As part of our #LockdownLessons series, Bizcommunity is reaching out to South Africa’s top industry players to share their experience of the current Covid-19 crisis, how their organisations are navigating these unusual times, where the challenges and opportunities lie, and their industry outlook for the near future.
Seabelo (Herbert) Theledi, founder and MD of Nthwese Developments
We chatted to Seabelo (Herbert) Theledi, founder and MD of Nthwese Developments, to get his take.
Seabelo (Herbert) Theledi: When the lockdown was instituted, it was a good move for the health and safety of all South Africans. As citizens and business owners, we all knew the Covid-19 spread had to be slowed down and we needed to do it quickly. Like most businesses, the lockdown had an immediate negative impact on the property sector.
Like most companies, we understood that a 21-day lockdown would be difficult. We believed that after 21 days our economy could start picking up and we would begin to return to normal. We are in unchartered territory and we are learning as we go.
Theledi: The Covid-19 pandemic has placed us in a very precarious position. From a humanitarian perspective, lives must come first, however, the economy is now in deep trouble because it is not functioning. The property sector, when it is operating well, contributes to the economy of South Africa. Now at a literal standstill, the sector is under massive pressure.
As a business, Nthwese Developments finds itself in a challenging position, we have institutions not operating who rent premises at our shopping centres and business premises, who are unable to pay rent. We are fortunate that food retailers, pharmacy groups, and essential companies are still allowed to operate, so our rental income hasn’t been wiped out.
The challenge is that as a business, we have commitments to staff, financiers and other operational expenses that must be met. We are grateful that our banking system and government were quick to introduce various relief programmes which have helped our business. These include the reduction of interest rates; the Covid-19 Temporary Relief Scheme through the UIF; payment holidays; monthly PAYE reductions; deferral of provisional tax payments and the recently announced relief for companies with turnover of less than R300m.
Theledi: We are seeing the benefits of relief programmes as mentioned above; we have not had difficulty dealing with salaries and wages and our staff are happy. We have also met all our negotiated obligations to date.
What is concerning for us now, due to the extended lockdown and move to Level 4 lockdown status, is the effect on smaller businesses in our shopping centres as well as our office rentals. We are pleased that clothing, hardware stores, and fast food retailers can start operating under strict conditions, however, the biggest concern for us is the smaller businesses such as internet cafés or hair salons – those businesses that are labour intensive – as they are hamstrung. They do not have access to the relief programmes offered by the government and the banking sector and we hope that this changes soon.
Theledi: In my view, there will be opportunities for the property sector, especially when infrastructure programmes are rolled out by the government; when that happens and the economy begins to recover, we can see the property sector begin to recover.
There are already opportunities in the residential property space, for instance some properties are being converted into isolation and quarantine centres. However, opportunities in the commercial property sector are not forthcoming at this stage.
We are hoping that when the economy picks up and begins to function again, as more numbers come into the economic cycle, that the property development and management sector can gain some ground.
Theledi: We have implemented all the HR guidelines in terms of Covid-19.
All our office staff are working from home and we continue to operate through virtual meetings and digital processes.
At our properties, we have laid out guidelines as prescribed by government for the property management teams who ensure security and cleaning services are operational at all shopping centres and business rental properties. All personnel have protective clothing and masks.
Our industry is only allowed to open at Level 2, so we will continue operating as we have until then.
Theledi: We have no issue with physical distancing as our employees are at home and we operate digitally. At our centres, all personnel are complying and we have not had any issues.
Theledi: On the positive side, I have learned a lot technologically. All our dealings are digital from meetings to digital signatures on documents to banking and communication through email. I am a pen and paper person so working virtually took some adjusting in the beginning, now I appreciate what technology can do for our business and lives.
I miss physical contact and the way we used to do things, there is so much value in meeting a person face-to-face. My work is largely about relationships, and it is strange to not be able to have a coffee with someone. I hope to get back to normal soon.
Theledi: Yes, it has in a big way. Our industry, like many others, is dependent on a functioning economy. Facing the real risk that we may not exist if an economy comes to a grinding halt, is a wake-up call. There will be no new developments in the future if the economy is not functioning. So, you think about this and the war I am referring to, and you appreciate the role of a functioning economy.
My outlook is that the economy is already battered in terms of ratings, news, and our currency. We are right down there in terms of the asset class we are in and we can only come out of this trough when the economy starts working.
Real estate is on its knees, we can see it and feel it. Valuations have gone down and property companies are battling. Nthwese Developments is fortunate that our loan book with institutions is not too high and we are therefore able to absorb the pain. That aside, the real estate sector is in real trouble.
Theledi: For the first time in the property sector, I have witnessed phenomenal collaboration through the National Property Practitioners Council (NPPC), which consists of various representative bodies from the South African real estate sector. The NPPC has become a voice for the sector to take our plea to the government and lobby on the real estate sector’s behalf. For example, lobbying for the Deeds Office to open so properties can change hands.
These initiatives have only come about due to the lockdown. Particularly amongst property developers and investors, Estienne De Klerk, CEO of Growthpoint Properties, spearheaded a chat group where we share our pains, highlight issues, and discuss solutions. I have never seen such solidarity to save jobs and the real estate sector as a whole. We have become one huge family.
As a sector, we have managed to communicate issues that affect us in a big way, such as municipal rates taxes and surcharges. We now speak through one voice to the retailers and occupants of our centres; we are negotiating as well as interacting continually with these stakeholders.
Theledi: The property sector is on its knees and was going through a difficult period even before lockdown. I am confident that as a sector, we will manage this transition and the pain that comes with it. We should be able to come out of it. We are right at the bottom economically and we have to come out of the trough; when we do, our role will continue to be important to the South African economy.
Theledi: Once a vaccine is confirmed, then we can start working our way back into normal life. It is the fear that there is no solution to the problem that is the most daunting aspect of this pandemic. Countries are worried they can’t manage the Covid-19 outbreaks and the curves. When the solutions come and are used, we will return to normal a lot quicker. I predict we may only see life in the economy by November.