the south african valuer...2 3 the south african valuer november 2016, no 126 the south african...

42
A THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 VALUER THE SOUTH AFRICAN VALUER November 2016, NO. 126 GS's visit to REIZ Northern Branch Country Seminar mSCOA: an overview SA's oldest practising valuer?

Upload: others

Post on 09-Jun-2020

10 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

A

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

VALUERTHE SOUTH AFRICAN

VALUERN

ove

mb

er 2

01

6,

NO

. 1

26

GS's visit to REIZ

Northern Branch Country Seminar

mSCOA: an overview

SA's oldest practising valuer?

Page 2: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

1

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

M

Y

CM

MY

CY

CMY

K

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]

Page 3: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

2 3

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

[email protected]

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

1

4

6

28

38

43

49

53

55

57

59

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

60

66

67

68

75

78

Continued from page 1

Page 4: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

4 5

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

Page 5: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

6 7

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

Page 6: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

8

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.

Page 7: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

11

THE SOUTH AFRICAN

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

Page 8: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

12 13

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 9: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

15

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 12614

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!

Page 10: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

17

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 12616

Page 11: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

18 19

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 12: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

20 21

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 13: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

22 23

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 14: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

24 25

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 15: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

26 27

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 16: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

28 29

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 17: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

30 31

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

• 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

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

Page 18: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

32 33

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 19: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

34 35

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 20: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

36 37

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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,

[email protected]

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.

Page 21: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

38

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 22: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

40 41

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 23: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

42 43

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 24: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

45

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 25: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

46 47

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

• 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.

Page 26: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

48 49

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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:

Page 27: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

50 51

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 28: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

52 53

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

• 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)

Page 29: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

54 55

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 30: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

56 57

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 31: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

58 59

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

(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

Page 32: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

60 61

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 33: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

63

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 12662

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 34: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

65

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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:

[email protected]

64

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

Page 35: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

66 67

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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.

Page 36: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

68 69

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 37: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

70 71

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

Page 38: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

72 73

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

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

Page 39: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

74 75

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

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

Page 40: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

77

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

Page 41: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

78 79

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

THE SOUTH AFRICAN

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

STA

TE /

NOR

THER

N CA

PE

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

E

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

TERN

CAP

E

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

Page 42: THE SOUTH AFRICAN VALUER...2 3 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 THE SOUTH AFRICAN VALUER NOVEMBER 2016, NO 126 SA Valuer Editorial Panel: Thys Beukes (Central Branch)

80

THE SOUTH AFRICAN

VALUERNOVEMBER 2016, NO 126

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

SOUT

HERN

CAP

E

KWAZ

ULU-

NATA

L

SAIV members are encouraged to become

part of the Professional Directory. Promote

your company and support your profes-

sion’s mouthpiece.

Articles and letters are welcome.

Contact The Editor:

[email protected],

[email protected]

or on 011 442 5644

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

SAIV logos for use by members

Email signature logo

Contact us for full details on the use of the SAIV’s logo

and other advertising options: [email protected]

Website logo