Reassessing discounted cash flow valuation: industry adoption and regulatory challenges in South Africa

Purpose This study aims to examine why discounted cash flow (DCF) remains marginal in South African secured-lending valuations and to assess whether semi-digitised workflows can shift adoption intent. Design/methodology/approach A predominantly qualitative study with limited quantification where possible (descriptive statistics): 12 semi-structured interviews (valuers and bank risk specialists), a structured survey of panel valuers exposed to a semi-digitised DCF workflow; coded themes and descriptive statistics are reported. Findings The current industry practice is income-capitalisation centric. However, after viewing a semi-digitised DCF workflow (a research instrument developed for this study), 94% found it easy to understand and 94% indicated they would or likely would use it; 69% said it addresses prior challenges, 81% that it helps manage complexity, and 75% perceived efficiency gains. Interviews highlight efficiency, standardisation, and data clarity as enablers, but training gaps, fragmented market data, and behavioural inertia remain headwinds. Practical implications Basel standards apply to banks' capital models—not to valuers' choice of method. Lenders can request an optional/additional investment DCF baseline alongside Market Value for internal risk analysis. Adoption is most likely with targeted training, common data standards, and proportionate digitalisation aligned with professional guidance (e.g. Royal Institution of Chartered Surveyors [RICS]). Originality/value This study provides South Africa–specific evidence on adoption barriers and behavioural change, with a clear regulatory narrative and a practical digitalisation route that preserves professional judgement.

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Publication Details

Journal
Journal of Property Investment and Finance
Published
2026-03-07
DOI
https://doi.org/10.1108/jpif-08-2025-0113
Primary Topic
Financial Reporting and Valuation Research
Type
article
Field-Weighted Citation Impact
0.00
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article

Reassessing discounted cash flow valuation: industry adoption and regulatory challenges in South Africa

Laetitia Lorna Van der Merwe (was Cook), Wynand Pohl
Journal of Property Investment and Finance
Financial Reporting and Valuation Research
article

Reassessing discounted cash flow valuation: industry adoption and regulatory challenges in South Africa

Laetitia Lorna Van der Merwe (was Cook), Wynand Pohl
article en

Abstract

Purpose This study aims to examine why discounted cash flow (DCF) remains marginal in South African secured-lending valuations and to assess whether semi-digitised workflows can shift adoption intent. Design/methodology/approach A predominantly qualitative study with limited quantification where possible (descriptive statistics): 12 semi-structured interviews (valuers and bank risk specialists), a structured survey of panel valuers exposed to a semi-digitised DCF workflow; coded themes and descriptive statistics are reported. Findings The current industry practice is income-capitalisation centric. However, after viewing a semi-digitised DCF workflow (a research instrument developed for this study), 94% found it easy to understand and 94% indicated they would or likely would use it; 69% said it addresses prior challenges, 81% that it helps manage complexity, and 75% perceived efficiency gains. Interviews highlight efficiency, standardisation, and data clarity as enablers, but training gaps, fragmented market data, and behavioural inertia remain headwinds. Practical implications Basel standards apply to banks' capital models—not to valuers' choice of method. Lenders can request an optional/additional investment DCF baseline alongside Market Value for internal risk analysis. Adoption is most likely with targeted training, common data standards, and proportionate digitalisation aligned with professional guidance (e.g. Royal Institution of Chartered Surveyors [RICS]). Originality/value This study provides South Africa–specific evidence on adoption barriers and behavioural change, with a clear regulatory narrative and a practical digitalisation route that preserves professional judgement.

Journal of Property Investment and Finance
Japan Real Estate Institute (JP)
Openalex Percentile: Top 34%
Financial Reporting and Valuation Research
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