Here’s what happened to South Africa’s R84 billion smart city

 ·6 Mar 2019
Modderfontein City

In 2014, Chinese development group Zendai Developments, announced its intention to build an $8 billion city (around R84 billion at the time) in Modderfontein in the east of Johannesburg.

The development was pegged as a smart city which would rival Sandton with nine functional zones, including a CBD, entertainment centre, and residential and educational districts.

The project was earmarked to be built on the 1600ha piece of land over 15 years (to be completed in 2030), housing approximately 30,000 families and creating aup to 200,000 fixed jobs for the local community.

Modderfontein concept

Modderfontein concept

However, after announcing the start of construction in 2015, with some infrastructure development making headway the following year, news coming from the project fell silent by mid-2016.

And by the end of the year, the project was dead.

In 2017, the Competition Tribunal of South Africa approved the sale of Zendai to local development group M&T for a reported R1.8 billion.

According to a late 2018 report by Noseweek, Zendai Developments ran into financial troubles with net liabilities amounting to R216 million.

The project was abandoned, the magazine said, with Zendai citing South Africa’s poor economic conditions (in 2017, at the peak of the Zuma administration’s decline), the uncertain future of the real estate market, and fluctuations of the rand.

According to Noseweek, the 1600ha of land is now sitting within M&T’s portfolio, which is understood to be earmarked for the same types of high-density residential units the company is known for around Centurion and Tshwane.

What happened?

Research conducted by Ricardo Reboredo, a PhD Candidate in Geography at Trinity College Dublin, and Frances Brill, a research fellow at UCL, tracked the project over the last six years, trying to identify what exactly went wrong with the plan.

According to the researchers, the project was hindered by conflicting visions between the developer and the City of Johannesburg.

This was exacerbated by unexpectedly low demand for both housing and office space – which meant the original plan for the project was incompatible with the city’s real estate market.

“Zendai’s aspirations to produce a high-end, mixed-used development did not fit with the City of Johannesburg’s approach. Rather than a luxurious global hub, the city wanted a more inclusive development – one which reflected the principles outlined in its 2014 Spatial Development Framework,” the researchers said.

To this end, the city demanded that Zendai include at least 5,000 affordable homes in its plans. It also wanted to ensure that the development was compatible with, and complemented, Johannesburg’s public transport system.

“The city was willing to contribute funding for the necessary infrastructure and inclusive housing,” the researchers said.

However, they found that Zendai rather remained steadfast in its commitment to its original vision for the city, eventually deciding against fully integrating the city’s wishes into its planning application. This saw the city draw-out the planning process.

While this was going on, problems mounted for Zendai.

“The owner, Dai Zhikang, was eventually forced to sell his stake in the project to the China Orient Asset Management Company. Rather than continuing with the project, the asset managers sold the land to the company behind the new housing development on the site (M&T),” the researchers said.

Read: Gauteng’s R84 billion smart city is coming

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