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R30bn Mooikloof project ‘raises red flags’

Our obsession with mega projects is not good for South Africa – Development Action Group.
An architect's model of Mooikloof Mega City, which shows the massive scale of the Pretoria east development. Image: Suren Naidoo, Moneyweb

The R30 billion Mooikloof housing project launched by President Cyril Ramaphosa earlier this month raises red flags for the future of housing.

The project, at Mooikloof east of Pretoria, aims to able build “housing at scale” with 50,000 apartments, priced at between R495,000 and R799,000, and targeted at state employees. It will create about 41,000 jobs and add an estimated R75 billion in turnover to the economy.

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Read: Infrastructure a key part of economic recovery plan – Ramaphosa

While this is undoubtedly impressive, it raises several concerns.

On one hand, developing new cities or towns on vacant land seems appealing. The cost of installing services is substantial, but there is less public contestation and such developments can theoretically provide housing at scale.

However, developments such as Century City in Cape Town, and Tongaat in eThekwini have shown how the new towns have become increasingly exclusive and unaffordable for poor people or even the middle class.

The alternative is to densify our cities and ensure that poor and vulnerable people are living close to current economic centres and are not burdened with high costs of transport and distant amenities. This can be costlier, but in the long term has significant benefits both for citizens and for the integration of South African cities.

Housing priorities 

Which brings me to the next point: what are the highest priorities for housing? We have an estimated 2 700 to 3 000 informal settlements and thousands of people living in poorly constructed backyard structures. It is unlikely that many of them will be able to afford or purchase apartments in the Mooikloof scheme. Dealing with the housing mess in South Africa, doesn’t require any mega projects.

It requires political commitments to make the hard choices – aligning political will for informal settlement upgrades across party lines, making resources and technical capacity available, and reforming some of the key impediments to delivery.

To build a new future we need to fix the foundations, and not just change the façade. The other critical priorities to be considered are in relation to public transport and climate change. Investing in robust public transport for metros and secondary cities could signal a change in development patterns and in our dependence on private vehicles.

The Mooikloof development assumes that ownership models are the best solution for South Africa and its poorer citizens.

Public rental stock and social housing are not part of the mix. This is alarming.

Global trends have demonstrated that well supported public rental and social housing models are critical to protect affordability for families over the long term. It is short-sighted to view the “home” as an economic asset whose success is measured by “return on investments”. This will recreate our current patterns of development, where collective body corporates will have to manage long term operations. This model is precarious, as the income diversity of the ultimate homeowners is significant. Such mega-developments should rather allow for different forms of tenure, including rental and social housing.

Infrastructure investment of this magnitude has historically been used to rebuild cities and in turn, revive the economy, after the world wars for instance. But South African history demands that some of the historical projects be revived. For instance, in District Six, several hundred land claims are still awaiting development.

Prioritise small contractors

This links to another point: it is common in government contracts that a certain percentage (often 30%) of construction is given to small upcoming emerging contractors, but the main contract is always awarded to large construction companies, which often use these emerging contractors as labour brokers. This often means that the smaller companies do not grow and may even collapse once the project is completed. If we are serious about a significantly different economic structure, we have to rethink the entire procurement model for such developments. We should prioritise small contractors, with necessary support mechanisms for growth, rather than just focus on large scale investment and returns.

In the Mooikloof project, the core instrument is the public-private partnership, where private sector resources will get incentives from government investment in infrastructure. The central role for the private sector in the delivery of housing is indisputable, but it is critical that the significant public investments in infrastructure are accompanied by clear guidelines and margins for the private sector. If the development goes ahead as planned, and everything is implemented exactly as imagined, it is likely that land values will skyrocket by the time the final unit is completed.

The property market trap

Property values in neighbourhoods like Century City and Tongaat have climbed up to 200% between the first set of developments and the more recent developments. This puts the entire project at significant risk of falling in the property market trap, where the same development becomes unaffordable due to rapidly escalating serviced land prices. This can only be resolved by clear guidelines and policy parameters for managing land price escalations and, as mentioned earlier, by a mix of tenure, including public rental housing.

Lastly, the development of such mega projects has not been our strength.

From the Joe Slovo project to thousands of other housing projects, very few developments have reached the intended scale. Often these projects spend large budgets on technical studies, feasibility analyses, and engineering drawings, but eventually only a fraction of the development is implemented. And, even if the development does come to fruition, if it requires this degree of vigour and energy, then why not get behind the hundreds of housing and informal settlement upgrading projects that are at a standstill?

It is now our responsibility to scrutinise how our shrinking resources are invested and for what purpose.

Kumar is executive director of the Development Action Group.

© 2020 GroundUp.

Views expressed are not necessarily those of GroundUp.
This article is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License and was originally published here.

LISTEN: Baldwin Properties CEO Steve Brookes discusses the Mooikloof Mega City project with Nompu Siziba

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while all other infrastructure and towns are neglected……can’t understand these peoples reasoning.

ANC – R 30 billion = theft / stealing / corruption .

Disselboom will be your pessimist for the day – this project is somehow scary for property value and the character of the “ooste van Pretoria”.

Similar thing been happening in Centurion for years now, just in much smaller chunks, where a town is densified at a pace which overtakes the infrastructure and the area per owned unit rapidly decreasing, which changes the character irrevocably.

You would be used to Disselboom being not so politically correct, and thus please look at the real-world of property value and the bigger picture of how economies work and not just the populistic need for housing.

The entire idea is based on the socialist central planning of society and complicated by incompetence and negligence. I worked in the financial hub of Chicago and lived 40km from the office. The train took me to the office on time, in no time. It wasn’t the legacy of apartheid that forced me to live 40km from work. It was the realities of the free market that made it cheaper for me to take the train.

This attempt to engineer an equal society where people of different capabilities, mindsets and incomes can live in the same neighbourhood is based upon a shocking ignorance of economic realities and human nature. The outcome is limited to two alternatives. Either the entire neighbourhood will eventually be populated by wealthy individuals because the initial beneficiaries have cashed in, or the wealthy part of the community will cash in and move out, leaving behind a slum. I promise you, no matter what the central planners believe, the “hidden hand” of the market will sort this mess out, and the results will be the opposite of what they intended.

Mooikloof will become DoringGat.

Surely you cannot compare SA with USA in any way.

Also, have you travelled in NYC? California?NJ LA?? where you would have noticed lots of slums close -and not 40km – to (notoriously) popular LA (Hollywood) Brooklyn Bridge. The list is endless.

Why can’t you compare the US and SA? As far as I know humans live on both land masses. Their behaviour and decisions do differ yes, but that’s where the irony comes in. Did you even look at the list of states/cities you mentioned? Do you realise what they happen to have in common?

New York State = Democratic Party since 1988
New York City = Blue since 1928
New Jersey = Democratic stronghold since 1992
California = Democratic since 1992
Los Angeles = Democratic since 1988

Is it just a coincidence that these states and cities you chose to mention all blue states and cities run by politicians pushing more and more socialist policies?

So let’s see what the people (“‘hidden hand’ of the market” as Sensei put it) of the six biggest states have done.

Just in August 2020, moving companies in New York City said they could not handle the demand for people wanting to move out of the city, so much so, that had to decline business because they didn’t have the capacity.

Over the last decade each of biggest 3 blue states (California, New York, Illinois) lost an average of 1 million people per year to other states.

While the biggest 3 red states (Florida, Texas, Tennessee) gained almost an average of 1 million people per year from other states.

Over the last decade the 3 red states mentioned also gained more than double the amount of jobs as the progressive states. If that doesn’t tell you anything then I can’t help.

We’ve seen similar things happen in South Africa with people leaving certain provinces to move to a certain Western Cape province and it will just ramp up even more over the coming years.

IcedCoffee, thank you for this very informative and insightful comment. You have managed to condense an entire degree course in political-economy into one comment.

@Sensei

Thank you. That means a lot coming from you. I always keep an eagle eye out for your comments as you word my thoughts better than I can with your condensed yet well worded insights.

Our Communist government loves Megaprojects just like they did in the Soviet Union. That is why they call each other “Comrade” and they are always working on their “new plan”. Pravin Gordhan is a true 1950’s communist who refuses to close SAA because he believes in a centrally planned economy. Therefore the state “must control every aspect of our lives” and he hates anything being privatised either partly or in whole. He is still of the archaic view that government can run companies successfully. Can somebody please tell him that the Berlin wall fell in 1989?

Well said but it ain’t just ideology. SA’s recent “mega projects” with the ANC regime involved have all show cased massive levels of corruption from the Arms Deal to Medupi etc. The ANC will steal anything but way more lucrative to skim a percent or two from a mega project that scrabble amongst each other on hundreds of small projects. Remeber how even the esteemed (sic) Trevor Manuel supported the Arms Deal through thick and thin; that is the power of big loot.

Absolutely, Jamnadas is so lost in the shroud of communism that he can’t make up his mind. Whilst FinMin he was continuously bemoaning the losses made by SAA, now that he is on the other side of the fence SAA is better than sliced bread…weak puppy

Indeed our communist government love their particular ideology and the comrades are among the most fierce adherents of the “Dead Horse Theory”. A quick read will show how persistent they are by their regular actions. This is how it goes:

“The Tribal wisdom of the Dakota Indians, passed on from generation to generation, says that, “When you discover that you are riding a dead horse, the best strategy is to dismount.” However, in modern business, education and government a whole range of more advanced strategies are often employed, such as:
• Buying a stronger whip.
• Changing riders.
• Appointing a committee to study the horse.
• Arranging to visit other countries to see how other cultures ride dead horses.
• Lowering the standards so that the dead horses can be included.
• Re-classifying the dead horse as living-impaired.
• Hiring outside contractors to ride the dead horse.
• Harnessing several dead horses together to increase speed.
• Providing additional funding and/or training to increase dead horse’s performance.
• Doing a productivity study to see if lighter riders would improve the dead horse’s performance.
• Declaring that the dead horse does not have to be fed, it is less costly, carries lower overhead and, therefore, contributes substantially more to the bottom line of the economy than do some other horses.
• Rewriting the expected performance requirements for all horses. And of course….
• Promoting the dead horse to a supervisory position.”

Illiterate comment!
Welcome to Africa – it’s not for sissies.

As long as these units get built SA will be better off than would have been the case without them. The market will work out who lives in them.
Balwin is an experienced and respected developer with many quality projects behind them. I think this project should be a lot better than the rows of souless RDP houses which are falling apart before they are a year old. The density of the project make providing convenient schools and transport easier.

I like your thinking.

Barriers to entry in established suburbs (excluding townships) are too high.

Looks like another cramped and unimaginative “township”, soon to be infected with the “usual” societal problems?

Hope not, but please be sure that the “purchaser’s” are given title deeds and that they pay their rates, taxes and consumption charges!

I read that as ‘corruption charges’. LOL.

Looks like another cramped and unimaginative communist centrally controlled “township”, soon to be infected with the “usual” societal problems?

Hope not, but please be sure that the “purchaser’s” are given title deeds, that they pay their rates, taxes and consumption charges and the saps have a branch office on each street!

You can say that again, Bob

MW server was on holiday yesterday so I pushed post twice…but it was worth repeating…

Cyril, leave town planning and development to the private sector.

Your R30 billion will in any event become R130 billion when your comrades are done

Government should spend money on bulk infrastructure, roads, sewage plants and reservoirs to enable developers to develop, not try and plan towns. Your Government is ust incapable

Ask me, our useless incompetent ANC led Municipality took 10 years to sign off on a project, losing in excess of R100 mill in rates, and other services

Really! It’s called planning and a stable Government to work with the private sector

The ANC have let us down and will continue doing so

“The only predictor of future behaviour is past behaviour!

Your wishy washy ideas are just that!

Wishy washy

‘Add an estimated R75 billion in turnover to the economy.’ Lol tell popeye april fools day is next year

The project will house mostly government employees. They will use their housing loan allowance to purchase and pay off the properties. That’s why the price range is so specific.

You hit the nail on the head.
This project will most likely be sponsored by government housing subsidies, payed by the taxpayer.
Very nice project for Squirrel to showcase the recovery and job creation.

Who in his right mind launches a R 30 bil housing project at this stage of the game.

Who gives a hoot about affordable housing!!! This project is for profit and is being undertaken by a JSE listed company so when the money trickles down to the workers and contractors then they can use it to go and buy affordable housing. It is not Baldwin’s issue..it is the ANC’s problem that the government cannot do squat without billions being squandered!!!

Damned if you do and damned if you don’t. If we are going to adopt our south african fear and negativity then we are not going to do anything. There is money here that can be made by Balwin and unless something goes horribly wrong.

For as long as the ANC is in control, things will go horribly wrong. When the democratic system empowers the collectivist mindset to control the resources of the state, disaster is unavoidable.

HOW MUCH HAS BEEN STOLEN ALREADY?

Someone got paid to get it off the group. Just saying.

Projects at between 10 an 15K per SQM wont solve any housing problem. This project should be in Mamelodi upgrading it.

Answers I want: why was it decided to be built there specifically…? lots of other less densed areas in the vicinity of Pretoria and surrounds. Directly opposite the so called rich people of Mooikloof Heights/Hills, was it to make a point/stand and to p…them off? Then how is Garsfontein drive going to handle the traffic? If it is or was envisaged to upgrade the roads then why was that not done beforehand? Where are they going to get their water from, Randwater or the closest country estate reservoir? If the latter then why was the residents not ‘informed’beforehand? Also should ‘nt residents in close proximity have been in the know beforehand so they could have objected if they wanted to? Couple of valid questions I hope to the Marxist powers that be

This is just like apartheid styled dormitory living with new ghettos for the poor on the periphery of the city.

Let me understand this a 32m2 studio apartment for R499k. Thats R15,5k per square metre and this is being marketed for the gap market?

I understand government needs to show some sort of infrastructure build. this is pure profit driven no developmental mandate. In my many years in housing I have yet to see a site with 41 000 people on it. At any given time maybe 3500 employed on a temporary basis.

But kudos to Balwin for selling this to Human Settlements.

Densify the cities? Great idea, pack them in like sardines. I like the quiet life in the rural areas that are being depopulated.

is this mega city going to have its own municipality?

With multiple, deployed anc and eff candidates fit for the trough!

The only red flag for this project is: it does not involve brothers/comrades/cadres and the like.

Balwin – with their proven track record – will not disappoint the President. A lot more can be said about Balwin, but we know the company
has the expertise to deliver on time and within budget – this is how big business earn their reputation.

We need more – albeit on a smaller scale – Mooinooi’s close to established infrastructure. Simply, the lower income people are too far from us well to do’s. The closer they are to us, their thinking will change. Their kids will go to school with our kids. Our kids will befriend their kids. And very soon
– our horizons will be broadened
– our kids will force us to accept their friends
– they become like us.

This will become ANC flagship project and will exceed our expectations.
Hopefully the naysayers would have packed their bags and left Saffa by then, failing humble pie will have to be eaten.

This project should have happened 30 years ago!!

The ANC government and “housing projects” in the same sentence….reminds me of a certain Bible verse:

Matthew 7 verses 24-27

…regarding the “foolish man who built his home on SAND.”

Perhaps just share out the money now ?
Easier and quicker.

The property sector is already struggling with vacancies because of recent over supply of housing and Steve decides to add more to the existing problem. I dont understand the reason to add a mega city over and above the existing problem. It could work better to use the money to upgrade the existing infrastructure in existing cities.

There are high density suburbs in the heart of SA cities. But it would be “xenophobic” to discuss why South Africans are relegated to the far fringes.

End of comments.

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