To me this New Year means many new things… but this is not about me. This New Year brings new challenges and it brings new opportunities for us as a collective business entity. We are not going to be intimidated, not even a little scared. We are going to take on these challenges and we are going to set the trend in the real estate industry...again, like our founders did many years ago.

Before I continue with the shop talk, please allow me an opportunity to wish each and everybody within the greater AÏDA network a fabulous New Year. May your 2007 be filled with love, peace, good health and prosperity.

Many things might be new to me, but it doesn’t mean that much should be new to you. Should I have said that nothing is about to change, I surely would have been dishonest. Since we operate in an industry that is for ever changing, we cannot be too rigid, can we?

Various fluctuating market conditions and developments within our industry will have a substantial impact on our business, wherefore a dynamic approach is imperative. When necessary, we should take informed decisions that would guide us through the implementation of calculated changes in the best interests of our group, our franchisees and our agents.

I recognize and appreciate the fact that for almost 50 years AÏDA has successfully been delivering quality products and services to its member franchisees and their customers. The brand enjoys real equity and it has been positioned very well throughout different markets across our beautifulSouth Africaand some of its neighbouring countries.

I must pay tribute, as I hereby do, to all previous role players: from Ms.AÏda Geffen with her new initiative in 1958, right through to Mr. Alex Fenwick. They did a great job in establishing and maintaining a great platform for us to work from. Going forward, we are not going to re-invent the wheel, but we are going to check the tyre pressure and the valve, or put differently: we are not going to change the direction of the ocean liner, but we are going to service the diesel engines and we are going to redecorate at least a few interior areas.

I met with the AÏDA management team during two days in December last year. We briefly touched on strategy, structure, culture, value systems and most importantly, our offering to the network. We basically took a snapshot of what AÏDA has to offer, and going forward, our challenge is to improve on that offering without jeopardizing the successful fundamentals of a proven business model.

The role of the Franchisor and the responsibilities of the supporting head office personnel will be reviewed during the first quarter of this year, while I shall also do my level best to meet as many role players as possible, in the shortest possible time.


In my view, a franchisor-franchisee relationship is pretty much like a marriage – think about it. Fact is that franchising is all about mutually beneficial and also inter-dependent relationships, wherefore I would love for us to continuously discuss “our business”. “Our” head office should provide meaningful support and direction, ensuring prosperity and sustainability to our franchises and their estate agents, putting them in a position to deliver predictable results.

Easier said than done, wherefore we are also going to rely heavily on our holding company, Jigsaw Holdings Limited, and its delivery mechanisms. Through economies of scale, Jigsaw can provide our network access to valuable support services, including training through DITASA, bridging finance through Ascendant, property valuations and inspections through SAVI, auctioneering services through Tirhani and referrals through the Jigsaw Referral Centre.

The year 2007 is going to be an exiting year. Buckle up and brace yourself, we’ll be moving into the fast lane soon.

The Usury Act and the Credit Agreements Act have previously regulated consumer credit in South Africa. Both these Acts have however now been replaced by the National Credit Act (“the Act”). The Act consists of 173 Sections and three schedules. There are a substantial amount of Regulations which are to be read with the Act, which include prescribed forms. The Act is implemented gradually and will become fully operative on 1 June 2007. The Act introduces new forms of protection for debtors in South Africa. Its purposes inter alia, are aimed at preventing reckless credit, over indebtedness and to provide assistance to debtors in such events. New bodies/functionaries are introduced to oversee the application of the Act, namely:

1. the National Credit Regulator who must ensure compliance with the Act;

2. the National Consumer Tribunal, who is a juristic person, and to a certain extent may be compared to that of a court, although it is not a court as such;

3. debt counselors, a natural person, who will assess an application by a consumer to be declared over-indebted and determine whether reckless credit has been granted, and make appropriate recommendations to court in this regard.

Certain provisions in Credit Agreements, which may be to the detriment of consumers, are prohibited. The Act in essence, attempts to prevent over indebtedness of consumers and/or the granting of reckless credit and assists consumers in instances, should it occur. Credit providers are therefore obliged to evaluate a debtor’s creditworthiness, before credit is extended. In addition a debtor who becomes over committed may apply for a debt review and a rescheduling of his debts, in order to enable him to pay them over an extended period of time.

Credit Bureaus are also regulated by the Act. They play an important roll by providing credit providers with information on consumers, to enable them to consider the consumers’ ability to repay the credit applied for. A mortgagor under a mortgage agreement is for example a consumer, whilst a mortgagee under a mortgage agreement is a credit provider. An agreement constitutes a credit agreement if it is a credit facility/credit transaction/credit guarantee or any combination of the aforesaid three transactions: which transactions of course may take different forms and some have sub-categories. A mortgage loan for instance is secured by the registration of a bond over certain immovable property. This is a typical example. The Act distinguishes between three categories of credit agreements, in which event different rules apply to each of them, namely small agreements, intermediate agreements and large transactions. A credit agreement is a large transaction if it is a mortgage agreement, notwithstanding for what amount credit was granted. (To continue: Rights of consumers).

This is not the first time I’ve written on this subject, so call me a bear. Fact is, however, that the South African economy can be viewed from quite a number of angles, but that only a few of these views get mentioned in the broader media.

From the earliest of times “skill” has been the one factor which distinguishes between average and above-average human beings. In fact, skill was the determining factor between life and death in most instances. Skill resulted in the smaller societies at the onset of the iron-age to overcome much larger nations still stuck in the stone age.

Debt, and in a sense personal or household debt, more than anything else has led to the rise and fall of cultures. The availability of credit does not automatically lead to civilizations utilising it, but history shows that the more used to it they become, the bigger the amounts taken up per household.

The indebtedness of the Americans at 120% of household income makes them the current champions of borrowing. Most households in the US owe money on more than one credit card. Bond accounts are maxed out, and with vehicles selling on zero rated debt, the American population currently has to set aside 16% of their monthly income to service debt.

In sunny South Africa currently 7% of annual GDP has to be set aside to service debt. This appears much better than the situation in the USA, but the problem is the rate at which indebtedness in our country is growing. From 1994 SA has seen a whole new middle class appear, with more and more previously disadvantaged people joining the higher end labour force. The bulk of the net worth of this new middle class is financed from interest bearing debt.

Interest Rates

As I write this analysis, Brent Crude is trading at US$55.25 per barrel. The direction of oil price movement determines inflation prospects, interest rate outlooks and growth composition. During 2006 we saw the price of the commodity rise all the way to $78, and then retracing back to the high $50’s before OPEC started applying production quotas.

As the price of fuel is one of the major determinants of the inflation rate in SA, any big move in the price thereof will immediately affect the repo rate applied by the Reserve Bank to maintain the CPIX targets. Local interest rates have probably risen to nearly their highest point for the foreseeable future, with the possibility of a further increase in February. However, should any event like increased military action in the Mid-East or shortages due to natural disasters result in oil price increases, the forecast for interest rates could vastly change.

Exchange Rates

The rand ended 2006 as one of the globe’s worst performing currencies, losing almost 20% from its starting value against the US dollar. After starting 2007 at R6,92/US$, it weakened in excess of 4% in the first couple of trading days to R7,22/US$. This sudden movement in a negative direction impacts the prospects of inflation rates and interest rates directly. Although the Reserve Bank increased the accumulation of foreign reserves over the last year, the currency remains prone to sudden swings as happened during early 2007.

Property Values

The growth in property values have decelerated from double digit figures South African home owners and investors have become used to over the past couple of years. The median price of residential property has stagnated at mid R500k prices over the past quarter, with both units sold and values asked declining.

The outlook for the residential property market depends primarily on households’ ability to afford repayments. This in part explains the continued strength in the property market at the lower end of the scale. The bulk of the new jobs created in SA during 2006 are at the entry level of the career path, and again with the most of these new employees coming from previously disadvantaged population groups. Research done during 2006 shows that the bulk of new house owners in township areas such as Soweto is due to the fact that people prefer the vibrant township life, close to family and friends.

Summary

To close I would like to quickly look at what's happening in property in some places around the globe. Predictions are that property in Japan will continue to lose value, as happened over the last couple of years. The weather and drought situation in Australia keeps farming communities to relocate to the bigger urban areas, resulting in prospects for continued rise in property value. City life in Oz is however getting more and more expensive, because of the lack of water. Perth recently started desalination which is an expensive way of getting drinking water, whilst other areas are considering the recycling of sewerage.

Property values in the UK are forecast to be static for at least another year. The fashion of property investment has however stuck to the Brits, with more and more of them investing in Eastern Europe, and countries afar a field as Estonia and Latvia. People who would have not found Bratislava on the map ten years ago can explain exactly which provincial town in Slovakia offers the best “upside”, and the pitfalls of buying a cottage in a Bulgarian mountain village.

In the USA the housing cycle is on a steep decent – properties sometimes take twice as long as a year ago to sell, and the sales price eventually accepted by buyers can often be as much as 25% less than the going rate of early 2006. Research into the number of new homes under construction show a 29% decline over the 11 months up to November 2006. Predictions are that this decline could continue for as much as another 3 years, and by as much as another 45%. Should this occur, the value of property in the US will remain under pressure for a long time to come, and with the spendthrift Americans deeply indebted already, could well see a recession take place in the world's only remaining superpower.

The Development Institute and Training Academy of Southern Africa (DITASA) is an accredited Academy that was brought into life by JIGSAW in 2003.

For the past three years, DITASA established itself as in influential and sustainable academy. The Services SETA recognised DITASA’s driving force in providing quality education and career advancement in real estate and therefore allocated a learnership of 1 750 learners to the Academy.

In terms of this learnership,DITASA has been training 1 100 existing real estate agents and 650 newly recruited individuals on the National Qualification Framework (NQF) level 4, formally listed as the Further Education and Training Certificate: Real Estate,NQF4

According to the Estate Agencies Affairs Board (EAAB), every person that wants to become a real estate agent in the future, would be required to obtain a qualification that will allow that person to practice as a real estate agent. This qualification will be the Further Education and Training Certificate: Real Estate, NQF4. The EAAB plans to commence this certificate training in 2007 through accredited training providers.

Agents in Aida (and other networks) that are currently part of the learnership, are privileged to complete the Further Education and Training Certificate: Real Estate, NQF 4, before it becomes mandatory by the EAAB. Learners on this learnership are urged to complete this learnership timeoulsy, as learners are going to pay a course fee for new enrolments.

The Development Institute and raining Academy of Southern Africa (DITASA) is an accredited Academy that was brought into life by JIGSAW in 2003.DITASA’s goal of providing opportunities for agents to increase their expertise and efficiency has led to the development of new training programs. Please visit our website at http://www.ditasa.co.za for further detail. Direct your enquires to (012) 682 9580.