Big business commits to fixing Joburg
Johannesburg has long been regarded as South Africa’s economic powerhouse, but recent years have earned it a simultaneous reputation as the nation’s capital of infrastructure decline and service delivery challenges. Concerns around deteriorating roads, unreliable water and electricity supply, waste management failures and public safety have contributed to growing frustration.
In response, organised business has committed to partnering with the City of Johannesburg in an effort to address these challenges. This initiative is one of the most significant private sector commitments to improving municipal service delivery in recent years. Business leaders and city officials are working together to identify practical solutions and 3Cube Property Solutions takes a deep dive into what’s at stake and how the initiative could reshape the city’s future.
Why organised business is stepping in
In a recent interview with Moneyweb, Busi Mavuso, chief executive officer of Business Leadership South Africa (BLSA), explained why the business community is stepping in. She points out that Johannesburg is not just a local municipality in difficulty, but South Africa’s commercial capital and a major contributor to national GDP.
“70% of the head offices of this country are in the City of Joburg. It contributes about 16% to the national GDP and is the place where many investment decisions are made,” she points out. She adds that, given the threat of electricity supply suspension and the city’s infrastructure renewal backlog, the problem has become a national economic crisis.
In short, Mavuso, together with the initiative’s other proponents, argue that Johannesburg’s challenges have escalated to the point where coordinated action is required.
The strategy behind the city’s turnaround
With local elections on the horizon in November, organised business has committed to making private sector resources available for “a programme of structured support” for Joburg’s recovery – but there’s a catch. According to a BLSA statement, this support is conditional on having “a counterparty capable of governing scrupulously, delivering for the city and being held to account”.
In the same BLSA statement, we are told that business leaders are already engaged. They are funding support to government departments, contributing to infrastructure repair and addressing local problems. “These efforts are real but fragmented,” states the report. “We want to systematise, coordinate and scale them.”
The impact of improved service delivery on commercial, industrial and retail property values
According to a blog post recently published by Real Estate Investor, businesses (and by association commercial property investors) increasingly favour reliable utilities, stable municipal governance, good transport access and secure environments. Similarly, the industrial sector is becoming increasingly sensitive to logistics efficiency, road infrastructure quality, electricity reliability and municipal responsiveness.
With these factors being viewed as just as important as the location itself, it stands to reason that if the public/private partnership is successful, commercial, industrial and retail property values in Gauteng could grow from strength to strength.
Following on from this, improved municipal performance is also likely to help attract new investment into the city. Well-maintained infrastructure and effective local governance are indicators of long-term stability and growth potential, as has been seen in the Western Cape. Greater demand and constrained supply are likely to place upward pressure on business real estate prices in Gauteng.
Potential challenges to the partnership’s success
While the partnership has been widely welcomed, its success will depend on its ability to overcome several significant challenges. Addressing years of infrastructure deterioration and service delivery failures will require substantial financial resources, technical expertise and ongoing commitment from all parties involved. Differing priorities, changes in political leadership and administrative hurdles could all affect the pace of implementation.
A further key consideration will be ensuring that sufficient funding and resources are available to support long-term projects.
The partnership between organised business and the City of Johannesburg is an ambitious attempt to address some of the city’s most pressing challenges. While the road ahead has many potential hurdles, the intervention highlights the value of sustained public/private collaboration. For investors, property owners and businesses, the progress of this initiative will be worth watching closely, as its results are likely to have a direct impact on property market performance. For advice on commercial, industrial and retail investments in Gauteng, get in touch with 3Cube Property Solutions.