Cut out middlemen and red tape to reduce cost of housing

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Windhoek

Property developers and construction companies who cut out middlemen, including subcontractors and speculators, can significantly reduce housing prices, specifically for the lower income segments of the market.

This is the opinion of one of the most successful property developers in Windhoek, Peter Mbutu, the Managing Director of MGM Properties.

“The moment you subcontract work then you push up the price, specifically for the lower income groups. You have to remember that subcontractors also make a profit on material. For instance, if a subcontractor buys a bag of cement for N$10 then he turns around and invoices government N$40 for that same bag of cement,” explained Mbutu.

He added that bureaucracy and cumbersome approval processes also push up the final cost of land. He added that the initiative to get the youth involved in the servicing of land is a brilliant idea, which will also drastically reduce the cost.

As a solution to the housing dilemma, Mbutu suggests that government cash in on its good relationship with China. “Government should import building material directly from China. All of such an initiative falls back on the responsibility of management.”

Furthermore, for medium and higher income groups Mbutu’s solution is to tax the rich for the benefit of the poor. “For these income groups I would provide land on a tender basis to make the big property developers compete against each other. Then, the money the municipalities make from these tenders can be used for servicing land,” he explained.

He argues that to further bring down house prices the State needs to put as much land on the market as possible. “To retain land and to only make it available to certain people also pushes up the price. This falls back on the basic principle of supply and demand,” Mbutu remarked.

“Our president really thinks like an entrepreneur,” Mbutu said, while expressing his admiration for the Head of State. “Our president needs our support and all of us need to give it to him. Everybody needs to stand together to make housing in Namibia a success,” Mbutu added.

Seated in his office at MGM Properties’ offices in Rocky Crest, Mbutu narrated how he and his wife had to make some strategic decisions that almost ended up in MGM closing its doors. This happened when his company waited for 14 months to receive Township Board approval for a complex development in Rocky Crest.

“While waiting for approval we had to decide whether to retrench people or not. My wife and I decided that we would not retrench anyone”, said Mbutu. Of course this decision meant that the company would have to carry the approximately N$1 million per month payroll while they were waiting for Township Board approval.

Mbutu added that the company also received ample support from Bank Windhoek, which he said saw the potential of the company, as well as the Mbutu couple’s passion for their business. Of course, the decision also came with consequences as MGM had to sell some of its prime development land in Rocky Crest in order to ride out the storm.

“The key pillars of any business are management and accountability,” Mbutu believes.

Mbutu and his wife, Madelein, started MGM Properties in 2005. Mbutu said his wife actually convinced him to enter the construction industry and they started the business with two staff members and an N$11 000 loan.

In fact, the company’s name is taken from his wife’s initials, Madelein Groenewald Mbutu (MGM). Today, their company constructs multi-million dollar housing complexes and directly employs about 235 permanent staff, as well as a number of smaller businesses, which brings the number of staff members closer to 500.

Unlike many construction and property development companies, all MGM Properties staff members enjoy the benefit of a pension and medical aid.

 

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