Director of Terblanche Properties shares his thoughts

Okkie Terblanche, one of the directors of Terblanche Properties in the Garden Route, shares his thoughts with us.

Rental property tax deductions

Ralf Metz’s book, Paying Less Tax Made Simple 2011, advises that SARS only allows you to claim the following deductions against your rental income:

• “The interest on your mortgage bond or loan raised against the property;
• Rates and taxes;
• Insurance;
• Repairs and maintenance costs – provided the property is in a lettable condition to start with and you entered into a lease agreement which requires you to make the repairs;
• Expenses incurred on the treatment of any timber against attack by beetles;
• Advertising;
• The cost of commission and rent collections;
• Electricity and water; and
• Depreciation of furniture if the property is let fully furnished.”

The cost of improvements, reconstructions or additions to the property cannot be deducted as these expenses are of a capital nature, says Metz. Neither will a deduction be allowed for repairs, says Metz, if you repair a property which was previously let and which you now want to occupy and sell. To get a deduction you will need to make the repairs while your property is being occupied for trade, adds Metz.

Also worth noting is that there is a very fine line of distinction between repairs and maintenance on the one hand and improvement and reconstruction on the other. Each case will be assessed on its merits.

*Based on a Moneyweb article

The effect of poor service delivery

Predictably the shocking lack of municipal service delivery has been blamed on a short of artisans in South Africa. John Botha, general manager of the Production Management Institute claims the reason that municipalities cannot do their jobs is because they don’t have qualified people.

At least R2-billion allocated to local government remained unspent last year even though many municipalities around the country are battling to overcome infrastructure problems or maintain essential assets such as water purification works.

Frustrated property owners throughout South Africa have increasingly complained about a lack of service delivery in almost every one of the 283 local authorities in the country and there appears to be little hope on the horizon that efficiency levels in municipalities will improve.

Botha says that the main reason for the poor levels of service delivery is that councils do not have properly qualified people to do the essential maintenance work needed to keep the local authorities running smoothly.

South Africa currently produces about 5 600 qualified artisans a year across all disciplines compared with a target of about 12 500 set by the Department of Higher Education and Training. The country apparently needs between 50 000 and 80 000 artisans at the moment.

“Artisans are urgently needed to keep our lights on, keep our water flowing and drinkable and ensure that our basic infrastructure such as sewage systems and storm water drains are kept in working order,” says Botha.

Mossel Bay Takes Western Cape Nomination in South Africa’s Town of the Year Competition

Mossel Bay – which won the Province’s Town of the Year title in 2007 – has been named the Western Cape’s nominee for Rapport’s and Kwêla’s national Town of the Year Competition for 2010.

This was announced yesterday (Sunday) in the nationwide edition of Rapport.

“We’re particularly proud of this nomination because the people of South Africa are the judges in this competition,” said Neels Zietsman, chairman of Mossel Bay Tourism.

“Mossel Bay has always held a special place in the heart of many South Africans, and we sincerely hope that this will carry through when the next round of voting begins on Sunday.”

Mr. Zietsman said that the combination of culture, environment, infrastructure, and a large selection of attractions and activities made Mossel Bay popular with residents, holidaymakers, foreign tourists, and investors alike.

“I’m sure this will come through when Kwêla puts the town in the spotlight on kykNET this coming Wednesday,” he said.

Mr. Zietsman congratulated the other eight nominees in the competition – Heidelberg in Gauteng, St Lucia in KwaZulu-Natal, Thabazimbi in Limpopo, Wakkerstroom in Mpumalanga, Potchefstroom in the North West Province, Springbok in the Northern Cape, Graaff Reinet in the Eastern Cape, and Clarens in the Free State Province – and wished them good luck.

“In many ways, these towns are all winners already, because, like Mossel Bay, they are already major contributors to tourism in their respective provinces,” he said.

“And while we’re obviously going to go all out to win the prize, we’re proud to find ourselves on a list with these outstanding destinations.”

Hetta Saunderson, of competition organisers M4 Events and Promotions, said that Kwêla and Rapport had visited all the finalists in the run up to the announcement of each Province’s nominee, and that each nominee has been showcased in Rapport, and on national television.

“We’d like to thank everyone for their incredible reception and hospitality. We realised that South Africa has the most beautiful and hospitable people. Every town that we visited has something of its own that makes it unique. People in South Africa should try to experience the beauty of our country before planning their oversees holidays,” she said.

Kwêla’s programme about its visit to Mossel Bay will be broadcast on kykNET this coming Wednesday, 14 July, at 8:00 p.m. Members of the public will be able to vote for the country’s Town of the Year any time between the 18th of July and 12h00 on the 30th of July, and the winning town will be announced in August.
Amongst other things, the sponsors will stage a concert for the people of the Town of the Year that will feature bands and artists such as Theuns Jordaan, Snotkop, Nadine, Andriette Norman, Coenie de Villiers, Pieter Koen, and Lee Scott.

“I really hope that we’ll be seeing that concert in Mossel Bay again this year,” said Mr. Zietsman

James Bond is Proudly South African

Daniel Craig, the current 007, has recently been snapped with a broken arm in a sling and a very interesting keyring. Look at it, isn’t that a rather familiar flag attached to his Aston Martin DB9 ignition key?

Thanks, Mister Bond. All South Africans thank you for promoting our country. We’ve always known this is a great place to be.

*Thanks to the Cherryflava blog for this photographu

How much is a Trillion Dollars?

I read this week that Monday’s record stock plunge in the USA wiped approximately $1.2 trillion of their stock market value. It was also the first ever trillion-dollar one-day loss, according to the Dow Jones Wilshire 5000, which is the broadest measure of stock market activity. This happened, of course, after George Bush’s rescue plan, which involved pumping $700 billion into the USA economy to keep many banks and financial institutions standing, was rejected by USA lawmakers.

So I started wondering, how much is a Trillion Dollars? A friend reminded me of Bill Bryson’s calculation in his book, Notes from a Big Country, which, coincidentally, is a book about the Land of the Brave and Free. Imagine, if you will, you are in a colossal safe in which there is $1 Trillion in clean crisp dollar bills. Imagine further that someone tells you you can keep each dollar bill you sign and you manage to sign one dollar bill every second. How long do you think it will take you to sign each and every dollar bill in that safe? A few weeks? A year?

Allow me to explain.

Signing one dollar bill each second will make you $1000 richer after 17 minutes. After 12 full days of furious dollar bill signing without any interruption, you will be a millionaire. That obviously means you will have $10 million after 120 days and $100 million after 1200 days (just over 3 full years of dollar bill signing). Here’s the great part. You will have signed enough dollar bills after 31,7 years to call yourself a billionaire and after almost 1000 years you will have signed enough dollar bills to be in Bill Gates’ league. Fact of the matter is, only after 31 709,8 years, without any interruption, will you have signed enough dollar bills to own the trillion dollars in the safe.

Now that is what the USA stock markets managed to wipe out in one day. ONE DAY!

Looking at the property market in South Africa, yes, there is a slowdown in house price growth. Absa’s latest index figures indicate an average nominal house price growth of only 1.7% on an annual basis. If you consider the effect of inflation, house prices are actually declining in real terms. However, annual growth of only 1,7% in nominal terms still paints a much prettier picture than a Trillion Dollar loss… in one day.

* Based on a recent article in Die Burger

John Mauldin’s thoughts on South Africa

I know this is a bit early for our blog post this week. However, I recently read a great article by John Mauldin. For those of you who don’t know, John Mauldin is a multiple New York Times best selling author and recognized financial expert. He has been heard on CNBC, Bloomberg and many radio shows across the USA. He is the editor of a highly acclaimed, free, economic and investment e-letter that goes to over 1 million subscribers each week. He has recently been voted second only to Warren Buffet as an investment guru. He wrote the article after a recent trip to South Africa…

“I start this week’s letter somewhere over the Atlantic, halfway through an 11-hour flight from Frankfurt to Dallas. It has been an altogether marvellous 11 days in South Africa, speaking to over 1,000 people at 12 venues, giving a half dozen media interviews, and meeting with many individuals. This week, I want to give you some impressions of not only South Africa, but talk a little about emerging markets in general.

Finding Value in South Africa
As I observed South Africa, it was forcefully brought home to me that there is more to the emerging-market story than China, India, and Brazil. There are any number of countries that are seeing robust growth and contributing to the world economy. It was reported at Davos this year that for the first time the developing world has a larger share of world GDP than the developed world.

Before we get into some facts, let me give you a few impressions. First, there are construction cranes everywhere in the four cities I visited: Johannesburg, Pretoria, Durban, and Cape Town. Twelve years ago the thirty miles from Johannesburg to Pretoria was mostly agricultural land. Today it is one big city, with offices, malls, and homes lining the freeway. There was a significant number of rather nice new housing developments, many if not most being built on speculation all along the
freeway.

Johannesburg is a world-class city, on a par with New York or London or any major city in terms of facilities, shops, infrastructure… and traffic. There were new shopping malls all over, and the stores were busy. Durban is a tropical jewel on the Indian Ocean. Again, there was construction everywhere – a green, verdant city of 1,000,000 people, with modern roads and great weather. I have been to Sydney, Vancouver, and San Francisco. I love all of them. But for my money, Cape Town is the most beautiful city I have been to in the world. Amazing mountains, blue water harbour’s, white sand beaches, with wineries nestled in among the mountains and valleys.

Grant Thornton did a survey in the 30 countries in which they do business. The four countries with the most optimism and confidence were India, Ireland, South Africa, and Mainland China. There are several reasons why… The economy has been growing at a reported almost 5% a year for the past several years, which is quite strong. They have had 32 consecutive quarters of positive growth. But the official figures may
understate the reality by a significant amount. If you look at the VAT (value-added tax) receipts, as well as other tax figures, some economists estimate the economy may be growing by 7% or more.The stock market has grown by over 25%, 47%, and 41% for the last three years. Such a bull run is always a boost to confidence. But there are also some real fundamentals underlying the emerging-market Bull markets. South Africa has a strong commodity sector, with numerous commodities and not just gold.

Football as an Economic Driver
The attention paid to football (or soccer in the United States) is rising to fever pitch in South Africa. And for good reason: they will host the World Cup in 2010. They expect some 3,000,000 fans to show up. The government is using the occasion to spend some 400 billion Rand (a little over US $50 billion) on all sorts of infrastructure projects. It will have the added effect of making the country more competitive, just as infrastructure in China has been a boost to that country, and a lack of infrastructure has limited India. The World Cup will also be a boost to tourism, already one of the most important sectors of the economy. South Africa also has a strong entrepreneurial class which is the base for much of the new business and development, not just in South Africa but in all of Africa.

There is much to like about emerging markets. That is where a great deal of the real potential growth in the coming decades will be. And South Africa will be one of the better stories. If you are not doing business there already, you should ask yourself, why not?”

The tide is turning

It is well-known fact that South Africa lost many of her skilled, affluent young (and old) citizens to other countries such as Britain, Australia and New Zeeland. These people (of all races, but most often white) left for many reasons, including crime, career opportunities in other countries and adventure. In fact, spending a year or two overseas before or after their studies has become somewhat of a necessary sojourn for many young South Africans. Often, unfortunately, they decide to stay in those other countries. The result, of course, is that a major brain drain has plagued South Africa since the unravelling of apartheid in the early 1990s.

But now they are coming back… or so it seems. Anecdotal evidence from some of the leading moving companies, real estate agents and non-profit groups say more and more expatriates are returning to South Africa. Hungry for their own culture, eager to raise children near their own families, and encouraged by South Africa’s economic potential, these adults are leaving their successful careers abroad to come back home.

In my opinion, South Africans (especially white South Africans) have always been just a tad too negative about this country. If there is a global crisis, South Africans seem to think that it’s only happening in SA or that we have it worse than anywhere else in the world. Case in point: the world is currently going through a major credit crunch. If one listens to many South Africans, it seems that we are the only country with rising inflation figures and interest rates, which is simply not true. I am not saying everything is wonderful here – of course South Africa has her fair share of issues. What I am saying is that many South Africans seem to lose all perspective when they start talking about the issues this country is facing at work and around the braaivleis (barbecue) fires. We are not the only country with rising food and fuel prices. We are not the only country with racism or political instability issues. We are basically pretty average when one has a look around the world.

There are several South African organisations dedicated to persuading expatriates to come back. One of these, The Homecoming Revolution, puts on career fairs for South African expatriates and provides candid information about the South African economy, security conditions and crime, and hosts networking dinners and other events for those who have returned. The manager of The Homecoming Revolution, Martine Schaffer, recently indicated that the people who returned outnumbered those who left. The South African Department of Home Affairs says it does not track South Africans who move abroad and then return. Anecdotal evidence, however, indicates more South Africans have been returning to the country since the late 1990s.

The South African Mail & Gaurdian newspaper reports that a spokesperson for Stuttafords Van Lines, the largest moving company in South Africa, said that for every person the company moves out of South Africa to the United Kingdom, it helps another 1,5 return. There is also the Come Back Home Campaign, which is essentially an Afrikaner-run initiative similar to the Homecoming Revolution, which reported a rise in the number of white South Africans looking for help with career advice, immigration papers and other tasks associated with moving home.

The South African government recognises that white South Africans have valuable skills, and is trying to persuade successful expatriates to invest in their country, even if they don’t come home. The government has launched a programme called Global South Africans to encourage talented South Africans expatriates to share their skills and knowledge with their fellow citizens. And the office of the South African deputy president has launched similar initiatives to inspire South Africans to share their skills or return home.

South Africa is still a great place to be. Looking at the evidence, it seems many expatriates seem to realise that again. It will be great to have them back. We need everybody to make this country as great as we all know it can be.

The grass is not always greener

I found this blog post on the Business Link Magazine blog recently. We are very positive about South Africa and our role in this country so this kind of article resonates with us. I include the full text here below.

24 reasons to stay in South Africa



Grumbling about South Africa’s current state of ‘crisis’ is commonplace. The gripes range from petrol price hikes, to rampant crime, government corruption and, of course, a critical energy shortage, all of which are making many South Africans seriously consider packing for Perth or other ‘greener’ pastures.



It’s all about perspective

Much of our point of view is shaped by the media, which invariably contains the bad, the shocking, and the doomsday reports (a trait that is not peculiarly South African).

Barry Glassner, in his book “The culture of Fear: Why Americans are afraid of the wrong things”, talks about misplaced fears. “Disproportionate coverage in the news media plainly has effects on readers and viewers,” he says. “Asked in a national poll why they believe the country has a serious crime problem, 76% of American people cited stories they had seen in the media. Only 22% cited personal experience. Between 1990 and 1998, when the nation’s murder rate declined by 20%, the number of murder stories on network newscasts increased 600% (not counting stories about O. J. Simpson).” Glassner also points out that we compound our worries beyond reason.

With this in mind, while South Africa’s imperfections are a reality, putting it into perspective is helpful. In the bigger scheme of things, and in relation to the rest of the world, South Africa’s future is actually looking bright – load-shedding or no load-shedding! In fact, there is so much good news about South Africa, that we do not have room to publish it all, so we will give you a starter of how green our pastures actually are – for the main meal, visit the website South Africa: The Good News, at www.sagoodnews.co.za. Also visit www.sarocks.co.za to start a blog on South Africa’s positive attributes.

The Facts

South Africa ranked 44th out of 131 countries in the World Economic Forum’s Global Competitiveness Report 2007/8

Three South African cities were voted amongst the world’s top 100 Most Liveable Cities in a study conducted by Mercer Human Resource Consulting. Cape Town was ranked 85th, Johannesburg 90th, and Port Elizabeth 97th

South Africa is ranked 20th out of a total of 128 economies in the World Economic Forum’s Global Gender Gap Report 2007, ahead of many developed nations, including the United States (31), Switzerland (40), Austria (27) and France (51)

South Africa is ranked 35th out of 178 countries for ease of doing business – ahead of Spain, Brazil and India – according to Doing Business 2008, a joint publication of the World Bank and the International Finance Corporation

South Africa ranks in the top four countries worldwide in terms of the transparency surrounding its budgets – ahead of the US, Norway and Sweden – according to the Open Budget Index

The number of tourists visiting South Africa has grown by 188% since 1994, from 3 million to 8.4 million in 2006 (Department of Environment and Tourism)

South Africa is the first, and to date only, country to build nuclear weapons and then voluntarily dismantle its entire nuclear weapons programme

South Africa will become the first African country to host the Soccer World Cup in 2010, and the first country in the world to have hosted the Cricket, Rugby and Soccer World Cups

South Africa is home to both the largest land mammal (elephant) and the smallest mammal (shrew)

South Africa is the only country to house an entire floral kingdom (fynbos), one of only six on the planet

South African Breweries ranks as the second largest brewing company in the world. It supplies up to 50% of China’s beer

Cape Town has the fifth-best blue sky in the world according to the UK’s National Physical Laboratory

21 South African beaches were awarded Blue Flags, an international indicator of high environmental standards for recreational beaches in 2007

South Africa ranks 57th out of 157 countries in the world in terms of economic freedom, ahead of Italy (64), Brazil (101), the United Arab Emirates (63), Greece (94th), India (104th) and China (126), according to the Index of Economic Freedom 2007

South African media ranks 26th out of 167 countries in the Worldwide Press Freedom Index 2007, higher than any country in Asia, the Middle East or South America, and ahead of Japan, Spain, Italy and the United States

South Africa accounts for almost 45% of the GDP of the entire African continent, with an economy three times the size of the second biggest country (Egypt)

The South African Constitution is widely regarded as being one of the most progressive in the world, drawing from the experiences of the world’s most advanced democracies

Almost a quarter of South Africa’s non-interest budget is spent on education

Johannesburg ranks second among cities in countries from Asia/Pacific, the Middle East and Africa in dealing with urbanisation and environmental challenges, in the MasterCard Insights Report on Urbanisation andEnvironmental Challenges

South Africa’s per capita GDP, corrected for purchasing power parity, positions the country as one of the 50 wealthiest in the world

Worldaudit.org ranks South Africa as the 40th most democratic country out of 150 nations

South Africa is the 35th best place in the world to do e-business, according to the Economist Intelligence Unit’s 2007 E-Readiness Report

South Africa is the best-ranked country in terms of price stability; our fiscal policy is ranked 11th, our international trade competitiveness 21st, and we are the 28th most-attractive destination for foreign direct investment, according to the World Competitiveness Yearbook 2005

The value of South African real estate has improved by 30% over the past five years

Expats buying back

We came across some interesting stats recently, which showed that South Africans living overseas are investing in SA in anticipation of the 2010 World Cup. Property 24 reports that the hospitality industry in particular is showing an upswing with expat South Africans investing in guesthouses back home in anticipation of a 2010 boost in the hospitality industry.

Some of South Africa’s largest real estate groups have recognised there is a shortage of accommodation for the World Cup, which makes investing in guesthouses and lodges a viable investment at this stage. According to information recently released by Pam Golding, transactions to the total value of over R130m over the past 12 months have been concluded by them in this regard, and some 70% of the guest lodges went to overseas buyers or South Africans returning to the country. Of course, with their stronger currencies, these South Africans find it easier to invest in the country of their birth than their local compatriots.

In the Garden Route, especially towns such as Knysna and Mossel Bay, there seems to be a similar trend developing. The great thing about these towns in the Garden Route is that they are close enough to Cape Town (either by air or road) while offering the discerning traveler a distinctly unique experience. They will definitely appeal to those travelers who want to be close enough to the soccer action, yet far enough out of the hustle and bustle of the city to offer the weary tourist a true South African experience. The area is well-developed and a town such as Mossel Bay (South Africa’s town of the year in 2007) is well managed by the local authorities and the local business people. The whole Garden Route is geared for tourism all-year round and a sizable chunk of the local GDP is produced by the tourism industry.

As always though, potential investors need to do their homework properly before they buy. Sheryl Ozinsky, the former manager of Cape Town Tourism, warned that the Soccer World Cup was likely to leave a vacuum in its wake if developers and buyers over-capitalise on the hospitality industry. Huge events like the world cup tended to displace more visitors than they attracted, she said. “It’s not going to make money for lots of people…I think it’s important that people see this event in its context.” Our advice is that potential investors speak to professional advisors to make sure they invest in properties and businesses that are sustainable after the World Cup.

Our view is that many overseas South Africans are coming back to the country… and not just to buy property with a view on 2010. Many of them come back for other reasons too such as work contracts expiring, a need to be closer to their families, inability to get permanent residency overseas, or just because “the grass wasn’t greener”.

Talk to us if you’re looking for some green grass of your own.