While Sandton and Rosebank are often viewed as the centres of South Africa’s economic activity, some of the country’s most lucrative property opportunities are emerging in townships and rural communities.
This is according to Java Capital’s founding director, Andrew Brooking, who says investors are increasingly recognising the value of developments that cater to ordinary South Africans rather than affluent consumers.
His comments came as Standard Bank and corporate finance and advisory firm Java Capital announced a partnership in Sandton on Tuesday that is expected to unlock billions of rands in funding for property and infrastructure projects across the country.
The partnership aims to improve access to capital for developers building affordable housing, student accommodation, shopping centres and fibre infrastructure, particularly in underserved townships and rural areas.
Java Capital, which has been operating for almost three decades, has backed numerous developments across South Africa, including shopping centres, residential projects and fibre infrastructure installations.
According to Brooking, some of the firm’s strongest-performing investments have been in township and rural retail developments, which are estimated to be worth R900-billion.
“What you are shopping for is what we would consider more defensive. It’s not a big discretionary spend, but everyday items people need to buy,” he said.
“Township and low-income retail has been a very good performer in the real estate space.”
Brooking said investors often underestimate the economic potential of lower-income communities because they focus too heavily on affluent urban nodes such as Sandton and Rosebank.
“If you look at successful South African businesses, many of them are not catering to Sandton or Rosebank. They are providing services to, or creating options for, ordinary South Africans who may not live in those areas,” he said.
Brooking believes the country’s long-term growth prospects are increasingly tied to communities that have historically been overlooked.
“More and more South Africans are realising that the future of this country is not in wealthy suburbs alone but in underserved areas, where there are far more people and where consumer spending power is becoming a real driver of business success,” he said.
He argued that investment in these communities has the potential to improve lives while generating sustainable returns for developers and investors.
“It is the built environment where people work, shop and live. It includes the roads they travel on, the fibre infrastructure that gives them internet access and the warehouses that support food supply chains. This is the environment in which ordinary South Africans live every day.”
Brooking said the quality of the built environment has a direct impact on people’s quality of life.
“People who live in poorly developed environments do not enjoy the same quality of life as those in well-developed areas,” he said.
He added that strategic investment in housing, retail and infrastructure could help bridge that gap.
However, Brooking warned that poor governance and weak service delivery continue to undermine development opportunities.
“There can be a lot of mismanagement in cities, towns and rural areas. There can be a lot of money available and spent, but it must be spent well if it is going to improve people’s lives,” he said.
“Johannesburg is an economic powerhouse. There is no reason why it should not thrive. If it is managed well, it will thrive.”
The partnership comes at a time when many municipalities are struggling with recurring water shortages, electricity outages, deteriorating roads, sewer infrastructure failures and mounting maintenance backlogs.
Standard Bank’s head of real estate at Corporate and Investment Banking, Andrew Robinson, said access to capital remains one of the biggest challenges facing developers, but financing alone will not solve the sector’s problems.
“One of the biggest inhibitors to development at the moment is access to services, the ability of municipalities to have power and water, and those types of things,” he said.
Robinson said developers are increasingly being forced to provide their own infrastructure solutions because municipalities are failing to deliver reliable services.
Many developers are investing in private water infrastructure, solar energy and alternative power systems to keep projects viable.
“Many developers are having to go off-grid, invest in solar energy and find private solutions to water and power challenges,” Robinson said.
Despite these challenges, he expects the Standard Bank-Java Capital partnership to stimulate more development activity by improving access to debt and equity funding.
Robinson said one of the sectors likely to benefit most is rural retail.
“There is a big opportunity in rural retail because we think it is underserved and there are definitely opportunities to do that,” he said.
He added that the partnership would enable developers to pursue projects ranging from affordable housing and student accommodation to shopping centres and fibre infrastructure.
For both Standard Bank and Java Capital, the message is clear: South Africa’s next wave of growth may come not from its wealthiest suburbs, but from the townships and rural communities that remain underserved yet increasingly attractive to investors.
