News/Insights

TUHF21 is embarking on a bold new journey, building on 18 years of development impact in inner cities through the TUHF Group to explore other markets, grow its existing product portfolio and develop innovative new ones.

The success of the TUHF Group lays a solid foundation for TUHF21 to build on the ethos of ensuring that urban regeneration, management, and training and mentorship of clients continue while having an independent view of the broader business activities across the group.

Essentially, TUHF21 will focus on three pillars to harness fresh opportunities:

• Managing and growing its Intuthuko, uMaStandi, and other products
• Developing new solutions based on relevant and practical research
• Providing agency services to TUHF Limited to ensure the development impact activities continue in a financially sound and highly governed manner.

TUHF21 has charted the course for its next phase of development and growth, ensuring that its members – Luhlaza, uMaStandi and Intuthuko – become viable Social Enterprises in their own right.

Geographic Expansion for uMaStandi

Due to the demand for the uMaStandi product, uMaStandi has expanded to include new areas of finance.

Current areas of finance:

• Gauteng – Soweto, Spruitview
• Cape Town – Khayelitsha, Delft, Mandalay and Montclair

New areas of finance:

• Pretoria – Atteridgeville and Mamelodi
• Ekurhuleni – Vosloorus and Tembisa
• Johannesburg South – Lenasia and Eldorado Park
• Cape Town – Langa, Gugulethu and Blue Downs

Values and Principles

Its values and principles are at the core of ensuring its success. They are:

• Impact through Strategic partnerships and collaboration 
• Sustainable & scalable social enterprise
• Innovation, creativity and continuous learning
• Integrity, accountability and ethical conduct 
• Teamwork, professionalism and high performance 

TUHF21 will focus on incubating businesses rather than having direct contact with entrepreneurs. It is ensuring that the financial solutions developed have business continuity and are sustainable, while always looking for new, innovative ways to provide real development impact.

The Johannesburg Stock Exchange (JSE) is excited to welcome the first listed Social Bonds in South Africa to its Sustainability Segment. The four social bonds valued at R609 million are listed by TUHF Limited (“TUHF”) in partnership with Standard Bank through a securitisation vehicle, Urban Ubomi 1 (RF) Limited. 

TUHF is a specialised commercial property and non-bank financial services company that finances micro-developers in inner cities. The company raises funds through the capital markets and provides these funds to property entrepreneurs who redevelop buildings in urban areas with the aim of supplying high quality, affordable rental housing.

“It is encouraging and inspiring to see South African businesses taking the Sustainable Development Goals (SDGs) to heart, and utilising the JSE Sustainability Segment to drive inclusive economic growth. As the biggest stock exchange on the continent, we are excited to list our first Social Bonds that will enable TUHF through Urban Ubomi to drive sustainable development through the provision of affordable housing and improved access to funding for property SMMEs and entrepreneurs,” says Sam Mokorosi, Head of Origination and Deals at the JSE.

In line with the 2030 Agenda for Sustainable Development, the Sustainable Development Goals were adopted by all United Nations Member States in 2015, and they serve as a shared blueprint to achieve a better and more sustainable future for all.

“The work that will be implemented through the capital raised by Urban Ubomi will significantly contribute to several of the SDGs, and the JSE is honoured to provide an environment that enables social development and financial inclusion in line with the SDGs,” concludes Mokorosi.

The JSE launched the Sustainability Segment in June 2020 with the aim to provide a platform for companies to raise debt for green, social and sustainable initiatives. The segment makes it accessible and easier for companies to list and trade sustainability-related instruments to raise funds for activities directed at sustainable development.

Residents of Johannesburg are usually divided along clear lines with regard to their affections for the city. Some love it with a passion, while others entertain a love-hate relationship with the inner workings of the City of Gold. However, despite the increasing number of potholes and overgrown pavements that characterise Jo’burg’s infrastructure, now and again there seems to be news of a development that causes the doubters among the investors to give the city the proverbial second chance. First it was Maboneng, and now it’s Jewel City.

Crossing the road from the Maboneng retail precinct to Jewel City on foot is a bit like entering one of the then recently completed London Docklands developments. Only launched in September 2020, it is a pedestrian precinct, clean, colourful, spacious and contemporary in design.  

There was a similar positive vibe around Maboneng when it launched roughly 12 years ago. As financial commentator Sinesipho Maninjwa wrote in a 2019 Biznews article, “Maboneng was the fruit of (the young investor, Jonathan) Liebmann’s labour. It attracted investors, trendy galleries and artisanal shops and, in a nutshell, became a shining example of how property development can combat urban decay.”

However, Liebmann’s company, Propertuity, ultimately collapsed. It was a tale of various challenges, including corporate governance and personalities, and accommodation offerings not speaking to the correct market – people who worked in town.

With the pedestrianised Jewel City, however, it appears as though the investors may have arrived at a model for inner-city development success. It is a physical continuation of the Maboneng Precinct, which is a perfect fit for the pedestrianised younger sibling across the road.

Live, work, play

Carel Kleynhans, CEO of Divercity Urban Property Fund, which is responsible for the development of Jewel City, speaks with pride about the “work, live, play” concept that his company has crafted in its development. “We believe in the fundamental value of living close to where you work. The Johannesburg inner city remains a major employment node of southern Africa and is also physically right in the middle of greater Johannesburg, with excellent access to transport. As such it remains very well located, especially for households who do not have private cars.”

Kleynhans says that Divercity, joint-owned by Atterbury Group, Ithemba Property, Nedbank Properties and RMH Property, has so far invested R1-billion in the Jewel City development. Divercity announced in October 2018 that it would be spending R2-billion on Jewel City.

“Contrary to widely held beliefs, there are many South Africans who value a city lifestyle of living within walking distance of amenities,” says Kleynhans. “Maboneng (across the road from Jewel City) still offers this and remains a popular place…”

Maboneng continues

Indeed, the Maboneng Precinct has seemingly morphed in purpose. From being a weekend outing for tourists and visitors from Jo’burg’s northern suburbs and beyond seeking food and arts, it now appears to be an attraction for locals, many of whom will live in Jewel City.

Arts on Main, a heritage building and the first Maboneng Precinct revamp, was home until 2018 to a food market and art and fashion boutique stores. While it is ghostly quiet inside today, a few quality shops and stalls on the Fox Street periphery of the building keep a sense of life and business alive.

“Maboneng has changed, but it doesn’t need to be resurrected,” says Kleynhans. “If anything there are more people in Maboneng now than ever.” Kleynhans’s office is a five-minute walk from Maboneng’s Arts on Main, in Jewel City itself, far from Sandton, where one might expect a booming property fund to position itself.

According to its website, Divercity is a for-profit property fund that is setting a new standard for socially responsible, environmentally sustainable and economically productive urban development, while delivering attractive returns for its institutional investors.

A national imperative

Paul Jackson, CEO of the Braamfontein-based Trust for Urban Housing Finance (TUHF), a specialised commercial property financing company that finances property investors exclusively in inner cities, says urban densification is a national imperative.

“It is happening as part of a natural demographic trend that happens as countries develop,” Jackson says this densification is happening at a much larger scale than people may believe. “According to the Centre for Development and Enterprise, 70% of South Africa’s population will be urbanised by 2030, with more than 60% urbanised already.”

In a word of warning, he says the current approach to urban development and housing investments “has contributed to enormous and unsustainable urban sprawl”, as people flock to urban areas and inner cities. Jackson speaks of the need to manage urban densification carefully, in order to avoid creating urban decay in the process.

Urban sprawl and improvement

Evidence of such warning is found in the hijacked buildings and decay evident when driving through the Jo’burg city centre en route to the six Fox Street blocks that play host to the “pristine” Jewel City.

Kleynhans says they are working with the Johannesburg Development Agency (JDA) to continue the pedestrianisation of Fox Street between Jewel City and Absa, and to connect to the recently upgraded Main Street link between Absa and Gandhi Square.

“I believe a contractor has already been appointed by the JDA and works are expected to commence soon,” he says.

“The City of Johannesburg, across administrations, has been very supportive of the kind of development we do. Our primary engagement with the City is through City officials, who are not political appointees but rather career public sector professionals.”

The oOfice of the Executive Mayor of Johannesburg, Moloantoa Geoffrey Makhubo, stresses the important role the business community has to play in helping the city to attain the goal “of an economically prosperous, safe and liveable City of Johannesburg”.  

Key to the City’s constructive relationship with Divercity is the latter’s commitment to addressing past legacies and iniquities, in line with the City’s own commitments. When asked about envisaged return on investment (ROI), Kleynhans’s answer is telling.

“While we deliver market-related return on equity for our shareholders, we also measure ROI in the form of the significant contribution our business model is making towards the undoing of apartheid-era spatial segregation, improved overall sustainability and access to high-quality, empowering living environments for our tenants.”

A different view

However, Jo’burg city property investor Gideon Mendel, whose property investments are just a few streets away from the precincts, disagrees that the City has the business community’s interests at heart, with security and basic services just two of his primary concerns. Mendel first invested in Jo’burg’s inner city in about 2002, focusing on the City and Suburban area west of what became known as the Maboneng Precinct.

“It was considered high risk, high reward,” he says, adding that in the last five years the cycle had started to reverse.

“My returns started dropping,” he says, adding that investors who look to invest in the city with the hope of establishing a good public-private partnership with the City are being let down.

“There is no consistency in security, sewerage, lights and water, and as a result rentals are going down,” says Mendel. “The City is killing our business model …”

Speaking to these concerns, Mayor Makhubo confirms that City Power has revamped and maintains the street lights to ensure safety at night, rating its performance “at about 75%”, attributing the shortfall to damage to poles by third parties and theft of aerial bundle conductors. He refers to “intelligent-driven and proactive operations … conducted on a daily basis to ensure safety and security, joint operations with other law enforcement agencies and static deployments … to counter street robberies, prostitution and vehicle-related crimes including business robberies”.  

Makhubo speaks of a “24/7 Undercover Unit” apparently at work in the area, with foot patrols and stop-and-search operations conducted in daylight hours. The “area” referred to could be crucial here, as the mayor speaks of the Maboneng Precinct being in Ward 61, “a vibrant area of the CBD”, with anything outside of it possibly being excluded from the special treatment described.

Two-weekend visits over four weeks revealed a visible private security presence in the Jewel City precinct, but no SAPS.

Mendel also speaks of his concern about slumlords. “There are some good builds in the city, but the problem is they have slums next to them.” David Mayers, MD of Quorum Holdings, one of the early investors in Propertuity and with a passionate belief in downtown Johannesburg, echoes his concerns.

“What is Jo’burg without potholes and hijacked buildings?”

Makhubo says Metro police officers who come across “bad buildings and dilapidated buildings” on patrol have instructions to report them to the “regional director’s office and Group Forensic and Investigation Services for further investigations”.

Evidently the Quorum MD requires more convincing, as he says he finds doing business in downtown Johannesburg challenging. “Anything City-related is a struggle, unfortunately… (Former mayor) Mr Mashaba was a breath of fresh air. His interest in the revitalisation of the inner city was evident in his and his team’s approach to developers.”

Regardless, Mayers has R800-million invested in the city, with R500-million in the Maboneng and City and Suburban area itself, and he’s not taking his money anywhere.

“There will always be a need for the Jo’burg CBD. Its location and superior transport networks will always render it as having a place in the larger city landscape. We have invested heavily, and continue to do so.”

Kleynhans says Divercity would “welcome a stronger City in terms of service delivery”, yet says he’s confident his company can work with the City “to continue delivering an excellent urban environment in and around Jewel City …”

A win for all, in Mayers’ eyes, “would be to see the various stakeholders – banks, city council – acknowledge the CBD and the developers who play within it as key to its ultimate turnaround”.

Discussing the Central Johannesburg Partnership’s plans in the mid-1990s to restore Johannesburg’s inner city, I ask Mayers why he feels it hasn’t happened.

 “There have been pioneers, like Mr Olitzky, Afhco and Ithemba, who have had great success. I think the issue with this ‘vision’ is one must appreciate the sheer scale of the Jo’burg CBD. Look at Jewel City, R2-billion but a mere blip on the map.”

TUHF’s Jackson pares it down to the bare essentials.

“People are already investing in inner cities, financing … urban development to create urban densification projects … The market trend is extraordinarily positive, and for government and private investors, the opportunity lies in helping to ensure that these investments are regularised and contribute to inclusive wealth creation.”

Amid the urban squalor and potholes tearing up the downtown streets and pavements, in its funky Maboneng and slick downtown Jewel City precincts, Johannesburg — this time with finance and appropriate thought behind it ­— is once again offering a glimpse of what is really possible.

What was once three apartment blocks managed through a family-owned trust in downtown Bloemfontein, is planned to become innovative shared accommodation catering for up to 300 residents to help meet the increasing demand for cost-effective, secure, and multi-purpose living in one of South Africa’s rapidly growing student towns.

Five years ago, two friends founded Dimatone PTY LTD and purchased a house in Bloemfontein close to the university. Ruben Moggee and Theuns Myburgh converted it to student accommodation and the rest, as they say is history.

“We began looking for other opportunities to develop more properties specifically focused on shared rooming and student accommodation. This is one of the key industries in Bloemfontein, and by 2020 we had already purchased and converted five properties catering for 50 students,” says Moggee, a director in the company.

However, the duo wanted to take on a larger accommodation project and when they came across the three apartment blocks up for sale, they recognised a keen opportunity to further their ambitions. The three apartment blocks had been with the same owners for 30-years with some tenants living there for the past two decades.

“While the apartment blocks presented us with an incredible opportunity, we felt it was too large a transaction to bite off on our own. Using our existing properties as collateral, we partnered with TUHF for assistance. In such a short space of time, and despite the challenges posed by the COVID-19 pandemic, we are aiming to launch the accommodation in March this year,” says Moggee.

Focused renovations

The three apartment blocks are next to one another and situated next to the renovated SARS offices. With joined off-street parking access behind the buildings, the site offers a perfect location to echo the revamping process currently underway in Bloemfontein.

“Existing shared- rooming, student accommodation and new builds are extremely small. These apartment blocks feature large rooms that can be utilised to create a nice atmosphere for young professionals as well as students,” says Moggee. “As part of the product, the apartments are offered as furnished and also comply with specifications received from the tertiary institutions, each apartment has to feature breakout and recreational areas and provide a unique onsite living experience. This fits the mixed-use zoning and character of the blocks perfectly as minimal to no configuration changes are required.”

To this end, Dimatone examined how best to optimise the 78 apartments to reflect modern furnishes and shared living that fits the commercial tenants on the ground floor. The bulk of the project has consisted of internal renovations and fit outs, ripping out the old carpets and restoring the original parkay flooring to its former glory.

As part of the renovation process, each apartment will be fully furnished, including a fridge, microwave, stove, beds, desks for studying purposes, and even storage spaces for books. There will also be uncapped Wi-Fi throughout the buildings, so tenants would just need to bring their bedding and clothes and move in.

“There will be a combination of bachelor/one-bedroom flats, two- and three-bedroom apartments. We are also in the process of establishing several recreational areas for residents that will feature televisions, a pool table and table tennis, as well as an outside braai area. The blocks will also have a common laundry area for tenants to do their washing and drying. Of course, security is critically important to give tenants peace of mind. As such, we have introduced physical access gates, cameras throughout the buildings, and will be installing biometric scanners for access control prior to opening,” adds Moggee.

Growth opportunities

The existing tenants were given preference to stay, where some have chosen to remain and embrace multi-purpose living, while those who wanted to find alternative housing were given as much time as they needed to move out during last year.

“Our existing team of managers will oversee the rental aspect of the accommodation while we focus on the renovations. We also have a close working relationship with NSFAS (National Student Financial Aid Scheme) so that we know exactly how to structure our agreements to benefit students from a rates perspective,” says Moggee.

He says that they want to create an atmosphere where tenants will feel comfortable. “It really needs to be a home away from home”, feels Moggee.

Moggee says that without the assistance of TUHF, none of this would have been possible.

“Our relationship with TUHF is not a traditional, transactional one. Instead, it is a true partnership where they have been supportive and understanding of the challenges posed by the pandemic. This will definitely not be our last project with them,” Moggee concludes.

Over the past three years, the KwaZulu Natal (KZN) property market has enjoyed unparalleled growth, outperforming other provinces as an investment destination. And yet, it is still considered one of the best kept secrets in the country!

“Going forward, there are three major trends that I believe have the potential to significantly change the positioning of KZN and see the province likely experience a surge in investment. Firstly, micro-units are becoming more popular as people are downsizing as a direct result of the economic impact of the COVID-19 pandemic. Secondly, many are looking for more communal living areas with their families instead of staying at the outskirts of the city. And finally, there is a short supply of quality student residential offerings in and around Durban. With the city becoming a hotspot for tertiary education, there will be a growing need to house out-of-towners around the universities,” says Moodley.

Urbanisation drive

Tying these three trends together is the fact that the urbanisation of the CBD is expanding into other areas beyond Durban property. This, according to Moodley, means people are becoming more open to the potential of living, working, and playing in a centralised area.

Moodley indicates: “Even though some investors are cautious about the commercial property industry in the CBD due to subdued performance in recent years, it is essential to take a long-term view of the opportunities. Many large, listed organisations and investors who own properties in the CBD are either looking to sell or transform their building stock into residential or mixed-use developments.”

Entrepreneurs can capitalise on the new normal trends around remote working spurred on by the pandemic. For instance, companies in the CBD are considering sub-letting the large office space no longer required given how many employees are working from home.

“This opens the potential to convert these old office buildings into residential or mixed-use units. These commercial buildings have been built with large-scale occupancy in mind. Looking beyond possible first impressions based on the façade and physical appearance – such buildings can have the capacity to house up to 400 people, while adhering to safety regulation such as having fire escapes in place and adequate plumbing able to deal with this number. The large corporate buildings have had this in place since they were built so it presents a soft landing for investors looking to convert these into residential properties,” he says.

All-inclusive living

Furthermore, there is potential to take these properties and make them accessible to a lower income earning individuals and families, and cater for a broader range of customers.

“It is about applying the work, life, play concept to be more inclusive to those that might traditionally have had difficulties in affording renting mixed-use properties. By expanding the base, it also creates more opportunities for local SMEs to be set up to create a self-sustaining ecosystem,” adds Moodley.

He indicates that KZN has an incredible amount to offer both from lifestyle living and business investment opportunities. It is an important geographic hub for the country, while in a post-COVID-19 landscape people will increasingly migrate to the coastal towns and cities to benefit from the quality of balanced lifestyle on offer, as concurred by transfer based data released by Lightstone in September 2020.

“In other coastal areas, cost of living may not be as accessible while weather fluctuations are quite extreme when compared to the affordability and year-long reliable climate of Durban. And when it comes to matching salary levels from other, traditionally wealthier parts of the country, Durban has grown in the past five years to come within 5% of what people earn in Johannesburg, for example,” says Moodley.

Companies in KZN are no longer afraid to pay for talent. Durban has already become one of the largest call centre hubs in the southern hemisphere. Furthermore, many specialist physicians are moving to the coastal towns and cities, with other professional people choosing to live at the coast and commute to Johannesburg for example.

“It comes down to the quality of life and the opportunities provided through a more innovative mixed-use property environment. With the repo rate being the lowest since the system was introduced in 1998 and the ability to find the right project at the right price, KZN will start attracting significant investor interest in the coming months,” concludes Moodley.

South Africa’s property sector, in general, has shown poor performance during the Covid-19 pandemic. Property stocks have taken a significant hit, where retail and commercial office space have been hit hardest and even some industrial property holdings have been affected. And none of these markets are showing signs of recovery yet.

Lower-income affordable housing – and inner-city housing in particular – has performed better than most other property markets in South Africa over the same period. Residential property as an asset class in South Africa, when compared with other international markets such as the US and Europe, is a very small sector. Hence, its performance in the face of the pandemic speaks to the resilience of inner cities, and the opportunities that lie in urban densification.

The urban densification imperative

Urban densification is a national imperative. It is happening, as part of a natural demographic trend that happens as countries develop. It happened in Europe in the 1700s, and in America in the 1800s, as people flocked to cities for better access to food, security, entertainment and services. It is now happening in Africa and South Africa is no exception. But South Africa’s urban development, and its approach to making housing investments in particular, have contributed to enormous and unsustainable urban sprawl as people continue to flock to urban areas and inner cities.

Urban densification is also happening at a much larger scale than people may believe. According to the Centre for Development and Enterprise (CDE), 70% of South Africa will be urbanised by 2030, with more than 60% of the country’s population urbanised already. However, it must be managed carefully to avoid creating urban decay in the process.

Meeting this challenge cannot be done with the traditional property development approach of building single, large scale and often comparatively expensive projects on the periphery of our cities. Due to space pressures within the existing urban landscape of most inner cities, urban densification must take the form of many less expansive projects that rely on ordinary people with local knowledge for their success. We are seeing small and medium-sized developers taking up opportunities to develop projects between R1m and R100m, and we expect this phenomenon will continue.

This means that metros will have to change their processes and redirect their capacities if they are to play a role in managing this trend and ensuring it happens in a way that enables and uplifts communities. Urban management and collaboration with private investors, and the communities themselves will be key to successful urban densification. Such collaboration can also free government resources up to focus on infrastructure development and town planning for these regenerated areas.

In this way, urban regeneration contributes to making better use of existing physical and social infrastructure, as well as promoting local economic development and thus inclusive economic growth.

Access to goods and services

Inner cities are multi-sector economies that, when managed well, attract pedestrians, commercial activity and reliable tenants and stimulate new businesses. Urban densification in South Africa continues to increase as people seek affordable, decent accommodation with access to physical and social infrastructure, as well as reduced commuting time and costs. The daily commute, for example, sees 20% to 40% of South Africans spending 2-3 hours of their day and 30% of their monthly income on getting to and from work.

As people increasingly move to the inner cities to reduce their living costs and/or gain access to better facilities and amenities, the opportunity to invest in inner-city rejuvenation and refurbishment projects increases. There’s room for smaller players in this space to take advantage of this trend by investing in multiple small projects – around 20 units at a time – and refurbish or repurpose existing buildings rather than investing in large-scale green fields projects that require sizeable tracts of open land to build.

A positive fiscal impact

The final driver behind inner-city investment is the knock-on effect on the greater economy. To put this into context, while RDP housing developments certainly serve an important purpose, these developments often have a net negative fiscal impact. They require additional services and ancillary infrastructure development in areas that have none, and people living in these developments often struggle to pay for services such as utilities, rates and taxes.

In contrast, a certain level of urban densification is necessary for economic and social action. It contributes to economic development at a micro level, which is by its nature inclusive. Stimulating the economy in localised spaces – one city block at a time – is critical to uplifting people from poverty. This is what we refer to as impact through scale – developments that bode real benefits in transformation through diversity, accessibility and economic inclusion. We, therefore, expect to see more investment in mixed-use developments in inner cities that are underpinned by this ethos and include retail, entertainment, educational and faith-based facilities rather than purely housing-focused developments.

This approach stimulates micro-economies in the immediate surroundings of a development so that urban densification largely has a net positive fiscal impact. It not only stimulates economic growth but attracts people that are more likely to be able to pay for services, rates and taxes. These projects also require less upfront investment, as they make use of existing infrastructure that can be refurbished or improved.

People are already investing in inner cities, financing important urban development to create urban densification projects. It is a phenomenon that is already shaping our urban areas. The market trend is extraordinarily positive, and for government and private investors, the opportunity lies in helping to ensure that these investments are regularised and contribute to inclusive wealth creation.

There is much debate in the market – from science fraternities to professional services firms and environmentalists – on the benefits that green and sustainable building principles promote. TUHF, a member of the Green Building Council of South Africa (GBCSA), has long been committed to investing in South Africa’s inner cities and has adopted the green agenda from inception. Through its membership, engagements with international and multilateral funding agencies, TUHF has direct exposure to the latest developments in green and sustainable building practices.

As commercial property developers adopt green building as best practice more frequently, residential developers are beginning to do the same. Property entrepreneurs in the inner-city are no exception.

A powerful driver has been a rampant increase in utility costs in the country. Sqiniseko Mbatha, Financial Analyst at TUHF says, “Between 2006 and 2016, electricity prices have increased by more than 300%. This has pushed our clients, and the market in general, to look at mitigating the risks of these spiralling costs.”

Although previously building green was considered “too expensive”, the reality today is that the technology has become more readily available and this is driving costs down with the return-on-investment benefits of incorporating green technology becoming clearer. For example, tenants are increasingly considering the cost of utilities when making their overall rental cost decisions and this gives them a more comprehensive affordability comparison.

“More and more property entrepreneurs have explored ways in which to contribute to sustainability by creating green assets using things such as heat pumps, solar options, and LED lighting. Our financing has benefited from this with the creation of more resilient building assets. This has become the impetus behind the need to come up with a more formalised green practice,” Mbatha continues.

In 2018, TUHF received technical assistance from one of its funders to develop a concept of what a green inner-city building would look like. TUHF then started developing a methodology for what this building strategy would encompass and act as best practice for all green initiatives going forward. In collaboration with several institutions, TUHF standardised this green build approach and formalised it with the introduction of the Luhlaza (meaning ‘green’) Initiative.

Massive impact, one unit at a time

While buildings might look the same, the focus is on extending the economic life of a building through green initiatives. Properties that have these elements in place are more resilient and hold their value for longer. This in turn bodes more long-term value for investors and developers.

“We are looking at people who want to shore up their business with long-term resilience,” Mbatha says. “Today, adding green elements to a building has become financially feasible. For example, five-years ago LED lighting was considered too expensive and now it is virtually part of standard development practice. The market is quickly getting to a point where being green is no longer an option but instead integral to creating a quality asset and to retaining tenants.”

The pandemic adds momentum

“From the pandemic experience, there are two focus tracks that we see influencing the adoption of green and sustainable buildings,” says Samson Moraba, Chairperson of the Board at TUHF. “Firstly, that buildings generally (whether an office or apartment building) have a significant role to play in combatting COVID-19 because this is where people come together. This means that buildings can be used as part of the prevention and containment measures to combat the spread of the virus.”

“Secondly, the condition of buildings becomes an important consideration. This is where the issue of green buildings becomes prevalent as these buildings offer enhanced measures to control and prevent the spread of the virus. This includes things like promoting natural light and ventilation in the building design, the quality of building materials and indoor spatial planning for physical-social distancing,” he continues.

With both financial and human health factors driving greening residential property, TUHF is working hard to back Luhlaza up with finance and demonstrate how their buildings are contributing towards establishing green environments that are feasible over a long-term. It has been difficult to gain traction in the residential environment because of the unique energy make-up of each building. Ultimately, TUHF’s focus is to ensure that the end-user benefits the most from green initiatives.

“At TUHF we remain passionate about our Massive Small vision – to create impact through scale. This vision is central to the ethos of the Luhlaza Initiative, which aims to connect investors who want to invest in a green product and property entrepreneurs who want to create green assets that will not only contribute to their portfolios but also positively impact the environment and society,” Moraba concludes.

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Research by McKinsey & Company cites that SMMEs represent more than 98% of businesses in South Africa, employing between 50-60% of the country’s workforce across all sectors, and are responsible for a quarter of job growth in the private sector¹.

However, SMMEs in South Africa have been hit hard by the pandemic. In fact, analysis by McKinsey & Company predicts that more than half of local SMMEs may close their doors permanently before the crisis passes¹. Given the significant direct and indirect contribution of SMMEs to the economy, their survival and rebound will be critical to the country’s overall recovery.

What makes entrepreneurs so important

There are several reasons for this, Xulu says. “The first is the proven ability of small businesses to have a positive impact on unemployment rates.”

“There are many international studies that indicate the importance of a thriving SMME sector in creating jobs and contributing to reducing unemployment,” Xulu says. “This is because they are often less cautious about hiring people, with little or even no experience, than their large corporate counterparts. SMMEs also tend to promote on-the-job skills development for less experienced individuals, who are willing to grab opportunities and make the most of them.” 

The second is SMMEs’ ability to be agile and responsive to changing market conditions and client needs. “Large enterprises often have a lot of policies, processes and procedures that are necessary to manage large workforces and product or service portfolios. But these can hamper their ability to adapt to change or provide tailor-made solutions for clients – particularly in a crunch,” he says.

Xulu indicates that SMMEs are seldom hindered in this way, allowing them to be more innovative, at a faster pace, and even disrupt the industries in which they operate. “Amazon, Uber and Airbnb are just some of the most well-known examples of entrepreneurial vision. Once introduced to market each of these businesses quickly disrupted traditional dynamics of their respective industries – and have since grown to become multinational businesses operating across territories.”

Lastly, in tougher market conditions, smaller businesses offering niche and specialised services through an outsourcing model can, and should, be leveraged by larger entities, to effectively support their growth strategies. “By partnering with SMMEs to outsource non-core business functions, or to access niche skills that may not be available in-house, established large organisations can invest constrained resources in their own recovery and business continuity. In doing this, established companies also play a role in enterprise development by empowering up-and-coming small entities,” says Xulu.

Opportunities for budding property entrepreneurs

“Urbanisation in South Africa is ongoing, as young people continue to flock to our three major cities – Johannesburg, Cape Town and Durban – to seek out opportunities,” Xulu says. “This trend makes investing in residential property in these inner cities a good opportunity for aspiring entrepreneurs because they show consistent above average demand and returns.”

Residential rentals are increasingly in demand in the inner cities as people seek out affordable accommodation with access to amenities and reduced commutes to work. “Systematically developing a property portfolio – such as starting with one’s own small apartment and adding to this as one’s finances grow – puts budding entrepreneurs in a position to build capital that could open doors for becoming property entrepreneurs,” he continues.

Capital and a good track record of managing rentals on a smaller scale is an important first step towards becoming a property entrepreneur. “Entrepreneurs have a responsibility to start out with their own capital, and demonstrate their dedication and ability to run a business successfully, before they approach investors,” Xulu believes, “and a small property portfolio is a great way to do this.”

From here, and with access to funding and the right support and advice, it is possible to grow a profitable, successful SMME.

Funding and advice

“Entrepreneurs who want to grow in the property market should look for funders who understand their market, not only because they are more likely to invest with them but, perhaps more importantly, to gain access to niche business and financial advice,” Xulu recommends. “Because entrepreneurs are often not financial experts – and budding property entrepreneurs come from all walks of life – this access to niche financial and business development advice becomes more and more important as the business grows.”

As an example, entrepreneurs who want to acquire a property for refurbishment in the inner city are more likely to succeed in their application for funding and gain access to expertise in this market from a specialist in inner city rejuvenation than from a traditional commercial bank. Take for instance how one approaches construction and tenanting for the inner-city environment, which could differ greatly from how to approach these in the suburbs.

The right finance provider will also provide the most appropriate financial education for the entrepreneur’s area of interest, ensuring a good working relationship between the two and ultimately increasing the chances of successfully growing an SMME.

“Despite the ongoing difficulties SMMEs face in surviving the pandemic, there is still opportunity to thrive in a post-Coronavirus future, however, focus needs to be given now to supporting SMMEs – through sustainable and scalable initiatives.  Without this, positioning the country better for economic inclusion and enablement becomes far more challenging,” concludes Xulu.

References

1. How South African SMEs can survive and thrive post COVID-19, McKinsey & Company – https://www.mckinsey.com/featured-insights/middle-east-and-africa/how-south-african-smes-can-survive-and-thrive-post-covid-19#

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Embracing inner-city revitalisation for a new world

Urbanisation is one of the most important drivers of both social and economic life. Most of the world’s economic innovation occurs within
cities and large metropolitan areas, and these are the places that prosper the most. Cities are like the Internet: they connect people.

Katherine Cox, Research, Development & Innovation Manager, says: “Research indicates that 80% of the world’s wealth is created in cities. People in cities thrive on the opportunities for work and play, and the endless variety of available goods and services.” Cities are where people find opportunities, especially women in the developing world. They are also the perfect testbeds for new innovations. Currently, there is massive urbanisation occurring not only in South Africa, but across the continent. This can be attributed to the significant economic opportunities to be had.

PROXIMITY CRITICAL
“Sharing spaces has become integral to this urbanisation. People are now reliant on affordable transport even if that means walking or cycling to where they need to go. This makes proximity critically important. People are therefore attracted to the idea of being able to live and access retail, commercial areas, education, social amenities
and their work within walking distance. To this end, inner-city living is becoming a key building block for the future of urbanisation,” she says.

Advanced cities such as Amsterdam in the Netherlands, Bristol in England, and Melbourne in Australia, are already developing plans that prioritise circular economics and climate resilience. Cities have prolific benefits other than basic needs, housing, and jobs. These include universities, cafés, art galleries, restaurants, and cultural facilities.
Yet, they also have traffic, overcrowding, crime, pollution, and disease.

“Cities, particularly in the developing world, are already facing rapid urbanisation. More than half the world lives in cities. By 2050, this will be two-thirds with 380 million new urban dwellers expected to have arrived in African cities. After all, it is in cities that we experience the power of proximity and economic opportunities,” she adds.

PANDEMIC CHANGES
Under the growing urban agenda, it has become clear that building sprawling, car-centric cities no longer works. Prior to COVID 19, cities were focusing on sustainable development, increasing density, resilience, and smart urbanism while remaining cognisant of the rapid
urbanisation and massive housing and infrastructure backlogs also taking place.

However, cities and urban populations have started undergoing a radical shift – from the dream of ownership to that of interdependence and sharing. Out of economic necessity, citizens either choose to or are forced to share living spaces, occupy micro-apartments, and invest in
bike and car shares. Furthermore, shared working spaces are giving rise to inclusive cities with inclusionary housing and crammed multimodal public transport hubs.

“Some are arguing that the COVID-19 pandemic may appear to be one of anti-urbanism, with dense urban areas
being the hardest hit in terms of infection and mortality statistics. Yet, cities have always faced severe challenges. For example, terrorism, and xenophobic and religious fundamentalist attacks repeatedly buffer urban areas. Cities have been the epicentres of infectious disease
since the time of Gilgamesh and they have always recovered and will continue to grow,” says Cox.

A NEW ORDER
Having said that, some aspects of cities will need to change; fear of density may push some to rural areas while others will see the reverse happen. Ambitious young people will continue to come to cities in search of personal and professional opportunities. The creative
class may be drawn by lower rents, thanks to the economic fallout from the virus.

Buildings and public spaces may be retrofitted for social distancing. There will also be longer-term trends affecting cities such as digitalisation of retail and work, leading to a repurposing of office spaces and malls. Most cities are seeing a shift to micro-mobility schemes including walking and bikes with increasing numbers of streets being pedestrianised and the number of dedicated bikelanes increasing.

“If anything, the pandemic has highlighted the importance of being able to access more green spaces in cities. There is an increasing demand for such public open spaces that are well-managed, cleaned, and more reflective of a post-pandemic world. This will see the green city
approach become essential as the high cost of services such as electricity and water are driving people to become more self-sustaining and ultimately moving off the grid,” adds Cox.

Such post-pandemic developments, therefore, create opportunity to promote smart density in the affordable housing space through TUHF, Intuthuko, and uMaStandi, as well as green investment through Luhlaza. Cities are resilient because their inhabitants are resilient.

“At TUHF, we believe in a ‘Massive: Small’ approach. This is implementing and financing small scale entrepreneurs in a way that is scalable and replicable to have a bigger, more inclusive, and sustainable impact than mega-projects, for example. We believe in how people from the street are becoming entrepreneurs and scaling up in previously unimaginable ways. The future of the urban environment will centre on these projects as people start looking at more innovative ways of living,” concludes Cox.

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TUHF takes a long-term view to developing inner cities in South Africa. Despite the many challenges, the prospects for inner city residential property remain strong. The demand is ever increasing: South Africa needs safe, low-income rental housing close to people’s places of work and TUHF is poised to meet this need on ever-increasing scales.

TUHF Limited hosted a one day conference on Wednesday, 30 October 2019 gathering industry players from the public and private sector involved in inner city development including inner city property investors, development agencies, listed property funds, property managers, brokers and the media. 

The conference created a platform for sharing thought-leadership between various inner city parties to activate growth, by discovering future investment opportunities and common benefit for all inner city players. 

National Inner City Trends – Prof Francois Viruly

National Inner City Market Research – Hayley Ivins-Downes

Site Disruptions in the Construction Industry: Reasons and Challenges – Andile Zondi

Finance’s Influence on the Housing Market – Kecia Rust