Joburg is fast becoming a megacity, but how does it compare with existing African megacities for return on investment?
Cairo, Kinshasa and Lagos all carry the status of megacity – cities with a population of at least 10 million inhabitants. Fast on their heels are Dar es Salaam, Luanda and Johannesburg, which are predicted to attain the status of megacity by 2030, according to the United Nations.
As cities like Johannesburg grow into megacities, they become more attractive to investors. A single district in a megacity can reach a market the size of an entire country like Botswana. Because people in megacities are concentrated, companies can benefit from lower fixed costs and easier distribution for their businesses.
Dr Walter Musakwa, University of Johannesburg, explains that Johannesburg is already seeing growing investment with an increasing number of multinationals settling in the city. It’s a cosmopolitan city with the biggest airport in Africa, as well as excellent infrastructure, including super-fast fibre connectivity.
‘When it comes to investment opportunities, however, Johannesburg presents certain challenges, especially when one compares it to cities like Kigali in Rwanda. South African laws are not necessarily business-friendly, and tend to be quite stringent,’ says Dr Musakwa.
For developers, the massive ongoing migration into Johannesburg means a lot of pressure on infrastructure and not necessarily enormous buying power, adds Peet Strauss, Pam Golding Properties’ Johannesburg Development Manager. ‘The people who are moving from rural cities into Johannesburg are not buying R20 million apartments in Sandton. Affordable housing is currently the main pressure point,’ he adds.
Private residential estates will also grow and develop, says Jonathan Kohler, owner of Landsowne Property Group. ‘When compared to other cities in Africa, I feel Johannesburg is leaps and bounds ahead in terms of property and infrastructure development. Estates such as Steyn City and Waterfall continue to be good investments, as an increasing number of people will opt for the security these estates offer.’
He adds that previously coveted areas such as Morningside are losing market share. ‘Demand for Morningside used to be through the roof, but we now see that the R6 million to R9 million market in that area is dying, as buyers increasingly turn to private estates.’
While the rise of these communities offers open spaces and a crime-free environment, the unintended consequence of gated estates is that they hinder spatial and social integration, says Dr Musakwa.
The new law requiring developers to build a certain amount of low-cost housing within every upmarket project, although positive, will do very little to mitigate this challenge.
Johannesburg is therefore on the back foot compared to other cities such as Vienna, Hamburg or Dallas. ‘Johannesburg is not a free city because one is not free to walk in public without thinking of safety. What’s more, the infrastructure and policies don’t promote liveable and walkable cities,’ he says.
There are, however, numerous opportunities in Johannesburg, according to Kohler. Modderfontein, Fourways, Rosebank and Steyn City are all promising areas that are likely to attract investment in the years to come. This development is partly as a result of the development of the Gautrain with 19 new Gautrain stations being built. Kohler admits that more needs to be done to boost the city’s public transport.
Johannesburg property is also very affordable compared to other prospective megacities in the world and Africa, according to Strauss. ‘There are many opportunities to create wealth through property, but currently there is not enough buying power to create this wealth. This will only happen when the city sees much-needed economic growth.
‘There are a lot of good noises around South Africa and Johannesburg, and the outlook is positive, but we need economic growth,’ he emphasises.