select
|

Building the case for pan-African property funds

The poorest continent is still strewn with pitfalls, not least corruption, woeful infrastructure and haphazard laws that can make securing "clean" title deeds on a plot of land an arduous process.

The wide variety of legal codes found in its 50-odd countries also adds to the headaches of anybody contemplating a regional or pan-Africa property fund.

But stacked on the other side of the equation is the compelling argument of demographics and growth: Africa is home to more than a billion people, and the IMF says its economy should expand 6 percent next year, putting it behind only China and India.

Furthermore, Africans are flooding into cities faster than anywhere else, with the United Nations projecting that by the middle of the century, two-thirds of its projected 2 billion people will live in cities, from 40 percent now.

Such urbanisation increases demand for services like modern office space, accommodation and shopping centres, and at the same time makes it easier and cheaper for retailers and banks to reach consumers under one glitzy, air-conditioned roof.

"Over the next few years, the face of African property development and ownership will change quite significantly, both in the amount of development and in the way people are able to invest in it as an asset class," said Mel Urdang, business development director at Liberty Properties in Johannesburg.

Liberty manages more than $6 billion of property in South Africa, but as opportunities become harder find in the continent's most advanced economy, it is trying to position itself as the shepherd of local and outside capital seeking property deals in Africa's frontier economies.
It has already teamed up with Zambia's state pension fund to build a $200 million shopping, office and hotel complex in Lusaka, and a regional or pan-Africa property fund was "very much on the drawing board", Urdang said.

With prolonged US and European economic weakness predicted, it is even more likely that international investors will be happy to swallow the risk of a leap into Africa in return for the premium yields that such funds would offer.

Others are more cautious, saying that it is one thing to build a water-tight business model around Africa's mushrooming mega-cities, and an entirely different thing to build a $200 million shopping mall in the teeming chaos of Lagos or Kinshasa.

"The demographics part, that's all very easy. We have absolutely no doubt about the markets," said Des de Beer, managing director of Johannesburg-listed property fund Resilient .

"The difficult parts are things like title. You hear stories about the mayor building a wall in front of developments and then wanting compensation to knock it down. The list goes on. It's very time-consuming."

However, with the likes of Resilient running out of mall-less towns and cities in South Africa, it is being forced to look to new markets in the rest of Africa.

The rapid expansion of South African retailers - this month high-end chain Woolworths became the latest to announce its first Nigerian stores - has also given the property firms stable tenants to work with as they spread their wings.

"The opportunities here have declined and the risk profile in West Africa is reducing. It's still very challenging, but less challenging that it was five or ten years ago," de Beer said. "Nigeria is the gorilla but it's the scariest."

Other obstacles are ropey infrastructure, often amounting to an absence of power, sewerage or passable roads, and the possibility of governments pushing for 50 percent local ownership of foreign ventures, as is happening in Zimbabwe.

"South African funds are looking for countries that most-mimic South Africa from a political risk angle," said Naim Tilly, a property analyst at Avior Research. "The low-risk countries such as Ghana will be the starting point."

But South Africans cannot afford to wait too long, as more nimble operators already 'in Africa' are squeezing into the space, and could start driving up prices.

Turnstar Holdings , a $180 million Botswana-listed property company, has just spent $77 million on a shopping and office complex in Dar es Salaam and is looking at similar ventures in Zambia, Kenya, Uganda and Ghana.

"We are trying to be everywhere there is a stable democracy and a stable economic outlook," said managing director Jakes Motlhabane. "I don't know of any African fund that has managed to spread across Africa. That's what we're aiming to do.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    • 15 Feb 2018
      One positive consequence of the financial crash in 2008 was the rise in consumerism, especially in the property market, where buyers have steadily become more knowledgeable and more value conscious.
    • 15 Feb 2018
      While most homeowners will take the agent’s commission into consideration when they are trying to determine what the will get out from the sale of their property, many often forget to factor in the other costs involved in a home sale, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      The forecast for the national rental market in 2018 remains a mixed bag of good news and bad news. Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria tighten their grip, it’s a double-edged sword as the market also will come under increasing pressure from factors like declining disposable income levels.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK