Select Page

Continental Shift

Nov 11, 2017 | Featured, Property Investment

African real estate has in recent years become a more crowded marketplace, but initial strong growth has slowed down in places. We take a look at investment opportunities and challenges across the continent

A question prefaces the Knight Frank Africa Report 2017: “Is Africa still rising?” This is in reference to the phrase “Africa rising”, coined by economists as the continent’s economy saw a steady growth for more than a decade at the start of the millennium. At last Africa was delivering on its promised potential, with an average GDP growth of more than 5% per annum between 2000 and 2014, primarily driven by fastgrowing Sub-Saharan economies. But strong external economic and geopolitical headwinds, including the collapse of commodity prices, have unceremoniously slowed down this growth.

“Within Sub-Saharan Africa, the drop in GDP growth can be largely attributed to the region’s three biggest economies: Nigeria, South Africa and Angola,” according to the annual Knight Frank report on Africa, which provides an overview of the continent’s property markets. “As Africa’s two largest oil exporters, Nigeria and Angola have both seen oil revenues badly hit by lower prices, and this has additionally put strain on government spending, debt levels and currencies. South Africa’s growth has been subdued by weakness in the mining and manufacturing sectors and the effect of a severe drought on agricultural production.” But there is reason for optimism.

“East African countries, including Tanzania, Ethiopia and Kenya, have all maintained GDP growth rates well in excess of 5%, benefiting from low oil prices and growth in private consumption and investment. The West African economies of Côte d’Ivoire and Senegal have also emerged as two of the continent’s strongest performers, aided by improved political stability, economic reforms and infrastructure investment.” “Even amidst economic downturns,” says Kfir Rusin, managing director at API Events, “African economies have the ability to change and adapt almost instantly, allowing for shorter down cycle periods relative to more mature markets.

“Whilst the geopolitical challenges have affected most African markets, we are seeing a solid recovery in 2017, with very positive growth outlooks for 2018.”


“The African real estate market has been fairly subdued in 2017, with the effects of a tumultuous 2016 taking its toll,” says Kfir. “A slowdown in the announcement of new developments and the raising of capital has been in line with African property-focused companies readjusting their strategies and managing current assets rather than seeking new business opportunities. Downward pressure on rentals and lowerthan-expected returns have put pressure on project promoters and
fund managers, with the focus now shifting to debt restructuring, renegotiation of leases and the lowering of company costs.

“Overall, the major shift in focus is towards products that are better tailored and suited to a particular local market or city. The last two years have been tough, but the appetite for African real estate remains, albeit at a more cautious level.” The Knight Frank report points out that demographic trends remain favourable to the continent’s longer-term development. The population of Africa is rising faster than that of any other global region, and its demographic profile is both young and increasingly urbanised.
Africa’s population has more than doubled over the past 30 years to more than 1 billion, and the United Nations forecasts that it will surpass 4 billion by 2100, which would be around 40% of the global population. With other regions likely to be characterised by slower population growth and ageing trends over the coming decades, Africa will be home to an increasingly significant portion of the global workforce.

The Torres Rani Towers in Maputo, a new residential and office building that reflects faith in Mozambique’s economic future.
The Victoria Beachcomber Resort & Spa in Mauritius has 254 rooms, which are let by Grit Real Estate Income Group. | The Egyptian economy continues to firm up, thanks in part to the government’s bold reform agenda. | The Circle Mall in Lekki is a prime retail and office development in Lagos, anchored by Shoprite. It was developed by RMB Westport.


Since a decade ago, when the African property market was largely untapped by global property funds, a series of investment vehicles have emerged that target Sub-Saharan real estate. Knight Frank identifies RMB Westport as an example, which was created in 2008 as a joint venture between Rand Merchant Bank and the Westport Property Group. Its current development projects include the Wings Office Complex in Lagos, Nigeria, and Muxima Shopping Centre in Luanda, Angola. RMB Westport’s second fund, which has a target of raising US$450 million (about R6 billion), has attracted commitments from global investment firm GIC and the UK investor Grosvenor.  “I started this journey 25 years ago as a fascination with the opportunities that might exist on the continent, and I am still excited by what can be done,” says Michael O’Malley, director and founding member of RMB Westport. The fund has created value-added real estate developments that are serving to change the African skyline.

In Nigeria, Ghana and Angola, a collection of modern shopping centres and office blocks developed by RMB Westport are in various stages of completion. Although the fund is still firmly invested in the African growth story, Michael acknowledges that there is a newfound realism after Angola and Nigeria, two of the previously strongest-growing economies in Sub-Saharan Africa, were left reeling from the commodity price crash. “All the countries we are investing in go through cycles. We have seen good times and bad times, but these cycles don’t last forever. Two years ago there seemed no end to opportunities, with a growing middle class and available funds. We couldn’t spend enough. Then the oil price fell off the table, and without the necessary diversification all hell broke loose.” Nigeria has been the worst affected. In 2016 it experienced a recession, with the economy contracting by an estimated 1.75%. Michael concedes that some of the weaker players in the market have had to bow out, but that the projects that are going ahead are strong in terms of their fundamentals. The landscape has changed, but stressed environments also provide their own opportunities.

RMB Westport has been cautious in the past year in Nigeria and Angola, and would probably be for another year. The fund, which used to be focused on the development of retail and office space, is busy creating new opportunities and looking at the logistics sector, industrial property and health- are facilities. It is also broadening its geographic outlook, Michael says, and is interested in what Francophone Africa offers, in particular Senegal, Cameroon and Côte d’Ivoire.
Another noteworthy player in the African real estate market is Grit Real Estate Income Group (formerly Mara Delta). Grit is one of the most acquisitive buyers of real estate, growing a portfolio that currently includes assets in Kenya, Mauritius, Morocco, Mozambique and Zambia. Grit started in 2014 with the acquisition of two assets with a combined value of US$142.3 million (about R1.9 billion): Anfaplace Shopping Centre in Morocco and the Anadarko building in Mozambique. Today, Grit’s portfolio consists of 20 properties in five countries with a combined value of US$546.3 million (about R7.35 billion) and an occupancy rate of 96.9%.

“We believe that Africa is absolutely still rising,” says Bronwyn Corbett, founding member and chief executive of Grit. “The number-one misconception is to view the continent as a country. In the global search for growth, investors have learnt to appreciate the different business nuances, economic drivers, risks and opportunities inherent to each country in Africa. Although many countries on the continent are still dependent on extraction economies, countries with more diversified economies are seeing growth.”

Bronwyn contends that the period 2000 to 2014 saw a lot of hype around the Africa investment case, which led to unrealistic price expectations. “When we started Grit in 2014, we walked away from many potential transactions on the back of unsustainable pricing. The subsequent commodity slump has led to a correction and unfortunate shake-out, with several players exiting the continent. On the positive side, this has led to more realistic pricing, and we see ourselves negotiating today on the same assets we had to forgo three years ago, but at much better price levels.”

The relationship with investment on the continent is a long-term one, says Bronwyn. “Most of our tenants are here for the long haul. Focusing on ‘doing it right’ from the start despite bureaucratic challenges and maintaining strong property fundamentals help to mitigate risk.” Mozambique is a good example of this vision. Despite severe economic headwinds, the Grit team has been focusing on operational risk management and maintaining strong relationships with local authorities, the central bank and tenants. During the worst periods, Grit was flexible and worked with tenants who had delayed payments. As a result, no bad debts have been written off, and several new long-term leases or early renewals have been negotiated. Bronwyn says Vodacom’s lease was renewed early for another 10 years, KPMG renewed its lease for 10 years on the same rental terms, and Pepkor signed a five-year lease at Zimpeto Shopping Mall in Maputo.

Despite Mozambique’s recent economic challenges, its skyline has been dramatically updated with the completion of the Torres Rani Towers development in downtown Maputo, a 72 000 m2 two- tower structure with office space, 181 furnished and serviced residences, a two-storey secured parking garage, and a retail area. Within the residential tower, 117 onebedroom and studio units will be fully managed by Radisson Blu. 


The Pam Golding Property Group has also embraced opportunities offered on the continent. The group has been appointed to market luxury apartments and villas in the first phase of the ground- breaking Zanzibar Amber Resort, a world-class beach, golf and hospitality resort situated on the prime north-eastern coast of Zanzibar, just off the Tanzanian coast. With a total capital investment of US$2 billion (about R27 billion), when completed, this will be the largest hospitality investment in East Africa. From a commercial real estate perspective, says Mark Latham, managing director at Pam Golding Commercial Africa, things are still rising, albeit slowly. “East Africa, Kenya in particular, is attracting investment, more so than West Africa. Francophone Africa is starting to see interest, with the first wave of investment and development coming into the commercial market.

The market has swung, Mark says. “We saw significant levels of investment and development in markets like Nigeria and Angola over the past five years. Numerous premium-grade office developments came on line in 2016/2017, which has put the markets into oversupply due to falling demand from typical occupiers of this type of space, especially those in or related to the energy sector. The market has reacted by discounting rentals and increasing incentives in order to drive demand, the success of which is debatable.”


The Knight Frank Africa Report 2017 puts the logistics property sector in the forefront for new development. The past decade has seen a focus on modern commercial property development within Sub-Saharan Africa, with logistics development being more limited. However, there is a growing recognition that the region’s key cities are undersupplied for modern logistics space, says the report. New developments opened in 2016 include York Commercial Park in the Zambian capital Lusaka and Agility Distribution Park at the Port of Tema in Ghana. Both projects offer built-to-suit units of a quality previously unavailable in these markets. The Improvon Group, an industrial and commercial property investment company based in South Africa, along with its private equity partner Actis, is planning to fi ll the gap in the local warehousing markets in Zambia and Kenya. “There is currently a lack of A-grade warehousing, which is generally utilised by the larger logistics sector,” says Mark Truscott, marketing manager, new and existing developments at Improvon. “Our aim is to build world-class facilities that will provide for superior operational effi ciencies. At present, many logistics providers are constrained operationally by the facilities they work from. “Our two industrial parks, York Commercial Park in Lusaka and Northlands Commercial Park in Nairobi, each spans about 40 hectares. We can develop about 200 000 m² of bulk in each park. Our intention is for both parks to be long-term investments and provide our fund with rental income.” On the choice of Zambia as an investment opportunity, Mark says, “Lusaka is a major distribution hub within the region. Its location means that many logistics operators service Lusaka from Johannesburg via road transport. The bulk is then broken up for further distribution within Zambia as well as other central African countries such as the DRC.”

ABOVE: York Commercial Park is a logistics, warehousing and distribution centre about 6 km outside the Lusaka CBD in Zambia. It was developed by South African warehousing and commercial property developer Improvon, in conjunction with growth market private equity investor Actis.


This sector has been a major focus for development activity within Africa over the past decade. The Africa Report 2017 identifies South Africa as by far the largest and most mature retail market in the Sub-Saharan region, with approximately 23 million m2 of shopping centre floor space compared with only about 3 million m2 in the rest of this region. The South African market continued to grow in 2016, most notably through the completion of the Atterbury Property Group’s 131 000 m2 Mall of Africa, the largest single-phase mall development ever in Sub-Saharan Africa.

Shoprite Holdings operates a total of 2 301 corporate (owned) and 388 franchise stores in 15 countries from Cape Town to Accra and the Indian Ocean islands. Christo Wiese, in his Chairman’s Report for 2017, acknowledges that there’s been a downturn in the economies of the bulk of the commodity-linked countries in which Shoprite trades. He remains positive, however. “There is no reason at all to turn negative on what Africa has to offer. Anyone taking note of demographic projections knows that Africa will be the world’s most populous region by the turn of the century. We remain committed to being a leading player in this huge market. South Africa and the broader African region are going through a relatively tough time. But we have been through tougher times before, and it will get better.”
Shoprite Holdings CEO Pieter Engelbrecht agrees that the momentum in Africa has slowed as economies, including the fast-growing Nigeria and Angola, have come under some strain, but, he says, “We stand firm on our investment in Africa.”

PICTURED ABOVE: Developed by property group Atterbury and opened in April 2016, Mall of Africa in Waterfall City, Midrand is the size of 65 rugby fields. Multi-storey building in Maputo, tenanted by Vodacom, was developed in 2009 by Sociedade de Construções Catemba Limitada and acquired by Grit in May 2015. | Cosmopolitan Mall is a dominant retail centre in Lusaka, anchored by strong multinational tenants, including Game and Shoprite. | Sandton City Twin Towers. Nearly half of all the office development taking place in South Africa right now is happening in Sandton. | Kumasi City Mall in Ghana, an 18 000 m2 shopping centre developed by Ghana Atterbury and designed by South African-based architects Boogertman & Partners. | Kafubu Mall in Ndola, Zambia is the result of a public-private partnership.

Africa is still rising, but at a different pace than before, and the focus has shifted from Sub-Saharan Africa to other parts of the continent. It’s a bit like a marriage: Investors are having to make a long- term commitment that comes with ups and downs now that the honeymoon period is over. Africa is not a country, and each region has its own set of opportunities as well as challenges.

Credits: Photos: Lauren Groenewald and Supplied, Text: Lauren Groenewald

Pin It on Pinterest

Share This