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Building the future of Africa
www.pwc.co.za/realestate
100 Building the future of Africa
Contents
Foreword 2
Section 2 Building the future of Africa – Drivers for real estate growth 12
References 74
Contacts 84
PwC
Foreword
However, our research suggests the We hope our report will provide
impact of global megatrends on insight into the real estate market in
Africa will be huge. In this report Africa and help to identify some of
we consider their impact on the the opportunities, risks and rewards
African continent. Our objective encountered by investors in African
is to provide an assessment of real estate.
the current state of the real
estate industry across Africa and
demonstrate how megatrends will
drive growth opportunities in key
African markets. Ilse French
2 Building the future of Africa PwC Africa Real Estate Leader
Section 1
PwC 3
Global institutional-grade RE
50
5.8%
45.3
45
40
35 3.9% 25.0
30 8.2% 29.0
25 23.8
20 18.9
18.7
15 16.9 20.3
10 14.3 14.6 18.1 8.9
5 10.3
5.9 6.9 2.0 3.7
4.6
0
2004 2007 2012 2020
PwC 5
The drivers for growth in Africa
From our analysis of these megatrends, we have identified eight potential
drivers of growth in the real estate industry in Africa.
1
Africa’s young population will drive the demand for
real estate and different types of real estate. Across
Africa there will be continued urbanisation, an
expansion of current cities and the rise of new cities.
According to the World Bank, Africa’s median age was 19.7 years in 2012,
and it is expected to increase to 25.4 years in 2050, making Africa the
continent with the youngest population. The global megatrend relating
to ageing populations and the consequent increase in the demand for
retirement homes is therefore not expected to have a significant impact in
Africa by 2020. Projections suggest that in 2015 the continent will have a
population of 226 million aged between 15 and 24 years1. This is expected
to double by 2045.2 This young population will drive growth in the demand
for housing. This may include new or emerging residential subsectors, for
example student housing.
Algiers
Accra Nairobi
Doula
Johannesburg
Al-Qahirah (Cairo) Dar es Salaam
Lagos
Al-Iskandariyah (Alexandria)
El Djazaïr (Algiers)
Kinshasa
Cape Town
Johannesburg
Dar-el-Beida (Casablanca)
Durban
10m Luanda
2m Durban
Cape Town
0m
Source: United Nations Population Division, World Urbanisation Propectus, the 2014 revision
PwC 7
2
Industrialisation will continue across Africa and
will be accompanied by a rapid growth in the retail
sector.
3
The export of natural resources and agriculture will
remain key sources of economic growth, but will
expose certain countries to increased risk.
4
Infrastructure shortages will create opportunities
for investment.
6
Continued advancement within pension fund,
stock exchange and banking regimes will facilitate
investment, and an increased range of investors
will drive demand for real estate investment
opportunities.
7
Technology will impact business and building
practices as well as consumer behaviour.
PwC 9
8
Sustainability will become entrenched in building
design and occupier requirements, with Africa’s
most ambitious countries changing city design and
building practices.
We observed that in certain countries where new cities are being built,
developers are using eco-friendly technologies to reduce their environmental
impact. Some of these technologies include solar building integration,
climate responsive building strategies, renewable building materials,
recycling and reuse, ecological building materials, an integrated planning
process, low-cost design and the use of innovative design tools, as can be
seen in One Airport Square in Ghana. This trend is expected to continue in
Africa, albeit at a slower pace than in the developed world. Konza City in
Kenya, Eko-Atlantic in Nigeria and Roma Park in Zambia are just a few of
the entirely new urban villages focusing on the concept of ‘place making’ in
a sustainable way. Use of these new technologies will be accelerated by new
sustainability legislation in the most progressive African markets.
Africa is
redefining itself
through real estate
* Recognition on page 83
PwC 11
Section 2
Megatrends in African
real estate
This section dicusses the
megatrends that will drive growth
in the real estate industry in Africa.
Millions
Nairobi, Kinshasa and Dar es 25
Salaam, for example, are expected 20
to see population growth of over
15
70% by 2025. Nigeria alone will add
7.6 million middle-class households, 10
followed by Ghana with 1.6 million. 5
Angola and Sudan will add one
0
million middle-class households 1990 2000 2014 2030
each. On a scale of urban population Total middle-class households Total lower middle-class households
and GDP growth, Nigeria is far
ahead of the rest.
Source: Standard Bank, Understanding Africa’s middle class
25
design and build commercial real 600
estate, seeking to use space more 500 498.6 20
efficiently. Construction techniques, 400 401.1 15
such as prefabricated buildings 300 326.7
and 3D printing, offer potential 303.9 10
200 204.4
for fast, cheap and eco-friendly
100 157.5 5
development. 115.3
0 21.0 25.2 48.8 46.1 0
1980 1990 2000 2010
World Africa
In South Africa, for the academic
year beginning January 2015, Source: United Nations Population Division, World Population Prospects, the 2010 revision
207 000 university students
and 400 000 students in
Further Education & Training
(FET) institutions will not have
adequate housing.20 Nigeria,
Kenya and Ghana also face
significant shortages in student
accommodation, leading to some
private investors targeting the
student housing market for future
developments.
PwC 15
With young, growing populations Africa’s worrisome youth
in most countries, the chance for a unemployment is normally
‘demographic dividend’ looks good. assessed against the continent’s
But a growing population can only fast economic growth. The
drive growth if enough people are unemployment rate in Africa is 6%,
above the poverty level and are compared to the global average
employed. of 5%.22 The difference may not
seem significant, but the issue is
The Gini index – a measure that unemployment in Africa is
of income inequality where 0 mainly affecting young people. It is
represents complete equality and estimated that youth unemployment
100 represents perfect inequality – is twice that of adults and accounts
shows there is significant variation for 60% of all unemployment.23 The
in income inequality across Africa. majority of African governments
According to World Bank analysis, are intervening to alleviate the
over the last five years South Africa youth unemployment problem. One
has had a Gini index score of 65 and example is the National Student
Nigeria, a score of 43. Financial Aid Scheme of South
Africa.
In Nigeria, Africa’s most populous
country, 84.5% of the population Demographic shifts will
lived below the US$2/day poverty affect demand for real estate
line in 2010, up from 83.1% in fundamentally. According to PwC’s
2004. In Mozambique, only 2.6% of report Africa Business Agenda
the population is considered part of 2014, 67% of respondents to the
the ‘stable middle class’ (per capita survey indicated that urbanisation,
consumption level of US$4 to $20/ closely followed by demographic
day). The situation is already very shifts, will impact their business
different in Egypt, where around significantly in the next five years.
30% of the population have made it
into the middle class.21
69%
Technological
67%
Urbanisation
63%
Demographic
19%
41% advances 31% shifts
5% 21%
14%
23% 22% 23%
PwC 17
2 Industrialisation will continue across Africa
and will be accompanied by rapid growth in
the retail sector.
Sub-Saharan
Africa
PwC 19
The expansion of the financial services sector
Natural resources, especially oil, Agriculture in Africa is also Africa has about
have for decades been the main
source of economic growth in
changing, with African governments
increasing their investments in the
1.2 billion hectares
Africa. The continent holds one sector. With world food production of agricultural
third of global mineral reserves and needing to rise 60% by 2050,45
one tenth of global oil reserves, Africa will be an important part
land,accounting for
and produces two thirds of the of the solution. The continued 23.9% of the world’s
world’s diamonds.42 New discoveries industrialisation of the agricultural
continue to drive new bursts of local sector is therefore important to
total. 46
activity. Natural resources remain drive growth. According to the Food
a key source of foreign exchange and Agricultural Organisation’s
reserves across Africa. statistics, Africa has about 1.2
billion hectares of agricultural
The impact of natural resources land,46 accounting for 23.9% of
on real estate development is the world’s total. It is estimated
well illustrated with the oil and that Africa has about 60% of the
gas discoveries in Mozambique world’s uncultivated arable land 47
in 2012.43 The infrastructure and that the agribusiness output
required to commercialise these will increase from US$313 billion to
discoveries was more than double US$1 trillion by 2030. 48
the country’s GDP. Investors acted
on the opportunity, providing the Downturn in commodity
infrastructure necessary to fully prices
exploit these resources, and as a
consequence an entire new city PwC’s recent report, Mine 2014:
developed in the northern province Realigning Expectation,
of Cabo Delgado. highlighted the difficulties facing
the mining industry. As a result of
Minister Oyoubi of Gabon says the global downturn in commodity
oil exports helped Gabon achieve prices, companies have been facing
growth of 6% during 2013, and significant write-downs and profit
Minister Konneh of Liberia noted slumps. These challenges faced by
that the mining sector is an the industry have a direct impact
important source of strong growth. on African countries dependent
Oil reserves in Angola led to the on commodity exports as the
establishment of the Angolan SWF. foundation of their economy.
In September 2014, the fund was
worth US$4.95 billion.44 The fund
has an objective to build Angola’s
infrastructure by investing up to
20% in alternative investments such
as real estate.
PwC 21
The chart alongside sets out the IMF commodity price indices (2005=100)
commodities price index for the
2010-2014 period. Following
price fluctuations in recent years, 220
The sharp decline in oil prices In addition to falling commodity This continued dependency on
is threatening the economies of prices, restrictive legislation natural resources will present both
several African countries, with may also impact on commodity opportunities and challenges for
Nigeria, Angola, Equatorial Guinea, revenue. For example, in Zambia real estate developers and investors
Gabon, Sudan, Algeria, Libya a new royalty regime has been across the continent. The risk
and Egypt being affected most.52 introduced increasing royalties presented by the economic fragility
Oil-exporting countries will lose payable by mining companies from of commodity exporting countries
government revenue as a result 6% to 20% for open mines and must be offset by the potential
of lower oil prices. The IMF has from 6% to 8% for underground rewards from investment, either
revised its growth projections for mines.54 This significant increase in directly in helping to exploit new
sub-Saharan Africa to reflect 0.9% royalty payments is likely to create commodity discoveries, or indirectly
negative impact on the continent’s disincentives for future private in the form of developments
GDP growth in 2015 as a result of sector investment, with consequent catering to the increased consumer
the fall in oil prices.53 As a result impact on employment and growth. demand resulting from associated
of the impact of the oil price economic growth. An increase in
fluctuation, the IMF estimates that economic diversity will begin to
non-oil sectors such as construction mitigate these risks, but this will
and retail will drive economic remain a key consideration for
growth, supported by high levels of investors in 2020 and beyond.
public spending.
PwC 23
Transport
China is Africa’s biggest A PPP is a government service or
Africa’s growing urban population
trading partner, with will increase pressure on existing private business which is funded
and operated through a partnership
total trade volumes transport networks. Although
between the government and one or
accurate urban congestion data
reaching US$210 for Africa is limited, being rarely more private companies.
billion in 2013, and the reported in the form of a congestion Data provided by the African
index,58 cities such as Lagos in Development Bank shows that PPPs
Chinese Government Nigeria, Dar es Salaam in Tanzania, have fostered development over the
expects that China will Kampala in Uganda, Gabarone in past decade. The majority of PPPs
Botswana, Johannesburg and Cape have taken place in infrastructure
have almost doubled Town in South Africa, and Nairobi developments such as power,
its bilateral trading in Kenya are considered to be some transport, telecommunication, and
of the most congested cities in sub- water and sanitation.
activity with Africa Saharan Africa.
Establishing PPPs in Africa is
to US$400 billion Statistical data projects that challenging because of the business
per annum by 2020, governments in most regions will environment, inadequate legal and
remain in a net borrowing position regulatory frameworks for PPPs, a
by which time it will beyond 2019,59 with increasing lack of technical skills to manage
have increased its total lending constraints being put onto PPPs and unfavourable investor
banks by regulators; so, where will perceptions of some countries.60
direct investment stock the financing for infrastructure
Despite these challenges, there have
on the continent to development come from? The lack
been a number of successful PPPs
of funding by governments and
US$100 billion.61 banks, due to a changing regulatory
on the continent. These include:
the N4 toll road from South Africa
regime, creates significant
to Mozambique; the Maputo Port;
infrastructure investment
the privatisation of the Ugandan
opportunities for the private sector.
telecommunications provider; and
Public-private partnerships water provision in the Dolphin
Coast, South Africa.
With Africa’s infrastructure
development facing challenges
in attracting private sector and
foreign direct investment, PPPs
have reliably funded infrastructure
projects across the continent.
Algeria
Angola
DRC
Egypt
Ghana
Kenya
Mozambique
Nigeria
South Africa
Tanzania
PwC 25
5 The influence of government policy and
legislation on the decision to invest will
increase, while local partnerships will
become increasingly important.
PwC 27
Property rights
The protection of property rights by government is also a key concern for real
estate investors. Of the 23 countries within Africa that were assessed by the
Property Rights Alliance for the International Property Rights Index 2014,
South Africa ranks highest in Africa (26th globally) in respect of institutional
property rights, followed by Botswana and Mauritius (joint 31st).72 Burundi
got the lowest scoring in Africa (95th globally), while Nigeria got the next
lowest scoring (94th globally). A variety of local factors also impact on
interests in land, for example government land ownership or tribal land
rights.
Trade agreements
One of the most important factors in Africa’s future development will be
increasing cross-border trade, both within Africa and with the rest of the
world. According to PwC’s report Africa gearing up, only about 11% of
Africa’s trade is with other African trading partners, compared to Asia, where
half of the trade is between countries in the region. There has been progress
in drafting trade agreements to help overcome regulatory obstacles and
stimulate cross-border trade on the African continent.
PwC 29
6 Continued advancement within pension fund,
stock exchange and banking regimes will facilitate
Global pension fund investment, and an increased range of investors
assets are expected will drive demand for real estate investment
opportunities.
to increase from
US$33.9 trillion in
2012 to US$56.5 Established stock exchange, pension fund assets are expected
pension fund regime and to increase from US$33.9 trillion
trillion by 2020.81 developed banking sector
in 2012 to US$56.5 trillion by
2020.81 Private real estate capital
A liquid stock exchange and an will become an important partner
established pension fund regime are of governments. Trends show that
important considerations for real institutional investors are raising
estate investors, as they provide a allocations to real estate assets.
possible ‘exit strategy’.
Many African countries are
While many of the African implementing pension fund
exchanges require further reforms. Nigeria’s pension fund
development in order to be assets grew from US$8.67 billion
internationally competitive, in 200982 to nearly US$30 billion in
progress has been made in a 2014,83 and is expected to triple its
number of areas. The liquidity of assets over the next three years to
African stock exchanges is similar US$70 billion. Namibia’s pension
to that of exchanges in India, fund assets are 80% and Botswana’s
Russia, Mexico or Indonesia, but 40% of their countries’ respective
Africa still accounts for less than GDPs. Kenya’s targeted savings rate
1% of the world’s stock market of 25% of GDP is well within reach
capitalisation. In South Africa, with current savings levels of 13%.84
the market capitalisation of real These funds can play an important
estate companies has grown over role in financing real estate and
ten times, to over US$30 billion, infrastructure development.
over the past decade.79 Over Regulations of the pension fund
US$500 million in new real estate regimes are changing by increasing
funds were listed on African stock alternative asset class limits to
exchanges in the 12 months to support Africa’s growth strategy.
September 2014 and more than Nigeria currently allows 15% of
twice the number of projects were in pension fund assets to be invested
the development phase in the same in real estate, which is set to grow
period compared to 2012.80 as the pension fund industry is
growing 30% annually.85
PwC’s report Asset Management
2020: A Brave New World Banks provide financial
estimates that global alternative infrastructure for real estate
investments, including real estate, development. The top banks in
will grow by 9.3% per year to reach sub-saharan Africa are dominated
US$13 trillion by 2020. This will by the Big Four South African
mainly be driven by high net worth financial giants,86 with total assets
individuals (HNWI), SWFs and worth US$456 billion.87 In the
pension funds. case of Standard Bank, the firm
is targeting 25% of revenue to be
PwC’s research indicates that derived from African countries
private capital and pension fund outside South Africa by 2017.88 The
investments will play a critical Big Four banks in South Africa are
role in funding the growing and well regulated and have created the
changing need for real estate and financial infrastructure to support
supporting infrastructure. Global development in Africa.
PwC 31
Private equity funds also look to attract institutional investors and
Oil is the main traditionally offer higher returns. Previously, investors in Africa were
predominantly South African, but investors seeking to invest on the
source for the continent are now more global.
creation of SWFs,
One of the main reasons cited by potential investors for investing in Africa is
and an estimated as a result of high rentals – for example, a monthly rate of between US$25 to
58% of SWF assets US$30/m2 for high-end office blocks in cities like Rwanda’s capital Kigali or
Ghana’s capital Accra, compared with below US$20 in Johannesburg, South
worldwide are Africa.91
derived from oil and
Forecasts of a 20% net annual return92 from investing in shopping malls,
gas revenues.94 office blocks or industrial complexes in countries such as Zambia and Kenya
are drawing in new investors.
Private funds are also beginning to respond to market demand in the low-
cost residential sector. For example, International Housing Solutions (IHS)
is a global private equity firm focussing on the development of residential
housing. By September 2014 IHS had raised US$136 million for its new
Fund II to be invested in new single-family homes, multi-family and student
housing in South Africa. The fund will also be actively looking at projects
in other countries, including Ghana, Zambia, Botswana, Namibia and
Mauritius.93
PwC 33
7 Technology will impact business and
building practices as well as consumer
behaviour.
The impact of the rise in technology Across Africa, consumer demand
In 2017, Africa’s is being felt across Africa. Almost for online shopping is less mature
social network 70% of Africa’s population now than in more developed regions.
have a mobile subscription,97 and Based on PwC’s report, Achieving
audience will total there are an estimated 800 million Total Retail, 25% of South African
24.2%, up from mobile phones in Africa, significant
for a continent with one billion
shoppers reported that it had been
less than one year since their first
9.5% in 201259 inhabitants.98 The International online purchase. The category
Telecommunication Union’s 2014 of consumer electronics and
figures note that 20% of the African computers reflected the most online
population were online by the end sales at 55%, closely followed by
of 2014 – up 10% from 2010 and clothing and footwear at 54%. The
396% from a decade ago. home improvement category came
in last at 17%.
Technology will also alter the face
of real estate by creating demand PwC’s Real Estate 2020:
for virtual environments such as Building the future projects that
websites or other online services entire retail chains will disappear
such as online shopping, games from the high streets of Western
or video-streaming services. countries in sectors such as video
Nigeria’s e-commerce market alone and music, as the majority of goods
generates US$2 million worth will be bought online. However, in
of transactions per week. It is Africa traditional shopping cultures,
expected that online transactions a lack of distribution networks and
will exceed US$6 billion by the end poor infrastructure mean it will take
of 2014 – significant if you take longer for the full impact of online
It is expected that into account that only 40% of the
population currently has access
retail to be seen in the real estate
market.
online transactions to the internet.99 Some services
The impact of technology on the
in Nigeria will traditionally delivered in a retail
setting are also moving online.
African continent should not be
exceed US$6 billion A recent article by the Harvard
discounted as it has the potential
to have a significant impact on
by the end of 201499 Business Review100 estimates
more people have mobile banking
the real estate market. Physical
real estate will be required to
accounts than traditional bank
service this huge growth area
accounts in nine countries on the
across Africa. Expanding local
continent – more than double
technology companies and new
compared to 2012.
international market entrants will
Responding to the rise of require office space with high levels
technology globally, some African of connectivity, as well as support
countries established themselves services such as server banks.
as technology hubs, with Kenya at However, technology also has the
the forefront. Konza Technology power to disrupt real estate markets.
City, a US$10 billion real estate For example, demand for and use
project marketed by the Kenyan of retail premises may change
government’s ICT board, is directly as consumers shift to making
modelled on California’s Silicon purchases online, while improved
Valley and is designed to include a connectivity will help companies
technology park, university campus, and other organisations (e.g. higher
science park and central business education providers) to deliver
district.101 Similar developments services to consumers remotely,
across Africa hold opportunities for removing the need for a permanent
developers to secure new tenants real estate presence where security,
in growth industries by providing cost or operational concerns exist.
high-grade accommodation while
offering attractive returns for
34 Building the future of Africa
investors.
8 Sustainability will become entrenched in
building design and occupier requirements,
with Africa’s most ambitious countries
changing city design and building practices.
PwC 35
Developers may also be forced
into pursuing sustainable design
and building practices as a result
of environmental, geographical
and infrastructure factors. Africa’s
climate is varied, ranging from
tropical rainforests to deserts.
Each type of environment presents
challenges for modern building
design and sustainable practices
can contribute to the management
of these various extremes without
relying on climate control and air
conditioning systems, which are
both expensive to run and often
inefficient.
Country analysis
An overview
Smart investing in Africa means
you’ll need to understand key
regions and local markets. Africa
is not just huge, it is hugely
diverse. From 2001 to 2014, six
of the world’s ten fastest-growing
economies were in sub-Saharan
Africa.103 This high growth is in
part due to the discovery and
ongoing exploitation of natural
resources: top-ranking Angola
and fourth-ranking Nigeria have
both benefitted significantly from
oil exports. Other factors are at
work too – especially increasing
government stability, continued
industrialisation and growth in
FDIs.
PwC 37
Fourteen years ago, the Economist Levels of development also vary
labelled Africa as the ‘Hopeless enormously. While South Africa has
Continent’, but in 2013 the a nearly US$400 billion economy,
Economist published ‘Aspiring the Democratic Republic of Congo
Africa’ at the same time PwC’s (DRC), despite significant mineral
Economic Intelligence Unit resources and the fourth-largest
predicted that nine African population in Africa, has an
economies would join the ‘7% estimated GDP of less than US$18
growth club’. billion.107 After rebasing its economy
in 2014, Nigeria overtook South
Africa could be on the brink of Africa as the biggest economy in
an economic take-off, much like Africa with a GDP of approximately
China was 30 years ago.104 Foreign US$510 billion.108
investment in Africa has grown
more than six-fold in the last Africa’s demographic dividend
decade105 and 74% of respondents
to PwC’s Global CEO survey106
said they expect to expand their
operations in Africa, while only 13% Population in 2019
of them are currently operating on 1 257.9 million
the continent. All of this creates
opportunities for the real estate
industry.
Global Competitiveness
Report
The Global Competitive Report is
published annually by the World
Economic Forum. The report
assesses the competitive landscape
of 148 economies and provides
insight into the drivers of their
productivity and prosperity. A score
between 1 and 7 is awarded to 12
pillars, where 7 is best. All countries
are compared against South Africa,
which achieved the best overall
ranking on the continent.
Income level
The income level classification
is a World Bank ranking of
countries based on their gross
national income (GNI). Low-
income countries are defined as
economies with a GNI of US$1 045
or less, middle-income countries as
economies with a GNI of between
US$1 045 and US$12 746 and
Political stability indicator Corruption Perception
high-income countries as economies The indicator, calculated by Index
with a GNI of more than US$12 746. the World Bank, measures the The index is calculated by
Low- and middle-income countries perception of the likelihood Transparency International and
are considered to be developing of political instability and/or measures perceptions of how
countries. politically motivated violence. The corrupt the public sectors in
indicator ranges from -2.5 to 2.5. different countries are seen to
The worldwide average is 0 for this be. The index ranks almost 200
indicator and may be used for cross- countries on a scale of 0 to 100,
country comparisons. where zero indicates high levels of
corruption. Developing countries
tend to achieve lower scores in the
index.
PwC 39
Country profiles
Nigeria
Key indicators109
Income level110: Lower middle income
PwC 41
Key industry forecast
2014 2015 2016 2017
people in Nigeria,
15% and 25% with maximum for discretionary spending. This
compared to South mortgage rates being between 16% equates to more than the current
Africa’s 480m2 and 30% which, when combined populations of Germany and France
with equity requirements of 10% combined.123
retail space per 1 000 to 20%, heavily restricts market
It is estimated that there is 1m2
people.124 access for low- and middle-income
of retail space per 1 000 people
families.120 Lagos is considered to
in Nigeria, compared to South
be Africa’s second most expensive
Africa’s 480m2 retail space per
property market.121
1 000 people.124 This translates into
significant opportunities, given the
The Nigerian government
current population of 170 million
established the Nigeria Mortgage
people. Numerous malls, such as
Refinance Company (NMRC) to
The Palms Mall and Ikeja City Mall,
encourage and promote home
have opened since 2011, but even
ownership in Nigeria by providing
the recent boom in retail space
financial facilities to mortgage
might not meet Nigeria’s rapidly
Plans are in the providers, thereby improving
growing demand. Plans are already
the availability and affordability
pipeline to spend of mortgage loans to Nigerians.
in the pipeline to spend US$3.5
billion on 25 destination malls in
US$3.5 billion on 25 Financing for the scheme would
Nigeria.
be a joint initiative between the
destination malls in Central Bank of Nigeria and the Commercial sector
Nigeria. private sector. The World Bank’s
The Nigerian commercial real estate
International Development
Association (IDA) is providing a 40- market is driven by an influx of
year, zero interest loan of US$300 institutional, foreign and private
million to assist the scheme.122 The business into Nigeria as well as
initial funding will be utilised as the growth of local established
Tier 2 capital while Tier 1 capital businesses and multi-national oil
will come in the form of equity companies across the cities of Lagos,
contributions from the Ministry of Abuja and Port Harcourt.
Finance, the Nigerian Sovereign The availability of office space is
Investment Authority, banks and improving and several A-grade
DFIs. projects are underway. Rental
figures in Lagos remain among
Retail sector the highest in the world, with
achievable rents at more than
Nigeria’s retail development
US$85/m2 per month.125 The office
is driven by the large growing
sector will be stimulated by several
consumer class. It is expected that
projects such as the Wings project
160 million Nigerians could live in
in Lagos and World Trade Centre
households with sufficient income
PwC 43
Kenya
Key indicators130
Income level131: Lower income
Kenya has one of the most varied Kenya has a strategic location in
ethnic populations in the world, East Africa, and many companies
with more than 70 distinct ethnic looking to expand in this region
groups.134 Kenya is sparsely are looking at Kenya as a market
populated with 79.2 people per km2, entry point. With its relatively
making it the 140th most densely stable political and economic
populated country in the world.135 environment, Kenya is seen as
According to the World Factbook, one of the easier East and Central
42.3% of Kenya’s population are African countries in which to do
aged between 0 and 14, with only business.137
2.6% aged over 65 years. The
average life expectancy in 2010 was The UK and Europe have
57.9 years but this has increased traditionally been Kenya’s biggest
in recent years. According to the trading partners. The recent
United Nations, it is predicted that slowdown in growth in European
Kenya will have a population of economies has translated into a
52.3 million by 2020. Kenya had an large trade and budget deficit for
urban population of 24% in 2011, the country. This may be offset in
but this percentage is growing fast future by strong regional growth,
with an annual urbanisation rate as Kenya’s trade with the Common
of 4.36% per annum for the period Market for Eastern and Southern
2010 to 2015.136 Africa (COMESA) now outstrips that
with the European Union. Half of
Kenya’s exports are now to African
countries.
PwC 45
Kenya’s ‘Vision 2030’ includes plans Government support
Nakumatt to improve the efficiency of the
retail market and further increase The government has big plans and
Local supermarket chain potential investment opportunities. Kenya’s ‘Vision 2030’ provides a
Nakumatt’s ‘blue label’ Malls are already surpassing office blueprint for future development.
packaged food line is space in profitability. Some initial success has already
been achieved with institutional
rapidly gaining market and business reforms, which has
share. Nakumatt has ample According to an article published in
the Economist, certain challenges improved the business environment.
opportunity for expansion prevail in the retail market. Retail The government’s trade strategy
in the rest of the East African sales are dominated by the informal looks to encourage greater exports
Community, including sector (80%). Nakumatt, the of processed goods, so there
country’s largest retailer, has only is potential for growth in the
Uganda, Tanzania, Rwanda manufacturing sector.
and Burundi. Fragile and a 2% market share. Foreigners
seeking a foothold in the market
conflict-prone countries in have to be concerned about several Kenya has flexible labour
which consumer demand is barriers. Regional trade policies also regulations and investment laws
that allow foreign investors to
rapidly rising and consumer work against foreign retailers that
seek to rely on imports. Preferential receive the same treatment as local
goods are in short supply, investors. Kenya’s financial sector
like South Sudan and tariffs on goods coming from the
Common Market for Eastern and is considered the most developed
Somalia, are also accessible Southern Africa or the East African in East and Central Africa, which
due to strong historical trade Community, as well as government facilitates access to debt and capital
market funding. However, Kenya
links. protection of local producers of
red meat, dairy products and eggs, has a fairly restrictive tax regime.
mean that imported food products The total tax rate payable by
from further afield often struggle to business is 44.4% and this includes
be competitive. a profit tax of 28.1%.142
Key indicators143
Income level144: Lower middle income
PwC 47
Ghana’s score in the Global Global competitiveness report
Competitiveness Report issued by
the World Economic Forum is set Institutions
out alongside. 6
Innovation 5 Infrastructure
4
Infrastructure Business 3 Macroeconomic
sophistication environment
Ghana’s most pressing challenge 2
PwC 49
Ghana’s construction industry value and growth
34%
11.6
10.55
8.60
Percentage
US$bn
7.03
7.81
4.49
5.58
Key indicators154
Income level155: Upper middle income
PwC 51
South Africa was ranked 43rd out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings Institutions
in 2015.160 South Africa’s score in 6
Innovation Infrastructure
the Global Competitiveness Report 5
4
issued by the World Economic
Business 3 Macroeconomic
Forum is set out alongside.
sophistication 2 environment
1
Infrastructure
Market size Health and primary
Key factors supporting the country’s education
position as the most developed in
sub-Saharan Africa and a member Technological Higher education
of the BRICS countries161 are its readiness and training
well-developed financial, legal, Financial market Goods market efficiency
communications and transport development Labour market
sectors, as well as an open trade efficiency
policy and a comparatively strong
domestic market. However, South South Africa
Africa still faces the triple challenge
of poverty, unemployment and
income inequality. To address this,
the government introduced what The NDP offers a long-term The transport sector is a key
is called the National Development perspective (up to 2030), sets out contributor to South Africa’s
Plan (NDP). a desired goal and identifies the competiveness in global
roles different sectors of society markets. The country’s transport
need to play in reaching that goal. infrastructure is modern and among
The South African The success of the Renewable the most developed in Africa,
government has a Energy Independent Power
Producer Plan, part of the NDP, is
having received a substantial boost
from projects associated with the
budgeted expenditure key to the roll-out of big projects 2010 FIFA World Cup.
of about US$80 in the US$72 billion infrastructure
development plan, together with The South African government has
billion over the next the successful completion of the two a budgeted expenditure of about
US$80 billion over the next three
three years to boost large coal power stations, Kusile and
Medupi, which are currently under years to boost both existing and new
both existing and new construction. major infrastructure projects.162
major infrastructure One of the biggest risks in the Residential sector
projects.162 economy relates to the energy crisis
Due to massive urbanisation,
that began in 2008 and re-emerged
in 2014/15. Energy capacity has expected to reach 70% by 2030,
the housing backlog in South Africa
The government- become the government’s priority
and Eskom, the government-owned is rising. Demand for affordable
owned power utility, power utility, is undertaking a housing continues to outstrip
supply for low- and middle-income
is undertaking a capacity expansion programme
to the value of US$33 billion that families. In 2012, the housing
capacity expansion will add 17GW of new generating backlog was estimated at 2.1 million
units.163 By 2014, the backlog stood
programme to the capacity to the national grid by
2019. In the short term, the phased at 2.3 million units, a figure that
value of US$33 introduction of new units at Medupi is estimated to grow by 178 000
units each year.164 Since 1994,
billion that will (from mid-2015 onwards) may
also alleviate some of the power the government has been able to
add 17GW of new shortages. However, until these provide 2.68 million units.165
PwC 53
Government support
The listed property South Africa has one of the most sophisticated business environments in
sub-Saharan Africa and relatively well-developed government institutions.
sector has been the The low cost of starting a business, estimated at 0.3% of per capita income,175
top performer of the means that entrepreneurs and developers can respond quickly to developing
opportunities.
four traditional asset
classes over the past The country is also acknowledged for its resilient and stable banking sector.
The tax and financial regulatory climate is robust, and the tax regime is
15 years and has progressive. Special development zones introduced by the Department
outperformed equities of Trade and Industry (DTI) make provision for tax concessions for
infrastructure development in certain areas of the country, resulting in the
by 6.4% and bonds formation of new industrial zones, such as Coega, Saldanha Bay and Dube
by 13.3% per year Tradeport.
Zendai
Zendai Modderfontein is believed to be the next Sandton and is set to overtake Africa’s richest
square mile in the next 15 years.
The project is estimated at
US$8.5 billion and is expected to
have 12 million m2 of development
capacity, including 100 000
homes, 6 km2 of open space and a
complete transportation network
with rail and express roads.
Key indicators178
Income level179: Upper middle income
PwC 55
Angola was ranked 181st out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings in Institutions
2015.184 Angola’s score in the Global 6
Competitiveness Report issued by Innovation 5 Infrastructure
the World Economic Forum is set 4
Business Macroeconomic
out alongside. sophistication
3
2 environment
1
Infrastructure Market size Health and primary
Angola’s electricity sector is among education
PwC 57
Mozambique
Key indicators196
Income level197: Low income
While still struggling to rebuild its Market size Health and primary
education
infrastructure two decades after the
end of a civil war, Mozambique is
also seeking to respond to a surge in Technological Higher education
readiness and training
demand for infrastructure resulting
from recent natural resource Financial market Goods market efficiency
discoveries. development
Labour market
efficiency
Most of Mozambique’s electricity
South Africa Mozambique
capacity is exported to South Africa.
Although less than a quarter of
Mozambicans are connected to the
local electricity grid, the country Residential sector
has insufficient capacity to meet The residential sector is one of the
increasing industrial and domestic more important real estate sectors
demand. The national electricity in Mozambique. It is mainly driven
provider expects electricity demand by the high demand and limited
to grow by around 15% to 20% per supply at the top end of the market.
annum over the next few years on Developers, attracted by rising
the back of a boom in the coal and prices and rentals particularly in
natural gas industries, while supply central Maputo, are entering the Transport projects
will only grow by 10% per year market with new developments
increasing the electricity shortfall. targeting high-end buyers. There worth US$17 billion
To address this, power projects is very limited current investment are planned
worth US$12 billion are in the in the low-cost housing sector, as
pipeline.208 superior returns can be achieved on
high-end projects. Low-cost housing
Transport projects worth US$17 developers are also put off by the
billion are also planned. This need to build the supporting major
includes increased rail links to transport and services infrastructure
ports and expanding port capacities to service new sites, the lack of
to allow for greater exports of government support for low-cost
agricultural goods and coal. housing schemes, and the limited
ability of low-income households to
access affordable finance.209
PwC 59
Retail sector Trade and investment in
Mozambique are undermined by a
The Mozambican formal retail number of factors such as arbitrary
sector is small as a result of the tax policies, minimal enforcement
significant size of the informal of property rights, and weak rule of
sector. Most of the retail activity is law.
The World Bank driven by South African retailers
such as Shoprite, Woolworths and
estimates that it takes Mr Price. Retail investment and
Private ownership of land is not
permitted, creating additional
230 hours, or 29 development are being stimulated challenges for prospective real
by the rising need for goods.
eight-hour working estate developers and investors.
Land tenure in Mozambique is
days to become tax Commercial sector currently obtained through ninety-
compliant.211 The office sector in Mozambique nine year usage rights or acquisition
is experiencing a mild uplift, with of buildings, infrastructure and
prime office rentals increasing from existing improvements on the
US$25 to US$30/m2.210 This uplift land. Foreign individuals and
is mainly as a result of interest from corporate entities can acquire land
diplomatic/aid sectors, banking and rights provided that they have an
telecommunication firms. investment project approved and,
being individuals, have been living
Government support in Mozambique for more than
five years. For corporate entities,
Mozambique is still facing they have to be incorporated or
challenges with its governance registered in Mozambique.
and corruption. Corruption
and bribery are perceived to be There are full property rights for
widespread. Slow decision-making Mozambicans and foreigners over
by government and high levels of the buildings, infrastructure and
perceived ‘red tape’ are also barriers improvements erected on land.
to doing business in the country. In 2007, new legislation was
The World Bank estimates that it introduced concerning real estate
takes 230 hours, or 29 eight-hour timeshare investments, which has
workings days, to become tax opened up investment opportunities
compliant.211 for foreign property investors.
Key indicators212
Income level213: Low income
PwC 61
The country’s diverse natural Infrastructure
Transport and resources provide the basis for
Infrastructure in Tanzania has
utilities infrastructure attracting investment, earning
foreign currency and supporting witnessed impressive investment
projects worth economic growth. Tanzania is a in recent years and there is
more to come. Transport and
US$19 billion are in significant producer of gold and
diamonds. Tanzanite gemstones, utilities infrastructure projects
the pipeline. coal and uranium oxide have the worth US$19 billion are in the
potential to become fast growing pipeline. Improvements to local
mining subsectors. infrastructure are also expected to
have a positive impact on residential
There are positive signs that house prices.
The construction of a Tanzania will stay on a favourable
Increased development will lead
growth path in the long run and
new US$10 billion establish itself as a viable alternative to greater congestion at the port of
port at Bagomoyo to Kenya as a gateway to the East Dar es Salaam. The construction
of a new US$10 billion port at
African region.
will help alleviate Bagomoyo will help alleviate
congestion once it Tanzania was ranked 131st out of congestion once it becomes
operational in 2017.221
189 countries in the World Bank’s
becomes operational Ease of Doing Business rankings
in 2017.221 in 2015.220 Tanzania’s score in the Of Tanzania’s population of around
49 million, about 20% currently
Global Competitiveness Report
issued by the World Economic have access to electricity. Improving
Forum is set out below. electricity supply and distribution
will assist the country in attaining
higher levels of economic growth.
Global competitiveness report Tanzania in 2013 produced about
800MW of electricity,222 and total
Institutions output is expected to exceed 3GW
6
Innovation 5 Infrastructure by the end of 2015 as various power
4 projects come on stream. The
Business 3 Macroeconomic increase in capacity will be enough
sophistication 2 environment to meet increased domestic demand
1 and stimulate the manufacturing
Market size Health and primary
sectors as well as providing a
education surplus for export.223
PwC 63
Namibia
Key indicators229
Income level230: Upper middle income
Infrastructure 1
PwC 65
Retail sector Government support
The Government’s
Developments in the retail sector The Government’s Targeted
TIPEEG programme are ongoing, with new malls Intervention Programme for
targeted investment under construction and existing Employment and Economic Growth
malls receiving makeovers and (TIPEEG) targeted investment to
to the value of expansions. The South African the value of US$1.27 billion, equal
US$1.27 billion, developer Atterbury, is involved in to 16% of GDP. The programme,
retail developments in Namibia. which has now ended, was expected
equal to 16% of GDP. to create an estimated 187 000
Atterbury is part of a US$110 jobs. With the programme’s
million development of The main objective being to channel
Grove. The development includes investment into agriculture,
54 000m2 of mixed-use floor space. transport, tourism and housing, the
The development includes a hotel, main focus was on infrastructure
offices, apartments, a medical projects. Reports on its success
centre, a health and fitness centre, vary, but the annual report of the
and space for 126 stores. There are National Planning Commission240
a number of new malls currently says 83 315 jobs were created
being developed across the country, representing 44.6% of the target
including in Windhoek and the of 187 000 jobs which the majority
north of the country. Plans for retail were temporary. Programme
developments in Swakopmund and expenditure at the time of the
Walvis Bay are also in the pipeline. report was US$940 million.
Key indicators241
Income level242: Upper middle income
The country has an urban population of 41.2% (31 Dec 2013) with the
majority of the urbanised population in Port Louis, the country’s capital.
There was a marginal decrease in the percentage of the total urban
population from 519 718 (41.3%) in Dec 2012 to 518 752 (41.2%) in Dec
2013.244 Based on current demographics, projections suggest the population
will decline from 2030 onwards:
Projected population
1.36
1.34
1.32
1.30
Millions
1.28
1.28
1.26
1.24
1.20
2016 2021 2026 2031 2036 2041 2046 2051
PwC 67
Mauritius’s age distribution has the
It is expected that the structure of a bell curve, with 44.1%
Mauritian economy aged between 25 and 54 years
old.245 The median age in Mauritius
will achieve GDP is 34.4 years. 246
growth of 4.2% in It is expected that the Mauritian
2015 and 2016 247 economy will achieve GDP growth
of 4.2% in 2015 and 2016,247 with
private consumption and tourism
being the main drivers.
Higher education
Infrastructure
Technological
readiness and training Infrastructure in Mauritius is well
Financial market Goods market efficiency developed and roads are in good
development condition. Of the total 1 910km of
Labour market
efficiency roads, 1 834km are paved.250 With
less than a tenth of the population
South Africa Mauritius owning cars, the road infrastructure
is considered sufficient to hold the
country’s traffic volumes.
Of the total 1 910km of roads, 1 834km are Mauritius has embarked on the
implementation of a broad-
paved.250 based infrastructure programme
(principally towards further
improvement of the road network,
port and airport) with investment of
US$880 million, representing a 39%
increase over 2012.251
PwC 69
The growth of medical tourism is Government support
Tax in Mauritius is also noted in Mauritius. Visitors
The government of Mauritius
considered low with come to Mauritius to receive
introduced two property investment
medical treatment either because
taxation at 15% for it is cheaper or because the
schemes, known as the Integrated
Resort Scheme (IRS) and the Real
onshore and between Mauritius healthcare system is more
Estate Scheme (RES). Foreigners
developed compared to their home
0% to 3% for country. Medical tourists showed
obtaining property worth more than
US$500 000 through either scheme
offshore investments. a 70.8% increase in 2012 and with
are entitled to a residency permit.
additional government investment,
Property sold out of the IRS can
the country is looking to attract
only be sold at a minimum value of
100 000 medical tourists by 2020,
US$500 000 where the RES does
up from 21,346 in 2012.254
not have a minimum investment
Hospitality remains a key driver limit. The introduction of these
for the Mauritian economy. There schemes has led to a 10% to 15%
is currently an oversupply of hotel average increase in property values
rooms on the island as compared over the past eight years.255
to the seating capacity of airlines
Through the introduction of the
operating towards Mauritius.
IRS and RES schemes, the island
Occupancy and rates are under
has seen tremendous growth in the
constant pressure and some hotels
number of ready-built units sold to
have resorted to heavy discounting
foreigners. As at December 2013,
to maintain market share. Despite
The Mauritius 1 122 units had been sold under
this, new hotels have opened
these schemes.256
Commercial Bank on the island. Another factor
contributing to the oversupply is Property values have also increased
The office development the emergence of beach bungalows due to significant increases in the
in Ébène, Mauritius is a as an alternative for visitors. cost of construction driven largely
28 042m2 US$ 4.5 million Today 30% of all visitors stay by increases in labour costs and in
development. in bungalows when visiting the the cost of imported raw materials.
island for holidays. That said, the
In addition to the above schemes,
Building materials are growth in the number of rooms and
the Government of Mauritius allows
predominately maintenance bungalows has been higher than the
foreigners that have obtained a
demand for such accommodation,
free and the building permanent resident status the right
thus prices have also suffered
contains numerous green to purchase units in apartments
recently.
initiatives such as solar of a minimum of two floors above
Commercial sector ground level.257
heating, photovoltaics,
energy storage and thermal There is a continued oversupply Tax in Mauritius is considered low
of office space in Mauritius. This with taxation at 15% for onshore
building mass activation,
explains the intensified competition and between 0% to 3% for offshore
and during winter months between office building owners for investments.
the building is 100% tenants. This competition has led
naturally ventilated. to downwards pressure on office
rental levels. Office rental rates
have started to decline in the main
business areas of Port Louis and
Ébène, predominantly in the case
of newly-built offices, which are
struggling to find tenants.
*Recognition on page 83
Key indicators258
Income level259: Low income
Inflation: 7.1%
PwC 71
Zambia was ranked 111th out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings in Institutions
2015.265 Zambia’s score in the Global 6
Innovation Infrastructure
Competitiveness Report issued by 5
the World Economic Forum is set 4
Business
out alongside. sophistication
3 Macroeconomic
2 environment
Infrastructure 1
PwC 73
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Recognition
We would like to thank the Africa is redefining itself The Mauritius Commercial
following people for the use of through real estate – After Bank (p70)
their photographs. The work is photographs (p11)
licensed under a Creative Commons • The Mauritius Commercial Bank;
Attribution 2.0 International • Celso Flores, Pollack Man34 Christian Bossu-Picat and Johan
Licence available on https:// Pretorius (Photographers); and
• Jeff Attaway
creativecommons.org/licenses/ Jean Francois Koenig (Architect)
by/2.0/ • Jeff Attaway, Evan Bench
• Rexford Nkansah
Africa is redefining itself
through real estate – Before No changes, other than cropping
photographs (p11) images, were made.
• Sue Hoppe, John Atherton
• Lu-Gerda de Klerk, Mstyslav
Chernov
• Hugues, Chris Snelling
• TPS. Dave, Caitlin
• Maria Michelle
PwC 83
Contacts
Your PwC regional contacts for Real Estate
Africa
Ilse French
ilse.french@za.pwc.com
Nigeria
Adekalu Balogun Uganda
adekalu.balogun@ng.pwc.com Uthman Mayanja
uthman.mayanja@ug.pwc.com
Ghana
Oseini Amui
oseini.x.amui@gh.pwc.com Kenya
Richard Njoroge
richard.njoroge@ke.pwc.com
Zambia
Nasir Ali Tanzania
nasir.y.x.ali@zm.pwc.com Michael Sallu
michael.sallu@tz.pwc.com
Namibia
Stefan Hugo Zimbabwe
stefan.hugo@na.pwc.com Clive Mukondiwa
clive.k.mukondiwa@zw.pwc.com
Botswana
Rudi Binedell
rudi.binedell@bw.pwc.com
Mauritius
South Africa Nicolas Vaudin
Ilse French nicolas.vaudin@mu.pwc.com
ilse.french@za.pwc.com
Mozambique
João Martins
joao.l.martins@mz.pwc.com
Angola
Mario Miranda
South Market mario.miranda@ao.pwc.com
East Market
West Market
PwC 85
The information contained in this publication is provided for general information purposes
only, and does not constitute the provision of legal or professional advice in any way. Before
making any decision or taking any action, a professional adviser should be consulted. No
responsibility for loss to any person acting or refraining from action as a result of any material
in this publication can be accepted by the author, copyright owner or publisher.