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Comments, Queries, and Objections with Respect to the Public Notice of the Intention to Grant the Lease of Immovable Property to Warwick Mall (Pty) Ltd.

These comments are submitted in response to the Public Notice published in the Natal Mercury on Tuesday 3^rd March. Comments were invited, although a deadline for responses was not given. Articles in the Mercury (prior to the public notice) and the Metro ezasegagasini also refer.

As professional built environment service providers within eThekwini, with direct experience in the Warwick Precinct and in other areas where the informal economy is a factor, it is with grave concern that we noted the proposal for the Warwick Mall. We would like to lodge our objection to both to the lack of transparency in the process of disposing of a public asset, the process by which the award of this development opportunity to a particular private developer for this particular proposal, and in particular to the consequences of both of the above, which we believe to be expedient and ill considered proposal, which is not necessarily in the broad public interest.

For the past decade, concerted efforts and investment (capital and social) have been directed at the management of the Warwick Precinct as an inter-modal transport interchange and the centre of a wide range of informal business activity. This energy and investment has led to eThekwini acquiring a reputation and respect, both nationally and internationally for its progressive and inclusive urban management initiatives, and to a number of prestigious awards for particular projects and individuals. For many, including international tourists, the precinct is attractive to visit, for its richness, variety, inclusiveness and unique cultural experiences, as well as being a convenient shopping precinct and transport node. This proposal, while it might be welcomed in some circles as an improvement, is certainly in contradiction to these values.

Especially with the new freeway overpass, the Warwick precinct presents an important opportunity to capitalise on the place it has in the collective consciousness of Durban as a market precinct and transport node. The fresh produce market in particular has historical significance. By developing it as a well designed, well managed, attractive precinct at an important entrance to the city, this character can be enhanced and exploited for tourism and other local economic development. This could, of course, include more formal commercial development, as long as the development is sensitive to the character of the place. The proposed demolition of the early morning market as well as other trader and commuter facilities in unacceptable.

In a context of climate change and global financial challenges, the development agenda needs to change. The best solutions to increased food insecurity, are local, and Durban has a tradition of market gardeners who sell their produce locally. Apart from the obvious local employment opportunities implied, this helps create a sustainable city that need not be dependent on imported food via supermarket chains. Destroying our early morning market to make way for a mall, anchored by a global chain, just does not make sense for local development.

The ‘shopping mall’ model in this context is counter intuitive, and is an inappropriate form in that it is an enclosed box with blank facades which contribute nothing to the streetscape, other than some token stalls around the perimeter, and although it is subject to private management within its doors, potentially creates urban management, and security problems around its perimeter. Examples such as the Wheel are also an indication that effective ongoing private management inside is not necessarily a given. The proposal as published indicates that rail commuters will have no option but to move through the mall, i.e. there is no choice in the movement pattern to and from the station. While this footfall through the mall is clearly to the mall shop owners’ advantage, it prejudices the informal traders on the outside, and even those who do find themselves with a trading site after construction of the mall, may find that their businesses are no longer viable.

It is known that this informal business is a significant contributor to the local economy both in terms of turnover (our mayor quotes a figure of R80 million/annum) and creation of livelihoods for thousands of people (directly and indirectly employed in informal trade) who might otherwise be unemployed. Trading opportunities, and survivalist traders in particular, are very sensitive to location, and in the absence of a strategic plan for the area, if there is one it has not been made public, it is difficult to see how these business interests have been accommodated, and whether the alternatives proposed will provide viable livelihoods. The numbers to be accommodated in the alternative sites appear to be inadequate. The development has been described in the newspapers as a “facelift” (is the subtext about clearing informal trade out?), and as a “revival of the Warwick Triangle”, which will boost profits for traders in the area. This is not substantiated.

It appears that the proposal has been driven by private development interests, and that there is no master plan for the area. If there is one, it is not in the public domain. The lack of public process seems to characterise all aspects of the development proposal, and reports from stakeholders in the area, seem to confirm that there has been no consultation prior to the project being approved. In fact, it appears that in spite of work being done on this proposal for some time, it has been deliberately kept out of the public domain.

The financial details regarding the expected gains and losses, are also unclear, and require explanation and/or interrogation. The published figures are superficial, and make it difficult to assess whether this is a good deal for the city.

In effect the 50 year leasehold payment over the first 2 years, the ramp & taxi rank form the basis of the "land" cost to the developer. R 22.5 mill + R 11 mill + (R 62.8 mill – R 24 mill)= R 72.3 mill.

Question 1 - Is this a realistic value for the "land"? This could only be calculated by "residual" after feeding in all the capital costs and rentals, and then assuming a market rate of return to arrive at this figure. To take this one step further would be to analyse an internal rate of return taking into account future cash inflows and outflows. The developer would not be investing the reported R 350 mill without expecting a reasonable profit – probably in the region of 12%. By anyone’s standards that is a large amount of money.

Question 2 - Phase 2? Does the developer have an entree into this without further ado?

Observation 1 - the R 22.5 mill over 2 years (interest free?) seems on the face of it a really good deal.

Observation 2 - R 62.8 mill for a 400 bay taxi rank seems very expensive @ R157 000 per bay. What happens if it costs less than this figure yet the City has contributed R 24 mill contribution?

Observation 3 – The cost to the City seems high. (R24 mill + R 11 mill+ opportunity cost associated with imposing this development in this precinct). It would also be useful to quantify the cost of the massive disruption (at best)of the informal economy, and the potential permanent loss of employment in that sector.

Question 3 - From the City’s side what is the additional rates revenue arising from this deal? How can one determine the fairness to the City of this deal without knowledge of the positive impact on the rates?

In order to give the public more insight into the proposed development that there should be transparency of all the financials & lease agreements.

We are not suggesting that no development should happen in the area, but call for a more sensitive proposal that acknowledges and accommodates the specific conditions of the site, and users of the precinct, rather than the acceptance of a particular commercial development model, which favours private over public interests and has its own urban development limitations. We argue that a more transparent and inclusive process could achieve this. Understanding the required delivery milestones, we assert that it is still possible that work on the taxi rank can begin, while space is created to interrogate the broader proposal.