Construction World May 2018

The business magazine for the construction industry

FEBRUARY 2017 MAY 2018

WORLD

CR O WN B I R O

P U B L I C A T I O N S

KEMACH JCB 10 years of service excellence SEALS DEAL

The importance of insuring building work WESTBURY CLINIC’S DESIGN nets international award

SA’s first PRECAST CONCRETE PARKADE

Best Projects 2018 First call for entries

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CONTENTS

04 The level 1 B-BBEE contributor challenge Achieving Level 1 Contributor status in for B-BBEE is one thing – staying there is another. 06 The importance of insuring building work It is vital to take out adequate and correct insurance for the lifespan of the project. 12 Are SA REITs true global property players? SA REITs operate successfully on the global stage – but are they global players? 16 First company to issue a Green Bond on the JSE Growthpoint Properties is the first South African company to issue a Green Bond on the JSE.

22 Clinic’s healthy design nets international award Westbury Clinic won first prize in the Health Completed Buildings at the Berlin World Architecture Festival. 24 SA’s first precast concrete parkade North East Parkade is also SA’s largest precast concrete structure to date. 28 Return of wind farms will reward fleet strategy The sign-off of agreements with 27 renewable energy projects will revitalise SA’s efforts to build the green energy sector. 30 Stabilising the R75 slope Project near Uitenhage ensures uninterrupted power supply. 34 Another example of light steel frame excellence The striking and functional Kaap Agri building in Paarl symbolises the company’s professionalism and success. 40 Major role in water conservation a.b.e. Construction Chemicals has a wide range of products available to prevent failures in concrete reservoirs. 42 Global standards. Regional service. Local expertise. RMD Kwikform has a wealth of industry experience and expertise in formwork and falsework. 47 Medical aid fund for the construction industry An in-depth understanding of the needs of employers and their employees.

REGULARS

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Marketplace

ON THE COVER

Property

The recent delivery of four JS305LS tracked excavators by earthmoving equipment specialist, Kemach JCB, has boosted key customer, Lusthof Civil & Plant Hire cc’s JCB fleet to 26 machines. Read the article on pages 18 and 19.

Environment & Sustainability

Projects & Contracts

Equipment

Products & Services

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CONSTRUCTION WORLD MAY 2018

The Best Projects Awards ceremony 2017: a vibrant gathering of builders, engineers, architects and contractors in celebration of excellence.

COMMENT

It finds that general building confidence, at 36 index points, was flat. It was, however, encouraging to see that key underlying indicators ticked up. Across the cidb’s grades, grades 3 and 4 lost confidence but grades 5 and 6 gained confidence on the back of improved activity growth. Surprisingly, in the Western Cape confidence among building contractors remained above the neutral 50-point mark – 54. In the Eastern Cape, Gauteng and KwaZulu-Natal the situation was vastly different: on average confidence levels here were a mere 30 points. The confidence levels for civils was also at 36 during the first quarter of the year – it is one point better than 2017’s low fourth quarter. Activity and profitability managed to claw back from its worst levels since 2011Q1 and 2010Q3. At grades level, grades 5 and 6 had no confidence growth while in levels 7 and 8, there was significant confidence growth The Construction Industry Development Board (cidb) recently released its SME Business Conditions survey for general builders and civil contracts for the first quarter of 2018. About the survey The cidb SME business conditions survey is conducted quarterly among Grades 3 to 8 cidb- registered contractors (categorised in Grades 3 and 4, Grades 5 and 6, and Grades 6 and 8).

from 24 to 30. The four provinces that are measured had less than 40 index points for growth, which implies that business conditions are unfavourable across the country. First call for entries – Best Projects 2018 The first call for entries for Construction World’s Best Projects Awards can be found on pages 20 and 21. We have added two new categories and separated one category. The first new category is for ‘Emerging Contractors’ and aims to recognise excellence in the execution of projects by black- owned or women-owned enterprises (51%). The second new category is for Quantity Surveyors. Even though Quantity Surveyors play a vital role in projects, they are often unheralded in successful projects. This category aims to specifically highlight the role of QSs by creating a category just for them. We have separated the Professional Services category into a category for Consulting Engineers and one for Architects. As the competition has grown, so has the number of entries. We now get equal numbers of both professions entering. I look forward to receiving your entry.

Wilhelm du Plessis Editor

@ConstWorldSA

www.facebook.com/construction-worldmagazinesa

EDITOR & DEPUTY PUBLISHER Wilhelm du Plessis constr@crown.co.za ADVERTISING MANAGER Erna Oosthuizen ernao@crown.co.za LAYOUT & DESIGN Lesley Testa CIRCULATION Karen Smith

PUBLISHER Karen Grant PUBLISHED MONTHLY BY Crown Publications cc P O Box 140 BEDFORDVIEW, 2008 Tel: 27 11-622-4770 • Fax: 27 11-615-6108

TOTAL CIRCULATION: (Fourth Quarter ’17) 5 024

The views expressed in this publication are not necessarily those of the editor or the publisher. PRINTED BY Tandym Cape

www.constructionworldmagazine.co.za

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MARKETPLACE

The LEVEL 1 B-BBEE contributor challenge UWP Consulting CEO Nonkululeko Sindane has praised her team for years of effort that have culminated in achieving Level 1 Contributor status in the B-BBEE Codes of Good Practice, but she concedes that staying there will be challenging.

U WP was certified at Level 1 by verifica- tion agency Renaissance SA Ratings in November 2017. Sindane says the entire submission process was completed inter- nally. “We took a decision not to outsource as we felt that we would understand the pro- cesses better by doing it ourselves. So now we know what we need to do to maintain it. “Our team responsible for our B-BBEE efforts across the business is on top of its game. It’s not only about scorecard num- bers, but about achieving positive results for the benefit of everyone in the company.” UWP will be assessed against the new Amended Construction Sector Codes of Good Practice in November 2018. Sindane points out that these codes have areas that are onerous, but not insurmountable. “We are working on plans to address all the chal- lenges and we are cautiously optimistic that Sindane says a fundamental change in the Construction Sector Codes lies in Manage- ment Control, where the points previously available for employing technical employees in junior management positions have been removed. “UWP will continue to employ young professionals at this level, but we will intensify the training and development needed to fast track their advancement in the company. Our young professionals will have to share the responsibility for their own progress and for our success as a company,” she emphasises. The ongoing focus to employ, train and support women in technical roles has its we can retain our Level 1 status.” Management control

difficulties as the whole industry is looking for the same people in a very small pool. “By devoting resources on the progression of women in engineering, we are upskilling the industry and that will ultimately benefit us all.” The Construction Sector Codes require 50% of shareholders in UWP to be registered professionals. Sindane says having the right mix of technical employees from the ground up is critical. “A genuinely transformed com- pany has a good degree of diversity in its ownership and management structures, and that’s what we’re trying to achieve.” Socio-Economic Development Showing the interconnectedness of the different scorecard elements, she points to UWP’s 100% Socio-Economic Development (SED) score, largely due to the company’s ‘Nurture a Girl’ initiative to support teenage girls in their final years of school. “We are providing social support includ- ing mentorship and training. The programme “Our team responsible for our B-BBEE efforts across the business is on top of its game. It’s not only about scorecard numbers, but about achieving positive results for the benefit of everyone in the company.”

includes girls with learning disabilities.” “We are also reaching out broadly within the participating schools so that the contri- butions we make are not limited to identified girls but benefit the whole school.” In the past year UWP has provided water tanks in needy schools, improved media centres, upgraded security, assisted with counselling facilities, and partnered with other organisa- tions to motivate learners. “All the Nurture a Girl beneficiaries (73 at present and growing) are being exposed to working in various roles in a consulting engi- neering environment,” Sindane points out. “I think the results will show for the compa- ny and the consulting engineering sector down the line.” Supplier development UWP has placed strong focus on Enterprise Development in the generic codes and is partnering successfully with several emerg- ing enterprises. “We are comfortable with the shift in emphasis to Supplier Develop- ment in the Construction Sector Codes as our enterprise development partners are potential suppliers of goods and services to UWP,” she says. “They have competencies that com- plement ours and will add value when we tender for new work together. “UWP’s procurement journey has been a long one requiring mindset changes. But today we have a genuinely transformed procurement process and we continue to improve on it for even better results.” Sindane points out that solid frame- works are in place for the development of employee skills internally and supplier skills externally. “It’s now about using these programmes to produce the required outcomes.”  CEO Nonkululeko Sindane is cautiously optimistic that UWP Consulting can retain Level 1 assessed against the new Amended Construction Sector Codes.

The ‘Nurture a Girl’ initiative to support teenage girls in their final years of school.

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MARKETPLACE

The importance of INSURING BUILDING WORK

The concept of insurance is straightforward but the actual selection of appropriate policies for specific contracts is not. institute an action of recourse for injury against any one of the contracting parties, or jointly. “Finally, it should be remembered that omissions from an insurer’s proposal form or false declarations will invalidate an insurance policy,” Putlitz adds.  or other site conditions may be at risk. “The period of insurance generally applies until the date of practical completion when the employer can occupy the works but it is advantageous to include the contractor’s defects liability period in the CWI to cover malfunctions of mechanical and electrical equipment, waterproofing coatings, and even landscaping. It is equally important for subcontractors to insure the tools they use on building sites and maintain general business insurances. “Should an accident occur, and someone gets hurt or killed, reparation is sought from the Public Liability Insurance policy so it is important that both the employer, the contractor, and subcontractor maintain separate policies. A third party is not governed by the contract and may therefore

Building operations invariably involve a variety of risks which could affect the environmental, financial, political and technical aspects of a building project. It is therefore important for the parties involved to take out adequate and the correct insurance for the full lifespan of a project, advises Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC).

• Removal of Lateral Support Insurance (RLSI) applies where the execution of the works may cause weakening or damage or interference with the support of land or property on site or adjacent to the site and the consequences thereof; and • Other Insurances (OI) applies to cover risks in transit of goods imported from overseas specifically for installation in a project. “The tender documents must specify if the employer or the contractor must insure the works in the joint names of the parties. Regardless of who insures the works, the beneficiary should be the employer – and he or she should pay the premiums.” Putlitz says the concept of insurance is straightforward but the actual selection of appropriate policies for specific contracts is not. “That is why it is important to deal only with a broker experienced in construction industry insurance matters: this type of cover is not a do-it-yourself activity and, if dealt with improperly, all claims will be rejected. The insurance must be carefully considered to include and list all identified risks including the location of the works, the type of structure, the method of construction and where existing structures

P utlitz says generally five types of insurable risk apply to all construction projects: • Contract Works Insurance (CWI) deals with the whole works during the construction period including plant and materials, work by specialist contractors, and additional professional fess where damage to the works occurs. Such a policy must be extended to include possible damage to existing buildings during alterations and additions and/or to include adjoining structures; • Supplementary Insurance (SI) deals with expense or loss caused by events outside the normal control of the parties, including civil commotion, riots, strike action etc. not included in the CWI policy. SI can be obtained from the South African Special Risks Insurance Association (SASRIA) in South Africa, or the Namibian Special Risks Insurance Association (NASRIA) in Namibia. Supplementary to the CWI, SI is not available to the public and needs to be arranged by a broker; • Public Liability Insurance (PLI) provides indemnity in the event of a death or injury to any person and or accidental loss or physical damage to tangible property;

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POSITIVE RESULTS

E rik Oostwegel, CEO: “I am pleased to report a successful start of our new strategic direction through which we aim to create sustainable impact through innovation and co-creation at the core of our business. More and more, we connect the digital with the phys- ical world. Working together with our clients and partners, we put a strong focus on using data and algorithms to translate insights into foresights. I am really proud of the progress made by the team.” Financial performance Royal HaskoningDHV improved operational performance in 2017 with a net result of €12,8-million (after profit sharing with staff of €8,5-million) compared to €12,1-million in 2016. Profitability (EBITA margin, recurring) rose to 4,9%. A focus on project management considerably improved project results. The free cash flow improved to €33,8-million (2016: -€2,2-million). This, together with an equity ratio of 45,6% leaves the business in a healthy financial position. Return on staff-owned depositary receipts amounts to 10,6%. Good sales across all business lines resulted in a significant increase in order book to €341-million at the end of 2017. Nynke Dalstra, CFO: “We managed to find the right balance as the positive net results have been achieved while investing in the busi- ness and sharing profit. We will continue to invest in innovation and the digital transformation of our company and support our clients in their transformation. This can only be fruitful when our clients and employees are satisfied. Hence, we continue to view client and employee satisfaction as important indicators of our performance and are pleased to see that these too increased in 2017.” Royal HaskoningDHV reports a return to organic growth and an improved operational performance which delivered a net result of € 12,8-million in 2017. The company’s strategic focus on its core strengths and developing new innovative services is resulting in a strong order book and a pipeline of transformational innovations.

design, parametric calculations and iReport are improving the accu- racy of modelling, the ability to quickly incorporate changes as well as the transparency and communication around the project which save stakeholders crucial time. The new strategic focus has been supported through hiring new talent and a programme of cultural renewal which builds on existing strengths while stimulating entrepreneurship, co-creation and innovation. Global ‘hackathon’ teams, Digital Immersion Days and an Innovation Academy have all assisted the digital transformation. Collaboration remains an essential part of the company’s ability to accelerate radical innovation to meet the challenges facing society. In 2017 it partnered with The Green Village, which aims to accelerate innovation for a sustainable future, and the tech start up incubator YES!Delft. It also joined the Mobility Centre for Africa, a platform for the research, testing and deployment of future smart mobility solutions across the continent. Sustainable operations Royal HaskoningDHV is focusing on specific Sustainable Development Goals (SDGs) in projects and in operations. In 2017 carbon footprint per employee shrank by 6,3% and the company an- nounced its transition to 100% electric vehicles within its fleet in the Netherlands. Its new Amsterdam office demonstrates sustainability in action following a renovation which kept as closely as possible to circular economy principles. Also in 2017, the company became one of the first engineering consultancies to achieve Level 1 Broad- Based Black Economic Empowerment (B-BBEE) accreditation in South Africa.  • Operational performance in 2017 improved with a net result of €12,8-million. • The digital world is increasingly being connected to the physical world. • The new strategic focus has been supported through hiring new talent and a programme of cultural renewal which builds on existing strengths while stimulating entrepreneurship, co- creation and innovation.

Digital transformation Leading services, geographies and innovation are at the core of Royal HaskoningDHV’s new strategic focus. The company is committed to better leverage leading services, key geographies, technology and innovations to create sustainable impact. Transformational innovations are being developed to take their place alongside solutions like Nereda® and Aquasuite®. For example, Flow- tack is a smart transport data system predicting traffic flows to reduce congestion and emissions; the iReport is an accessible online digital platform where information is visual and dynamic, enabling it to be rapidly shared and understood at the touch of a button. Digital engineering capabilities have also been strengthened. For example, during the Gorinchem-Waardenburg dyke improvement proj- ect in the Netherlands, integrated digital delivery is helping to forge a new way of working. The use of Building Information Modelling (BIM), 3D

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MARKETPLACE

GLOBAL INFRASTRUCTURE roll-out key Motheo Construction Group is ‘heartened’ by the finding in ‘The Future of Infrastructure’ report launched by integrated infrastructure delivery company AECOM at the 2018 World Economic Forum in Davos in January that says adequate investment in infrastructure projects is crucial to national prosperity.

the VRP, concluded with the government in October 2016. “We see this as a transformative mile- stone in the construction sector, and an excellent way forward for our companies and consortium members,” CEO Dr. Thandi Ndlovu said at the official signing ceremony. Speaking at the Infrastructure Africa Business Forum last year, South African Minister of Trade and Industry Dr. Rob Davies said infrastructure development was a fundamental catalyst for increased inter-regional trade and industrialisation. “Infrastructure development is at the heart of our efforts to promote high levels of in- clusive growth and development throughout the continent.” It is estimated that Africa has an infra- structure deficit at present of USD93-billion a year for the next 20 years. This was exac- erbated by the fact that Africa was losing over 40% of its competitiveness due to a lack of infrastructure, or the inefficiency of existing infrastructure. Agenda 2063, which represents the vision of the African Union (AU) for unity, self-determination, and collective prosperity, is a shared framework for inclusive growth and sustainable development to be achieved by 2063. The idea was mooted at the 50 th anniversary of the Organisation of African Unity, and ratified in 2015. “It is the AU’s plan for the socio-eco- nomic transformation of the continent over the next 50 years, and includes the AU’s infrastructure plan to expedite Africa’s build programmes,” Infrastructure Africa MD Liz Hart elaborated. 

T he inaugural report, which surveyed over 500 professionals worldwide, outlines the issues faced in delivering infrastructure projects, as well as promoting solutions such as the integrated delivery model for Africa in particular. AECOM cited funding shortages as the main reason for infrastruc- ture backlogs in areas such as Africa. While Design, Build, Finance and Operate (DBFO) is perceived as a preferred global project-delivery model, not all of these boxes can be ticked in an African context. “We can- not necessarily bring the financing, opera- tions, or building side to bear on all projects,” Darrin Green, Managing Director for Civil

infrastructure at AECOM, comments. “However, we are engaged in very de- liberate partnering with select contractors and financiers. That is the way things are going, with clients increasingly looking for a ‘one-stop shop’ for infrastructure delivery,” Green notes. Civils MD Archie Rutherford stresses that companies like Motheo Construction Group is best positioned to collaborate with other major players in terms of promoting the inte- grated delivery model in an African context. He points to the company’s newly-es- tablished partnership with WBHO in its commitment to the Voluntary Rebuilding Programme (VRP). “This is coupled with our status as a Black Women Owned, CIDB Level 9 contractor, which enhances our ability to deliver on the holistic infra- structure solutions that are so essential for the continent’s development.” Motheo Construction Group was one of three major black-owned con- tractors to have signed a development agreement with WBHO in terms of

Civils MD Archie Rutherford and Motheo Construction Group CEO, Dr. Thandi Ndlovu.

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KZN roofing COMPANY GIVES BACK

Since its humble beginnings in 2009, GWR Roofing, Pinetown-based roofing specialist in service of the commercial, residential and industrial markets, has had a markedly unique approach to employee engagement. With an ethos underpinned by skill level, work ethic, accountability and relationship building, management at GWR Roofing have initiated an on-the-job mentorship programme to give high-potential roofing candidates a leg up into the industry. A ccording to Andrew Gove, Director at GWR Roofing, “In a field as specialised as roofing, our staff are our most valuable asset and it is a priority for us to develop, train and create opportunities for them to not only improve their lives and enrich the communities from which they hail, but to keep improving the quality of workmanship we offer our clients. “Limited avenues for training in the roofing and carpentry sectors in South Africa impact on the talent pool that feeds the roofing industry. As such, we took it upon ourselves to institute an in-house training programme to develop our own staff and extend training and mentorship opportunities to high-potential individuals from outside our business who are looking to build a career in the industry,” says Gove. A hand up, not a handout One such candidate is Sihle Dikaneng, a young man from Newcastle in KwaZulu-Natal, who was studying a diploma in engineering. With a firm interest in building a career in the roofing sector, he contacted the Institute for Timber Construction South Africa (ITC-SA), the pro- fessional body for the engineered timber construction industry, who put him in touch with GWR Roofing. “Sihle has since joined one of our teams in a junior capacity, where he will receive training, learn the ropes in a very hands-on way and earn his way up the ranks in our team,” comments Gove. “As part of this apprenticeship, theoretical

marketing as well as financial and operational basics in order to gain a fundamental understanding of how a business operates and how to manage an organisation successfully, benefitting from the same values that underpin GWR Roofing. A boost for business, industry and the economy Gove asserts that while mentorship certainly carries a measure of al- truism, it also comes with many benefits to the host company, which extend to the wider industry as well. “Mentorship and training repre- sent key social responsibilities for us as a South African company, but they also lend equity to the organisation and brand, and support our own marketing efforts; an automatic payback and investment for our business. “Mentorship serves as a dynamic community ‘payback’ that will foster goodwill as GWR Roofing releases reputable, skilled artisans and business owners back into the community. The expectation is that the employee will return to the business world and their com- munity not only with an enhanced skill set, but with the mindset of paying it forward,” he adds. While mentorship is not devoid of any challenges, like time, money, logistics and mentee commitment, the benefits of such programmes have far-reaching implications for the roofing industry as a whole. “Mentorships can help improve the quality and skill level of peo- ple doing roof installations and will hopefully put an end to sub-stan- dard workmanship and resultant wastage of resources,” Gove notes, adding, “By training individuals in the trade, we can also attract talent to the industry; that is people who have the aptitude to take their trade to the next level and become entrepreneurs. “While there are many positives associated with private compa- nies, like ours, engaging in mentorship programmes, a formalised apprenticeship programme, with proper engagement from the public sector, is what South Africa needs. GWR Roofing is passionate about the way it operates and believes that if individuals can onboard values of responsibility and business ethos supported by strong relationships and excellent service, they cannot but thrive commercially and reputationally. “It is possible for us to build an industry where individuals can work together as suppliers and service providers and still be competitive; when pricing is no longer the driving factor for winning business, the entire industry and workforce will make gains,” says Gove. 

content derived from Volume 1 and 2 of the ITC- SA’s Roof Erectors Handbook is taught, on-site training is conducted and the ITC-SA examina- tions must be successfully completed. The aim is to have Sihle running his own team on site, installing roofs and having them signed off by an ITC-SA Inspector,” he adds. While Sihle is undergoing training in both theoretical and practical aspects of the roofing trade, he will also undergo in-house training in Interested in building a career in the roofing sector, Sihle Dikaneng contacted the Institute for Timber Construction South Africa (ITC-SA), the professional body for the engineered timber construction industry, who put him in touch with GWR Roofing, where he is now undergoing training.

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MARKETPLACE

ADVANCING URBAN MOBILITY

Victor Radebe, Executive Director and founder of Mobility Centre Africa (MCA), describes MCA as a non-profit company that seeks to bring together government, industry and academia to discuss issues around the future of mobility – particularly with regards to charting a course to the adoption of new technologies in the rapidly changing world of transportation. Construction World spoke to him after the MCA’s third roundtable in Cape Town.

Victor Radebe, Executive Director and founder of Mobility Centre Africa.

effect on the environment) are discussed at these roundtables. “As a tech-savvy nation, the only way we can proactively manage the mobility disrup- tive forces is to first develop a conducive legislative and policy environment; and gov- ernment’s role cannot be overemphasised,” says Radebe. One disruptor Global ride sharing company, Uber, was MCA’s official partner for the 3 rd Future Mobility. Yolisa Kani – Head: Public Pol- icy Southern Africa of Uber says Uber is faced with the same mobility challenges as everyone. “As much as we have disrupted the market, we do not have all the solutions. We want to collaborate, with our experiences and expertise – the common goal is to share information. We are a unique country, so European or South American models cannot merely be transplanted. What stops us from moving quicker than we want to, is not having the correct regulatory environment – and that is why we are part of the conversation about regulations.” Alon Lits, Uber’s General Manager Sub- Saharan Africa says: “The technology exists – Uber is a proven product. It is obviously more complicated than merely taking theory and operationalising that. We do not see it as a threat to the mini-bus industry, but may be perceived to be a threat.” Radebe concludes: “The aim in not to be ahead of Government – we have to be on par. We need mobility regulations for business to thrive for the benefit of members in the community. The discussions have the aim of lessening the gap of what industry can do and what Government perceives as beneficial to the people of the country.” 

The discussion so far This roundtable was the 3 rd in a series of events in a drive to prepare South Africa and the continent at large for improved future mo- bility. It was preceded by two events hosted in Durban and Johannesburg last year. The 1 st Future Mobility Roundtable envisaged the MCA to be a platform for the research, testing and deployment of future Smart Mobility Solutions. The 2 nd Future Mobility Roundta- ble brought together transport and mobility experts who shared insights on the future of mobility on the continent. Unlike the previous three roundtable events the MCA organised, the 4 th Future Mo- bility Roundtable took the form of an 'uncon- ference' to stimulate debate. The theme of this event was 'Predict 2055 Future Mobility'. Rapid urbanisation Because of rapid urbanisation, people’s movement around cities put huge strain on infrastructure. “Mobility is indirectly about the economy. Unfortunately the more successful you are, the more you become the victim of your own success. Autonomous vehicles encourage urban sprawl as people can live outside urban areas but work inside the city,” says Radebe. Public transport systems in South Africa have, largely, been unsuccessful. Most of these systems only transport single digit percentages of the total number of commuters. “Mega-transport systems were aimed at moving 30% of people. It is nowhere

near that figure. People are still sticking to mini-bus taxis as these are far more agile,” Radebe explains. “The problem with these systems is that it is unknown who will move people for the ‘the first and last mile’”. There- for it is failing. Clear motivation The motivation for the MCA is clear: the transport industry in South Africa does not have a good history of collaborating with government. “Road freight, the Automobile Association, the insurance industry, and banks are all part of the value chain, but have historically not worked well with government as the latter believes they are only concerned about profit, while itself is only interested in empowerment and the people on the ground,” says Radebe. “So before we engage actively with government, we want to create a plat- form to start the discourse from scratch. It is something new – no one truly understands the concept of shared mobility yet.” The MCA therefore sets as its goals the proactive management of disruptions (such as UBER), to maintain a competitive auto industry, the development and local- isation of innovations and to avoid a job bloodbath (which, it is perceived, automation will cause). MCA is largely targeting land transpor- tation (the auto-industry) as 40% of urban space is occupied by vehicles. The problems brought on by this (crashes, congestion, affordability of transport and the negative

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PROPERTY

Estienne de Klerk, CEO of Growthpoint Properties SA.

Are SA REITS true GLOBAL PROPERTY p layers? In the last decade, SA REITs have proven their ability to operate successfully on the inter- national stage and play in almost any market in the world. But does this make them truly global real estate players?

Nedbank’s perspective Len van Niekerk, Senior Property Analyst, Global Markets: Equities at Nedbank CIB agrees that SA REITs are not yet global players in the traditional sense. However, he notes the most prominent ones on the global stage are probably NEPI Rockcastle with its €5-billion CEE portfolio and Growthpoint, to some extent, being SA’s largest REIT company. Growthpoint is ranked 54 th with a weight of 0,6% in the Bloomberg World REIT Index. In this index, SA listed property compa- nies account for a total of 1,1% of the index compared with the likes of Unibail-Rodamco, with a weight of 1,76%. Nedbank CIB is the sponsor of the upcoming SA REIT Confer- ence 2018, which will be hosted by the SA REIT Association in Sandton Central later this week. The gathering will delve into the sector’s global participation and influence, as well as other compel- ling conversations and trending topics. Jaap L. Tonckens, CFO of Unibail-Rodamco, will present a keynote session exploring REITs in Europe. He will take part in a fireside chat, moderated by Estienne de Klerk, CEO of Growthpoint Properties SA, and including Spiro Noussis, CEO of NEPI Rockcastle PLC; Laurence Rapp, CEO of Vukile Property Fund; and Jamie Boyes, Director and Portfolio Manager at Catalyst Fund Managers. Van Niekerk explains that for REITs, investing outside SA is more than a matter of acquiring properties. Companies have to build sustainable local business platforms in these new countries. Among those REITs that have ventured offshore, there hasn’t been a single method of doing this. However, it is most often achieved through a local partnership and development boots on the ground. “SA real estate investors have made their presence the most felt in CEE but are largely irrelevant in the developed markets of Europe, UK, and North America and Asia,” says Van Niekerk. “Realistically SA companies cannot compete when it comes to asset size in

Not quite yet. However, with more international investment expected from SA REITs in the immediate future, the day that they can stand among the elite number of global REITs may not be too far off. The SA listed property sector has been on a globalisation charge in recent years. It now has exposure in over 25 countries, and nearly 45% of the FTSE/JSE SAPY Index earnings come from outside SA. “While SA REITs have dramatically increased their offshore investment, none can yet claim global exposure in the traditional sense of being invested in all the major global markets in the world. They are still some way off being global companies,” points out Estienne de Klerk, CEO of Growthpoint Properties SA, the country’s largest primary JSE-listed REIT. “That said, some REITs have built very representative businesses in specific markets. NEPI Rockcastle is the largest real estate firm in Central and Eastern Europe (CEE) and Growthpoint Properties Australia is now the 11th largest REIT on the ASX. The continued growth of these kinds of platforms will make the SA market even more relevant on a global scale,” points out De Klerk. He adds that SA’s strong asset management and institutional in- vestment market is another aspect that makes it attractive to foreign real estate businesses, and it has lured several inward listings of mainly European firms. Also, SA REITs are market anchors in Africa as an investment destination.

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PROPERTY

First issuer listing in the property sector 4 Africa Exchange Proprietary Limited (4AX) is proud to confirm and introduce the listing of its first issuer operating in the property sector, being Heartwood Properties Limited (Heartwood Properties).

4AX CEO, Fay Mukaddam, said: “We are very excited about this listing and we welcome Heartwood Properties as an issuer on the 4AX Equity Market. The Heartwood Properties listing is a new venture listing by way of introduction and the shares will begin to formally trade on 4AX.” What it is Heartwood Properties is a property development company with an attractive portfolio of commercial real estate assets focused primarily within the ware- housing and office sectors. It currently operates predominantly within the Gauteng region, however, opportunities are being pursued in other regions as well. Heartwood Properties has defined its strategy and business model to service businesses operating in the medium to large owner- managed sector; businesses that require warehousing or offices space, and/or may be looking to expand. According to John Whall, CEO of Heartwood Properties: “We are optimistic about the exciting opportunities and potential that our listing on 4AX offers us, as well as to potential investors of Heartwood Properties. The listing of Heartwood Properties on 4AX will assist in bringing into fruition our goals, which includes raising

capital for deployment in our developments; organically growing the company through new acquisitions, and continuing to enhance our existing real estate portfolio. At the same time, the listing of Heartwood Properties also provides potential investors, and our tenants, a unique opportunity to invest in a dynamic listed property equity.” The shares listed on 4AX today comprise of 100 000 005 ordinary no par value shares at a listing price of R0,59 per share. Pallidus Capital will act as the ongoing external issuer agent of Heartwood Properties. The Head of Pallidus Capital’s Exchange Advisory Division, Johan Fourie, said: “Heartwood Properties’ portfolio is of a high quality. It is currently valued at over R100-million, shows great growth potential with the pipeline properties, and it presents stable income over the short, medium and long-term. “The decision by Heartwood Properties to list on 4AX was influenced by the efficient and cost effective alternative model 4AX offers to the market. 4AX brings to the market an alternative model which reduces regulatory costs and inefficiencies, but promotes and is compliant with the highly regarded financial regulatory standards enforced in South Africa,” added Fourie. The entrepreneurial and innovative

4AX CEO, Fay Mukaddam.

nature of Heartwood Properties’ business and portfolio compliments 4AX’s vision to attract investment opportunities of this calibre – offering valuable opportunities for retail and institutional investors. “Strained economic growth experienced in the country in recent years has placed key development sectors and businesses operating in South Africa under immense pressure to grow in tougher economic times. Although markets, investors, business leaders and society, alike are cautiously optimistic of the vision and promise of the new leadership for the country, there is a renewed buoyancy that can be seen in the markets,” says Mukaddam. “Business and investor confidence is on the rise and there is definite budding new energy and excitement across all sectors in the country. With this, we are confident that the property investment appetite will grow,” concludes Mukaddam. 

International markets, but many can compete toe-to-toe when it comes to development and asset management skills. Being entrepreneurial and creating great returns are things that SA REITs are far more interested in than simply the size of assets under management.” Van Niekerk expects most new capital, debt and equity, raised by SA REITs to continue to be invested outside SA for the foreseeable future. “International markets offer attractive initial yield spreads, which is the gap between the yield on the investment and cost of debt. The offshore investment destinations also have higher GDP growth rates than SA; notably CEE, which has attracted the most from SA REITs and has a forecast GDP growth rate of 3% to 3,5% per year over the next three years compared with 1,6% for SA.” NEPI Rockcastle recently reported nominal sales growth at their shopping centres of 8%. Van Niekerk notes this is a strong result given the near-zero inflation rate in the region. Cautiously optimistic The SA economic environment is also contributing to REITs investing offshore. While current business confidence in SA could be described as cautiously optimistic, many investment decisions are still in the wings awaiting the removal of policy uncertainty and implementation of structural changes. The general state of oversupply of real estate relative to tenant demand and the weak economy means that conditions in the local

• The SA listed property sector has been on a globalisation charge in recent years. • Among those REITs that have ventured offshore, there hasn’t been a single method of doing this.

real estate sector will remain tough for the foreseeable future. “Other than economic and political reasons for investing outside SA, international investment is a natural evolution and diversifica- tion of a growing sector looking for new markets and investment opportunities,” says Van Niekerk. While SA REITs cannot yet be considered true global players, Director and Portfolio Manager at Catalyst Fund Managers Jamie Boyes stresses that the quality of the businesses – the manage- ment, balance sheet, and assets – of several SA REITs are certainly comparable to many global developed market REITs. “The market has changed quite a lot over the last five to 10 years. I expect SA REITs to continue to garner interest from non-SA inves- tors who are still looking for opportunities outside of their traditional basket of investments,” says Boyes. He adds: “As other emerging markets become more established mature businesses, investment interest into emerging market REITs is likely to grow. This would probably help the SA REITs that are looking for a more global investor base.” 

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ENVIRONMENT & SUSTAINABILITY

First company to issue a GREEN BOND on the JSE

• Green Bonds raise money that is specially allocated for funding projects that result in positive environmental and climate benefits. • The proceeds of the bonds will be used exclusively to finance or refinance Growthpoint’s new and existing sustainable green properties. • Annual reporting on each building’s carbon emissions, energy, water and waste. Bond Fund (ALCB Fund), an initiative of KfW Development Bank and the German Government backed by additional inves- tors. It aims to promote the development of African capital markets by acting as an anchor investor in primary bond issuance. It has invested around USD70-million since inception in 13 countries. In addition to anchor investments, the ALCB Fund offers technical assistance to cover transaction related costs, including compliance with international Green Bond standards. Karl von Klitzing, Chairman of the Board of the ALCB Fund, says: “We are delighted to be investing in Growthpoint’s inaugu- ral Green Bond and to be supporting the sustainable real estate sector. As the first corporate Green Bond issuance in Sub-Sa- haran Africa, it represents a milestone for the market. Growthpoint has developed a comprehensive framework with the Green Building Council of South Africa to ensure investors are well informed of the environ- mental impact of its green buildings. We hope to contribute towards improved Among the investors in the new Growthpoint Green Bonds is the African Local Currency

Growthpoint Properties is the first South African company to issue a Green Bond on the Johannesburg Stock Exchange (JSE). The Growthpoint Green Bonds, for terms of five, seven and 10 years, were issued and listed on the JSE on Friday, 9 March 2018.

G reen Bonds raise money that is specially allocated for funding projects that result in positive environmental and climate benefits. The R1,1-billion (USD94-million) Green Bonds issued by Growthpoint will be used to fund the green buildings and green initiatives of South Africa's leading REIT. The Green Bonds form part of Growth- point’s R20-billion Domestic Medium Term Note (DMTN) Programme. Growthpoint has a national scale Aaa.za Moody’s rating, with many banks opting to hold Growthpoint paper as High-Quality Liquid Assets (HQLA). The Green Bonds are priced at 139 basis points (1,39%) for the five-year term, at 169 basis points (1,69%) for the seven-year term and at 200 basis points (2%) for the 10-year term above three-month JIBAR. The bond auction took place on Tuesday, 6 March 2018, and is believed to be the first public auction in South Africa for a 10-year bond for a real estate company. The Growthpoint Green Bonds constitute green instruments falling within the Green Bond Principles of the Real Estate Sector and the green segment of the JSE’s Interest Rate Market. Donna Nemer, Director Capital Markets at the JSE, says: “The JSE is proud to Green Bond proves there are benefits in commit- ting to promoting South Africa’s climate-resilient future as well as for being at the forefront of the financial sector’s response to the invest- ment challenges posed by climate change. Growthpoint is laying new foundations for the capital flows needed to achieve the commitments within the South African context for securing investments and jobs in future and is to be greatly congratulat- ed for this.” welcome Growthpoint Properties to the Green Bond Segment as the first corporate in South Africa to issue a Green Bond. Growthpoint’s successful inaugural

Norbert Sasse, Group CEO of Growthpoint Properties, comments: "Growthpoint’s inaugural Green Bonds link our sustainable developments and green buildings with cap- ital markets. This gives investors a unique opportunity to participate in supporting greater environmental sustainability and climate change mitigation and enables them to evaluate the environmental impact of their investment. The work of the JSE, bond arranger RMB and our team at Growthpoint, as well as the interest and support of in- vestors in our pioneering Green Bonds, has been exciting. We are pleased with the re- sults of the issue and the positive response from local and international investors. We intend to continue to be a catalyst for a more sustainable property sector.” Dirkje Bouma, Growthpoint’s Group Treasurer, adds: “The new Green Bonds give Growthpoint access to alternative sources of funding and allow us to lengthen the weighted average term of our debt book.”

reporting standards as a catalyst for further Green Bond issuance in renewable energy, housing and infrastructure sectors.”

Growthpoint is a leader in green building and climate

change mitigation. Over 86 of its properties are green-cer- tified buildings and have a combined property value of R18,7-billion. The proceeds of the bonds will be used exclusively to finance or refinance Growthpoint’s new and existing sustain- able green properties and its projects which reduce environmental impact. The green buildings to which Growthpoint will assign proceeds are all independently cer- tified by the GBCSA and their costs

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Wind energy programme back on track The South African Wind Energy Association (SAWEA), together with the broader renewable power sector, is celebrating Minister Radebe’s confirmation that the country’s renewable procurement programme will resume.

The task of getting the REIPPPP which has endured extended policy uncertainty for over two years back on track will no doubt be a challenge for all involved However, the industry has reaffirmed its commitment to working with government, civil society and labour to ensure that the programme makes an optimal contribution to job creation, advancing the transformation agenda and attracting further foreign direct investment. Over the past two years, renewable industry employees across the value chain, at power plants, construction companies, manufacturing facilities, service providers and other related firms have been retrenched and many local firms continue to face significant financial losses due to the delay. South Africa’s manufacturing and construction industries in particular, stand to benefit immediately from conclusion of the PPAs. The recovery and growth of the domestic manufacturing industry is particularly critical, given its potential to increase investment, create jobs and drive down the price of renewable technology. Policy certainty is essential to realising continued value chain benefits, attracting investment and creating jobs. “The Industry is therefore immensely relieved to receive confirmation today from Minister Radebe that PPAs will be signed

with no further delay,” said Brenda Martin, CEO of SAWEA. At the end of 2015, after three successful competitive bid rounds utility-scale renewable power projects totalling 6376 MW and amounting to investment of over R200- billion had been procured. The estimated average portfolio cost for all technologies under the REIPPPP has dropped consistently in every period to a combined average of R0,86 /kWh by that point. Thirty seven Preferred Bidders from Rounds 3.5 and 4 should normally have signed PPAs with Eskom by no later than April 2016. Instead, the agreements have remained unsigned, delaying invest- ment of over R59-billion, the creation of over 13 000 construction jobs and a further 2 000 operations jobs. Minister Radebe has advised the Office of the Director General and the IPP Office to commence with the arrangements for the signing of the 27 renewable energy projects to realise the substantial investment that will help to stimulate the country’s economy at a time that is most needed. “SAWEA and all its members look forward to resuming a focus on realising the great contribution that wind and renewable power can make to South Africa’s social, environmental and economic development,” concluded Martin. 

Karl von Klitzing, Chairman of the Board of the ALCB Fund.

Norbert Sasse, Group Chief Executive Officer of Growthpoint Properties.

assured by Growthpoint’s auditors. Besides annual reporting on each building’s carbon emissions, energy, water and waste, inves- tors can access Growthpoint’s app which records the water and energy consumption on an ongoing basis.  Responsible Investment Index for eight years running. It owns and co-owns the largest port- folio of certified green buildings of any company in South Africa and is recognised as a leading developer of green buildings. Growthpoint provides space to thrive with innovative and sustainable property solutions. It is an international property company and the largest South African primary REIT listed on the JSE. It owns and manages a diversified portfolio of 559 property assets, locally and internationally. Growthpoint is a Founding Member of GBCSA, a member of the GBCSA’s Green Building Leader Network, a component of the FTSE4Good Emerging Index and has been included in the FTSE/JSE

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