August 31, 2006
By Anish Abraham
POTENTIAL investors have until 15 October to submit firm proposals indicating how they intend seizing on the many investment opportunities the City of Johannesburg has to offer.
This was said by City Treasurer, Jason Ngobeni at the end of the two-day infrastructure conference held at the Sandton Convention Centre from 29 to 30 August.
Though individual companies are free to submit proposals, Ngobeni said it would be more beneficial for potential investors to submit proposals as a consortium between themselves and financial services providers.
"We will then look at all received proposals and try to determine the economic value that they could add."
Ngobeni said the City expects investors to propose various funding mechanisms, from public-private partnerships to special purpose vehicles and asset-backed financing. Those who attended the conference have until the end of September to engage with the relevant departments or municipal-owned companies to get a more detailed picture of their capital infrastructure plans.
City officials used the conference, described as the first of its kind in the country and continent, to outline the City's various projects and programmes, with a particular focus on existing investment opportunities.
The conference is aimed at soliciting development and funding proposals from private investors, so that the City can eradicate its R8-billion backlog, as well as develop other possible public-private partnership ventures.
One event which promises attractive investment opportunities, said City officials, is the 2010 Soccer World Cup.
Infrastructure developments related to this soccer spectacle will be spearheaded by the Johannesburg Development Agency (JDA), which is overseeing plans to revamp the Ellis Park precinct, as well as areas around Nasrec and Park Station in the inner city.
Lael Bethlehem, CEO of the JDA, envisages a vibrant retail and trading area around Park Station, which caters for commuters not only from Johannesburg, but from around the country and other parts of the continent.
Giving the site a higher status is the fact that it will also be the location for the Johannesburg Gautrain station. Accessibility to such a vital transport line opens up opportunities for investment in retail, commercial and residential units.
As such, the agency has planned for an International Transit and Shopping Centre to be developed around the station. Decks can also be used to build over the railway lines to the west of the station, opening up more floor space.
Vast opportunities also exist in terms of providing space for commercial, retail and residential purposes, as well as car-park facilities in major developments such as those taking place around Ellis Park and Nasrec. Such integrated facilities at these developments would ensure that enough rental income is generated to cover the operating costs.
"Obviously this is a very expensive project and will only work if it is done in partnership with various private sector players," Bethlehem said.
To ensure projects related to the World Cup are carried out without any hitches, the City has created a dedicated 2010 Unit, which is based within the Office of the City Manager.
The unit co-ordinates larger projects like the precinct development plans in Nasrec and Ellis Park, the training venues and related transportation, water and electricity infrastructure.
It also places a special focus on pedestrian mobility as well as the promotion of non-motorised transport, like bicycles. Whereas investments in the recent World Cup in Germany were mainly from the private sector, the bulk of spending in South Africa will come from government.
"The focus is not just on stadiums, but entire precinct development. These are projects that will transform the landscape of Johannesburg for the better," said Carmel Joseph, an official from the unit.
Perhaps the most attractive investment opportunities lie in the burgeoning property market.
The Johannesburg Property Company (JPC) used the conference to outline its plans to release council-owned land to investors and property developers.
The JPC has already released land for development projects totalling some R7,5-billion, including projects at Orlando Ekhaya, Bruma Lake and the Randburg CBD.
The regeneration of the Bruma area is seen as vital, as it is the main entrance point to Johannesburg from the international airport, and the regeneration of the Randburg central business district is a current mayoral priority.
"The Better Buildings Programme and tax incentives such as the Urban Development Zone also play a vital role in our inner city urban regeneration efforts," said Gugu Mazibuko, the company's managing director.
In terms of the programme, buildings in a poor physical or financial condition can be given over to investors in return for refurbishment, management and ensuring the rates and services charges are paid to the City.
Approximately R950-million is owed by over 3400 properties around the City, with the highest concentration of these defaulting properties located in the CBD, Hillbrow and Yeoville.
Over R1-billion has already been invested in inner city property since the tax incentive came into effect, and Linda Vilakazi-Tselane, acting director of the Department of Economic Development, says they hope to have secured a further capital investment of R5-billion within the Urban Development Zone.
Uhuru Nene told delegates about prospects in developing houses for mid-income groups.
Nene said the City faced a huge challenge in its aims to deliver 100 000 houses over the present five-year mayoral term.
"These are not just RDP houses, but mixed-income developments. We currently get funding from provincial government, but we also really need the private sector to partner us," she said.
Moving from RDP projects to more sustainable mixed-income and mixed-use developments forms part of the national department of housing's Breaking New Ground programme.
Nene said the current housing market was "dysfunctional" as there was a huge gap in the price difference between low-cost houses provided by government and entry-level bonded houses.
"There is no service to cater for those who earn between R3500 and R7000 per month and want to enter the housing market," she explained.
The department is also piloting a small-scale housing project where new building materials, methods and typologies are being tested.
"The Gauteng department of housing has a five-year plan to construct 50 000 affordable rental units as part of the Breaking New Ground programme, which includes 5000 units through the Johannesburg Social Housing Company (Joshco)," said company head Rory Gallocher.
Joshco is a city-owned entity responsible for providing low-cost housing services and products to residents. However, Gallocher said some 23 percent of its income is derived from instalment sale products.
Gerald Dumas, Joburg Water's managing director, highlighted opportunities available in upgrading water infrastructure. "You can gain comfort from knowing that your tap water is of the highest quality and rated amongst the best in the world."
He said main challenges faced by the water utility were the need to replace ageing infrastructure and the installation of prepaid water metering systems. The change in the metering system has the potential to save the company up to R160-million per year.
Dumas also gave the audience an insight into the Gcin'amanzi project, which aims at replacing ageing infrastructure, installing prepaid meters and fixing leaks in houses in Soweto. "We are losing seven billion litres of water on a monthly basis, resulting in a loss of income of up to R20-million," he explained.
Despite obtaining funding from a French development agency, there is still scope for partnerships with the private sector in rolling out the project throughout Soweto and other townships.
Even Metrobus needs funding to increase its fleet ahead of the 2010 soccer tournament.
"We have buses that are older than some people here," said Jeffrey Ngcobo, strategic operations manager at Metrobus, to chuckles from the conference hall.
It is no laughing matter though, as the company's vintage buses cost a small fortune to run: it costs Metrobus R8 per kilometre to maintain, and that's before diesel usage, which costs up to 35 percent more than the newer Volvo buses in its fleet.
Ngcobo outlined potential public-private partnership opportunities at the bus company, ranging from providing a comprehensive integrated Information technology system, to customer information display systems and to creating a more accessible and safety compliant headquarters for the company.
"We are also looking at acquiring 182 buses in the 2007-8 and 2008-9 financial years, so that the average age of buses in our entire fleet is less than eight years old," he added.
The tourism and hospitality industry also anticipates huge business growth ahead of the 2010 World Cup. Johannesburg Tourism Company chief, Eddy Khosa, said they were doing their best to get visitors to spend more time and money in the city.
Together with the Gauteng Film Office, the company is calling on the private sector to invest in a landmark Kliptown project that will see the establishment of a film academy and studios, as well as facilities for promoting cultural entertainment.
Apart from the above, opportunities also exist for creating surrounding infrastructure such as bars, restaurants, residential chalets and arts and crafts shops.
"Tourism has been identified as one sector that can help reduce unemployment in South Africa. We estimate that 2400 sustainable jobs will be created through this project," said Khosa.
Safety and security of residents is also a major issue, and the Johannesburg Metropolitan Police Department will require an additional 300 CCTV cameras to cover the inner city and other areas. The network currently has 200 cameras connected to it.
"We are taking a block-by-block approach to reclaim the inner city," said Chris Ngcobo, Metro police chief.
The newly formed Community Development Department also has a vital role to play in the run up to the soccer spectacular, as it is upgrading the various stadiums around the City.
Johannesburg is unique, as it will be hosting games in two venues, something that other cities have not done before. Official matches will be held at Soccer City and in Ellis Park.
It is also upgrading other smaller stadiums like Orlando, Dobsonville and Rand Stadiums, with the possibility of using them as training venues during the World Cup.
"There is also the need for more social infrastructure as the City expands. This goes beyond just the stadiums themselves, but for all manner of surrounding support services," said Xolile George, lead official from the department.
Just as with the potential advertising opportunities at the fresh produce market, the same is also possible at the 14 taxi and trading facilities run by the Metropolitan Trading Company. Its facilities are valued at between R900-million and R1-billion.
More importantly, 11 of those 14 facilities form part of the City's Strategic Public Transport Network, and will thus be situated on high-density transportation routes.
Opportunities for private sector involvement also existed in making facilities friendlier for use by people with disabilities and redesigning street trading stalls to ensure they enhance the ambience of the city.
"We want to move taxi ranks away from being associated only with crime, grime and filth," said CEO of the Metro Trading Company, Kgosientso Ramokgopa.
All these measures are an effort by the company to reduce its dependence of the core City administration for subsidy funding.
Closing the conference, city treasurer Jason Ngobeni thanked everyone for their participation, adding that it was vital for the City to solve its problems through meaningful partnerships.
"The City's ability to pay for all its capital projects is limited. We cannot afford anything more than R3-billion per year, and for a city of our size should be spending closer to R7-billion a year on capital infrastructure projects," he explained.
"The solution lies with you, and we are asking you to share those ideas with us," Ngobeni stressed.
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