11 Nov Driving Transformation of The Gauteng Property Market

THE GAUTENG PARTNERSHIP FUND is well-positioned to drive much-needed inner-city regeneration and provide sustainable housing.

The regeneration of Johannesburg’s inner-city has been a long-running effort, stretching back to 1986 when the Johannesburg City Council sought to create a vision for the City of Gold. A key part of this vision was collaborating with the private sector to address the complex issues affecting the central business District (CBD).

With just over a quarter of the country’s population living in Gauteng, the demand for housing far exceeds government budgets, making it clear that a multistakeholder approach, particularly with private sector involvement is essential for success. David van Niekerk, chief executive of the Johannesburg Inner City Partnership (JICP), says much work lies ahead. “The CBD should be the most important area that investors want to come into,” he told the media earlier this year. “It should be a primary node of any CBD, and then investment will follow. But capital investment and management are not happening in Joburg. The level of service has diminished to virtually nothing.”

THE GPF’S ROLE IN REALISING REVITALISATION POTENTIAL

The potential within the Gauteng City Region’s CBDs is undeniable. In her inaugural Budget Vote Speech as the MEC for Human Settlements in Gauteng, Tasneem Motara emphasised prioritising the revitalisation of CBDs across the Gauteng City Region (GCR). Her department, she explained, would “drive the effort towards the revitalisation of our CBDs through the resuscitation of dilapidated buildings and infrastructure within our inner cities”. She saw the role of the Gauteng Partnership Fund (GPF) as “critical” in this programme.

Established by the Gauteng Department of Human Settlements in 2002, the GPF initially focused on the social housing market but its mandate has expanded significantly since to include affordable rental housing and the implementation of identified mega projects. The GPF plays a crucial role of program management and ensuring timely payments for mega projects, in accordance with the agreed upon milestones. Its core mandate is to serve as the funding and implementing agent for sustainable human settlement developments in Gauteng, offering innovative funding products to share project risk with the private sector. With a steadfast dedication to transparency, ethical governance, responsible financial practices and audits, the GPF has become a trusted partner to developers and funders over the past two decades – leveraging more than R2.2-billion from the public and private sectors to help transform the lives of countless Gauteng residents. With over 20 000 homes delivered across various typologies, including in the Johannesburg and Tshwane CBDs, the GPF is well-positioned to drive inner city regeneration.

A study conducted by Viruly highlighted the positive impacts of GPF’s developments on communities, encompassing improved health, wellbeing, social cohesion and the creation of over 130 000 job opportunities.

“The GPF provides a junior loan facility that enhances both the equity from the developer and the senior loan. The senior funder risks are further mitigated by a first mortgage bond with a significantly reduced exposure due to the GPF junior loan. The concessionary GPF junior loan affords the project a more feasible weighted average cost of funds which assists the developer to achieve project feasibility,” says GPF chief executive officer Lindiwe Kwele. “We rely on partnerships to deliver meaningful change in the affordable housing and student accommodation sectors. Our mandate is to drive inclusive growth, create sustainable communities where people can live, work and play and contribute to economic recovery through affordable rental housing.”

PARTNERING FOR SUCCESS

The GPF is actively seeking investors and financial institutions to collaborate in transforming the Gauteng property market. Kwele points out that the GPF’s innovative funding structures, including mezzanine financing, make it an attractive partner to senior funders looking for low-risk, high-impact housing projects. Moreover, contributing to solving the housing crisis in the province by creating liveable, resilient communities presents a significant opportunity for investors.

One notable partnership is between the GPF and Futuregrowth Asset Management, which led to the development of The Opal Student Accommodation. This thriving property was developed by Patricia and Mulalo Tshitema of Bono Investment Property (Pty) Ltd. Based in Nasrec, South of Johannesburg, it comprises 94 units yielding 376 beds.

This development was funded through the GPF’s Entrepreneur Empowerment Property Fund (EEPF) programme, an incubator designed to support historically disadvantaged individuals to enter the affordable rental property market. With a focus on empowering women and youth, 40 per cent of the EEPF’s beneficiaries are women, and the GPF’s transformation policy ensures that 75 per cent of project professionals have majority black shareholding.

“The GPF’s timely processing of drawdowns or milestone claims within 14 days each time we lodged a claim ensured that our project continued without delay. The support we received was instrumental to our success.” Pleasingly, Bono Investment Property (Pty) Ltd was awarded the SA Property Investor of the Year Award in Opal’s success expanded Patricia’s portfolio and made her an attractive prospect for future partnerships and investment. Notably, Patricia has since won two awards from the South African Investors Network (SAPIN) and was named winner of Leading Woman 2024 by SAIBPP (South African Institute of Black Property Practitioners).

PASSION, PURPOSE, GOVERNANCE AND TRANSPARENCY

While challenges related to the economic environment and operational pressures exist, the GPF has consistently demonstrated transparency and efficiency in handling project finances, as highlighted by successful projects such as The Opal Student Accommodation. Considering recent public concerns, the GPF remains committed to maintaining the highest standards of governance and accountability.

The GPF is passionate about the transformation of the property market in Gauteng. “In line with the GPF’s unwavering vision, the entity is steadfastly prioritising the expansion of historically disadvantaged groups’ participation and empowering small, micro, and medium enterprises (SMMEs).

By allocating a substantial portion of capital budget to SMMEs, the GPF is not only catalysing economic growth, but also promoting inclusivity and gender equality,” says Kwele.

She emphasises that the GPF has been an unwavering partner to investors and the provincial government since it was established 22 years ago. “Our milestones to date unequivocally testify extraordinary results that materialise when passion aligns with purpose.”

Misleading reports have suggested that the GPF disbursed over R30-million to a company owned by the son-in-law of Deputy President Paul Mashatile for a project that was never completed. However, an amount of just over R7-million was disbursed – only for work carried out. Additionally, an independent investigation into the claims found no evidence of maladministration or corruption within the GPF’s handling of the Nonkwelo Investments project. This further emphasises the GPF’s reputation as a trustworthy partner for investors, developers and government.

Moreover, the report clears the trustees, employees and deputy president of any conflict of interest, affirming the integrity of the individuals associated with the GPF.

“The GPF is currently managing a robust project pipeline exceeding R2-billion and we are strategically engaging with potential funding partners to collaborate on the implementation of sustainable human settlements throughout Gauteng,” says Kwele. It is crucial for clients to prioritise timely loan repayments to secure the sustainability of the GPF and facilitate ongoing housing development.

She adds: “Concurrently, we are finalising several substantial agreements with leading financing institutions, poised to fulfil our mandate of providing the people of Gauteng with access to vibrant, liveable settlements and secure land tenure. These efforts underscore our commitment to fostering inclusive economic growth and prosperity across the Gauteng City Region. Additionally, the GPF is exploring providing bridging loans or purchase order financing to SMEs involved in the construction of housing in its target market.”

The GPF, through public-private sector partnerships, innovative financing and operational excellence, is an exceptional government partner.

This advertorial was originally published on 27 October 2024 in The Sunday Times – Commercial Property supplement.