The City of Cape Town has just completed an auction for 50 surplus properties, which in a normal world would be regarded as routine asset management. But not in South Africa, where almost every political party outside the DA fired up the emotional baggage gun in an effort to paint it as a “betrayal of the people”.
The idea that Cape Town should cling to all municipal properties as though they were the crown jewels is emotionally satisfying, politically resonant, and administratively absurd.
The city is not a museum of publicly owned sentiment. It is a service delivery machine in a country where municipalities routinely struggle to keep the lights on, the pipes flowing and the billing system in roughly the same century as the calendar. Treating every erf as sacred because it is “public” is not spatial justice; it is asset hoarding with some dubious political branding.
Nowhere is this more obvious than in Joburg. It abandoned its former headquarters, the Metro Centre, three years ago, and is now renting offices for R3m a month, some of this reportedly paid to political cadres. This is despite the fact that Joburg still owns nearly 29,000 properties. Apparently, state-of-the-art equipment and furniture in the Metro Centre have just been abandoned. This is what responsible asset management does not look like.
Cape Town’s position is simply that the auctioned sites were assessed as not required for municipal purposes, and that proceeds would be reinvested in infrastructure and services. Seems reasonable enough, particularly since we are talking about a few bits of industrial property, the forlorn Good Hope Centre and a weirdly very valuable property in Clifton.
But for the ANC, Cosatu and a whole collection of other parties, any sale of any property by the state is the equivalent of a treasonous act. To be fair, there are international examples of very successful state intervention in the housing market, and oddly, South Africa is one of them.
But from the emotional press releases of the city’s political opponents, you would think Cape Town has no housing programme for the poor at all. Actually, the data shows the Western Cape as a whole has produced a smidgen more subsidised housing stock than other provinces.
South Africa has plainly built a substantial subsidised housing stock: 29.9% of households nationally, and 32.4% in the Western Cape, report living in RDP or government-subsidised dwellings.
But the fact is that housing provision by the state is extremely complicated and difficult. Singapore has a spectacularly successful housing programme, and more than 80% of residents, almost 1-million people, live in what are called HDB flats. Across the OECD, social housing averages about 7% of total housing stock, and it’s intended to mitigate the lack of housing for the poor.
But even in the very developed OECD market, the IMF has pointed out that there is no clear evidence that rent controls lower rents over time, though they do appear linked to lower housing supply. The OECD’s own work finds more restrictive land use regulation is associated with weaker housing supply responsiveness, and tighter rent controls with lower supply elasticities.
Housing provision is not only an expense issue; it also relates to the regulatory environment, infrastructure provision and payment reliability. The problem is that provision of direct public housing is slow: Cape Town says housing projects typically take three to five years to plan and complete.
Public-landlord models are expensive and messy to run. Cape Town says it is the landlord to about 42,345 rental units (about 32,373 nonsaleable and 9,973 saleable), and lists chronic problems including poor revenue collection, maintenance shortfalls, unlawful occupation, overcrowding and nonpayment.
Against this argument, there is some evidence that market-only systems don’t always solve housing affordability or supply issues. But in a sense, Cape Town’s problem is that it’s been so successful; between 2011 and 2022, the city’s population rose from 3.7-million to 4.7-million (up 27.6%), and households rose from about 1-million to 1.5-million (up 36%).
Dealing with this influx from some pretty disastrous state housing efforts in the rest of the country is partly why Cape Town needs to sell its surplus properties, just to maintain a programme that is plainly more successful than most of the rest of the country.
The bottom line is that municipal finance is not a religion. Leasing where that makes sense, selling where that makes sense, transferring where that makes sense — that is what grown-up asset management looks like. Diversified revenue is not ideological betrayal; it is what people do when they have budgets instead of manifestos.
Cohen is a former editor of the FM and senior editor for Currency News
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