BUSINESS ECONOMIC INDABA 29 JANUARY 2019

1. BUSINESS ECONOMIC INDABA • 29 JANUARY 2019 SAPOA was established in 1966 by South Africa’s property investment organizations, to bring together all role players in the commercial property field and to create a power platform for property investors. As SAPOA’s members control approximately 90% of all commercial retail and industrial property in South Africa, SAPOA is recognized as the representative body and official voice of the property industry in this country.

2. SAPOA was established in 1966 by South African’s property investment organizations, to bring together all role players in the commercial property field and to create a powerful platform for property investors. As SAPOA’s members control approximately 90% of all commercial retail and industrial property in South Africa, SAPOA is recognized as the representative body and officialvoice of the property industry in this country

3. PANEL DISCUSSION MACRO ECONOMIC ENVIRONMENT Property Sector Perspective

4. INDICATORS Upsides • A new political administration  • A sophisticated emerging market; • Young population; • Access to the continent; • SA thus has locational advantages; • Land reform can be used as a mechanism for growth if well managed; Downsides • Low economic growth; • Failing Municipalities; • Poor policy implementation; • Corruption; • Weak systems of accountability; • Weak education and health systems; • High cost of doing business; • Mass youth unemployment; • Spatial Integration – • Majority of the population (black S- Africans ) living far away from cities’ where, transport and allied costs adds to costs for the economy; • Policy uncertainty and the political climate adding to many buyers’ wait-and-see attitude towards property investment; • A floundering power supplier

5. 110.00 5.6 % SA Cash : 105.00 3.0 % SA Bonds : 100.00 95.00 - 6.3 % SA Equities : Year-to-date South African asset class performance 90.00 85.00 80.00 - 22.9 % SA Listed Property: 75.00 Jul/2018 Jul/2018 Jul/2018 Jul/2018 Jul/2018 Apr/2018 Apr/2018 Apr/2018 Apr/2018 Apr/2018 Oct/2018 Oct/2018 Jun/2018 Jun/2018 Jun/2018 Jun/2018 Jan/2018 Jan/2018 Jan/2018 Jan/2018 Jan/2018 Mar/2018 Mar/2018 Mar/2018 Mar/2018 Feb/2018 Feb/2018 Feb/2018 Feb/2018 Aug/2018 Aug/2018 Aug/2018 Aug/2018 Sep/2018 Sep/2018 Sep/2018 Sep/2018 May/2018 May/2018 May/2018 May/2018 SA Bonds SA Listed Property SA Listed Equity SA Cash Source: STANLIB Research 9 October 2018

6. SA Listed Property total returns since 1995 2018 the worst year so far in modern history

7. SA Listed Property Offshore Exposure Offshore through Offshore JSE 42 % • In 2009, Offshore exposure was 1% (R2bn). • 5 years ago, offshore exposure was 6%. • Today, it’s around 42% and increasing (R200bn). SA 58 % Company Data, Anchor Stockbrokers September 2018

8. Europe (CEE) as a % of total investments in CEE Rest of Africa out of favour

9. Bulgaria’s top 3 malls are owned by South Africans Paradise Center, Sofia The Mall, Sofia Serdika Center, Sofia Hyprop Investments NEPI Rockcastle NEPI Rockcastle

10. Romanian malls are mostly owned by South Africans Mega Mall, Bucharest Promenada Mall, Bucharest City Park Mall, Constanta

11. South African exposure is increasing in other CEE countries Croatia, Hungary & Poland CEE Real GDP growth forecasts from 2017 to 2022 3% average growth CEE Unemployment forecasts from 2017 to 2022 Unemployment declining

12. Property rates a negative factor Rates & taxes becoming a larger slice of the pie

13. CITIES – OUR PATHWAYS TO PROSPERITY (Gauteng, Cape Town, eThekwini, and Nelson Mandela Bay) account for 42% of South Africa’s population and 57% of formal economic activity. Between 1996 and 2013, the metro economies grew at nearly twice the pace of the rest of the country. Per capita income in the metros is about 40% higher than in the rest of the country; Cities - and how they are governed and managed - must be at the heart of the national economic growth and jobs debate To achieve higher GDP growth, Cities have to deal with the following: Attract the right set of skills; Encourage entrepreneurship; Make the streets of a city safer for its inhabitants; Densify – Build UP not OUT

14. CONCLUSION: PROPERTY FUNDAMENTALS Policy certainty – Expropriation without Compensation; Clarity on Energy pricing – NERSA/Eskom; Functional and co-operative municipalities that are ‘’Open for Business’’; Stabilisation of ever increasing costs of Rates and Taxes & establishment of a 3rd party ombudsman or independent regulator for municipal costs; Focus on spatial development plans including Urban Centric development and planning; Maintenance of independence of the SARB, Judiciary and State Sustainable Cities + Inclusive growth = Growing SA Incorpoarted