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Why South African property businesses are eyeing the North

In recent months an increasing number of business leaders have stated their intentions of expanding into our northern neighbours, citing improved growth opportunities among reasons for casting their aspirations abroad.

Catalyst investment manager, Paul Duncan, says the bottom line is opportunity. Business is looking at alternative markets for growth and quality acquisitions.

In the South African context this is especially true when it comes to, for example, the retail space with a plethora of shopping malls in metropolitan areas and others mushrooming in some outlying regions.

Duncan says local competition, coupled with obtaining regulatory approval for new developments is a challenge. He stresses that this not necessarily a bad thing. “We don’t want a planning environment that is too flexible.”

He cautions, however, that venturing into the rest of Africa can be seen as tantamount to entering uncharted territory.

In reference to an announcement recently by the Resilient Income Property Fund that it will be partnering with leading local retailer, Shoprite and Standard Bank in Nigeria, Duncan says this is the preferred route to follow. Both Shoprite and Standard have been doing business in Africa for years now. “You have to have people on the ground …people who know the market intimately …it takes years to develop local knowledge and expertise,” Duncan said.

He said the same of investment and development company, Atterbury, which recently concluded its second major African property transaction. Together with insurance giant, Sanlam, Atterbury acquired an 85% stake in Ghana’s first A-grade shopping centre, the Accra Mall. The remaining 15% is held by the family of the late original owner Joseph Owusu Akyaw.

Stanlib’s head of property, Keillen Ndlovu, concurs saying partnering with the host country is crucial in terms of laws, culture, dynamics and political environment. “Most African countries are growing at more than double the rate of South Africa, which shows great opportunities there,” Keillen said.

He added that Stanlib was also looking for opportunities in other emerging markets like Brazil, China, India and Russia. “Brazil is believed to be under-shopped. It’s nowhere near South Africa in terms of shopping centres. China is still showing great growth with massive urbanisation. This goes for India and Russia as well.”

Economist Mike Schüssler says the trek north has become part of a new strategy over the past two or three years with a host of industries climbing on the bandwagon. They include agriculture, transport, mining, accounting firms and banks.

He says as democracy spreads to the rest of the continent, productivity levels are increasing together with the potential for investment. African embassies based here are also doing a pretty good job in promoting their respective countries’ investment prospects.

Schüssler also made reference to a new World Bank report on Africa’s economy released in April 2012. The report stated: ”Economic growth in Sub-Saharan Africa remains strong and is poised for lift-off after growing at 4.9% in 2011, just shy of the pre-crisis average of 5%.

“Excluding South Africa, which accounts for over a third of the region's GDP, growth in the rest of region was 5.9%, making it one of the fastest growing developing regions.”

Yet another property analyst, who asked to remain anonymous, said South Africa had seen a massive run in property in the boom years. Many property companies had sought growth in other markets. For example, Redefine went to the United Kingdom, Growthpoint to Australia and Atterbury to Germany.

The analyst said there were several reasons why South African businesses were exploring other investment opportunities. He said companies striking while the iron was hot were likely to succeed in countries like Nigeria. It was stressed that this emerging economic powerhouse was not necessarily ripe for malls on the scale of the 140 000m² Sandton City, but with only three malls to talk of in that country, the scope for development was there.

(Moneyweb)



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