“The drought is over so the grass is literally greener [and] it’s still South Africa, but you can pretend you don’t live in South Africa by enjoying one less stage of load-shedding,” comedian Nik Rabinowitz said last month, while promoting a “Move to the Cape” expo.
It was an unusual event, with an unusual name. Rabinowitz joked: “I would call it the ‘much cheaper than moving to Sydney expo’, or the ‘much cheaper than moving to London expo’, or the ‘exponentially cheaper than moving to New York expo’ or the ‘significantly warmer than moving to Toronto expo’, or the ‘way less confrontational than moving to Tel Aviv expo’.”
Many a true word ... but these are, in fact, the compromises many of South Africa’s more affluent residents are contemplating as they flee the steadily crumbling northern provinces for the relative stability of coastal promises.
“It’s a mecca for outdoors [enthusiasts] and I love the outdoors,” Romeo Kumalo tells the FM.
Kumalo, the co-founder and CEO of ICT pan-African investment firm LLH Capital, and husband to TV presenter Basetsana Kumalo, made the big move to Cape Town in 2021, when Covid restrictions loosened.
“It wasn’t planned; it was quite an impulsive decision. We thought, we’re not moving country, so if it doesn’t work out we could go back to Joburg.”
And yet, he says, it may as well be a different country. “It’s a different network, the pace is different, the atmosphere and people are different.”
It’s a view echoed by many of the “semigrants” who spoke to the FM for this cover story.
And even those who work for the city of Joburg know they’re on a hiding to nothing if nothing changes.
“Right now, it’s hard to compare Joburg and Cape Town — you’ve got to be upfront about it,” says Joburg MMC for economic development Nkuli Mbundu.
While Joburg has been the economic hub of South Africa for more than a century, Mbundu admits the city just hasn’t built service delivery that is geared to service the influx of people who arrive from all over the country and continent. “Therefore you will find [that] upwardly mobile residents seek a better quality of life, less traffic, consistent power and water [elsewhere].”
Of course it’s a no-brainer that people will move to areas of greater opportunity, where the ease of doing business and quality of life is seen as better. The work-from-home trend has made it that much easier too. But the push factors in Gauteng are becoming increasingly significant.
BNP Paribas senior economist Jeff Schultz points to the palpable deterioration in Gauteng’s economic infrastructure. “Roads, electricity, water reticulation infrastructure have all degraded significantly in recent years and [that] has most likely prompted a lot of middle-class South Africans to seek greener pastures in the Western Cape,” he says.
“[The Cape’s] municipal audit scorecard speaks for itself and stands out starkly across collapsing municipal finances in most parts of the country.”
The DA-run Western Cape came out tops in Ratings Afrika’s 2022 municipal financial sustainability index, with an average score of 52 out of 100. It was the only province whose average exceeded 50 and whose municipalities Ratings Afrika considers to be largely sustainable financially.
Still, the province offers more than just a better-run administration. Other semigrants cite the abundance of options: quirky art places, the beach, the winelands, restaurants and coffee shops. “You walk a lot here,” says a semi-retired professional who has made the move. It’s a far cry from Joburg, “where you wake up stressed, are stressed through the day and go to bed stressed”.
Antoinette Rebelo, a sales consultant at property development company Blok, is a recent convert, having arrived in Cape Town in October. “With a new city and a baby, I’ve seen my lifestyle become a lot more balanced,” she tells the FM.
The semigration floodgates opened in 2021, when the Covid restrictions loosened, says Owen Farmerey, MD of moving company Biddulphs International. At first, the focus was primarily on the Western Cape’s Garden Route, but it soon shifted to Cape Town. The July riots in KwaZulu-Natal (KZN) and subsequent uncertainty swung the pendulum further.
Semigration, however, isn’t just a Covid phenomenon.
According to Stats SA, 18% of migrants to the Western Cape between 2006 and 2011 came from Gauteng (about 75,000 people over five years). But over the past five years (2016-2021), that accelerated to 21% — about 100,000 people made the trek down south.
Stats SA now expects that to accelerate, reaching 24% in 2021-2026.
Numbers in the property market bear this out. While rising interest rates often torpedo homeowners’ plans to relocate, the cumulative 350 basis point (bp) hike in rates since November — on top of rising food and fuel prices — hasn’t slowed the trek. Yet data from FNB, a major player in South Africa’s R1.6-trillion mortgage market, suggests more people are semigrating than ever before.
FNB senior economist Siphamandla Mkhwanazi says the proportion of sellers planning to move provinces jumped to 14% in the third quarter of 2022, up from 8% in the first quarter of 2020 and the highest level since FNB started tracking housing patterns in 2007.
This is particularly noticeable among middle- and upper-income households (who typically own homes upwards of R1.6m), where 16% of sellers were planning to relocate within South Africa in the third quarter. At the same time, the proportion of sellers planning to emigrate slowed to 8%, from a pre-Covid high of 14%, according to FNB’s stats.
In other words, as Rabinowitz joked, people are opting to move to the Cape as an alternative to emigrating.
Gregor Klotz, director of residential developer Axis Property Group, says exorbitant living costs in First-World cities are prompting even wealthy South Africans to opt for semigration. You can see why: it costs 72% more to live in Australia’s Brisbane than in Cape Town, he says, citing data from online portal Expatistan. For London that cost differential rises to a towering 134%.
But make no mistake, Gauteng is still by far South Africa’s largest and wealthiest province. It still has a population of just over 16-million people (26.6% of the country’s total) against the Western Cape, which is in third place (after KZN), with 7.21-million people — just 12% of the population.
Gauteng also contributes most of the country’s GDP and typically grows slightly faster than the Western Cape, as you’d expect of the country’s industrial, mining and administrative capital.
In the decade to 2019, the Western Cape grew its economy 20.3% in real terms while Gauteng’s grew 22%, according to Stats SA. Over this period, the Western Cape’s share of national GDP remained constant, at 13.6% in nominal terms, while Gauteng increased its share from 33.8% to 34.5%.
In 2019, Gauteng’s GDP per capita was R72,921 against the Western Cape’s R63,693. So there’s no denying who is the top dog.
But the income gap has narrowed in the past two decades, says Stellenbosch University economics professor Johan Fourie. At the current rate, he adds, Western Cape per capita incomes will overtake Gauteng’s by 2040.
Soaring house prices
Yet there’s also no denying that those who move to the Cape get far less bang for their buck when it comes to homes.
Semigrants will pay “two to three times” the cost of a comparable property if they’re looking to buy in Cape Town’s sought-after southern suburbs (Constantia and Bishopscourt) or Atlantic seaboard (Clifton, Camps Bay, Bantry Bay, Mouille Point and the V&A Waterfront), says Basil Moraitis, Western Cape head of Pam Golding Properties (PGP).
And while there are plenty of luxury homes going for R5m-R15m in Joburg’s Sandton, there’s very little for less than R15m on the Atlantic seaboard, says Seeff Property Group chair Samuel Seeff. “You’re more likely to pay R20m-plus for something similar.”
These sorts of prices are pushing the Western Cape up the sales charts. Before Covid, the overall value of residential property sales was noticeably higher in Gauteng, according to analytics firm Lightstone. But last year, for the first time, the total quarterly value of houses that changed hands in the Western Cape (R32bn) matched Gauteng. Each now has a 36% share of the housing market by sales value, though far more homes are sold in Gauteng.
It means the price of a home is that much more expensive in the Western Cape. Lightstone head of digital Hayley Ivins-Downes says the median price of a house in Cape Town is up a whopping 161.5% over 10 years; in Joburg, it’s up only 55.8%. In the third quarter of 2022, the median asking price in Cape Town clocked in at R2.5m on the Private Property portal, according to Re/Max of Southern Africa — 80% up on the R1.38m-plus price in Gauteng.
The price difference is, however, less noticeable in more affordable, middle-class areas. In Cape Town’s northern suburbs, the price gap typically drops to 20%-40%. In an older Joburg area like Ferndale, for example, a three-bedroom standalone house can be bought for R1.4m. Seeff says a similar house in a comparable area (Cape Town’s Parklands) would cost about R1.8m.
Even renting will cost you more. Johette Smuts, head of data and analytics at rental processing firm PayProp, says Western Cape tenants pay an average R9,533 a month, against R8,382 a month in Gauteng.
In well-heeled Cape Town suburbs including Camps Bay, Clifton, Bantry Bay and the V&A Waterfront a standard, two-bedroom apartment rental will cost an average R19,000 a month, according to Rode & Associates. That is far more than the R11,000 you’d pay in Joburg’s Rosebank, or R8,800 in Sandton.
Yet these home prices haven’t slowed semigration; they’ve just pushed migrants out to the smaller towns and villages in the Western Cape.
PGP CEO Andrew Golding tells the FM this trend has accelerated as several former holiday towns have invested in schools, medical facilities, shops, telecoms and transport infrastructure. “That’s made these areas more attractive to younger buyers looking to invest in primary homes,” he says.
The land of milk and honey
It’s not just the well-heeled heading to the Western Cape. They’re part of a broader influx that premier Alan Winde attributes mainly to better socioeconomic opportunities in the province.
He may well be right. When it comes to unemployment the difference is stark. In the second quarter of 2022, the Western Cape’s unemployment rate was 6 percentage points (pp) below the national average (27.5% vs 33.9%), while Gauteng’s was 0.5pp worse, at 34.4%, according to Stats SA’s quarterly labour force survey.
The Western Cape’s better record on jobs probably reflects the fact that it is a services-driven economy in a country where the tertiary or services sector has been growing much faster than the primary (mining and farming) or secondary (manufacturing) sectors.
Of course, better governance and smarter policy choices by the DA government, which has been in power since 2009, haven’t hurt.
“Municipalities in the province are generally better managed,” says Winde, which means business owners tend to find it easier to do business in the province.
That’s an understatement. In a country where services are breaking down in most municipalities, the Cape’s municipalities are enjoying the institutional equivalent of compound interest.
“People do their jobs, consumers pay their bills, and infrastructure is maintained,” says DA local government spokesperson Cilliers Brink. In many others, he says, corruption and ineptitude are the norm.
And it’s also true that Cape Town usually experiences load-shedding one stage lower than the rest of South Africa, thanks to the Steenbras Dam hydroelectricity scheme. That makes it “the most energy-secure municipality in the country”, says Winde.
It’s a big drawcard in a country that’s recently been in the dark for 10-odd hours a day, thanks to stage 6 blackouts.
In fact, the Western Cape has been building a green energy ecosystem for years. It has wooed more foreign direct investment into green technology over the past 20 years than any other city in Africa, says Wrenelle Stander, CEO of Western Cape tourism, trade and investment promotion agency Wesgro.
Stander says the Atlantis special economic zone (SEZ) is the only designated “green tech” zone of its kind in Africa — a key advantage for the Western Cape.
The province has also been quick to take advantage of regulatory changes that have allowed users to generate their own power, which can be sold back to municipalities. It has opened two bid windows to buy 800MW of renewables from independent power producers.
Winde expects Cape Town to be free of load-shedding within three years, as a result.
Nor is it a slouch when it comes to digital infrastructure. With Cape Town rated as Africa’s “tech capital”, the city has attracted giants including Amazon, Google, Microsoft and Construct, and is home to almost 60% of South Africa’s start-ups, many of them in the tech space.
Fourie touts the Western Cape’s “innovation culture”: over the past decade, the top two entities in South Africa for published patent applications were the universities of Cape Town and Stellenbosch.
This is evident in the astounding transformation of Stellenbosch. In the 1980s, it was a “sleepy economic backwater”, he says. But a Technopark was built on the outskirts of the town to provide opportunities for university spin-off companies to build technology-intensive products. Since 2013, more than 200 businesses have been incubated by the university.
This makes the province a standout in a country that has failed to prioritise research & development (R&D). Real R&D investment in South Africa as a share of gross fixed capital formation has fallen from a high of 9.1% in the early 1990s to just 4.1% today.
“There’s reason to believe in better Western Cape growth trends,” says Sanlam Investments chief economist Arthur Kamp. This is due to the rising numbers in the labour force, while the innovation which underpins productivity will enhance economic growth.
“Even so, all the provinces are heavily reliant on central government for funding and its ability to increase spending is severely constrained. Hence, meeting demand for services in the Western Cape will require even further improvements in efficiency.”
Keeping up the pace
The big question is whether the Western Cape can cope with this level of migrants. While 20% are from Gauteng, and often wealthier and able to contribute buying power and wealth, another 40% are from the Eastern Cape and tend to be poor and unskilled.
The corollary also matters for Gauteng: how will the erosion of its educated elite, coupled with a steady influx of people from poorer neighbouring provinces and countries, affect its economy?
The latest construction data should alarm anyone living in Gauteng. It shows that in the first half of 2022, the Western Cape recorded a 33% increase in the value of building plans passed, while Gauteng recorded a drop of 7.5%.
John Loos, property strategist at FNB Commercial Property Finance, says this growth, as well as retail and office space planning, suggests “the Western Cape is gearing up for more rapid growth in demand for property space than Gauteng”.
This suggests the Western Cape economy will be the overall winner. But it is likely to be more complex than that. The relative effects will depend largely on migrants’ skills levels, their motivation for moving, and the abilities of the two economies to absorb them productively.
Intellidex director Peter Attard Montalto believes the Western Cape has the potential to attract the head offices of banks and other financial services companies. Over time, he says, it could even dethrone Gauteng as South Africa’s de facto financial hub.
But he doesn’t think the province will be able to decouple from the rest of the country economically any time soon. The biggest constraint is that its mandate is limited largely to providing education and health care, which cannot shift the growth dial in the short to medium term.
“Provinces need to fully utilise all their provincial powers, but even that isn’t likely going to be enough to compensate for the drag national government exerts in key areas like logistics, passenger transport and policing,” says Attard Montalto. As a result, he sees an increase in “lawfare” between the national and provincial governments.
That conflict is set to become all the more pressing as the population grows.
According to Stats SA, the Western Cape will gain an additional 626,537 people over the next five years, about half of them in-migrants. This implies that, in eight years, the province will need to add a city similar in size to the Free State capital Mangaung (population 800,000). Over a decade, the province will add about 1.25-million people — equivalent to the current population of the Nelson Mandela Bay metro.
“We are cognisant of the fact that with the Western Cape’s population growing at a rapid rate,” says Winde, “this will place the provincial government and its partners under pressure to keep delivering quality services.”
Says local government MEC Anton Bredell: “The challenges are immense.” While those from Gauteng often generate new investment, others come “with barely the clothes on their backs” to look for jobs and better schools.
Consider what this means for water. An increase of 100,000 people a year translates to an extra requirement for 21.7Ml of water a day in Cape Town. That will require the city to build the equivalent of half of the province’s fourth-largest dam, Wemmershoek.
Bredell’s department is in charge of planning for the future water needs of various municipalities. For example, an estimated 60,000 people will move to the Overberg each year, of which 36,000 will move to Hermanus. They will need an extra 15Ml of water a day, of which about 7Ml will have to be provided for free to the indigent. This has huge budgetary implications.
If managed well, the influx of people will result in more opportunities for economic development and job creation, he says. But this will require all tiers of government to work together. “If we don’t plan ... all that will happen is more informal settlements,” he warns.
To cope with the influx, Winde has established a dedicated infrastructure department to expand critical infrastructure, such as roads and sanitation. Upgrades to health facilities are already under way in Khayelitsha and on the Cape Flats, as well as in the outlying towns of Ceres, De Doorns, Paarl, Darling and Worcester. New health facilities are also envisaged for Knysna, Villiersdorp, Gouda, Ladismith, Paarl, Mossel Bay, Philippi and Parow.
The province is also rapidly expanding schools. It has ramped up infrastructure spending on public ordinary schools by 50% in the current year, and increased the education budget by R6.2bn over the next three years. In the coming year it will create 1,143 new teaching posts — the largest increase since 2016.
It is also working with the province’s universities to find solutions to issues such as urbanisation and conservation. The province’s cabinet has also adopted an “inclusionary” housing policy to promote more integrated communities in well-resourced areas — implying that the densification of housing in urban areas will no longer be put off.
“There are quite heated debates [about this],” admits Bredell. “We still have this nimbyism — not in my backyard [mentality]. But everybody needs to understand the pressures.”
Land invasions and illegal occupations exemplify these pressures. In the 2020/2021 financial year, the province spent nearly R356m to prevent land invasions, but the CBD remains blighted with mini-tent cities, a relic of Covid and a reflection of rising unemployment.
There is no sugar-coating the fact that while the province has intensified efforts to upgrade informal settlements and deliver affordable housing, the demand for housing assistance far exceeds available resources.
To solve this, the province will need every inch of its much-touted innovation skills.
Meanwhile, in Joburg ...
Joburg, too, has an influx of migrants — 18,000 each month, up from 16,000 in 2020/2021.
That’s to be expected, says economic development MMC Mbundu, given the city’s status as an economic hub. “These [in-migrants] are mostly semiskilled workers who are looking for a better life,” he says.
At the same time, however, he says the loss of “a bigger base of the upwardly mobile” has led to a fall in high-end revenue collection, which has knocked the city’s ability to provide services.
“Cities are first and foremost competing economic units. It’s not surprising that other cities work to attract more upwardly mobile residents due to a more compelling business case offering and better service delivery. This has an impact on revenue collection as it erodes the tax base,” he says. “We’ve got our work cut out for us.”
Mbundu’s department is responsible for attracting investment into the city. For that, the authorities need to “get the basics right, get the safety right, and get the city’s responsiveness and service rates to operate effectively”.
It’s a big ask: “We have aged infrastructure in the City of Joburg — we’ve got something like a R300bn infrastructure backlog — and that has an impact on service delivery,” says Mbundu.
As a start, the multiparty coalition governing the city is looking to establish a regime that “will be co-operative enough to attract business people”.
It’s also looking to develop a business index consistent with ones used by the World Bank and World Economic Forum “to inform the city as to where the needs are to improve resource allocation and bread-and-butter issues of service delivery”, Mbundu says.
“For now, our plan is to bring back the inner-city rejuvenation project that is looking to transform Joburg into a walkable and liveable city. We are working with the departments of development planning and community development on multiple projects [to] transform the city.”
As part of this, the city plans to hand over buildings to businesses in exchange for investment in their redevelopment, starting with six developments consisting of 38 properties, in June 2024.
It’s an important step. The flight of capital from the inner city to the northern suburbs from the mid-1990s left about 400 buildings abandoned or hijacked. These, says Mbundu, “are a haven for crime, and inhabitants don’t pay rates”.
The plan for these buildings is to expropriate them, then develop them.
At the same time, the city is looking to establish SEZs in City Deep and around Nasrec to attract investment, to “slow down the semigration challenge we face”. It plans to apply to the National Treasury for special tax rebates for businesses in the SEZs.
“This will likely happen over the next three to four to five years. It’s about large capital projects with the private sector,” Mbundu says.
Of course, attracting investment requires service delivery. And stable service delivery requires a stable government. In Mbundu’s view, the disruptions caused by no-confidence motions against Joburg executive mayor Mpho Phalatse constitute “a power grab by the ANC and its coterie of one-seat parties to win back the City of Joburg. That is a big risk to service delivery.”
With no real end in sight to the musical chairs in council, consistent service delivery seems a long way off. That means Joburg is unlikely to reverse the losses from semigration any time soon — and Cape Town’s grass will grow greener for some time to come.
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