1. 1 Actual Regulatory Cost of Property Development on Selected Municipalities in South Africa Consultative Workshop with Municipalities 30 April 2013 Southern Sun Hotel, OR Tambo Airport

2. Presentation Outline 2 1. Project Brief2. Study Areas3. Limitations of the Study4. Project Approach and Methodology5. Cost Comparison : Findings6. Municipal Challenges and Constraints7. Property Developer Surveys8. Summary of the Study9. Recommendations10. Way Forward

3. Project Brief 3 To comparatively investigate the municipal development cost of property-related projects in select municipalities in which SAPOA members are most active. To determine both the costs of doing property- related investment; as well as to assess possible limitations posed by municipalities that impact development progress and feasibility. To comparatively investigate the municipal development cost of property-related projects in select municipalities in which SAPOA members are most active. To determine both the costs of doing property- related investment; as well as to assess possible limitations posed by municipalities that impact development progress and feasibility.

4. Sampling/Municipal Selection 18 Municipalities was selected (please see map on next slide). Objective to study two representative municipalities for each province ideally the largest cities. Mandate from GGDA to include all Gauteng Metro’s. Selection is regarded as a pilot project for a future larger sample which will be included. Wish list of larger sample for future analysis included in the report. Budget and capacity limitations. 4

5. Sampling/Municipal Selection 5

6. Overall Methodology A. Municipal Cost Assessment Findings ObservationsRecommendations B. Municipal Capacity Surveys C. Developer Experience Surveys 6 Study comprised of three components: A.Municipal Cost Assessment B.Municipal Capacity Surveys C.Developer Surveys

7. A. Municipal Service Cost 1.Finalise Reference Framework 2. Review Rates and Tax Policies of individual municipalities 3. Identify information gaps and uncertainties 4. Consult Municipal Departments to fill data/information gaps and ensure correct interpretation of calculation methods 5. Data capture, information review and critical analysis 6. Investigate outliers 8. Comparative Analysis and Results 7 7. Consult with Municipalities to analyse and understand outliers a) Identify cost indicators to be studied b) Develop appropriate & standardised scenarios Main Respondent Groups Town planning departments Budget department Call centre Engineering departments

8. Development Scenarios Type of DevelopmentDescription of the Development Medium Density Residential Developments 20 unit townhouse sectional title duplex (100m² each) on a 0.8ha site Retail Centre Regional Retail Centre (GLA of 40 000m²) on a 10ha site Commercial Office 8 floor high-rise office tower block (1 000m² per floor) on a 3200m² site Industrial Large industrial factory (10 000m²) on a 2.5ha site 1. Environmental Impact Assessment Fees9. Sewerage Consumption Charges 2. Zoning and Re-Zoning Fees10. Refuse Consumption Charges 3. Township Establishment Fees11. Electricity Consumption Charges 4. Subdivision Fees12. Vacant Land Rates 5. Building Plan Fees13. Property Rates 6. Sewerage Connection Fees14. Property Rebates 7. Electricity Connection Fees15. Surcharges 8. Water Consumption Charges Development Cost Components 8

9. B. Municipal Capacity Surveys 1.Finalise Reference Framework 2. Telephonic and questionnaire email interviews with target sample 3. Identify information gaps and limitations 4. Second round interviews to fill data/information gaps and ensure accurate interpretation of responses 5. Relate responses to cost calculations 6. Comparative Analysis and Results 9 Main Respondent Groups Head Engineers Head Town Planners *or respondents designated by department heads. a) Develop focussed questionnaires b) Identify representative departments and contact person for each Municipality

10. C. Developer Surveys 1.Finalise Reference Framework 2. Questionnaire Submission to Database (First Round) 3. Review first round responses 4. Second round submission to increase responses 5. Relate responses to cost calculations 6. Highlight most important responses 7. Comparative Analysis and Results 10 a) Develop focussed questionnaires b) Develop online survey platform Main Respondent Groups Property Owners Developers Lease Brokers Property Management Companies

11. Study Limitations 1. Insufficient financial capacity and timeframe to cover all municipalities in South Africa2. Different municipal structures and thus approach for each municipality had to be adjusted. 3. Standardisation limitations due to many influential factors as well as complicated and unique nature of individual developments 4. Respondents were unable to provide rationale for budgets as respondents were officials responsible for implementation and not necessarily the decision-makers. 5. Vast number of municipalities and range of components to compare led to a difficulty in determining “affordable” and “expensive” 6. Municipalities of various sizes (Metros and LM) are not all identically comparable 11

12. Summary: Observations The municipal service costs of municipalities vary extensively Variations are mainly due to different calculation techniques Costs for indicators such as connection fees can not be generalised as it is reliant on unknown variables (e.g. distance to existing connections, availability of bulk services). Each municipality in their local context face their own unique challenges and problems Frequently highlighted challenge include: – capacity and financial resources – practical experience – backlog on infrastructure maintenance – developers taking advantage of system limitations Negative perceptions towards municipal performance is currently evident from the majority of developers 12

13. Zoning & Re-zoning tariffs 13

14. Zoning & Re-zoning tariffs 14

15. Zoning & Re-zoning tariffs 15

16. Rebated Property Rates 16 ResidentialRetailCommercialIndustrial Johannesburg44584013,653.5001,029.8645363875 Tshwane87966018,956.0001,429.8247447000 Ekurhuleni74000010,430.0007867205142500 Cape Town6062008,486.8006401473334100 Msunduzi111000014,140.0001,066.5605555000 Nelson Mandela Bay74410010,417.4007857705115825 Buffalo City73500012,862.5009702005053125 Mangaung77928827,034.0002,039.13610620500 Ethekwini91290314,504.0001,094.0167353500

17. Rebated Property Rates 17 ResidentialRetailCommercialIndustrial Mogale City6339461479800011161925813500 Emfuleni594108119000008976005830000 George40105442147003179091655775 Mbombela5198249349816774808 Emalahleni57608773211255522222876156 Polokwane47592943050003896641691250 Sol Plaatjie91186319159000144513610661750 Khara Hais1261832132552009998215207400 Rustenburg529947128800009715205197500

18. Property Rates 18

19. Property Rates 19

20. Subdivision 20

21. Building Fees 21 ResidentialRetailCommercialIndustrial Johannesburg2500040500085000105000 Tshwane2244044044088440110440 Ekurhuleni226002013906667580115 Cape Town552321104640220928208016 Msunduzi193451097693222440240 Nelson Mandela Bay52417120840 Buffalo City53330945000202000177600 Mangaung15000047600009520001190000 Ethekwini2915039775087350106750

22. Building Fees 22 ResidentialRetailCommercialIndustrial Mogale City24200575200115040143800 Emfuleni55811875653902148305 George889201007076204516254676 Mbombela62501202502425030250 Emalahleni3226264321120498149910 Polokwane41040820800164160205200 Sol Plaatjie25080501600100320125400 Khara Hais82301108302443029830 Rustenburg

23. Township establishment 23 ResidentialRetailCommercialIndustrial Johannesburg4209 Tshwane72671635011770 Ekurhuleni5375 Cape Townn/a Msunduzin/a Nelson Mandela Bay2280 Buffalo Cityn/a Mangaung34020000006400042500 Ethekwini3424212

24. Township establishment 24 ResidentialRetailCommercialIndustrial Mogale City6676 Emfuleni5295 Georgen/a Mbombela9985 Emalahleni4218 Polokwane6794 Sol Plaatjien/a Khara Hais20601030 Rustenburg6050

25. Water connection 25 ResidentialRetailCommercialIndustrial Johannesburg3428435482 Tshwane1611023610 Ekurhuleni3734845906 Cape Town55806962 Msunduzi1959727605 Nelson Mandela Bay3000035000 Buffalo City2848238664 73045 Mangaungquotation Ethekwiniquotation

26. Water connection 26 ResidentialRetailCommercialIndustrial Mogale Cityquotation Emfuleni2805030200 George135840quotation Mbombela2800034000 Emalahleni2537 Polokwane8948quotation Sol Plaatjie Khara Hais1410017800 Rustenburg2828027131

27. Vacant Land 27 ResidentialRetailCommercialIndustrial Johannesburg4458405573000445840557300 Tshwane12028001503500012028001503500 Ekurhuleni5960007450000596000745000 Cape Town2424803031000242480303100 Msunduzi4040005050000404000505000 Nelson Mandela Bay4464605580750446460558075 Buffalo City4410005512500441000551250 Mangaung1559201949000155920194900 Ethekwini875200109400008752001094000

28. Vacant Land 28 ResidentialRetailCommercialIndustrial Mogale City845600105700008456001057000 Emfuleni3400006375000510000742500 George1002801253500100280125350 Mbombela4459005573750445900557375 Emalahleni2789003486250278900348625 Polokwane4558202050000164000205000 Sol Plaatjie3988074772559818184435 Khara Hais631207890006312078900 Rustenburg1500001875000150000187500

29. Electricity Consumption 29 ResidentialRetailCommercialIndustrial Johannesburg1.210.560.8 Tshwane1.030.320.36 Ekurhuleni1.090.950.99 Cape Town1.40.550.54 Msunduzi0.590.650.59 Nelson Mandela Bay1.070.620.65 Buffalo City0.540.90.97 Mangaung0.940.87 Ethekwini0.750.9 0.51

30. Electricity Consumption 30 ResidentialRetailCommercialIndustrial Johannesburg1.210.560.8 Tshwane1.030.320.36 Ekurhuleni1.090.950.99 Cape Town1.40.550.54 Msunduzi0.590.650.59 Nelson Mandela Bay1.070.620.65 Buffalo City0.540.90.97 Mangaung0.940.87 Ethekwini0.750.9 0.51

31. Recommendations Standardised and transparent costing and calculation approaches. Customer care and liaison to disseminate information and communicate w.r.t. backlogs and system delays. Development consulting services provided in-house by municipalities as a value added development promoting service and additional income generator for the municipality. Mutual understanding of both parties (Municipality and Developers) of the processes its limitations, time constraints and costs incurred. Utilisation of information technology to streamline and track development processes 31

32. Way Forward 32 1. A detailed manual outlining the standardised approach to tariff setting to be investigated and developed 2. Create an Index on development costs to be available to the public 3. Broaden the study areas to a more representative national sample 4. The potential the development and introduction of an Information Technology administrative system 5. Develop an online “calculator” tool to calculate specific costs To ensure the continued relevance of the research, it is suggested the cost analysis be reviewed annually due to new tariff policies released by municipalities in July of every year.