Will Thomas Matlala’s talk of creating one big black controlled property fund stick or is it just a noble idea?
After floating the idea for the first time last week, Matlala seems to have gone onto overdrive as if to follow the saying: if you throw enough mud against the wall some of it will stick. This week he reiterated the thought with remarkable vigour. The president of the South African Institute of Black Property Practitioners (SAIBPP), Matlala, was speaking at a workshop held by the organisation in Sandton.
“We need to up the game,” said Matlala amid loud applause from his audience of transformation activists. He reminded the audience that South Africa’s black economic empowerment (BEE) programme is the second type of massive socioeconomic engineering experienced by the country in less than 100 years. He was juxtaposing BEE to the Afrikaner empowerment programme which matured in the 1960s. “There is no need for us to reinvent the wheel. We have the template”.
He said black operators with emerging commercial property portfolios should seriously consider consolidating into single pool that can be listed on the JSE. Such consolidation can create an entity that can be the second biggest listed property fund on the JSE. The biggest property fund on the JSE is Growthpoint Properties which boasts a portfolio valued around R55bn. The second largest is Redefine Properties with a portfolio valued around R30bn. The size of these two funds serve to expose the order of Matlala’s ambition.
Some in the audience were a bit skeptical. One who spoke to us but declined to be named said “It is an interesting idea but I do not see it taking off, at least not in the order of the size referred to and not in the short term”.
“The main challenge is stock,” said the SAIBPP member. “There is not enough stock of commercial property to propel this idea”. He added that most of the sizeable portfolios in black hands have already made their way into the JSE. There is not much left out there to create even a R5bn portfolio”.
The submission that black commercial property operators will struggle to create a universe of R5bn (from unlisted properties) at this day and age should be taken as an indictment to South Africa’s economic transformation poser, BEE.
But then there is another problem. This debate is largely based on thumb sucked numbers. There is currently no way of telling with certainty the total value of commercial properties controlled by black players.
This is partly a function a disorganised BEE movement. Formal black business organisations are yet to create a respectable research based think tank to understand their universe. In the case of the property sector the department of public works, the largest commercial property player in the country, has not helped the situation by not cleaning up its data.
To his credit Matlala alluded to this weakness during his presentation this week. He said black business organisations needed to beef up their advocacy. He said in the debate about land redistribution bill, Afriforum has produced a 600 page document, we produced a page.
Despite all this Matlala’s has been forceful in pushing the idea of consolidation. Last week he was quoted saying “We can create a gigantic black player if we break out of the spaza shop mentality -. We can change the course of history”.
This week he said many of the sprinkles of black players are only good enough to pay school fees and buy luxury cars but they do very little for economic transformation. “We need to be creating an organ which is big enough to be taken seriously by government when drafting policies”.
He added that while the prevailing wave of BEE has had its successes it has proven to be largely diffuse leading to an emergence of few success stories. “While we should not take away credit from the BEE success stories, they do emphasise a too individualistic brand which breeds animosity from the man in the street. Whereas the path which led to the development of institutions like Sanlam and Absa was more collectivised albeit within the confines of the Afrikaner community,” says Matlala. This collectivisation allowed for the emergence of strong institutions which continue to shape our economic landscape to this day”.
“We should not be tripping over ourselves to find out what works and what does not work. What works is there”.
“It’s a question of saying how did they do that. We know they had an unwavering government support and had their eye in the future by encouraging their kids to study”.
With the government in view Matlala warned that government should not deviate from the practice of offering 10 year leases into shorter leases. Such a deviation will disturb empowerment.
The DPW is a key feature in Matlala’s idea. The DPW houses the largest property portfolio in the country valued around R450bn and is also the largest leaser of commercial property. As such Matlala’s thoughts will live and die around DPW’s strategies.
As the debate started by Matlala rages on it is befitting to consider the words uttered the 17th century nihilist philosopher Nietzsche “Untroubled, scornful, outrageous – that is how wisdom wants us to be. She is a woman and never loves anyone but a warrior.”
The editor wishes to host a debate on this subject. Editorial contributions are most welcomed.