The art of quantum planning applied to the building industr. july 2010 sv

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TowardsThe Art of Quantum Planning

Applied to the Building IndustryDr. Llewellyn B. LewisDr. Llewellyn B. Lewis

July 2010July 2010

THE STRATEGIC FORUMTHE STRATEGIC FORUM

A place of assembly for strategic conversations

THE STRATEGIC FORUMwww.strategicforum.co.za

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Studium Ad Prosperandum

Voluntas in Conveniendum

BUILDING RESEARCHSTRATEGY CONSULTINGUNIT cc

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THE ART OF QUANTUM PLANNINGwww.strategicforum.co.za

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My core belief about what makes for quality strategic planning is to have a learning-oriented approach.

Planning is a way for an organization to learn its way forward and compete more effectively by making quality decisions. (Gerald Harris: The Art of Quantum Planning: 2009)

“We understand that the only competitive advantage the company of the future will have is its managers’ ability to learn faster than their competitors.” (Arie P. de Geus, “Planning as Learning” Harvard Business Review, March–April 1988)

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At the end of 2008 and early months of 2009, the world economy was going through economic turmoil that is being compared to the Great Depression of the 1930s.

The economic stress is the result of a host of factors, including bad lending practices in mortgage markets, the creation of complex and hard-to-value financial instruments (known as derivatives), plain old fraud (the Bernard Madoff investment scandal), and, from my point of view, poor strategic planning by the managers of some of the world’s biggest companies. (Gerald Harris: The Art of Quantum Planning: 2009)

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Where we intended to go

Found something better quicker

Missed it completely

Events pushed us here on the way

The uncontrollable factors in the environment and in our organizations lead to different results

What we expect versus what happens


(Gerald Harris: The Art of Quantum Planning: 2009)

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How do we end up somewhere we had no intentions of going?Political Change

Social Change

Economic Shifts

Environmental Issues

Technological Change

Demographics

Financial Markets

New Values



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• Ways to get out of unhealthy group-think, old patterns, and safe comfort zones

• New models and metaphors for thinking about how the organization can grow and adjust to uncertain developments and new opportunities

• Ways to bring the whole person into planning and creative work

Do we need any more evidence than today’s headlines?

What Needs Improvement in Strategic Planning?



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Why better planning can be found in ideas from Quantum Physics

• Quantum physics is the study of the structure of the universe as a whole system starting from the tiniest particles (light photons, electrons, etc).

• Planning involves thinking systemically, framing ideas, and using models and metaphors to improve understanding.

• By nature human beings draw from nature and many other fields of activity to create meaning.

• Powerful ideas and models for thought exist in quantum physics and can be translated and used to help find meaning in other areas of human endeavor.



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Quantum Physics

Quantum Ideas and Metaphors

Creative Thinking

Metaphysics

Strategic Planning

Organizational Design &Development

Study how the universe works

Take some good ideas on structure and flow to open thinking and drive creativity

Turning ideas into creative and innovative services and products

Bring in information on key aspects of the business: markets, technology, competition, regulation, finances, economic issuesInvestment in

Operations

Decide how to combine people and physical assets into a productive system.

Product or Service

The core business learning loop

The Pathway from Quantum Physics to Success in Business Strategy

The core quantum thinking loop



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We Can Learn to Be More Creative from the Way the Universe Works!

Seven Big Ideas1. Non-Duality

2. Uncertainty and Positionality

3. Observation and Intention

4. Time and Space as Illusion

5. Many Worlds

6. Field of All Possibility

7. Everything is Energy Open Thinking

Quality Questions

Learning

Creativity

Innovation



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1. Non-Duality (Thinking beyond duality)

Idea in Quantum PhysicsQuantum Idea Translated for

Planning & Creativity

Light has the properties of both a particle and a wave. It is both and can display the properties of both. Depending on your point of observation it can be one or the other.

We must see things and ideas for what they are and the direction they are moving. The needs and desires of a customer can be both discrete and continuous. The purpose of the organization can be very specific and multi-faceted. An event in the business environment can mean more than one thing depending on the point of view from which it is observed.



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Idea in Quantum Physics Quantum Idea Translated for Planning & Creativity

Light has the properties of both a particle and a wave. It is both.

Avoid over-simplified thinking. Beware of positionality – taking a position, holding to it, and arguing from it as if it were the absolute truth.


Mortgage Bonds: Defined as Debt (not Investment). Repayments not regarded as savings Household debt too high – therefore curtail mortgage loans Rental versus Ownership. A reinvented model required? Observing influences what is being observed. Property valuers appointed by Bank or Owner? Who pays the Piper? Banks through Valuers influence valuations – then report it and it becomes input thus confirming their point of view. Is it wise for Banks to report average House Prices?

(Based on Gerald Harris: The Art of Quantum Planning: 2009)

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Mortgage Bonds: Defined as Debt (not Investment) Repayments not regarded as savings Household debt too high – therefore curtail mortgage loans Rental versus Ownership. A reinvented model required? Observing influences what is being observed. Property valuers appointed by Bank or Owner? Who pays the Piper? Banks through Valuers influence valuations – then report it and it becomes input thus confirming their point of view. Is it wise for Banks to report average House Prices?





THE ART OF QUANTUM PLANNINGwww.strategicforum.co.za International Housing Solutions managing partner Soula

Proxenos says too many local property developers are holding on to old fashioned notions of Home Ownership.“Given SA’s huge housing backlog and the lack of delivery to meet demand, I believe we have a great opportunity to provide both home ownership and rental options”. (Business Day, 14 July 2010).

“We cannot afford to rely on home ownership alone and in fact we do our fellow citizens a disservice if we rely on home ownership to solve the backlog.” (Soula Proxenos: Business Day, 14 July 2010).


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According to the FNB Estate Agent Survey for the 2nd quarter of 2010, buy-to-let buying expressed as a percentage of total property buying reached a new low of 7%, down further from the previous quarter’s 9%. The buy-to-let percentage has slumped a long way since being estimated at around 25% back in 2004 at the peak of the residential boom.(John Loos, FNB Property Market Analytics, 14 July 2010).

So where will the rental stock come from?The conventional Investment model must be challenged.Reinvention is required.


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In the USA The Home Valuation Code of Conduct, adopted in May 2009 to ensure appraiser independence, bars mortgage brokers and bank loan officers from selecting appraisers. Mortgage brokers and realtors complain that the rules have produced low-ball appraisals that have blown up deals, while appraisers argue the change has harmed appraisal quality. (Jessica Holzer, WSJ, June 2010).


So what is the response of the Building Industry?Does it accept the situation that the Banks have inordinate power and influence over the fortunes of the industry?Some PARADIGM REINVENTION IS REQUIRED.

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2. Uncertainty and Positionality (Inescapable uncertainty)



You cannot simultaneously know (measure) the speed and the position of an electron. The very process of measuring the speed or position affects the other. Uncertainty is inescapable.

It is not possible to get all the information needed to make the exact right decision. Taking a position that any perspective is “right” is inherently limited by that subjective point of view. A shift in point of view changes what we can measure and see. No analysis can be complete or definitive because what something is now may not be what it is in the future.



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You cannot simultaneously know (measure) the speed and the position of an electron.

There is NO WAY TO ESCAPE UNCERTAINTY in the business environment or marketplace. Assumptions and context should be vigorously CHALLENGED to support more open learning.

Must there be NO RISK/UNCERTAINTY before the Banks lend? What are the Banks waiting for to increase lending? Certainty? Economic recovery? Consumer confidence? Have the Banks lost their appetite for LT lending?


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“. . . They (the Banks) do hold the key to economic recovery and to the survival of small businesses. Although we are seeing the return of some stability in the market, there will be no real recovery until stable consumers can access credit.” (Bus. Report, 26 November 2009).


More than 50 percent of home loan applications are still being declined despite many banks relaxing their credit criteria. (Business Report, 17 March 2010)

So where will the development finance come from?The conventional Investment model must be challenged.Reinvention is required.

Mortgage Advances in 2009 of R195 Billion in real terms was the lowest level since 1991. This compares with almost R502 Billion in 2006 (at 2009 values).

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Britain's economic recovery was at risk of being undermined by the lack of bank lending to businesses, Business Minister Vince Cable was quoted as saying yesterday. "We could have a second credit crunch if we don't get credit flowing, there is a real danger that growth in the economy could be undermined," Dr Cable said in an interview in the Independent on Sunday. (Business Day, 19 July 2010)


The bankers have done it again. After almost destroying the economy and strangling small businesses by refusing desperately needed credit, they are now declaring record profits and are again enjoying giant bonuses. The Times, London ©, 10 August 2010)

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This leads to the third explanation for the paradox of financial affluence amid economic squalor. We rail against banks and bankers, but we need more credit to revive the economy. The more public spending is cut, the more urgently private bank lending is required. The banks, therefore, have society in a choke hold. The Times, London ©, 10 August 2010)

What is needed is for regulators to suspend their normal rules and to encourage banks to take more risks – whereas the backlash against reckless casino banking has done the opposite. The Times, London ©, 10 August 2010)

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3. Observation and Intention (Intentions, Actions and Reality)



The probability of where a particle is gets reduced when we observe it. Our observation at the moment we make it and measure it is real. Other observations from other points of view are also real.

Our observations and intentions are powerful and influence the reality we are observing. However, our intentions and observations do not cause a single reality. A different point of observation with different intentions can create a new reality. Intention must be paired with openness.



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The probability of where a particle is gets reduced when we observe it.

The intentions of the Organisation give focus to and influence events in the business environment.

• Understand the context. Dig deep to unearth the dynamics. • The aversion against Low Cost Housing closes opportunity• The grass is greener offshore• The lack of trust (the golden triangle) • Set the intent. Work from the future backwards. • What is the Vision of the Building Industry? Is there a vision?• The success of the Soccer World Cup is a prime example.


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• Understand the context. Dig deep to unearth the dynamics. • The aversion against Low Cost Housing closes opportunity• The grass is greener offshore• The lack of trust (the golden triangle) • Set the intent. Work from the future backwards. • The success of the Soccer World Cup is a prime example.• What is the Vision of the Building Industry? Is there a vision?

Minister Sisulu said the Department aimed to double delivery in the next two years from the

250000 annual delivery of houses to 500000, which is estimated to cost R345 Billion by 2014. (Business Day, 5 March 2009)


So how will the Affordable Housing be delivered?The conventional Investment model must be challenged.Reinvention is required.

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MIXED USE INTEGRATED DEVELOPMENTS: REINVENTED FUNDING MODEL

DEVELOPMENT FACILITATION PROCESSCommitment and

sustainability of Funds provide NEWCO with major Differentiating

feature

Newco can on-sell to Professional Managing Agent (e.g. JHC,

Trafalgar)INVESTOR

20%

INVESTOR20%

BANK/S70%

BANK/S70%

DEVELOPER10%

FTHB

CONTRACTOR

NEWCO

INTEGRATEDHOUSNG

VENTURE CAPITAL

FUNDS

BUY OR RENTOR RENT TO BUY(DEFERRED PURCHASE)

FTHB

DHSINSTITUTIONAL

SUBSIDY

Leveraged Venture Capital Funds provide potential for lowering

Cost of Affordable Housing Finance

Financial Charter (FSC) Points.

Risk Sharing. Exit or re-mortgaging potential after second

exit point. (Bankruptcy remote)

DEVELOPER has potential to buy out Banks and Investor through re-

mortgaging and to become Property Landlord at second exit point

Contractor can focus on productivity and quality and is assured of timeous payment.

DHS Vision of Sustainable Integrated Housing is achieved

FTHB can develop credit rating to obtain mortgage

for Home Ownership (Banks or NHFC)

Exit at Second Exit Point with Funds

recycled into other developments

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This immediately raises the question of the future of SA housing and its underlying delivery and mortgage finance structure?

The performance of Affordable Housing is a KEY UNCERTAINTY with very HIGH IMPACT.

Following are ideas for the next 12 years. A futuristic outlook is informed by a scenario structure to think about this question and more importantly to raise deeper underlying questions which might help in the formulation of solutions and policy.


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Key Drivers Shaping the SA Housing Market in the Future

• SA economic growth (GDP growth)• Interest rates (monetary policy)• Housing backlog• Job growth (quality, quantity and location)• Growth in consumer spending/credit/mortgages• Government policy on housing finance/subsidies• Market and competitive structure in private/bank

lending

This list is not exhaustive and can be added to by you as you think about this issue as well.


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Key Drivers of Change and the Scenario Map

Nat

ure

of

SA

Eco

no

mic

Gro

wth

Nature of Mortgage Finance Investment in SA

Nature of SA Economic Growth: How strong will growth be? What will it be driven by (consumer spending, government investment, trade growth, new technologically driven markets)?

Nature of Mortgage Finance in SA: How and at what levels will long term private money come back into housing finance? How will government policy support housing (tax breaks, mortgage subsidies)? What institutional structure will emerge to support housing finance?



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Drivers of Change and the Economic Scenario MapN

atu

re o

f S

A E

con

om

ic G

row

th

Nature of Mortgage Finance Investment in SA

Moderate Stable

Slow Unstable

Limited Substantial

NOW 2Q 2010

Keynes was right Government to the Rescue

Subsidies Infrastructure

Friedman was Right SA Social

Capitalism; Growth through

Redistribution; The Golden

Triangle.

SA A Third

World Country


SA Social Democracy;

Redistribution through Growth


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Drivers of Change and the Housing Scenario Map

Investment Climate

NOW, 2Q 2010

Muddling along as we

are, or change . . .

NOW, 2Q 2010

Muddling along as we

are, or change . . .

Government intervention,

PPP’s; Subsidies,

Infrastructure

SA Social Capitalism;

Growth through Redistribution;

The Golden Triangle.

SA Social Democracy; Redistribution

with Growth

SA Communism; Redistribution with or without growth

SA – A Third World Country

SA Communism; Redistribution with or without growth

SA – A Third World Country

1. The High Road

2. Upper Middle Road

3. Lower Middle Road

PROPERTY A POOR INVESTMENT / AVERAGE / GOOD / A PREFERRED INVESTMENTParadigm Regression Paradigm Paralysis Paradigm Shift Paradigm Reinvention

BOUYANT GROWTH> 5 % PA

GDFI > 25 % OF GDP

SUBSIDIES3 - 5 % OF BUDGET

AVERAGE GROWTH 2 - 5 % PA

GDFI 20 - 25 %OF GDP


LOW GROWTH0 - 2 % PA

GDFI 15 - 20 %OF GDP


NEGATIVE GROWTH< 0 % PA

GDFI < 15 %OF GDP

SUBSIDIES< 1 % OF BUDGET

NO

CO

NF

IDE

NC

E

L

OW

A

VE

RA

GE

HIG

H C

ON

FID

EN

CE

Ris

k A

vo

ida

nc

e

Ris

k A

ve

rsio

n

Ris

k T

ole

ran

ce

R

isk

Ta

kin

g

Inve

sto

r C

on

fid

ence

4. The Low Road4. The Low Road



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THE HIGH ROAD (UBUNTU: Partners in Building South Africa): MEDIUM TO LOW PROBABILITY

• Route 1 (The High Road) can be described as a type of SA Capitalism which recognises the responsibility of the rich helping the poor, but also acknowledges that this can only be achieved through economic growth. It is therefore based on the DUALISTIC principle of Growth through Redistribution and Redistribution through Growth

• This is a world in which government policy accentuates competitive market solutions and they work. Policies that allow market-based solutions, though initially painful produce the quickest and most stable results. Real cost and values are allowed to play out. Innovation results and all forms of housing investment recovers on a base of sound private management.

• This requires courageous political leadership based on an IGNITING VISION, a collaborative mindset and the PRODUCTIVE CAPABILITY to fund and build 5 million Affordable houses eliminating the housing backlog by 2020 and creating 300 000 new jobs annually.

• The strategy for Sustainable Integrated Housing Settlements is visionary and achievable.

• SA has demonstrated the productive ability to succeed through the Soccer World Cup and can continue to do so, provided all the resources of the GOLDEN TRIANGLE are deployed.

• The rewards will be a healthy building industry acting as an engine for economic growth, wealth creation and nation building through home ownership, with SA a world model of a reconciled, winning Nation.


Description of Scenario Routes


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THE UPPER MIDDLE ROAD (Long walk to freedom); MEDIUM TO HIGH PROBABILITY

• Route 2 (The Upper Middle Road) can be described as a type of SA democracy verging on socialism.

• There is a desire to uplift the populace through the provision of housing, health and education, but the low growth scenario results in increasing unemployment.

• This is a world in which a balanced combination of government intervention and competitive market initiatives are put in place. This leads to a moderate return of private investment in long term housing finance by some institutions, but also buffers some of the harsh impacts of total free-market solutions.

• Bubble-based economic growth is avoided but government spending and deficits remain an issue, with housing subsidies increasing steadily to 2020.




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THE LOWER MIDDLE ROAD (Pretoria will provide): HIGH PROBABILITY

• Route 3 is a world of muddling along in which government policy accentuates affirmative action and BEE solutions with a result that the “rich get richer.” Social justice is part of core SA values but political will subverts application. Government focuses on PUNITIVE TAXES of the limited number of tax payers to fund spending. An expanded ghetto-ization of SA housing results.

• It is characterised by an entitlement culture based on redistribution with or without growth and at any cost.

• The entitlement culture is funded by the increasing tax BURDEN of the limited number of taxpayers in the country supporting a disproportionately large and growing army of dependents through social grants as well as huge subsidies for housing, health and education.

• In the long run this scenario is unsustainable and the risk of deterioration to the Low Road is ever present. SA could continue muddling along with some half hearted attempts at cooperation between Government and the Private Sector and end up back where we are with SA failing to live up to its potential.




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THE LOW ROAD (Cry the beloved Country): MEDIUM TO LOW PROBABILITY

• Route 4 (The Low Road) can be described as a type of SA Socialism verging on Communism with SA becoming a Third World POPULIST Country like Zimbabwe.

• Corruption is out of control and housing delivery is almost non-existent and backlogs unmanageable.

• The majority of people end up in unserviced squatter camp ghettos without any hope of home ownership.

• The inability to deliver because of corruption, nepotism, cadre deployment, tender-preneurs, Affirmative Action and BEE results in the continued deterioration of Provincial and Local Government Services, infrastructure, health and education AND INCREASING HOUSING BACKLOGS.

• The risks for endemic social unrest and violence increases progressively, and the environment will be supportive of populist leaders.




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AFFORDABLE HOUSING DELIVERY AND BACKLOG: 2002-2009LOWER MIDDLE ROAD SOYUZ AND HIGH ROAD COLUMBUS SCENARIO: 2009-2020

(Source: StatsSA and BMI-BRSCU Workings)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

AN

NU

AL

HO

US

ING

DE

LIV

ER

Y (

UN

ITS

)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2,400,000

2,600,000

AN

NU

AL

HO

US

ING

BA

KL

OG

(U

NIT

S)

DOH Delivery: Lower Middle Road Soyuz Scenario DOH Delivery: High Road Columbus Scenario

Annual Housing Backlog under Columbus Scenario Annual Housing Backlog under Soyuz Scenario

THE ROLE OF AFFORDABLE HOUSING IN THE ECONOMY: 2009www.strategicforum.co.za

5 Million houses built in next 12 years and

Backlog eliminated by 2020.

The target remains the eradication of all slums, or informal settlements, by 2014. For this to happen, some 500 000 new units a year must become available, according to the Department of Housing’s Strategic Plan 2008 to 2011.

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*) Subsidy and stand included because affordability is determined in this way.

Zoning Type Density )Gross) Units m2/Unit Total m2 R/m2 R/Unit Stand Total R Million* %Giveaway RDP Residential 2 Row Housing 90 Units/Ha 478,750 45 21,723,281 2,074 94,114 9,411 103,525 45,057 3.11%Giveaway RDP Residential 3 Walk-ups 125 Units/Ha 2,128,750 45 96,592,031 2,074 94,114 9,411 103,525 200,345 13.82%Upgraded RDP Residential 1 1 House/Stand 200 m2-450 m2 1,665,000 68 113,220,000 3,935 267,554 26,755 294,309 445,477 30.74%GAP Housing Residential 1 Semi-Detatched 190 m2 488,750 113 54,984,375 3,935 442,644 44,264 486,908 216,342 14.93%

Residential 1 1 House/Stand 1 per 350 m2 238,750 180 42,975,000 3,935 708,230 70,823 779,053 169,090 11.67%5,000,000 42 211,179,375 5,097 215,262 1,076,310 74.27%

1,076,310

Zoning Units m2/Unit Total m2 R/m2 R/Unit Stand Total R Million* %Business 5,000 5,000 25,000,000 4,957 24,783,464 2,478,346 27,261,810 123,917 8.55%Industrial 5,000 5,000 25,000,000 4,039 20,195,000 2,019,500 22,214,500 100,975 6.97%Business 10,000 5,000 50,000,000 2,960 14,800,000 1,480,000 16,280,000 148,000 10.21%

20,000 5,000 100,000,000 3,729 18,644,616 5,977,846 65,756,310 372,892 25.73%311,179,375 1,449,202 100.00%

* Land excludedEmployment created per annum 301,072

144,920

(Source: BMI-BRSCU Estimate)

Non Residential (m2)Offices & Banking

Grand Total

Industrial and WarehousingShopping & CommercialTotal Non Residential Total Non Residential

Grand Total

ESTIMATED NON RESIDENTIAL INVESTMENT IN SUSTAINABLE INTEGRATED DEVELOPMENTS

ESTIMATED RESIDENTIAL INVESTMENT IN SUSTAINABLE INTEGRATED DEVELOPMENTSResidential

Bonded (FSC)Total Residential

BNG Housing

Investment in Sustainable Integrated Housing Developments: 2009www.strategicforum.co.za

If the 5 million houses can be built in the next 12 years this will result in investment of R1,5 Trillion (land excluded).And . . . Create 300 000 additional jobs in the process.

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Affordable Housing delivery is bedeviled by political and financial considerations. Zuma’s Government has committed to “upgrading” informal settlements for 400 000 households by 2014 as a core outcome. Of course this begs the obvious questions: • What about the commitment to eradicate squatter settlements by that time? • What are the subsidies then for? This is the usual prevarication which successive Housing Ministers have been known for. It leads to confusion and lack of political will to solve the problem once and for all.

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• Understand the context. Dig deep to unearth the dynamics. • The aversion against Low Cost Housing closes opportunity• The grass is greener offshore• The lack of trust (the golden triangle) • Set the intent. Work from the future backwards. • The success of the Soccer World Cup is a prime example.• What is the Vision of the Building Industry? Is there a vision?

“Basil Read had earmarked public-private partnership (PPP) projects totaling R45 billion in various industries for work that would be carried out over the next two years”, Marius Heyns, the chief executive of the listed construction firm, said on Friday.(Bus. Report, 15 March 2010)

“Basil Read’s goal was to become a R5bn plus group by 2010. With that goal firmly in sight, we have set a new target of becoming a global construction group with R10bn in turnover by 2013,” CEO Marius Heyns said. (Bus. Day, 19 April 2010)


The importance of intent and Vision in achieving objectives is well proven.Who articulates the Vision for the Building Industry?

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4. Space and Time Illusion (Things and Order)



Some particles can travel at greater than the speed of light and are not confined to time. Some properties of particles occur at faster than the speed of light in the universe so they happen in no time. The creative power of the universe is not limited by time. The universe can create without time as an essential ingredient.

Perceptions about the past or the future are not limitations on creativity or what is possible. Any “this” before a “that” is only a perception from a particular point of observation, not reality. What can be created is not limited to a particular sequence that stands for all time. Something new can appear out of “nowhere” and change everything.



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Some events in the Universe occur at speeds faster than the speed of light and are not confined to time in the sense of past or future.

Change assumptions, add new observations and shift the point of view and another plausible sequence is possible.


• Something can suddenly emerge at a time and place when it had not been there an instant before (The sub-prime crisis)

• Acknowledging a locked-in position on a sequence can pinpoint where there may be big risks should it prove wrong (eg investment fund industry).


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The Sub-Prime crisis is the name for what is a historic turning point in our economy and culture. It is at its core, the result of a speculative bubble in the housing market that began to burst in the United States in 2006 and has now caused ruptures across many other countries in the form of financial failure and a global credit crunch. (Shiller, Robert J. 2008 : 1)


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The sub-prime loans in the US represent only 3% of total mortgage debt. In fact, when the IMF made its estimate of total US financial sector losses in its global financial stability report, it estimated that of total losses of $1,4-trillion, only around $150-billion could be traced to mortgages and only a fraction of that to sub-prime mortgages. So much for the idea that US sub-prime lending caused the crisis. It was merely the fuse that lit the bomb. The explosive was non-traditional lending outside the banking system, centering on securitization. (Dr. Vince Cable: The Storm: The World Economic Crisis and what it means: 2009)


Scenario Planning and regular monitoring helps to prepare for events that can suddenly (or slowly) emerge.

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5. Many Worlds (Catalytic and Kaleidoscopic Thinking)



A different point of observing a particle can lead to different measurements of its position and different probabilities of its velocity. All the different measurements are real from their position of observation. Therefore there can be multiple realities.

Perception about the business environment and events set context. Depending on the point of observation there can be multiple contexts; each one valid. Creativity and planning has to challenge all assumptions and “sacred cows” in the organization. Openness to different world views is required for more robust planning.



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A change in perspective changes the potential of what the organisation can become. Even one person “seeing it” might be sufficient.

Competitors, regulators, customers and other stakeholders/outsiders may observe the same set of events and trends and draw very different, and equally valid, perceptions.



Cement Statistics, perceived as collusion by the Competition Commission and an invaluable source of strategic information by the Industry; Mortgages seen as Debt; Rental seen as preferable to Ownership; Sub-prime seen as cause of financial crisis; Foreign ownership seen as a threat; Golf Estates seen as elitist and an environmental threat; Contrast between the Developer and Contractor Paradigms; World Cup seen as impossible;

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The possibility of a ban on foreign ownership of land in the country was raised earlier this month in the context of a resolution which will go before the African National Congress's (ANC's) national conference next month.

The resolution calls for "usage patterns in the country, especially the sale of land to foreigners, which leads to pricing beyond the reach of South Africans" to be investigated. (Business Day, 14 November 2002)


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ERWIN RODE: I would say that 99% of South African houses are not affected by foreign buying. (Moneyweb, June 2004)

The ANC Youth League, becoming increasingly vocal and more controversial in its views, gives investors in South African residential property its blessing - provided they are not foreigners.This was the message from Floyd Shivambu, spokesperson for the ANC Youth League. (Realestateweb, 3 February 2010)

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According to Malema, "we no longer want townships and rural areas, we want our people to live as equals. Where there is land for settlement, let's get that land for our people to settle.” … "It doesn't matter where that land is located. If it is in the beachfront of Cape Town, let's use this land for the benefit of our people and let's not sell it to the foreigners." Malema insisted that "we need a government that will say we're going to take this land then we will determine the price... take it, or leave it.” (F W De Klerk Foundation, 24 September 2010), 3 February 2010)

48 © BMI-BRSCU








And then Rudy Giuliani - you might remember, he was the man who made a name internationally after 9/11 in New York - he said that when he hosted Nelson Mandela in 1994 he was assured there by our former president that property rights and intellectual rights in South Africa would always be protected, and that there would never be nationalisation - which was a big issue at that time. (Alec Hogg, Moneyweb, 11 August 2010)

The respect for Property Rights is fundamental for a healthy Building Industry.Who promotes these VALUES for the Building Industry?

49 © BMI-BRSCU

6. The Field of All Possibility (The Unified Field Theory)



Everything is connected to everything else in a unified field. The unified field balances weak and strong forces. The state of the field is not confined to time or a particular sequence and can change instantaneously. All that is possible is in the field. The field will always be in balance and change what needs to change to achieve it.

Planning and creative activity have to be based on a shared understanding the interconnectedness of all and the infinite range of what is possible. What is possible in the market cannot be limited or controlled from any single position. All actions affect the market and cause reactions. Creative work must acknowledge both infinite possibilities and the requirement of balance.



50 © BMI-BRSCU

6. The Field of All Possibility (The Unified Field Theory)



Everything is connected in a unified field and in balance. The totality of all the powers in the field causes all of existence to come into reality at any given moment.

The entire company, its people, its products and services, its relationships – everything about it – are connected either weakly or strongly to everything in its business environment.


The Building, Construction and Property Industry is a large, interconnected system of some R3000 Billion. It has critical mass, momentum and a future. Building and Construction activity amounts to R329 Billion annually. Total Mortgage Advances amount to R200 Billion annually (down from R450 Billion in 2007). Commercial property ownership amounts to R1,5 Trillion and Residential Property to R4,4 Trillion (land included). Total Mortgages outstanding amounts to R1000 Billion (2009). Employment provided for 1 million people.


The role of the Building, Construction and Property Industry in the economy is without doubt.Who promotes the role of the Building Industry in the economy to Government?

51 © BMI-BRSCU

BUILDING & CONSTRUCTION INVESTMENT

R329,26 BILLION

BUILDING INVESTMENT

R151,99 BILLIONCONSTRUCTION INVESTMENT

R177,3 BILLION

TOTAL MORTGAGE ADVANCES

R195 BILLION

RENTAL INCOME

R34 BILLION

ADDITIONS & ALTERATIONS

R33 BI0.

RES MORTGAGE ADVANCES

R174,3 BILLION

RENTAL INCOME

R34,6 BILLION

PUBLIC SECTOR NON RES BUILDING STOCK

R577 BILLION

FACILITIES MAN

R58 BIO.

PRIVATE SECTOR NON RES BUILDING STOCK

R941,48 BILLION

REFURBISHMENT

R437 BI0.REFURBISHMENT

R58 BIO.

PRIVATE SECTORRES BUILDING STOCK

R4 369 BILLION

COMMERCIAL MORTGAGE ADVANCES

R20,5 BILLION

THE ROLE OF BUILDING, CONSTRUCTION AND PROPERTY IN THE ECONOMY: 2009www.strategicforum.co.za

TOTAL MORTGAGES OUTSTANDING

R1000 BILLION

RES MORTGAGES OUTSTANDING

R700 BILLION

COMMERCIAL MORTGAGES OUTSTANDING

R300 BILLION

REFURBISHMENT

R94 BIO.FACILITIES MAN

R94 BIO.

RENTAL INCOME

R56,4 BILLION

52 © BMI-BRSCU

7. Everything is Energy! (Organisations as Energy Systems)



Everything in the Universe is composed of energy at its various levels. Energy equals matter vibrating at the square of the speed of light [E=mc(squared)] tell us that all matter is composed of energy vibrating at various levels m=E/c(squared).

Our organizations and businesses are composed of energy - they are alive. The assets (mass) of our organizations have to be used in a high vibration manner to create the energy that gives our organization life. The ease of use and accessibility of the value our organizations deliver sets the vibration level.



53 © BMI-BRSCU

7. Everything is Energy! (Organisations as Energy Systems)



Everything in the Universe is composed of energy. The frequency or vibration level of the energy makes a difference in the form a particular thing takes.

The organisation has energy. It is alive and should be viewed as such. The energy level can rise and fall and affect the state of the organisation. It is based on the ideas, values and culture of the organisation.


The Building, Construction and Property Industry is a POTENTIAL HOTSPOT. An igniting Vision of Building as an Engine for growth and wealth creation and property a preferred investment, combined with a collaborative culture and a cooperative mind-set, cross boundary networking and the productive capability CAN make South Africa a Winning Nation. And a repetition of the sub-prime crisis will not catch a cooperating industry unawares.


54 © BMI-BRSCU

Productive capacity

Alliances,Joint

Ventures

Cross functional

Networking

Enterprise Development,

BEE

Skills Training and Developmen

t

Leadership,Lobbying,Advocacy

Modeling cooperative behaviour

REINVENTION

The Hot Spot Scenario: mapping emergence(Based on Gratton: 2007: 145)

Building: The Engine for Growth and Wealth Creation. Property a preferred investment

Management Training and Development

BUSINESS

Government Labour


55 © BMI-BRSCU

Productive capacity

Alliances,Joint

Ventures

Cross functional

Networking

Enterprise Development,

BEE

Skills Training and Developmen

t

Leadership,Lobbying,Advocacy

Modeling cooperative behaviour

REINVENTION

The Hot Spot Scenario: mapping emergence(Based on Gratton: 2007: 145)

Building: The Engine for Growth and Wealth Creation. Property a preferred investment

Management Training and Development

BUSINESS

Government Labour


The GOLDEN Triangle

It’s BUSINESS that creates Economic Stability, not the Government. It’s BUSINESS that generates the wealth and the value that enable Government to invest in other areas. (Allan Leighton on Leadership: 2008: xxv)

Government must create the climate conducive to investment and promote growth through countercyclical investment in infrastructure, housing, health and education.

At the Brait Debate, Gordhan made a similar plea for a reinvention of how we view ourselves in relation to our country and each other. Calling for humility and self-awareness, he called for “a new engagement of the issues in a constructive national spirit”. (Bus. Day, 10 June 2010)

56 © BMI-BRSCU

GFCFR540,6 BILLION(22% OF GDP)

BUILDING INV.R115.47* BILLION(21.4% OF GFCF)

CONSTR. INV.R177,3 BILLION(32,8% OF GDFI)

GDPR2494 BILLION

GOVERNMENT BUDGETR739 BILLION(30% OF GDP)

TRANSFER DUTYR8- R9 BILLION PA

FTHB SUBSIDIES(1,9% OF BUDGET = R13,8 BILLION)

(230 000 HOUSING UNITS)INVESTMENT IN AFFORDABLE HOUSING

(R200 BILLION 2010-2020)

RESIDENTIAL AND NON RES BPP AND

BUILDINGS COMPLETED (BC)

PRIMARY AND SECONDARY PROPERTY MARKET

R195 BILLION PA MORTGAGE ADVANCES PA

R1000 BIO MORTGAGES O/S

LISTED PROPERTY SECTOR MARKET CAPITALISATION

R98 BILLION

ANNUAL HOUSINGNEED

(POP. GROWTH ONLY)250 000

INTEGRATED HOUSING

EMPLOYMENTIN BUILDING & CONSTRUCTION

> 1 000 000 PEOPLE

* When the UNRECORDED Home Improvement is taken into account Building Investment = 28% of GFCF

PROPERTY OWNERSHIPENGINE FOR GROWTH

AND WEALTH CREATIONR4,5 TRILLION RES PROPERTY

R1,5 TRILLION NON RES PROPERTY

URBAN HOUSINGBACKLOG 1,5 MILLION

UNITS IN 2009

GOVERNMENT INFRASTRUCTURE SPEND (R852,5 BILLION 2010-2020)

THE ROLE OF BUILDING, CONSTRUCTION AND PROPERTY IN THE ECONOMY: 2009www.strategicforum.co.za

57 © BMI-BRSCU

BUILDING & CONSTRUCTION INVESTMENT

R329 259 MILLION BUILDING INVESTMENT

R151 988 MILLIONCONSTRUCTION INVESTMENT

R177 271 MILL

CONTRACTOR (50,8%)

R66 905 MIOCONTRACTOR (50,8%)

R66 905 MIO

SUBCONTRACTOR (49,2%)

R64 798 MIOSUBCONTRACTOR (49,2%)

R64 798 MIO

LABOUR (40%)

R131 704 MIO

LABOUR (40%)

R131 704 MIO

DIRECT TO USER (40%)

R79 022 MILLIONDIRECT TO USER (40%)

R79 022 MILLIONMATERIAL (60%)

R197 555 MIOMATERIAL (60%)

R197 555 MIO

INDIRECT VIA DISTRIBUTION (60%)

R118 533 MILLION

INDIRECT VIA DISTRIBUTION (60%)

R118 533 MILLION

LARGE IND BUILDERS MERCHANT (10%)

R19 756 MILLION

LARGE CHAIN BLDRS MERCHANT(25%)

R49 389 MILLION

LARGE CHAIN BLDRS MERCHANT(25%)

R49 389 MILLION

HYPERMARKET/SUPERMARKET(5%)

R9 878 MILLION

HYPERMARKET/SUPERMARKET(5%)

R9 878 MILLION

SPECIALIST SHOP(5%)

R9 878 MILLION

SPECIALIST SHOP(5%)

R9 878 MILLION

LOCAL HARDWARE STORE(15%)

R29 633 MILLION

LOCAL HARDWARE STORE(15%)

R29 633 MILLION

RESIDENTIAL INVESTMENT

R12 775 MILLION

NON RESIDENTIAL INVESTMENT

R56 125 MILLION

UNRECORDEDADDITIONS AND ALT’S INVEST**

R36 523 MILLION

* 2009 Prices** Residential and Non Residential

RESIDENTIAL INVESTMENT

R59 340 MILLION

CURRENT REALITY OF BUILDING & CONSTRUCTION: CURRENT REALITY OF BUILDING & CONSTRUCTION: 2009*2009*

CURRENT REALITY: BUILDING & CONSTR: 2009

58 © BMI-BRSCU

TOTAL BUILDING ACTIVITY: 2000-2009 THE STRATEGIC FORUM SCENARIOS: 2010-2020

(Source: SARB, StatsSA, MFA, BMI-BRSCU Workings)

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

R M

ILL

ION

S (

2009

VA

LU

ES

)

TOTAL BUILDINGS : 2000-2007: LOWER MIDDLE ROAD SOYUZ SCENARIO: 2000-2007

1984 PEAK LEVEL OF INVESTMENT

TOTAL BUILDINGS HIGH ROAD COLUMBUS SCENARIO

TOTAL BUILDINGS LOW ROAD CHALLENGER SCENARIO

TOTAL BUILDINGS HIGHER MIDDLE ROAD APOLLO SCENARIO

TOTAL BUILDINGS LOWER MIDDLE ROAD SOYUZ SCENARIO

1984 PEAK LEVEL OF INVESTMENT

CURRENT MOST LIKELY FUTUREBETWEEN LOWER MIDDLE ROAD SOYUZ AND

LOW ROAD CHALLENGER SCENARIOS

The High Road Scenario will not require a major miracle to be realised.But . . . Political will and Leadership is essential.


59 © BMI-BRSCU

Stage 1Hubris bornOf success

Stage 2Undisciplined

Pursuit of More

Stage 3Denial of Risk

and Peril

Stage 4Grasping for

Salvation

Stage 5Recovery and

Renewal

WELL FOUNDED HOPE

STRATEGIC DRIFT AND REINVENTIONwww.strategicforum.co.za

?

What will it take?

(Source: Based on Collins: How the Mighty Fall: 2009)

19

93

/01

19

93

/06

19

93

/11

19

94

/04

19

94

/09

19

95

/02

19

95

/07

19

95

/12

19

96

/05

19

96

/10

19

97

/03

19

97

/08

19

98

/01

19

98

/06

19

98

/11

19

99

/04

19

99

/09

20

00

/02

20

00

/07

20

00

/12

20

01

/05

20

01

/10

20

02

/03

20

02

/08

20

03

/01

20

03

/06

20

03

/11

20

04

/04

20

04

/09

20

05

/02

20

05

/07

20

05

/12

20

06

/05

20

06

/10

20

07

/03

20

07

/08

20

08

/01

20

08

/06

20

08

/11

20

09

/04

20

09

/09

New mortgage loans and readvances by month and application: 1993-2009 (September)(Source: SARB, BMI-BRSCU Workings)

60 © BMI-BRSCU

Total Building: BC: 1993-2010: Net Building in the Pipeline (NBIP): by Month: 1993-2009: R*1000 (Current Values) (June)

(Source: StatsSA, BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: NBIP (BPP-BC): Chart 16)

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Total Building NBIP (BPP-BC) Total Building BC

12 per. Mov. Avg. (Total Building NBIP (BPP-BC)) 12 per. Mov. Avg. (Total Building BC)


Can the Building Industry TRANSFORM and

REINVENT itself – can it recover?

61 © BMI-BRSCU

New mortgage loans and readvances by month and application: 1993-2010 (March)(Source: SARB, BMI-BRSCU Workings)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1993

/01

1993

/07

1994

/01

1994

/07

1995

/01

1995

/07

1996

/01

1996

/07

1997

/01

1997

/07

1998

/01

1998

/07

1999

/01

1999

/07

2000

/01

2000

/07

2001

/01

2001

/07

2002

/01

2002

/07

2003

/01

2003

/07

2004

/01

2004

/07

2005

/01

2005

/07

2006

/01

2006

/07

2007

/01

2007

/07

2008

/01

2008

/07

2009

/01

2009

/07

2010

/'01

R M

illio

ns

(Cu

rren

t V

alu

es)

New mortgage loans and re-advances applied on existing buildings

Gross new mortgage loans and re-advances for construction of buildings

Net new mortgage loans and re-advances applied on vacant land

12 per. Mov. Avg. (New mortgage loans and re-advances applied on existing buildings)


It will FUNDAMENTALLY depend on the strategy of

the FINANCIAL INSTITUTIONS.

62 © BMI-BRSCU

Low Low High HighPOWERPOWER

INTER

ES

T (

STA

KE)

INTER

ES

T (

STA

KE)

UN

AFEC

TED

U

NA

FEC

TED

S

TA

KEH

OLD

ER

SS

TA

KEH

OLD

ER

SLow

Low

Hig

h

Hig

h

PLAYERSPLAYERSDemand creatorsDemand creatorsFuture orientedFuture orientedProactiveProactiveInnovativeInnovativeEntrepreneurialEntrepreneurialRisk TakersRisk Takers

RESERVESRESERVESDemand RespondersDemand RespondersCurrent orientationCurrent orientationReactiveReactiveResponsiveResponsiveService orientedService orientedRisk ManagersRisk Managers

ONLOOKERSONLOOKERSDemand observersDemand observersPast orientationPast orientationPassivePassiveRisk AvoidersRisk Avoiders

REFEREESREFEREESDemand FacilitatorsDemand FacilitatorsCurrent orientationCurrent orientationReactiveReactiveResponsiveResponsiveMediatingMediatingGatekeepersGatekeepersRisk AverseRisk Averse

BYSTANDERS ACTORSBYSTANDERS ACTORSBuilding Industry Stakeholder AnalysisBuilding Industry Stakeholder Analysis


63 © BMI-BRSCU


LEV

EL O

F I

NTER

ES

T (

STA

KE)

LEV

EL O

F I

NTER

ES

T (

STA

KE)

UN

AFEC

TED

UN

AFEC

TED

STA

KEH

OLD

ER

SS

TA

KEH

OLD

ER

SLow

Low

Hig

hH

igh

PLAYERSPLAYERSCommittedCommittedIn the KnowIn the Know

RESERVESRESERVESInvolvedInvolvedKeep InformedKeep Informed

CROWDCROWDInterestedInterestedMinimal EffortMinimal Effort

REFEREESREFEREESConcernedConcernedKeep SatisfiedKeep Satisfied

BYSTANDERS ACTORSBYSTANDERS ACTORSBuilding Industry Stakeholder AnalysisBuilding Industry Stakeholder Analysis


64 © BMI-BRSCU


INTER

ES

T (

STA

KE)

INTER

ES

T (

STA

KE)

UN

AFEC

TED

U

NA

FEC

TED

S

TA

KEH

OLD

ER

SS

TA

KEH

OLD

ER

SLow

Low

Hig

hH

igh

BYSTANDERS ACTORSBYSTANDERS ACTORS


PLAYERSPLAYERSProperty Entrepreneurs, Property Entrepreneurs, developers, developers, Public Sector,Public Sector,FINANCIAL FINANCIAL INSTITUTIONSINSTITUTIONS(Mortgage Origination, (Mortgage Origination, Approval, Approval, Advances)Advances)

RESERVESRESERVESArchitects, Specifiers,Architects, Specifiers,Manufacturers, Manufacturers, Distributors,Distributors,Contractors,Contractors,FINANCIAL FINANCIAL INSTITUTIONSINSTITUTIONSDeposits, Repayments, Deposits, Repayments, Insurance) Insurance) CROWDCROWDLabour, Labour, Unions,Unions,Consumer bodies,Consumer bodies,FINANCIAL FINANCIAL INSTITUTIONSINSTITUTIONS(Property Values, Property (Property Values, Property reports (HPI), Statistics)reports (HPI), Statistics)

REFEREESREFEREESGovt Prov-, Local-Govt Prov-, Local-Authorities, CIDB, NHBRC, Authorities, CIDB, NHBRC, SABS, Agrement Board, SABS, Agrement Board, MBA’S, SARB, State MBA’S, SARB, State Tender Board,Tender Board,FINANCIAL FINANCIAL INSTITUTIONS INSTITUTIONS (Valuations, LTV ratios, (Valuations, LTV ratios, Mortgage Rate, term, Mortgage Rate, term, Affordability)Affordability)

Building Industry Stakeholder AnalysisBuilding Industry Stakeholder AnalysisFinancial Institutions have INORDINATE Power and Interest. They play in all the quadrants of the Stakeholder Matrix and are SIMULTANEOUSLY PLAYERS, RESERVES, REFEREES and CROWD.They make the rules of the game and influence every facet of it.

65 © BMI-BRSCU

How can we create an environment that gives us the leverage to influence the Financial Institutions?“Are we making the same

mistake again, not to see a crisis in the making?”

Relationships and tools that can be used to manipulate a crisis have to be prepared for years – sometimes decades – in advance.

This reflects (Holling’s) belief that in a changing eco system the persistence of relationships matters more than anything else.

That’s a reason that the re-acquiring of habits of international cooperation in everything from food aid to nuclear energy is so essential.

It lets us begin to rebuild the webs of contacts, influence, and leverage to shape the environment around problems that we’ll never be able to attack directly. (Ramo: 2009: 214)


66 © BMI-BRSCU

Total Mortgage Loans and Readvances: 1979-2009(Source: SARB, BMI-BRSCU Workings)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

R M

illi

on

s (

Cu

rre

nt

Va

lue)

-100%

-50%

0%

50%

100%

150%

Gol

d bo

om

SA

SO

L II

SA

SO

L III

Aus

terit

y pa

ckag

e

Rub

icon

spe

ech

Deb

t sta

ndst

ill

Eco

nom

ic r

ecov

ery

Man

dela

's r

elea

se

Dem

ocra

tic E

lect

ion

Tra

nsiti

on to

Dem

ocra

cy

Cur

renc

y co

llaps

e

Wor

ld T

rade

Cen

tre

BN

G H

ousi

ng P

rogr

amm

e

Sub

Prim

e C

risis

Cre

dit C

runc

hDefining Events

Y/Y

Per

cen

atag

e C

han

ge

STRATEGIC DRIFT AND THE PROPERTY BUBBLEwww.strategicforum.co.za

The decline in Total Mortgage Advances was a massive R246,5 Billion . . . .4 Times the size of annual New Residential Building Construction!

67 © BMI-BRSCU

Total Mortgage Loans and Readvances: 1979-2009(Source: SARB, BMI-BRSCU Workings)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

R M

illi

on

s (

Cu

rre

nt

Va

lue)

-100%

-50%

0%

50%

100%

150%

Gol

d bo

om

SA

SO

L II

SA

SO

L III

Aus

terit

y pa

ckag

e

Rub

icon

spe

ech

Deb

t sta

ndst

ill

Eco

nom

ic r

ecov

ery

Man

dela

's r

elea

se

Dem

ocra

tic E

lect

ion

Tra

nsiti

on to

Dem

ocra

cy

Cur

renc

y co

llaps

e

Wor

ld T

rade

Cen

tre

BN

G H

ousi

ng P

rogr

amm

e

Sub

Prim

e C

risis

Cre

dit C

runc

hDefining Events

Y/Y

Per

cen

atag

e C

han

ge

STRATEGIC DRIFT AND THE PROPERTY BUBBLEwww.strategicforum.co.za

The decline in Total Mortgage Advances was a massive R246,5 Billion . . . .4 Times the size of annual New Residential Building Construction!

Did the Banks lose their appetite for

long-term “Debt”?

68 © BMI-BRSCU

Building Industry Stakeholder AnalysisBuilding Industry Stakeholder Analysis


INTER

ES

T (

STA

KE)

INTER

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T (

STA

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UN

AFEC

TED

U

NA

FEC

TED

S

TA

KEH

OLD

ER

SS

TA

KEH

OLD

ER

SLow

Low

Hig

hH

igh

PLAYERSPLAYERSProperty Entrepreneurs, Property Entrepreneurs, Property developers,Property developers,Public Sector,Public Sector,Building IndustryBuilding Industry

RESERVESRESERVESArchitects, Specifiers,Architects, Specifiers,Manufacturers, Manufacturers, Distributors,Distributors,Contractors, Financial Contractors, Financial Institutions,Institutions,Building IndustryBuilding Industry

CROWDCROWDLabour, Labour, Unions,Unions,Consumer bodies,Consumer bodies,Building IndustryBuilding Industry

REFEREESREFEREESGovt, Provincial, Local-Govt, Provincial, Local-AuthoritiesAuthoritiesCIDB, NHBRC, SABS, CIDB, NHBRC, SABS, Agrement Board, MBA’S,Agrement Board, MBA’S,SARB, State SARB, State Tender Tender Board,Board,Building IndustryBuilding Industry

BYSTANDERS ACTORSBYSTANDERS ACTORS

Think “outside the box”. Change the “rules of the game”.Become a PRO-ACTIVE PLAYER in each of the quadrants of the Stakeholder Matrix.

How can we create an environment that gives us the leverage to influence the Banks?


69 © BMI-BRSCU


Building Industry Stakeholder AnalysisBuilding Industry Stakeholder Analysis


INTER

ES

T (

STA

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INTER

ES

T (

STA

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UN

AFEC

TED

U

NA

FEC

TED

S

TA

KEH

OLD

ER

SS

TA

KEH

OLD

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SLow

Low

Hig

hH

igh

PLAYERSPLAYERSProperty Entrepreneurs, Property Entrepreneurs, Property developers,Property developers,Building IndustryBuilding Industry(Mortgage Origination, (Mortgage Origination, Approval, Advances)Approval, Advances)

RESERVESRESERVESArchitects, Specifiers,Architects, Specifiers,Manufacturers, Manufacturers, Distributors, Financial Distributors, Financial Institutions.Institutions.Building IndustryBuilding Industry(Contractors, Deposits, (Contractors, Deposits, Repayments, Insurance)Repayments, Insurance) CROWDCROWDLabour, Labour, Unions,Unions,Consumer bodies,Consumer bodies,Building IndustryBuilding Industry(Property Values, Property (Property Values, Property reports (HPI), Statistics)reports (HPI), Statistics)

REFEREESREFEREESGovt, Prov-, Local-Govt, Prov-, Local-AuthoritiesAuthoritiesCIDB, NHBRC, SABS, CIDB, NHBRC, SABS, Agrement Board, MBA’S,Agrement Board, MBA’S,SARB, State Tender SARB, State Tender Board,Board,Building IndustryBuilding Industry (Valuations, LTV ratios, (Valuations, LTV ratios, Mortgage Rate, term, Mortgage Rate, term, Affordability, Quality)Affordability, Quality)

BYSTANDERS ACTORSBYSTANDERS ACTORSDevelop an Igniting Vision and a Grand Strategy: Promote Building as the engine for growth, nation building and wealth creation through Property Ownership.

Develop an Igniting Vision and a Grand Strategy: Promote Building as the engine for growth, nation building and wealth creation through Property Ownership.

70 © BMI-BRSCU


Every American President including George Bush promoted Home Ownership

Who promotes Home Ownership and Property as a preferred Investment in South Africa?

71 © BMI-BRSCU


Is this the NEXT STEP for SA?

Geithner is leading the Obama administration’s effort to develop a housing finance strategy by January next year, “We need to delineate more clearly the public policy goals of how best to promote reasonably priced and stable mortgage costs for most Americans from how best to provide access to affordable housing for lower-income Americans.”

72 © BMI-BRSCU


“Fixing this system is one of the most consequential and complicated economic policy problems we face as a country,” Mr Geithner said.

“This is a test for Washington. The stakes are high. The housing industry supports millions of jobs. For many Americans, their home is their largest financial asset.”

The system’s size and complexity mean that a wrong move by the Obama administration could restrict credit, drive down home prices, increase foreclosures and slow the economy, housing advocates and industry participants say.

“It’s like building an aeroplane while you’re still flying it,” said David Ledford, senior vice-president of mortgage finance at the National

Association of Home Builders in Washington. Housing investments and related services account for 15% of gross domestic product, according to the group, ranking the industry second to healthcare.

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The Major GAMEBREAKING POTENTIAL lie in the following areas:

An igniting vision of nation-building through home-ownership, property as a preferred investment and building as an engine for growth and wealth-creation;

Interest Rates falling further by 2-3 percentage points;

The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation;

Return of Investor Confidence, Banks first and then Consumers;

Property a preferred Investment. (Source: BMI-BRSCU)


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The Major GAMEBREAKING POTENTIAL lie in the following areas:

An igniting vision of nation-building through home-ownership, property as a preferred investment and building as an engine for growth and wealth-creation;

Interest Rates falling further by 2-3 percentage points;

The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation;

Return of Investor Confidence, Banks first and then Consumers;

Property a preferred Investment. (Source: BMI-BRSCU)

Retail Motor Industry chief executive Jeff Osborne is calling on South Africa’s banks to open the credit taps and on government to play its role by reducing the prime interest rate by a meaningful 2 percent. (Bus. Report, 26 November 2009)

“. . . They (the Banks) do hold the key to economic recovery and to the survival of small businesses. Although we are seeing the return of some stability in the market, there will be no real recovery until stable consumers can access credit.” (Bus. Report, 26 November 2009)

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Brian Joffe, CEO of Bidvest, the R112 Billion annual turnover company employing some 105 000 people recently stated that much more must be done to stimulate the economy and to promote growth.

“The lending criteria of the Banks are hopelessly too strict. It makes it very difficult for the economy to grow. Interest Rates are also too high. It must reduce and then things will happen. The Government must become more aggressive (in promoting growth).” (Sake24, 7 March 2010)

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In order to achieve the VISION FOR THE BUILDING INDUSTRY SYSTEM a collaborative culture is required based on trust and cross boundary networking and dynamic Public, Private Sector Partnerships that can deliver on Infrastructure, Housing, Health, Education, Safety and Security et al and make South Africa a Winning Nation and a World model of Nation Building and Reconciliation. (Source: BMI-BRSCU)


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We have concluded that it is not one single body or institution or company that should develop and drive an igniting vision for the building industry.

The industry COLLECTIVELY must take ACCOUNTABILITY to develop an igniting vision of Nation Building through Home Ownership, Property as a Preferred Investment and Building as an Engine for Growth and Wealth Creation.

We envision that every major organisation in the Building Industry from Development to Manufacturing, to Distribution, to Contracting and Finance should adopt this overarching vision and customise it for their

own vision.

Then the Building and Property Industry will indeed become a HOT SPOT industry driven by an igniting vision, a collaborative mind-set, cross boundary networking and the productive capability to make South Africa a Winning Nation. Then a repetition of the sub-prime crisis will not catch a cooperating industry unawares.


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NATIONAL ISSUES

GROWTH WEALTHEMPLOYMENT PROPERTY

ORGANISATION’S ROLE

INVESTMENT ENVIRONMENT

MARKETING LOGISTICS

VISIONBuilding is the engine for growth and wealth creation through Property Ownership and THE ORGANISATION is the preferred Partner for good as the green BUILDING solution of choice.

MANUFACTURING

BUILDING INDUSTRY A FORCE FOR GOOD

REINVENTIONDoing well while

doing good.

REINVENTIONDoing well while

doing good.

YESTERDAY’S ECONOMY

TOMORROW’SECONOMY

NARROW FOCUS ON COMPANY

NARROW FOCUS ON COMPANY

BROAD FOCUS ON CONTRIBUTION TO NATIONAL ISSUES

BROAD FOCUS ON CONTRIBUTION TO NATIONAL ISSUES

Overarching vision aligned with National Issues, adapted and customised by the organisation for their own vision and values.


MISSIONDeveloping and growing competitive awareness, knowledge and support of PRODUCTS and maintaining consistent standards in the environmentally friendly production of PRODUCTS for good value and performance in building.

VALUESThe Organisation has an igniting vision, a culture, or mind set of co-operation, collaboration and cross-boundary networking; and a production capability to facilitate delivery of fit for purpose products and solutions and based on the unashamedly ethical values and code of conduct of:• Respect• Responsibility• Honesty• Integrity• Accountability• Collaboration

BORROWBUY BURN

ENVIRONMENTALSUSTAINABILITY

SOCIALSUSTAINABILITY

ECONOMICSUSTAINABILITY

Social development and equity, economic growth and financial performance, and environmental conservation and protection (the triple bottom line) are at the core of sustainability. And sustainability is at the heart of corporate social responsibility. To mainstream sustainability, leaders will need to drive corporate social responsibility out of the sphere of corporate affairs, risk, compliance and philanthropy, and into the domain of corporate vision, strategy and overall corporate thinking and behaviour.

Technology

The art of quantum planning applied to the building industr. july 2010 sv