Businesspeople are invariably practical people, and so the recent interest rate cut has been greeted by the real estate industry with enthusiasm. In a recent News24 feature, a number of prominent figures in the field suggested that this was a ripe opportunity, and the time was right to buy.
‘The current market is one to seriously consider if you are a buyer who has a secure monthly income and has a long-term view of where you want to live or invest. The cumulative effect of the interest rate cuts has reduced monthly payments by almost 20% from where it was in March this year,’ said Herschel Jawitz.
Others – from Leadhome, ooba, BetterBond, High Street Auctions, Leapfrog, RE/MAX, Seeff and Pam Golding – joined him in this, pointing to the favourable payment terms that the current circumstances would make possible.
This makes some sense.
This is a rare opportunity to turn turmoil to advantage. Somewhere within these sentiments is the idea that the pandemic will not last forever. Sooner or later (probably sooner in the grand scheme of things), South Africa will return to normal.
That is true, but it is also the problem. ‘Normal’ in the South African context is a stressed condition. The economy as a whole has underperformed for a decade. Per-capita-GDP growth in the years following the global financial crisis was at around half the world average. Before the pandemic hit, South Africa was in a recession, and unemployment stood at 29.1%.
Even at that point, for growing numbers of South Africans, a ‘secure monthly income’ was uncertain. With some three million jobs estimated to have been lost in the lockdown period, this can only have escalated exponentially.
Mired in these circumstances
The passing of the pandemic will not address this. South Africa is mired in these circumstances largely because of a string of policy choices. One might point to racial empowerment policy, the politicisation of the civil service and rigid labour laws. And of course, over the past two-and-a-half years, there has been the move on property rights – the commitment to a policy of expropriation without compensation (EWC), the process to amend Section 25 of the Constitution and the Expropriation Bill.
The latter has a direct bearing on those contemplating investing in fixed property; the frame of reference used to drive the issue is the need for land reform. A government empowered to seize at no compensation represents a real threat to property investments, whether these are farms, residential properties or business premises.
Curiously, the real estate industry has been quite sanguine about it, seeing it largely as a matter for the farming sector to deal with. Some voices have airily dismissed concerns on just these grounds. Yet, to the extent that EWC is justified by land reform, residential properties could very well be within its purview. It is important to recognise this.
Acknowledging the danger raises the question as to how it should respond. Business has a responsibility to understand the realities of the society in which it is operating. It also owes it to its clients to be forthright in how it intends to deal with this threat.
There have been some less than encouraging responses from within the financial sector about this. One property financier tweeted: ‘In the event of expropriation, the bond repayments would still remain owing to the mortgage lender. However, we understand that the rights of all parties will be considered in any expropriation processes and have no reason to believe that residential properties will be affected.’
Cas Coovadia, then of the Banking Association of South Africa, similarly commented: ‘Where land is being expropriated, government needs to guarantee repayment to the banks.’
All of this is deeply disappointing, not only for the evident complacency of the responses, but for the evasion of responsibility evident in them.
Business cannot exist in a society divorced from its realities, and from its attendant responsibilities. Inasmuch as it sees opportunities to sell to potential clients – an entirely honourable thing – it must be forthright in speaking on those issues that threaten them. And it needs to realise that it cannot insulate itself from these threats. It needs to find its voice.
EWC is not an issue that will evaporate. Nor can it be dismissed as someone else’s concern, or as a self-evidently destructive idea that will never be put into operation. Businesspeople need to understand that their pragmatism and practicality is not a universal attribute.
As the adage goes, they may not be interested in politics, but politics will find a way of being interested in them.
[Picture: Tierra Mallorca on Unsplash]