Eskom unhinges building sector
Thématique :
sud afrique
By Roy Cokayne, Business Report, March 6, 2008,
Developers say approval delays will cost thousands of jobs - Policy applies mainly to industry, utility says
Eskom’s decision to take four to six months to approve new developments will have a “devastating” effect on the building industry, lead to thousands of job losses and cause steep land price increases.
This was the view of the property industry and economists yesterday after the utility said it would take up to six months to give a quote on new applications for projects requiring more than 100 kilovoltamperes (kVA) of electricity.
The SA Property Owners' Association (Sapoa) criticised Eskom for its “unco-ordinated communication” and failure to consult on the new strategy.
Sapoa chief executive Neil Gopal said its members had projects worth billions of rands in the pipeline, some negotiated with foreign investors. Eskom’s unco-ordinated messages sent out negative signals.
Sapoa had requested an urgent meeting with Eskom and the public enterprises department to learn how they decided applications would take four to six months and not two to three months to process, said Gopal.
“It is also important for them to hear what impact this must have on jobs, the scrapping of deals and investments.”
Erwin Rode, the chief executive of Rode & Associates, said the new strategy would be devastating for property developers, building contractors, associated professions and jobs.
Rode said Eskom was transferring the pain of the electricity shortage from the mining industry because it was a foreign exchange earner.
“Fixed investment in building will unwind rapidly over the next year and layoffs will happen as current projects are completed.”
Francois Viruly, a property economist, said planning approval for developments would increasingly be linked to power availability, which would lead to unintended consequences.
“If you can’t get infrastructure into land, it starts impacting on land availability and land prices will start to move up strongly,” he said. With interest rates high, delays could severely affect the viability of projects, which could sink because of the holding costs. It was critical for Eskom to stick to its timeline to process applications, Viruly said.
He expected developers to be more cautious on greenfield developments. “There will be a greater focus on the redevelopment of existing properties.”
However, Andrew Etzinger, Eskom’s general manager of resources and investment strategies, said the strategy “effectively applies to industry”.
There was “a lot of headroom” between the peak power demand of a house and 100kVA.
Etzinger confirmed that Eskom was considering rationing power to municipalities, where a lot of building and shopping centre development took place. A number of municipalities had anticipated this and were prioritising applications for power supply.
Etzinger said Eskom could not commit itself to a precise date to give quotes for applications because of uncertainties and volatility. It was confident it would be able to meet the four- to six-month period.
But he stressed that not all applicants would get a quote within this time, because Eskom had to ensure capacity was available before it approved applications.
Growthpoint Properties, South Africa’s largest property investment company, confirmed it had already been told by Eskom that approval for power supply for a property project in Sandton would be delayed by between four and six months.
Developers say approval delays will cost thousands of jobs - Policy applies mainly to industry, utility says
Eskom’s decision to take four to six months to approve new developments will have a “devastating” effect on the building industry, lead to thousands of job losses and cause steep land price increases.
This was the view of the property industry and economists yesterday after the utility said it would take up to six months to give a quote on new applications for projects requiring more than 100 kilovoltamperes (kVA) of electricity.
The SA Property Owners' Association (Sapoa) criticised Eskom for its “unco-ordinated communication” and failure to consult on the new strategy.
Sapoa chief executive Neil Gopal said its members had projects worth billions of rands in the pipeline, some negotiated with foreign investors. Eskom’s unco-ordinated messages sent out negative signals.
Sapoa had requested an urgent meeting with Eskom and the public enterprises department to learn how they decided applications would take four to six months and not two to three months to process, said Gopal.
“It is also important for them to hear what impact this must have on jobs, the scrapping of deals and investments.”
Erwin Rode, the chief executive of Rode & Associates, said the new strategy would be devastating for property developers, building contractors, associated professions and jobs.
Rode said Eskom was transferring the pain of the electricity shortage from the mining industry because it was a foreign exchange earner.
“Fixed investment in building will unwind rapidly over the next year and layoffs will happen as current projects are completed.”
Francois Viruly, a property economist, said planning approval for developments would increasingly be linked to power availability, which would lead to unintended consequences.
“If you can’t get infrastructure into land, it starts impacting on land availability and land prices will start to move up strongly,” he said. With interest rates high, delays could severely affect the viability of projects, which could sink because of the holding costs. It was critical for Eskom to stick to its timeline to process applications, Viruly said.
He expected developers to be more cautious on greenfield developments. “There will be a greater focus on the redevelopment of existing properties.”
However, Andrew Etzinger, Eskom’s general manager of resources and investment strategies, said the strategy “effectively applies to industry”.
There was “a lot of headroom” between the peak power demand of a house and 100kVA.
Etzinger confirmed that Eskom was considering rationing power to municipalities, where a lot of building and shopping centre development took place. A number of municipalities had anticipated this and were prioritising applications for power supply.
Etzinger said Eskom could not commit itself to a precise date to give quotes for applications because of uncertainties and volatility. It was confident it would be able to meet the four- to six-month period.
But he stressed that not all applicants would get a quote within this time, because Eskom had to ensure capacity was available before it approved applications.
Growthpoint Properties, South Africa’s largest property investment company, confirmed it had already been told by Eskom that approval for power supply for a property project in Sandton would be delayed by between four and six months.
