R5,5 million, R6,5, R10,5…
The property: remainder of portion 14 of the farm Witfontein
16 IR; the diagram, which is not up to date as it does not show
all the subdivisions, suggests that there is a puzzle to be
unravelled. The master plan is a result of the ROD, geological
conditions (dolomite), wetlands, etc.
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VALUERNOVEMBER 2016, NO 12610
THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
VALUATION ROLL ENTRIES
ROLL VALUE CATEGORY REASON EFFECTIVE DATE MONTHLY RATES 2016/17 MONTHLY RATES (2016/17)
GV2013 44 000 000 Farms Agricultural 1/7/2013 R8 369.67 8 369,67
GV & SVR1 was done by the same municipal valuer
SVR2 – new municipal valuer
COMPONENTS
NO EXTENT (HA) EXTENT (HA)
1 Undevelopable Remainder (Located outside of the Estate) 3,8436 3,8436
2 Ptn A (Undivided separate land situated 2 km north of site) 37,6615 37,6615
3 Estate Management Centre (Operational & Security rooms) 3,951 3,9251
4 Open Space Corridors (Golf Course / Natural Veld / Dams / Wetlands) 173,8451 173,8451
5 Natural Areas set aside as conservation land due to wetland and urban edge 116,9436 116,9436
6 Proposed PWV 3 Road Reserve 12,0485 12,0485
7 Proposed Agricultural Uses (stabling of horses & estate workshops) 8,6018 8,6018
8 Proposed Mixed Use Precinct 19,652 19,652
9 Proposed Residential 2 / Group housing 30,0613 30,0613
10 Proposed Residential 1 / Single Erven 57,2355
1. Undevelopable remainder (located outside of the estate)
Advertising board: rental – R10 000 per month
Vodacom mast: rental – R5 000 per month
Valuation: income method
2. Ptn A (Undivided separate land situated 2 km north of site)
Encumbrances: power line servitude, Rand Water servitude,
dolomite, access
Valuation: comparable sales, dry land.
GOLF ESTATE PURCHASE PRICE PURCHASE DATE PROPERTY DESCRIPTION
Woodhill Golf Estate R2,029,000 2000/02/25 Erven 862 and 449 Pretorius Park Blair
Atholl Golf Estate R10,000 2005/12/20 Rem of Erf 412 Blair Atholl Ext 4
Eagle Canyon Golf Estate R95,000 for golf course and 2010/06/30 Erven 1258, 1259 and 1260
Honeydew Manor Ext 7 R9,535,000 for clubhouse
Silver Lakes Golf Estate R10,000,000 2010/10/28 Rem extent of Erf 763 Silver Lakes
Dainfern Golf Estate R1,000,00 2000/06/06 Erf 631 Dainfern
4. Open space corridors (golf course/natural veld/dams/
wetlands)
Not suitable for development; dolomite,wet lands. Developer
oblige to maintain golf course; subsidised by developer.
Valuation: nominal value; comparable sales.
The MV based his value on the depreciated replacement cost
of the golf course.
MV based his value on the replacement cost of the 27 hole
course.
Golf course has been running at a loss since inception, at
best there could be a beak even.
3. Estate Management Centre (operational and security
rooms)
Access control, estate management
Vodacom mast: rental – R5 000 per month
Valuation: nominal value; income method
The MV valued the offices as an income producing property.
The VAB did not agree with the nominal value for the EMS?
Applied the tariff for farm land with potential.
5. Natural areas set aside as conservation land
due to wetland and urban edge
Urban edge, wetlands
Valuation: nominal value.
6. Proposed PWV 3 road reserve
Gauteng Infrastructures Act: demarcated and sterilised
Value: no value
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
7. Proposed agricultural uses (stabling of horses and estate
workshops)
Stabling: one dwelling and stables to add value
Estate workshops to service the estate and golf course
Value: comparable sales, dry land, nominal value.
8. Proposed mixed-use precinct
Potential – offices: flood lines, wetlands
Valuation: comparable sales, nominal.
9. Proposed residential 2/Ggroup housing
Potential – Res 2
Value: comparable sales.
10. Proposed residential 1/single erven
Potential – Res 1
Value: comparable sales
VAB DECISION
NO COMPONENT EXTENT (HA) VALUE (R)
1 Undevelopable remainder (located outside of the estate) 3,8436 811 477
2 Ptn A (undivided separate land situated 2 km north of site) 37,6615 941 538
3 Estate Management Centre (operational and security rooms) 3,9251 1 624 758
4 Open space corridors (golf course/natural veld/dams/wetlands) 173,8451 97 000
5 Natural areas set aside as conservation land due to wetland and urban edge 116,9436 2 000
6 Proposed PWV 3 Road Reserve 12,0485 1 000
7 Proposed agricultural uses (stabling of horses and estate workshops) 8,6018 185 398
8 Proposed mixed-use precinct 19,652 13 768 495
9 Proposed residential 2/group housing 30,0613 28 558 235
10 Proposed residential 1/single erven 57,2355 45 788 400
Total 91 778 301
Rounded to 92 000 000
CATEGORY
• 2014/15 Rates Policy
• No Category for multiple purpose
• Two thirds dominant use
• Ratio regulation
• Agricultural property
• Farm Property not used for any purpose
• 75% of the property is not used for any purpose
• VAB
• Farms Other
• SVR 5
• Farms Agricultural
By Ben Espach (BSc), professional valuer
and life member of the SAIV, served on
the Northen Branch Executive from 1990
- 2014 and the National Executive from
1994 - 2013. He was president from
2007 - 2009 and is currently a Director of
Rates Watch (Pty) Ltd.
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Derrick Griffiths presented the next address, SUBDIVISION
OF AGRICULTURAL LAND in three sections: Subdivision
of Agricultural Land Act, Act 70 of 1970 (SALA); Repeal of
Subdivision of Agricultural Land Act, ACT 64 of 1998 and
Draft Preservation and Development of Agricultural Land Bill,
2015 (DAFF/PDALFA).
Derrick deals in detail with Act 70 of 70 in two parts in the
Legal Beagle in the August issue of The South African Valuer
on page 34 and in this issue on page .., so only the second
and third sections of his presentation will be mentioned here.
ACT 64 OF 1998
The Act was promulgated in 1998 as The Subdivision of
Agricultural Land Act Repeal Act, 1997 in Government
Gazette No 19294 of 28 Sept. 1998. Its purpose was to repeal
SALA and all amendments and it was scheduled to come into
operation on a date fixed by the President by proclamation in
the Gazette. To date it has not been proclaimed.
PRESERVATION AND DEVELOPMENT OF AGRICULTURAL
LAND (DAFF/PDALFA) BILL
This bill addresses the preservation and/or sustainable
use of agricultural land with the Department of Agriculture,
Forestry and Fisheries (DAFF) as the custodian. Its purpose
is to regulate the subdivision and change of land use; the
recognition that ‘high value agricultural land’ is a scarce and
non-renewable resource which needs to be protected. The
Minister can proclaim ‘Protected Agricultural Areas’ (PAA) for
the purposes of crop production or livestock production to
protect ‘high value cropland or high value rangeland’. PAAs
must be registered in the Deeds Office.
The National Agricultural Land Register is an electronic-based
geo-referenced register of all agricultural land to manage,
administer and monitor the use, preservation and loss of
agricultural land. It will contain:
• spatial information, including capability, suitability, potential
and status of the natural agricultural resources; socio-
economic information and land use;
• owner information, including nationality and gender;
• planning authorities and municipalities must classify
agricultural land in terms of the Act, ie 'high' or 'medium'
value agricultural land;
• 'Agricultural Sector Plan' (ASP) for the preservation
and development of agricultural land; ASP guides
every province and municipality on provincial
development plans or frameworks, municipal
integrated development plans (IDPs), Spatial
Development Frameworks (SDFs) and Land Use
Management Schemes.
THINGS TO LOOK OUT FOR:
• Taxation to discourage conversion of agricultural land to
other non-agricultural uses and to encourage the optimal
utilisation of agricultural land for agricultural purposes.
• Scientific reports and agro-ecosystem reports compiled by
an agricultural scientist registered with the SA Council for
Natural Scientific Professions (SACNASP).
Revised Draft DAFF/PDALFA – GG N 41247 – 2 Sept 2016
DAFF/PDALFA [BXX-2016] Version 2.1: August 2016
Invitation to consultation workshops and public comments
Available at www.daff.gov.za
By Derrick Griffiths (BProc MAgric) is
a Fellow of the SAIV. After becoming
a state prosecutor he worked as an
attorney. He became a valuer in 1986.
He is the chairperson of the SAIV
Northern Branch Executive and serves
on the National Executive.
0
20
40
60
80
100
120
140
160
15-192 0-24 25-293 0-34 35-394 0-44 45-495 0-54 55-596 0-64 65+
Valuers Statistics
Professional Valuer Professional Associated Valuer
Single Residential Property Asessor Candidate Valuer
Candidate Single Residential Property Assessor
After tea there were two presentations: the first was by Pieter
Venter on ‘APP UP YOUR VALUATION’, valuations to help a
valuer improve the outcome of an instruction.
Pieter introduced his talk by saying that we are not living
in the dark ages any more nor the information age; we
are currently in the beginning of the innovation age. The
definition of innovation is “the process of translating an idea
or invention into a good or service that creates value or for
which customers will pay”. (Business Dictionary 31/08/2016)
There are applications that could/would help the valuer to
present a better product. What is a valuer’s job description?
Is it only to estimate value? (Caveat – Daniel Defoe said: “If
the shoe fits, wear it!”) There are applications for research,
photos, GIS, measurements, calculations, data storage,
management systems, stats and databases:
• for research - deeds, surveyor general diagrams and
zoning information;
• for photographs - time stamp; date and coordinates; tools:
GPS, phone, camera; time of day; Google street view?;
Google 3D Building View is much clearer.
• GIS/maps - Planet GIS; 1Map; Google maps; Google Earth;
drones (up-to-date pics, easy access, recall and review,
legislation, legal issues, safety); ArcGIS/ArcView/ArcMap;
• for measurements - old faithful (wheel); laser (Leica,
Bosch,Stanley, etc); Lidar; Leica Pegasus:Backpack;
Pieter Venter (BEd BAHons), besides
being a candidate valuer with Pierre
Rynners Valuers, is a GISC technician
and a member of the SA Council for
Professional and Technical Surveyors
(PLATO).
• for calculations – Cougar; measurements feet to metre,
etc; sketch up; AutoCAD;
• for storage – Dropbox; One Drive; offsite data storage;
Google Drive;
• for valuation systems/management - VA 3; Pro Valuer;
Ovvio; Cougar; Property Master.
WHAT ARE THE QUESTIONS YOU SHOULD ASK?
Do you understand the app? Did you ask the right questions?
Is there copy right? Plagiarism? Was the data analysed? Is
the data reliable? Who has the highest authority? Where
does the data come from? Remember that everything on the
internet is NOT GOSPEL!
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Although Huxley Reynolds, MD of Precision Device
Distributors (PDD) was given the last slot of the day, his
presentation, MEASURING EFFICIENTLY, was delivered so
enthusiastically and persuasively that everyone woke up and
paid attention.
Huxley aimed to give a simple explanation of efficient
measuring practices and said: “We recognise that measuring
is not the only thing you do, however, it is a critical part of
the valuation process. We hope that by the end of this very
quick presentation you will have a greater awareness of
measurement and its effects.”
FACTS - DO YOU KNOW?
• The correct 'measuring tool' for a particular task is not
always the same.
• Any manual measurement tool does not guarantee accuracy
– the user defines performance.
• Tolerance is an 'allowance' for application accuracy/human
interface with technology.
• Are you being held liable for your measurements?
1. Consider manual methods vs automated for bulk/detail,
draughting and attestation.
2. Like wheels, tapes, laser distance meters etc, the user
defines performance.
3. It is not possible to measure everything accurately, but
can be limited – 5% industry tolerance? – less than 0.1%
technology performance – room to improve
4. Financial implications – incorrect measurement – future
values, one party loses, the other gains framework.
• 100m x 100m Commercial building
• @ 5 Degree linear (Hz slope) error on two lengths
(L x B)
• Sqm = 10 000 SQM + 0.4% = 10 080m
• @ GLA rental of R80.00 p/sqm = R6’400.00 error
• Excludes term and escalations
Excludes multiple, compounded, errors.
THE “STANDARD”?
• Today – There is no specific published accuracy 'STANDARD'
to which any structure must be measured (why?) ie you
must measure to within 2% of the total etc.
• There is a fiduciary onus on the 'measurer' to use their 'best
efforts', which (by implication) requires a combination of the
correct knowledge and applicable instrumentation.
• Your measured task can be disputed and be arbitrated
against
• Just how much ERROR is acceptable? - to which
role-player?
TOLERANCE?
• “The measurement tolerance is to be specified in the scope
of work and report. The service provider should provide an
appropriate degree of tolerance, having regard to the nature
of the instruction, the equipment available and conditions at
the time of measurement”*
• ADVICE - Agree on the scope of work, upfront, before
you start
*International Property Measurement Standard: Office buildings
Practicality
• Reality bites – it’s not always so easy
• Curves, intrusions, extrusions, skew walls, obstructions,
slopes, no easy access, TIME! et al
• People have different 'ways' of doing things
• Instrument + person = 'system'
• How do we ensure consistency?
Shapes
• We’re going to plot our manual measurements in CAD?
• How are we going to get the angles which give us
the shape?
• It’s not so important?
• Automation is far easier and much more accurate.
Personal management devices (PMDs) – Minimum
specification
For valuers' daily tasks – our suggestion:
• LASER based of at least 100m range or more (not 'ultrasonic')
• Accuracy = +-1mm linear and +-0.2 degree angle accuracy
• Certification/calibration
• Built in tilt sensor (180 or 360 degrees)
• Live view display for outdoor conditions
• Valid warranty with local service centre
• Good build quality and great internal components - they are
not cheap!
Laser distance meters (PMDs)
• Personal measurement devices
• Specifications and certifications
• Functionalities
• Correct use?
• PMDs – personal – must trust them, my user settings.
New technology
• First ever continuous 2D scanner
• Simply walk around the building – the instrument will capture
and plot the shape
• Output is DXF point cloud, CAD compliant
• Cm accurate
• Very fast
• 800m²
• 15 minutes
• Less than 0.1% error
• All features captured
• Electronic file, date and time stamped
• Share with multiple users
• EXACT!
Where are we headed?
• Inertial Measurement Units (IMU)
• Simultaneous localisation and mapping (SLAM)
• Point Clouds - PLY / DXF / LAS / RAR formats
• “The processing and algorithms you won’t ever see.”
Huxley Reynolds
The delegates who stayed overnight enjoyed a dinner/braai that evening.
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There were four presentations on Saturday 17 September. The
first was given by Tom Bate and was titled DEMYSTIFY THE
VALUATION OF TRADE RELATED PROPERTIES (TRPS)
WITH REFERENCE TO HOTELS AND HOSPITALS.
INTRODUCTION
The presentation focused on the value of the PropCo (land
and buildings) of both hotels and hospitals. It excluded
boutique hotels or B&B establishments, that are often a labour
of love with uncertain accounts and little space to separate
the business from the property interest. It also excluded
specialist hospital operations and hospitals with less than
100 beds. The aim was to set out the key factors behind the
principles and how to put them into practice.
THE STARTING POINT
As members of the SACPVP valuers need to remind
themselves that the SACPVP as a member of the IVC is
required to follow the International Valuation Standards; the
RICS considers the Red Book as compliant with the IVS.
KEY REFERENCE DOCUMENTS
• The IVS Manual and guidance notes (in particular IVS
GN 12-2007)
• The Red book and guidance notes (in particular GN2-2012)
• The IVS and RICS define hospitals and hotels as Trade
Related Properties (TRPS).
Definition of TRPS: Any property designed for a specific type
of business where the property value reflects the trading
potential for that business. In other words, the profitability of
the TRP will determine the levels of rental that it can afford to
pay and hence the price a buyer will be prepared to pay.
DETERMINING THE MARKET VALUE OF A TRP
Hospitals and hotels tend to be sufficiently unique that
comparison as a method of valuation is inappropriate.
This requires the valuer to revert to the income approach
by capitalising the landlord’s portion of the net operating
profit, which represents the rent, at an appropriate rate, by
either using a DCF or cap rate approach, depending on the
circumstance.
DETERMINING THE MARKET RENT – APPLY THE
PROFITS TEST
RICS GN2:3.1 sets out a number of key steps in the Profit
Test approach:
1. Determine the Fair Maintainable Turnover (FMT) that a
“reasonably efficient operator” (REO) could generate; it
assumes that you have checked that the hospital or hotel
is in fair condition and properly equipped.
2. Determine the “fair maintainable operating profit” (FMOP),
defined as the level of profit, prior to depreciation and
finance costs, that the (REO) would expect to derive from
the (FMT); this should include an allowance for periodic
expenditure such as decoration, refurbishment and
renewal of the trade inventory
HOW DO YOU FIND THE FMOP?
REFER TO THE EBITDA
• The EBITDA is effectively the FMOP defined as the Earnings
Before Interest, Taxes, Depreciation and Amortisation. If
the term EBITDA excludes a deduction for rental, the
abbreviation changes to EBITDAR
• It may need to be adjusted to reflect the trading potential of
a reasonably efficient operator (IVS GN12 5.3).
• The IVS clearly states that the rental should be derived by
taking a % of the EBITDA (IVS GN12 C6).
• In reality one needs to have good reason to assume that the
current operator is not an efficient operator, which means
using the actual accounts.
PRACTICAL APPLICATION
One needs to refer to 'best practice' both internationally
and locally.
Lease assumptions
• The definition of market rent states willing lessor and willing
lessee on appropriate lease terms: FRI (full repair and
insurance) and 10- to 15-year lease with annual escalation.
• Splitting the net profit between the PropCo and OpCo; draw
from the UK and South African experience; with a mature
FMOP, 45% to 50% of the EBITDA can be taken as the
rental. Beyond this point, it can spell disaster!
• Example – A number of flagship hotels agreed rentals shortly
before the 2008 crash at a level above 50% of projected
EBITDA. The contractual rentals have in many cases
escalated above 80% of EBITDA. Similar experiences have
been seen in the UK with listed hospitals.
THE CAPITALISATION RATE
There are generally only a limited number of sales with many
comprising the sale of the PropCo and Opco. One therefore
needs to separate out the Opco component in any analysis.
In the absence of direct sale evidence it is often argued that
the cap rate range for the office sector provides a benchmark.
THE DISCOUNT RATE
This should equate to the market cap rate plus the assumed
growth rate.
ARE THERE ANY CROSS CHECKS OR ALTERNATIVE
METHODS?
Comparative valuation approach
The measure of comparison is based on a value per bed
(referred to as key in the case of hotels). The market/
comparative approach is likely to be a poor indicator of
market value, as you are not comparing ‘like with like’. Each
hotel or hospital has its own unique circumstances. It plays
a role as a cross check to the income approach in terms of
providing a value range.
HOTELS
• A rental at 50% of EBITDA will equate to approximately 12%
- 20% of the gross turnover assuming adequate profitability
and true accounts.
• The core range is between 15% and 16% for adequately
profitable ‘full service’ hotels, with a higher percentage
sometimes applicable for ‘minimum service hotels’.
• One can look at the income from the F&B/other revenue
separately.
• There are numerous leases to support the percentage of
turnover figures.
HOSPITALS
• A rental at 45% to 50% of EBITDA will equate to
approximately 10% - 14% of the gross turnover assuming
adequate profitability and true accounts and occupancy
above 55% to 60%. The percentage of turnover estimate is
very general, as the percentage has varied over time.
UNDERSTANDING THE HOTEL MANAGEMENT
PERFORMANCE DATA
• Key indicators
• Occupancy - rooms sold expressed as a percentage of
rooms available
• Rack rate - the full room rate before any discount
• ADR (average daily rate) - room revenue generated
expressed as the average rate per room sold per day
• RevPar (revenue per available room) - average daily earnings
for total number of rooms available. In other words, if one
multiplied the RevPar by the total number of rooms and then
by 365 days, one would arrive at the total room revenue.
Year ended30 June 2013
No. of rooms 213Occupancy 45.24%Rack Rate Single (incl. VAT) R 767.50Revpar R 277.11Achieved room rate ADR (excl. VAT) R 632.22F&B revenue as % of rooms revenue 9.75%EBITDA (Pre internal rental) R 10,917,499Rooms Revenue R 21,544,012Restaurant Revenue R 1,715,447Bar revenue R 395,636Total revenue R 23,655,095
UNDERSTANDING THE MARKET
• The hotel industry is cyclical. The key drivers being
national and global economic trends, rising operating
costs, occupancy levels, ADR and the level of growth in the
room inventory.
• Compare hotel data with STR stats.
• Understand where the hotel fits into the market. Is the driver
tourism, business or a portion of both?
• A single year’s figures can be misleading.
• One needs to ensure that the assumed rental based on the
EBITDA/turnover is not at the top or bottom of the cycle.
• Kamil Abdul-Karrim, in his Pam Golding presentation
to the SAIV in 2012, demonstrates the cycle well in the
graphs below.
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AveCape Town 68.30% 69.90% 69.10% 67.50% 60.70% 57.30% 56.10% 61.10% 62.90% 67.20% 62.60% 63.88%Sandton 69.30% 78.50% 75.40% 72.80% 63.50% 62.00% 57.10% 63.20% 63.10% 62.90% 66.40% 66.75%Pretoria 71.00% 74.00% 70.60% 70.90% 54.70% 52.20% 48.60% 52.50% 61.81%Durban 74.60% 73.00% 69.00% 67.80% 64.00% 56.00% 56.80% 57.60% 64.85%South Africa 67.90% 69.40% 69.30% 68.50% 58.90% 56.70% 53.40% 58.70% 60.60% 59.90% 60.30% 62.15%
4 Star Hotels Occ % - annual STR statistics
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A MARKET OVERVIEW
A valuation based on a 2008 EBITDA with occupancy levels
above 80% would have led to a potential over-valuation.
You need to understand where we are in the cycle: Has the
industry recovered from the 2007/2008 level? Will it ever
return to the same level of corporate spend? Occupancy
levels at 72% in 2007 are now around 64%. ADR levels at
R671 in 2007 now at R1,086. RevPar level at R484 in 2007
now at R691 (the growth has been below inflation).
We are perhaps at ‘20 to’ on the clock; 25% to 30% to go
before we start to see new builds - perhaps in 20017/18.
Nothing substantial currently going up, but proposed
Raddison Red and Blue at the V&A Waterfront and Tsogo
500-bed hotel in Cape Town, Marriot hotel in Melrose Arch
and Sun International hotel in Polokwane in 2017/18.
The market is not even:
There is strong tourism growth potential in Cape Town with
24 million visitors to the Waterfront annually. The cheap Rand
and revised visa requirements both affect tourism. In the rest
of SA minimal economic growth is projected. There are weak
commodity prices and policy uncertainties.
HOSPITALS
The granting of bed licences is critical to controlling supply.
Medical aid tariffs determine the gross revenue. Potential
political interference adds to the risk. There is concern
over the future capacity to recruit quality doctors and
nurses and the Competition Board is starting to threaten
strong intervention.
SUMMARY
• The presentation was a brief overview – you need to refer to
IVS / RICS guidance notes.
• Ensure you have taken out any notional building rental when
using the EBITDA to establish a market rental.
• The accounts are your key guide to value. If they are not
achieving better figures, why should anyone else?
• Be cautious of using a DCF – you risk making unrealistic
projections particularly in our current economic times.
• Try to establish a mid cycle sustainable EBITDA.
• The exception - new developments when it may take several
years to arrive at a mature figure.
• The OpCo may ignore the short-term loss of income if they
are optimistic in the longer term.
• Cost does not equal value. The market value could be below
cost! Even developers/corporates misjudge the market.
• Often there is a shortage of information. Turnover is a good
alternative basis.
• What if the hotel or hospital is not profitable? This makes for
a highly subjective valuation!
• Be aware of the condition and future potential spikes in
the expenses.
• Check that the accounts have adequate reserves to cover
refurbishment/replacements and maintenance. The general
minimum guide with hotels is around 4% of turnover for
replacements and around 3% for repairs and maintenance,
giving an overall allowance of 7%.
WORKED EXAMPLE – PERCENTAGE EBITDA
RandEBITDA as at Yr end March 2015 R 20,000,000add: say 7% to project EBITDA to 30 May 2016 R 21,400,000EBITDA as at 30 May 2016 R 21,400,000Propco rental @ 50% of EBITDA R 10,700,000Less: 0.75% management fee R 80,250Net adjusted rental R 10,619,750Capitalised at: 9.25% R 114,808,108Value per key - 229 rooms R 501,345
WORKED EXAMPLE – PERCENTAGE TURNOVER
RandGross annual turnover yr end March 2015 52,000,000Project turnover March 2016 by say 7% 55,640,000 Net rental @ 20% of gross turnover R 11,128,000Less: 0.75% management fee R 83,460Net adjusted rental R 11,044,540Capitalised at: 9.25% R 111,280,000Value per key - 229 rooms R 485,939
Tom Bate (MSc, BSc, Land Econ (UK),
MRICS, MIV (SA)) is a partner with Mills
Fitchet and has been in the valuation
profession for 35 years. He acts for City
Lodge and carries out periodic work for
most of the major hotel groups and listed
funds that retain hotels as part of their
portfolio.
Dawie Roodt’s presentation, advertised as ‘The chilling
economic climate’, was renamed THIS IS US – A
DEMOGRAPHIC OVERVIEW. As the presentation
concluded, one could clearly see how both topics came
together to underpin the current economic environment.
In his inimitable way and with innumerable graphs and
tables, Dawie ran through the global macro economy and
that of South Africa.
Dawie explained how his values revolve around personal
freedom. Central to this value are those of private property
rights and the right to trade, move, contract, speak, and
to be successful and rich. He maintains that rich and
successful people make for rich and successful countries.
In this environment of freedom one does, however, have
responsibilities, all of which come down to honouring and
protecting others’ property rights; or honour my contracts
and never steal from me.
In the context of a free world, two major entities often
intervene to make life better for us all, or so they claim.
These entities include central banks and ministries of
finance which are in their turn responsible for the monetary
and fiscal policy of a country. What we’ve seen since the
early 2000s is how the world we live in has been driven by
monetary madness and fiscal follies. Monetary madness,
caused by omnipotent central bankers, drove nominal
rates negative through exotic measures – quantitative
easing (QE). This has lead the world down the rabbit hole
of a virtual and real divide. No wonder populist parties are
gaining so much favour.
Fiscal follies occurred when governments used counter-
cyclical measures to try to save their economies from a
global meltdown. Instead of curbing back on expenditure
once the threat had gone, they just kept on spending. Now,
many countries, including South Africa, are at record high
debt levels. Because of this mad world they have created,
governments are paying record low interest rates, for
record high debt levels. That does not make sense in any
practical context: if you could borrow any amount you
wanted, and the more you borrowed the lower interest
rates got, the result would be that if you borrowed enough,
the interest rate would become negative!
Dawie went on to discuss the current macro outlook.
Important drives of the current global economic outlook
are politics, US interest rate decisions, the lowflation
in Europe, China’s standstill, and the looming market
corrections. The answer to many of these economic
felicities is, however, simple: maintain positive interest
rates, continue with prudent fiscal management, don’t
mess with markets, and never waste a good recession!
Turning to South Africa, Dawie explained how the
ideologically confused tri-partite alliance was causing
political instability, which in turn causes policy uncertainty,
which finally hampers economic growth. No wonder we’ve
seen the economy preform worse and worse since 2009
– or as he likes to refer to it, the ‘Z-period’. In this context
and with the support of facts, statistics and graphs, Dawie
discussed South Africa’s macro economy. He focused on
interest rates, food price inflation, the historic Rand/US
Dollar undervaluation, unemployment (which is fuelled
by weak growth, skewed labour legislation, and a lack
of skills).
To wrap up, he turned to fiscal finance, his speciality.
He explained how the South African spending ‘problem’
originated from the ideologically confused tripartite
government. Its confused nature led to weak policies,
weak implementation, social rather than economic
upliftment, and unsustainably high spending on
government employment and grants.
The solution he offered went as follows - government
efficiency would be improved in two ways: first by
decreasing the size of government; then by having all civil
servants resign and reapply for their jobs; servants, which
they should be, would then be re-employed based solely
on their ability; costly state-owned enterprises should
be privatised; anti-job legislation should be scrapped
and a world-class skills development system should
be established. Companies should not waste a good
recession, should stop protecting failures, and should not
rely on protecting exchange rates.
Dawie looked at the evolution of human development
from Blombos to artificial intelligence and tied this into
global demographics. Demographics, the changes in
human statistics, drive politics, economies, markets, and
everything else. He mentioned that China would be the
first country to be old before it gets rich; and then turned
to South Africa’s demographics, giving key forecasts
on the population statistics, dependency-ratios and the
economic distribution of wealth. He argues quite rightly
that demographics are doing the job of BEE.
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Dawie Roodt is the Chief economist
of Efficient Group Limited; he is a
nationally renowned economist with 30
years’ experience, and specialises in
government finance and monetary policy.
RISK
Dawie ended his presentation by explaining how we fit into
this world of risk and return. As an investment specialist who
understands economics, he continued to elaborate on how
risk should be interpreted and which risk an individual can
take. There is market, personal or institutional risk. Market
risk cannot be mitigated, but one can navigate through it. One
should never take institutional risk, but rather decide which
level of personal risk one is willing to take. Only thereafter
can one determine which level of returns one can expect by
saving in various instruments.
After tea Dr Antonie Gildenhuys, retired judge of the Land
Claims Court and Johannesburg High Court, and Honorary
Member of the SAIV, presented KNOTS AND TIES, dealing
mostly with the Expropriation Bill.
The Constitution (Act 108 of 1996) and various other Acts
contain a number of directives which must be complied with
when determining the amount of compensation payable to an
owner whose property has been expropriated. Distorted by
these directives, valuations made in terms thereof are often not
a determination of a likely selling price, but a determination of
a monetary amount arrived at on a different basis and made
for a different purpose.
The Constitution does not require compensation to be the
market value of the expropriated property, but rather an
amount that is just and equitable, reflecting an equitable
balance between the public interest and the interests of the
owner of the expropriated property. Market value is just one of
several the factors to be considered in arriving at an amount
of compensation that would be just and equitable.
Section 25(3) of the Constitution provides:
The amount of compensation and the time and manner
of payment must be just and equitable, reflecting an
equitable balance between the public interest and the
interests of those affected, having regard to all relevant
circumstances, including ...
The Constitution then lists five "relevant circumstances",
one of them being market value. More about the "relevant
circumstances" will follow later.
The requirement that compensation must be "just and
equitable, reflecting an equitable balance between the public
interest and the interests of those affected", is mirrored in
Section 12(1) of the Expropriation Bill [B 4D—2015] which is
presently before Parliament. If and when it becomes law, it
will replace the existing Expropriation Act, No 63 of 1976. The
precept of just and equitable compensation comes from the
German Constitution. Article 14(3) of the Basic Law for the
Federal Republic of Germany, 1949, reads:
Expropriation (Enteignung) shall only be permissible
in the public interest. It may only be ordered by or
pursuant to a law which determines the nature and
extent of compensation. Compensation shall reflect a
fair balance between the public interest and the interests
of those affected.
It is an accepted principle in many countries that there
should be equality for public charges. The doctrine was
first developed and formulated in France, and is known as
égalité devant les charges publiques. Under this doctrine,
if land is expropriated for the benefit of the general public,
the compensation due to the owner should be borne by
the general public through the fiscus, funded by taxes. If
the amount of compensation is insufficient to maintain the
value of the expropriated owner's estate, the shortfall will be
seen as a burden which should not be borne by the
expropriated owner.
How then is "just and equitable compensation" to be
determined? Prof W J du Plessis, Valuation in the Constitutional
Era, 2015 PER vol 18 no 5 p 175, gives the following answer:
What are the tools that a judge must use to arrive
at "just and equitable" compensation?... it requires a
contextual determination of compensation that aims
at the "just and equitable" rather than at market value
compensation. The use of more rigid or precise tools
is not feasible… The tool we have is the Constitution,
which tells us where we ought to go. It is up to valuers
to get us there.
What is a contextual determination, and how must it be
applied? The following two examples are of interest. Prof Du
Plessis, in her article (ibid), states that:
[Contextual determination] would enable a judge
at times to consider including evidence on or
considerations such as the economic standing of an
owner in determining what an equitable amount of
compensation would be. It might encourage a judge to
consider discounting compensation, if the goal that the
expropriating legislation wishes to achieve requires the
owner's rights to give way to the bigger public purpose.
In Msiza v Director-General, Department of Rural Development
& Land Reform, 2016 (5) SA 513 (LCC), a land reform case
where there was a large increase in the value of the relevant
land over the period during which the owner owned the land,
Ngcukaitobi AJ held that the increase in value justifies an
award of compensation which is less than market value. He
stated in his judgment that:
The object of section 25 is not to reward property
speculators. It is to serve the public interest. ...Thus,
when factor [25(3)](e) is read in conjunction with
section 25(8) of the Constitution, which directs the
state to promote land reform, this would support the
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interpretation that compensation below market value
can be paid in land reform cases.
Both these examples intrude upon the doctrine of equality
for public charges. Whether the constitutional and social
imperative of land reform in South Africa justifies such
intrusions is an issue to which there is no easy answer. If an
upward or downward adjustment to a valuation made by a
valuer in accordance with standard valuation practices is
called for in order to meet what the valuer perceives to be the
requirements of justice and equity, it will add a new dimension
to the valuation profession.
The relevant circumstances to which regard must be had
when determining just and equitable compensation, are set
forth in sec 25(3) of the Constitution and are echoed in sec
12(1) of the Expropriation Bill. They include:
• the current use of the property;
• the history of the acquisition and use of the property;
• the market value of the property;
• the extent of direct state investment and subsidy in the
acquisition and beneficial capital improvement of the
property; and
• the purpose of the expropriation.
In addition, the Expropriation Bill in sec 12(2) thereof contains
a list of further circumstances which the expropriating
authority must not, to the extent that it is just and equitable to
do so, take account of. The list mirrors a similar list contained
in the existing Expropriation Act, No 63 of 1975. The list of
circumstances to be disregarded includes:
(a) the fact that the property has been taken without the
consent of the expropriated owner;
(b) the special suitability or usefulness of the property for
the purpose for which it is required by the expropriating
authority, if it is unlikely that the property would have been
purchased for that purpose in the open market;
(c) any enhancement in the value of the property, if such
enhancement is a consequence of the use of the property
in a manner which is unlawful;
(d) improvements made on the property after the date on
which the notice of expropriation was served ....... , except
where they were in advance agreed to by the expropriating
authority or where they were undertaken in pursuance of
obligations entered into before the date of expropriation;
(e) anything done with the object of obtaining
compensation therefor;
(f) any enhancement or depreciation, before or after the date
of service of the notice of expropriation, in the value of
the property in question, which can be directly attributed
to the purpose in connection with which the property
was expropriated.
These provisions contain their own knots and ties. Under
sec 12(2)(c) of the Expropriation Bill, if the use of the
expropriated property is illegal, any enhancement in its value
as a consequence thereof must be ignored. Sec 46 (2)(b) of
the Local Government Municipal Property Rates Act, No 6 of
2004, by contract, provides as follows:
In determining the market value of a property, the
following must be considered for purposes of valuing
the property, the value of any immovable improvement
on the property that was erected or is being used for a
purpose which is inconsistent with or in contravention of
the permitted use of the property, as if the improvement
was erected or is being used for a lawful purpose;
The provision that any enhancement or depreciation in the
value of the property must be disregarded if it can be directly
attributed to the purpose in connection with which the
property was expropriated, requires the valuer to value the
property in an imaginary market. This led King J to remark, in
the case of Transvaal Buildings (Pty) Ltd v Johannesburg City
Council 1979 (1) 949 (W) at 956A-B, that -
I must arrive at a price in a market that did not exist
at the time of expropriation. This is so because I
must ignore any enhancement or diminution in value
flowing from the expropriation or the scheme causing
the expropriation. It is an Alice in Wonderland world
in which the consideration of principles of valuation ...
make the task of the ... valuator seemingly 'curiouser
and curiouser'.
The following remarks by the well-known British judge, Lord
Denning, in Myers v Milton Keynes Development Corporation
[1947] 2 All ER 1096 (Eng), are to the same effect:
It is apparent, therefore, that the valuation has to be
done in an imaginary state of affairs in which there is
no scheme. The valuer must cast aside his knowledge
of what has happened ... due to the scheme. Instead,
he must let his imagination take flight to the clouds. He
must conjure up a land of make-believe, ...where there
is to be supposed the old order of things continuing.
The value of expropriated property to be determined by a
valuer can, in terms of existing and proposed legislation, also
vary according to the purpose of the valuation. Sec 12(1)(a) of
the Property Valuation Act, No 17 of 2014, provides
When a property has been identified for purposes of
land reform that property must be valued by the Office
of the Valuer-General for purposes determining the
value of the property having regard to the prescribed
criteria procedures and guidelines.
The term "value" has been defined in sec 1 of the Property
Valuation Act No 17 of 2014 as follows:
'Value', for purposes of section 12(1)(a), means the
value of property identified for purposes of land reform,
which must reflect an equitable balance between the
public interest and the interests of those affected by the
acquisition, ...
It would seem, firstly, that when a valuer has to determine
the value of property for purposes of acquisition as part of
land reform, "criteria procedures and guidelines" prescribed
by government will have to be followed, which could impinge
upon accepted valuation principles. Secondly, a consequence
of applying the prescribed "criteria procedures and guidelines"
might well be that the value of property if determined for land
reform purposes, would differ from the value if determined for
other purposes.
Having regard to the various criteria for determining
compensation contained in the Constitution and other
legislation, some of which have been mentioned above, what
practical steps should a valuer follow to reach an acceptable
conclusion, bearing in mind that the effect of many of the
circumstances to be considered are very difficult to quantify?
Mokgoro J in Du Toit v Minister of Transport 2006 (1) SA 297
(CC) at 316D, gave the following guidelines:
The market value of the expropriated property could
become the starting point in the application of s 25(3)
of the Constitution since it is one of the few factors in
the section which is readily quantifiable. Thereafter, an
amount may be added or subtracted as the relevant
circumstances in s 25(3) may require. Actual loss may
play a similar role depending on the circumstances of
the case.
Legislation regulating valuation principles can have a
significant effect on valuations undertaken in terms thereof,
especially valuations for expropriation and land reform
purposes. Valuers will have to be cognisant of and apply
such legislation, which could import new challenges into the
valuation profession.
Antonie Gildenhuys
On Saturday 17 the final presentation was given by Dianne
de Wet and Darran Kuppan, both professional valuers,
members of the SACPVP board and members of the Council’s
Investigation Committee. Dianne de Wet serves on the SAIV
KZN branch executive as vice chair; Darran is a valuations
quality control consultant for Barclays Shared Services Africa
and was a member of the SAIV KZN branch executive from
2004 to 2016 and the National Executive from 2006 to 2008.
Their presentation was titled ‘WHEN VALUERS RUSH IN
WHERE ANGELS FEAR TO TREAD’, or: actions or omissions
that expose you to a breach of the Valuers Code of Conduct.
This title was used to draw attention to the fact that the
Investigation Committee of the Council deals with an average
of fifty cases of discipline annually at great cost to the Council.
Valuers were reminded to familiarise themselves with the
Valuers Code of Conduct (entrenched in the Valuers Act
No. 47 of 2000) and the International Valuation Standards.
Professional standards should be upheld by remembering to
obtain written client instructions, by remaining objective and
impartial at all times and by carrying out adequate research for
assignments (for which you are adequately experienced and
qualified) so that reports are of a consistently high standard.
Dianne de Wet
and Darran Kuppan
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VALUiNG REAL ESTATE iN MOZAMBiqUE – A CASE Of iNpUT AVAiLABiLiTy UNCERTAiNTy
V
INTRODUCTION
The aim of this article is to provide an overview of valuing real
estate in Mozambique both in terms of the legal and practical
aspects. The article will first aim to provide an overview
of the real estate development policy and secondly the
accompanying process which in both instances is based on
the Lands Act (or Lei de Terras). The third aim is to illustrate
the limited availability of inputs when valuing in Mozambique
and the uncertainty it creates in the final value conclusion.
REAL ESTATE DEVELOPMENT POLICY
SUMMARY POLICY REQUIREMENTS
The following is a summary of the real estate development
policy requirements:
• The use and exploitation of land is the right of Mozambican
people, although subject to the verification of certain
conditions, this right can also be granted to foreign citizens
and entities wishing to develop projects.
• The right to the use and exploitation of the land is constituted
upon the surface of the land and the corresponding airspace,
provided that they are not integrated in the public domain.
• Additionally accrued are further rights of access to public
roads and public services of water, electricity, telephones
and other, as well as the right to mortgage the real property
and improvements that have been legally built on the land
and subject to rights of use and exploitation, upon which
they have acquired the right to property.
• In turn, duties of the holders of the right of use and
exploitation of the land include:
• to use the land respecting the principles defined
in the Constitution of the Republic of Mozambique
and other legislation in force and, if conducting
an economic activity, this should be done in
accordance with the exploitation plan and
according to the legislation relating to the activity
carried out;
• to provide access through its land to neighbours
who do not have access to public roads or water
resources of public use, allowing the constitution
of easements;
• to respect the constituted easements and the
rights arising therefrom;
• to allow the execution of operations and/or
installation of accessories and equipment under
the exercise of mining activities, subject to fair
compensation;
• to keep the landmarks of boundaries, triangulation
and cadastral demarcation or similar;
• to cooperate with the Registry Services.
Two types of phase authorisations are provided, namely
provisional authorisation and definitive authorisation.
PROVISIONAL AUTHORISATION
Provisional authorisation is issued following an application
and has a duration of two years for foreigners and five years
for nationals, and contains the following elements:
• Identification of the entity that authorised the application
and the authorisation date
• Number of the authorisation
• Identification of the applicant
• Sketch, area, location and identification number of the land
on cadastral register
• Term of the provisional authorisation
• Type or types of exploitation for which the authorisation
was granted
• Fees owed
• Date and place of issue
• Signature of the person responsible for the services that
issued the authorisation and its seal.
Following confirmation and completion of the proposed
investment or the compliance with the exploitation plan, the
applicant shall be granted the definitive authorisation to the
use and exploitation of the land and issued with its title.
DEFINITIVE AUTHORISATION
Definitive authorisation is issued after verified compliance
with the exploitation plan or the investment project and
contains the following elements:
• Identification of the entity that authorised the application
and the authorisation date
• Number of the title and identification of its holder
• Area and its geometrical definition, with the respective
coordinates, location and identification number of the land
on cadastral register and identification numbers of the
confining plots
• Term of the right of use and exploitation of the land
• Type or types of exploitation for which the right to the use
and exploitation was granted
• Description of the existing improvements
• Fees owed
• Date and place of issue
• Signature of the person responsible for the services that
issued the title and its seal.
EXTENDED POLICY REQUIREMENTS
Although a summary of policy requirements is provided
above, the following are further policy requirements as per
the Lands Act:
• The granting of the right to the use and exploitation of
the land is carried out for the period corresponding to the
period fixed by the Investment Authorisation, not exceeding
50 years and renewable for an equal period.
• Should the land be improved, however, all improvements
effected on the land and the use thereof become the
perpetual property of the owner and this right cannot be
alienated without reasonable compensation.
• In cities and villages, and in human settlements or population
agglomerates organised by an urban plan, the applicant to
the right, to the use and exploitation of the land has the
maximum period of two years to start the works necessary
for the use of the land; this period may be extended for an
additional six months upon presentation of proper reasons.
The deadline for the beginning of the exploitation of the land
shall not exceed ten years, counting this deadline from the
date of acquisition of the right to the use and exploitation
of the land.
• Works necessary to qualify for confirmation of construction
commencement are not well defined and currently the
mere erection of a fence or construction of a small building
could fulfil this requirement and therefore guarantee the
conversion of the land lease to one of ownership.
• The holders of rights to the use and exploitation of the
lands can transfer by inter vivos action; the infrastructures,
buildings and improvements existing on it, through a public
deed proceeded by the authorisation of the state entity
grantor of the right to the use and exploitation of the land.
Therefore, although the land cannot be transferred, the
shares of the company holding the land or the improvements
on the land can be transferred.
• In the case of urban buildings, the transmission of the
building also conveys the right to use and exploitation of
the respective land, without the need of prior authorisation
from the grantor.
• The conclusion of the contracts of transfer of the holding
must be carried out by public deed and is subject to the prior
grantor’s approval of the right to the use and exploitation of
the land and, in the case of local communities, it depends
on the consent of its members.
• The constitution, modification, transfer and extinction of the
right to the use and exploitation of the land are subject to
registration in the Land Registry Office and in the National
Land Registry.
• The Lands Act provides for the possible forms of termination
of the right to the use and exploitation of the land. The right
of use and exploitation of the land may be terminated in
the event of non-compliance with the exploitation plan or
the investment project without a justified reason, under
the conditions and the timing that have been established
in approval of the application, even if tax obligations are
being fulfilled.
• The right to the use and exploitation of the land can also
be terminated for reasons of public interest; however such
termination shall be compensated with the payment of fair
indemnity and/or compensation.
• The Urban Soil Regulation, for application in urban areas,
provides for the creation of new mechanisms of granting of
the right to the use and exploitation of the land, which are
not in accordance with the Lands Act, namely by:
• raffle: its object is the attribution of the right to the
use and exploitation of the land in lands located in
basic urbanisation areas, and is only intended for
national citizens;
• auction: its object is the attribution of the right
to the use and exploitation of the land in plots or
parcels located in full or intermediate urbanisation
areas for the construction of buildings for housing,
commerce and services;
• private negotiation: the object of this mechanism
is the attribution of the right to the use and
exploitation of the land on lands intended for
housing construction by direct initiative of housing
cooperatives or associations; installation of
industrial and agro-livestock units, installation
of trade units of big surfaces, terminals and
commercial warehouses or services, whose
characteristics require sizeable surfaces;
construction of housing projects associated with
large investment projects.
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• Discussions are currently ongoing with regard to the legal
effectiveness of granting the right to the use and exploitation
of land in accordance with the procedure laid down in the
Urban Soil Regulation, because of its compatibility with
the provisions of the Lands Act, which is a legally binding
instrument superior to that of the Urban Soil Regulation
provisions.
REAL ESTATE DEVELOPMENT PROCESS
SUMMARY OF DEVELOPMENT PROCESS
The following is a summary of the development process:
• Depending on the location of the project, the licensing
process is authorised by the local municipality or by the
district/provincial administration. The licensing of special
projects, such as hotels, resorts, industrial facilities or large
retail and entertainment facilities requires authorisation
from local and national administration (ministries and
supervisory institutions).
• The licensing process generally involves the following
bodies:
• Architectural Project Approval – municipality
competency;
• Construction Licence – municipality competency;
• Building Supervision Licence – Municipality and
Fire and Security Institute; and
• Operation Permit – municipality or the supervisory
institution.
• During the application process two copies of all documents
must be submitted. After confirmation of receipt of the
document by the administration by means of an official
stamp, one of the copies is returned to the developer.
• After submission of the architectural project the municipality
has the following legal deadlines:
• analyse the documents and request for alterations
and other documents if needed: 30 days;
• analyse and approve the architectural project
(Project Licensing): 60 days;
• analyse and approve the engineering projects
(Construction Licence): 30 days for local
administration and 60 days for national
administration.
• Following receipt of the Building Permit the developer has
eight days to publish, on site, the information as per the
Construction Licence.
• After conclusion of the works the developer must request
from the municipality the inspection of the buildings.
• The inspection and supervision licence and the Operation
Permit is granted 30 days after completion of the inspection.
PROJECT DEVELOPMENT STAGES
Project development is divided into six stages:
• Stage 1 is the planning and initiation phase and takes one
month on average.
• Stage 2 is the feasibility and pre-concept phase and takes
two months on average.
• Stage 3 is the project design and approval phase and
consists of three sub-stages:
• Stage 3a is the construction rights permit
(Architectural Project Approval);
• Stage 3b is the Environmental Impact Assessment
(EIA). Projects with a substantial impact on the
urban environment are required to obtain an
Environmental Licence. This licence is approved by
the Ministry of Environment through the submission
of an Environmental Impact Assessment study
(EIA). The EIA Regulation considers three
categories of environmental impact:
• Category A: subject to a full EIA study;
• Category B: subject to a simplified
EIA study; and
• Category C: subject only to a good
environmental practices management
study.
Each category has its own deadlines for approval
according to the specific terms of the environmental
impact. The approval process for Categories A and
B is subject to public participation and publication
of EIA results. The legal times for approval of the
Category A licence range between 9 and 12 months
and for Category B between 3 and 6 months. The
preparation and submission of the EIA should be
developed during the approval of the project. The
approval of the construction licence is subject to the
environmental licence.
• Stage 3c is the Construction Licence. The overall
average timing for this stage is 4 to 5 months.
• Stage 4 is the commitment phase and takes on average
one month.
• Stage 5 is the construction phase and consists of two
sub-stages:
• Stage 5d is the Building Supervision Licence (with
the conclusion of works);
• Stage 5e is the Operation Permit (to be issued
before operation starts); the timeline varies
depending on the size and type of development.
• Stage 6 is the building management and operation phase.
DOCUMENT REQUIREMENTS
The following documents are required for the approval process:
• Architectural approval:
• submission requirement addressed to the municipality
requesting the approval of the architecture project,
identifying the developer, the type of construction
and the general uses proposed;
• full description of the project (Project Memo) including
the areas, volumes, heights, number of units, uses,
materials, type of constructions, etc;
• site plan @ 1:1000 with the location of the project;
• footprint plan @ 1:200 with the proposed
constructions and uses;
• copy of the DUAT, land registry or title deed;
• topographic plan obtained from the municipality
(cadastral plan);
• architectural project @ 1:100 scale;
• responsibility term of the architect responsible for the
project (must be a nationally registered architect);
• description of the subdivision or fractioning areas
and the common areas (if applicable).
• Construction Licence:
• submission requirement addressed to the
municipality requesting approval of the engineering
project drawings;
• copy of the architectural approval letter;
• engineering project drawings at a suitable scale;
• responsibility term of each engineer responsible for
each project (must be a national registered engineer);
• estimate of the total construction cost;
• copy of the contractor’s licence and a commitment
letter that construction will be done on terms
approved by the municipality.
• Building Supervision Licence:
• The revised architectural project according to the
changes made during the construction (if any).
• Operation Permit:
• copy of the Building Supervision Licence;
• copy of the updated title and land registry including
Figure 1: Overall timeline for a project development
the new construction;
• copy of the individual titles for each fraction
(if applicable).
Figure 1 illustrates the process and its various stages.
PRACTICAL VALUATION ILLUSTRATION
VALUATION ILLUSTRATION OVERVIEW
The aim of this section is to illustrate valuations in practice in
Mozambique. The valuation consists of a portfolio of 74 industrial
properties, 13 commercial offices, and 163 residential properties
(staff buildings) valued for sale purposes on 23 October 2015
at market value and held under leasehold ownership. The
properties are located across the districts of Montepuez,
Namuno, Nampula, Balama, Pemba, Quissanga and Mueda in
the Cabo Delgado and Nampula Provinces.
The subject properties are located approximately 2 450
kilometres north east of Maputo, a main city of Mozambique as
per Figure 2.
Figure 2: Property location overview
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Each of the properties were place-marked, using the
property register certificate number and the town as the
marking composite as illustrated on Figure 3. The property
certificate number is the South African equivalent of the title
deed number (eg, T1111/2015), while the town is added for
additional description.
Figure 3: Specific properties overview
In order to illustrate the legal description used in Mozambique,
Table I lists some of the subject properties of the valuation
project.
Certificate numbers 86 and 87 located in the town of
Montepuez in the Cabo Delgado province are used as
examples. The table illustrates whether the information,
supplied by the client, included a copy of the property
certificate (the South African title deed equivalent), a diagram
(the South African surveyor general diagram equivalent), the
GPS co-ordinates, who the rights to the property are granted
in favour of and the land extent.
CERT. NO.
TOWN DISTRICT PROVINCE CERT. DIAG. GPS CO-ORDINATES IN FAVOUR LAND AREA (M²)
86 Villa de Montepuez Montepuez Cabo Delgado Yes Yes S 13 07 22.59 E 38 59 36.71 Abc 8 712.000
87 Villa de Montepuez Montepuez Cabo Delgado Yes Yes S 13 07 22.59 E 38 59 36.71 Abc 23 556.000
92 Nacuca Montepuez Cabo Delgado Yes Yes S 13 03 42.2 E 38 47 31.16 Abc 28 120.000
93 Nairoto (Incl.
Ancuabe)
Montepuez Cabo Delgado Yes No S 12 18 27.52 E 39 06 32.26 Abc 1 938.000
Table I: Legal description example
Figure 4 illustrates a typical property certificate (the South
African title deed equivalent). The type of information
obtainable from the property certificate is the certificate
number, extent of the land, in whose favour the rights to the
land are granted, whether there is a bond issued over the
property and the bond amount. The certificate does not
provide any sale price, sale date or transfer date information.
Figure 4: Property certificate example
Annexed to the property certificate there is sometimes a
building layout diagram along with building descriptions
and extents as per Figure 5 on page 33 (the South African
Surveyor General Diagram equivalent, but they include the
buildings). These details are only as at the time of issuing the
certificate and are not necessarily up-to-date with the current
improvements found on the land.
Figure 5: Building layout and descriptions annexure example
VALUATION METHOD AND/OR APPROACH
There are essentially two overall criteria for determining the
most appropriate method of valuation to apply to a specific
property, namely the nature of the property and availability of
market data. Please note: this discussion has been limited to
the types of properties found in the client’s portfolio as well
as the overall market dynamics currently found in
Mozambique only, and is not necessarily applicable to other
country dynamics.
The nature of the property criteria can generally be divided
into specialised versus non-specialised property. Specialised
property is property used for a single specific purpose and
will require capital investment to change the buildings and/
or improvements structurally in order to offer a more general
utility, ie to convert them to non-specialised. For example,
hotels, filling stations, or cold storage facilities are generally
seen as specialised properties. However, even though a
property is specialised, if the building can be utilised for
warehousing or an industrial utility in general, then it ceases to
be specialised. Non-specialised properties are generally seen
as properties or buildings with a general purpose or utility
and include residential, commercial, industrial properties (and
retail, although this was not considered in the subject project).
The availability of market data criteria can generally be
divided into income- versus non-income-producing property.
An income-producing property is a property that produces
income through rental or specialised business performance.
Generally commercial and industrial properties are seen as
income-producing, ie they can be rented out in the market,
while residential properties are generally seen as non-income-
producing. However, market data are not always available
for different types of properties, resulting in the selection of
secondary methods of valuation rather than the preferred
primary method.
The preferred and ideal method of valuation for any type of
property, whether it be specialised or non-specialised, is the
Sales Comparison Method. This method values a property
based on processes of comparison, making allowances
and adjustments for differences. Because of the nature of a
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MARKET RENTAL (US$/M²/MONTH) EXPENSE RATE (%)/MONTH
TOWN DISTRICT STAFF BUILDING
INDUSTRIAL OFFICE PORCH STAFF BUILDING
INDUSTRIAL OFFICE PORCH
Villa de Montepuez Montepuez 2.50 3.50 10.00 3.50 15.00% 10.00% 20.00% 10.00%
Nacuca Montepuez 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Nairoto (Incl. Ancuabe) Montepuez 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Namara Montepuez 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Namuno Namuno 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Meloco Namuno 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Hucula Namuno 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Machoca Namuno 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
N'ropa Montepuez 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Namapa Nampula 2.50 3.50 10.00 3.50 15.00% 10.00% 20.00% 10.00%
Namapa-Erati Nampula 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Balama Montepuez 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Chipembe Balama 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Mecuti Balama 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Pemba Pemba 3.50 10.00 30.00 10.00 10.00% 5.00% 15.00% 5.00%
Nanjua Montepuez 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Mahate Quissanga 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
Mueda Mueda 2.50 3.50 10.00 3.50 15.00% 10.00% 20.00% 10.00%
Serimula Montepuez 1.50 2.00 8.00 2.00 15.00% 10.00% 20.00% 10.00%
property and market data availability or unavailability, however,
other methods of valuation need to be selected. Specialised
properties generally do not transact that frequently in the
open market place and as a result offer limited information
availability. It is possible to value specialised property
based either on historical and forecast financial information
using the Profits Method or, as a method of last resort, the
Cost Method.
The data required for valuing a specialised property based on
the Profits Method are, among others, the financial statements
and coinciding management/operational reports for three
historical financial years and five forecast years. The profits
method is not a business valuation; it derives the hypothetical
rental feasibility from the normalised business performance
in order to deliver a capitalised value. It is assumed that this
approach is not desirable because of a number of reasons:
time, cost, information and instruction constraints.
Therefore, to value specialised property it is assumed that the
Cost Method is the most appropriate method of valuation.
The Cost Method depreciates the New Replacement Cost of
a building by allowing for physical deterioration, functional
obsolescence and economic obsolescence. Once the
Depreciated Replacement Cost is calculated, the vacant land
value is added to this amount to deliver to final total value of
the property. The value of the land is generally determined
by the Sales Comparison method of similar tracts of land
having recently sold with allowance made for differences in
extent, shape, frontage (access/egress) and location, but
if there is an unavailability of market transactional data for
vacant land, the Residual Method can be used to determine
the greenfields value of land.
The data required for non-specialised property are either
market transactions having occurred in the past three
years or recently concluded lease agreement data, that
is, market rentals. Listed or advertised market rentals are
not market rentals as they are generally subject to some
negotiation pressure before finalisation. However, if rental
information is available for income-producing properties
such as commercial and industrial property, then the Income
Capitalisation Method can be used to determine the value. If
rental information is lacking, then the Cost Method is used.
Residential property is generally seen as non-specialised
property and non-income- producing. There will be exceptions,
namely, the possibility to rent residential properties out
in various property pockets; unless a market is formed,
however, an income approach to valuing residential property
will be limited. Therefore, the suggested method of valuation
generally is the Sales Comparison Method, where allowances
are made for differences between market transactions and
the subject property toward determining the value.
To summarise the valuation approaches, the decision criteria
can be illustrated in Figure 6.
Figure 6: Valuation method selection criteria
Further, the applied valuation methods in terms of the
valuation illustration example are highlighted in Table II.
PROPERTY TYPE DATA AVAILABILITY
METHOD - BUILDINGS
METHOD - LAND
SPECIALISED Yes Profits Included
SPECIALISED No Cost Sales Comparison/Residual
NON-SPECIALISED, INCOME-PRODUCING
Yes Income Capitalisation
Included
NON-SPECIALISED, INCOME-PRODUCING
No Cost Sales Comparison/Residual
NON-SPECIALISED, NON-INCOME-PRODUCING
Yes Sales Comparison
Included
NON-SPECIALISED, NON-INCOME-PRODUCING
No Cost Sales Comparison/Residual
Table II: Applied valuation methods
Two overall approaches were applied in the project. The first
was the Income Capitalisation Method where rental research
was conducted for Pemba and extrapolated for the various
other towns in the portfolio. The second was the Depreciated
Replacement Cost (DRC) Method combined with the
Residual Vacant Land Method. Since all the properties are
held under leasehold and sales information is not available, it
was not possible to use the direct Sales Comparison Method,
but the market research included some details on greenfield
land values.
INCOME APPROACH: APPLIED MARKET RENTALS
There is no formal office market in the rural areas of
Mozambique, but it is possible to determine hypothetical
rental rates by using an anchoring approach: by conducting
market research in the port city of Pemba, these rentals can
be extrapolated to the other regions where the properties in
the portfolio are located. Using the Pemba rentals as anchor,
an extrapolated and hypothetical rental scenario can be
created for the various towns, taking into account access
to amenities, degree of development, etc. The intention is
not to provide an exhaustive list of criteria, only the
approach adopted.
Table III: Applied market rentals
Table III illustrates the applied rentals using Pemba as anchor
and extrapolating hypothetical rentals for the various towns
in order of proximity to Pemba. To give a sense of the rental
levels, Pemba’s $3.50/m²/month translates to R42/m²/month,
while Nampula, Montepuez and Mueda’s $2.50/m²/month
translates to R30/m²/month.
INCOME APPROACH: APPLIED VACANCY RATES
The same approach was adopted in determining the vacancy
rates. Once the vacancy rates were determined for Pemba,
the hypothetical rates for the other towns were extrapolated.
The vacancy was determined for each town as a market
norm and applied to the subject properties located in the
respective towns. The maximum vacancy rate is calculated
at 50% in Hucula, Machoca and Serimula, respectively, while
the minimum vacancy is calculated at 10% in Pemba.
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TOWN DISTRICT k = RFR + RP + ie - G + d
Villa de Montepuez Montepuez 14.64% 1.90% 6.25% 5.60% 0.94% 1.83%
Nacuca Montepuez 17.41% 1.90% 8.75% 5.60% 0.81% 1.97%
Nairoto (incl. Ancuabe) Montepuez 15.75% 1.90% 7.50% 5.60% 0.88% 1.63%
Namara Montepuez 17.74% 1.90% 8.75% 5.60% 0.81% 2.31%
Namuno Namuno 16.23% 1.90% 7.50% 5.60% 0.88% 2.11%
Meloco Namuno 19.92% 1.90% 10.00% 5.60% 0.75% 3.17%
Hucula Namuno 20.46% 1.90% 12.50% 5.60% 0.63% 1.08%
Machoca Namuno 20.83% 1.90% 12.50% 5.60% 0.63% 1.46%
N'ropa Montepuez 18.02% 1.90% 8.75% 5.60% 0.81% 2.58%
Namapa Nampula 14.16% 1.90% 6.25% 5.60% 0.94% 1.34%
Namapa-Erati Nampula 13.23% 1.90% 6.25% 5.60% 0.94% 0.42%
Balama Montepuez 15.99% 1.90% 7.50% 5.60% 0.88% 1.86%
Chipembe Balama 18.67% 1.90% 10.00% 5.60% 0.75% 1.92%
Mecuti Balama 15.88% 1.90% 7.50% 5.60% 0.88% 1.75%
Pemba Pemba 9.54% 1.90% 2.50% 5.60% 1.13% 0.67%
Nanjua Montepuez 17.02% 1.90% 8.75% 5.60% 0.81% 1.58%
Mahate Quissanga 16.68% 1.90% 7.50% 5.60% 0.88% 2.56%
Mueda Mueda 15.73% 1.90% 6.25% 5.60% 0.94% 2.92%
Serimula Montepuez 22.71% 1.90% 12.50% 5.60% 0.63% 3.33%
TOWN DISTRICT VACANCY (%)
Villa de Montepuez Montepuez 25.00%
Nacuca Montepuez 35.00%
Nairoto (Incl. Ancuabe) Montepuez 30.00%
Namara Montepuez 35.00%
Namuno Namuno 30.00%
Meloco Namuno 40.00%
Hucula Namuno 50.00%
Machoca Namuno 50.00%
N'ropa Montepuez 35.00%
Namapa Nampula 25.00%
Namapa-Erati Nampula 25.00%
Balama Montepuez 30.00%
Chipembe Balama 40.00%
Mecuti Balama 30.00%
Pemba Pemba 10.00%
Nanjua Montepuez 35.00%
Mahate Quissanga 30.00%
Mueda Mueda 25.00%
Serimula Montepuez 50.00%
Table IV: Applied vacancy rates
INCOME APPROACH: APPLIED CAPITALISATION RATES
Since all properties in Mozambique are held on leasehold and
the sale of interest in a company is private information (not
disclosed or registered publically), it is not possible to analyse
transactions in order to determine the capitalisation rate. As a
result, the formula approach is adopted.
The following equation is widely used in the property industry
for the calculation of a property capitalisation rate (Hoesli &
MacGregor, 2000, p. 44):
k = RFR + RP + ie - G + d
where k is the capitalisation rate, the following assumptions
are made:
• RFR is the risk-free real rate being the average of high and
low RFR less ie;
• RP is the property risk premium;
• ie is expected long-term inflation;
• G is the expected income growth;
• d is the expected depreciation rate linked to deterioration
and obsolescence.
TABLE V: APPLIED CAPITALISATION RATES
To determine RFR, Mozambique has 91-day, 182-day,
364-day and other Treasury bills. Unfortunately there is no R186
equivalent, therefore the most comparable Treasury bill is the
364-day and is used as basis for the risk-free real rate.
To determine RP, there are various ways to compute the property
risk premium. The approach adopted was to apply a fixed factor
to a range of economic risk factors. These economic risk factors
were an expression of the economic obsolescence of each town.
To determine ie, reports from both the Instituto Nacional de
Estatística and KPMG were used.
To determine G, an assumption was made, from the market
research, on the attainable property growth rate which was
moderated by a risk factor.
To determine d, a weighted depreciation factor was calculated
for each town in the portfolio.
It should be noted that the nature of the project required the
valuations to be performed without physical inspection. Access
to two previous valuation reports, supporting photographs and
property descriptions informed most of the input decision making.
Table V summarises the applied capitalisation rates per town. The
maximum capitalisation rate calculates to 22.71% in Serimula
and the minimum capitalisation rate to 9.54% in Pemba.
COST APPROACH: APPLIED REPLACEMENT COST RATES
The following replacement rates were calculated:
• Staff buildings range between US$ 375/m² and US$ 625/m²,
with an average of US$ 407/m².
• Industrial buildings range between US$ 281/m² and US$ 468/
m², with an average of US$ 306/m².
• Office buildings range between US$ 375/m² and US$ 625/m²,
with an average of US$ 407/m².
• Porches range between US$ 140/m² and US$ 234/m², with an
average of US$ 152/m².
Translating it to ZAR:
• Staff buildings range between ZAR 4 500/m² and ZAR 7 500/
m², with an average of ZAR 4 900/m².
• Industrial buildings range between ZAR 3 375/m² and ZAR 5
625/m², with an average of ZAR 3 700/m².
• Office buildings range between ZAR 4 500/m² and ZAR 7 500/
m², with an average of ZAR 4900/m².
• Porches range between ZAR 1 700/m² and ZAR 2 800/m², with
an average of ZAR 1 800/m².
COST APPROACH: APPLIED RESIDUAL VACANT
LAND VALUES
Vacant greenfields land is taken on a residual value per ha
basis and applied to the legally registered extents of the various
properties. The following norms were used:
• Land in Pemba is taken at a flat rate of US$ 60 000/ha
(or ZAR 720 000).
• Land in Villa de Montepuez, Namapa and Mueda is taken at
US$ 30 000/ha (or ZAR 360 000).
• Land in all the other towns is taken at US$ 10 000/ha
(or ZAR 120 000).
VALUATION ASSUMPTIONS AND OUTPUTS
The following market assumptions and criteria have
been applied:
• a greenfield residual land per ha approach to valuing
vacant land;
• a hypothetical office rental market in the rural areas.
The following outcomes resulted from the application of the
Income Capitalisation Method and the Cost Method:
• There was a significant difference in value between the two
methods which could be explained by the rural nature of the
properties: the Income Capitalisation Method delivers a lower
value because of the informal nature of a rental market in rural
areas and the associated higher risk in terms of cash flow,
while the Cost Method delivers a higher value as a result of
the high construction cost (building material cost, labour cost,
transport cost).
CONCLUSION
The aim of this article is to highlight the uncertainty associated
with the unavailability of inputs. There are various uncertainties
around the accuracy of property and market information.
The former is because of limited availability of information
and the latter because of the necessity of extrapolation
and generalisation.
By David Jansen van Vuuren
BCom, NDREES, MBA, Professional
Associated Valuer, Director of Research
& Valuation Specialised Valuers,
David has been a professional researcher
and valuation practitioner in SADC
for the past nine years in the lifestyle,
manufacturing, agribusiness and
agricultural sectors.
REFERENCES
Hoesli, M. & MacGregor, B., 2000. Property Investment:
Principles and Practice of Portfolio Management. 1st ed. Essex:
Pearson Education Limited.
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MUNiCipAL STANdARd ChART Of ACCOUNTS, mSCOA: AN OVERViEW
V
National Treasury has issued a Regulation for the Municipal
Standard Chart of Accounts, more familiarly known as mSCOA.
mSCOA has a specific view to stabilise the overall systems of
financial management and internal control operationally functional within
municipalities. All municipalities must implement mSCOA by 1 July 2017.
There is no phasing-in period. The purpose of this document is to provide
a high-level overview of this business reform. The writer will also consider
the implications for municipal valuers and the compliancy required for
valuation management systems.
BACKGROUND
What is mSCOA and what does this mean for municipalities?
In October 2008 National Treasury addressed a strongly
worded memo to the Minister of Finance on its concerns
about how local government operated. These concerns were
primarily about inconsistencies in local government financial
and other data, poor data integration and irregular reporting.
The memo provided details about how this placed limitations
on any oversight by Parliament. This is, in a nutshell, the
problem statement which has driven the development
of mSCOA.
The primary objective of mSCOA is to achieve an acceptable
level of uniformity and quality in the collection of municipal
data sets. mSCOA is an acronym for Municipal Standard Chart
of Accounts, which denotes a business reform that will change
the way local government operates, and for the better. It is
proposed that greater data quality and credibility will lead to
the much needed standardisation of budgeting, transacting
and reporting required for comparative analysis between
municipalities. It is anticipated that mSCOA will serve as a
platform for improving the financial skills of officials within local
government. The mobility of these officials will be enhanced
as mSCOA will be the standard for financial management
across local government. Uniform data sets will enable
Treasury to draw standard reports promoting accountability
and transparency. mSCOA compliance aligns municipal
infrustructure, planning and development (IDP) with budgets
and annual financial statements. Further, by prescribing key
business processes, oversight will be enabled which will
increase the financial performance of municipalities. It is a bold
step in the right direction. It is regulatory so it will happen.
mSCOA has been welcomed by certain municipalities and
conveniently ignored by others. There are two projects that
we are all familiar with that never fail: weddings and funerals.
Most weddings are well planned, budgeted for and roll out as
they are intended to. Certain municipalities have embraced
mSCOA, their implementation will be smooth and the results
as predicted. For other municipalities there is no budget, no
planning but none the less the event cannot be postponed.
Funeral approach will be uncomfortable but it is inevitable.
There is no deferment of the implementation date which is
1 July 2017.
SEVEN SEGMENTS
There are seven segments for mSCOA of which six are
regulated. The seventh segment is the Municipal Standard
Classification which records the organisational vote or sub-
vote against which the transaction is recorded. This is not
prescribed but would be useful. The mSCOA codes are
selected from National Treasury segment spread sheets.
The process of mapping the various segments has been
undertaken by an appointed mSCOA project steering
committee within each municipality. This is one of the work
streams identified by National Treasury’s preferred approach;
more about works streams later. The Chart is locked down
in the data base. Any changes have to be effected by
National Treasury.
WHAT IS A PROJECT SEGMENT?
The business of local government consists of a number of
transactions. Each segment denotes how a transaction
relates to a specific project and what type of project.
There are capital, operational and default projects within
every municipality.
Capital project
Infrastructure project
Non- infrastructure
projects
Existing project
New project
Rehabilitation / Refurbishment
Upgrade and additions
Road / Water / Electricity
WHAT IS AN ITEM SEGMENT?
The second question which must be asked about each
transaction is what is its nature?
ITEM CATEGORIES
1. Expenditure Employee related, operational, other, etc
2. Revenue Exchange revenue (eg service charges) non-exchange revenue (eg penalties, etc)
3. Gain and losses Impairment loss, foreign exchange, etc
4. Assets Current assets and non-current assets
5. Liabilities Current liabilities and non-current liabilities
6. Net assets Reserves, accumulated surplus, etc
WHAT IS A FUNCTION SEGMENT?
Against which function or sub-function should the transaction
be recorded? Here there is a differentiation between core
functions which are mandated and non-core functions which
are not mandated.
FUNDING SOURCES
1. Revenue General, including equitable share, municipal services, property rates
2. Borrowings Current, non-current (eg overdrafts, finance leases, DBSA, etc)
3. Transfer and subsidies Grants other than equitable share (eg MIG, MSIG, FMG, EPWP, INEP)
4. Commercial services Revenue from abattoirs, fresh produce markets, caravan parks, etc
5. Cash-backed reserves
WHAT IS A REGIONAL IDENTIFIED SEGMENT?
Which geographic area is receiving the benefit from the
transaction?
1. The whole municipality
2. Administration or head office
3. A specific ward
WHAT IS A COSTING SEGMENT?
From which department are we recovering the costs?
Are there charges for activity-based recoveries, charges made
against a specific department, internal billing or recoveries,
which is a default?
WHAT IS THE MUNICIPAL STANDARD CLASSIFICATION
SEGMENT?
This is the non-prescriptive segment which records the
relevant department or cost centre against which the
transaction should be recorded, eg office of the municipal
manager, technical services, community services.
BUSINESS PROCESSES
Then on top of the segments there are 15 core business
processes which should be undertaken by the municipality.
These are contained in Chapter 13 of the Regulations. It is
anticipated that these will soon be gazetted by the Minister
of Finance.
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NINE WORK STREAMS
In order to complete the process the municipality must also
subscribe to nine work streams.
• Commissioning mSCOA steering committee (governance)
• ICT infrastructure and network
• Verification of current vote structure to mSCOA vote
structure and prepare annual budget on the structure
• Data cleansing
• HR and payroll
• Planning (IDP, budget, SDBIP, PM)
• Core systems and additional
• Real estate, land use and grant management;
• Document management
Municipalities were required to incorporate mSCOA into their
Integrated Development Plans, IDPs, their SDBIP and the
projects and procurement plans. There was also a requirement
for a council resolution to adopt mSCOA and to appoint a
high-level steering committee with a project sponsor to lead
the planning, risk register and implementation processes.
The mSCOA Project Steering Committee should include all
heads of department and the municipal manager. mSCOA is
about business reform, it is a serious matter and requires the
commitment of the strategic heads within every municipality.
The big work initially is to capture and collect all the required
segments, to impose these into the municipality’s financial
system. Like all projects, there are various methodologies
and tools available to support the roll-out. The message from
Treasury is clear: you will be audited on the approach so use
a simple methodology which is accessible and understood
by all the stakeholders. All municipalities must verify their
existing vote structure against the mSCOA regulations. The
due date for this exercise to be completed was September
2016. Another clear directive is careful planning and diligent
monitoring and control of the process. Some tasks just take
longer. There is an enormous amount of change required.
Everyone is inherently resistant to change and municipal
officials more so than most.
A parallel process was for each municipality to conduct an
IT audit. In order for mSCOA to be successfully integrated
it requires a strong IT network. mSCOA prescribes a single
data base with a single point of entry, the so-called ‘one
version of the truth concept’. Ideally this should be a web-
enabled environment. National Treasury is not stipulating the
nature of each IT network but it is recommending upgrading
to accommodate the mSCOA compliance.
SCHEMATIC OF THE PROPOSED SEAMLESS INTERFACE
Of particular interest is the requirement that all interfaces
between the financial system and third party applications is
conducted seamlessly. That means no fingers, no flash discs,
no spread sheets. The process must be automated in order to
meet the mSCOA compliance requirements.
It is inevitable that the resultant exercise will reveal certain
data inconsistencies. Data cleansing, or the alignment of
data sets, is required in terms of mSCOA. Remember that
the problem statement which launched mSCOA was around
inconsistent and unreliable data sets. This is a clear directive
to municipalities to ‘clean up their act’.
The focus of the valuers is towards meeting the requirements
of the valuation roll maintenance work stream. This will invoke
the seamless interface of the section 78 updating triggers
required by the MPRA with the maintenance of the property
register.
The real estate, land use and grant management work stream
brings together all the related legislative frameworks for the
Spatial Planning and Land Use Management Act, SPLUMA,
spatial and urban policy and land use planning.
mSCOA requires all document management to be located in
a central data base.
Municipalities are also required to have a clear organogram
compliant with the requirements of the South African Local
Government Association and the respective bargaining
councils. There will no longer be any room for phantom
payroll recipients.
In summary mSCOA requires the 100% commitment of the
municipality to achieve the required compliance.
Strategic business
processes
Operational business
processes
Service delivery
Decision support system
Management information
system
Content management
system
ApplicationsContent / document repositories / data
warehousesDatabases
LEGISLATIVE OR BUSINESS REQUIREMENT SYSTEM / APPLICATIONS MINIMUM FUNCTIONALITY REQUIRED BY
VALUATION ROLL MANAGEMENT
Valuations Module to give effect to the Municipal Property Rates Act, 2004, and as a minimum:
Seamlessly integrate with the revenue management module. Legislation
Integrate information for spatial analysis in a Geographical Information System (GIS). Best practice
Integrate with the building control system used in the municipality to ensure completion of additions and new buildings get immediately updated on the billing sub-system.
Best practice
Integrate with the land use system to ensure appropriate tariff is timeously applied. Best practice
Integrate with the Surveyor General (SG) database and town planning systems in use at the municipality.
Best practice
Integrate with the deeds registry and monitor actual sales with current valuations as well as ownership against the billing system.
Best Practice
Validate and report anomalies in the asset register on municipal owned properties. Best practice
Provide the municipal website with the Municipal Property Rates Act, 2004 required A&B valuation rolls.
Legislation
Managing and calculation of property rates, special rating areas and service charges on a property subject to a number of requirements including but not limited to:
The valuation of property will be performed in the separate (Computer Assisted Mass Appraisal) system and the individual property values and relevant property attributes passed to the Solution via an interface with valuation module. Data to be validated and managed within the Solution in compliance with legislation policies and business rules to enable calculation of property rates.
Legislation
Property rates and service charges are calculated at different tariffs depending on various criteria such as the category of the property.
mSCOA Regulation
Functionality is required to exempt certain categories of property and/or certain categories of property owners from rates.
Legislation
Functionality is required to calculate a rebate or a reduction in rates in compliance with the requirements of legislation and/or business rules.
Legislation
Functionality is required for the phasing in of rates in compliance with legislation. Legislation
Clearance Certificate Management to be online and comply with Section 118 of the Municipal Systems Act, 2000.
Legislation
WHAT DOES MSCOA MEAN FOR MUNICIPAL VALUERS
AND VALUATION MANAGEMENT SYSTEMS?
Valuation Management Systems are considered as systems of
internal control to the financial systems within municipalities.
Vendors were invited to participate in the transversal
procurement process. A municipality must conduct its own
systems audit to ensure that all the core and sub systems used
by the municipality comply with the mSCOA requirements.
Extract from Bid Rt25-2016: Integrated Financial Management and Internal Control System
PROCESS OF BECOMING RECOMMENDED VENDOR OR
PANELLIST
The National Treasury concluded the process of establishing
a panel of service providers for provision of an Integrated
Financial Management and Internal Control System for local
government. A media statement was issued by National
Treasury on 2 August 2016.
The purpose of the transversal contract (RT25-2016 for the
period 1 June 2016 to 31 May 2019) was to procure a panel
of mSCOA enabling systems that a municipality may use to
fast track and simplify its system(s) procurement process. A
municipality must conduct its own systems audit to ensure
that all the core and sub systems used by the municipality
comply with the mSCOA requirements.
Of the 33 bidders who responded to the tender, seven have
been placed on the panel. It is strongly recommended that
municipalities consider using the service providers on the
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panel. MFMA Circular No. 80, issued on 8 March 2016, and
mSCOA Circular No.6 issued 2 August 2016, outline the
process and associated requirements for use of the panel of
service providers established in terms of RT25-2016
WHAT ARE THE IMPLICATIONS IF YOUR VMRS DID NOT
PARTICIPATE IN THE TRANSVERSAL PROCUREMENT
PROCESS OR IF YOUR PROPOSAL IS NOT
RECOMMENDED BY NATIONAL TREASURY?
The focus of mSCOA is on the entire business reform. The
Valuation Management Systems are systems of internal
control which are required to integrate to the financial system
seamlessly, as well as contain the functionality requirements
of the MPRA. The transversal proposals all include
functionality for a valuation management system. National
Treasury’s requirement is for seamless interface. In the event
that this cannot be demonstrated the municipality will be non-
compliant with mSCOA.
DOES A MUNICIPALITY NECESSARILY HAVE TO USE THE
VMRS WHICH WAS PART OF THE FINANCIAL SYSTEM
VENDORS TRANSVERSAL PROPOSAL?
According to Silma Koekemoer, SCOA Project Manager in
the office of the Chief Directorate: Local Government Budget
Analysis at National Treasury, this is not a requirement.
Many VMRS vendors have provided excellent service to
their municipal clients over the years. These relationships
should be maintained. The financial system vendor and
the VMS vendor must co-operate to achieve the compliant
interface prescribed by mSCOA. All municipalities must use
an mSCOA compliant Valuation Management System which
must interface seamlessly with their financial system.
Janet Channing (BA MPhil NDPV) is the
managing director of MetGovis (Pty) Ltd
and a professional valuer. She brings a
wealth of experience in local government
support, always at the forefront of
legislation. Janet is a specialist in
municipal valuation and rating issues.
The MetGovis solution, MetVal valuation
management system, is MSCOA
compliant.
www.metgovis.co.za
Tel: 033 – 343 2868 or
email: [email protected]
CONCLUSION
mSCOA is described as a journey. It is a regulatory reform and
it is implementable by 1 July 2017. Funding for the process
and for the necessary IT infrastructure upgrade should
already be in place. National Treasury has taken a hard line
and is emphatic that this reform will be achieved. It is in the
interests of sustainable local government.
fiLLiNG STATiON VALUATiONS fOR BANk SECURiTy pURpOSES – A pRACTiCAL AppROACh
V
ROLEPLAYERS
State, through the Department of Energy, Department of
Environmental Affairs – a major emphasis is placed by
DoE on transformation to include HDSAs in new forecourt
transactions, and this may become more of an issue with the
granting of licences in future.
Local authorities, through the implementation of town
planning schemes and land use control.
Property owner – the person/company who owns the land
on which the filling station is situated.
The operator – the person/company who actually sells the
fuel on site, and who will be responsible for most of the
compliance of legal issues, ie:
- ensuring compliance with the conditions of the
contract with the fuel providing company;
- compliance with legislation for prevention of any
environmental issues;
- labour issues
- franchise agreements.
The oil company, the wholesale/bulk supplier of fuel to
the site.
Other franchise partners who may operate from a filling
station site.
FACTORS UNIQUE TO A FILLING STATION SITE
A filling station site is unique in several aspects, including:
Zoning – needs to allow specifically for the selling of fuel as
well as other products.
Buildings – custom-built for a specific purpose, with limited
alternative use potential.
Locality – needs good exposure and easy access.
Funding – operator needs lots of operating funds –
no payment, no delivery of fuel. 20 000 l delivery
= ± R225 000 – R250 000.
REQUIREMENTS FOR A SUCCESSFUL FILLING
STATION SITE
Exposure to large volumes of passing traffic
Easy access (low speed, traffic light, high visibility)
Island space – ease of movement for vehicles between
pumps and leaving the forecourt
Attractive convenience shop with parking space
Clean rest rooms if on main roads!
Very few sites with an old, run-down appearance will do high
volume sales.
APPROVALS REQUIRED TO START A FILLING STATION
Before a new filling station can be opened, three sets of
approvals, authorisations and licences are needed:
Land use rights for purposes of a filling station – usually
‘Business 1’ zoning with annexure for a filling station
An environmental authorisation and
Site and retail licences.
In terms of the Petroleum Products Act, 1977 (PPA) as
amended in 2006, which is administered by the national
Department of Energy, one cannot apply for a site and/or
retail licence before you have both land use rights and an
environmental authorisation.
LICENCES REQUIRED
Three different licenses are applicable:
A wholesale licence – this allows the oil company to provide
fuel to the site.
A site licence – this licence is issued once all the legal
requirements in terms of the zoning, EIA approval, roads, etc
have been fulfilled. It is issued to the person/company who
owns the land, but is NOT TRANSFERABLE – if the property
is sold, a new licence needs to be applied for!
A retail licence – this is granted to the operator of the filling
station. Oil companies are not allowed to have retail licences.
FILLING STATION COMPONENTS
• Forecourt – canopy, pump islands, pumps and nozzles,
tanks, with associated attendant’s office, management
office and ablutions;
• Convenience shop with its storage space
• Excess land and extra building areas that can generate
additional income.
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In general, fuel companies prefer the station to operate in
isolation, not attached to other businesses except where they
have franchise agreements, ie restaurants (Wimpy, Maxis),
take-aways (Steers, Debonairs, etc), convenience shops
(Pick n Pay, Woolworths), etc.
In rural towns, car dealerships, workshops or other shops
are often part of the same property. Supply agreements can
dictate who may be operating from these ‘other’ premises.
The owner requires written approval for a new tenant from the
fuel company – preserving the brand image is important to
the fuel company.
RAS – REGULATORY ACCOUNTING SYSTEM
RAS was implemented in December 2013 by the DoE
to provide for a more ‘fair’ distribution of the retail fuel
(petrol) margin.
• The fuel price is made up of various components, ie taxes,
transport costs, wholesale margin and retail margin.
• The wholesale margin is the profit that goes to the oil
company, while the retail margin is the ‘profit’ which is
divided between the land owner, the operator and the oil
company.
• With RAS, this division of profit is made on the basis of
‘who made the capital investments (CAPEX) on the one side
(land, buildings and equipment), and the remuneration for
operating expenses on the other side’. This is done via a
‘matrix’, whereby the retail margin is divided into different
components.
• As at 18 November 2015, the retail margin of 155.7 c/l was
divided as follows:
- 67.1 c/l – for CAPEX 29.55 c/l for land & buildings,
15.67 c/l for pumps, tanks and
other equipment,
21.9 c/l ‘Entrepreneurial
Compensation’
- 88,6 c/l – for OPEX distribution
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• Any other agreements between land owner, fuel company and
operator
• Fuel sales history and breakdown by grade – at least twelve
months, but the futher back, the better
• Convenience shop turnover history – the longer, the better.
1. Determine forecourt rental
VALUATION PROCESS
INFORMATION REQUIRED:
• Property description
• Zoning
• Leases and franchise agreements
• Supply agreements
2. Determine convenience shop rental
3. Determine rental for any other components
of property
4. Determine property related expenses
5. Calculate nett annual income and capitalise to
establish value.
Analyse all the leases and agreements, and understand who is
involved, and who pays for what. Be careful with ‘incomes’ that
are related more to the operator than the property owner, ie car
wash income, airtime sales, etc.
Scenario 1: Fuel company takes a head lease of R130 000 per
month over the whole property, with a lease back to the owner
of R130 000/month. He is appointed as the operator, but the
fuel company can replace him at any time with another operator
if he does not perform – he is therefore only entitled to the R130
000/month income for his property if he is replaced, and will not
be able to generate any other income in such a case. Compare
rental with RAS matrix and establish if it is realistic.
Scenario 2: Land and buildings belong to property company
(ie in a shopping centre scenario), which has a supply/franchise
agreement with the fuel company, but business is operated by
independent operator approved by the fuel company. Landlord
has a lease with the operator, but no other say in the business.
Rental can be for a fixed monthly amount, or based on turnover,
or fixed plus a RAS-coupled turnover clause.
Scenario 3: Client owns the land, took a bond to construct the
buildings, fuel company installed all equipment. Fuel company
registers a long-term servitude over the property, pays a rent
to the land owner that will repay the bond over a ten-year term,
thereafter reverts to a rent based on fuel sales or a fixed amount.
There are usually at least two five-year renewal options. This
scenario normally requires a DCF valuation – beware of the
potential pitfalls!
Various other scenarios are possible – investigate and make
sure what case applies.
1. Forecourt rental
Forecourt rentals are a function of the amount of fuel being sold.
The basic principle is to:
• Determine the average number of litres of petrol sold per month
for at least a year.
• If justified, project how much this might be for the next twelve
months.
• Determine the current retail margin to the operator.
• Multiply the number of litres sold x retail margin to establish the
gross monthly income for the operator.
• Now, determine an affordable rental the operator can pay for
the forecourt from this gross monthly income.
In the past, we were guided by sliding scale percentages used
by the fuel companies to determine the rental – the more litres
sold, the higher the percentage rental charged.
This has now been replaced by RAS. In terms of RAS, a fixed
portion from the retail margin is allocated to land, buildings and
equipment. Although equipment forms an integral part of the
property, it can belong to a third party, requires replacement from
time to time, and this valuer’s contention is that the allocation
from the dealer’s margin for equipment shall not be included in
the potential income to the property owner.
The current RAS allocation to land and buildings only
is 29.55 c/l. A site selling 250 000 litres per month will therefor
get 250 000 x R0.2955 = R73 875 from the dealer’s margin.
According to the ‘old’ Engen tables, where the landlord
would be entitled to 250 000 x 155.7c/l x 15.36%
= R59 789 / month.
2. Convenience shop rental
The convenience shop includes the retail area, fridges and
storage areas directly related to the shop. Convenience shops,
in most cases branded, are the money-making part of a filling
station. They operate at profit margins of 30-40%, normally
trade 24/7, and therefore attract rentals substantially higher than
rentals for shops close by.
Several feasibility studies recently indicate a ‘rule-of-thumb’
turnover for convenience shops to be around R1.30 to R1.60
per litre of fuel sold on the forecourt. However, this can vary
substantially depending on the locality of the site. On a 250
000-litre/month site, the shop turnover can amount to R325 000
to R400 000 per month. The industry norm is to allocate 9-11%
of shop turnover to a rental. The rental at 10% in the above case
can be between R32 500 and R40 000/month for an area of
around 125-150 m².
3. Rental for ‘other’ components
Franchise agreements can provide for a fixed rental or a turnover
rental – request details, and a history of at least two years if there
is a turnover rental.
Some older filling stations may have showrooms, workshops or
more shops as part of the site improvements. Rentals for these
are normally based on area market rates.
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FILLING STATION SITE XXX:
Fuel sales = 250 000 litres per month – rent @ RAS rate 29.55c/l
= R73 875/month
Convenience shop turnover = R400 000/month @ 10% = R40 000/month
ATM = R4 000/month
Gross monthly income = R117 875
= R1 414 500 p.a.
Expenses @ 22.5% = R318 263
Nett Annual Income = R1 096 237
Value, capitalised @ 12% = R9 135 000
NB – The above value will be for a site where buildings and
equipment are as good as new. If any work will be required to
get improvements back to latest brand standards, make an
allowance for this.
Caution – Do not believe all sales figures provided to
you over the counter – check these with fuel company or
auditors. Financial statements can also be of assistance.
Note on diesel sales
• Retail profit margin for diesel is not regulated.
• A site selling high volumes of diesel will normally sell at low
profit margins, while low volumes will be at higher margins.
• Take history of sales volumes as well as the actual margin for
the past year into account, and base rental for diesel pumps
on the ‘Engen’ or other rental bands.
• DO NOT value diesel wholesale depots as filling stations!
They can disappear overnight.
Checklist - Summary
When instructed to do a valuation for a bank, the following
documentation and information will be required to do the
valuation, but also assess the other risks in the security
provided:
• Fuel sales figures per type and grade
• Approved retail licence
• Convenience shop turnover, excluding airtime sales
• Supply agreement
• Franchise agreements if applicable
• All leases affecting the property (head leases, sub-leases,
third-party leases, etc)
• Zoning and compliance with restrictions
• Approved Environmental Impact Assessment or Land
Management Plan – peruse and note if conditions set are
actually complied with
• Latest report on condition of tanks and equipment (annual
report to be available)
• Check for insurance/environmental risks on site – signs
of excessive spillage or leaks, faulty pumps, fire fighting
equipment (serviced?), what happens on adjoining
properties that may affect the subject site, etc
• General observations – risk of area changes, road changes,
new competition in close proximity, external environmental
risks.
Note: The liquid fuels industry has never been in agreement
on how to value retail sites. The document is issued by the
Department of Energy and is updated annually. It was sent in
by Thys Beukes.
BUyiNG A fARM - A VALUER’S pERSpECTiVE
V
VALUING PERMANENT CROPS
The factors that influence the value of permanent crops can be
categorised into area or location, crop type, plant population,
orchard establishment, irrigation, location on the farm, yield
history and the condition of the orchard.
The area in which the farm and crops are located is the first
value factor to consider. Although most crops are able to
grow in most areas, the yield performance of the crops differs
from area to area. The climate of an area is the single most
important factor that determines whether a particular crop is
adapted to an area and produces well. Other area specific
factors to consider are the distance to the market, the surety
and stability of irrigation water and, lastly, perceptions about
the best area for a crop.
Different crop types have different values, and the same
crop type’s values also differ from area to area. Individual
orchards on a farm are valued separately. According to
Pienaar (2013), in general terms the order of values from the
highest to the lowest is table grapes, deciduous fruit, citrus,
macadamia, avocados, bananas, pecan nuts, guavas and so
forth. Permanent crops also differ in value according to age
and cultivar.
Plant population influences orchard values in two ways:
plant population at time of establishment and plant
population when mature because of plants missing. If an
orchard is planted at high density, the leaf area exposed to
the sun is high when the trees are still young. This results in
higher yields per hectare, and a higher orchard value. The
extent of missing plants influences the value of an orchard by
negatively influencing the production of the orchard.
There are not many areas in South Africa where permanent
trees or vine crops are planted under rain-fed (dryland)
conditions. Most are planted under irrigation. The factors
that influence the irrigation values are the specific water
allocation per hectare and the type of irrigation. Irrigation was
discussed in more detail in the previous article.
The type of soil is a major factor in the success of any orchard.
Different crops favour different soil types, while almost
all irrigated crops require well-drained soils with no layer
in the subsoil that inhibits root development, and causes
water logging.
The location of orchards on a farm influences the value
of each individual orchard, and therefore the total value of
the farm. Orchards next to busy dirt roads are negatively
influenced by dust pollution, while theft is a challenge next to
any busy road, especially if the orchard is not properly fenced.
The distance to pack houses is a factor with fruit that bruises
easily, such as bananas.
Orchards are usually established to be in production for at
least 20 years, therefore the quality and thoroughness of the
establishment process is important. The soil must be properly
prepared through cultivation, fertilisation and levelling. The
favoured direction of the slope of the soil is important, and
differs between crop types. Other factors to consider are
the incline of the soil, ridging, row direction, trellising and
crop covering.
Each crop and cultivar has a theoretical yield potential that is
related to age as well as area. Because orchards are valued
individually, it is wise to evaluate the yield history of each
orchard. Any progressive farmer should be able to submit
such information.
Lastly, the physical condition of the orchard influences its
value. Diseases in an orchard inhibit production and influence
the value negatively. Pruning and developing is a continuous
process; both are crop- and cultivar-specific. Sometimes
trees are manipulated to be relatively small for easier picking
of the fruit; this is not a sign of poor growth or a lack of proper
management. Deficiency symptoms give cause for concern
though, and need to be properly assessed. Most deficiencies
can be rectified quite easily by applications of the correct
nutrient, although the time of recovery differs in each situation.
If the pH of the soil was not rectified before planting this is
difficult to rectify afterwards and larger quantities of nutrients
are required.
Car washes, trailer rentals, etc can be additional income
generators for the owner or operator – determine the sustainability
of these businesses before adding extra rental income. ATMs
are often an extra rental generator – determine if rent is paid to
the operator or the landlord. Cell masts, bill boards, etc – refer
lease details.
4. Operating expenses
These would be the normal expenses as per commercial
property valuations:
• Rates and taxes
• Maintenance
• Insurance
• Security – if multi-tenanted and required, if single tenanted, this
would be an expense for the operator
• Cleaning - ditto
• Others that may be deemed applicable.
Summary: (This is for owner-occupied/operated filling stations,
and to be used as a test against tenanted sites – where tenanted,
use actual leases, but test against these indicators.)
1. Forecourt rental = litres sold x RAS allocation from
dealers margin
2. Convenience shop rental = % of turnover
3. Other rentals as per market/leases
4. Expenses – as per market norms.
Stand back and see if the rental is realistic – is this the amount
the property owner will get at the end of the month if he is not in
any other way involved with the business being operated from
the site? If not, look again at the leases and agreements.
Example:
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To summarise, the value allocated to each individual orchard
on a farm should include the value of the land, the water
entitlement, the trellising, the in-land irrigation system and
the value of the plants. The value of the crop on the land is,
however, not included in a normal fixed property valuation
report, and is negotiated separately between a buyer and
a seller.
VALUING GRAZING AND NATURAL VELD
The following statement is true, although it seems to go
against all logic: There is no direct correlation between
grazing capacity and grazing land values.
The value of veld or grazing does not change directly in
correlation with the change in carrying capacity; that only
happens in the calculations made in budgets related to a
farm’s carrying capacity. This direct correlation is often found
amongst agricultural economists treading in the professional
valuer’s domain. But grazing capacity does influence grazing
land values. The fact is that there are more factors than
carrying capacity that determine the value of grazing in
an area.
Examples of these factors are alternative uses, such as
grazing land that is bought for mining purposes; further
residential or commercial development; conversion to a
game farm; leisure, etc. In the same way as cultivated dry
lands, irrigated land, permanently established pastures
and permanent crop land, grazing and veld are not valued
according to production capacity, but rather according to the
comparable sales method.
When valuing veld or grazing land remember that
• natural grazing and permanently established pastures are
valued separately; and
• infrastructure such as fences, water reticulation, cattle
handling facilities and roads are Class B improvements
and are therefore valued as part of the grazing land and not
separately or additionally.
FACTORS WHICH INFLUENCE VELD VALUE ON A
SPECIFIC FARM ARE:
• Terrain/topography
This has an influence on the ease with which all grazing on the
farm can be accessed by animals and management. Making
and maintaining fire breaks on farms with steep mountains or
baboon cliffs are difficult, and soils are usually shallow.
• Camp/grazing systems/farm plans
Over the years a large variety of grazing systems has been
developed, all suited to specific situations. A system should
minimise the trampling of veld close to the watering point
and ensure that animals do not have to walk too far to a
watering point.
• Availability and quality of water
Quality of water plays a major role, not only in irrigation but
also in livestock farming.
• Condition of infrastructure (fences and water reticulation)
• Grass species and veld types
Different veld types can be found on adjacent farms and even
on a specific farm. The differences come into play mainly
where there are grazing plains, mountains, broken country,
veld and marshland in the same area.
Pecan nut orchards in the North West Province near Hartbeesfontein, where farmers have recently started experimenting with the crop.
Photo: Rumpff Kruger
• Occurrence of poisonous plants
There are numerous plants in South Africa that are poisonous
to animals in varying degrees. If these cause substantial
problems on a farm, a lower land value than normal should
be considered.
• Grazing capacity, condition of veld
The grazing capacity of a farm influences its value, but the
grazing capacity of sections or camps is influenced by
the condition of the specific veld. Veld can be in a good
condition, or show signs of overgrazing, but can recover with
good management.
Carrying capacity is measured in:
Ha/large stock unit (Ha/LSU), an LSU = 1 mature head of
cattle with a mass of 450 kg.
Animals in production (cows and sheep in lactation or
pregnant) = more than 1 LSU at 450 kg.
Climate and soil play a major role in the development of
different veld types. The two broadest veld types are sweet-
and sourveld. Sweetveld is found in low-rainfall areas with
mild winters and has good grazing in winter. Sourveld, on the
other hand, is found in high-rainfall areas with cold winters
and has the best grazing in spring. The foremost publication
on veld types is a publication by Acocks: Veld types of South
Africa, 1988.
Veld type is a unit of vegetation whose range of variation
is small enough to permit the whole of it to have the same
farming potential. Acocks grouped the 90 veld types with 75
variants into eleven veld-type groups:
Coastal Tropical Forest, Inland Tropical Forest, Tropical Bush
and Savanna, False bushveld, Karoo and Karoid, False
Karoo, Pure Grassveld, False Grassveld, Temperate and
transitional forest and scrub, Sclerophyllous Bush and False
Sclerophyllous Bush.
VALUING PERMANENTLY ESTABLISHED PASTURES
Permanent pastures can be established on dry land or
under irrigation, and can consist of grass only, broadleaf
plants only, a mixture of grasses or a mixture of grass and
broadleaf plants.
When deciding which permanent pasture to establish, a
farmer usually takes note of the following factors:
• The annual rainfall, rain distribution between winter and
summer, and its intensity
• A pasture’s sensitivity to low temperatures and frost
• The adaptability to sandy, clay or organic rich soil
• Use – whether it is to be baled, used as standing hay or
green pasture.
Pastures, if treated and fertilised properly, can greatly enhance
the carrying capacity of a farm. Research at Potchefstroom
University (now North-West University) established that dry
land planted pastures can enhance meat production per
hectare to between three and four times what it would have
been on natural veld in the same area.
Marginal dry lands are seldom economically viable for
production of cash crops, and a good alternative is to
establish permanent pastures. The value of these marginal
lands is between that of natural veld and medium-to-high
potential dry lands. It is important to take note of the age
and condition of plant population, weed infestation and other
value-inhibiting factors that could be present. The suitability
of the cultivar for the area is also important.
The most popular dry land perennial (permanent) pastures
found in South Africa are:
• Eragrostis Curvula (Weeping love grass/Oulandsgras)
Endemic to South Africa and most commonly planted pasture
for grazing as well as haymaking. It is well adapted to summer
rainfall areas with a rainfall of 650 mm and more per annum,
but will survive with a minimum of 450 mm per annum. Yields
are 8 to 20 tons/Ha.
• Digitaria eriantha (Smutsvinger)
This is one of the best grazing grasses. It is often used as
standing hay and stays tasty until late in the winter. It is not
popular for haymaking because it does not dry out easily.
This grass can grow in areas with 300 mm of rain per annum,
but as a planted pasture it does best in areas with rainfall in
excess of 450 mm, where it can be grazed at 5 to 6 LSU (large
stock unit)/Ha.
Mixed natural grazing
near Potchefstroom in the
North West Province
Photo: Rumpff Kruger
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• Cencrus ciliaris (Foxtail Buffalo grass/Bloubuffelsgras)
This is endemic to Africa. This grass can be planted in dry
areas, below 300 mm rain per annum, but its production is
influenced negatively by cold conditions. It grows better in
sandy to sandy loam soil and is difficult to establish in clay
soils. It is a tasty and excellent grazing grass with high yields.
It is hardy in dry conditions and has a root system of up to
2 metres deep.
Planted pastures under irrigation are mainly used in intensive
farming such as dairy farming or for haymaking as in the case
of lucerne. The most common permanent irrigated pastures
in the country are probably lucerne and Kikuyu grass.
• Lucerne is often called the ‘king of haymaking’; the most
popular cultivar is the SA Standard. Lucerne can be
established in areas with a rainfall of 400 mm and higher, but
performs best under irrigation. It prefers deep soils for its
root system of up to 3 metres. It can give four to ten cuttings
per season, which gives 15 to 20 tons per hectare and more,
depending on the moisture and climate.
• Kikuyu grass was introduced into South Africa in 1911; it
came from the Kikuyu region of Kenia (Dannhauser, 1987). It
is a prolific grower and creeping grass, and can withstand
heavy grazing. It must be irrigated or otherwise the rainfall
must be above 700 mm per annum for optimum production.
It grows best in loamy or clay soils. Kikuyu is primarily a
By Rumpff Krüger, professional valuer,
ACOM Valuers
Smutsvinger (Digitaria eriantha) near Groot Marico, North West Province
Photo: Rumpff Krüger
grass suited for grazing, and not haymaking. It is popular
with dairy farmers, especially along the coast.
The value of dry land permanent pastures is normally between
that of grazing and arable land in the area. The value of
irrigated permanent pastures is usually the value of irrigated
land plus the depreciated value of the establishment cost.
LEGAL BEAGLE Act 70 of 1970: Subdivision of Agricultural Land Act (part two)
V
In the August edition of The South African Valuer we dealt with some
legal aspects of the Act. We now look at some practical aspects in the
valuation of undivided shares in ‘agricultural land’.
As background one should understand the aim of the Act.
In general the following explanation is offered: when farms
were originally surveyed they consisted of large ‘economical’
units; the original farm would have been known only by its
allocated farm name and number. Note that in many instances
the original numbers have been replaced with new numbers,
which is irrelevant for the purposes of this article.
One of the main reasons behind subdivision can be found in
the tradition of inheritance. A father who was the owner of
a farm would usually bequeath his farm to his sons. Rarely
were farms bequeathed to daughters. This type of inheritance
created a problem. For instance, if a farmer had one farm
and three sons and each inherited a third share of the farm,
this would create three less economic farming units. These
subdivisions could sometimes be identified by some or other
referenced description, in which case the sons would each
hold an undivided share in the farm, one of the exceptions
provided for in Section 2 of the Act. In other cases each ‘portion’
would be properly surveyed and conveyed, ie subdivisions
were registered. The original farm would then consist of the
remainder portion as well as portions 1 and 2 of the farm, each
measuring one-third of the original extent. Now if each of these
three sons had three sons and continued with this practice, the
original farm would eventually consist of nine portions. It is not
hard to see how this practice created a lot of uneconomical
farms. Subdivision did not pertain only to inheritance but
also to cases where farms were subdivided for the purpose
of sale. Many farms were subdivided into a number of small
‘uneconomical’ plots which were sold to various owners
who could barely scrape together an existence on these
small portions.
Act 70 of 1970 came about to prevent this ‘uneconomical’
subdivision of ‘agricultural land’. Nowadays subdivision
would rarely be granted if such a subdivision would result in
the creation of additional farm units. Permission to subdivide
would usually only succeed if it is shown that there will be a
simultaneous consolidation so that no additional units are
created in the process.
A subdivision only comes into existence once it is registered
in the Deeds Office. The procedure is basically as follows: a
surveyor surveys the land and draws up subdivision diagram/s;
he then submits the subdivision diagram/s, with his signature,
to the surveyor general; the surveyor general examines the
diagram and when satisfied that the survey was conducted
properly will approve the diagram by placing his signature
thereon. But until this diagram is submitted to the registrar
of deeds and registered in the Deeds Office, the subdivision
exists only on paper. For registration to take place after the
promulgation of Act 70 of 1970 the permission of the Minister
of Agriculture, Forestry and Fisheries (DAFF) is required.
When Act 70 of 1970 came into existence all subdivisions
without ministerial approval became prohibited. We dealt
with Section 3 of the Act, which prohibits subdivision and
the registration of an undivided share, or part of an undivided
share, in agricultural land not already held by any person, in the
first part of this article.
Before the Act came into operation, where a farm had been
bequeathed or sold to more than one person, it was possible
to register the farm in the names of more than one person,
even if the subdivision was not surveyed. Typically the title
deed would reflect equal ownership as follows: Person 1 (½
share) and Person 2 (½ share). This is now prohibited in terms
of Section 3 of the Act and only in exceptional circumstances
will the minister allow registration of undivided shares, eg
where a couple married out of community of property together
bought a farm to be registered in the names of each spouse
as undivided shares. In this case they would each hold an
undivided share of the whole property.
Section 2 of the Act deals with the actions which are excluded
from Section 3 of the Act, as already described in part 1 of this
article. Several exclusions exist.
Source: Farm Valuations in Practice (Pienaar, 2013)
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By Derrick Griffiths
Firstly, the state is excluded from the application of the Act.
Secondly, any subdivision of, or the passing of an undivided
share in any land in accordance with a testamentary
disposition or intestate succession, if the testator died before
the commencement of the Act, is excluded. Although this
would seem unlikely, there are still cases where estates have
not been finalised and this exception is relied upon.
Thirdly, an undivided share can be registered if it was sold in
terms of a contract entered into prior to the commencement
of the Act. Although statistically a possibility, I believe that the
minister will frown hard upon sale agreements produced so
long after the commencement of the Act. The same would
apply to the registration of a lease as referred to in Section 3
of the Act which was concluded prior to the commencement
of the Act.
Fourthly, any subdivision of any land in connection with
which a surveyor has completed the relevant survey and
has submitted the relevant subdivisional diagram and survey
records for examination and approval to the surveyor general
concerned prior to the commencement of the Act is excluded.
And although it also seems improbable that such subdivisions
have not yet been registered in the Deeds Office, there are still
many of these cases.
The practical implication for valuers stems from the fact that
a distinction is to be made between the case of the married
couple above, and the following two situations:
a. where a subdivision which has been surveyed and submitted
to the surveyor general for approval, but which has not yet
been registered in the Deeds Office, and
b. where a ‘subdivision’ has not been surveyed and such
diagram has not been submitted to the surveyor general for
approval.
The ownership in both cases will be reflected the same, ie as
ownership of an undivided share, the difference being that in
one case subdivision is possible in terms of the Act, but in the
other case it is prohibited. It is this distinction which lies at the
heart of this article.
It is therefore imperative that when a valuer is asked to value
an undivided share in a farm, he/she should make very certain
which situation applies. Suppose for example, that there are
three owners of undivided shares in one farm portion. Each will
be registered as one-third shareholder of the farm. In practice
one would find that each shareholder would live and farm on a
demarcated area (one-third) of the farm, whether surveyed or
not. Now let’s suppose that one of these ‘portions’ has been
improved substantially and SANRAL decides to proclaim a
road through this portion.
In the case where subdivision is allowed the shareholder of
that ‘portion’ through which the road runs will be entitled to
all the compensation. The portion can therefore be valued
as if it is a registered portion. And as we know, there could
be a difference in value depending on whether it is valued as
part of a larger farm, or as a smaller farm portion on its own.
Smaller farm portions usually achieve higher unit values (R/ha).
Allowance should, however, be made for the registration costs
to bring about subdivision.
But in the case where subdivision is prohibited, each holder of
an undivided share has shared ownership of the whole farm.
Therefore each ‘owner’ of an undivided share would legally
become entitled to compensation of one third of the value of the
land and the improvements that are being expropriated even
though in practice they live on demarcated ‘portions’. In this
case the value of the land (and improvements) is determined
by valuing it as part of the whole farm of which it forms part. It
cannot be valued as if it exists as a portion on its own.
The importance of the distinction between the two situations
should now be clear. In the first instance where subdivision
is possible the portion is valued as though it is a subdivision
on its own and the owner of the surveyed portion that is
represented by his/her share is entitled to all the compensation,
and in the second instance the share is valued as part of the
whole and all the shareholders are legally entitled to a share of
the compensation. (There may be other legal reasons on which
this situation may be challenged, eg prescription, but these are
not dealt with here.)
In summary, when dealing with the valuation of undivided
shares, the valuer should conduct the necessary investigation
in the surveyor general’s office in order to inform him/herself as
to the correct position in terms of the Act, ie whether he/she is
dealing with an undivided share which can be subdivided, or
whether subdivision is prohibited. This makes a huge difference.
GLAdWiN V EkURhULENi METROpOLiTAN MUNiCipALiTy:The municipality’s entitlement to disconnect or refuse to supply electricity or water to a property based on amounts owed by a prior owner of the property
V
INTRODUCTION
As the subheading of this article suggests, it examines the
entitlement of a municipality to disconnect the supply of
services (electricity or water) to a property or to refuse to
connect up or restore that supply to a property on the basis
that amounts are owed to the municipality by prior owners of
the property.
GlADwin V EkuRhulEni METRoPoliTAn
MuniCiPAliTy 1
In this case the owner had a tenanted property, and the tenant
had (without the owner’s knowledge) bypassed the prepaid
electricity meter situated at the property. The owner did not
detect that this was the case as the owner did not reside
at the property and further did not receive any municipal
statements in respect of electricity charges, and believed
that all was well in relation to the supply to the property. The
tenants (who bypassed the supply) subsequently moved out,
and the landlord re-tenanted the property, only to be advised
shortly after the new tenants moved in that the prior tenant
had bypassed the prepaid meter. Shortly after this occurred
the Ekurhuleni Municipality picked up that the prepaid meter
was bypassed and terminated the electricity supply to the
property on the basis of its bylaws allowing it to do so
without sending the owner or the tenant a pre-termination
notice warning that disconnection would occur. The owner
and tenants were initially happy that the municipality had
realised that there was a problem as they at first believed
that this would lead to a speedy resolution (in the form of the
municipality correcting the bypass such that the tenant could
pay for its own prepaid electricity).
However the municipality demanded that the owner of the
property make payment of amounts related not only to the
theft of electricity by the prior tenant (which the owner had
agreed to make payment of and in relation to which there
was no dispute) but also in respect of over R40 000.00 which
the municipality claimed was owing to it by the prior owner of
1 Chantelle Louise Gladwin v Ekurhuleni Metropolitan Municipality (unreported case no. 14497/2016 (Weiner J)).
the property. The municipality ultimately refused to reconnect
the disconnected prepaid meter on the basis of the arrears
purportedly owed by the prior owner. Furthermore the owner
requested on numerous occasions that the municipality
furnish it with information as to what the charges purportedly
owing by the previous owner were for and when those
charges were incurred (as it is trite law that if those charges
were incurred in relation to electricity and water services
more than three years ago, they would have prescribed and
would no longer be legally claimable by the municipality from
the prior owner or the current owner).
The municipality failed entirely to provide the owner with any
information relating to the arrears purportedly owing by the
prior owner, and never furnished the owners with any invoices
showing the raising of such charges despite repeated
requests.
LEGAL ISSUES
There were two important legal issues that came before the
court in this case. These were:
(i) whether a municipality is entitled to disconnect the supply of
services to a property, or refuse to reconnect or restore that
supply, on the basis of amounts owed to the municipality
by a prior owner of the property;
(ii) whether a municipality is entitled to do the above specifically
in the case where it has not notified the current owner of
what the charges owed by the prior owner are made up of
or when they were incurred, or has not invoiced the current
owner in relation to those charges.
COURSE OF LEGAL PROCEEDINGS
It is important to understand that this case did not play out
as most litigious matters do. The owner originally instituted
urgent legal proceedings for an order that the municipality
restore the supply to the property based on the owner’s
understanding of the law (namely that a municipality is not
entitled to terminate the supply or refuse to restore the supply
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to the property in respect of amounts purportedly owed by
prior owners). At the urgent court hearing the municipality
agreed to restore the electricity supply and tendered the
owner’s legal costs for the bringing of the urgent application,
subject to the proviso that the two issues referred to above
(the 'merits of the matter') would be fully argued before the
court in the ordinary course (to which the owner readily
agreed).
When it came time for the municipality to file its answering
papers in the matter, however, no papers were filed by the
municipality. The owner accordingly applied to court for an
order to be made in her favour as a result of the municipality
failing to file any papers to contradict her argument set out
in the founding affidavit. The municipality further withdrew
its opposition to the application entirely two days before the
hearing of the matter by the Gauteng Local Division of the
High Court, meaning that it had taken a conscious decision
no longer to fight the relief sought by the applicant (the
owner) in the matter, knowing full well that this would result in
the owner obtaining the court order as prayed for in the court
application.
It has been suggested by some that the fact that the
municipality did not oppose the relief sought on the day of
the hearing means that the relief was granted by the court
without having considered the issue and can be challenged
by the municipality at a later stage should it choose to do so.
The authors are in strict disagreement with this, however, for
the following reasons:
(i) The judge had read all the papers in this matter and was
fully prepared (should it have been necessary) to hear
argument from both sides on the day of the hearing, and
the Court transcripts will bear this out.
(ii) The judge accordingly granted the order after having
applied her mind to the situation and having read the
papers. The order was not granted simply as a formality by
the Court because there was no opposition in the matter.
(iii) The order granted did not contain the usual interdictory
relief (ordering the municipality to restore the supply
of electricity to the property, because this had already
happened), but rather declared that the municipality
had acted unlawfully in refusing to restore the supply
on the basis of the arrears purportedly owing by the old
owner. This type of relief is referred to as declaratory
relief, and because the nature of this court order is that
the declaratory relief so clearly prohibits the Ekurhuleni
Municipality from acting in this manner in future, it sets a
precedent for future cases.
(iv) Although the municipality withdrew its opposition
at the last minute, it did this knowing full well that a
judgment would be granted containing the declaratory
relief referred to above. If it did not want an order to be
granted in these terms it would then have defended the
application. Accordingly, although technically speaking
the municipality withdrew its opposition, in essence it
decided to give up the fight and concede the relief sought.
This must be understood in the circumstances referred to
above as the municipality agreeing that it was no longer
worth fighting the issues because the Court’s conclusion
was foregone in this instance.
Conclusion
The Gladwin case sets a precedent that other consumers
can use in court as authority for the proposition that a
municipality is not entitled to terminate the supply of services
to a property, or to refuse to reconnect or restore the supply
of services to a property, in relation to amounts purportedly
owed by prior owners of that property. A municipality is
especially not entitled to do this in a case where it has not
invoiced the current owner of the property in relation to the
charges purportedly owed by the prior owner. This judgment
represents one small step forward for consumers who are
facing abuse from the municipalities (much of which flows
from a misunderstanding by municipalities of the decision
handed down by the Supreme Court of Appeal in the case
of City of Tshwane v Joseph Perregrine Mitchell2 ). Hopefully
the Gladwin order will serve to carve out a little clarity in
respect of precisely what it is that municipalities are and are
not entitled to do when it comes to debts purportedly owed
by prior owners.
2 City of Tshwane Metropolitan Municipality v PJ Mitchell (38/2015) [2015] ZASCA 1 (29 January 2016).
By Chantelle Gladwin partner, and Rogan Heale
candidate Attorney, at Schindlers Attorneys
pRESCRipTiON Of MUNiCipAL ChARGES
V
INTRODUCTION
In the light of the City of Johannesburg Metropolitan
Municipality’s decision to unilaterally assess accounts and
write off prescribed charges in relation to those accounts, the
authors have been inundated with requests from consumers
for further information relating to the law of prescription of
municipal charges.
THE PRESCRIPTION ACT 68 OF 1969
In terms of the Prescription Act read with various cases on
the issue, it is trite (accepted) law in South Africa that refuse,
rates and sewerage charges prescribe after a period of 30
years; whereas water and electricity charges prescribe after a
period of three years.
WHAT DOES ‘PRESCRIBED’ MEAN?
It means that the law considers the charges that have
prescribed as being too old to enforce the creditor’s right to
collect. In most cases a creditor can still demand payment of
prescribed charges and include them on the invoice, but the
debtor can raise the defence of prescription when asked for
payment. In relation only to charges that are subject to a credit
agreement regulated by the National Credit Act 34 of 2005
(read with the National Credit Amendment Act 19 of 2014) it
is further unlawful for a municipality to invoice a consumer for
prescribed charges, or to collect them from the debtor. In
most, but not all cases, water and electricity charges invoiced
by a municipality will be regulated by the National Credit Act
and it is thus unlawful for a municipality to demand payment
of prescribed charges, to invoice consumers for same, or to
collect same.
PRESCRIPTION IS TRICKY
Although it seems simple in principle to preclude a municipality
from claiming charges that have prescribed, it is much more
difficult than one first imagines in practice to determine
precisely which amounts have prescribed. The following are
difficulties experienced in determining which amounts (if any)
have prescribed, and when they prescribed:
(i) In terms of the Prescription Act the prescription period
starts running when the debt falls due. A debt commonly
falls due when invoiced; however, prescription can also
start running when the knowledge of the claim should
reasonably have come to the creditor’s attention. This
means that if the creditor – ie the municipality – didn’t raise
an invoice for the amount in question for several months or
years, prescription might have started running not when the
municipality did eventually invoice the consumer, but rather
when it would have been reasonable for the municipality to
have invoiced that consumer.
This is especially important in the context of cases where
a municipality fails for several months (or years) to invoice
a consumer of the whole or a portion of that consumer’s
electricity or water consumption. This could happen for
many reasons, the most common of which would be that
the municipality has failed to take actual readings of the
meters for an extended period.
(ii) Prescription is ‘interrupted’ and the prescription period
must begin running afresh in respect of charges that a
consumer has admitted indebtedness. What is important
is that the admission of indebtedness must be made to the
creditor and not to a third party, and the acknowledgement
of liability must be unambiguous and unequivocal,
meaning that it must be very clear that the debtor in
question intended to acknowledge liability for the amount
in question. This becomes problematic when consumers
are advised by a municipality to sign an acknowledgement
of debt in respect of charges that they dispute, in order
to procure a payment plan in respect of such charges or
in order to arrange for the reconnection of the services
which were terminated as a result of the non-payment of
the disputed charges.
(iii) Once an amount has been paid, it cannot prescribe.
Often people do not know this, and they pay amounts
that are prescribed. Once payment of a prescribed
amount has been made, you cannot then claim a reversal
of the prescribed amount, or a refund of the amount
erroneously paid.
(iv) Once a municipality has summonsed a consumer in
respect of any amount, this amount does not prescribe.
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(v) Case law exists to the effect that a part payment of a debt, or
a partial acknowledgement of a part of a debt, can interrupt
the running of prescription in respect of the whole of that
debt. This is particularly problematic where consumers
have been invoiced for several months or years based on
estimated readings, and have either paid or acknowledged
liability in respect of the charges raised on estimated
readings. When the municipality at a later point in time
does a reconciliation of the consumer’s account based on
actual readings and raises further charges over and above
the amounts already raised based on estimated readings,
the question then arises as to whether the consumer –
having already paid or admitted liability in respect of the
charges raised previously based on estimated readings –
has acknowledged its liability in respect of the whole of the
debt (which was only raised subsequently based on actual
readings), or has interrupted the running of prescription in
respect of the whole of the debt by virtue of having paid a
portion of it at an earlier point in time.
(vi) The mere fact that the municipality may invoice a consumer
for charges incurred for a period of more than three years
in one invoice does not necessarily mean that the charges
incurred or consumed more than three years before the
invoice date have prescribed. As above, one needs to
determine whether any of those charges invoiced have
already been paid or liability acknowledged in respect
thereof, or summonsed. Only to the extent that none of
these have occurred in respect of the charges invoiced
which are older than three years, can those charges
have prescribed.
(vii) An admission of liability cannot operate in respect of a
debt that has already prescribed. This means that any
consumer who enters into an acknowledgement of debt
in respect of a portion or the whole of debt that has
already prescribed, does not ‘revive’ that debt, as there
was no debt whatsoever to acknowledge indebtedness
of in the first place.
The principles enumerated above apply to prescription as it
would operate between the municipality and the principal
debtor. They do not necessarily apply to any third parties
(such as sureties, or owners of properties who are not the
principal debtor – ie where an owner of a property is held
liable for a tenant’s debt in respect of that property). In these
cases different principles may apply.
CONCLUSION
From the discussion above it is clear that each and every
case must be dealt with on its own merits to determine which
charges have prescribed, and when they did so. A thorough
analysis of the account needs to be conducted based on all
the principles enumerated above. Note further that simply
because an amount has prescribed, does not mean that all
interest charged in respect of that amount has also prescribed.
DISCLAIMER
This article explains several of the most important principles
relating to prescription, but because of the voluminous
nature of the law of prescription it cannot cover everything.
Consumers who require specific legal advice in relation to
their own municipal accounts should contact an attorney for
further assistance.
By Chantelle Gladwin partner, and Rogan Heale
candidate Attorney, at Schindlers Attorneys
RESTRAiNT Of TRAdE ANd UNLAWfUL COMpETiTiON: WhAT’S ThE diffERENCE?
V
INTRODUCTION
We often receive queries from various clients, being both
employers and employees, regarding the distinction between
restraints of trade and unlawful competition. The distinction
is set out briefly in the article below.
DISTINCTION BETWEEN RESTRAINTS OF TRADE AND
UNLAWFUL COMPETITION
The most apparent distinction between the two is that restraints
of trade are regulated by, and form part of, the law of contract,
whilst unlawful competition is based in the law of delict. In
other words, while parties must, either verbally or in writing,
agree to the terms of a restraint of trade, unlawful competition
does not require any such agreement and an employer may
enforce its right not to have its goodwill impinged upon even
in the absence of any agreement. In such a case the employer
or competitor may rely on the provisions of the law of delict.
For an employer to establish a case in delict, it must prove
the ordinary delictual requirements, ie:
i) a wrongful act or omission;
ii) fault, in the form of either negligence or intention;
iii) a causal link between the wrongdoer's behaviour and the
damages sustained; and
iv) patrimonial damages suffered; these requirements are often
difficult to prove in the context of unlawful competition.
The element of wrongfulness is usually present in unlawful
competition where there is infringement of a ‘competitor’s
right to goodwill’ in relation to his business.
The victim must hold a legal right to goodwill and there must
be infringement of the right. However, infringement of the
right alone is usually insufficient – there must also be an
infringement of a legal norm, for instance, improper motive
or malice that goes against the convictions of society and is
against the public interest and good morals.
An ex-employee may infringe upon the rights of his or her
ex-employer either by breaching the provisions of their
contract of employment or by acting unlawfully. Although the
majority of unlawful competition cases deal with ‘passing off’,
unlawful competition also finds application when a person –
for instance, an employee – obtains and uses trade secrets
or confidential business information of a competitor – for
instance, an ex-employer.
An employer may choose to rely on the enforcement of the
restraint of trade or, in the absence of a restraint of trade
agreement, choose to rely on the delictual nature of an
employee’s unlawful competition. It is noteworthy to mention
that, the delictual nature of unlawful competition ensures
that such recourse is available at any time (whether during
or after employment) to the employer; whereas restraints of
trade, generally, only come into existence subsequent to the
termination of the employment agreement and only endure
for a specific period – although this depends largely on the
wording of the restraint clause.
CONCLUSION
While two separate and distinct fields of law, the law of
restraints of trade and unlawful competition do overlap. It
is advisable that employers always include well drafted
restraints of trade in their employment contracts as this
will serve as the primary protection of the employer’s trade
secrets and connections. In the absence of such a restraint
clause, however, employers can look to the law of unlawful
competition for protection of their rights, provided the
requirements as set out above are met.
By Pierre van der Merwe, senior
associate at Schindlers Attorneys
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John Loos writes
Most of the recent indications have been
that the residential mortgage market has
been slowing down in terms of volume
and value of new lending, with little or
no real growth to speak of. That should
not be too surprising, given that interest
rates have risen mildly in recent years,
and the country’s economic growth rate
hovers not far from zero, constraining
employment and income growth
for households.
Looking forward, we are not projecting
any major change to this situation. The
FNB forecast is for slightly improved
economic growth in 2017 of 1%, from
an expected 0.2% rate for the entire
2016. That mildly improved expectation
is on the back of the belief that the SARB
(SA Reserve Bank) is done with interest
rate hiking for the time being, and will
keep interest rates at current levels,
where Prime Rate is 10.5%, through
2017 and 2018. In addition, we assume
some normalisation of agriculture GDP
(gross domestic product) in 2017 as the
drought conditions ease, and signs of
some mild global economic turnaround
could also be mildly more supportive of
our domestic economy next year.
However, a 1% economic growth
forecast remains a weak one, and that
would not be expected to lead to any
major mortgage market strengthening
just yet. Average house price growth
is forecast at 3% for 2017, after an
expected 5.1% average for 2016.
Only in 2018 do we project a slight
strengthening in the annual average
price growth rate to 4.7%, should mildly
improved economic forecasts hold. But
in both 2017 and 2018, such average
house price forecasts would translate
into house price decline in real terms, ie
when one adjusts house price inflation
for general Consumer Price Index
(CPI) inflation.
In terms of mortgage market transaction
volumes, after a forecast -6.3% decline
in the volume of bonded property
transactions by individuals (natural
persons) for 2016 as a whole, a further
-2% decline is projected in 2017,
with positive growth in the bonded
component of property transactions only
returning to positive growth in 2018.
Growth in the average value per bonded
property transaction by individuals is
forecast to slow to as low as 1% for 2017,
contained by a financially constrained
household sector.
However, while the residential mortgage
market is indeed slow, we have not seen
a major deterioration in financial stress
levels in the market to date. Viewing
NCR (National Credit Regulator) data, we
did admittedly see mortgages in arrears
for longer than three months (which we
classify as ‘non-performing loans’), rise
to 3.4% of the value of total household
sector mortgage loans outstanding
by the second quarter of 2016, from a
lowly 3.1% at the end of 2015. But this
is not a severe rise, and the percentage
remains very low compared to a painful
high of 9.4% reached in the first half of
2010, following the 2008/9 recession
and 2008 Prime Rate interest rate peak
of 15.5%.
Should the FNB economic and interest
rate forecasts indeed play out in the next
few years, the projection is for this non-
performing loan percentage to resume
a gradual declining trend in the near
term, averaging .3.2% of total loans
outstanding in 2017 after a forecast
3.3% for 2016 as a whole.
So, while there is a distinct lack of
growth in the residential mortgage
market, which appears set to continue,
the market continues to perform well,
under the poor economic circumstances,
in terms of the level of mortgage debt
repayment performance.
Solid mortgage debt repayment
performance has much to do with a
major lowering of overall household
indebtedness since 2008, along with
the SARB’s more moderate approach
to rate hiking these days.
This solid performance has much to do
with the major changes in the stringency
of mortgage lending subsequent to
the financial ‘crisis’ of 2008/9, and is
perhaps also because of a more cautious
household sector in recent years. The
result has been a healthy decline in the
value of household sector mortgage
loans as a percentage of household
sector disposable income, from a 49.2%
all-time high early in 2008 to 34.7% by
the second quarter of 2016.
Everything hangs together, so important
for the mortgage market is that total
household indebtedness also be
brought to lower and more manageable
levels. Indeed, the household sector
debt-to-disposable income ratio has
also declined substantially, from an
87.8% high in early 2008 to 75.1% in the
second quarter of 2016.
This improvement in the level of
household indebtedness, greatly
lowering household sector vulnerability,
has been the key factor helping mortgage
debt repayment performance to remain
at relatively low levels, to date, through
the most recent period of economic
weakness and interest rate hiking.
In addition, the magnitude of interest
rate hiking has not yet been extreme,
and interest rates remain relatively low
despite the hikes to date. So households
have not been severely tested yet.
Perhaps a third important contributor has
been the SARB’s very slow pace of rate
hiking, which has sent out the signals to
borrowers and lenders to ‘keep it tidy’,
but at the same time has given them
ample time to prepare themselves in
various ways for further rate hikes.
A hypothetical model simulation of a
2008-style economic shock, in 2017,
yields far better results in terms of
bad debt levels this time around.
We then used our FNB Home Loans
Econometric Model to attempt to test
how the level of household sector
vulnerability has changed since 2008
as a result of this improvement in the
level of indebtedness. We did this by
attempting to re-create an inflation and
economic shock similar to that of 2008.
It must be stated that this ‘shock’
scenario is not what we expect to
happen, but merely for the purpose of
testing household sector vulnerability.
In this shock model scenario, we took
oil prices back up to a brief high of
$150/barrel late in 2017 (a far less likely
event these days compared with 2008),
assumed a major global food price
inflation shock similar to that of 2008,
and a Rand depreciation significantly
more severe than in our actual FNB
forecast. We also assumed a significant
global economic recession.
In this hypothetical shock scenario, the
modeled outcome is a GDP contraction
of -2.1% in 2017, and a CPI inflation
high of 10.5% in 2018, with Prime
Interest Rate assumed to peak at 15.5%
(same as in 2008) early in 2018 as a
result. This hypothetical scenario is very
similar to that of 2008/9. It produces a
sharp -36.9% decline in the volume
of bonded transactions by individuals
(natural persons), and a -2.1% average
house price deflation rate in 2018.
It also, as should be expected, leads to a
significant rise in the value of mortgages
in arrears for longer than three months
to 5.7% of the value of total loans
outstanding in 2018. However, should
this hypothetical modeled event occur,
this would represent a vastly better
situation than that following the 2008/9
recession, where this non-performing
loans percentage for the mortgage
industry peaked at a higher 9.2% in
2010, according to NCR data.
The modeled 2008-style shock situation
thus points to the substantial lowering
of household indebtedness relative to
income levels as a key contributor to
the stability in the residential mortgage
sector in recently tougher economic
times.
While a 2008-style oil-driven inflation and
economic shock is not expected, the
current economic environment remains
weak, and if anything our FNB growth
forecast risks do lie to ‘the downside’.
Therefore, while the vulnerability of the
household and residential mortgage
sector to economic shocks has been
greatly reduced since 2008, we believe
that more is needed. And indeed, further
healthy decline in the debt-to-disposable
income ratio is forecast in the next few
years, as credit growth looks set to
remain ‘pedestrian’.
• Signs of slowing in the commercial
property sector have been evident
for some time
The signs of slowing in the commercial
property sector have been emerging for
some time. From a multi-year high of
10% year-on-year in the first half of 2013,
Bi-Annual IPD Commercial Property
Data showed a gradual slowdown in
all property average capital growth per
square metre to 3.5% by the first half of
2016. It must be emphasised that such
estimates of capital growth are net of
capital expenditure on properties.
The slowing in capital growth was
broad-based, extending across all three
of the major commercial property sub-
segments. While all three segments
showed slowing capital growth in the
first half of 2016, retail property was still
holding up best with growth of 5.3%
year-on-year, industrial and warehouse
Overview – commercial property outlook – can retail property once again be the relative ‘outperformer’ in a soft property period?
The residential mortgage market is weak in terms of transaction growth, but solid in terms of debt repayment performance under
weak economic circumstances.
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property in the middle with 3.5%, and
office property the weakest with a
negative rate of -0.9%.
Recent SARB data, too, has pointed to
weakening in the commercial property
market, with its estimate for the value
of new commercial property mortgage
loans granted declining by -16.44%
year-on-year in the second quarter of
2016, the second successive quarter of
year-on-year decline.
• A slowing in the commercial property
sector is easily explained by the past
few years of economic weakening
and mild interest rate hiking
The slowing in various forms of growth
in the commercial property market of
late is explained in part by a broad
economic growth stagnation which
started back around 2012. Following the
massive global and local monetary and
fiscal stimulus packages which lifted the
economy out of its 2008/9 recession,
South Africa’s GDP growth accelerated
to peak at 3.3% in 2011. Since then,
however, it has tapered all the way to an
average of 0.3% year-on-year for the first
half of 2016, the result of South Africa’s
myriad structural constraints, a global
commodity price slump and a domestic
drought to add to the pressures.
In addition, short-term interest rates
have risen by 200 basis points since
January 2014, while Government Long
Bond Yields have risen from a 6.9%
average for May 2013 to 8.7% by
November 2016. Weakened growth,
implying the prospect of higher vacancy
rates, along with increased interest rates,
have conspired to lift capitalisation (cap)
rates off their best levels.
• FNB forecasts are for slight
improvement in overall economic
conditions in 2017, but perhaps not
yet enough to turn the commercial
property sector stronger just yet
We do believe that interest rate hiking
may be over for the time being. As the
drought conditions look set to ease,
domestic food prices could come off
quite strongly, helping CPI inflation back
into its target 3-6% range. That would
end the need for further rate hiking for the
time being, provided the Rand behaves
reasonably well. Economic growth could
also be given a mild boost to around 1%
in 2017, as agriculture picks up after the
drought and slightly higher commodity
prices begin to provide some additional
support especially to the mining sector.
but slightly improved economic
conditions may not yet turn the
commercial property sector stronger as
early as next year.
This is because of certain leads and
lags built into the economic cycle.
‘Mainstream’ retail sales have seen
growth beginning to slow more sharply
only in recent months. This retail, most
relevant to shopping centre space
demand, lags the cycle a little, unlike the
more ‘leading’ vehicle retail component.
We thus project further annual slowdown
in real retail sales growth from a forecast
2.1% for 2016 to 0.7% in 2017, which
could be expected to raise the average
retail property vacancy rate.
Our 1% overall economic growth
forecast is also not expected to be
sufficient just yet to lift manufacturing
capacity utilisation or economy-wide
inventory growth significantly, which
would be required to boost industrial
and warehouse space demand.
and with regard to growth in demand for
office space, the fortunes of the finance,
real estate and business services sector
are crucial, though not its GDP growth
but rather its employment growth. This
sector lagged the recovery post-2009
and has also lagged in the economic
slowdown since 2011. Unfortunately,
therefore, it is expected that it will
weaken further before turning the corner,
and that during the forecast period there
could be some job loss that could slow
the demand for office space.
• 2017 expected to be another year
of slowing in capital growth (net of
capital expenditure)
Therefore, despite some expected turn
in fortunes for the overall economy, we
would still expect 2017 to be a slower
year on the commercial property front
than 2016.
• Retail property expected to again
be the ‘relative outperformer’ in a
weaker property period, while office
and industrial could see some capital
depreciation (net of capital expenditure)
our econometric model-driven forecasts
are for retail property capital growth to
slow to 3.9% in 2017, which is low but
positive. However, as was typical in the
last two periods of market weakness,
we project some capital depreciation
(remembering that this data is net
of capital expenditure) for both the
industrial and office property sectors.
These two sectors already showed
significantly weaker capital growth than
the retail property sector in the first half
of 2016, according to IPD bi-annual
stats, and have typically performed
weaker than retail property in the past
two periods of market weakness.
From 1998 to 2003, office property
experienced a capital depreciation per
square metre of -16.2%. From 1998
to 2002, industrial and warehouse
property experienced a -20.7% capital
depreciation. During the same weak
property period, retail property managed
to grow by low positive rates in each
of those years, although certain sub-
sectors of retail property did have some
mild depreciation. In the very short-
lived 2008/9 dip in the market, office
property (-1.5% and industrial property
(-0.2%) once again experienced slight
capital depreciation while retail property
(+1.2%) had very low positive capital
growth.
• Some questions must admittedly be
asked as to whether retail property
can remain an ‘outperformer’ after
two decades of ‘running the hardest’
of the three main commercial
property segments?
But while we once again forecast retail
property getting through the slow
property period as the ‘outperformer’
relative to the other two sectors,
admittedly there are some risks to such
a projection. We say this, firstly, because
retail property has run the hardest of all
of the major property segments over the
past two decades. Since 1995, retail
property’s capital value per square
metre (inclusive of Capex), according to
IPD annual stats, has risen by a massive
770.7%. By comparison, industrial
space has inflated by a lesser 466.7%
and office space by 464.5%.
Even our estimates of cumulative
house price inflation since 1995 haven’t
kept pace with retail property values,
despite having inflated by an impressive
estimated 594.6% since 1995. Some
key further questions that we have to
raise with regard to our projections of
relative segment performances are:
1. How will online retail affect the way
we shop and the extent to which we visit
retail centres? Whereas retail property
has been the best performing segment
in previous periods of market weakness,
could the additional challenge of
online shopping change its position
relative to industrial and office property
performance?
2. Within retail property, will the
larger regional centres be the better
performers in a downturn? Many
smaller neighbourhood centres have
received major upgrades, and have
some strong brands as tenants. Will they
compete better with regionals in tougher
economic times in future?
For the time being, though, early signs
in IPD bi-annual data are once again
that the retail property sector’s capital
growth is slowing a little less than the
industrial and office segments of late.
We have for some time been saying that
‘smaller is better’ when it comes to home
buying. However, that does not preclude
the smaller-sized home market from
experiencing a slowdown.
All the factors that we have periodically
claimed are more in favour of small-
sized home buying remain relevant at
the present time. The current economic
environment remains weak, causing
weak household income growth, and
interest rates have risen mildly in recent
years. Effective personal tax rates
continue to rise, while municipal rates
and tariff increases outpace general
inflation. And, of course, there is the
‘sliding scale’ for transfer duties, putting
more expensing homes, which are
on average larger, into higher transfer
duty brackets. So, not surprisingly, the
smaller-sized home market continued to
outperform the medium- and large-sized
segments in the third quarter of 2016.
However, all of this does not prevent the
smaller-sized market from going into
a slowdown too, and indeed, while it
remains the relative ‘outperformer’ of the
three size segments, it has shown signs
of slowing of late.
In our FNB House Price Indices, we
compile a set of three indices according
to the size of homes: our three size
categories are the small-sized segment
(homes 20-80 square metres in size),
medium-sized homes (80-230 square
metres in size) and the large-sized homes
segment (230-800 square metres).
The house price inflation rates for the
three categories continue to differ
noticeably. The small-sized home
category’s (average price = R616,180)
price inflation was the highest of the
three segments, at 8.1% year-on-year in
the third quarter of 2016. However, this
represents a slowing in growth from the
previous quarter’s revised rate of 11.7%
and the first quarter’s high of 11.9%;
next was the medium-sized home
category (average price = R1.111 million)
with 5.8% year-on-year price inflation,
which reflects a slight de-celeration
from 6.6% in the second quarter and
7.5% in the 1st quarter; the large-sized
home buying continues to be very much about size, smaller being better, but even the smaller-sized home market shows signs of
slowing of late.
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home category (average price = R1.958
million) may be ‘stabilising’ a bit at very
weak levels, having seen its inflation rate
accelerate mildly from 1% year-on-year
in the first quarter of 2016 to 3% by the
third quarter. At such a low price inflation
rate, however, we cannot yet call this a
‘strengthening’, as the 3% rate remains
significantly negative in real terms,
when adjusting for general inflation, as
measured by the CPI (Consumer Price
Index), of nearer to 6%.
The small-sized home category has ‘out-
inflated’ the other two categories for
most of the time from 2010 onward. And
if one evaluates the performance of the
three size categories’ price indices since
even further back from the first quarter
of 2001, a more than 15-year period,
we see that the small-sized segment
has outperformed the other two on a
cumulative inflation basis. The Smaller-
Sized House Price Index has inflated by
372.9% since the first quarter of 2001.
The Medium-Sized Index is not too far
behind with 351.9% cumulative inflation
over the same period. But the large-
sized segment has underperformed by
a significant margin, especially since
around 2011, cumulatively inflating by
a significantly lesser 285.3% since early
2001.
In short, the focus on size continues
to be a key factor in the South African
housing market, with ‘smaller remaining
better’, still driving stronger house price
inflation in the small-sized segment
compared to the other two segments.
This relative ‘outperformance’ of the
small-sized segment is expected to
remain intact in the coming years, with
especially the large-sized segment
underperforming noticeably, given the
myriad financial-related constraints
mentioned in this note. However, that is
not to say that the small-sized segment
cannot also see a market slowdown,
and indeed that appears to have been
the case in the most recent two quarters.
Sectional title homes have seen a long-
term rise in prominence in South Africa’s
property trade, driven by mounting
urban land and infrastructure scarcity,
which requires a ‘drive’ towards smaller
average sized properties as we look
to use land and infrastructure more
economically. But these long-term
structural changes don’t exempt it
from shorter-term cyclical fluctuations.
And indeed, as a cyclical slowdown
plays out, both the sectional and full
title segments have recently found
themselves softening.
In an attempt to measure the progress
of the sectional title segment’s growth,
we use deeds data transactions by
individuals only (natural persons), which
we believe should be a good proxy for
residential transactions by individual
households.
Here, we see the volume and value
of sectional title transactions having
increased in significance since 2010 after
a 2008/9 recession dip. We see sectional
title transactions volume having risen to
29.94% of total property transactions by
individuals by the third quarter of 2016,
from a cyclical low of 23.58% in the third
quarter of 2010.
The relative recovery in sectional title
transaction volumes more or less
followed a post-recession recovery in
first-time buying levels from around
2010/11, with the highly cyclical first-
time buyers believed to be typically a
significant source of demand for smaller-
sized sectional title homes.
This period of relatively strong sectional
title demand post 2010 has contributed
to the segment’s average house price
inflation catching up with the full title
average, and even marginally exceeding
it for much of the time from 2012 onward.
This may have been changing in recent
times, however, with the highly cyclical
and interest rate-sensitive first-time
buyer percentage having fallen back
from an early 2014 high of 28% of total
home buying, to 18% by the third quarter
of 2016.
And so we have seen a hint of a move
towards flattening out in the trend in
sectional title transaction volumes’
share of total transactions since 2015,
and sectional title volume growth has
been a bit slower than that of full title in
recent quarters.
In addition, although the FNB Sectional
Title House Price Index remained at a
slightly faster growth rate than full title, ie
6.08% year-on-year vs full title’s growth
of 5.36%, both house price indices
were experiencing slowing growth, but
with the Sectional Title Index’s growth
having slowed a little more significantly
off a higher base. Younger and first-time
buyers are more credit-dependent and
thus interest rate-sensitive than repeat
The sectional title housing market segment still mildly outperforms the full title segment, but both segments have been cooling off
gradually in recent times.
home buyers on average, and we believe
that rising interest rates since early 2014
have been key in cooling off first-time
buyer levels to a greater extent than
they have cooled of the overall market.
This, in turn, may be cooling sectional
title demand just a bit more than that of
full title.
As yet, though, our group of FNB valuers
still perceive a stronger demand relative
to supply in the sectional title market
compared to full title, as reflected
in the FNB Valuers’ Market Strength
Index (MSI) for sectional title property
measuring 52.37 in the third quarter of
2016, compared to full title’s 50.04 level.
However, when we measure year-on-
year growth of the MSI, we see a more
significant slowing, from a higher growth
rate back early in 2014, in the MSI for
sectional title compared to the MSI for
Full Title.
Within both the full title and sectional
title segments, it is very clear that
‘smaller is still better’ when one
compares the relative strength of the
various sub-segments, although all
have been slowing. The smallest sized
sectional title sub-segment, namely the
‘less than two-bedroom’ segment, still
showed the strongest price inflation to
the tune of 9.8% in the third quarter of
2016. Significantly behind was the ‘two-
bedroom’ sub-segment with 6.5% price
growth, while the largest ‘three-bedroom
and more’ category was the slowest
sub-segment with 5.3% average price
growth. All three of these sub-segments
showed slowing price growth from prior
quarters.
In the full title segment, the same
relative picture emerges. The smallest
sub-segment, ie the ‘two-bedroom and
less’ category, showed the strongest
price inflation to the tune of 6.4% in the
third quarter of 2016. This was followed
by the ‘three-bedroom’ segment with
5.7%, while the largest ‘four-bedroom
and more’ segment showed the slowest
price growth of 2.6%. Like the sectional
title sub-segments, the three full title
sub-segments had all shown some mild
slowing in price growth of late.
In short, the sectional title segment is
typically more cyclical than the full title
market. This means that in tougher
economic and interest rate times it can
weaken a bit more significantly then the
full title market. Both segments have
started to show signs of softening, but
to date certain of the key performance
indicators still put sectional title as mildly
stronger than the full title segment. This
comes through in the segment’s slightly
superior house price inflation in the
third quarter as well as its higher Market
Strength Index compared to that of full
title.
However, we believe that first-time and
younger age group buyer demand is
more important to the sectional title
market than to the full title segment,
and this group is seeing a decline in
significance in the market of late. We
therefore don’t believe that the sectional
title segment will remain stronger then
the full title market for too much longer,
as both segments soften.
John Loos
Household and Property Sector Strategist:
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SAiBpp ANNUAL CONVENTiONV
Empowerment, transformation, and collaboration: These are some
of the themes that emerged at the annual convention of the South
African Institute of Black Property Practitioners which took place
on 2 and 3 November.
According to Vuyiswa
Mutshekwane, SAIBPP
CEO, the convention was
very successful. “The way
we crafted our programme
really reflected our
objectives – to facilitate
a solution-oriented
strategic discussion
around the transformation
of the property sector,”
she said. “In crafting our programme, we sought to draw
meaningful input from all key property industry stakeholders."
The programme included representatives from the private
sector, financial services, civil society and the public sector –
namely; the department of public works, provincial and local
government as represented by the CEO of Joburg Property
Company, Ms Helen Botes.
The Green Building Council spoke about the opportunities
available for green building practitioners within the space as
a new area for black professionals to work in, while Mashilo
Pitjeng, Managing Director of Tsebo Real Asset Management,
spoke about the necessity of internal reflection and the need
for self-empowerment.
During a panel discussion on funding, Robin Lockharte Ross
of Nedbank discussed the role the financial services sector
can play in making it easier for new entrants to access finance.
Boni Muvevi, CEO of the Gauteng Partnership Fund (GPF),
explained that Gauteng has a low-income housing backlog
of approximately 900 000 units. Government has limited
resources, so the GPF was established with the private sector,
and the Gauteng Department of Human Settlements (GDHS)
as its executive authority. The GPF serves as the financing
vehicle of the GDHS. Its Empowerment Property Fund assists
companies to fund the property acquisition, renovation or
conversion of housing projects in Gauteng. “The Fund is
necessary because of constraints to entrance to the property
market for BEE entities, including lack of equity to contribute
towards a project or assets as security of loan,” Muvevi said.
According to Helen Botes, CEO of the Joburg Property
Company, local government’s key strategic projects to
drive transformation include a comprehensive land strategy
framework. It focuses on job creation and transformation,
SMME and youth development in property, women’s
development in property to achieve gender parity, and
partnership between private and public sector on public
land to contribute to the achievement of the 17 sustainable
development goals. “The provision of land for socio-
economic purposes is a vital component of a healthy, growing
economy,” Botes said. “Land provides an intrinsic link to the
economic sustainability and strength of a city and on a wider
scale, contributes to the overall national and global economy.”
This framework holds JPC accountable in terms of the key
performance areas, and positions the CoJ to respond
adequately and capably and support socio-economic growth.
In a panel discussion on facilities management, David
Khasebe explained that international FM standards are
generic, and that SA has always adopted, never developed,
standards. The new South African-developed PDCA model,
which is awaiting approval and publication of draft standards,
addresses SA-specific issues: incomplete, confused
planning; misapplication of in-house and outsourced models;
high levels of under-resourcing; lack of core competencies;
and lack of investment in research and benchmarking. “The
new approach will promote 21st-century workplace projects,
condition assessments, green buildings, and monitoring and
control,” Khasebe said. “The new facilities management has
the potential to compete with tourism as a strategic economic
sector and job creator.”
Khasebe’s discussion partner, Mohsien Hassim, spoke about
the Internet of Things (a system of interrelated computing
devices, mechanical and digital machines, objects, animals
or people, that connects objects like cars, buildings,
machines turning them into ‘intelligent’ assets than can
communicate with people, applications and each other).
The IoT’s application to facilities management, automation
improves overall management, enhances the asset life cycle
and reduces running costs. While there are challenges for
South Africa, such as data costs and the volatility of the Rand,
we are also focusing on science and technology as growth
areas. “Smart phone market penetration is skyrocketing,
there is a technology update within government, and Smart
City initiatives are happening,” Hassim said.
The Gauteng MEC for Health, Qedani Mahlangu, was one
of the attendees. Nandi Mayathula-Khoza, MEC for Social
Development and Office of the Premier, introduced the
Gauteng Tshepo 500 000 project, an expanded public works
programme. Its stakeholders include several provincial
departments, such as those for Social Development,
Economic Development and Infrastructure Development.
The Tshepo 500 000 is an employment creation and
entrepreneurship development programme with the goal
of training, skilling and mentoring 500 000 young people
through a set of projects aimed at empowering youth, women
and people with disabilities. The programme is taking place
over five years (2014—2019).
“We really took an aerial view of the industry and sought
to understand its key levers of change, and to provide a
platform for attendees to engage with key decision makers
in the industry,” Mutshekwane concluded. “The event was
fully subscribed, with 250 people attending from quite
diverse areas: property owners, developers, contractors,
professionals from the built environment. There was a lot of
networking going on and business cards being exchanged,
so we’re hoping that the business opportunities that emerge
will be one of the outcomes.”
A p p R A i S A L i N S T i T U T E N E W SV
Congress hears Appraisal Institute’s ideas to modernise regulation.
On 16 November 2016 the Appraisal Institute told a
Congressional hearing there is a “better, less-complicated
approach” that would modernise the US appraisal regulatory
structure by improving quality, reducing costs and addressing
fundamental concerns that drive appraisers from the profession.
In Capitol Hill testimony before a subcommittee of the House
Financial Services Committee, the Appraisal Institute suggested
that Congress realign the appraisal regulatory structure with
those of other industries in the real estate and mortgage
industries. As the nation’s largest professional association of real
estate appraisers, the Appraisal Institute recommended using as
a model the National Mortgage Licensing System cooperative
among state agencies.
“Appraisers are being choked by rules and regulations in nearly
every facet of their business,” Bill Garber, Appraisal Institute
director of government and external relations, told the Housing
and Insurance Subcommittee in written testimony. “Appraisers’
professional lives have become extremely complicated, more
expensive and less productive due to a dated and archaic
regulatory structure. As a result, consumers suffer from increased
turnaround time, delays in loans and potential higher costs.”
Noting that the federal regulatory structure for real estate appraisal
essentially has been untouched since 1989, the Appraisal
Institute’s written testimony said regulation is “overwhelming”
appraisers and proving to be “counter-productive” for the
profession and for users of appraisal services.
“Real estate appraisers face a ‘layering effect’ of rules and
regulations that creates a disincentive for potential entry into the
profession, while also diminishing the profession’s profitability,”
the Appraisal Institute said in its written testimony.
“After almost 27 years, it is time to make the appraisal regulatory
structure and process more efficient and responsive to the needs
of practitioners and consumers,” Garber told the subcommittee
at the hearing.
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FeLLow in Focus
DaviD arthur thomas White
i was born in England,
in Cheshire and
educated at Harrow
School and Trinity College
Dublin. Afterwards I did
the three-year course in
Estate Management at the
Royal Agricultural College,
Cirencester, at the end
of which I sat the Royal
Institution of Chartered
Surveyors exams and
became a member of the
RICS in 1970. The General
Practice Division of the RICS
was split into the Urban
and Rural Divisions and I
was a member of the Rural
Division, having studied
agriculture and forestry.
My first job was with a firm of Chartered Surveyors – Strutt & Parker
– at their office in Cheshire near Chester, not too far from where I
was brought up. The work was very varied and not just valuations.
Once we were acting on behalf of the owner of a grazing farm in
Wales and were negotiating with the tenant an increase in the rent
(a lot of the agricultural land in UK is tenanted); the new rent could
not be agreed and we went to arbitration which was held in the
nearby North Wales town of Pwllheli. The tenant, although he could
speak English perfectly well, exercised his right to speak in Welsh,
knowing that the landlord’s men wouldn’t understand a word! This
necessitated an interpreter to be summoned and a long drawn-out
hearing ended in a small rental increase being granted.
Another job which was good experience for future servitude
valuations was negotiating compensation for a large oil pipeline
across the UK.
After two years in Cheshire, contacts that I had made when I was at
university in Dublin asked me if I would like to take a job in County
Waterford in Ireland managing country estates. This period in my career as a chartered
surveyor lasted ten years in which time I married my wife, Judy, and our two eldest children
were born in Kilkenny. During this period I concentrated a lot on forestry and sawmilling
and also represented the private timber growers in the Republic of Ireland at EU meetings
in Brussels. Again meetings were drawn out because of all the interpretation necessary,
but the chairman (usually a German baron) always had his priorities right by making sure at
the outset that we were happy with the lunch menu at a good Brussels restaurant!
The second part of my career began in the early 1980s when we moved to South Africa.
My interest and love of Africa began after spending a gap year after school in East Africa
in Uganda working on a tea estate. A few years earlier I had been introduced to Graham
McIntosh, now a lifelong friend and then the newly elected MP for the PFP in Pietermaritzburg
North. Graham, whose father was a well-known valuer in Pretoria, organised a house for
us to rent in Hilton; the house was owned by the mother of Michael Cassidy (the Christian
evangelist and founder of Africa Enterprise), so it was an added bonus to get to know
Michael and his wife Carol. Graham introduced me to Measured Farming, an agricultural
consultancy firm which was doing a lot of valuation work necessitated by the creation of
the homelands under government policy. This was at the time that the 1982 Act had come
into law and valuers had to be registered. Being a member of RICS, I was able to register
in terms of the Act. In Measured Farming at the time, the main valuers were Pat Mills, Clive
Henderson, Geoff Fitchet and John Ing, except for Clive Henderson who is still practising,
the other three are no longer with us.
Although I had learnt valuation practice and studied Agriculture and Forestry, I still had
to get to grips with South African conditions and am most grateful that I could work with
such people. Pat Mills had done Agriculture at Potchefstroom (he used to tell me that he
could not go farming as he had the wrong surname to get a loan from the Land Bank); he
was instrumental in professionalising the valuation of agricultural land in SA and putting
on courses in conjunction with KZN University. Clive Henderson had studied forestry at
Oxford and worked in Canada and was extremely helpful and we did many valuations
together. The Faustmann Formula was never used in Britain (I suppose before the EU we
did not like Germans!); also the growth rates in SA are so much quicker than in Britain or
Ireland; a sawlog rotation of 25 to 30 years in SA would be at least double in Europe.
Geoff Fitchet, before joining Measured Farming, had been dairy farming in the Bulwer area
and I learnt so much from him about the key grasses of South Africa.
The firm Measured Farming split in the early 1980s: Pat Mills and Geoff Fitchet founded
Mills Fitchet and I decided to stay in South Africa but wanted to live in Cape Town, so in
1985 opened an office in Cape Town under the name Mills Fitchet.
The rest is history, as the say. My family now comprises two more children born in South
Africa - one in Pietermaritzburg and one in Cape Town.
I have very much enjoyed my 30-year valuation career in South Africa and as a career it
has much to recommend it. It is mentally challenging and I do feel that more specialisation
will be necessary in the future. An aspect that I have enjoyed particularly is as an expert
witness. For many years we worked with Adv Francois Junod SC in expropriation cases
and learnt much from him and other advocates, especially that there are no short cuts.
Another area which I have enjoyed is part-time lecturing at the Cape Technikon and UCT.
As the number of valuers in South Africa is not particularly large, a great bonus is the
friendship and helpfulness among valuers which has meant a lot to me and which should
not be taken for granted but encouraged.
As to changes in the profession since I started and the future: the majority of valuers are
employed by the government, municipalities and financial institutions, while I have always
been in private practice and I therefore see things from this perspective. I think the valuer
is better educated now (or thinks so) - certainly he is more businesslike.
The doing away of the fee structure has tended to produce a ‘free-for-all’, with valuers
taking on work for which they have little experience at a low fee. I feel that the Institute,
in order to assist those thinking of entering the profession, should do a comprehensive
survey of likely income levels that can be expected in both the public and private sectors.
S A I V a t h o m e
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THE SOUTH AFRICAN
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South Africa’s oldest practising valuer?
At the National Seminar in 2015 the SAIV General
Secretary took great pleasure in handing a
‘Certificate of Special Recognition for his loyal
attendance at SA Institute of Valuers events and his
contribution thereto’ to a familiar gentleman with a
white beard.
At the Northern Branch Country Seminar
in September 2016, the General Secretary
announced to the delegates present that the
same gentleman (also present, as ever) was
to celebrate his 90th birthday the following
week.
The gentleman is Llewellyn Hunt.
Below he tells how he came to valuation
and his experiences as a valuer during
his ‘retirement’ years. (For the rest of his
interesting life story you will need to read his
booklet which he mentions.)
During my last years as a municipal engineer,
I spent most of my time on administration
and when nearing mandatory retirement
realised that Engineering Technology had
largely passed me by.
Some 2½ years before retirement, my wife
suggested that we attend a short course on
Estate Agency in Nelspruit. This we attended
and six weeks later, after having had the best
lecturer I had ever had, we both passed the
Estate Agents Board Exam in Pretoria: this
inspired my interest in valuation.
My wife went into estate agency, and I
started studying for the National Diploma in
Property Valuation, via Technicon SA, which
I completed two years after retirement.
Then came the period under a mentor: I was
fortunate to have as my mentor a valuer
who had just been awarded the contract
for the valuation roll for White River. This
involved examining all available plans on
record in the municipal offices, inspecting
all properties for alterations or modifications,
and preparing the field sheets for the final
inspection with my mentor, where we had to
go onto as many properties as possible.
In those days we had to value land and
improvements separately and that is where
the later-developed Pretoria Formula for
the comparison of different erf sizes would
have been very useful. Later on I was able
to use it on a few occasions. As towns or
townships became fully developed, sales of
vacant land became so much more difficult
to find, and that is probably why the later act
required market value of the whole property.
My mentor’s approach was: “You’ve got the
diploma, go and do the job.” He was very
thorough on going through my valuations
and carrying out many inspections with me.
He warned me: “Never overvalue, as that is
the best way of landing in court!”
Having done many deceased estate
valuations, I was able to register as an
Appraiser for Deceased Estates with the
local magistrate, and could then do such
work on my own account. This I did until it
was necessary to undergo annual medical
fitness reports at a later age.
My first reports were typed on an old Olivetti
portable typewriter, with many applications
Llewellyn at the SAIV MPRA
Seminar on 4 November 2016
Diploma ceremony +/- end 1993
Technicon SA
of Tippex. Their appearance was such that
they had to be photocopied before they
could be presented. Initially I used a film
camera and had to hand spools into Foto-
First for processing, trim the photos to
size and paste them into the report, later
copying these in black and white for the
required record. Learning to use a computer
and digital cameras was quite a hurdle, but
very necessary, with many frustrations and
dramas on the way.
In due course, I upgraded to Professional
Associate Valuer and later to Professional
Valuer.
It was preparing the full reports for farm
valuations that gave me the experience
used later for writing my little book Learning
from Life for Life, sub title: Memories and
Experiences of a Recycled Teenager (that is
after I had become able to use a computer
and digital cameras).
Irrespective of anything else, the use of
comparable sales is still the most practical,
but is not always applicable, particularly
on farm valuations. The saddest of the
valuations that I had to do were those where
a family was forced to mortgage their home
to keep a failing business going, and then
finally losing everything.
Possibly the most challenging were farm
valuations, which varied from stock farming
only, to mixed farming and timber plantations.
Then there were the wide variety of irrigation
systems which varied from flood irrigation,
to drag lines, swinging arm, centre pivot,
micro sprays, drip, and finally submerged
drip lines planted in the rows with the
sugar cane pieces. The latter is probably
the most water efficient of them all. An ex
farmer friend told me that if spray irrigation
was done at night there was some 25% less
water loss as a result of evaporation.
Other challenges were in the townships
where most of the streets had no names,
there were no street numbers and many
dwellings did not even have an erf number.
Fortunately, a GPS has helped substantially
in avoiding frustration.
Now at 90 years of age, I can appreciate the
value of keeping busy, and very importantly,
keeping physically fit. They say a change is
as good as a holiday, so perhaps it is time to
find another line of interest.
Valuation has been a wonderful way of
getting me away from the TV and computer
screens and out from between four walls.
It has taken me to parts of the country
that I would otherwise not have seen and
away from White River, but confirms that
there is no place like home. I have seen
how many others live and work from as far
away as Delmas, Phalaborwa, Steelpoort,
Burgershall, Groblersdal, Standerton,
Piet Retief, Jeppes Reef, Komatiepoort. I
have seen farms, factories, warehouses,
townships, dwellings and accommodation
establishments of various kinds.
Not all my body parts are original, being
somewhat of a bionic man with two hip
replacements, two lens replacements in
the eyes after cataract removal. I was
able to play table tennis at age 86 while a
younger friend was still so able. What I have
experienced is that often when I received an
order for a job, it was as though it gave me
a physical boost, stressing the need to keep
busy.
Unfortunately deafness has caught up with
me and even with two expensive hearing
aids, I miss more than 70% of any lecture
or conversation so that seminars become a
frustrating waste of time. So it seems time
to find other outlets for my energy.
NG Kerk Middelburg South
24 November 1962
Exercising
On the plot mid 1990s
S A I V a t h o m e
or: Valuation as a retirement option
72 73
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VALUERNOVEMBER 2016, NO 126
S A I V a t h o m e
f R O M T h E G S ’s O f f i C EV
In the blink of an eye the year has slipped passed us.
That 2016 was a busy year is an understatement! - but for the
betterment of the SAIV and the profession. Have we reached
all our goals? Perhaps not. What is important is that we keep
pushing the goalposts further away so that we don’t stagnate
but move forward. During 2016 the to-do list kept on growing,
an indication that the SAIV is moving forward and that we are
entering into an era where we must broaden our horizons and
change our way of thinking, an era in which we should be
changing. As we know…change is the only constant.
We look forward to another busy year in 2017 during which we
hope to bring you more value-adding benefits.
HAVE A QUERY? CONTACT USMembership: [email protected]: [email protected] queries: [email protected] | 086 100 SAIV
S A I V a t h o m e
These are the valuers (many
familiar) who attended
a course given by the
University of Natal Faculty of
Agriculture from 7 to 10 July 1993.
The photograph was sent to us by
Joe Kondos (a member of the class)
who described the course as well
organised and intensive. Such was
the demand for the course that the
faculty had to increase the intake
number in order to accommodate
all the of candidates. The only
articles which the attendees were
required to bring with them were a
pen, pencil, eraser and calculator.
Joe can be contacted on
0713624056, [email protected]
or Skype ID: joeko11Missing: C Laing, L Watkins, A Gildenhuys, J Waldeck, D Edwards and P Mills
CORRECTION
The August 2016 issue of The South African Valuer, No 125, in
‘From the GS’s Office’ (page 58) stated
‘During the past few months we have also ADDED VALUE to
your membership:
• We have arranged a 10% to 35% discount on personal
insurance cover for our members through Kern Insurance
Solutions Consult.’
This should have read:
• ‘We have arranged a 10% to 35% discount on professional
indemnity cover for our members through Kern Insurance
Solution Consult.’
The editor apologises for any inconvenience this error might
have caused to our members.
A special word of thanks goes to all our members who have
participated in our surveys and requests for comments. Without
your input we could not have achieved what we have this year.
May you all enjoy a well-deserved break and start 2017 with
renewed energy.
Melanie N Vallun
General Secretary
74 75
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VALUERNOVEMBER 2016, NO 126
SAIV membership statistics: 1 October 2016 vs 1 November 2016
Members
Fellows
Life members
Retired members
Non-practising members
Non-practising affiliate members
Non-resident members
Active members total
Honorary members
Student members
Other members
All members total
43
3
1
47
10
10
57
43
3
1
47
10
10
57
60
1
2
1
64
25
25
89
60
1
2
1
64
26
26
90
122
6
6
2
136
1
35
36
172
122
6
6
2
136
1
34
35
171
429
20
2
11
4
466
6
115
121
587
432
20
2
11
4
469
6
116
122
591
172
13
3
9
2
199
2
38
40
239
172
13
3
9
2
199
2
40
42
241
17
7
24
0
24
21
7
28
0
28
826
43
5
29
9
17
7
936
9
223
232
1168
829
43
5
29
9
21
7
943
9
226
235
1178
1 October 2016 VS 1 November 2016 Cen
tral
1/1
0/20
16
Cen
tral
1/1
1/20
16
Eas
tern
Cap
e 1/
10/2
016
Eas
tern
Cap
e 1/
11/2
016
Kw
aZul
u-N
atal
1/1
0/20
16
Kw
aZul
u-N
atal
1/1
1/20
16
Nor
th 1
/10/
2016
Nor
th 1
/11/
2016
Sou
th 1
/10/
2016
Sou
th 1
/11/
2016
Gen
eral
Sec
reta
ry 1
/10/
2016
Gen
eral
Sec
reta
ry 1
/11/
2016
Tota
l per
cat
egor
y 1/
10/2
016
Tota
l per
cat
egor
y 1/
11/2
016
It is good to report that our non-resident affiliate memberships increased from 6 in May this year to 21.
We are hoping that in the months to come our new Zimbabwean affiliates will benefit from their membership with us.
TAiLpiECE: TOp TEN fASTEST GROWiNG CiTiES iN AfRiCA
V
Unlike most cities on the list of Africa's fastest growing cities, Lagos
is Nigeria’s commercial hub, not the capital. The small coastal city
has an amazing growth rate of 77 people per hour, hence it is the
fastest growing city in Africa. Strong economic growth, led by an oil boom,
has driven the rural poor towards the city, and the population surge is also
being driven by high birth rates and the return of Nigerians living abroad
just before the recession.
Though Africa has a couple of urban cities that attract
foreigners, visitors and investors, these cities' rapid rate of
urbanisation does come with its challenges. However the
focus of this article is to showcase the top ten fastest growing
cities in Africa and what makes them tick.
There are indeed grey areas that need to be looked into, as
regards the African cities that continue to grow rapidly with
reckless abandon. Cities such as Bamako, Ouagadougou,
Abidjan, Kinshasa, Luanda and Lagos, need to be well
structured to attain their full potential. A critical assessment
of the bottlenecks will also serve as a panacea towards
improving environmental standards within urban settings.
Here are the top ten fastest growing cities in Africa.
10. BAMAKO, MALI
Bamako is the capital city of Mali and also the largest. In
2006, it was estimated to be the fastest growing city in Africa
and sixth fastest in the world. Currently it has a growth rate
of 19 people per hour.
9. JOHANNESBURG, 8. ABIDJAN, 7. KHARTOUM
Three cities are tied on our ninth spot of fastest growing African
cities. In ninth position, we have South Africa’s largest city
and one of the most beautiful cities in Africa, Johannesburg,
Ivory Coast’s Abidjan and Khartoum, the Sudanese capital.
All three cities account for a growth rate of 21 people per hour.
Johannesburg is the most beautiful and most organised of
the lot. It is in fact the second largest city in Africa and one of
the 50 largest urban areas in the world.
Johannesburg, South Africa
Khartoum, Sudan
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THE SOUTH AFRICAN
VALUERNOVEMBER 2016, NO 126
Abidjan, Ivory Coast
6. NAIROBI, KENYA
Known as the safari capital of Africa, Nairobi is an energetic,
modern city that serves as a fascinating introduction to both
wildlife and nightlife. It records a growth rate of about 22
people per hour.
5. OUAGADOUGOU, BURKINA FASO
Often shortened to Ouaga, Ouagadougou is Burkina Faso’s
capital city, it is also the largest city in the West African country.
Ouaga is the economic, administrative, communications and
cultural centre of Burkina Faso.
4. LUANDA, ANGOLA
Luanda, formerly named São Paulo da Assunção de Loanda,
is the capital and largest city in Angola, and the country’s
most populous and important city. Luanda is a port city on
the southern coast of Angola. Luanda is the most expensive
city in the world for expatriates. It has a growth spurt of 34
people per hour.
3. CAIRO, EGYPT
Egypt’s capital is the third fastest growing city in Africa. Cairo
is set on the River Nile and has a growth rate of 44 people
per hour.
2. KINSHASA, DEMOCRATIC REPUBLIC OF CONGO
DRC’s Kinshasa, set on the Congo River, comes in second
with a growth record of 61 people per hour. Once a site of
fishing villages, Kinshasa is now an urban area with a 2014
population of over 11 million.
1. LAGOS, NIGERIA
Unlike most cities on this list, Lagos is Nigeria’s commercial hub,
not the capital. The small coastal city has an amazing growth rate
of 77 people per hour, hence it is the fastest growing city in Africa.
Strong economic growth, led by an oil boom, has driven the rural
poor towards the city, and the population surge is also being driven
by high birth rates and the return of Nigerians living abroad.
The city of excellence is often referred to by a section of his populace
as, ‘no man’s land’; others call it, 'Lasgidi – city of hustlers'.
Conclusively, a thriving urban city without affordable housing,
portable water supply, energy, transportation, security, sewage
disposal and drainage is like a ship without a rudder.
These cities need to up their game to stand the heat of their ever
growing population.
Posted by: Lekan Olofinji in Real Estate, Tourism & Travels
14 October 2016. Sent to us by Debo Adejano
78 79
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VALUERNOVEMBER 2016, NO 126
P R O F E S S I O N A L D I R E C T O R YEA
STER
N CA
PE
GAUT
ENGBOYD VALUATIONS (PTY) LTD
Commercial, Industrial and Retail Property Valuers and Consultants11 Providence Place, Old Seaview Road, Port Elizabeth 6070PO Box 27981, Greenacres 6057Tel: 086 111 1789 • Fax: 041 368 9815Cell: 082 655 9299 (G Boyd) • Email: [email protected] J Boyd: B Com (Real Est), MSc (Property Studies) NDPV, MRICS, MIVSA, Professional Valuer
BRUCE MCWILLIAMS INDUSTRIES (PTY) LTD
Property Managers – Brokers – Developers - ValuersBMI House, 85 Cape Road, Mill Park, Port ElizabethTel: 041 396 1400 • Cell: 083 227 3496E‑mail: [email protected] • Web: www.bmi.za.netMark Bakker: Managing Director, Professional Valuer, MIVSA
MASSEL PROPERTYSERVICES (PTY) LTD
Specialists in mass valuation, valuation monitoring, rates policies, expropriations, market valuations, property consultationBuilding No 4, Bartlett Lake Office Park, Bartlett, Boksburg 1459PO Box 5117, Boksburg North 1461Tel: 011 894 2311 • 011 918 4895/6/7 • Fax: 086 686 1952Email: [email protected] F Collatz: Professional Valuer, FIVSA, BTech Real Estate, BComm (Unisa), HDip Mun and Admin Law (RAU), IAAO • D W Lombard: Professional Valuer, MIVSA, NDip Prop Val, IAAO
RATES WATCH
The municipal valuation and property rates watch dogUnit 1, Bartlett Lake Office Park, Dr Vosloo and Trichardt Road, BoksburgS 26 10’14.9” E 28 15’14.3”PO Box 15550, Impala Park 1472Tel: +27 11 918 0544/0237 • Fax: +27 086 504 7720Email: [email protected] Massel: CEO • Kokkie Herman: Director, Rates •Ben Espach: Director, Valuations
GRIFFITHS VALUATIONS
Rynlal Building, Suite 41, 320 The Hillside, Lynnwood, PretoriaPO Box 95099, Waterkloof 0145Tel: +27 12 346 4083 / +27 12 346 3972Fax: +27 12 346 6584Derrick Griffiths: Professional Valuer, B.Proc. (NDPV, FIVSA)Cell: +27 83 297 2757 • Email: [email protected]
Attorneys, Notaries, Conveyancers,Valuers, Labour Law Practitioners,Estate and Tax Planning Practitioners29A President Boshoff Street, BethlehemPO Box 693, Bethlehem 9700Tel: 058 303 5241/4 • Fax: 058 303 6926 • Email: [email protected] Breytenbach: MIVSA, Professional Valuer • Danie du Plooy: Professional Associated Valuer
BREYTENBACH MAVUSO INC
FREE
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NOR
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EDRIC TRUST (PTY) LTD
Property, Letting, Sales, Sectional Title Administration, Valuations, Insurance Agents22 Elizabeth Street, Bloemfontein 9301PO Box 300, Bloemfontein 9300Tel: 051 448 9431 • Fax: 051 430 8815 • Email: [email protected] V Fullaway: FIVSA, Professional Associated Valuer, AppraiserEmail: [email protected] • Schalk van der Vyver: Candidate Valuer, Student Member • Neil Fullaway: Candidate Valuer, Student Member
VALQUEST
Property Valuers550 Chopin Street, Constantia Park, PretoriaPO Box 32836, Glenstantia 0010Tel: 012 998 6111 • Fax: 012 998 6722 • Email: [email protected] Vallun: FIVSA, Professional Valuer, NDPV • Marius Groenewald: MIVSA, Professional Associated Valuer, BSc Construction Management, MSc Real Estate
VALUDATA
Valuers, Assessors & Property Consultants3 Petrus Street/Straat 3, Heuwelsig,Kimberley 8301 or 1 Angel Street, NewPark, Kimberley, 8301PO Box 80, Kimberley 8300Tel: 053 831 3382 • Fax: 086 657 0342 • Cell: 082 553 1172 (Pierre de Klerk, Sole member of Panprop CC)Email: [email protected] and cc to [email protected] cc t/a Valudata Reg. no. 1986 0158 0123
DOUGLAS PROPERTY VALUATIONS CC
Tel: 021 794 2702/20 • Fax: 021 794 2707 • Email: [email protected] members are:Colin Douglas: Professional Valuer, Appraiser, BComm, Nat Dip Prop Val, Nat Dip Building Construction • Cherry Douglas: Professional Valuer, Appraiser, BA (UCT), HDE (UCT), Nat Dip Prop Val (UNISA)Other Valuers:Paul Bowen-Davies: Professional Associated Valuer, Nat Dip Prop Val (UNISA) • Geoff Douglas: Professional Associated Valuer, BA Hons (Rhodes) BEd (UCT), Nat Dip Prop Val (UNISA) • Sydney Holden: Professional Associated Valuer, BA BComm Hons, Real Estate, MTRP (SA)
JERRY MARGOLIUS & ASSOCIATES
Property Valuers, Appraisers, Sectional Title Consultants, Arbitrator, Mediator and Umpire PO Box 400, Green Point, Cape Town 8051Tel: 021 434 4702 • 0861 825 848 (VALUIT) • Cell: 082 425 8793Fax Mail: 0866 840 240 • Email: [email protected] Jerry Margolius: M. Phil (UCT), NDip Prop Val, HDip. Arbitration, FIVSA (Life), Aarb, MRICS, Professional Valuer, Chartered Surveyor (Valuations)
MILLS FITCHET MAGNUS PENNY
Countrywide Valuations of Property for all purposes. Specialising also in Agricultural/Forestry Property. Offices in Johannesburg and PietermaritzburgSuite 303, Newspaper House, 122 St George’s Mall, Cape TownPO Box 4442, Cape Town 8000Tel: 021 424 5284/1540/1287/1782 • Fax: 021 424 1146Email: [email protected] A Gibbons: AEI (Zim), FIVSA, Professional Valuer • M R B Gibbons: NDPV, CIEA MIVSA, Professional Valuer • Kyle Keefer: Candidate Valuer
STEER PROPERTY SERVICESt/a STEER & CO
Valuers of Commercial, Industrial and Residential property. Also valuers of Plant and MachineryPO Box 1879, Cape Town 8000Tel: 021 426 1026 • Fax: 021 426 1183Email: [email protected] • [email protected] M Hofmeyr: MIVSA, Professional Valuer, Appraiser • John P van der Spuy: MIVSA, NDPV, Professional Valuer, Appraiser • Nina Vass: BSc (Hon) Property Studies (UCT), Professional Associated Valuer, Appraiser
Property economists, valuersand town planners. Valuationsnationwide of all property types11 de Villiers Street, Bellville 7530PO Box 1566, Bellville 7535Tel: 021 946 2480 • Fax: 021 946 1238 • Email: [email protected] Rode: BA, MBA, Professional Valuer, FIVSA, CEO: Rode & Associates (Pty) Ltd • Karen Scott: BCom Hons, Professional Valuer, MIVSA, MRICS • Monique Vernooy: BTech, NDREE, Professional Valuer, MIVSA • Madeniah Jappie: BSc Hons, Professional Associated Valuer • Tobias Retief: B.A, NDREE, Professional Valuer, MIVSA • Janelle van Harte: Candidate Valuer • Marlene Tighy:BSc Hons, MBL, Pr Sci Nat, Professional Valuer, MRICS
RODE & ASSOCIATES (PTY) LTD
WES
TERN
CAP
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APPRAISAL CORPORATION
Professional Valuers and Appraisers withoffices in Cape Town and Southern Cape. Member of SAPOA35 Kloof Street, Cape Town 8001PO Box 4157, Cape Town 8000 • www.appraisal.co.zaTel: 021 423 6400 • Fax: 021 423 6410 • Email: [email protected] F du Toit: NDPV, NDPD&M, FIVSA, Professional Valuer, Appraiser • Ms J L Falck: BCom (Hon), FIVSA, MRICS, Professional Valuer, Appraiser • S E Jacobs: NDRE, Professional Associated Valuer • W R Green: NDRE, Candidate Valuer • R Jackson: BSc (Hon) Property Studies, Candidate Valuer • K C Davids: Candidate Valuer
ADVAL VALUATION CENTRE
Property ValuationsUnit 8, Mountain View Office Park, 28 Bella Rosa Street, Rosendal, Bellville 7530PO Box 5339, Tygervalley 7536Tel: 021 914 9062 • Fax: 021 914 2184www.adval.co.zaJ F (Johan) Cilliers: BTechPV, NDPV, FIVSA, MRICS, Professional Valuer, Appraiser • A Cilliers: BTechPV, NDPV, MIVSA, ProfessionalValuer, Appraiser
WES
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CAP
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GoIndustry DoveBid SA
Valuation, appraisal & disposal specialists of industrial & corporate plant, machinery, equipment & propertyA liquidity services marketplaceNational footprint, global reach10 Evelyn Road, Retreat, 7945, Cape TownTel: 021 702 3206 • Fax: 021 702 3207www.Go-Dove.com/southafricaJohn Cowing (Managing Director), [email protected] John Taylor (Associate Director), [email protected] Kim Faclier (Property Managing Director), [email protected] Donovan Dalton (Head of Valuations), [email protected]
P R O F E S S I O N A L D I R E C T O R Y C O N T I N U E D
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MPU
MAL
ANGATETRAGON VALUERS (PTY) LTD
Professional ValuersPO Box 2654, Evander 2280Tel: 017 632 1552 • Fax: 086 514 5981Email: [email protected] • Witbank • SecundaJ J Steyn: Professional Valuer, NDPV, MIVSA • J Reyneke: Professional Valuer, NDPV, MIVSA • O J Potgieter: Professional Valuer, NDPV, MIVSA • WJ Nel: Candidate Valuer
MILLS FITCHET
Countrywide valuations of property for all purposes. Offices in Gauteng, Cape and KwaZulu-Natal
“We value our land” • “Si linganisa intengo yomhlaba”Tel: 033 330 6990 • 033 234 4321 • Fax: 033 330 3158 • 033 234 4751Cell: 082 895 8880 • 082 781 3875Email: [email protected] • [email protected] R Stephenson: BAgric Mgt, AFM (UK), LLB (Natal), FIVSA • T R L Bate: MSc, BSc, Land Econ (UK), MRICS, MIVSA • S B G de Klerk: MSc, BSc Bldg, Pr.CPM, MCIOB, NDPV, MIVSA • S Aldridge: NDPV, CEA, MIVSA
VALUERS AFRIKA (PTY) LTD
Valuers, Appraisers, Property Consultantsc/o de Clerq and Wes Street, Ermelo 2351PO Box 2472, Ermelo 2350Tel: 017 811 2212 • Fax: 086 676 4502 • Email: [email protected] Winckler: Professional Valuer, Appraiser (FIVSA) • Ian Müller: Professional Valuer • Sydney Lukhele: Professional Associated Valuer • Christiaan Winckler: Candidate Valuer, Professional QS
APPRAISAL CORPORATION
Professional Valuers and Appraisers withoffices in Cape Town and George. Member of SAPOAUnit 3 Beetlewood, 25 Wellington Street, George 6529Tel: 044 874 1902 • Fax: 044 874 2831 • Email: [email protected] • www.appraisal.co.zaM J Steinmann: NDPV, NDCS, MIVSA, Professional Valuer, Appraiser • J F du Toit: NDPV, NDPD&M, FIVSA, Professional Valuer, Appraiser
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