Actual Regulatory Cost of Property Development on Selected Municipalities in South Africa

1. Actual Regulatory Cost of Property Development on Selected Municipalities in South Africa Consultative Workshop with Municipalities 30 April 2013 Southern Sun Hotel, OR Tambo Airport

2. Presentation Outline

3. ProjectBrief • To comparatively investigate the municipal development cost of property-related projects in select municipalities in which SAPOA members are most active. • To determine both the costs of doing property-related investment; as well as to assess possible limitations posed by municipalities that impact development progress and feasibility.

4. Sampling/Municipal Selection • 18 Municipalities was selected (please see map on next slide). • Objective to study tworepresentative municipalities for each province ideally the largest cities. • Mandate from GGDA to include all Gauteng Metro’s. • Selection is regarded as a pilot project for a future larger sample which will be included. • Wish list of larger sample for future analysis included in the report. • Budget and capacity limitations.

5. Sampling/Municipal Selection

6. Overall Methodology • Study comprised of three components: • Municipal Cost Assessment • Municipal Capacity Surveys • Developer Surveys A. Municipal Cost Assessment B. Municipal Capacity Surveys C. Developer Experience Surveys Findings Observations Recommendations

7. A. Municipal Service Cost Finalise Reference Framework a) Identify cost indicators to be studied b) Develop appropriate & standardised scenarios 2. Review Rates and Tax Policies of individual municipalities 4. Consult Municipal Departments to fill data/information gaps and ensure correct interpretation of calculation methods 3. Identify information gaps and uncertainties Main Respondent Groups Town planning departments Budget department Call centre Engineering departments 5. Data capture, information review and critical analysis 6. Investigate outliers 7. Consult with Municipalities to analyse and understand outliers 8. Comparative Analysis and Results

8. Development Scenarios Development Cost Components • Environmental Impact Assessment Fees 9. Sewerage Consumption Charges • Zoning and Re-Zoning Fees 10. Refuse Consumption Charges • Township Establishment Fees 11. Electricity Consumption Charges • Subdivision Fees 12. Vacant Land Rates • Building Plan Fees 13. Property Rates • Sewerage Connection Fees 14. Property Rebates • Electricity Connection Fees 15. Surcharges • Water Consumption Charges

9. B. Municipal Capacity Surveys Finalise Reference Framework b) Identify representative departments and contact person for each Municipality a) Develop focussed questionnaires 2. Telephonic and questionnaire email interviews with target sample Main Respondent Groups Head Engineers Head Town Planners *or respondents designated by department heads. 3. Identify information gaps and limitations 4. Second round interviews to fill data/information gaps and ensure accurate interpretation of responses 5. Relate responses to cost calculations 6. Comparative Analysis and Results

10. C. Developer Surveys Finalise Reference Framework a) Develop focussed questionnaires b) Develop online survey platform 2. Questionnaire Submission to Database (First Round) 4. Second round submission to increase responses 3. Review first round responses Main Respondent Groups Property Owners Developers Lease Brokers Property Management Companies 5. Relate responses to cost calculations 6. Highlight most important responses 7. Comparative Analysis and Results

11. Study Limitations

12. Summary: Observations • The municipal service costs of municipalities vary extensively • Variations are mainly due to different calculation techniques • Costs for indicators such as connection fees can not be generalised as it is reliant on unknown variables (e.g. distance to existing connections, availability of bulk services). • Each municipality in their local context face their own unique challenges and problems • Frequently highlighted challenge include: • capacity and financial resources • practical experience • backlog on infrastructure maintenance • developers taking advantage of system limitations • Negative perceptions towards municipal performance is currently evident from the majority of developers

13. Zoning & Re-zoning tariffs

14. Zoning & Re-zoning tariffs

15. Zoning & Re-zoning tariffs

16. Rebated Property Rates

17. Rebated Property Rates

18. Property Rates

19. Property Rates

20. Subdivision

21. Building Fees

22. Building Fees

23. Township establishment

24. Township establishment

25. Water connection

26. Water connection

27. Vacant Land

28. Vacant Land

29. Electricity Consumption

30. Electricity Consumption

31. Recommendations • Standardised and transparent costing and calculation approaches. • Customer care and liaison to disseminate information and communicate w.r.t. backlogs and system delays. • Development consulting services provided in-house by municipalities as a value added development promoting service and additional income generator for the municipality. • Mutual understanding of both parties (Municipality and Developers) of the processes its limitations, time constraints and costs incurred. • Utilisation of information technology to streamline and track development processes

32. Way Forward To ensure the continued relevance of the research, it is suggested the cost analysis be reviewed annually due to new tariff policies released by municipalities in July of every year.