by Experts
With growing economies and populations‚ Africa offers rich opportunities for property developments‚ although the diversity of countries mean a “one size fits all” approach needs to be avoided‚ industry experts have said.
Speaking at a South African Property Owners Association (Sapoa) and Investment Property Databank research breakfast recently‚ Malcolm Horne‚ Chief Executive Officer of Broll Property Group‚ said there were growing opportunities “beyond the comfort zone of SA‚ and astute investors will reap the rewards”.
Horne said the African property landscape would be transformed over the next decade. Pieter Steyn‚ Absa’s head of commercial property finance‚ said local property investors and developers currently enjoyed opportunities in SA‚ as well as foreign markets such as the UK‚ Germany and Australia.
Steyn said: “With the exponential growth of the African economy and the opening of its business markets‚ diversification into African opportunities should be seriously considered as a key element of a short- to medium-term investment strategy.”
Two weeks ago‚ Resilient Property Income Fund’s Chief Executive Officer, Des de Beer, said Resilient planned to stop developing shopping centres in SA because of “the massive regulation” in the country. He said developments in SA were taking six years because of red tape. The property group would take its operations to Nigeria‚ De Beer said.
Marc Wainer‚ Chief Executive Officer of SA’s second-largest listed property company‚ Redefine Properties‚ said developments in SA had become “impossible” and there was no will to get things done.
However‚ Steyn said diminishing opportunities in SA were not necessarily the result of a lack of will‚ but rather because of obstacles imposed by municipalities and inefficiencies. He added that there were still opportunities in the country.
Caswell Rampheri‚ Chief Executive of the Buna Group‚ identified three key markets on the continent: west Africa‚ east Africa and southern Africa.
West Africa — especially Ghana and Nigeria — was a high-risk‚ high-return area but there was a lack of regional cohesion.
Ghana was “a country to watch” and was the fastest-growing economy in the world in 2011. It also had clear rules and regulations‚ he said.
East Africa was considered a high-risk‚ moderate-return area‚ he said‚ although it had improving regional cohesion which meant investors could use Kenya as a base to expand elsewhere.
The southern African market was seen to offer moderate risk and moderate returns‚ and Rampheri said Mozambique was “a gem waiting to be unlocked”‚ where retailers were “crying for space”.
He said that Zambia was Rampheri’s highly recommended country for property investments‚ with inflation decelerating‚ population growth‚ established markets‚ political stability and infrastructure in place. Zambia was “investor-friendly.”
The country offered attractive investment incentives‚ with zero corporation tax rates for a period of five years after the first year of profit‚ and opportunities were “in abundance”.
Zambia’s property market offered “superior returns” on a risk-adjusted basis‚ Rampheri said.
He said while there were still challenges on the continent — including the “opaqueness of data and information”‚ a shortage of institutional capital‚ and high costs of development — many aspects were improving.
Steyn said there was a “realisation that opportunities are tougher to come by in SA”‚ with more obstacles being imposed by municipalities on commercial property investors‚ and inefficiencies and corruption‚ while consumer debt meant less spending power.
Because of this‚ many South African developers were identifying Africa as a place worth exploring‚ Steyn said. He said seven African countries were in the top 10 fastest-growing economies in the world‚ and 13 African countries already had a higher per-capita gross domestic product than China.
The continent was experiencing a population boom‚ and would have 2 billion customers in 2050‚ from 1 billion in 2010‚ he said.
This‚ combined with rapid urbanisation and opening trade‚ meant “the demand will create itself”‚ he said.
However‚ the challenges could not be ignored‚ with many countries ranking badly on indices for corruption and ease of doing business‚ and political instability was still a concern in many countries.
Also‚ the South African government “needs to put more effort into improving its trade links with the rest of Africa to make it easier for companies to take advantage of these opportunities”‚ Steyn said.
Steyn agreed Ghana was an attractive market‚ where there was an ease of doing business‚ no language barrier‚ and several companies had “earmarked it as their next destination”.
Zambia‚ although small‚ was very attractive and investors needed to “get there quick”‚ he said. Kenya was also attractive‚ although the high levels of corruption were concerning. Other opportunities were available in Mozambique‚ Namibia‚ Nigeria‚ the Seychelles‚ Tanzania and Uganda.
“The key to any investment in any African country is to understand that every country is different‚ with a mix of different political‚ cultural‚ lingual and regulatory factors‚ which means it is essential to do your homework beforehand‚” Steyn said.
Neil Gopal‚ CEO of Sapoa‚ said: “The South African commercial property sector is in a unique position to lead successful real estate development and investment in Africa. This is underpinned by the strength of our property sector and our globally respected development expertise.”
