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Bolstered Infrastructure development to ensure South Africa remains leader in African infrastructure

Category Industrial Property News

South Africa is a major economic anchor and an important gateway into the African continent, which contains 30% of the globe's mineral reserves, and more than 1 billion people.

South Africa's economy was originally based on agriculture and mining. But this has changed over the years with services and manufacturing now contributing the greatest share to GDP. South Africa is the best performer in Africa when it comes to trade facilitation logistics, and among the best in terms of transport infrastructure. According to PwC's Africa Gearing Up report, factors supporting South Africa's position are its well-developed financial, legal, communications and transport sectors, as well as an open trade policy and a comparatively strong domestic market.

South Africa (and its people) is known for its resilience. Despite the immense challenges brought on by the Covid-19 crisis, it is clear from recent reports from Treasury, the recent State of the Nation (SONA) address, as well as from various industry sectors, that there are economic green shoots visible, post-pandemic. Some of these shoots may still be relatively small, but they offer some promise of stimulating the South African economy, relieving debt, creating jobs and attracting direct foreign investment.

These opportunities for growth will potentially lead the way for the rest of post-pandemic Africa.

Infrastructure Development, Deregulation and Opening The Grid to Keep South Africa Competitive

Historically, South Africa's transport infrastructure has been among the most developed in Africa, with our air and rail networks being the largest in the continent, and all major roads being in good condition. The need to move goods from ports to inland centres of commerce like Johannesburg, has created a transport- intensive domestic economy, resulting in the transport sector being a key contributor to South Africa's competitiveness in global markets (PwC). Maintaining the level of infrastructure and keeping borders open for transport and logistics is imperative to economic growth and stability.

It is no surprise then, that the most significant economic stimulus measures already announced by the President during the SONA include: a R340bn infrastructure investment project and an increase in local production capacity.

The 2021 SONA certainly had a positive tone, and provided a feeling of optimism while not avoiding the issues South Africa faces in a number of areas. Other themes of the State of the Nation included, among others; economic recovery, stimulating investment, sustainable yet significant job creation, unlocking integrated energy resources, an employment stimulus, the expansion of South Africa's energy generation capacity, and billions in business support and tax relief programmes.

Encouraging with regards to Direct Foreign Investment is that President Ramaphosa's annual investment conferences in 2020 had attracted almost R774 billion of a five-year target of R1.2 trillion, indicating that South Africa is still an attractive investment option for global markets, with positive sentiment remaining, despite the economic setbacks of the past few years (this is a direct quote from Everett). "With its advanced infrastructure, diverse economy, sophisticated capital markets and developed manufacturing capacity, South Africa is the ideal location for any company wanting to reach the continental market with greater effectiveness from a cost and logistical point of view," the President said during an address towards the end of 2020.

Construction as a Main Driver of Socio-Economic Transformation

The most immediate driver of socio-economic transformation's will be infrastructure development. While skill development is branching throughout sectors such as transport, energy, water and telecommunications; construction on key projects has already begun and progress is already being seen, according to a recent IOL article.

One such example in terms of infrastructure development includes the Lanseria Smart City - for which the draft masterplan was completed in November 2020 and is now out for public comment - which is earmarked for radical residential and commercial development in Gauteng's West Rand and is the potential home for 350,000 to 500,000 people within the next decade.

The area's commercial, warehousing and industrial zones are situated along the N14 highway which will serve as a major logistical vein, connecting the new city with Centurion to the north east and the central M5 interchange linking Johannesburg and the North West province. Commercial, warehousing and industrial zones are situated along the N14 highway which will serve as a major logistical vein, connecting the new city with Centurion to the north east and the central M5 interchange linking Johannesburg and the North West province. Read more here.

Additionally, the Infrastructure Investment Plan sets to target construction and rehabilitation of the National roads. Backed by the R100 billion Infrastructure Fund, which is now in full operation, we will see the revival of construction and the creation of instant and consistent job creation.

The Industrial Property Sector Remains Stable

While many sectors have seen the impact of Covid-19, the industrial property sector has remained remarkably stable.

Stephanus Weyers, Director and Principal at API Property Group said: "Considering the current economic climate and the pressure this puts on the real estate industry, it is interesting and encouraging that the effects have hardly been felt in the industrial property sector. We are inclined to believe that this is because South Africa and more largely the Gauteng province has, over the years, become the access point for many business people into Africa. We are encouraged by the fact that the affordable market segment has achieved good growth, which continues to empower South Africans starting their journey on the property ownership ladder with wealth building opportunities."

Michael Schröder, Director of Industrial & Commercial Property at API Pretoria says Industrial property prices have continued on a steady growth path. "With stock remaining stable and enquiries on the increase, it is a sign of good things to come in the future," concludes Schröder.

As an API Property Group Director based in Johannesburg, Dion Williams agrees that industrial property prices are still in an upward trend, with the supply-and-demand scenario pushing purchasers to pay top prices.

Weyers adds: "We are experiencing an influx of established and new international business people intent on setting up shop in Gauteng. New business trends have seen the emergence of a new set of entrepreneurs, looking to establish their businesses within many of the thriving industrial nodes of the country, which is regarded by such entities as the gateway of business into Africa. Moreover, their interests lie in the industrial property market, which has had some of the lowest vacancies in 10 years. The demand for micro- to medium industrial facilities is particularly high, as well an increased demand for storage and warehousing facilities due to a dramatic rise in online shopping during Covid-19. Through our ongoing activity in the industrial and commercial market as API, we have observed that transport and logistics throughout and into Africa is coordinated from Gauteng and Durban. We are also seeing a surge in the demand for manufacturing, combined with the established infrastructure in South Africa with specific reference to roads and municipal services."

Africa is widely regarded as the world's priority node for significant economic growth, and South Africa - with its solid infrastructure and established businesses - is the logical gateway. With additional, significant infrastructure development, opening of the grid to private power producers and new opportunities in local manufacturing brought on by the fourth industrial revolution, South Africa is regarded as the platform from which to access this business growth forecasted for the next 25 - 30 years.

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Author: API Property Group

Submitted 23 Feb 21 / Views 771