Making sense of the Building, Construction and Property Market in the VUCA environment: Sept 2013 (Presentation)
 

Making sense of the Building, Construction and Property Market in the VUCA environment: Sept 2013 (Presentation)

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In this presentation we make snse of the Building, Construction and Property market in the volatile, uncertain, complex and ambiguous (VUCA) environment. We also look at some of the maajor issues ...

In this presentation we make snse of the Building, Construction and Property market in the volatile, uncertain, complex and ambiguous (VUCA) environment. We also look at some of the maajor issues faced by the Industry, which can fundamentally affect the future.

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Making sense of the Building, Construction and Property Market in the VUCA environment: Sept 2013 (Presentation) Making sense of the Building, Construction and Property Market in the VUCA environment: Sept 2013 (Presentation) Presentation Transcript

  • 1 © BMI-BRSCU© BMI-BRSCU Towards Making sense of the Building-, Construction- and Property-Industry In the VUCA ENVIRONMENT Dr. Llewellyn B. Lewis September 2013 THE STRATEGIC FORUM A place of assembly for strategic conversations THE STRATEGIC FORUM www.strategicforum.co.za BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc Reg. No. 2002/105109/23 • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc • BMI • BMI • BMI • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc Reg. No. 2002/105109/23 • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc • BMI • BMI • BMI • BMI • BMI • BMI •
  • 2 Volatility, Uncertainty, Complexity and Ambiguity will be the order of the day. We can accept that the new normal is also underway in South Africa. It is evident that it is not technical issues bedevilling the Industry. Many Political, Economic and Social issues affect the trends in the Industry, most of which are out of control of the Industry as the following facts and anecdotes illustrate. As Mamphela Ramphele said in 2008, it was astounding that SA’s business sector had remained largely silent, even on failures that directly affected it. “The private sector is too scared to upset (the government) ... but its silence is creating the seeds of social instability.” she said. (Business Day, 3 December 2008). THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 3 Across every sector of society, decision makers are struggling with the complexity and velocity of change in an increasingly interdependent world. The context for decision-making has evolved, and in many cases has been altered in revolutionary ways. In the decade ahead, our lives will be more intensely shaped by transformative forces, including economic, environmental, geopolitical, societal and technological seismic shifts. The signals are already apparent with the rebalancing of the global economy, the presence of over seven billion people and the societal and environmental challenges linked to both. The resulting complexity threatens to overwhelm countries, companies, cultures and communities. Klaus Schwab Founder and Executive Chairman World Economic Forum THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 4 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 5 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 6 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 7 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 8 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 9 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 10 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 11 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 12 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 13 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 14 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 15 THE INDUSTRY DASHBOARD: MORTGAGE ADVANCES YTD Actual YTD FC -2.43% 4.13% -3.82% 1.72% -52.61% -20.70% -3.50% 3.73% 1.51% 2.70% 0.66% 2.99% Jul-13 2013 vs 2012 MORTGAGE ADVANCES (VALUE) Mortgage Advances on Existing Buildings Mortgage Advances on Construction of New Buildings Mortgage Advances on Vacant Land Total Gross New Mortgage Loans and Re-advances Total Mortgage Loans Outstanding Mortgage Advances Weighted Average PROGNOSIS: YTD ACTUAL VS FORECAST: MORTGAGE ADVANCES
  • 16 THE INDUSTRY DASHBOARD: MORTGAGE ADVANCES, TOTAL GROSS: 2013 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Y/Y Cum Actual 2007 30 111 71 925 116 917 153 368 199 882 233 827 270 620 307 387 339 290 376 890 413 167 441 410 Y/Y Cum Actual 2012 16 758 40 402 63 876 82 716 102 296 122 292 141 944 160 781 179 147 200 723 221 734 238 146 Y/Y CUM Actual 2013 15 597 34 362 53 754 74 682 96 973 118 009 138 756 160 759 182 301 205 994 228 833 247 038 Y/Y Cum % Change Actual 2013 vs 2012 -6.93% -14.95% -15.85% -9.71% -5.20% -3.50% -2.25% -0.01% 1.76% 2.63% 3.20% 3.73% -20% -15% -10% -5% 0% 5% 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 400 000 450 000 RMillions Y/Y Cum Actual Total gross new Mortgage Loans and Readvances: 2013 vs 2012 and 2007 by month: January - Dec (Source: SARB, BMI-BRSCU Workings) MAT FORECASTACTUAL Y/YCum%ChangeActual2013vs2012 -3.50% 3.73%TotalGrossNewMortgageLoansandRe-advances
  • 17 THE INDUSTRY DASHBOARD: GFCF RES, NON RES & CONSTRUCTION YTD Actual YTD FC 6.08% 5.78% 6.46% 5.98% 6.31% 5.90% 6.45% -0.64% 6.31% 2.98% GFCF Residential GFCF Non Residential GFCF Total Building GFCF Construction Gross Fixed Capital Formation Weighted Average GROSS FIXED CAPITAL FORMATION (VALUE) PROGNOSIS: YTD ACTUAL VS FORECAST: GROSS FIXED CAPITAL FORMATION Jul-13 2013 vs 2012
  • 18 THE INDUSTRY DASHBOARD: GFCF TOTAL BUILDING: Q1-Q4 2013 Cum GFCF Q1 Cum GFCF Q2 Cum GFCF Q3 Cum GFCF Q4 CUM Q/Q GFCF TOTAL BUILDING 2008 23 088 48 055 74 036 100 916 CUM Q/Q GFCF TOTAL BUILDING 2012 26 469 53 573 80 674 108 232 CUM GFCF TOTAL BUILDING 2013 28 183 56 955 85 136 114 615 CUM Q/Q % CHANGE 2013 VS 2012 6.48% 6.31% 5.53% 5.90% 5.00% 5.20% 5.40% 5.60% 5.80% 6.00% 6.20% 6.40% 6.60% 0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 CumQ/QPercentageChange RMillions CUM Q/Q GFCF TOTAL BUILDING 2013 VS 2012 (FC) (Source: SARB, BMI-BRSCU Workings) MAT FORECASTACTUAL 6.31% 5.90%GFCFTotalBuilding
  • 19 © BMI-BRSCU© BMI-BRSCU GFCF CONSTRUCTION: Q1-Q4 2013 www.strategicforum.co.za 2013/'01 2013/'02 2013/'03 2013/'04 CUM GFCF CONSTRUCTION 2008 25 056 54 178 88 986 127 142 CUM GFCF CONSTRUCTION 2012 45 393 90 913 137 498 185 772 CUM GFCF CONSTRUCTION 2013 48 441 96 773 139 035 184 581 CUM Q/Q % CHANGE GFCF CONSTR 2013 VS 2012 6.71% 6.45% 1.12% -0.64% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 180 000 200 000 CumQ/QPercentageChange RMillions CUM Q/Q GFCF CONSTRUCTION: 2013 VS 2012 (JUNE) (Source: SARB, BMI-BRSCU Workings) MAT FORECASTACTUAL 6.45% -0.64%GFCFConstruction
  • 20 THE VUCA ENVIRONMENT www.strategicforum.co.za As we at BMI-BRSCU look ahead to 2013 and on to 2020 it is evident that we will be facing an uncertain Political, Economic and Social environment. Nevertheless, as we analyse all published data and peruse the anecdotes in the News, we can say with some certainty that the decline in the Building Industry has been arrested and is moving sideways (in physical m2 volume) and strongly upward (in current value, which of course includes price inflation).
  • 21 © BMI-BRSCU RESIDENTIAL BPP & BC: 1994-2013: M2 (JUNE) www.strategicforum.co.za 0 100 000 200 000 300 000 400 000 500 000 600 000 700 000 800 000 900 000 1 000 000 1 100 000 1 200 000 1 300 000 1 400 000 1 500 000 1 600 000 1 700 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 SquareMetres BPP & BC Total Residential (Including A&A): 1993-2013 by month: m2 (July) (Source: StatsSA; BMI-BRSCU: BC by Month and Type of Building: Chart 28(14)) BC TOTAL RESIDENTIAL: M2 BPP TOTAL RESIDENTIAL: M2 12 per. Mov. Avg. (BC TOTAL RESIDENTIAL: M2) 12 per. Mov. Avg. (BPP TOTAL RESIDENTIAL: M2) 21 The decline in BPP (m2) has halted but trend is sideways The decline in BC (m2) has SLOWED but trend is sideways
  • 22 © BMI-BRSCU RESIDENTIAL BPP & BC: 1994-2013: R*1000 (JUNE) www.strategicforum.co.za 0 500 000 1 000 000 1 500 000 2 000 000 2 500 000 3 000 000 3 500 000 4 000 000 4 500 000 5 000 000 5 500 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 R*1000(CurrentValues) BPP & BC Total Residential: 1993-2013 by month: R*1000 (Current Values) (July) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL RES BC&BPP R) BC TOTAL RESIDENTIAL: R*1000 BPP TOTAL RESIDENTIAL: R*1000 12 per. Mov. Avg. (BC TOTAL RESIDENTIAL: R*1000) 12 per. Mov. Avg. (BPP TOTAL RESIDENTIAL: R*1000) 22 The decline in BPP (R*1000) has halted and trend is strongly upward The decline in BC (R*1000) has been halted but trend is SLUGGISHLY upward
  • 23 © BMI-BRSCU NON RESIDENTIAL BPP & BC: 1994-2013: M2 (JUNE) www.strategicforum.co.za 100 000 200 000 300 000 400 000 500 000 600 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 SquareMetres BPP & BC Total Non Residential (Including A&A): 1993-2013 by month: m2 (July) (Source: StatsSA; BMI-BRSCU: BC by Month and Type of Building: Chart 29(14)) BC TOTAL NON RESIDENTIAL: M2 BPP TOTAL NON RESIDENTIAL: M2 12 per. Mov. Avg. (BC TOTAL NON RESIDENTIAL: M2) 12 per. Mov. Avg. (BPP TOTAL NON RESIDENTIAL: M2) 23
  • 24 © BMI-BRSCU NON RESIDENTIAL BPP & BC: 1994-2013: R*1000 (JUNE) www.strategicforum.co.za 0 500 000 1 000 000 1 500 000 2 000 000 2 500 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 R*1000(CurrentValues) BPP & BC Total Non Residential: 1993-2013 by month: R*1000 (Current Values) (July) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL NR BC&BPP R) BC TOTAL NON RESIDENTIAL: R*1000 BPP TOTAL NON RESIDENTIAL: R*1000 12 per. Mov. Avg. (BC TOTAL NON RESIDENTIAL: R*1000) 12 per. Mov. Avg. (BPP TOTAL NON RESIDENTIAL: R*1000) 24
  • 25 © BMI-BRSCU TOTAL BPP & BC: 1994-2013: M2 (JUNE) www.strategicforum.co.za 25 500 000 600 000 700 000 800 000 900 000 1 000 000 1 100 000 1 200 000 1 300 000 1 400 000 1 500 000 1 600 000 1 700 000 1 800 000 1 900 000 2 000 000 2 100 000 2 200 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 SquareMetres BPP & BC Total Building (Including A&A): 1993-2013 by month: m2 (July) (Source: StatsSA; BMI-BRSCU: BC by Month and Type of Building: Chart 30(14)) BC TOTAL BUILDING: M2 BPP TOTAL BUILDING: M2 12 per. Mov. Avg. (BC TOTAL BUILDING: M2) 12 per. Mov. Avg. (BPP TOTAL BUILDING: M2)
  • 26 © BMI-BRSCU TOTALBPP & BC: 1994-2013: R*1000 (JUNE) www.strategicforum.co.za 26 0 1 000 000 2 000 000 3 000 000 4 000 000 5 000 000 6 000 000 7 000 000 8 000 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 R*1000(CurrentValues) BPP & BC Total Building: 1993-2013 by month: R*1000 (Current Values) (July) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008:TOTAL BLDNG BC&BPP R) BC TOTAL BUILDING: R*1000 BPP TOTAL BUILDING: R*1000 12 per. Mov. Avg. (BC TOTAL BUILDING: R*1000) 12 per. Mov. Avg. (BPP TOTAL BUILDING: R*1000)
  • 27 TOTAL BUILDING PLANS PASSED (M2) ENDED 2012 AT + 0,42% COMPARED TO 2011. THE INDUSTRY DASHBOARD: BUILDING PLANS PASSED: YTD FORECAST 2013 VS 2012 m2 R*1000 40 919 4.72% 191 824 7.09% 387 175 9.97% 2 991 293 14.24% 130 112 8.70% 1 035 711 11.98% 75 312 60.67% 874 354 141.97% -32 705 -1.05% 339 325 2.14% 600 814 6.33% 5 432 506 11.12% m2 R*1000 132 522 19.61% 1 128 725 23.79% 246 608 32.87% 1 670 531 38.59% 109 285 7.26% 665 489 10.27% 14 107 4.17% 175 214 9.92% 14 325 1.36% 387 602 5.84% 516 847 11.95% 4 027 560 16.81% 1 117 661 8.09% 9 460 066 13.00%TOTAL * July 2013 Shopping Industrial and warehouse Other buildings Additions and alterations TOTAL * July 2013 Office and banking Dwelling-house < 80 square metres Dwelling-house => 80 square metres Flats and townhouses Other buildings Additions and alterations TOTAL NON RES BUILDING PLANS PASSED (BPP): SOUTH AFRICA: YTD FC 2013 VS 2012 RES BUILDING PLANS PASSED (BPP): SOUTH AFRICA: YTD FC 2013 VS 2012 Numbers m2 R*1000 5.70% 6.75% 5.64% 2.13% 12.49% 20.45% 18.81% 18.27% 31.11% 247.10% 514.17% 0.11% 5.68% 10.46% 19.96% m2 R*1000 70.89% 86.39% 50.66% 67.73% 5.34% 9.64% 58.11% 75.48% 16.40% 26.84% 27.76% 41.70% 15.72% 26.80%GRAND TOTAL RES AND NON RES *July 2013 Shopping Industrial and warehouse Other buildings Additions and alterations TOTAL NON RESIDENTIAL NON RES BUILDING PLANS PASSED (BPP): CUM YTD JULY 2013 VS 2012: TOTAL RSA Office and banking Flats and townhouses Other buildings Add's and alt's TOTAL RES * July 2013 RES BUILDING PLANS PASSED (BPP): CUM YTD JULY 2013 VS 2012: TOTAL RSA Dwelling-house < 80 square metres Dwelling-house => 80 square metres YTD Actual YTD FC 10.46% 6.33% 19.96% 11.12% 27.76% 11.95% 41.70% 16.81% 15.72% 8.09% 26.80% 13.00% 15.80% 8.12% 26.96% 13.03% Non Residential BPP (R) Total BPP (m2) Total BPP (R) Building Plans Passed Weighted Average (m2) BUILDING PLANS PASSED (BPP) (m2 and value) Building Plans Passed Weighted Average (R) Non Residential BPP (m2) PROGNOSIS: YTD ACTUAL VS FORECAST: BUILDING PLANS PASSED Jul-13 2013 vs 2012 Residential BPP (m2) Residential BPP (R)
  • 28 THE INDUSTRY DASHBOARD: RES BUILDING PLANS PASSED: YTD ACTUAL 2013 VS 2012 28 5.70% 6.75% 5.64% 2.13% 12.49% 20.45% 18.81% 18.27% 31.11% 247.10% 514.17% 27.33% 70.89% 86.39% 50.66% 67.73% 5.34% 9.64% 58.11% 75.48% 47.19% 0.11% 5.68% 16.40% 26.84% 11.32% 26.80% -50% 50% 150% 250% 350% 450% 550% No m2 R'000 No m2 R'000 No m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 R'000 R'000 < 80m2 > 80m2 Flats and Townhouses Other Total Office and Banking Shopping Ind&WH Other Total A&A Dwellings A&A Other A&A Tot Tot % Difference in Cumulative Y/Y BPP: Cum YTD Actual 2013 vs 2012 by Segment (July) (Source: StatsSA, BMI-BRSCU Workings)
  • 29 4.07% 4.72% 7.09% 2.71% 9.97% 14.24% 11.11% 8.70% 11.98% 60.67% 141.97% 15.39% 19.61% 23.79% 32.87% 38.59% 7.26% 10.27% 4.17% 9.92% 20.93% -1.05% 2.14% 1.36% 5.84% 3.25% 12.99% -15% 5% 25% 45% 65% 85% 105% 125% 145% 165% No m2 R'000 No m2 R'000 No m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 R'000 R'000 < 80m2 > 80m2 Flats and Townhouses Other Total Office and Banking Shopping Ind&WH Other Total A&A Dwellings A&A Other A&A Tot Tot % Difference in Cumulative Y/Y BPP: Cum YTD FC 2013 vs 2012 by Segment (July) (Source: StatsSA, BMI-BRSCU Workings) THE INDUSTRY DASHBOARD: RES BUILDING PLANS PASSED: YTD FORECAST 2013 VS 2012 29
  • 30 RES BUILDINGS COMPLETED (M2) ENDED 2012 AT – 1,21% COMPARED TO 2011. THE INDUSTRY DASHBOARD: RES BUILDINGS COMPLETED: YTD FORECAST 2013 VS 2012 RES BUILDINGS COMPLETED (BC): YTD JULY 2013 VS 2012 m2 % R*1000 Dwelling-house < 80 square metres 480 972 -2.53% 1 292 043 Dwelling-house => 80 square metres 1 646 349 2.80% 8 868 218 Flats and townhouses 689 585 21.60% 3 888 543 Other buildings 55 380 304.23% 283 226 Additions and alterations 1 086 327 24.81% 5 024 486 TOTAL 3 958 613 11.63% 19 356 516 NON RES BUILDINGS COMPLETED (BC): YTD JULY 2013 VS 2012 m2 % R*1000 Office and banking 479 813 136.22% 3 322 510 Shopping 312 452 -13.11% 1 533 632 Industrial and warehouse 486 821 -22.37% 2 117 683 Other buildings 166 180 18.18% 781 825 Additions and alterations 459 073 40.26% 393 725 TOTAL 1 904 339 14.88% 8 149 375 GRAND TOTAL 5 862 952 12.66% 27 505 891 * July 2013 RES BUILDINGS COMPLETED (BC): YTD FORECAST 2013 VS 2012 m2 R*1000 Dwelling-house < 80 square metres 21 272 2.36% 144 132 6.17% Dwelling-house => 80 square metres 101 647 3.62% 1 048 310 7.19% Flats and townhouses 129 439 11.71% 1 011 688 17.29% Other buildings 42 138 92.70% 185 961 60.95% Additions and alterations 285 392 19.46% 1 358 010 19.77% TOTAL RES 579 889 9.17% 3 748 102 12.52% NON RES BUILDINGS COMPLETED (BC): YTD FORECAST 2013 VS 2012 m2 R*1000 Office and banking 190 536 41.18% 1 418 036 45.01% Shopping 84 506 16.92% 232 072 8.32% Industrial and warehouse -209 011 -18.52% -744 870 -15.80% Other buildings 73 683 36.64% 320 162 30.19% Additions and alterations 181 744 33.10% 931 496 28.10% TOTAL NON RES 321 457 11.32% 2 156 895 14.35% TOTAL RES & NON RES 901 346 9.83% 5 904 997 13.13% * July 2013 YTD Actual YTD FC 11.63% 9.17% 18.31% 12.52% 14.88% 11.32% 20.86% 14.35% 12.66% 9.83% 19.19% 13.13% 12.67% 9.84% 19.13% 13.14%Buildings Completed Weighted Average (R) Total BC (m2) Total BC (R) Buildings Completed Weighted Average (m2) BUILDINGS COMPLETED (BC) (m2 and value) Residential BC (m2) Residential BC (R) Non Residential BC (m2) Non Residential BC (R) PROGNOSIS: YTD ACTUAL VS FORECAST: BUILDINGS COMPLETED Jul-13 2013 vs 2012
  • 3131 -4.75% -2.53% -1.40% 0.51% 2.80% 9.70% 20.12% 21.60% 32.75% 304.23% 374.35% 15.74% 136.22% 158.65% -13.11% -24.47% -22.37% -15.52% 18.18% 8.25% 18.52% 24.81% 26.34% 40.26% 28.53% 27.07% 19.19% -200% -100% 0% 100% 200% 300% 400% 500% No m2 R'000 No m2 R'000 No m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 R'000 R'000 Dwellings < 80m2 Dwellings > 80m2 Flats and TH Other Total Office & Banking Shopping Ind&WH Other Total A&A Dwellings A&A Other A&A Total Total % Difference in Cumulative Y/Y BC: Cum YTD Actual 2013 vs 2012 by Segment (July) (Source: StatsSA, BMI-BRSCU Workings: Chart BC 59) THE INDUSTRY DASHBOARD: RES BUILDINGS COMPLETED: YTD ACTUAL 2013 VS 2012
  • 3232 THE INDUSTRY DASHBOARD: RES BUILDINGS COMPLETED: YTD FORECAST 2013 VS 2012 0.54% 2.36% 6.17% 1.97% 3.62% 7.19% 12.96% 11.71% 17.29% 92.70% 60.95% 10.37% 41.18% 45.01% 16.92% 8.32% -18.52% -15.80% 36.64% 30.19% 10.57% 19.46% 19.77% 33.10% 28.10% 22.48% 13.31% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% No m2 R'000 No m2 R'000 No m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 m2 R'000 m2 R'000 R'000 m2 R'000 m2 R'000 R'000 R'000 Dwellings < 80m2 Dwellings > 80m2 Flats and TH Other Total Office & Banking Shopping Ind&WH Other Total A&A Dwellings A&A Other A&A Total Total % Difference in Cumulative Y/Y BC: Cum YTD FC 2013 vs 2012 by Segment (July) (Source: StatsSA, BMI-BRSCU Workings: Chart BC 59)
  • 33 DOMESTIC CEMENT SALES (TONNES) ENDED 2012 AT + 2,89% COMPARED TO 2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cum YTD sales: 2012 779 003 1 663 70 2 637 34 3 510 50 4 486 60 5 552 46 6 488 79 7 465 47 8 528 70 9 615 29 10 789 9 11 559 5 Forecast 2013 773 583 1 652 12 2 619 00 3 468 18 4 417 49 5 454 09 6 364 71 7 314 58 8 348 62 9 405 39 10 547 8 11 296 2 % Change FC 2013 VS 2012 -0.70% -0.70% -0.70% -1.21% -1.54% -1.77% -1.91% -2.02% -2.11% -2.18% -2.24% -2.28% -3% -2% -2% -1% -1% 0% 0 2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 14 000 000 Tonnes Domestic Cement Sales: YTD FC 2013 vs 2012 (March) (Source: Cement & Concrete Institute; BMI-BRSCU Workings) Cumulitive%Change:YTD2013vs2012 YTD FORECASTACTUAL THE INDUSTRY DASHBOARD: DOMESTIC CEMENT SALES: 2012 -0.70% -2.28%DOMESTIC CEMENT SALES (Tonnes) PROGNOSIS: YTD ACTUAL VS FORECAST: CEMENT SALES Jul-13 2013 vs 2012
  • 34 LOCAL BUILDING LUMBER SALES (M3) ENDED 2012 AT + 0,38% COMPARED TO 2011. THE INDUSTRY DASHBOARD: LOCAL BUILDING LUMBER SALES: 2013 VS 2012: M3 (MAY) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 Cum Y/Y Local Building 80 164 176 989 279 604 366 414 463 621 554 962 642 100 747 186 836 497 943 845 1 055 1 1 114 1 2013 Cum Y/Y Local Building 79 559 172 349 262 215 352 292 447 929 545 255 655 341 771 901 876 276 984 228 1 096 6 1 162 7 % Change Cum Y/Y Local Building: 2013 vs 2012 -0.75% -2.62% -6.22% -3.85% -3.38% -1.75% 2.06% 3.31% 4.76% 4.28% 3.93% 4.36% -8% -6% -4% -2% 0% 2% 4% 6% - 200 000 400 000 600 000 800 000 1 000 000 1 200 000 1 400 000CubicMetres Lumber Sales by End-use: Local Building: Cum Y/Y 2013 vs 2012 (Aug) (Source: Crickmay & Associates, BMI-BRSCU Workings) %ChangeCumY/YLocalBuilding:2013vs2012 MAT FORECASTYTD ACTUAL -0.70% -2.28%DOMESTIC CEMENT SALES (Tonnes) PROGNOSIS: YTD ACTUAL VS FORECAST: LOCAL BUILDING LUMBER SALES Jul-13 2013 vs 2012
  • 35 -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Total Res BC Cum YTD % Change (m2) 9.85% 14.93% 9.27% 16.32% 13.49% 11.10% 11.63% 10.30% 10.97% 11.08% 9.83% 9.17% Total Non Res BC Cum YTD % Change (m2) -30.93% 4.65% 9.70% 5.20% 3.89% 7.22% 14.88% 14.35% 9.31% 13.64% 10.61% 11.32% Total BC Cum YTD % Change (m2) -3.17% 11.61% 9.40% 12.57% 10.19% 9.81% 12.66% 11.57% 10.43% 11.88% 10.07% 9.83% Domestic Cement Sales (Tonnes) -0.70% -0.70% -0.70% -1.21% -1.54% -1.77% -1.91% -2.02% -2.11% -2.18% -2.24% -2.28% Local Building Lumber Sales (m3) -0.75% -2.62% -6.22% -3.85% -3.38% -1.75% 2.06% 3.31% 4.76% 4.28% 3.93% 4.36% Total Residential BPP (m2) -2.70% 3.89% 5.31% 10.85% 10.09% 9.58% 10.46% 9.04% 9.44% 8.55% 6.75% 6.33% Total Non Residential BPP (m2) 84.87% 53.55% 63.12% 44.52% 35.51% 22.03% 27.76% 24.95% 21.08% 16.70% 14.37% 11.95% Total Building BPP (m2) 20.72% 18.20% 21.09% 20.61% 17.69% 13.42% 15.72% 13.84% 13.00% 11.08% 9.11% 8.09% Cumulative YTD Buildings Completed (BC), Domestic Cement Sales and Local Building Lumber Sales: % Change by Sector: January - Dec 2013 (Source: StatsSA; BMI-BRSCU Workings) CUM ACTUAL CUM FORECAST BMI-BRSCU Estimate of Cement Sales The figures are now released by PPC on behalf of the major producers, namely PPC, Lafarge, Afrisam, NPC, Ash Resources, Sephaku Ash and Ulula Ash. The data do not include exports by these firms or sales by other cement companies or imports. (30 Aug 2013) 35 PROGNOSIS www.strategicforum.co.za
  • 36 THE VUCA ENVIRONMENT: THE NDP www.strategicforum.co.za
  • 37 THE VUCA ENVIRONMENT: THE NDP www.strategicforum.co.za
  • 38 THE VUCA ENVIRONMENT: THE NDP ROADMAP www.strategicforum.co.za THIRTY-THREE prominent business figures from several leading South African companies on Sunday boldly called for unity among businesses to arrest a decline in confidence in South Africa’s future, warning the country could "unravel" if challenges in education, corruption and unemployment were left unresolved. In an open letter published in City Press and the Sunday Times on the eve of the African National Congress’s (ANC’s) electoral conference in Mangaung where major policy decisions on South Africa’s economic trajectory will be made, the chairmen and CEOs offered their assistance to the government but challenged it to implement its policies and the National Development Plan (NDP). (Business Day, 10 Dec 2012)
  • 39 INVESTEC boss Stephen Koseff has rounded on African National Congress (ANC) deputy president Cyril Ramaphosa, saying he is “totally on the wrong bus” when it came to acknowledging the reality of the country’s economic situation. What really irked Mr Koseff and other bankers at the summit was Mr Ramaphosa’s view that the parts of the NDP on which everyone agreed should be implemented now, and the rest of it left to “dialogue”. THE VUCA ENVIRONMENT: THE NDP ROADMAP www.strategicforum.co.za AFRICAN National Congress (ANC) deputy president Cyril Ramaphosa told a banking summit that the National Development Plan (NDP) was like a moving caravan and those who did not jump aboard risked being left behind.
  • 40 THE VUCA ENVIRONMENT: THE NDP ROADMAP www.strategicforum.co.za “. . . Even with a relatively narrow focus, finding common ground would require a change in the way they operated. Rather than trying to resolve all the issues, the group sensed that they would need to go through many cycles of seeing the problem, clarifying their purpose and “searching for things we could agree on”. Seek agreement and go became our mantra. We didn’t want to waste time fighting over all the pieces of the big puzzle that we disagreed on and spending all our time arguing who was right. “This proved to be a fundamental learning. It oriented us to action, based on what we could agree on and to get going”. (Senge: The necessary revolution: 2010) Ramaphosa and Manuel are CORRECT. Koseff is on the wrong bus!
  • 41 PRESIDENT Jacob Zuma has confirmed plans to locate the National Planning Commission (NPC) within the state, while retaining the existing body in an advisory role. However, Minister in the Presidency Trevor Manuel was quick to emphasise this does not mean the NPC would be "axed". THE VUCA ENVIRONMENT: THE NDP ROADMAP www.strategicforum.co.za
  • 42 In the past 18 months the South African economy continued to function significantly below full capacity, although in a number of areas bottlenecks visibly inhibited economic progress. The National Planning Commission released a vision statement and development plan for the country in November 2011, targeting the elimination of poverty and reduction of inequality by 2030 through appropriate changes, hard work, leadership and unity. Having identified the key developmental challenges facing the country and its people, the commission developed a plan focusing on – the creation of jobs; – improving South Africa’s infrastructure; – appropriate transition to a low-carbon economy; – an inclusive and integrated rural economy; – reversing the spatial effects of apartheid; – improving the quality of education, training and innovation; – providing quality healthcare for all; – social protection; – building safer communities; – reforming the public service to build a capable state; – eliminating corruption; and – transforming society and uniting the country. Addressing the infrastructure bottlenecks was recognised as of particular importance. In 2011, to ensure timeous and effective implementation in this area, Cabinet created the Presidential Infrastructure Co- ordinating Commission, chaired by the President and including half the members of Cabinet, the nine provincial premiers, and the mayors of the metropolitan areas. The President underlined the need for speeding up the capital programmes of the public sector in his State of the Nation address to Parliament early in 2012, when he unveiled the government’s infrastructure development programme. (SARB, Annual Economic Report: 2012) THE VUCA ENVIRONMENT: THE NDP ROADMAP www.strategicforum.co.za
  • 43 (Source: WEF: Global Risks 2013: Eighth Edition) THE VUCA ENVIRONMENT: TOP 5 RISKS www.strategicforum.co.za
  • 44 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 45 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 46 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 47 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 48 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 49 Societal Needs Take-make-waste solutions Regenerative solutions – all life flourishes Damage to social and environmental solutions DELAY Short-term fixes Easier, faster Fundamental solutions Harder, take time Unintended Side effects (Source: Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 50 Learning Capabilities for Systemic Change (Source: Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 51 When asked why he robbed Banks, the infamous Willy Sutton responded simply”, “Because that’s where the money is.” If global carbon emissions were currency, most of the ”money” could be found in office buildings, malls, hotels, factories, apartment buildings and private homes. The greatest consumers of energy today – and in turn the largest contributors of greenhouse gases – are our commercial, industrial and residential buildings. Heating, air-conditioning and electricity for what the industry calls the “built environment” accounts for 40 percent of greenhouse gas emissions in the United States (almost 60 percent globally), almost twice the emissions of the automotive sector. Obviously the built environment represents a high leverage point for anyone looking to create energy systems suited for life beyond the Industrial Age Bubble. (Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 52 Frustrated for several years by industry consensus processes that seemed to keep devolving to “lowest common denominator agreements,” David Gottfried, a small-town developer, along with environmental litigator Michael Italiano believed there had to be a better way. They joined Berkebile and his AIA committee to form a small group of like-minded people who were interested in genuinely addressing the total impact of buildings on the environment, human health and well- being and communities. Ten years later they had succeeded in establishing the US Green Building Council (USGBC) and the Leadership in Energy and Environmental Design (LEED) certification system, which has now spread around the country and the world. Today the USGBC – and its sister Green Building Councils in Countries such as India, China, Brazil and Mexico – has become a powerful and unifying force within the building industry. (Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 53 • The first USGBC meeting occurred in Washington DC in 1993; • They shared a simple core vision: transforming how buildings get built; • Knowing that competition and fragmentation thwarted real change, the founding group resolved to get representatives of the entire system involved from the outset; • Finding common ground was a problem and they identified the areas of agreement; • This proved to be a fundamental learning. It oriented them to action, based on what they could agree on and to get going; • The group discovered one area of agreement early on: market-based forces were much more powerful than legal or government action in spurring innovation and genuine commitment; • This idea of market-based transformation became a second key founding idea; • The introduction of the LEED certification system in 2000 led to explosive growth; • By mid-2007 over 7 500 buildings were registered with LEED worldwide, up from just 635 in 2002; • The value of green building construction starts exceeded $12 Billion in 2008; • Today the GBC has more than 90 regional chapters and projects in 41 countries; • The total cost of designing and building LEED certified buildings now averages < than a 1,8% premium over conventional buildings; • A wave of basic innovation is now transforming the building industry; • A next generation of “living” (regenerative) buildings is coming – buildings that produce more energy and clean water than they use and function more like trees and forests. (Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 54 Alice Lane, Sandton is a 4 Star Green Star SA rated office, as developer Abland received certification from the Green Building Council of South Africa (GBCSA) for the design of their prestigious Sandton project. No. 2 Silo is a high-end residential development, part of the redevelopment of the Silo area at the V&A Waterfront. There are two distinct buildings linked together. No. 1 Silo is office space, and No. 2 Silo is the residential building. 32 Registered Green Building Projects in South Africa THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 55 Department of Environmental Affairs City: Pretoria Tool: Green Star SA - Office v1 > Design Rating: 6 Star Hyundai Automotive SA (Pty) Ltd Head Office City: Johannesburg Rating: 4 Star The first office building in the South African automotive industry to achieve a 4 Star Design Certification setting the precedent for other industry participants to follow 32 Registered Green Building Projects in South Africa THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 56 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za Typical Clamp kiln operation
  • 57 Clamp kiln operation at Langkloof Broken bricks from a fired clamp kiln THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 58 Zig-zag-kiln at Apollo, Western Cape Zig-zag-kiln at Apollo, Western C Side view with flue gas duct Covering green bricks THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 59 Top view of the kilnZig-zag-kiln at Apollo, Western Cape THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 60 Side view with chimney and flue ducts So-called „zig-zag-kiln at Apollo, Western Cape THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 61 DENIAL Companies - carry on past “tip” Policy makers – stimulus spending (or austerity, or both) ANGER Implications of change becomes more obvious Need to BLAME someone for the disaster BARGAINING Companies – Asset sales, closures Individuals – Stop borrowing, start saving DEPRESSION Reality begins to be confronted Growing awareness of what has been lost ACCEPTANCE Finally people accept what has happened New opportunities emerge out of extreme pessimism THE NEW NORMAL The paradigm of loss model: Elizabeth Kuler-Ross: Source International eChem THE TIPPING POINT THE VUCA ENVIRONMENT 2008 2012 2020 ? THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za
  • 62 DENIAL Companies - carry on past “tip” Policy makers – stimulus spending (or austerity, or both) ANGER Implications of change becomes more obvious Need to BLAME someone for the disaster BARGAINING Companies – Asset sales, closures Individuals – Stop borrowing, start saving DEPRESSION Reality begins to be confronted Growing awareness of what has been lost ACCEPTANCE Finally people accept what has happened New opportunities emerge out of extreme pessimism THE NEW NORMAL The paradigm of loss model: Elizabeth Kuler-Ross: Source International eChem THE TIPPING POINT THE VUCA ENVIRONMENT 2008 2012 2020 ? THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za STRATEGIC RESPONSES: COMPETING ON THE EDGE OF CHAOS New order can emerge from chaos. Complexity theory argues that nothing innovative can emerge from systems with a high degree of order and stability (eg regulated industries); similarly, completely chaotic systems (eg riots) are incapable of functioning or creating anything. Somewhere on the boundary between order and disorder, control and chaos, sits creativity, innovation, self-renewal and growth. Pascale (1999) calls this point “the edge of chaos”. (OUBS, Strategy: Unit 8: 28)
  • 63 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za Sustainable Value Drivers • Disruption • Clean Technology • Carbon Footprint Drivers • Pollution • Material Consumption • Waste Drivers • Climate Change • Resource depletion • Poverty Drivers • Civil Society • Transparency • Connectivity INTERNAL EXTERNAL TODAY TOMORROW Strategy Pollution prevention, Minimise waste and emissions from operations Strategy Product Stewardship, Integrate Stakeholder views into business process Strategy Sustainability Vision, Create a shared roadmap for meeting unmet needs Strategy Clean Technology, Develop the sustainable competencies for the future Payoff Cost and Risk Reduction Payoff Reputation and Legitimacy Payoff Sustainable Growth Trajectory Payoff Innovation and Repositioning Sustainability Value Framework (Senge: The necessary Revolution: 2010) STRATEGIC RESPONSES: COMPETING ON THE EDGE OF CHAOS
  • 64 THE VUCA ENVIRONMENT: THE NEW NORMAL www.strategicforum.co.za There are many forces compelling businesses toward the regenerative economy, but the Sustainable Value framework helps to categorise them into 4 groupings: 1. Increasing industrialisation of the last two centuries and its side effects, inter alia material consumption, pollution, and waste generation. Firms can create immediate value by reducing the level of material consumption and pollution associated with their activities. 2. The proliferation of “civil society stakeholders”. As the power of national governments has eroded in the wake of global trade regimes, NGO’s and other civil society groups stepped into the breach, assuming the role of monitor (and in some cases enforcer) of social and environmental standards. Companies that operate at greater levels of transparency and responsiveness to the public’s desire for sustainable practices will see the direct impact of improved brand image on their bottom line. 3. Emerging “disruptive” technologies that challenge the status quo could render many of today’s energy- and material-intensive industries obsolete. 4. Global problems like resource depletion, deteriorating ecosystems and climate change; poverty and inequity in the developing world; and an equally broad set of sustainability drivers in the developed world, including global security issues and their close links to climate, resource consumption and energy supply and security. Responding to this set of drivers is essential for the health of the planet, and firms can also create value by pursuing sustainability related opportunities that are rapidly emerging in all industries. Global sustainability is so complex that it cannot be addressed by any single corporate action. Therefore companies that hope to thrive in the years to come must address each of the four broad sets of drivers. (Senge: The necessary Revolution: 2010)
  • 65 VSBK at Langkloof For successful transformation to take place it is important to have something that people can touch. A lot of talk about climate change and the whole systems approach are too theoretical for most people. While some people can imagine alternative futures with little help, most move from the concrete to the abstract – not the other way around. (Based on Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 66 VSBK at Langkloof VSBK at Langkloof adding fuel to the green bricks Unloading site with steel bars, hydraulic equipment and cart THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 67 VSBK at Langkloof VSBK at Langkloof Stacking fired bricks Stacking fired bricks; View from top THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 68 Market-based forces are much more powerful than legal or government action in spurring innovation and genuine commitment. THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za VSBK Kilns and burnt bricks at Langkloof.
  • 69 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za Next Investment phase at Langkloof – 18 Kilns
  • 70 THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za Next Investment phase at Langkloof – 18 Kilns
  • 71 Langkloof Bricks has been accoladed with two "Eastern Cape Top Green Organisation" awards by the Institute of Waste Management Southern Africa (IWMSA), in association with the Department of Economic Development, Environmental Affairs and Tourism (DEDEAT) These awards were issued in recognition of the innovative practices undertaken by Langkloof Bricks to minimise its impact on the environment by means of reducing and transforming waste into a resource, in addition to contributing toward energy efficiency, air quality and climate change through the successful implementation of the SA- VSBK (Vertical Shaft Brick Kiln) technology. THE VUCA ENVIRONMENT: CLIMATE CHANGE www.strategicforum.co.za
  • 72 Learning Capabilities for Systemic Change (Source: Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: FINANCING AND INFRASTRUCTURE
  • 73 And yet few sectors present more difficult challenges for change. The building industry is highly fragmented and the competitiveness – and even suspicion – between different competing interests is, for most veterans in the industry, just part of the way the business works. “There was often an adversarial relationship among the three main parties in any major project: the owner/developer, the architect and the contractors”. Developers, for example, “. . . tend to set their budget for total building costs a low as possible to maximise their profit on the project. Architects, engineers and construction firms then compete to maximise their share of the fixed budget”. So what you end up with is buildings that have the cheapest heating and air- conditioning systems, as opposed to the most efficient – despite the fact that a higher priced, more efficient system would save the owner money in the long haul (and be better for the environment) The net result is often a suboptimal conventional design that wastes resources and has double or triple the operating costs of green buildings – costs that are passed on to occupants indefinitely. (Senge: The necessary Revolution: 2010) THE VUCA ENVIRONMENT: FINANCING AND INFRASTRUCTURE
  • 74 THE VUCA ENVIRONMENT: FINANCING AND INFRASTRUCTURE YTD Actual YTD FC -2.43% 4.13% -3.82% 1.72% -52.61% -20.70% -3.50% 3.73% 1.51% 2.70% 0.66% 2.99% YTD Actual YTD FC 6.08% 5.78% 6.46% 5.98% 6.31% 5.90% 6.45% -0.64% 6.31% 2.98% YTD Actual YTD FC 10.46% 6.33% 19.96% 11.12% 27.76% 11.95% 41.70% 16.81% 15.72% 8.09% 26.80% 13.00% 15.80% 8.12% 26.96% 13.03% YTD Actual YTD FC 11.63% 9.17% 18.31% 12.52% 14.88% 11.32% 20.86% 14.35% 12.66% 9.83% 19.19% 13.13% 12.67% 9.84% 19.13% 13.14% -0.70% -2.28% 3.31% 4.36% 7.77% 5.01% 13.27% 8.03% Buildings Completed Weighted Average (R) OVERALL AVERAGE (R) Jul-13 Total BC (m2) Total BC (R) Buildings Completed Weighted Average (m2) DOMESTIC CEMENT SALES (Tonnes) LOCAL BUILDING LUMBER SALES (m3) 2013 vs 2012 OVERALL AVERAGE (m2) Non Residential BPP (R) Total BPP (m2) Total BPP (R) Building Plans Passed Weighted Average (m2) BUILDINGS COMPLETED (BC) (m2 and value) Residential BC (m2) Residential BC (R) Non Residential BC (m2) Non Residential BC (R) GFCF Residential GFCF Non Residential GFCF Total Building GFCF Construction Gross Fixed Capital Formation Weighted Average BUILDING PLANS PASSED (BPP) (m2 and value) Building Plans Passed Weighted Average (R) Non Residential BPP (m2) MORTGAGE ADVANCES (VALUE) Mortgage Advances on Existing Buildings Mortgage Advances on Construction of New Buildings Mortgage Advances on Vacant Land Total Gross New Mortgage Loans and Re-advances Total Mortgage Loans Outstanding Mortgage Advances Weighted Average GROSS FIXED CAPITAL FORMATION (VALUE) PROGNOSIS: YTD ACTUAL VS FORECAST BY INDICATOR Jul-13 2013 vs 2012 Source: BMI-BRSCU Jul-13 2013 vs 2012 PROGNOSIS: YTD ACTUAL VS FORECAST: GROSS FIXED CAPITAL FORMATION PROGNOSIS: YTD ACTUAL VS FORECAST BY INDICATOR PROGNOSIS: YTD ACTUAL VS FORECAST: BUILDING PLANS PASSED PROGNOSIS: YTD ACTUAL VS FORECAST: BUILDINGS COMPLETED PROGNOSIS: YTD ACTUAL VS FORECAST: CEMENT SALES PROGNOSIS: YTD ACTUAL VS FORECAST: LOCAL BUILDING LUMBER SALES PROGNOSIS: YTD ACTUAL VS FORECAST: MORTGAGE ADVANCES Jul-13 2013 vs 2012 Jul-13 2013 vs 2012 Jul-13 2013 vs 2012 Jul-13 2013 vs 2012 Residential BPP (m2) Residential BPP (R)
  • 75 THE VUCA ENVIRONMENT: THE LEVERAGE POINTS FINANCING AND INFRASTRUCTURE -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% MORTGAGE ADVANCES (VALUE) Mortgage Advances on Existing Buildings Mortgage Advances on Construction of New Buildings Mortgage Advances on Vacant Land Total Gross New Mortgage Loans and Re-advances Total Mortgage Loans Outstanding Mortgage Advances Weighted Average PROGNOSIS: YTD ACTUAL VS FORECAST: GROSS FIXED CAPITAL FORMATION Jul-13 GROSS FIXED CAPITAL FORMATION (VALUE) GFCF Residential GFCF Non Residential GFCF Total Building GFCF Construction Gross Fixed Capital Formation Weighted Average PROGNOSIS: YTD ACTUAL VS FORECAST: BUILDING PLANS PASSED Jul-13 BUILDING PLANS PASSED (BPP) (m2 and value) Residential BPP (m2) Residential BPP (R) Non Residential BPP (m2) Non Residential BPP (R) Total BPP (m2) Total BPP (R) Building Plans Passed Weighted Average (m2) Building Plans Passed Weighted Average (R) PROGNOSIS: YTD ACTUAL VS FORECAST: BUILDINGS COMPLETED Jul-13 BUILDINGS COMPLETED (BC) (m2 and value) Residential BC (m2) Residential BC (R) Non Residential BC (m2) Non Residential BC (R) Total BC (m2) Total BC (R) Buildings Completed Weighted Average (m2) Buildings Completed Weighted Average (R) PROGNOSIS: YTD ACTUAL VS FORECAST: CEMENT SALES Jul-13 DOMESTIC CEMENT SALES (Tonnes) PROGNOSIS: YTD ACTUAL VS FORECAST: LOCAL BUILDING LUMBER SALES Jul-13 LOCAL BUILDING LUMBER SALES (m3) PROGNOSIS: YTD ACTUAL VS FORECAST BY INDICATOR Jul-13 OVERALL AVERAGE (m2) OVERALL AVERAGE (R) PROGNOSIS: YTD ACTUALAND FORECAST: 2013 VS 2012 BY INDICATOR (Source: SARB; StatsSA; BMI-BRSCU Workings) YTD Actual YTD FC The LEVERAGE POINTS
  • 76 As can be seen from the analysis of Mortgage Advances (Total Mortgage Advances expected to increase by + 1,72% compared to 2012, but – 44% compared to 2007) the real-estate market remained in the doldrums during the past 18 months, consistent with the stagnation in banks’ mortgage advances; In contrast the tremendous growth in unsecured lending is partly a result of a shift in lending from home loans into personal loans by the big four banks; Their latest results all make this shift in "business mix" abundantly clear. The reason is easy to see: unsecured lending is vastly more profitable than home loans; This lack of appetite for home loans is clear across the industry. According to June data, there is just over R1 Trillion worth of home loans in SA, just 1.5% more than a year ago. Over the same period, total assets in the banking system have grown 7.8%, with unsecured loans the largest growth area. What does this shift mean for the country? Anecdotally, the trend need not mean fewer homes are being financed. Some of the unsecured lending is being used to finance deposits on homes, with banks only willing to fund at lower loan-to-value ratios. So the flat growth in mortgage finance does not mean that total property finance is flat, as some unsecured loans are being used for this; The shift has damaged the ability of the average South African to own a home. This entrenches an economic advantage for those who already own their homes, making it more difficult to transform the patterns of ownership in the economy. While there has been a boom in the size of the black middle class, the simultaneous shift in banking behaviour means this has not translated into a proportional greater ability for black consumers to buy property. (Business Day, 16 September 2013) THE VUCA ENVIRONMENT: FINANCING www.strategicforum.co.za
  • 77 THE VUCA ENVIRONMENT: FINANCING www.strategicforum.co.za Mortgage Lending Unsecured credit Alternative Financing; Crowdfunding Consumption; Home Loan Deposits DELAY Short-term fixes Easier, faster Fundamental solutions Harder, take time Unintended Side effects (Source: Senge: The necessary Revolution: 2010) Real-estate companies that have jumped into the crowdfunding pool are working within the SEC's guidelines. For example, Fundrise Fund LLC has registered some of its offerings with the SEC to solicit unaccredited investors for $100 minimum investments in small, locally based projects. Realty Mogul Co. requires a $5,000 minimum investment, but like Prodigy, it only allows accredited investors to participate.
  • 78 THE VUCA ENVIRONMENT: FINANCING MORTGAGES AND UNSECURED LENDING
  • 79 THE VUCA ENVIRONMENT: FINANCING MORTGAGES AND UNSECURED LENDING
  • 80 THE VUCA ENVIRONMENT: FINANCING MORTGAGES AND UNSECURED LENDING
  • 81 THE VUCA ENVIRONMENT: INFRASTRUCTURE www.strategicforum.co.za Infrastructure spend Collusion bid rigging Fair competition Clients benefit DELAY Short-term fixes Easier, faster Fundamental solutions Harder, take time Unintended Side effects (Source: Senge: The necessary Revolution: 2010) Fines; Tarnished Reputation; Price Increases; Capacity.
  • 82 © BMI-BRSCU82 2013-2020 Average R*Million R*Million % % 23 623 2 953 1.61% 0.85% 117 565 14 696 8.04% 4.25% 61 128 7 641 4.18% 2.21% 4 523 565 0.31% 0.16% 56 100 7 012 3.83% 2.03% 199 273 24 909 13.62% 7.21% 43 004 5 376 2.94% 1.55% 444 56 0.03% 0.02% 106 505 13 313 7.28% 3.85% 612 165 76 521 41.84% 22.13% 25 115 3 139 1.72% 0.91% 35 950 4 494 2.46% 1.30% 32 673 4 084 2.23% 1.18% 9 042 1 130 0.62% 0.33% 46 733 5 842 3.19% 1.69% 120 842 15 105 8.26% 4.37% 28 368 3 546 1.94% 1.03% 286 916 35 865 585 638 73 205 40.03% 21.17% 223 928 27 991 15.31% 8.10% 41 358 5 170 2.83% 1.50% 1 463 088 182 886 100.00% 52.90% 568 176 71 022 43.62% 20.54% 504 415 63 052 38.72% 18.24% 230 057 28 757 17.66% 8.32% 1 302 649 162 831 100.00% 47.10% 2 765 737 345 717 100.00% 1 037 151 1 728 586 3 457 171 ©BMI-BRSCU Affordable Housing General Government PUBLIC RESIDENTIAL INVESTMENT IN BUILDING & CONSTRUCTION: 2013-2020: LMR SOYUZ SCENARIO SECTOR AND SEGMENT PRIVATE RESIDENTIAL Dwelling-houses < 80 m2 Dwelling-houses > 80 m2 Townhouses & Flats Other (Incl. hotels & casinos) General government Public corporations Private business enterprises TOTAL CONSTRUCTION TOTAL BLDNG AND CONSTR 3 years (2013-2015) 5 years (2013-2017) 8 years (2013-2020) Unrecorded Res Add's and Alt's Unrecorded Non Res Add's and Alt's GRAND TOTAL CONSTRUCTION General Government Public Corporations Private Business Enterprises TOTAL NON RESIDENTIAL Shops Industrial & warehouse Other Additions & Alterations PUBLIC NON-RESIDENTIAL Public authorities. Private Business Enterprises TOTAL RESIDENTIAL PRIVATE NON-RESIDENTIAL Offices Additions & alterations THE VUCA ENVIRONMENT: INFRASTRUCTURE www.strategicforum.co.za
  • 83 THE VUCA ENVIRONMENT: STRATEGIC RESPONSE www.strategicforum.co.za The VUCA world is essentially about the transition to a new set of values, which tells us that: • Consumers no longer define themselves by the size of their car, house or new kitchen. • Instead, their focus is in five key areas: Value for money – they are highly price sensitive Simplicity – they are looking for less complex lifestyles People, not things – family and friends are increasingly important Values – they value trust, and they are concerned about their carbon foot print Convenience – they want products to last, and to be available locally
  • 84 238147 247611 247890 259162 257363 257248 281991 299978 301486 441410 208488 0 100 000 200 000 300 000 400 000 500 000 600 000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 RMillions(CurrentandConstant2012Values) Total MortgageAdvances: 2002 - 2012 (Current Values) The Strategic Forum Scenarios: 2013-2020 (Constant 2012 Value) (Source: SARB, BMI-BRSCU Workings) High Road New York Scenario: 2012-2020 Higher Middle Road London Scenario: 2012-2020 Lower Middle Road Sao Paolo Scenario: 2012-2020 Low Road Harari Scenario: 2012-2020 Sao Paolo Scenario:2012-2020 Sao Paolo Scenario is Current Most likely future R233 Billion decline in only 2 years! Under the Upper Middle Road it could take a decade to get back to the 2007 level www.strategicforum.co.za
  • 85 28814 32532 33917 37773 47042 60020 72969 86085 100772 101307 95866 99392 108232 111629 116337 125585 126990 133996 142036 148360 143959 0 50 000 100 000 150 000 200 000 250 000 300 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 RMILLIONS(CURRENTANDCONSTANT2012VALUES) TOTAL INVESTMENT IN BUILDING: 2000-2012 (CURRENT VALUES) THE STRATEGIC FORUM SCENARIOS: 2013-2020 (CONSTANT 2012 VALUE) (Source: SARB, StatsSA, MFA, BMI-BRSCU Workings) TOTAL BUILDINGS : 2000-2007: LOWER MIDDLE ROAD SOYUZ SCENARIO: 2008-2015 TOTAL BUILDINGS HIGH ROAD COLUMBUS SCENARIO TOTAL BUILDINGS LOW ROAD CHALLENGER SCENARIO TOTAL BUILDINGS HIGHER MIDDLE ROAD APOLLO SCENARIO CURRENT MOST LIKELY SCENARIO BETWEEN LOWER MIDDLE AND LOW ROAD SCENARIOS High Road 10% Upper Middle Road 20% Lower Middle Road 40% Low Road 30% www.strategicforum.co.za
  • 86 SCENARIOS FOR CONSTRUCTION: 2013-2020 www.strategicforum.co.za 19029 23022 30663 35115 40739 53124 80879 127302 161595 158236 169816 185772 168358 147101 146250 156454 161556 161556 176011 185364 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 RMILLIONS(CURRENTAND2012VALUES) INVESTMENT IN CONSTRUCTION: 2001-2012 THE STRATEGIC FORUM SCENARIOS: 2013-2020 (Source: SARB, StatsSA, MFA, BMI-BRSCU Workings) MOTORWAY SCENARIO: 2007-2015 HIGHWAY SCENARIO: 2007-2015 FREEWAY SCENARIO: 2001-2015 BYWAY SCENARIO: 2001-2015 2 per. Mov. Avg. (FREEWAY SCENARIO: 2001-2015) The current MOST LIKELY FUTURE is the FREEWAY SCENARIO
  • 87 © BMI-BRSCU© BMI-BRSCU Towards Building, the Engine for growth and wealth creation Dr. Llewellyn B. Lewis September 2013 THE STRATEGIC FORUM A place of assembly for strategic conversations THE STRATEGIC FORUM www.strategicforum.co.za BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc Reg. No. 2002/105109/23 • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc • BMI • BMI • BMI • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc Reg. No. 2002/105109/23 • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc • BMI • BMI • BMI • BMI • BMI • BMI •