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Cape Town’s commercial property poised to power the grid


With the expectation of a broadly weaker economy in 2023, the announcement by Cape Town’s mayor that Treasury has waived the requirement to tender to supply own solar generated power back to the local grid has come as good news for the local commercial, industrial and retail property sectors.

So says Brent Townes, Commercial Property Chief Operating Officer for Lew Geffen Sotheby’s International Realty in Cape Town, adding that many of these property owners not only have the budget but also the roof space available to be net energy contributors and could therefore potentially benefit from the new scheme.

“And, with the ongoing industrial expansion along the N7 corridor and up the West Coast as far as Saldanha, many new developments are substantial structures like warehousing which perfectly lend themselves to solar power generation.

“Not only will the companies themselves benefit enormously from their investments by being able to conduct business as usual without disruptions as well as establishing an additional source of income which could escalate at NERSA approved rates, they will also be contributing on a macro level.

“A reliable power supply is only one of the pressing issues we’re facing as unemployment and a general economic slowdown are also major challenges and this new scheme bodes extremely well for employment and economic growth.”

He adds that the capitalisation rates in in Cape Town traditionally run a little lower than the national average in the property sector, and this widening of value is also likely to increase with investors who own suitable properties seeing a healthy capital appreciation.

“Property valuations should therefore also increase as a property with the potential for self- generated energy as well as an additional income stream will surely impact its value and this would need to factored into the valuation process in much the same way signage and cell phone tower income has been.”

Townes believes that the scheme is a win-win for all, not just commercial property owners:

  • The City benefits as it will buy in at one rate and sell at another;
  • Weekend loadshedding should decrease as businesses that are closed will be able to contribute substantially over that period;
  • Which, in turn, should also reduce the burden during the week (storage depending).

According to Cape Town Mayor, Geordin Hill-Lewis, payments to commercial customers will be possible before June 2023, and within the year for any resident with the necessary city-approved generation capacity.

And, as the City will also pay these customers an incentive over and above the Nersa-approved tariff, it’s a very attractive proposition for anyone with the capacity to join the scheme. A caveat being that an owner with an asbestos roof would not qualify in terms of the scheme

“Although consumer price inflation appears to be slowing, with only a moderate hike of 25 basis points on 26 January, we have not yet begun to recover from the economic fallout of pandemic not yet felt the full impact of the recent rate hikes so this new incentive is both timeous and fortuitous,” concludes Townes.