Fixing Vukile-owned malls damaged by riots to cost less than expected

Six of the property fund’s 45 shopping centres in SA were impacted by the recent unrest in KwaZulu-Natal and Gauteng.
Vukile’s KwaMashu Shopping Centre, seen here before suffering significant structural damage, is only expected to return to full operation in Q2 next year. Image: Supplied

JSE-listed Vukile Property Fund expects repairs to properties damaged during the recent civil unrest in the country to cost less than 2% of the value of its South African retail portfolio.

It confirmed this in a Sens update last week, adding that “estimated damage suffered is less than originally anticipated and is significantly lower than the value for which Vukile is insured”.

With the fund’s direct retail investment in southern Africa valued at around R14.7 billion, fixing the affected properties is likely to cost the company less than R300 million.

“Having spent the past week on site with our team of professional advisors and actively engaging with tenants, service providers and insurers, management now has a good understanding of the estimated damage and a project plan to reinstate damaged properties as quickly as possible,” Vukile said.

Read: The scale of the destruction

The fund also reported a potential loss in rental income of less than 3% of the company’s annual gross rental income, for which it intends to claim from insurers.

‘Ample facilities’ 

“Vukile has ample undrawn facilities at its disposal to enable the company to effect repairs ahead of its insurance claims being finalised, thereby ensuring its centres are fully operational as quickly as possible,” it stressed.

The real estate investment trust (Reit), which has a South African retail portfolio comprising 45 properties, initially reported that six of its shopping centre properties located in KwaZulu-Natal and Gauteng were damaged due to the riots and looting in early July.

The civil unrest ensued largely in the two provinces after former president Jacob Zuma handed himself over to the police to serve a 15-month jail sentence for contempt of court. The unrest resulted in the destruction of at least 161 shopping centres, 11 warehouses and eight factories, leaving more than 300 people dead.

Vukile expects to have most of its affected properties fully operational between mid-August to end of October 2021, with most of the damage related to shopfronts, roller shutter doors and fixtures and fittings.

Only the KwaMashu Shopping Centre in KwaZulu-Natal suffered significant structural damage. It constitutes 60% of the total damage to Vukile’s South African retail portfolio, and is expected to be fully operational by April 2022.

In July, following the unrest, President Cyril Ramaphosa announced government’s intentions to provide support to the affected businesses.


Finance Minister Tito Mboweni and National Treasury Director-General Dondo Mogajane last week revealed that a financial support package worth R36.2 billion will be used to not only cover insurance claims from affected businesses but will also contribute to providing social relief and funding for the police and the South African National Defence Force.

Small businesses affected by the riots and looting stand to suffer the most financial strain according to Keillen Ndlovu, head of listed property funds at Stanlib.

“It’s unfortunate that some of the smaller tenants may not be able to recover from this. [But] some will benefit from government support as well as incentives from landlords,” he told Moneyweb.


Ndlovu also noted that, although destructive, the riots and looting seen in previous weeks will not deter businesses from seeking growth opportunities in township locations where most of the looting and riots occurred.

Read: SA property, retail firms bet on townships despite unrest

“While the confidence has been dented, the demand for retail services and goods has not gone away. In some areas people have to now travel longer distances to do their shopping.

“Centres that were not damaged and those that are able to open sooner will benefit from additional demand in the short term,” he said.

“Longer-term opportunities remain in the lower to middle LSM markets – this is where the population is and where growth opportunities are.”


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