The City of Cape Town is Living in a Bubble

Red Tape Strangles Property Development Industry in Western Cape 

By Leani Wessels 

Take a look at the latest audit report on the City of Cape Town. It’s so squeaky clean you can eat off it. But if you look closer at the City’s financials, there are gaps belying the veneer of functionality.  Jobs losses, housing backlogs and overly cautious officials are among the red flags that the property development industry raised at the Western Cape Property Development Forum (WCPDF) conference in May 2019 

According to the property developers’ spokesperson in the Western Cape, Deon van Zyl, it now takes an average of between four and eight years to complete a development in Cape Town – double the time when compared to a few years ago This expanded timeframe, largely due to a long, complex and uncertain regulatory approval process, is now severely curtailing the development of much-needed private and public infrastructure, and has come to undermine the construction industry significantly. 

According to town planning consultant, Tommy Brummersince 2016 there have been 86 amendments to the spatial development framework and this has caused havoc in the planning industry.  

Due to red tape and tough economic headwinds, the industry is in crisis mode with thousands of jobs at stake.   

The property cycle is unpredictable, climate conditions such as the drought and the uncertainty of the timing of approvals all influence financial outcomes. An alignment of the stars is necessary for the successful development and luck clearly plays a role, said John Chapman, director at Rabie Property Group. 

Some of the regulatory requirements are ludicrous, for example, a 30-day period is required from the Department of Labour before work can commence and a contract has to be in place before it can consider the application. Demolition permits and heritage applications were also inhibitors to the development process, he said.

Chapman appealed for the planning applications to be grouped under one umbrella to make it a one-stop shop.  

Fear of mistakes means that nothing gets done at all.

Crispian Olver, author of How to Steal a City: The Battle for Nelson Mandela Bay: an Inside Accountsaid that thanks to the constant restructuring and the politicization of the bureaucratic process at the City of Cape Town, officials are too scared to make mistakes, which means they don’t make any decisions at all.  

Cape Town is hiding the complete annihilation of their housing services, said Olver to a rapt audience.  According to Olver, the City’s usual housing statistics were left out of its most recent financial results for 2017/2018. 

REImag glanced at the Annual Reports for 2016/2017 and 2017/2018. What a shock. Take a look around you when next you’ve been stuck in traffic for two hours to get into Cape Town and come back and tell us that housing isn’t one of the major issues facing the city. The latest Report hardly mentions the words, inclusionary, student, micro, high rise, retiree and affordable. These are sectors in the housing industry desperate for attention and the City has removed all reference to its performance or plans for these from their results. But at least their audit is clean.  

Clean audits do not equal growth.

According to Olver, during his research for his book on the City of Cape Town, someone in the housing department told him: I find it impossible to meet our housing targets because Cape Town is so into clean audits. The finance department is very pedantic and you can’t run these kinds of housing projects with inflexible financial management.  

The centralisation of the department created a complete logjam in the Mayor’s office, said OlverAs more and more authority got taken away from the officials; the portfolio committees, they couldn’t get critical decisions made in the administration. 

The velocity of the economy is largely driven by the speed at which officials are allowed or are willing to do their job. Everything should be done to speed up the process and remove stumbling blocks to the advantage of everyone, especially the least advantaged among us, the WCPDF said.  

Effects on the economy.

Further scrutiny of the City of Cape Town’s financials by Professor Brian Kantor, revealed a net debt position of -R6 billion. Net debt is when you combine Cash and Investments and detract any borrowings.

 I can think of many things you can do with useful capex. You can maintain the (transport) grid, for example, it’s under pressure isn’t it?’ Remember the City’s responsibilities: growth and redistribution! According to Kantor, leveraging a healthy balance sheet such as this would offer the City massive amounts of debt to invest back into bulk infrastructure.  

‘If the City says to you that it doesn’t have money, it should be treated with utter contempt,’ said Kantor. 

Let’s not get distracted from getting the economy working by creating rules and regulations. Let’s simplify and make it easier to invest in the Western Cape. 

 

So where to from here? 

The WCPDF says it has already challenged the Premier Elect, Alan Winde, to establish an Economic War Room with the purpose of formal engagement between government and the private sector, with the sole purpose of addressing bureaucratic and process bottlenecks. “We need to go further and to measure performance at a practical level:” 

  • We want the War Room to measure and report on the process of all statutory applications from date of submission to decision, for all provincial and municipal applications in the Western Cape. 
  • We want the War Room to report on occupancy certificates per municipality on a monthly basis. We need to know what projects are being realised as much as what’s in the pipeline. 
  • The War Room must understand real cost items and industry needs to be open and share industry data, and stop hiding behind anecdotal stories. We need to call out individuals that are stalling delivery and we need to celebrate people who make things happen. 
  • It must monitor all public procurement processes and report on the time it takes to take projects to tender and the time it takes to then draw up tenders, and assess and award tenders. 
  • The War Room must consider the expenditure of public sector capital budgets and investigate in detail when capital budgets are underspent. Underspending of capital budgets takes work from the consulting and construction industries but, worst of all, it takes food off the table of labour that desperately needs employment. Approximately 27% of a capital project goes to labour wages. 
  • It has to track provincial and municipal staff vacancies, specifically those positions that are critical to delivery.  
  • We want the War Room to consider conflicting and duplication of legislation and policies. An active process of cleaning up statutory processes must commence, even if it means declaring intergovernmental conflict with the national tier of government where legislation oversteps limits or where economic investment at ground level is being hampered by such legislation or policies. 
  • We want it to help each municipality in the Western Cape to practically define and illustrate their growth visions in ways that entice private sector investment and inform residents of changes to come. Stop the report writing and draw the pictures. 
  • We want citizens to be informed and be prepared for future change. The Not in my backyard responses happen because nobody has an idea of what the plan is. 
  • We need the War Room to empower people that want to contribute to the economic growth of this province and each municipality in it to be able to contribute constructively. 
  • We want the War Room to create a culture of internal mentorship for officials to help them move from a culture of gatekeeping to a culture of delivery facilitation. Senior officials must be taught to guide junior decision makers. 

Deon van Zyl, WCPDF chairperson said the following: 

Together with UCT’s Nedbank Urban Real Estate Research Unit, we have already invested substantial time and money in practically illustrating the plethora of hoops this industry needs to jump through before we can hit the ground. This work will be presented later this morning. The War Room can hit the ground running with this work in place already. Let’s start there. 

As a voluntary organisation, we have already shown our colours and willingness to roll up our sleeves and contribute. This event is another example of our investment in the Western Cape economy. The money and time behind this event are private sector’s contribution. 

Let’s not get distracted from getting the economy working by creating rules and regulations. Let’s simplify and make it easier to invest in the Western Cape. 

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