In about five years, South Africa’s best- performing property developer expects to make as much from the dead as it does from the living.
Calgro M3, which has gained more than any other stock on the Johannesburg exchange over the past six years, forecasts that an expanding cemetery unit will match the profit generated by its main housing construction business as early as 2020, Managing Director Wikus Lategan said in an interview.
“The cemetery contracts will grow exponentially,” Lategan said at his Johannesburg office Dec. 14. “South African culture favors traditional interment over cremation and elders that might have been buried in their village are increasingly brought to the city so relatives can access their graves for mourning.”
Burial space in South African cities is shrinking as many of the population of 55 million migrates to urban areas and graveyard construction declines because the state is prioritizing repairs to water and electricity systems. The nation has a higher mortality rate than about half the countries in sub-Saharan Africa because it’s the region’s fourth most HIV- infected country, according to the United Nations. Aids causes almost a third of deaths, government statistics show.
The company in 2015 built the Nasrec Memorial Park pilot cemetery project between Soweto and central Johannesburg. Calgro M3 has gained 42 percent this year to 21 rand, valuing the company at 2.7 billion rand ($173 million). The stock has advanced more than 50-fold since trading at 40 cents in December 2009, a greater increase than any other of the more than 400 companies listed on the Johannesburg stock exchange.
“There is far more to come as they work though their 19- billion rand project pipeline,” Samantha Pauwels, an investment analyst at Cannon Asset Management Pty Ltd., said by e-mail. “The balance sheet is far better today than a few years ago.” The company has reduced risk and is diversifying “across a number of projects including ambitious plans with the burial business,” she said. Cannon holds 2.2 percent of Calgro M3.
The developer currently focuses 80 percent of its construction on low-income housing, using its own architects, engineers, constructors and marketers to deliver complete dwellings, Lategan said. Calgro M3 targets land that can’t be built on for cemeteries. It seeks to promote them as a safe destination for jogging, picnics and commemoration near the center of the city, akin to Pere Lachaise in Paris, where Oscar Wilde is buried.
“Graveyards have such a bad name in South Africa because of vandalism and the quality of maintenance,” Lategan said. “We can’t just go and build a cemetery in a built-up residential neighborhood. People don’t want to stay next to cemeteries.”
The company has a partnership with Hollard Insurance Co. to offer plans to help pay for graves starting at 5,000 rand plus funeral services, tombstones and family support, Lategan said.
The Nasrec development includes man-made streams and ponds with graves laid out in circles adjoining open space, instead of row upon row. Electric fencing, surveillance cameras and sports park-style overhead lights promote safety. The company provides tombstone alarms to alert security, probably the only place in the world that has them, Lategan said. The model will move to three more cities with about five parks by 2018, he said.
“It’s not a cemetery -- it’s a park where people happen to be buried,” he said. “It’s a place where we have a dignified and tranquil feeling.”
With assistance from Vernon Wessels