Does he have any room to manoeuvre?

He probably has some short-term room to maneuver because there have been some tax overruns, notably mining taxes.

Mining production up until a number of months ago enjoyed a very good period.

So we're talking about possibly up as much as 50 billion rands of tax overruns.

Obviously, one would like to see more expenditure underruns than tax windfalls because as fast as tax windfalls come, they can disappear.

But I guess it does, while that is the case, you can see the budget being still adhered to while there could be some relief, some mild relief in terms of fuel levies.

It is possible.

Ultimately, what we are all looking for are any structural reforms that the Finance Minister can announce to effectively unlock opportunities, right? Because we all agree that growing at less than 1% on an annual basis is doing nothing to address these socio-economic challenges we are facing in this country.

How much of the office recovery then is, you know, genuine demand growth as opposed to tenants consolidating then in better space?

Yeah, it's...

Look, I think the office space, over time, office had its real heyday probably back in the 80s or early 90s.

And thereafter, if you look at building activity for a few decades, it's been shrinking as a percentage of the total non-residential building stock.

Retail took over.

It had its boom years.

And that's sort of declining, that share is declining, and industrial took over.

And I guess, John, to bring you into that conversation then, what does, so if developers are funding then power, water, roads, what are the sort of long-term fiscal and rate-based implications for municipalities?

And turning then to that picture that what we're seeing in the provinces then, John, uh, the Western Cape, of course, recorded the strongest provincial, um, increase at about 11.2%, but what is driving the continued strength of property prices in that market?

I think it's years of ...

Look, I mean, it's been well reported that, that, uh, not, not only the West, the City of Cape Town Metro, but a lot of the best run municipalities are in that region.

It's built a brand for itself over two or three decades as, as a relatively well run, I wouldn't say, you know, it's, it's not Switzerland or something, but it's a developing country.

It's got developing country problems, but it, you, you know, runs relatively well, um, services infrastructure wise.

And of course, it's touted as a, as a great lifestyle for certain, for a portion of high income and highly skilled people.

So it's attracted this net semigrant inflow of skilled and affluent, uh, um, households the over 20 year, you know, two decades or so.

Is this still a good market to be buying into, or does it depend very much on where you are?

Is it possible for government to cut the taxes it charges on fuel in the way it did a little earlier in the year?

Yeah, I think, Stephen, they've shown that it is possible.

You know, anything in that regard is possible.

The fuel levy component of the fuel price is just over four rand a litre and a few months ago, yes, they reduced it by somewhere in the region of that, if I remember correctly, temporarily for a few months and then gradually eased back into the fuel levy when the fuel price came temporarily down.

So it is possible, and it wouldn't necessarily break the bank once off.

The last one was estimated at, I think, 5 to 6 billion rand worth of savings for the consumer, in other words, cost for national treasury, I guess, whichever way you look at it.

And in a budget that's over a few trillion rand, it's not a big amount in the grander scheme of things.

I mean, is that a big factor in a decision like this?

Does locking up these large tracts of land for really low-density development, we're talking data centers, and these could easily be located way outside of the metropole itself, does that distort local manufacturing and logistics property dynamics? I would imagine it does.

I'm guessing it could.

I know when you've got distance between data centers and where the demand for them, where the usage is, there's a latency impact, but that can be overcome, as I understand it, through the right sort of feeds.

So I guess what this is about is the investment in required infrastructure at some other location more significantly removed from Cape Town to make it actually work and the kind of high tech sort of nature of these data centres I guess that would be significant too so it's probably about that and it comes back to urban planning and how you expand the city of Cape Town and the region economically outwards and that would take a very significant amount of planning but Yes, I think all those things have to be taken into account.

There's other industries.

There's housing.

The big issue with Cape Town, more so than other, say, landlocked metros, say, in Gauteng, is that Cape Town has run into a greater land scarcity already with the ocean on a couple of sides and higher value farmland, I guess, around the periphery.

and they will be ongoing, and now there's the AI

And that is going to put pressure in the immediate and down the line.

Yeah, Simon, I think I'd hope for a resolution to the conflict by now on significantly low oil prices, but we're not seeing it.

Brent crude this morning at 95-ish when I last looked, I think.

And possible further petrol price hikes to come next month.

It's early days, though.

But I think this is the problem.

This whole conflict affects us in three different ways.

I mean, households are going to be making stock decisions and they're going to be finding those discretionary items and cutting or reducing.

And that is going to put pressure in the immediate and down the line.

Yeah, Simon, I think I'd hope for a resolution to the conflict by now on significantly low oil prices, but we're not seeing it.

Brent crude this morning at 95-ish when I last looked, I think.

And possible further petrol price hikes to come next month.

It's early days, though.

But I think this is the problem.

This whole conflict affects us in three different ways.

I mean, households are going to be making stock decisions and they're going to be finding those discretionary items and cutting or reducing.

What do you make of the transaction and of the vote giving it the go-ahead?

Well, in- interesting one.

Yeah, if you look at Balwin's share, 245 odds when I last looked.

Uh, it's up from, it's improved significantly from about 180 in 2023 when interest rates were on the rise at that stage of the cycle.

cycle.But still pretty poor from, uh, if you, if one looks back to 2015, which was nearer to 10 rand a share.

So, um, and it, and it, and it generally, I think the, the, the price and the trend sort of reflects the, the mediocrity of the residential development market.

It's been a, I think it's been a struggle since COVID.

By all accounts, it does look as though this could be a win-win for everybody involved, I guess.

What do you make of the transaction and of the vote giving it the go-ahead?

Well, in- interesting one.

Yeah, if you look at Balwin's share, 245 odd when I last looked.

Uh, it's up from, it's improved significantly from about 180 in 2023 when interest rates were on the rise at that stage of the cycle.

But still pretty poor from, uh, if you, if one looks back to 2015, which was nearer to 10 rand a share.

So, um, and it, and it, and it generally, I think the, the, the price and the trend sort of reflects the, the mediocrity of the residential development market.

It's been a, I think it's been a struggle since COVID.

By all accounts, it does look as though this could be a win-win for everybody involved, I guess.

John, have we utilized the first three loans effectively? I mean, as you mentioned, it might not be a good grand number in the bigger scheme, but it does start to add up and we can't keep going back for financing if we're not able to show signs that we're utilizing these finances accordingly.

Well, difficult for me to say whether we've used those specific parts of the finance effectively or not.

But if we look at our overall management of state-owned enterprises, I think there has been dramatic improvement that we can say.

And I think the World Bank states that in its media release on this loan.

If you go back a few years and load shedding was almost a daily occurrence across the country.

Now it's quite rare.

So that has improved radically.

But from an infrastructure development perspective, water sanitation, we know we've been battling with, not just as a city of Joburg, not just as Gauteng, but as South Africa.

John, have we utilized the first three loans effectively? I mean, as you mentioned, it might not be a good grand number in the bigger scheme, but it does start to add up and we can't keep going back for financing if we're not able to show signs that we're utilizing these finances accordingly.

Well, difficult for me to say whether we've used those specific parts of the finance effectively or not.

But if we look at our overall management of state-owned enterprises, I think there has been dramatic improvement, that we can say.

And I think the World Bank states that in its media release on this loan.

If you go back a few years and load shedding was almost a daily occurrence across the country, now it's quite rare.

So that has improved radically.

The management of the electricity sector and obviously with the help of allowing private sector in independent power IPPs.

But from an infrastructure development perspective, water sanitation, we know we've been battling with, not just as a city of Joburg, not just as Gauteng, but as South Africa.

If we're looking at the entry level apartments in Cape Town now selling for, what, 1.2 million or more, what, what does that say, what does that have to say about social mobility? Are we creating a generation that may never own property?

Well, I think, uh, yeah, it's, it's a tough one to, you know, for a quick solution, it's very difficult.

But, you know, I've read years ago already, if you look in a country such as the UK and parts of London, which are extremely expensive.

And those, let's call it with all due respect, lesser paid professionals, v- very important professionals, you know, nurses, teachers, um, they're crucial.

Um, firemen, policemen, what- whatever it might be.

Um, you do find that the expensive areas can run into shortages of certain skills because they can't live there anymore, so they'll move to other centers or other areas and, and, and look for jobs, you know, nearer to places of home.

If, uh, London obviously has a good public transport system, which helps somewhat But, um, what, what needs to happen, and this is obviously a quite a process, is you, you- when, when I was in London in the 1990s, long time ago now, but I doubt it's changed, um, you, you, you look for corporate jobs, um, you know, of, of various types and, or, or government jobs and they have a London allowance.

But, but can an economy, can a country genuinely claim to be prosperous if the people who keep its schools, its hospitals, its police stations running, the young professionals joining the economy, um, can it really be called prosperous i- if, if they're forced to live further and further away from the, from the social structures, from the work opportunities? Just, just how big of a crisis, not just in South Africa, but globally is this?

What are you seeing?

Yeah.

Look, um, I think, uh, firstly, defining first-time buyers is, is a tough one.

It can often be older first-time buyers who've got divorced and their spouse had the house and now they've split up, and now this person might even be in their 40s or 50s buying a house for the first time.

But nevertheless, uh, Uber, um, mortgage originators last year and at one stage they did say that the share of young buyers in the 24 to 33-year-old age category was dropping as a share of total buyers.

I think it's got a lot to do with the economy.

You know, people have these wonderful theories about youngsters not wanting to buy, have other priorities.

Yeah.

What are you seeing?

Yeah.

Look, I think firstly, defining first-time buyers is a tough one.

It can often be older first-time buyers who've got divorced and their spouse had the house and now they've split up and now this person might even be in their 40s or 50s buying a house for the first time.

But nevertheless, Uber mortgage originators last year and at one stage they did say that the share of young buyers in the 24 to 33-year-old age category was dropping as a share of total buyers.

I think it's got a lot to do with the economy.

People have these wonderful theories about youngsters not wanting to buy, have other priorities.

I mean, it must be great if you're renting something out, you can really get yourself a good tenant and charge them.

I can't help but be happy to see that South Africa's own inflation expectations sit below the global inflation expectations, and that should bode well for us, surely?

Yes, South Africa has come much more into line with developed economies as the years have gone by.

At one stage, we were up in more towards the high single digits as an inflation country years ago.

And slowly but surely, we've brought our inflation down into line with developed economies.

But of course, interest rates are sharply lower than what they were two decades ago.

That's the benefit of having lower inflation.

But having said that, we still with South Africa is we're at four and a half percent for May.

suffer a little less than perhaps some of the other economies where do we start to see sort of a deviation in how economies themselves perform individually does it have anything to do with the proximity towards the war uh geographically speaking or is it around just what some of each of these economies might be doing in their own backyards

I can't help but be happy to see that South Africa's own inflation expectations sit below the global inflation expectations, and that should bode well for us, surely?

Yes, South Africa has come much more into line with developed economies as the years have gone by.

At one stage, we were up in more towards the high single digits as an inflation country years ago.

And slowly but surely, we've brought our inflation down into line with developed economies.

But of course, interest rates are sharply lower than what they were two decades ago.

That's the benefit of having lower inflation.

But having said that, we still with South Africa is we're at four and a half percent for May.

I see the likes of the UK, the likes of Japan set to... suffer a little less than perhaps some of the other economies where do we start to see sort of a deviation in how economies themselves perform individually does it have anything to do with the proximity towards the war uh geographically speaking or is it around just what some of each of these economies might be doing in their own backyards

Tell us how concerning is this decline and what do you believe then are the main factors behind it?

Well, it is concerning.

I mean, I think the main factors behind it are the overall growth rate is obviously the main problem, but If one looks at sectoral trends, it's been quite widespread.

The mining sector has done reasonably well in recent years.

It's grown its production significantly.

Its employment was up 1.7%.

The electricity sector also 1.6% up, as were in retail trade, 0.3%.

How should we interpret these trends and what do they also suggest in about income growth?

eight john lewes joins us an independent uh economist the south african reserve bank uh their latest leading economic indicator for april 2026 they've just dropped a sharp 1.8 month on month drop breaking a seven month winning streak pointing to uh a slowdown in the economy and i was like yeah right sherlock we could all see that coming talking about april now john i i would imagine that's going to be persisting um because it lags behind reality first and foremostly we are looking at a very significant drop in fuel prices the end of this month could it swing back

Well, Clarence, yeah, I think this leading indicator is often a sign of what's to come in terms of economic growth direction in, say, maybe up to six months, half a year or so.

So I think it suggests that we're probably in a soft period already.

We've seen petrol prices go up quite noticeably.

We've seen interest rates go up once.

CPI inflation rise is probably not yet finished with us, and there's Possibly one more interest rate hike, or I think there might be in July before the Reserve Bank calls it quits.

So I think the leading indicator is still something realistic to look at.

So how are consumers dealing with it?

Yeah

... or cost of living problems, and that's a campaign issue with their midterm elections coming up.

So I think that helps, and the markets are responding to the more positive environment with drops in oil prices.

It looks promising for fuel price declines coming through next month, uh, to come through next month.

And so I think as we go past July, the, the Reserve Bank could be looking at a significantly better inflation outlook and s- it should, should my assumption of a, a settlement in the Middle East come to fruition, and then they would hold interest rates for, uh, some time.

And I think either late this year or early next year, we could see a resumption of interest rate reductions.

Are we gonna see some houses price slow down in terms of home sales just because of, you know, I mean, a quarter percent and even a half a percent is not massive, but there is a bit of a confidence issue in, in that regard and a bit of uncertainty, which could take some shine off what's been a bit of a nice recovery in, in house prices.

Yes, I think we could see a mild slowdown there.

the ratings agencies but without economic growth none of these conversations effectively mean anything for the consumer and for the average south african because the economic growth is where the jobs are created is where the standard of living is improved how do we start to balance or at least reconcile consumer confidence with what should be economic growth with what is economic growth

Well, I think the consumer is probably going to be in a weak confidence situation for a few years because while we are making the structural reforms slowly, and by that I mean government has taken steps to fix electricity supply.

It's a lot better than a few years ago.

Now there's efforts to fix the transnet part of the economy, the ports and the logistics.

So there are moves afoot to start reforming the economy.

But those structural reforms will probably take some years before the impacts are felt.

And what government does need to do, it's still got a very weak infrastructure budget, a capex budget.

far faster and creating far more jobs.

How do we start to balance or at least reconcile consumer confidence with what should be economic growth with what is economic growth?

Well, I think the consumer is probably going to be in a weak confidence situation for a few years because while we are making the structural reforms slowly, and by that I mean government has taken steps to fix electricity supply.

It's a lot better than a few years ago.

Now there's efforts to fix the transnet part of the economy, the ports and the logistics.

So there are moves afoot to start reforming the economy.

But those structural reforms will probably take some years before the impacts are felt.

And what government does need to do, it's still got a very weak infrastructure budget, a capex budget.

far faster and creating far more jobs.

What exactly does the RPPI actually tell us? What do those numbers mean? Good afternoon to you.

Good afternoon, John.

Well, it's an index, so the value of the index doesn't mean very much.

We just look at growth rates with it.

You know, sort of similar to the CPI, I guess you could say.

And year on year, in other words, from January last year to January this year, there was a 7.8% national increase in the average house price.

That's decent.

Gauteng property prices generally moving in a positive direction, or might we go into a bit of a stall now?

Uh, does that end up costing us all money?

Well, the investment initially to, to do it properly would, would cost quite a significant amount of money, Stephen.

You've got to replan your whole cityUh, now public transport can be en- far more energy efficient than, uh, private transport where you've got one person per vehicle.

But obviously it depends on, especially in the case of, say, train transport, which is the most energy efficient but heavy on CapEx.

Uh, it requires this massive outlay in infrastructure initially, and it requires too a certain planning for densification along transport corridors so that you've got the mass demand to make it somewhat financially viable.

If you've got low density cities, like large parts of South African cities are, then it can end up being heavily subsidized, and we, we know the state of government finances at the moment.

So, um, so public transport is a complicated business.

We've all put so, sunk so much money and investment into our cars, almost all of which, uh, run on some kind of fossil fuel, that we're gonna hang on to them and hope against hope that oil prices will come down, and they probably will, and then we'll go on as before until the next oil crisis.

Any interesting insights across the country looking at smaller towns and cities?

There's plenty.

I think the first thing is before we get into regions, let's look at SEG's property classes.

The outperformer in recent years, there's been a few structural changes in the commercial property market which have created outperformance in the industrial property market.

One could never, a number of years ago, have dreamt that dirty warehouses and this very unglamorous sector would be the blue-eyed boy of the property market.

It was always about posh retail.

Many years ago, office space had its day.

And then there's just lots of examples Any final thoughts you'd like to add on the market and potentially for listeners across the different role players in the market? I know we've covered a lot of detail or perhaps specific things to look out for.