20
CONSTRUCTION WORLD
OCTOBER
2014
e are going out and iden-
tifying the land, making
a call on it, putting the
equity in and servicing
it and taking the legal
risk of obtaining all the
necessary approvals before any stand is
actually sold. This means you are really
only getting half back of what you could in
terms of revenue, yet taking all the devel-
opment risk. That is our next step, to move
into top structure construction specifically
for individual clients in the affordable end
of the bonded and FLISP (Finance Linked
Individual Subsidy Programmes) markets.
We are currently involved in the construc-
tion of Reconstruction and Development
Programme/Breaking New Ground (RDP/
BNG) units, but that is a very different game
to building bonded units.”
Diepsloot project
At present Esor Construction through
subsidiary Safdev Tanganani is the turnkey
contractor of a R2-billion integrated housing
and infrastructure development in Dieps-
loot, north of Johannesburg. The 237 ha
project will ultimately see the construction
of nearly 9 000 houses of various typolo-
gies and tenure options, three schools, five
multi-functional nodes, three shopping
centres, five neighbourhood parks, a magis-
trate’s court and a hospital. “We started
constructing two landmark and iconic pedes-
trian bridges across William Nicol Drive to
the value of R52-million in July 2013. These
bridges form part of the bulk infrastructure
for the development and will link the current
Diepsloot to the new,” Duncan says.
“It is an interesting project with a rather
unique contractual relationship. The land
is owned by Gauteng Province while we
retain the development rights. Safdev is
defined as the turnkey contractor, but we
are dependent on Gauteng Province for all
the requisite planning, legal processes and
attendant works orders required to imple-
ment the project,” Duncan explains. He adds
that the development is a significant show-
case for the company’s full service offering.
“Where such a project is good for a company
like us is that we can keep quite a large part
of the value chain in house which is what is
required in order to make a project of this
scale viable. There is insufficient margin for
every primary element of the project to be
treated as an independent business activity
and taking out a full margin. Margins have
to be combined to create the necessary crit-
ical mass and ultimately to deliver fair value
to our client, the Gauteng Department of
Human Settlements.
In-house development
division
“This was one of the main drivers of the
rationale to establish an in-house develop-
ment division that will essentially identify,
package and implement the projects while
using our civils and building capabilities for
the construction. Ideally you do not want to
outsource the development function as you
want to do as much as possible in house in
order to optimise the value chain. This gives
you a few extra bites of the apple, which now
includes taking a development margin, an
infrastructure margin and finally a building
margin for the top structures.
“One aspect that we have not consid-
ered bringing in house at present is the sales
function. This is a very specialised field and
we are quite happy to say horses for courses
and that we aremuch better at the bricks and
mortar side than we are at filling out bank
applications. Yes, in the fullness of time we
will look to broaden our product offering by
completing the value chain from identifying
an opportunity for a development to selling
the house to the end user. This definitely
enhances your ability to own and control the
process,” Duncan comments. “However, we
are also happy to work with the right part-
ners in joint ventures as this spreads the risk.
“Currently we are utilising our civils
capabilities for the two pedestrian bridges
while our building skills will be deployed
for some of the top structures. There is
not a single free standing top structure in
the entire development as everything will
be either semi-detached or multi storey
units. In fact the bulk of the development
will be three storeys, making it one of the
highest density integrated developments in
Gauteng. That is the way that designs are
moving and is inevitable given the extreme
shortage of well located land and the exor-
bitant costs of providing bulk services.”
Duncan adds that Diepsloot has been classi-
fied as one of the top seven National Priority
Projects in South Africa at present.
Challenges
Major challenges facing the housing market
are bulk services. “Land and legal require-
ments are more process type issues whereas
bulk services capability is a huge issue.”
to capitalise on affordable housing
ESOR CONSTRUCTION
Esor Construction
plans to move into top
structure construction
in order to capitalise
further on the
affordable housing
market in South
Africa, Kevin Duncan,
divisional managing
director, says.
A long distance view of South Bridge, showing the close
proximity of the existing Diepsloot informal settlement .
COVER STORY
